Vu v. Lin (In re Vu)

• Decision Date: 07 November 2018
• Docket Number: Adv. No. 15-61,Case No. 14-13852REF
• Citation: 591 B.R. 596
• Parties: IN RE: Tam Q. VU, Debtor Tam Q. Vu, Plaintiff v. Young [sic] Lin, Defendant
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

591 B.R. 596

IN RE: Tam Q. VU, DebtorTam Q. Vu, Plaintiff

v.Young [sic] Lin, Defendant

Case No. 14-13852REF

Adv. No. 15-61

United States Bankruptcy Court, E.D. Pennsylvania.

Signed November 7, 2018

Alaine V. Grbach, Alaine V. Grbach, Esquire, Lancaster, PA, for Plaintiff.

Eleanor Hui Chen, Eleanor Hui Chen Esq., Philadelphia, PA, for Defendant.

MEMORANDUM OPINION

RICHARD E. FEHLING, United States Bankruptcy Judge

I. INTRODUCTION

Defendant's conduct in barring Plaintiff from entering Plaintiff's restaurant constituted a willful violation of the automatic stay that caused Plaintiff to suffer actual damages to his property ($7,250) and emotional distress ($2,000), which combined is $9,250. I will also impose on Defendant, as part of Plaintiff's actual damages, a close approximation of Plaintiff's attorney's fees in the amount of $3,500. Defendant's conduct in violating the stay was patently egregious and outrageous, thereby requiring the imposition of punitive damages in the amount of $5,000. The award of punitive damages is intended to punish Defendant and will deter him (hopefully) from such blatant transgressions of the automatic stay in the future. The total amount owed to Plaintiff from Defendant therefore is $17,750 and I will enter judgment in favor of Plaintiff and against Defendant in that amount.

On February 18, 2015, Plaintiff/Debtor, Tam Q. Vu ("Plaintiff"), initiated this adversary proceeding against Defendant/Landlord, Yung Lin ("Defendant"), seeking damages under 11 U.S.C. § 362(k)(1) for violating the automatic stay. I held the trial on April 27, 2018, and directed the parties to file post-hearing briefs, which they did.¹ This matter is now ripe for decision.

II. FACTUAL AND PROCEDURAL BACKGROUND

Sometime in January 2013, Plaintiff purchased the assets of a restaurant business operating at 1930 Columbia Ave., Lancaster, PA (the "Premises"), from Kar Thiem Lee ("Mr. Lee") for $73,000. On January 15, 2013, as part of the acquisition of the restaurant, Plaintiff entered into an Assignment and Assumption of Lease with DFY Realty Management, Inc. ("DFY"), the owner of the Premises. Defendant is the President of DFY.

Beginning almost immediately, in April 2013, Plaintiff had difficulty making timely lease payments to DFY. In February 2014, DFY filed a state court eviction action against Plaintiff. The state court entered a judgment of eviction against Plaintiff and in favor of DFY on April 24, 2014. The Sheriff scheduled eviction of Plaintiff from the Premises on May 13, 2014, but Plaintiff stayed the eviction when he filed his bankruptcy petition on that date. Defendant received notice of Plaintiff's bankruptcy filing the next day, May 14, 2014.

After Plaintiff filed his bankruptcy petition, he paid rent to DFY for approximately two months. Thereafter, his payment on the lease became sporadic. Sometime in January 2015, upon the poor health of both Plaintiff and his wife, Plaintiff decided to surrender the Premises to Defendant effective on January 31, 2015. On or about January 28, 2015,² Defendant entered the Premises (which Plaintiff had not yet surrendered) and changed the locks. As a result, Plaintiff was unable to enter the Premises to retrieve his personal property.³

On January 29, 2015, counsel for Plaintiff sent counsel for Defendant a letter advising her that Defendant had violated the automatic stay by locking Plaintiff out of the Premises. The letter stated that Plaintiff desired to remove his personal property from the Premises and have an auctioneer catalogue the property for sale. Plaintiff's counsel requested that Defendant's counsel contact her for Plaintiff to arrange for speedy liquidation of the personal property. As Defendant had done previously, counsel for Defendant acted with insouciance, ignoring the letter, and she did not reply. Plaintiff was provided no opportunity to enter the Premises to catalogue or retrieve his personal property. As a result, Plaintiff filed the complaint now before me seeking actual damages (including attorneys' fees) and punitive damages against Defendant under 11 U.S.C. § 362(k)(1) for violating the automatic stay.

III. DISCUSSION

A. Plaintiff incorrectly claimed that the Trustee had abandoned the restaurant assets and other property from the estate before Defendant's actions.

Plaintiff alleged in his brief for the first time that the Chapter 7 Trustee had abandoned all assets to Plaintiff on January 7, 2015.⁴ This abandonment was said to have occurred a couple weeks before Defendant allegedly violated the automatic stay.

Plaintiff appeared to rely on (but did not definitively plead) Section 362(a)(3) of the Bankruptcy Code as the basis for the alleged stay violation. If Plaintiff were correct in alleging that the assets had been abandoned from the estate on January 7, 2015, however, no violation of the stay could have occurred. The stay of Section 362(a)(3) applies to, and protects against, acts to obtain possession of, or exercise control over, property of the estate. 11 U.S.C. § 362(a)(3). It neither applies to, nor protects against, acts to obtain possession of, or control over, property abandoned from the estate which would thereafter revert back to a debtor. See Fields v. Bleiman, 267 Fed. Appx. 144, 146 (3d Cir. 2008) ; 11 U.S.C. § 362(c)(1).

On June 20, 2018, I ordered the parties to file supplemental briefs to address the abandonment issue. I also asked Plaintiff to identify the subsection of Section 362(a) on which he relies for his claim of a stay violation. All briefs have been filed and the abandonment issue is ready for disposition.

Plaintiff's supplemental brief now clearly identifies Section 362(a)(3) as the basis for his demands.⁵ Plaintiff also retracts the statement in his first brief charging that the Chapter 7 Trustee had abandoned all assets to Plaintiff on January 7, 2015. To the contrary, the Trustee filed a "no asset" report on January 7, 2015, but did not abandon the property from the estate on that day.⁶ Plaintiff now alleges that under Section 544(c) of the Bankruptcy Code, 11 U.S.C. § 544(c), such property was deemed to have been abandoned to Plaintiff upon the closing of the main bankruptcy case. Because Plaintiff now acknowledges that the property in issue had not been abandoned by the Trustee, Plaintiff's Section 362(a)(3) action remains viable.

Plaintiff's supplemental brief, however, states that Defendant was wrong in taking control over the property because Plaintiff had exempted it in his Schedule C.⁷ Plaintiff's second red herring appears at first glance to present another self-defeating obstacle to Plaintiff's recovery under Section 362(a)(3). Property claimed by a debtor as exempt becomes exempt and is no longer property of the bankruptcy estate unless, 30 days after the creditors' meeting, the trustee or another party in interest files an objection to a debtor's claimed exemptions. Taylor v. Freeland & Kronz, 938 F.2d 420, 423 (3d Cir. 1991), aff'd 503 U.S. 638, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992) ; In re Mollo, 196 Fed. Appx. 102, 104 (3d Cir. 2006)citing Taylor.

The deadline for objections to Plaintiff's exemptions was February 6, 2015, 30 days after the January 7 creditors' meeting. Neither the Chapter 7 Trustee nor any other party objected to Plaintiff's claim of exemptions. All of the property that Plaintiff had claimed as exempt therefore finally became exempt and was no longer property of the estate on February 7, 2015. Before that date, however, the property claimed as exempt remained property of the estate. Because Defendant's conduct occurred before February 7, 2015 in all respects, Plaintiff's request for sanctions for Defendant's violation of the automatic stay remains viable. The restaurant and other personal property at issue in this dispute were property of the estate at all relevant times of Defendant's conduct.

B. Defendant violated the automatic stay when he changed the locks to the Premises, and he further violated the stay when he failed to respond to Plaintiff's request for an opportunity to access the Premises to retrieve and catalogue his property.

The filing of a bankruptcy petition operates as an automatic stay of all collection activities, including "any act to obtain possession of property of the estate or to exercise control over property of the estate." 11 U.S.C. § 362(a)(3). The automatic stay is one of the fundamental protections afforded to a debtor by the Bankruptcy Code. Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr. ), 973 F.2d 1065, 1074 (3d Cir. 1992) ; In re Traversa, 585 B.R. 215, 219 (Bankr. E.D. Pa. 2018). The scope of the automatic stay is broad and provides a debtor with a breathing spell from his creditors. The automatic stay stops all harassment and collection efforts and maintains the status quo between a debtor and his creditors. Univ. Med. Ctr., 973 F.2d at 1074 ; Traversa, 585 B.R. at 219.

Section 362(k)(1) of the Bankruptcy Code provides that "an individual injured by any willful violation of a stay ... shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages." 11 U.S.C. § 362(k)(1). As the Third Circuit instructed:

It is a willful violation of the automatic stay when a creditor violates the stay with knowledge that the bankruptcy petition has been filed. Willfulness does not require that the creditor intend to violate the automatic stay provision, rather it requires that the acts which violate the stay be intentional.... [A] creditor's good faith belief that he is not violating the automatic stay provision is not determinative of willfulness.

Lansdale Family Rests., Inc. v. Weis Food Serv. (In re Lansdale Family Rests., Inc. ), 977 F.2d 826, 829 (3d Cir. 1992) ; see also Lansaw v. Zokaites (In re Lansaw ), 853 F.3d 657, 664 n.4 (3d Cir. 2017).

Defendant received notice of Plaintiff's bankruptcy filing on May 14, 2014. I find and conclude, therefore, that Defendant had actual knowledge of Plai...