In re Robinson
| Decision Date | 11 December 1998 |
| Docket Number | Bankruptcy No. 197-21544-575. |
| Citation | 228 BR 75 |
| Parties | In the Matter of Karen A. ROBINSON, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
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Lance Roger Spodek, P.C., by Lance Roger Spodek, New York City, for debtor.
Stein & Sheidlower, L.L.P., by Eric S. Sheidlower, New York City, for First Union Mortgage Corporation, Federman & Phelan and Ocwen Federal Bank, FSB.
Karen A. Robinson ("Debtor") seeks a finding of contempt against First Union Mortgage Corporation ("First Union") and Federman & Phelan, Esqs. ("F & P") for violation of the automatic stay and damages for such violation pursuant to section 362(h) of the Bankruptcy Code. 11 U.S.C. § 362(h). This motion stems from a March 12, 1998 filing of an application for, and entry of, judgment in connection with a foreclosure proceeding brought prepetition against Debtor. The Court heard argument at an April 9, 1998 hearing, and thereafter directed the parties to file supplemental briefs and, in proper evidentiary form, any additional evidence that they wished the Court to consider.
The Court has jurisdiction of this core proceeding1 pursuant to 28 U.S.C. §§ 157(b)(2)(A) and 1334(b) and the general Order of reference dated August 28, 1986 of the United States District Court for the Eastern District of New York. The following opinion constitutes the Court's findings of fact and conclusions of law pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.
Debtor filed a voluntary Chapter 7 petition on October 15, 1997, thereby invoking the protection of the automatic stay. 11 U.S.C. § 362(a). According to her petition, Debtor has a one-half interest in a "vacation home" located at 203 Keller Drive, Bartonsville, Pennsylvania. Debtor's bankruptcy petition schedules First Union as a secured creditor with respect to the property and identifies F & P as representing First Union.
At the time Debtor filed her bankruptcy petition, she and Victoria Sorrentino ("Sorrentino"), a co-mortgagor on the vacation home, were defendants in a foreclosure action that had been commenced by First Union on May 27, 1997. F & P, a law firm specializing in foreclosures, represents First Union and Ocwen Federal Bank, FSB ("Ocwen"), the current servicing agent for the mortgage, in the foreclosure proceedings.2
Prior to October 1997, Sorrentino filed a petition pursuant to Chapter 7 of the Bankruptcy Code. On October 10, 1997, an order modifying the automatic stay to permit foreclosure on the premises at 203 Keller Drive by "Ocwen Bank as Servicer for the Mortgagee of Record" was entered in Sorrentino's case, which was then pending in the United States Bankruptcy Court for the Middle District of Pennsylvania.
On October 15, 1997, Debtor filed her petition in this Court. Notices of the commencement of the case were sent to the creditors set forth in Debtor's creditor matrix. F & P and First Union appear on the creditor matrix, and the certificate of service in the Court's file indicates that the Court's noticing agent served both F & P and First Union3 at their correct addresses by first class mail on October 18, 1997. The Court's file includes one proof of claim filed by another creditor in response to that mailing. Even though Ocwen had notified Debtor that it should be the addressee of correspondence relating to the mortgage on the property, Ocwen was not scheduled and did not receive notice of the bankruptcy before the events in question.
On March 12, 1998, in violation of the automatic stay triggered by Debtor's bankruptcy filing, Frank Federman, Esq. ("Federman") filed an application for the entry of judgment in First Union's foreclosure action against Debtor and Sorrentino. The Monroe County, Pennsylvania, Court of Common Pleas granted the application the same day (the "Judgment").
Federman, as attorney for First Union, mailed Debtor notice of entry of the Judgment. On March 20, 1998, Debtor contacted her attorney, Lance Roger Spodek, Esq. ("Spodek"). During the course of an approximately 35 minute telephone conversation, she expressed "concern." Spodek asserts that he assuaged her fears, told her to remain calm, and assured her that the entry of the Judgment would not lead to a wage garnishment. Later that day, Spodek reviewed the file and contacted F & P in hopes of reaching Federman so that the matter could be resolved without the need for a motion. Federman was unavailable and, after a 25 minute delay, Spodek reached another F & P attorney, Daniel Schmieg, Esq. ("Schmieg") and advised Schmieg of Debtor's bankruptcy. Schmieg responded that F & P had not received notice of Debtor's bankruptcy and informed Spodek that, upon confirmation of Debtor's filing, F & P would take appropriate action to vacate the Judgment.
Spodek then demanded to be compensated for his efforts in correcting the automatic stay violation. At the time he made the demand for compensation, Spodek had spent approximately one and one-half hours speaking with his client, reviewing the underlying file, and attempting to contact Federman in order to resolve this matter. Schmieg rejected the fee demand and informed Spodek that F & P would not compensate him.
After Schmieg's March 20, 1998 conversation with Spodek, F & P reviewed Debtor's foreclosure file and concluded that F & P had not received notice of debtor's bankruptcy filing from Spodek, the Court, First Union or any other source. F & P received confirmation of Debtor's filing on March 22, 1998. Spodek filed the instant motion on March 23, 1998 seeking damages from First Union and F & P (collectively, the "Respondents").4 F & P, by request dated March 30, 1998 and filed with the Monroe County, Pennsylvania, Court of Common Pleas on April 1, 1998, vacated the Judgment.
Debtor's moving papers describe Spodek's conversation with Schmieg, including Schmieg's refusal to accede to Spodek's demand for compensation, and assert that Debtor should be awarded unspecified damages for "anticipated cost to rectify the public record and credit bureau records for this post petition entry of judgment and an award of counsel fees in an amount to be determined by the Court." The motion papers were devoid of any factual information as to the nature or even likelihood of the "anticipated cost" and included no information as to counsel fees actually incurred by Debtor. Upon questioning by the Court as to the legal and factual basis of the demand for the "anticipated cost," Spodek abandoned that element of the motion but asserted that Debtor was entitled to compensation for unspecified emotional injuries and counsel fees incurred in connection with the motion. Respondents' counsel asserted that no award of damages or fees would be appropriate because neither Respondent had actually received notice of commencement of the bankruptcy case. Following the lengthy argument, the Court entered an order permitting Debtor to file and serve supplemental papers, including evidence supporting any claimed damages, made provision for a response to any such papers, and took the matter under advisement.
The automatic stay invoked by the filing of a bankruptcy petition protects a debtor from creditors' attempts to collect prepetition debts. The automatic stay is designed to give debtors breathing space so that they may reorder their affairs. See Kirk v. Shawmut Bank (In re Kirk), 199 B.R. 70, 71 (Bankr.N.D.Ga.1996). The protections afforded by the automatic stay are fundamental to the bankruptcy process. The automatic stay prohibits a person from, inter alia; commencing or continuing an action against a debtor that could have been or was commenced against the debtor before the filing of the petition; acting to obtain possession of or exercise control over property of the estate; and acting to collect, assess, or recover claims against the debtor that arose prepetition. 11 U.S.C. § 362(a)(1)(3) and (6).
A debtor injured by a willful violation of the automatic stay is entitled to actual damages, including attorneys' fees and, in appropriate circumstances, punitive damages. 11 U.S.C. § 362(h). If the party charged with violating the stay knows that the stay is in effect, any deliberate act taken in violation of the stay justifies an award of actual damages; an additional finding of maliciousness or bad faith on the part of the offending creditor is not necessary to support an award of actual damages but would warrant the further imposition of punitive damages pursuant to section 362(h). See Crysen/Montenay Energy Co. v. Esselen Associates, Inc. (In re Crysen/Montenay Energy Co.), 902 F.2d 1098, 1105 (2d Cir.1990).5 In either case, the Debtor must prove by a preponderance of the evidence that the violator had knowledge of the bankruptcy petition. See In re Sharon, 200 B.R. 181, 199 (Bankr. S.D.Ohio 1996). Cf. Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 659, 112 L.Ed.2d 755 (1991).
F & P, on behalf of First Union, deliberately requested and obtained entry of the Judgment in violation of the automatic stay. The only remaining question is whether the Respondents had knowledge of the stay. Although the Court's file in this matter includes a certificate indicating that notice of Debtor's bankruptcy filing was mailed to each Respondent when the case was commenced, Respondents deny that they received notice of Debtor's bankruptcy filing prior to entry of the Judgment.
In order to establish that Respondents had knowledge of the automatic stay, Debtor relies on the presumption of receipt. The depositing into the mail system of a properly addressed and stamped letter creates a rebuttable presumption of receipt by the party to whom the letter was addressed. See Cablevision Systems Corp. v. Malandra (In re Malandra),...
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