7 ABR 439
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA
In re:
RICHARD BOYD BELEW, JR., and MARY COLLEEN BELEW,
Debtors.
Case No. A03-00597-DMD
Chapter 7
MEMORANDUM ON THE DEBTORS’ MOTION FOR SANCTIONS FOR
VIOLATION OF THE AUTOMATIC STAY
A hearing on the debtors’ motion for sanctions for violation of the automatic stay was held on September 2, 2003. Debtors Richard and Colleen Belew appeared on their own behalf. Chris Canterbury appeared on behalf of Burton and Betty Fields. Betty Fields also attended.
This court has jurisdiction over this matter pursuant to 28 U.S.C. § 157(b)(2), 11 U.S.C. § 362 and the United States District Court’s order of reference. Having reviewed the debtors’ motion and Ms. Fields’s opposition and considered the testimony and documentary evidence presented at the hearing, I have concluded that the debtors’ motion must be granted. The debtors will be awarded actual and punitive damages for the Fields’s willful violation of the stay.
Case Background
Between July of 2002 and June 10, 2003, the debtors resided in rental property in Chugiak, Alaska. Their landlords were Burton and Betty Fields. Betty Fields, who described herself at the hearing as a “semi-retired real estate broker,” is the one who had the majority of the contact with the debtors.
The debtors experienced difficulty in making their rent payments on time and, during the course of their tenancy with the Fields, they were served with four notices of eviction for nonpayment of rent. The first notice was served on December 9, 2002; the last one was served on May 9, 2003. The Fields filed a complaint for forcible entry and detainer against the debtors in state court on May 19, 2003. The eviction hearing was scheduled for May 30, 2003.
7 ABR 440
The debtors filed their chapter 7 petition the day before the eviction hearing, on May 29, 2003. Mary Belew testified that she contacted Alaska Legal Services the day the petition was filed and asked if their bankruptcy would stop the eviction. She said she was told that the bankruptcy would do this and that she should bring a copy of her petition to the eviction hearing. She was also told to contact the landlord to advise of the bankruptcy filing.
The Belews tried to contact the Fields by telephone that evening, without success. The next morning, before the eviction hearing, Richard Belew spoke to Betty Fields on the phone at about 8:00 a.m. and informed her of the bankruptcy filing. Mrs. Fields said she was going to attend the hearing in any event. Richard also attended the hearing. He said he tried to provide the state court with a copy of his bankruptcy petition, but the judge wouldn’t look at his papers. He said he was told his bankruptcy was irrelevant to the eviction hearing because he didn’t have an equity interest in the property. A partial judgment for possession of the rental property and a writ of assistance were entered in favor of the Fields at the time of the hearing. The debtors were told to vacate the rental property by June 7, 2003, at 5:00 p.m.
After the eviction hearing, the debtors tried to contact an attorney for legal advice. Through Alaska Legal Services, they were finally able to speak to an attorney about their situation. They were advised to file a notice of automatic stay with the state court. They did so on June 5, 2003. They also hand delivered a copy of the notice to Betty Fields the same day.
On Saturday, June 7, 2003, the debtors spent the entire day packing. They didn’t intend to stay on indefinitely in the property, but thought that after they had filed the notice of automatic stay they would have a little more time to move. After they had dinner that evening, at about 5:15 p.m., they found that they had no running water in the rental unit. The Fields had turned off their water. 1.
The debtors called the police because they didn’t think the Fields would voluntarily
turn the water back on. A police officer arrived around 6:00 p.m. and discussed the situation with the Fields, whose home was located on the same property as the rental unit. During the course of the discussion, Betty Fields informed the officer that a writ of assistance was in effect and that the Belews could be evicted as early as the following Monday. 2.
On Monday morning, June 9, 2003, Richard Belew contacted the State Troopers to see if the writ for eviction was still in force. He was told that he was scheduled to be removed by the Troopers, but an exact time had not yet been set. 3.
Mary Belew and the debtors’ two young children moved out on June 9. Richard Belew moved out on June 10. They tried to get into a shelter, without success. They stayed in an inexpensive hotel for 2 weeks. Mary Belew’s parents put the cost of the hotel, about $1,800.00, on their credit cards. The Belews have repaid Mary’s parents for this expense. The Belews then shared the small apartment where Mary’s parents lived for about a week, and stayed with friends for another week. The Belews also had to kennel their cat and put their personal items in storage. They have since moved into a rental unit in Anchorage.
Betty Fields called the Troopers on the afternoon of June 10th to inform them that the Belews had moved out, and the writ of assistance was recalled. 5.
holding these items until the Belews can arrange to pick them up, and do not intend to charge them for storage.
I. Scope of the Automatic Stay
Section 362(a)(1) automatically stays:
the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the [bankruptcy case], or to recover a claim against the debtor that arose before the commencement of the [bankruptcy case]. 6.
The filing of a bankruptcy petition also stays any act to obtain possession of, or exercise control over, property of the bankruptcy estate, 7.
The language of § 362(a) is unambiguous and clearly prohibits the continuation of judicial
actions against the debtor once a bankruptcy petition has been filed. 11.
A majority of courts, including the Ninth Circuit, have determined that acts taken in violation of the automatic stay are void. 20.
A creditor who receives notice of a debtor’s bankruptcy filing has an affirmative duty to cease all activity with regard to the collection or enforcement of claims against that debtor. 24.
II. The Fields Have Violated the Automatic Stay
Examining the chain of events that occurred after the Belews filed their bankruptcy petition, it is clear that the automatic stay was violated by the Fields. First, the eviction hearing should not have been held the day after the petition was filed. This judicial proceeding was stayed in accordance with § 362(a)(1), even though the Belew’s rental agreement had terminated, under state law, prior to the filing of the petition. 29.
The Fields filed their F.E.D. action against the Belews before the bankruptcy petition was filed. This was a judicial action against the debtors that was stayed by § 362(a) once the Belews filed bankruptcy. The Fields knew of the bankruptcy filing and should have obtained relief from stay in the bankruptcy court before continuing with the eviction action. Because they failed to do so, the eviction hearing on May 30th violated the stay. Additionally, the partial judgment for possession and writ of assistance were entered in violation of the stay, and are void. 33.
The Fields also violated the stay when they turned off the water to the rental unit on June 7th. This act, committed while the debtors still occupied the property, was another attempt by the Fields to enforce their claim post-petition. The Fields also violated state law by turning off the water while the Belews were still occupying the property. 34.
Finally, Betty Fields did not recall the writ of assistance until after the debtors had moved out. She made it clear to the officer who visited the premises on June 7th, when the water had been turned off, that she intended to have the writ served if the debtors didn’t move out. She also called the Troopers on the following Monday, June 9th, to advise them that the debtors were still occupying the property. Though she knew the Belews had filed bankruptcy, she pressed on with the state court proceeding and the enforcement of her claim against the debtors.
The Fields’s conduct is not excused by the fact that the debtors’ rental agreement had been terminated prepetition, nor by the fact that the rental unit is not property of the bankruptcy estate. The stay stops the initiation or continuance of all claims against a debtor. 35.
of the Belew’s bankruptcy, they proceeded at their peril when they pressed on with the F.E.D. action. The Fields should have obtained relief from stay from this court before continuing to prosecute their claim against the debtors.
II. Willful Violation of the Stay
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.” 36.
Betty Fields knew that the Belews had filed a bankruptcy petition. She was given verbal notification of the bankruptcy on the morning of the eviction hearing, and was served with written notification about 5 days later. Yet she continued to prosecute the F.E.D. action, turned off the water to the rental unit and failed to recall a writ of assistance. She intended to do all of these acts, and each one of them violated the automatic stay. Her belief that this conduct was justified is no defense. She has willfully violated the stay.
Section 362(h) is mandatory; when a willful stay violation has occurred, actual damages must be awarded to the individuals who have been injured by such violation. Here, the debtors testified that they had to live in an inexpensive hotel for two weeks, had to kennel their cat and had to place their items in storage after they moved out because they otherwise would have been
homeless. All the shelters were full and their options for staying with friends and family members were limited.
The Belews initially testified that they spent about $1,800.00 for the hotel. Mary Belew testified on cross-examination that they stayed in the hotel from June 9th through about June 23rd, a period of 15 days, at a cost of $96.32 per day. 39.
While some measure of damages is appropriate for the debtors’ emergency lodging expense, awarding the Belews the full amount they paid for the hotel would be inappropriate. Had the Fields immediately pursued relief from stay upon learning of the Belews’ bankruptcy filing, they could have received an order from this court permitting them to continue the F.E.D. action in about 15 days, or by June 16th, 41.
In addition to their actual damages, punitive damages will be awarded here. Punitive damages for willful violation of the stay should only be awarded “in appropriate circumstances” upon a showing of “reckless or callous disregard for the law or rights of others.” 42
Conclusion
The debtors’ motion for sanctions for Burton and Betty Fields’s willful violation of the stay will be granted. The debtors are awarded actual damages, in the sum of $722.40, against both Burton and Betty Fields, and punitive damages of $200.00 against Betty Fields only, for the Fields’s violation of 11 U.S.C. § 362(h).
An order and judgment will be entered consistent with this memorandum.
DATED: September 30, 2003.
BY THE COURT
DONALD MacDONALD IV
United States Bankruptcy Judge
N O T E S:
1. Betty Fields conceded that she should not have turned the water off until the Belews “were officially evicted by the judicial office which would be happening the first of the following week if they were not out.” See Aff. of Betty Fields, filed Aug. 25, 2003 [Docket No. 24] at ¶ 2.
2. Id. at ¶ 3.
3. See Debtors’ Mem. for Mot. for Sanctions, filed August 5, 2003 [Docket No. 19], at p. 3.
4. See Aff. of Betty Fields, filed Aug. 25, 2003 [Docket No. 24], at ¶ 5.
5. Id.
6. 11 U.S.C. § 362(a)(1).
7. 11 U.S.C. § 362(a)(3).
8. 11 U.S.C. § 362(a)(6).
9. 11 U.S.C. § 362(a).
10. 11 U.S.C. § 101(15).
11. Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 (9th Cir. 2002).
12. Superior Propane v. Zartun (In re Zartun), 30 B.R. 543, 545 (B.A.P. 9th Cir. 1983).
13. Eskanos, 309 F.3d at 1214.
14. Phoenix Bond & Indemnity Co. v. Shamblin (In re Shamblin), 890 F.2d 123, 125 (9th Cir. 1989).
15. Franchise Tax Bd. v. Roberts (In re Roberts), 175 B.R. 339, 343 (B.A.P. 9th Cir. 1994).
16. Robinson v. Chicago Hous. Auth., 54 F.3d 316, 317-18 (7th Cir. 1995); Cuffee v. Atlantic Bus. and Cmty. Dev. Corp. (In re Atlantic Bus. and Cmty. Dev. Corp.), 901 F.2d 325, 327-28 (3rd Cir. 1990); In re Smith Corset Shops, 696 F.2d 971, 976 (1st Cir. 1982).
17. See, e.g., Kir Temecula v. LPM Corp. (In re LPM Corp.), 300 F.3d 1134, 1136-37 (9th Cir. 2002).
18. Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1188 (9th Cir. 2003).
19. Zartun, 30 B.R. at 545.
20. Schwartz v. United States (In re Schwartz), 954 F.2d 569, 572 (9th Cir. 1992). See also Kalb v. Feuerstein, 308 U.S. 433, 438 (1940); Ellis v. Consol. Diesel Elec. Corp., 894 F.2d 371, 372-73 (10th Cir. 1990), In re 48th St. Steakhouse, 835 F.2d 427, 431 (2d Cir. 1987); Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir. 1982) [all cited in Schwartz].
21. Eskanos, 309 F.3d at 1214; citing Hillis Motors, Inc. v. Hawaii Auto. Dealers’ Ass’n, 997 F.2d 581, 585 (9th Cir. 1993).
22. Shamblin, 890 F.2d at 125, citing In re Stringer, 847 F.2d 549, 551 (9th Cir. 1988); Kalb, 308 U.S. at 443 [Court found that state court was deprived of jurisdiction over foreclosure proceeding after bankruptcy was filed].
23. Gruntz v. County of Los Angeles (In re Gruntz), 202 F.3d 1074, 1087 (9th Cir. 2000).
24. Eskanos, 309 F.3d at 1214; Schwartz, 954 F.2d at 572.
25. Eskanos, 309 F.3d at 1214.
26. LPM Corp., 300 F.3d at 1136-37; Schwartz, 954 F.2d at 572.
27. In re Gagliardi, 290 B.R. 808, 818 (Bankr. D. Colo. 2003).
28. Eskanos, 309 F.3d at 1214.
29. See A.S. 34.03.220(b).
30. A.S. 34.03.270.
31. A.S. 34.03.280.
32. A.S. 34.03.285; Ak. Civil R. 85.
33. See Gruntz, 202 F.3d at 1087.
34. A.S. 34.03.280.
35. 11 U.S.C. § 362(a)(1). Although there are limited exceptions to the automatic stay, none of them are applicable here. See 11 U.S.C. § 362(b).
36. 11 U.S.C. § 362(h).
37. Pinkstaff v. United States (In re Pinkstaff), 974 F.2d 113, 115 (9th Cir. 1992).
38 Id.
39. Mary wasn’t sure if this amount included tax. She didn’t have copies of receipts with her at the hearing.
40. $96.32 x 15 days = $1,444.80.
41. See 11 U.S.C. § 362(d); AK LBR 4001-1(b)(1) [which requires 15 days’ notice by mail of a motion for relief from stay]. In appropriate circumstances, this court has shortened the time for considering a motion for relief from stay, and relief has been granted in 7 to 10 days.
42. Goichman v. Bloom (In re Bloom), 875 F.2d 224, 228 (9th Cir. 1989).