Wells Fargo Bank, N.A. v. Jimenez
| Decision Date | 06 August 2008 |
| Docket Number | No. 1:07-cv-0123 MCA/CEG.,1:07-cv-0123 MCA/CEG. |
| Citation | 406 B.R. 935 |
| Parties | WELLS FARGO BANK, N.A., Appellant, v. Pilar Mercedes JIMENEZ, Appellee. |
| Court | U.S. District Court — District of New Mexico |
James L Rasmussen, Keleher & McLeod, P.A., Albuquerque, NM, for plaintiff.
Michael K. Daniels, Albuquerque, NM, for defendant.
THIS MATTER comes before the Court on Appellant Wells Fargo Bank, N.A.'s Notice of Appeal [Doc. 1-2], filed February 2, 2007, and upon Appellant's objections filed August 6, 2007 [Doc. 22] to the Proposed Findings and Recommendation of the United States Magistrate Judge [Doc. 21], filed July 23, 2007. Appellant ("Bank") appeals the Bankruptcy Court's Order Denying Defendant's Motion for Summary Judgment and Granting Plaintiff's Cross Motion for Summary Judgment [Doc. 1-6; Doc. 15 in Adversary Proceeding 05-01150-m], filed December 21, 2005. This Court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158(a), and, having reviewed the briefs of the parties and the record on appeal, reverses the Bankruptcy Court and declines to accept the recommendation of the Magistrate Judge.
Appellee Pilar Mercedes Jimenez ("Debtor") filed a voluntary Chapter 7 bankruptcy petition on July 5, 2005. As of the date of her petition, she maintained a checking account and a savings account at Bank. The checking account had a balance of $5,173.33 and the savings account had a balance of $649.18. Debtor listed the checking account on her Schedule B, but described it has having a balance of $4,000. On her Schedule C, she claimed the checking account as exempt property under 11 U.S.C. § 522(d)(5). Debtor did not initially schedule the savings account.
On July 8, 2005, Bank learned that Debtor had filed for bankruptcy and immediately placed an "administrative freeze" on her account balances. Bank is not a creditor of the Debtor and did not receive notice from the Court. Rather, Bank has a policy whereby it seeks out knowledge of bankruptcy filings and places an administrative freeze on accounts held by customers who Bank ascertains have filed bankruptcy. Bank's policy, which apparently is in force nationwide, is facilitated by the federal courts' CM/ECF system, which provides subscribers with virtually instantaneous notice of court filings.
The same day Bank froze Debtor's accounts, it sent letters regarding each account to the Chapter 7 Trustee in Debtor's case. The letters stated, in part:
[Bank] has received notification of [Debtor's] bankruptcy petition. Sections 541 and 542 of the Bankruptcy Code require [Bank] to act in good faith to preserve the status quo and to follow your directions with regard to property of the estate. When [Bank] received notice, it checked the value of the debtor(s)'s account, less identifiable Social Security payments, on the filing date and the notice date. [Bank] understands that the smaller of these figures ... became property of the bankruptcy estate (as such, the "Estate Funds"). The Estate Funds are now in bankruptcy status, which means they are payable only to or upon your order.
The Estate Funds will remain in bankruptcy status until the earlier of receipt of direction from you on their disposition or September 12, 2005, which is 31 days after the scheduled First Meeting of Creditors. If you wish [Bank] to take any other action with the Estate Funds, please check the appropriate boxes below and return a signed copy of this letter to [the Bank's Operations Manager].
Attached to Bank's letters to the Trustee was a form listing four options from which the Trustee could select. The form stated, in part:
[Trustee] hereby directs [Bank] to take the following action with regard to Estate Funds:
[] Release Estate Funds totaling $_______ to the customer.
[] Turn over Estate Funds totaling $_____ to the Trustee.
[] Take no action with the balance of the Estate Funds until such funds are not part of the Bankruptcy Estate.
[] Other (please give specific instructions):_________
Signed: _____________, Bankruptcy Trustee
Bank also sent letters to Debtor's counsel, which stated in part:
[Bank] has received notification of [Debtor's] bankruptcy filing. When [Bank] received notice, it checked the value of [Debtor's] account, less identifiable Social Security payments, on the filing date and the notice date. The smaller of these figures ... became property of the bankruptcy estate (the "Estate Funds"). The Estate Funds are now in bankruptcy status, which means they are no longer available to [Debtor].
[Bank] is required by operation of Sections 541 and 542 of the Bankruptcy Code to act in good faith to preserve the status quo and so must follow the trustee's direction with regard to the Estate Funds. Accordingly, [Bank] has asked for instructions from the trustee. As you know, the trustee has 30 days from the first meeting of creditors to object to a claim of exemption for the Estate Funds and ownership of claimed exempt property remains with the bankruptcy estate until such time passes or the trustee directs otherwise.
[Bank] is prepared to immediately follow the trustee's direction regarding the Estate Funds and you may be able to expedite the trustee's decision. Alternatively, please provide [Bank] with a copy of [Debtor's] claims exemptions for funds that should re-vest in [Debtor] at the end of the objection period.
Debtor initiated an adversary proceeding against Bank on July 11, 2005, after her counsel was unsuccessful in persuading Bank to release the funds to her. Debtor amended her schedules on July 14, 2005 to add the savings account and to claim exemptions for the full value of both accounts.
Debtor's Complaint for Turnover of Property and Damages alleged that Bank's administrative freeze and failure to honor checks drawn on the checking account violated the automatic stay. Debtor petitioned the Bankruptcy Court to order Bank to turn over the funds in the accounts to Debtor, and to award her compensatory and punitive damages, as well as attorney's fees. Bank moved for summary judgment on July 14, 2005.
On July 15, 2005, the Trustee authorized Bank to release $4,000 to Debtor. Bank accordingly reduced its hold on the checking account to permit Debtor to access up to $4,000. The parties nevertheless continued to litigate the propriety of the administrative freeze, and Debtor filed a response to Bank's motion, as well as her own cross motion for summary judgment on July 23, 2005.1
On December 21, 2005, the Bankruptcy Judge issued a Memorandum Opinion and an Order denying Bank's motion for summary judgment and granting Debtor's motion for summary judgment. Though the Bankruptcy Court found in favor of Debtor regarding Bank's liability for violating the automatic stay, it subsequently dismissed her claim for damages. After holding an evidentiary hearing, the Bankruptcy Court found that there was no evidence to support an award of actual damages and that punitive damages were unwarranted.2 The Bankruptcy Court's Final Order Dismissing Plaintiff's Claims was entered on January 22, 2007.
Bank appealed the Bankruptcy Court's summary judgment ruling. This Court referred the matter to the Magistrate Judge for recommended disposition. The Magistrate Judge recommended affirming the decision of the Bankruptcy Judge. [Doc. 21.] Bank filed objections to the Magistrate Judge's proposed disposition. [Doc. 22.]
Bank appeals from a grant of summary judgment in favor of the Debtor. Bank has also filed timely objections to the Magistrate Judge's Proposed Findings and Recommended Disposition.
Timely and specific objections to a Magistrate Judge's report trigger a de novo review by the District Judge. 28 U.S.C. § 636(b)(1); In re Key Energy Res. Inc., 230 F.3d 1197, 1200 (10th Cir.2000). In reviewing a bankruptcy court decision under 28 U.S.C. § 158(a), the district court applies the same standards of review that govern appellate review in other cases. In re Hodes, 402 F.3d 1005, 1008 (10th Cir. 2005). A grant of summary judgment is reviewed de novo, applying the same legal standard as the court below. Byers v. Albuquerque, 150 F.3d 1271, 1274 (10th Cir.1998). Summary judgment is appropriate "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).
This appeal presents a question of law: Did Bank's imposition of an "administrative freeze" that prevented Debtor from accessing the deposit accounts in question violate the automatic stay? Whether a party's actions violate the automatic stay is a question of law that is reviewed de novo. In re Taumoepeau, 523 F.3d 1213, 1218 (10th Cir.2008). Before reaching this question, however, the Court must consider the matter of Debtor's standing.
Debtor's standing to assert a violation of the automatic stay is a threshold issue. Standing is a component of the "Cases" or "Controversies" requirement for federal jurisdiction and may be raised by any party at any time, including sua sponte by the Court. New England Health Care Employees Pension Fund v. Woodruff, 512 F.3d 1283, 1288 (10th Cir. 2008). Whether a plaintiff, Debtor in this case, has standing is a legal question upon which Debtor bears the burden. Woodruff, 512 F.3d at 1288. The Bankruptcy Court held that Debtor does have standing. The Magistrate Judge concluded that Bank had abandoned the question of Debtor's standing. For the reasons set forth below, this Court believes that the Bankruptcy Court was in error and that Debtor does not have standing to assert a violation of the automatic stay under the facts of this case.
To establish standing, the plaintiff must show:...
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