Opinion
No. 00-971.
August 7, 2001
Order
This matter is before the court on the parties' crossmotions for summary judgment. Based on a review of the file, record, and proceedings herein, the court grants plaintiff's motion and denies defendant's motion.
Background
Plaintiff James Rosengren ("Rosengren") financed his home with a loan from defendant GMAC Mortgage Corporation ("GMAC"). In January 2000, Rosengren filed Chapter 7 bankruptcy. At the time of the filing, Rosengren was past due on two payments to GMAC. However, the GMAC mortgage loan was not listed on the bankruptcy petition as a debt to be discharged because Rosengren intended to make up the back payments. (Rosengren dep. at 25-26.) His only goal in filing for bankruptcy was to "get out from under" two automobile loans totaling approximately $37,000. (Id. at 15.)
Rosengren testified that he received a message on his home answering machine in early February 2000 asking him to call GMAC. He returned the call and spoke with a woman, later identified as Irene Wolfgram of GMAC. (Id. at 47.) When Wolfgram learned that Rosengren had filed for bankruptcy, she indicated that she could not speak further with him. (Id. at 46; Wolfgram dep. at 64.) Nonetheless, Wolfgram proceeded to ask him whether he intended to reaffirm his obligation to GMAC. (Wolfgram dep. at 64-65.) Rosengren replied that he wanted to work out a payment schedule so that he could keep his home, but that his attorney advised him that reaffirmation paperwork was not necessary. (Id.) Wolfgram suggested he speak further with his attorney. (Supp. Barry Aff. Exh. 1.) She also agreed to have someone else from GMAC call him. (Rosengren dep. at 46.)
GMAC does not dispute that for purposes of summary judgment, GMAC initiated the first contact with Rosengren. However, for purposes of clarifying the record, the court notes that GMAC's phone log gives no indication that a message was left at Rosengren's home and that he called GMAC back and reached Wolfgram. Rather, the log suggests that Wolfgram initiated a single telephone call to follow up on Rosengren's delinquent account and that she reached him on this first and only attempt. (Supp. Barry Mt. Exh. 1.)
Rosengren then received a second message on his answering machine from Paul Webb, a bankruptcy specialist for GMAC. (Barry Aff. Exh. 4, Webb dep. at 32.) Webb said he was aware that Rosengren wanted to keep his home, but he indicated that because Rosengren was delinquent, GMAC had little choice but to file for relief from the bankruptcy stay, a move which would impose additional fees on Rosengren's loan balance. (Supp. Barry Aff. Exh. 1.) Webb encouraged Rosengren to speak to his attorney. (Id.) Rosengren asserts that he did not return Webb's call, but that another GMAC bankruptcy specialist, Jeff Choi, called him on February 10, 2000. (Rosengren dep. at 47.) Choi told him that if he did not make up his two past due payments soon, a relief motion would be filed, costing him $500. (Rosengren dep. at 48.) Rosengren advised Choi that he planned to make one payment by February 18, 2000 and the other by March 15, 2000. (Choi dep. at P 4.) Choi requested that Rosengren pay by money order rather than personal check. (Rosengren dep. at 62.)
GMAC's records suggest that Rosengren did return Webb's call on February to and that Choi spoke to him at that time. (Supp. Barry Aff. Exh. 1.)
Rosengren made the double payment and retained possession of his home. His bankruptcy was discharged on April 12, 2000. Rosengren then filed this lawsuit alleging that GMAC violated the automatic stay provision of the federal bankruptcy code, 11 U.S.C. § 362, and invaded his privacy. According to his complaint, he seeks $5,000 in compensatory damages and $25,000 in punitive damages. On March 7, 2001, the court granted GMAC's motion to dismiss the state law invasion of privacy claim. The parties now bring cross-motions for summary judgment on the automatic stay claim.
Discussion
Summary judgment is appropriate where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56 (c). The moving party bears the burden of demonstrating to the court that no genuine issue of material fact exists, See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L.Ed.2d 265, 106 S.Ct. 2548 (1986). A fact is material only when its resolution affects the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L.Ed.2d 202, 106 S.Ct. 2505 (1986). A factual dispute is genuine if the evidence is such that it could cause a reasonable jury to return a verdict for either party. See id. at 250.
On a motion for summary judgment, all evidence and inferences are to be viewed in a light most favorable to the nonmoving party. See id. at 255. The nonmoving party, however, may not rest upon mere denials or allegations in the pleadings, but must set forth specific facts sufficient to raise a genuine issue for trial. See Celotex, 477 U.S. at 324. Moreover, if a plaintiff cannot support each essential element of its claim, summary judgment must be granted because a complete failure of proof regarding an essential element necessarily renders all other facts immaterial. See id. at 322-23. With this standard at hand, the court considers the parties' cross motions for summary judgment.
The federal bankruptcy code provides that the filing of a bankruptcy petition acts as an automatic stay with respect to "any [post-petition] act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. § 362 (a)(3). The code also forbids a creditor from engaging in "any [post-petition] act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title." 11 U.S.C. § 362 (a)(6). Once a bankruptcy petition is filed, the stay is effective immediately. McDonell v. Eggestein, 357 N.W.2d 168, 170 (Minn.Ct.App. 1984).
An individual who has been "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 (h). As the language of the statute suggests, to prevail on a claim for violation of the stay, a plaintiff must establish that: (1) a violation occurred; (2) the violation was committed willfully, (3) the violation caused actual damages. Lovett v. Honeywell, Inc., 930 F.2d 625, 628 (8th Cir. 1991); Adams v. Hartconn Assocs., Inc (In re Adams, 212 B.R. 703, 708 (Bankr. D. Mass. 1997). If all three elements are met, the court must award compensatory damages then decide whether punitive damages are appropriate. Adams, 212 B.R. at 708.
GMAC argues that this lawsuit should be dismissed because its contacts with Rosengren during the pendency of his bankruptcy do not constitute a "willful violation" of the automatic stay. GMAC emphasizes that it contacted Rosengren only as a courtesy and in response to Rosengren's expressed desire to make up his late mortgage payment and keep his house. GMAC suggests that under those circumstances, its continuing contacts with Rosengren do not reflect a deliberate intent to violate the stay. However, a "willful violation" of the automatic stay does not require specific intent to violate the stay. Rather, the standard for a willful violation of the automatic stay under Section 362 (h) is met if there is knowledge of the stay and the defendant intended the actions which constitute the violation. See Fleet Mortgage Group, Inc. v. Kaneb, 196 F.3d 265, 268 (1st Cir. 1999); Crysen/Montenay Energy Co. v. Esselen Assocs., Inc. (In re Crysen/Montenay Energy Co.), 902 F.2d 1098, 1105 (2d Cir. 1990); Cuffee v. Atlantic Bus. Community Dev. Corp. (In re Atlantic Business Community Corp.), 901 F.2d 325, 329 (3d Cir. 1990); Goichman v. Bloom (In re Bloom), 875 F.2d 224, 227 (9th Cir. 1989).
In this case, it is undisputed that GMAC was aware that Rosengren had petitioned for bankruptcy at the time that Paul Webb and Jeff Choi telephoned Rosengren and exerted pressure on him to bring his account current. Even Irene Wolfgram became aware of Rosengren's status during her phone call to him, yet she continued to seek information regarding Rosengren's intent as to his condominium. This record of GMAC's repeated intentional contact with Rosengren despite its knowledge of his bankruptcy compels the conclusion that GMAC willfully violated the automatic stay.
GMAC suggests that there can be no violation where the debtor is equally at fault. However, once the creditor receives actual notice of the debtor's bankruptcy, the burden is on the creditor to prevent violations of the automatic stay. Mitchell Const. Co., Inc v. Smith (In re Smith), 180 B.R. 311, 319 (Bankr. N.D. Ga. 1995). As one bankruptcy court observed:
In order to reduce the possibility of stay violation accusations, a creditor advised that a bankruptcy has been filed or is being filed should continue the conversation only long enough to obtain information to verify the bankruptcy, i.e., the creditor should ask for the case number and the district and division in which the case is pending. If this information is unavailable, the creditor should ask for the name of the debtor's attorney and then promptly hang up. Questions regarding the debtor's intentions with respect to collateral are inappropriate.
In re Skeen, 248 B.R. 312, 318 n. 2 (Bankr. E.D. Tenn. 2000). In view of the fact that Webb and Choi were clearly aware of Rosengren's status as a bankruptcy petitioner, it was incumbent on GMAC to observe the strictures of the automatic stay provisions and direct all further contact to Rosengren's attorney.
The question remains as to whether GMAC's failure to adhere to the stay has damaged Rosengren in any way. GMAC contends that because Rosengren retained possession of his condominium, as was his intent from the beginning, he cannot establish that he has been damaged by GMAC's contact with him. Moreover, GMAC vigorously asserts that Rosengren's failure to timely disclose his actual damages precludes recovery.
The record indicates that during discovery Rosengren did not provide the requisite disclosure of damages under Fed.R.Civ.P. 26 (a)(1)(C), and in his deposition he testified that he lost nothing because of GMAC's conduct. (Rosengren dep. at 64, 73.) In addition, in the context of settlement discussions, GMAC made repeated attempts to precisely ascertain Rosengren's damages, to no avail. For example, after receiving a demand for $25,000, defense counsel sent plaintiff's attorney a letter on October 20, 2000, which stated:
. . . without a breakdown of the alleged damages, they (GMAC) have no means by which to make a good faith response to your settlement demand . . . I have indicated that the Pretrial Order requires that you make available a computation of any damages claimed by the disclosing party based under Rule 26 (a)(1)(c).
Please amend your settlement offer by complying with the provisions of the Rule and providing a breakdown of the alleged damages, breaking down any actual or consequential damages as opposed to punitive damages or attorney's fees.
(Supp. Aff. Thomas Olson Exh. B.) Plaintiff's counsel responded by repeating his client's prayer for relief: "an amount in excess of $5,000 against Defendant as compensatory damages and $25,000 as punitive damages." (Id. Exh. C.) No computation of compensatory damages was furnished with the letter. Additional correspondence provided by defense counsel reflects that this evasive pattern continued throughout the discovery period. (Id. Exhs. D-G.)
It was not until GMAC filed its motion for summary judgment that Rosengren finally submitted, by affidavit, an itemization of his damages. According to Rosengren, based on GMAC's insistence that he complete immediate double payment, he has suffered actual damages in the amount of $87, which includes a Speedpay service fee of $15, a stop payment fee of $21, S50 in interest on a loan from a friend and two $1 late payment fees from his utilities providers. By the court's calculations, Rosengren's actual losses total $88.
Rosengren also suggests that he suffered embarrassment due to his need to borrow money from his family to meet Choi's harassing directives. As succinctly stated by one bankruptcy court, "because the emotional distress suffered . . . was fleeting, and medically insignificant, the Court concludes that it is not compensable." Crispell v. Landmark Bank (In re Crispell), 73 B.R. 375, 380 (Bankr. E.D. Mo, 1987). See also Copeland v. Hubbard Broadcasting, Inc., 1997 WL 729195 at [*]4 (Minn.Ct.App. 1997) (requiring evidence of at least a minimum amount of physical manifestation of distress before claim of emotional distress based on direct invasion of rights can proceed).
Citing to Camfield Tires, Inc. v. Michelin Tire Corp., 719 F.2d 1361, 1365 (8th Cir. 1983), GMAC argues that Rosengren should not be entitled to avoid summary judgment by submitting this belated and contradictory statement of damages. GMAC also asserts that had it been made aware of the limited extent of Rosengren's actual damages, it would have consented to a judgment and would have immediately paid the claim for damages rather than continue this lawsuit. The court is sympathetic to GMAC's frustration, however it must accept the possibility that as a layperson. Rosengren may not have fully appreciated what he was being asked to provide when questioned at his deposition about his losses. (Rosengren Aff.)
By contrast, plaintiff's counsel undoubtedly knew exactly who was being asked of him, yet he failed to comply with his duty under Fed.R.Civ.P. 26 (a)(1)(C) to disclose a computation of his client's damages and refused to respond to GMAC's repeated requests that he provide them with this vital information. While the statute requires the court to award Rosengren his $88 in damages, counsel's dilatory conduct does not merit a substantial award of attorney fees. As a federal bankruptcy judge once noted:
The Bankruptcy Court is a very busy place and the Court's time and parties' monies should be spent on matters which are of serious consequence to the parties involved. As it relates to stay violations, such seriousness is not necessarily equated to the size of the economic impact of a matter, but may well include emotional trauma visited upon debtors by creditors who refuse to honor either the automatic stay or the discharge injunction, who harass debtors in other inappropriate ways or who demonstrate repetitive noncompliance. This Court will always hear and give serious attention to such allegations. But the unnecessary escalation of a matter of somewhat limited consequence which could have been resolved by much less lawyering does not make economic or emotional sense. Such escalation creates damages, magnifies costs, and burdens the system. More significantly, such efforts reveal a lack of perspective.
In re Newell, 117 B.R. 323, 325 (Bankr. S.D. Ohio 1990).
The federal district court is no less interested than the bankruptcy court in promoting efficiency and encouraging the consensual resolution of relatively minor disputes. Moreover, the court notes that the policy of Section 362 (h) to discourage willful violations of the automatic stay has long been "tempered by a reasonableness standard born of courts' reluctance to foster a `cottage industry' built around satellite fee litigation." In re Robinson, 228 B.R. 75, 85 (Bankr. E.D.N.Y. 1998) (quoting Putnam v. Rymes Heating Oils, Inc. (In re Putnam), 167 B.R. 737, 741 (Bankr. D.N.H. 1994)). Attorneys are not at liberty to incur large legal fees simply because those fees will be shifted to their adversaries pursuant to Section 362 (h). Price v. Pediatric Academic Assoc., Inc., 175 B.R. 219, 221 (S.D. Ohio 1994), on remand, In re Price, 179 B.R. 70 (Bankr. S.D. Ohio 1995).
Therefore, based on the failure of plaintiff's counsel to timely advise opposing counsel of his client's actual damages and in light of the de minimus nature of those damages, the court will limit the award of attorney fees in this case to $150, which reflects the court's estimation of the limited legal work required to dispose of this matter short of litigation. See Prier, 179 B.R. at 73 (limiting fee award to $75 where legal fees and judicial time far exceeded the $13 in actual damages); Putnam, 167 B.R. at 741-42 (reducing attorneys' fees by over 50% where, inter alia, the fees bore no relation to the amount of actual damages suffered and where Debtor failed to attempt to settle the matter before filing the motion). See also Robinson, 228 B.R. at 85-86 (cataloguing additional cases in which courts have greatly reduced awards of attorneys' fees in situations where unnecessary costs were incurred.)
Finally, plaintiff's request for punitive damages in this case is denied. Under Section 362 (h), an award of punitive damages is within the discretion of the trial court and proper only in appropriate circumstances. Davis v. IRS, 136 B.R. 414, 423 n. 20 (E.D. Va. 1992). Appropriate circumstances ordinarily are those in which the creditor has demonstrated egregious, vindictive or intentional misconduct. Lovett, 930 F.2d at 628. No evidence of such conduct is before the court, therefore punitive damages are not warranted.
In sum, the court concludes that Rosengren has met his burden of establishing that GMAC wilfully violated the automatic stay provisions of 11 U.S.C. § 362 and that he has been damaged as a result of GMAC's conduct. Therefore, the court denies GMAC's motion for summary judgment and grants Rosengren's motion for summary judgment, awarding Rosengren $88 to compensate him for his losses. Rosengren's request for punitive damages is denied and the award of attorney fees is limited to $150.
Conclusion
For the foregoing reasons, IT IS HEREBY ORDERED that:
1. Defendant's motion for summary judgment is denied.
2. Plaintiff's motion for summary judgment is granted.
3. Plaintiff is awarded $88 to fully compensate him for the damages he suffered as a result of defendant's violation of the automatic stay provisions of 11 U.S.C. § 362.
4. Plaintiff is also awarded attorney fees in the amount of $150.
LET JUDGMENT BE ENTERED ACCORDINGLY.