In re San Angelo Pro Hockey Club, Inc.

• Decision Date: 13 March 2003
• Docket Number: No. 02-60321-RLJ-11.,02-60321-RLJ-11.
• Citation: 292 B.R. 118
• Parties: In re SAN ANGELO PRO HOCKEY CLUB, INC., Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Texas

292 B.R. 118

In re SAN ANGELO PRO HOCKEY CLUB, INC., Debtor.

No. 02-60321-RLJ-11.

United States Bankruptcy Court, N.D. Texas, San Angelo Division.

March 13, 2003.

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David Weitman, Hughes and Luce, Dallas, TX, for Debtor.

Samuel S. Allen, Jackson Walker, San Angelo, TX, for City of San Angelo.

MEMORANDUM OPINION

ROBERT L. JONES, Bankruptcy Judge.

Before the court are the issues of whether damages should be awarded to San Angelo Pro Hockey Club, Inc., the Debtor and Debtor-in-Possession (the "Debtor"), for the City of San Angelo's (City's) violation of the automatic stay (11 U.S.C. § 362) concerning the Debtor's personal property and trade fixtures, and whether certain items of property constitute personal property, trade fixtures, fixtures, or leasehold improvements. These issues were originally raised by the Debtor's motion (the "Motion") seeking an order imposing an award of damages and, alternatively, for civil contempt against the City for violation of the automatic stay. The Motion alleged that the City violated the automatic stay by (i) failing and refusing to turn over control and possession of the Debtor's leased premises at the San Angelo Coliseum; (ii) failing and refusing to turn over to the Debtor control and possession of the leasehold improvements permanently affixed to the realty; (iii) refusing to allow the Debtor to exercise its right of possession and control over its personal property and trade fixtures located on the leased premises.

On an expedited setting, hearing on the Motion was held September 25, 2002. Upon request by the City, the court granted the parties until October 2, 2002, to file additional briefs on the issues presented. On October 4, 2002, the court issued its findings of fact and conclusions of law from the bench, specifically holding as follows:

1. That there was no stay violation with respect to the leasehold premises as the court found the lease was terminated prior to the bankruptcy;

2. That the City did violate the stay as to the personal property and trade fixtures owned by the Debtor as the court found that such items were property of the bankruptcy estate;

3. That the evidence was insufficient to determine the characterization of specific items of property;

4. That the issue of damages and any questions regarding characterization of specific items of property would be set on the court's November 7, 2002, San Angelo docket;

5. That the court was making no findings regarding the Debtor's rights to payments from concessions;

6. That all relief requested by either of the parties under their motions was denied.¹

See Court's October 4, 2002 ruling.

Hearing on the issues of whether damages should issue and questions concerning the characterization of specific items of property was, in accordance with the court's ruling, set on the court's November 7, 2002, docket. Upon request of the parties, the hearing was continued to December 9, 2002, and was held December 9-10 and January 13-14, 2003.

In accordance with the court's October 4, 2002 ruling, the court finds it has jurisdiction over the issues raised under 28 U.S.C. § 1334(b) and that this is a core proceeding under 28 U.S.C. § 157(b)(2) as it concerns section 362, the automatic stay; section 541, property of the estate; and addresses matters affecting the administration of the bankruptcy estate.

Background

The court refers to its specific findings and conclusions made from the bench on October 4, 2002. A copy of the transcript of the court's October 4, 2002 ruling is attached hereto. As background, the court notes that, as evident by the Debtor's name, the Debtor, prior to the bankruptcy filing, owned and operated the San Angelo hockey team, a minor league professional hockey team that is a member of the Central Hockey League. The team played at the San Angelo Coliseum under a lease agreement between the Debtor and the City. The Debtor's rights to the team were derived from a franchise with the League. As a result of several disputes between the Debtor and the City regarding payments under the lease (both as to whether all payments were made and the timeliness of payments), the issue of whether the lease could be terminated was submitted to binding arbitration. The arbitrator held for the City, which precipitated the bankruptcy filing and the Motion. The Debtor, by the Motion, contended that the arbitration ruling was ineffective. This court, in its October 4 ruling, held that the parties were bound by the arbitration award.

The central issue properly before this court was whether the City had committed a stay violation by denying any rights to the Debtor concerning the leasehold premises and all other property associated with the leasehold (personal property, fixtures, trade fixtures, and leasehold improvements). The arbitration award addressed only the leasehold premises. A stay violation was premised upon the Debtor retaining rights in property. See Court's October 4, 2002 ruling at 16-17. This necessitated that the court make certain findings regarding the Debtor's rights in property. The court, having found a stay violation by the City because the Debtor retained its rights in personal property and trade fixtures, addresses first whether damages should issue for the City's stay violation. As contemplated by the court's October 4 ruling, the court will then address the characterization of specific items of property to resolve whether a stay violation occurred as to such items.

Discussion

A. Damages

The Debtor's damage model reflects total damages of $155,579.08. There are ten components to the model: (1) rental of ice plant — $48,000; (2) use of the glycol coolant — $14,192.78; (3) use of the homosote — $5,000; (4) use of the goal judge boxes — $800; (5) use of the VIP parking barriers — $800; (6) damage to ice-making equipment — $1,249.99; (7) value of missing equipment — $41,272 (includes four laser lights at $35,000); (8) storage of equipment for nine months — $15,300; (9) insurance for nine months — $3,843.78; (10) interest carry on loans secured by equipment — $25,120.53. See Debtor's Ex. 18. The Debtor reduced its damage claim by approximately $40,000 to account for items incorrectly listed as missing or damaged (as was discovered during the course of the hearing).

In addition, the Debtor seeks recovery of attorney's fees for prosecuting its motion of approximately $220,000 ($179,000 through November 30, 2002, plus an additional $41,000 incurred through the January hearings). See Debtor's Exs. 26-30.

Section 362(h) provides that "[a]n individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorney's fees, and, in appropriate circumstances, may recover punitive damages." 11 U.S.C. § 362(h) (2002) (emphasis added). As conceded by the parties here, the Debtor, as a corporation, may not recover damages under section 362(h). See In re Freemyer Indus. Pressure Inc., 281 B.R. 262, 268 (Bankr.N.D.Tex.2002) (Lynn, J.); First RepublicBank Corp. v. NCNB Tex. Nat'l Bank (In re First RepublicBank Corp.), 113 B.R. 277, 279 (Bankr.N.D.Tex.1989) (Felsenthal, J.).²

The court may, however, award damages to a corporate debtor in enforcement of the court's civil contempt power or pursuant to its equitable powers under section 105 of the Code. See In re Freemyer Indus. Pressure Inc., 281 B.R. at 269 (court relied on its equitable power under section 105 in assessing damages); In re First RepublicBank Corp., 113 B.R. at 279 (the court assessed damages for violation of stay to corporate debtor based on Rule 9020 and contempt).

Section 105 allows the court to issue orders or judgments "necessary or appropriate to carry out the provisions of ..." the Bankruptcy Code. In re Freemyer Indus. Pressure Inc., 281 B.R. at 269. The applicable provision here is section 362, the automatic stay. An award of damages in favor of a corporate debtor may provide an incentive for debtors to prosecute violations of the stay and for creditors to observe the limits imposed by the automatic stay. See id. Similarly, civil contempt as a sanction may serve to insure compliance with the automatic stay or to compensate a debtor for losses or damages sustained because of a stay violation. See McComb v. Jacksonville Paper Co., 336 U.S. 187, 191, 69 S.Ct. 497, 499, 93 L.Ed. 599 (1949); Jove Eng'g, Inc. v. IRS (In re Jove Eng'g, Inc.), 92 F.3d 1539, 1555 (11th Cir.1996).

The Fifth Circuit has recognized that a major purpose of civil contempt is to compensate a party for damages sustained as the result of a violation of a court order or injunction. See American Airlines Inc. v. Allied Pilots Ass'n, 228 F.3d 574, 585 (5th Cir.2000). The automatic stay is a self-executing injunction, and therefore, for contempt purposes, constitutes an order issuing from the bankruptcy court. See Gruntz v. County of Los Angeles, 202 F.3d 1074, 1082 (9th Cir.2000); In re Jove Eng'g, Inc., 92 F.3d at 1546.

As noted, section 362(h) requires a "willful" stay violation before damages will issue. Though section 362(h) is not applicable, the court, in determining whether damages should be awarded under either the court's equitable or contempt powers, begins its analysis by determining whether the City's conduct constitutes a willful violation of the stay. Willfulness within the context of an alleged stay violation is almost universally defined to mean intentional acts committed with knowledge of the bankruptcy petition. See Fleet Mortgage Group, Inc. v. Kaneb, 196 F.3d 265, 269-70 (1st Cir.1999); Citizens Bank of Md. v. Strumpf (In re Strumpf), 37 F.3d at 155, 159 (4th Cir.1994), rev'd on other grounds, 516 U.S. 16, 116 S.Ct. 286, 133 L.Ed.2d 258 (1995); Price v. United States (In re Price), 42 F.3d 1068, 1071 (7th Cir.1994); Lansdale Family Rests. Inc. v. Weis Food Serv. (In re Lansdale Family Rests. Inc.), ...