Posted by NCBRC - April 28th, 2017
Where the bankruptcy court granted partial summary judgment on the debtor’s complaint for willful violation of the automatic stay, but did not decide damages, the order was interlocutory and the Bankruptcy Appellate Panel lacked jurisdiction over the appeal. Lugo Ruiz v. FirstBank Puerto Rico, No. 17-7 (B.A.P. 1st Cir. April 14, 2017). Read More
Posted by NCBRC - April 24th, 2017
“Civil contempt proceedings are exempted from the automatic stay under the government regulatory exemption when the proceedings are intended to effectuate the court’s public policy interest in deterring litigation misconduct.” Dingley v. Yellow Logistics, LLC, No. 14-60055 (9th Cir. April 3, 2017).
The underlying Nevada state court litigation arose out of a dispute in between Mark Dingley’s towing company and two transportation companies, Yellow Logistics, LLC, and Yellow Express, LLC, (Yellow) in which Yellow sued Mr. Dingley for improper towing, storage and sale of one of Yellow’s trucks. The Nevada court ordered $4,000 in discovery sanctions against Mr. Dingley when he failed to appear for a scheduled deposition. When he then failed to pay the sanction the court ordered Mr. Dingley to show cause why he should not be held in contempt. Mr. Dingley filed for chapter 7 bankruptcy before the contempt issue came to hearing. Yellow filed a brief in the state court arguing that the automatic stay did not apply to prevent the ongoing contempt litigation. Mr. Dingley responded with a complaint in the bankruptcy court arguing that Yellow’s state court brief violated the automatic stay. The bankruptcy court agreed with Mr. Dingley and awarded sanctions. Read More
Posted by NCBRC - April 19th, 2017
Emotional distress damages may be awarded for willful violation of the automatic stay. Lansaw v. Zokaites (In re Lansaw), No. 16-1867 (3rd Cir. April 10, 2017).
Garth and Deborah Lansaw operated a day care center out of property they leased from Frank Zokaites. The Lansaws and Mr. Zokaites had numerous disputes during the course of their relationship and the Lansaws eventually entered into a lease with a third party. Mr. Zokaites asserted a lien against the Lansaws’ personal property for unpaid rent and, the next day, the Lansaws filed a bankruptcy petition. Despite notice of the bankruptcy, Mr. Zokaites entered the day care center during business hours, took photographs and behaved in a physically threatening manner toward Ms. Lansaw. Mr. Zokaites also entered the property during off hours, confronted Ms. Lansaw’s mother who was there to clean, and padlocked the door, allowing Ms. Lansaw to reenter only in the company of a police officer. Additionally, Mr. Zokaites threatened the Lansaws’ new landlord with legal action if he did not end the lease with the Lansaws. After a lengthy procedural history, and a hearing, the bankruptcy court awarded the Lansaws $7,500 for emotional distress, $2,600 in attorney fees, and $40,000 in punitive damages. Read More
Posted by NCBRC - April 17th, 2017
Where the debtors’ attorneys filed a fee application as an administrative claim after the debtors completed their chapter 13 plan, the court properly denied the administrative claim and treated the debt as discharged. Cripps v. Foley, No. 16-744 (W.D. Mich. March 31, 2017).
After the debtors, Lon and Deborah Cripps, completed their chapter 13 bankruptcy and the trustee had filed the notice of completion, their bankruptcy attorneys, Dietrich Law Firm, filed a fee application for $642.60 as an administrative claim. (During the course of the bankruptcy, Dietrich Law had filed fee applications amounting to over $13,000 which had been approved and paid through the plan). The trustee objected to the fees as untimely and, while the issue was pending, the Cripps’ were granted discharge. While the court approved the fee application under section 330(a), it found that the fees could not be paid as an administrative claim under section 503. Read More
Posted by NCBRC - April 13th, 2017
Application of section 505(a)(2)(B), which carves out an exception to the government’s abrogation of sovereign immunity in tax refund claims, involved issues of both fact and law, and therefore, the district court remanded this appeal to the bankruptcy court for determination of whether it had subject matter jurisdiction over the debtors’ claim for turnover of their tax refund. United States v. Copley, No. 3:16-cv-207 (E.D. Va. March 31, 2017).
Chapter 7 debtors, Matthew and Jolinda Copley, listed the United States as a creditor for a tax debt of over $13,000 from 2008, 2009, and 2010. They also listed a 2013 tax refund in the amount of over $3,000 which they sought to exempt under Virginia’s homestead exemption statute. Post-petition, the IRS notified the Copleys that it had withheld their 2013 tax refund as set off against the tax debt. The Copleys sought turnover of the refund and both parties moved for summary judgment. The bankruptcy court granted judgment in favor of the Copleys, relying on sections 522 and 542(a) and case law establishing that, unless the IRS acts to offset the tax debt prior to bankruptcy, the refund becomes part of the bankruptcy estate. Read More
Posted by NCBRC - April 5th, 2017
Plan confirmation did not adjudicate claim allowance on contested unsecured claims, therefore, res judicata did not bar the debtors’ post-confirmation challenges to the proofs of claim. LVNV Funding v. Harling, No. 16-1346, and LVNV Funding v. Rhodes, No. 16-1347 (4th Cir. March 30, 2017).
In two chapter 13 cases, LVNV filed proofs of claim prior to plan confirmation. The debtors, Derrick and Teresa Harling, and Jeffrey Rhodes, objected after plan confirmation but prior to the claims bar date. LVNV argued that the objections should have failed under the doctrine of res judicata. The bankruptcy courts found that res judicata did not apply, and disallowed the claims on the basis that the underlying debts were uncollectible due to the passage of the statute of limitations.
LVNV appealed both cases directly to the Fourth Circuit. Read More
Posted by NCBRC - April 3rd, 2017
There was sufficient evidence of the mortgage servicer’s reckless indifference to the mortgagor’s rights to support a punitive damage award eight times the compensatory damage award for invasion of privacy. May v. Nationstar Mortgage, No. 16-1285, 16-1307 (8th Cir. March 29, 2017).
While in chapter 13 bankruptcy, Jeannie May entered into an agreement with her mortgagee to pay down her mortgage and arrears. After she was discharged from bankruptcy, the mortgage servicer, Nationstar, sent her a mortgage statement in which it misstated a $51 credit as a $5,162 debit. Nationstar also damaged Ms. May’s credit score by incorrectly reporting a delinquent debt. Ms. May spent the next two years trying to get Nationstar to correct the admitted error. Instead of correcting the problem, however, Nationstar commenced aggressive collection efforts including threatening of foreclosure, conducting periodic property inspections, and making numerous mocking and sarcastic phone calls to her. Ms. May sued Nationstar alleging invasion of privacy under state law, and federal claims under RESPA, FDCPA and FCRA. The jury awarded compensatory damages of $50,000 for the invasion of privacy, and $50,000 for the violation of the FCRA. It also awarded $400,000 in punitive damages for the invasion of privacy. Read More
Posted by NCBRC - March 29th, 2017
Breaking with the majority view that passive retention of estate property may be an “exercise of control,” the Tenth Circuit held that the lender must take some affirmative action to support a stay violation claim. WD Equipment, LLC. v. Cowen, No. 15-1413 (10th Cir. Feb. 27, 2017).
Jared Cowen defaulted on the purchase money security interest loan for one vehicle and a non-pmsi loan for another vehicle. After the vehicles were repossessed, by separate but related lenders, Mr. Cowen filed for chapter 13 bankruptcy. The case was dismissed, however, because, without his trucks, he could not earn income to finance his plan. The bankruptcy court retained jurisdiction over Mr. Cowen’s adversary complaint for violation of the automatic stay. In the hearing on that complaint, the lenders lied and presented forged documents to support their claims that the sale of one vehicle and title transfer of the other took place pre-bankruptcy. The bankruptcy court found that the lenders’ failure to turn over the vehicles constituted continuing violation of the automatic stay and awarded damages. The district court recalculated damages but otherwise affirmed. Read More
Posted by NCBRC - March 28th, 2017
Because the debtor had no equity in her residential property to which it could attach, the Sixth Circuit found that the bankruptcy court properly authorized sale of the property and denied her claim for exemption based on her state law redemption rights. Brown v. Ellman (In re Brown), No. 16-1967 (6th Cir. March 20, 2017).
Susan Brown’s residence was valued at $170,000 and was secured for more than $200,000. When she filed her chapter 7 petition, she indicated her intent to surrender the property. The trustee sought an order allowing him to sell the property for $160,000 and use the proceeds to pay administrative costs and make distributions to creditors. Ms. Brown objected and claimed an exemption under section 522(d) based on her state law redemption rights. She did not seek a stay of the sale. The sale went forward and the bankruptcy court denied Ms. Brown’s exemption claim on the basis that she had no equity in the property. The district court affirmed. Read More
Posted by NCBRC - March 24th, 2017
“The mirage of promised mortgage modification lured the plaintiff debtors into a kafkaesque nightmare of stay-violating foreclosure and unlawful detainer,” for which the court ordered over $1 million dollars in actual damages plus a significant punitive damage award. Sundquist v. Bank of America, No. 10-35624, Adv. Proc. No. 14-2278 (Bankr. E.D. Cal. March 23, 2017).
In the first 30 pages of the 109-page opinion, the court walked through the facts of the case illustrating Bank of America’s egregious conduct and including extensive quotes from Renee Sundquist’s journal. A few highlights include the following facts. Though struggling financially, Erik and Renee Sundquist were current on their home loan, defaulting only after Bank of America told them that the only way they could get loan modification would be if they were in default. After that began a series of abortive modification attempts during which Bank of America consistently lost paperwork, denied modification for no apparent reason, or otherwise dangled modification before the Sundquists without actually providing it, while at the same time going forward then retreating on foreclosure actions. At one point, a Bank of America employee told Renee that modifications were “not real” but were simply a way for Bank of America to make more money before foreclosure. Read More