Opinion
Case No. 98-10301-SSM, Adversary Proceeding No. 99-1002
September 13, 1999
Michael H. Ditton, Esquire, Alexandria, VA, Plaintiff pro se
James A. Murphy, Esquire, LeClair Ryan, P.C., Richmond, VA, of Counsel for defendant Capital One
C. Thomas Brown, Esquire, Silver Brown, P.C., Fairfax, VA, of Counsel for defendant Crestar Bank
Cindra M. Dowd, Esquire, Glasser and Glasser, PLC, Norfolk, VA, of Counsel for defendants Bank of America National Trust and Savings Assn. and Federal Home Loan Mortgage Corporation
MEMORANDUM OPINION
Before the court is the motion of defendants Capital One Financial Corporation and Capital One Services, Inc. (collectively, "Capital One") for summary judgment. At a hearing held on September 7, 1999, the court heard the arguments of the parties and took the motion under advisement. Upon review of the record and the applicable law, the court grants the motion for summary judgment and dismisses the remaining count against Capital One.
Background
The background of this case is set forth at length in the prior memorandum opinion dated March 31, 1999, and will not be repeated except to the extent necessary to place the present motion in context. Briefly, Capital One had sued the debtor in the General District Court for the City of Richmond for an unpaid balance due on a Visa credit card and had obtained a judgment against the debtor which it attempted to enforce by means of a garnishment against his bank accounts at Crestar Bank. After the garnishment was quashed, the debtor filed an action against Capital One and Crestar in the Circuit Court of Prince William County. The claims against Capital One included violations of the Federal Telephone Consumer Protection Act, the Fair Debt Collection Practices Act, fraud, conspiracy to injure in reputation, trade, business or profession, abuse of process, and use of intercepted wire, oral and/or electronic communications.
On January 13, 1998, the debtor filed a voluntary chapter 7 petition in this court. For reasons that are unexplained, he did not include Capital One on the list of creditors ("the mailing matrix") filed with the petition, and Capital One was not mailed a copy of the notice of commencement of case. On January 16, 1998, however, his bankruptcy attorney mailed a suggestion of bankruptcy to Capital One's "agent" of record in the Richmond General District Court action. Capital One's in-house litigation counsel states in his affidavit that Capital One did not receive notice of the bankruptcy until January 21, 1998. On that same day Capital One's outside counsel filed a demurrer in the Prince William Circuit Court action which contained, as part of the prayer for relief, a "standard" request for attorney's fees.
The notice of commencement of case was mailed on January 16, 1998. On February 6, 1998, the debtor filed with this court schedules that listed Capital One as the holder of an unsecured claim. However, the amended mailing matrix — which was not filed until April 8, 1998 — still did not include Capital One. As a result, Capital One was not mailed notice of the debtor's discharge, either.
Apparently, Capital One was not represented by an attorney in that action, but by an employee.
The affidavit does not state what form the notice took, but presumably it was the suggestion of bankruptcy since, as noted above, Capital One was not sent notice by this court. The court also notes that the suggestion of bankruptcy was not mailed to the address shown for Capital One on its warrant in debt but to a separate address for reporting lost and stolen cards. More significantly, perhaps, the address shown in the certificate of service contained no ZIP code.
The demurrer was initially noticed for a hearing to be held on March 13, 1998. On March 11, 1998, the debtor mailed to Capital One's outside counsel a suggestion of bankruptcy. Capital One's counsel states in his affidavit that he received it the following day, and that it was the first actual notice he had of the debtor's bankruptcy filing. Capital One then continued the hearing on the demurrer to March 20, 1998. The debtor was not present on that date. Nor, apparently, was a court reporter. In his affidavit, Capital One's attorney states that at the hearing the state court judge ruled, based on his own research, that the automatic stay did not prevent consideration of the demurrer. Capital One's attorney also states in his affidavit that he did not request any attorney's fees at the hearing. On March 23, 1998, the state court judge entered an order sustaining the demurrers of both Capital One and Crestar, and dismissing all the counts against Capital One with prejudice, except for the fraud count, as to which the debtor was granted 21 days to file an amended motion for judgment. The proposed order which the state court judge marked up did not seek attorney's fees from the debtor, and none were awarded. The debtor's subsequent appeal to the Supreme Court of Virginia was ultimately dismissed.
The debtor received his discharge on April 23, 1998. Approximately three months after his case was closed, the debtor filed a motion to reopen. That motion was granted on November 5, 1998, and on January 5, 1999, the debtor filed the present adversary proceeding against Capital One and several other defendants asserting a variety of claims. Relevant to the present motion, two counts of the complaint allege claims against Capital One:
Count I Damages and sanctions for violating the automatic stay
Count VI Vacate and declare void the order dismissing the debtor's state court action against Capital One and Crestar
On March 10, 1999, this court dismissed Count VI for failure to state a claim upon which relief could be granted: first, because the automatic stay, in the court's view, did not bar a party who was a defendant in a prepetition suit brought by the debtor from seeking dismissal; and second, because the debtor's causes of action, at the time they were dismissed by the state court, were no longer property of the bankruptcy estate. The court declined to dismiss Count I, however, because the demand for attorney's fees was based on the debtor's prepetition conduct and was therefore an act to collect a prepetition claim. The present motion for summary judgment joins issue on the question of whether Capital One's demand for attorney's fees was "willful" and whether the defendant has shown that he suffered any damages.
The court's reasoning was set forth orally on the record at the hearing on Capital One's motion to dismiss. A more complete discussion of the issue is set forth in the memorandum opinion of March 31, 1999, which addressed the separate motion to dismiss filed by Crestar Bank.
Discussion I.
Under Federal Rule of Civil Procedure 56(c), as incorporated by Federal Rule of Bankruptcy Procedure 7056, 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." In ruling on a motion for summary judgment, a court should believe the evidence of the non-movant, and all justifiable inferences must be drawn in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). At the same time, the Supreme Court has instructed that summary judgment "is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1985). Additionally, not every dispute as to the facts will preclude the entry of summary judgment, but only those disputes over facts that might affect the outcome of the suit under the governing law. Anderson at 248, 106 S.Ct. at 2510. Finally, although a moving defendant has the burden of showing that there is no genuine issue of fact, the plaintiff is not thereby relieved of his own burden of producing evidence that would support a jury verdict. Id. at 256, 106 S.Ct. at 2514.
II. A.
Section 362(h), Bankruptcy Code, allows an individual debtor who is injured by a willful violation of the automatic stay to recover from the offending creditor compensatory damages, punitive damages, and attorney's fees. As stated in this court's prior memorandum opinion, a violation of the automatic stay is "willful" where the creditor is aware of the bankruptcy filing and intentionally engages in conduct that violates the stay. In re Peterkin, 102 B.R. 50, 53 (Bankr. E.D. N.C. 1989); In re Manuel, 212 B.R. 518, 519 (Bankr. E.D. Va. 1997) ("A `willful violation' does not require a specific intent to violate the automatic stay. Rather the statute provides for damages upon a finding that the defendant knew of the automatic stay and that the defendant's actions which violated the stay were intentional"). See Budget Service Co. v. Better Homes of Va., 804 F.2d 289, 292-93 (4th Cir. 1986) (affirming award of sanctions under § 362(h) where the creditor "knew of the pending petition and intentionally attempted to repossess the vehicles in spite of it")
As noted above, Capital One was not included on the list of creditors filed by the debtor with his bankruptcy petition and was therefore never sent the standard notice of commencement of case that was mailed out for the clerk by the Bankruptcy Noticing Center on January 16, 1998. Additionally, the affidavit of Capital One's outside counsel that he was unaware of the bankruptcy filing until he received the suggestion of bankruptcy from the debtor on March 12, 1998, stands unrebutted. The issue, however, is not whether the attorney was aware of the bankruptcy filing, but whether his client — that is Capital One — was aware of the bankruptcy in sufficient time to have alerted its outside counsel. Since Capital One received no notice from the court, the question is whether the mailing on January 16, 1998, of the suggestion of bankruptcy to Capital One in connection with Capital One's own suit in the Richmond General District Court was sufficient to put Capital One on notice of the debtor's bankruptcy prior to January 21, 1998.
Capital One's in-house litigation counsel attempts to sidestep the issue by asserting that Capital One had set up a special post office box for receiving bankruptcy notices — the address of which could be obtained by telephoning Capital One's customer information department — and that the notice it did receive had been directed to a different address (with the implied suggestion that whoever processed it did not recognize its significance). At oral argument, however, it was conceded by Capital One's attorney that the bankruptcy noticing address — or even the fact that there was a special bankruptcy noticing address — was not disclosed on any billing notices sent to the debtor. A consumer financial institution must know that some number of its account holders will file for bankruptcy. A company or organization is responsible for creating appropriate internal procedures to respond to notices of bankruptcy filing and cannot simply adopt a head-in-the-sand approach. The suggestion of bankruptcy in the debtor's case, moreover, was not directed to a lock-box, but rather to an address designated for the receipt of correspondence. While the suggestion of bankruptcy referred only to the Richmond General District Court litigation and not the Prince William Circuit Court litigation, it beggers the imagination to suggest that Capital One could not easily have run a cross-check to determine if the debtor was a party to any other litigation or collection efforts. It is particularly egregious that Capital One, by its own admission, had actual knowledge of the bankruptcy filing at least by January 21, 1998, but never communicated that knowledge to the attorney who was representing it in the Prince William Circuit Court litigation. That attorney, as noted above, only learned of the filing on March 12, 1998, when he received the suggestion of bankruptcy mailed by the debtor.
Nevertheless, where notice of a bankruptcy filing is mailed to a corporation or other organization, there clearly must be some finite period of time for the corporation or organization to bring the matter to the attention of those employees and outside agents (attorneys and collection agents) responsible for litigation or collection efforts. The affidavit of Capital One's in-house litigation counsel represents that Capital One did not receive the suggestion of bankruptcy until January 21, 1998, the same date that the demurrer was filed. The debtor has no direct evidence that it was received earlier but represents that the courtesy copy mailed to him by his attorney bore a January 16, 1998, postmark. The debtor also states that in his experience, mail sent to Richmond, Virginia, addresses from Northern Virginia normally arrived the following day. Given, however, that January 16, 1998, was a Friday, and that the following Monday, January 19, 1998, was a Federal holiday (Martin Luther King, Jr., Day), and given, moreover, that the address for Capital One did not include a ZIP code, delivery on January 21, 1998, as stated in the affidavit, is by no means a far-fetched or improbable occurrence. Thus, the court concludes that the plaintiff has not forecast evidence sufficient to carry his burden of proving that Capital One, when it made its demand for attorney's fees, did so with actual knowledge that the debtor had filed bankruptcy. In the absence of such knowledge, the violation of the stay would not be willful and would provide no basis for recovery under § 362(h), Bankruptcy Code.
B.
Even if the court is incorrect on the issue of willfulness, however, the court would nevertheless be required to grant summary judgment simply because the debtor sustained no damages arising from the attorney's fee request. As discussed above, Capital One's attorney, once made aware of the bankruptcy filing, made no further request for attorney's fees, and none were awarded. Nor does the record show that the debtor was forced to incur any expense or suffered any distress as a result of the demand for attorney's fees. While the debtor avers that he suffered great distress upon receiving a copy of the demurrer and subsequent notice of hearing, and had to go to the trouble of preparing and mailing a suggestion of bankruptcy, a fair reading of his discovery responses and affidavit is that his distress arose, not from the demand for attorneys' fees, but from the threatened — and ultimately actual
— dismissal of his lawsuit. All the consequential damages described in his discovery responses and affidavit flow from the dismissal of his lawsuit and not the demand for attorney's fees. But, as this court has previously held, the dismissal of the lawsuit did not constitute a violation of the automatic stay. The debtor has pointed to no evidence of any damages suffered specifically and solely as a result of the request for attorney's fees. Accordingly, the court concludes that the debtor has not forecast sufficient evidence to show that he would be entitled to any damages.
III.
For the foregoing reasons, the court will grant the motion of Capital One for summary judgment on Count I and will dismiss that count with prejudice. A separate order will be entered consistent with the court's ruling.