In re Prairie Trunk Ry., Bankruptcy No. 85 B 09421.

Citation125 BR 217
Decision Date14 March 1991
Docket NumberBankruptcy No. 85 B 09421.
CourtUnited States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois

David G. Lynch, Rudnick & Wolfe, Chicago, Ill., for Gallatin County State Bank.

Richard M. Kates, Chicago, Ill., for Consolidated Rail Corp.


JOHN H. SQUIRES, Bankruptcy Judge.

This matter comes before the Court on the motion of Consolidated Rail Corporation ("Conrail") for damages against Gallatin County State Bank (the "Bank") for willful violation of the automatic stay pursuant to 11 U.S.C. § 362(h), and on the motion of the Bank for summary judgment on Conrail's motion pursuant to Federal Rule of Civil Procedure 56, incorporated by reference in Federal Rule of Bankruptcy Procedure 7056. For the reasons set forth herein, the Court having reviewed the pleadings and the exhibits attached thereto, hereby denies the motion of Conrail for damages against the Bank for willful violation of the stay. The Court hereby grants the motion of the Bank for summary judgment.


The Court has jurisdiction to entertain these motions pursuant to 28 U.S.C. § 1334 and General Rule 2.33(a) of the United States District Court for the Northern District of Illinois. These matters constitute core proceedings under 28 U.S.C. § 157(b)(2)(A) and (O).


The threshold issue is whether the language of section 362(h) which provides relief to "individuals" should be construed to permit relief to corporate or other artificial legal entities as well. Many of the relevant facts and background of the case and a discussion of the section are contained in an earlier Opinion of the Court. See In re Prairie Trunk Railway, 112 B.R. 924 (Bankr.N.D.Ill.1990). Pursuant to that decision, the Court held that the Bank willfully violated the automatic stay under section 362(a). The Court, however, found that the cause of action created by section 362(h) is available only to debtors or their pre-petition creditors, and does not provide a remedy to third parties not protected by the scope of the automatic stay. The issue of whether section 362(h) includes relief to a corporate or other artificial legal entity, rather than a natural person was not argued or decided. Conrail is undisputedly not a natural person, but is the holder of a pre-petition claim. The Bank asserts that Conrail is not an "individual" to whom relief under section 362(h) is available.

Pursuant to the instant motion filed by Conrail, it seeks a hearing as to actual damages, costs, attorneys' fees and punitive damages against the Bank under section 362(h). The Bank seeks summary judgment based upon the recent decision of In re Chateaugay Corp., 920 F.2d 183 (2d Cir.1990), which held that only a natural person can recover damages under section 362(h), creating a split among the circuits that have addressed this issue. Conrail cites and relies upon In re Atlantic Business & Community Corp., 901 F.2d 325 (3d Cir.1990) and Budget Service Co. v. Better Homes of Virginia, Inc., 804 F.2d 289 (4th Cir.1986) from the Third and Fourth Circuit Courts of Appeal, respectively. Better Homes was the first circuit opinion to construe the word "individual" in section 362(h) to include a corporation. The Seventh Circuit Court of Appeals has not decided the issue, nor has the District Court for the Northern District of Illinois taken a position on the matter. Thus, the Court must determine whether it should follow Chateaugay as urged by the Bank, or Better Homes as argued by Conrail.


In order to prevail on a motion for summary judgment, the movant must meet the statutory criteria set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 56(c) reads in part:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Fed.R.Civ.P. 56(c); see also Donald v. Polk County, 836 F.2d 376, 378-379 (7th Cir. 1988).

In 1986, the Supreme Court decided a trilogy of cases which encourage the use of summary judgment as a means to dispose of factually unsupported claims. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "The primary purpose for granting a summary judgment motion is to avoid unnecessary trials when there is no genuine issue of material fact in dispute." Farries v. Stanadyne/Chicago Div., 832 F.2d 374, 378 (7th Cir.1987) (quoting Wainwright Bank & Trust Co. v. Railroadmens Federal Sav. & Loan Ass'n, 806 F.2d 146, 149 (7th Cir.1986)). The burden is on the moving party to show that no genuine issue of material fact is in dispute. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514; Celotex, 477 U.S. at 322, 106 S.Ct. at 2552; Matsushita, 475 U.S. at 585-586, 106 S.Ct. at 1355-56. There is no genuine issue for trial if the record, taken as a whole, does not lead a rational trier of fact to find for the nonmoving party. Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356. "If the evidence is merely colorable or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-250, 106 S.Ct. at 2511 (citations omitted); see also Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d 656, 659 (7th Cir.1987), cert. denied, 484 U.S. 977, 108 S.Ct. 488, 98 L.Ed.2d 486 (1987).

Once the motion is supported by a prima facie showing that the moving party is entitled to judgment as a matter of law, a party opposing the motion may not rest upon the mere allegations or denials in its pleadings, rather its response must show that there is a genuine issue for trial. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Celotex, 477 U.S. at 323, 106 S.Ct. at 2552-53; Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356; Patrick v. Jasper County, 901 F.2d 561, 564-566 (7th Cir.1990). Moreover, all reasonable inferences to be drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Davis v. City of Chicago, 841 F.2d 186, 189 (7th Cir. 1988); Marine Bank, Nat. Ass'n v. Meat Counter, Inc., 826 F.2d 1577, 1579 (7th Cir.1987); DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 811 F.2d 326, 329 (7th Cir.1987); Bartman v. Allis-Chalmers Corp., 799 F.2d 311, 312 (7th Cir.1986), cert. denied, 479 U.S. 1092, 107 S.Ct. 1304, 94 L.Ed.2d 160 (1987); In re Calisoff, 92 B.R. 346, 350-351 (Bankr.N.D.Ill.1988). Furthermore, the existence of a material factual dispute is sufficient only if the disputed fact is determinative of the outcome under the applicable law. Donald v. Polk County, 836 F.2d at 379; Wallace v. Greer, 821 F.2d 1274, 1276 (7th Cir.1987); Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.1983) (en banc), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983).

Rule 12 of the General Rules of the United States District Court for the Northern District of Illinois adopted by the General Order of the Bankruptcy Court on May 6, 1986, requires that the party moving for summary judgment file a detailed statement of material facts as to which they contend there is no genuine issue. The statement must include specific references to the affidavits, parts of the record, and other supporting materials relied upon to support the summary judgment relief sought. Failure to submit such a statement constitutes grounds for denial of the motion. Rule 12 also requires that the party opposing the motion file a statement of material facts as to which there is a genuine issue. If the opposing party's Rule 12 statement fails to deny the facts set forth in the movant's statement, those facts will be deemed admitted.

Neither party has filed its requisite Rule 12 statement. Hence, the Court could deny the Bank's motion. The only material fact, however, is undisputed because Conrail is not a natural person, but a corporate or other artificial legal entity. The issue challenges Conrail's standing to invoke relief under section 362(h). Consequently, the matter is really a question of law which the Court will resolve before both parties are put to further trouble, expense, and cost of trial on this theory of recovery.

B. 11 U.S.C. § 362(h)
Section 362(h) provides as follows: An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys\' fees, and, in appropriate circumstances, may recover punitive damages.

11 U.S.C. § 362(h).

This section was added by the 1984 amendments to the Bankruptcy Code without the benefit of any legislative gloss. See 1984 U.S.Code Cong. & Ad.News 576-606. The language creating the statutory cause of action is confined to an "individual." Prominent secondary authorities question its availability as a remedy for use by entities who are not natural persons. One authority concludes that only individuals are protected. 2 Cowans, Bankruptcy Law and Practice, § 11.3 at 292 (rev. ed. 1989). Another authority questions whether courts can continue to make awards for willful stay violations in cases of non-individual debtors. 1 Ginsberg, Bankruptcy: Text, Statutes, Rules, § 3.01(b) at 200 (2d ed. 1989 and 1990 Supp.). A third authority notes that the reasons for the addition of section 362(h) have not been stated, and hence the reasons for limiting its benefits to individuals for making the recovery mandatory are not entirely clear. 2 Colliers on Bankruptcy, ¶ 362.12 at 362-75 (15th ed. 1990).

Various courts have interpreted section 362(h) to allow corporations which...

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