578 B.R. 898
Bankr. D. Utah2017Background
- Debtors Lisa Hart and Chad Passa filed Chapter 13 on May 22, 2014; their plan provided for paying two mortgages directly and retaining two Utah residential properties (Magna and Draper).
- Creditor Clark had prepetition state-court lawsuits (the “Domestic Matter” and the “Conspiracy Matter”); bankruptcy stay was in effect, but the state court was allowed to liquidate claims only (order lifting stay expressly prohibited collection or entry of a nondischargeability judgment).
- Clark obtained default judgments (Nov. 4, 2014 and Apr. 10, 2015) and filed proofs of claim; he recorded those judgments with the Salt Lake County Recorder in November 2015 while the automatic stay remained in effect (First Recorded Judgments).
- Debtors completed plan and received discharge on Sept. 13, 2017; Clark (through counsel) rerecorded at least the Conspiracy judgment on Sept. 22, 2017 (Second Recorded Judgment) after discharge.
- Debtors moved for sanctions for willful violation of the automatic stay and for violation of the discharge injunction; trial evidence showed recording of judgments created liens that delayed or cancelled sales of both properties.
Issues
| Issue | Debtors' Argument | Clark / Pranno's Argument | Held |
|---|---|---|---|
| Whether recording judgments in Nov. 2015 violated the automatic stay | Recording created liens and therefore was an act to collect/enforce prepetition claims in violation of §362(a) | Recording was only to "preserve" judgments for later collection, not present collection | Court: Willful violation of stay — recording perfected liens and was prohibited despite claimed intent; creditor knew stay applied |
| Damages for stay violation | Debtors sought actual damages (expenses from delayed sales), fees, punitive damages | Clark disputed causal link between liens and sale delays; challenged some expense estimates | Court: Awarded actual damages $1,798.80 (calculated per-day/month delays) and allowed attorney-fee application; declined punitive damages for lack of proof |
| Whether rerecording post‑discharge violated discharge injunction (§524) | Rerecording after discharge continued collection efforts and was willful, proven by creditor and counsel admissions | Clark/Pranno argued title report errors and other technicalities but admitted the rerecording | Court: By clear and convincing evidence, post-discharge recording violated discharge injunction; liens voided and ordered released |
| Sanctions against creditor's counsel (Pranno) | Counsel intentionally participated in rerecording after discharge and should be liable jointly and severally | Pranno claimed lack of bankruptcy expertise; counsel’s actions were authorized by client | Court: Pranno willfully participated; jointly and severally liable with Clark for discharge‑injunction damages and fees |
Key Cases Cited
- Johnson v. Smith (In re Johnson), 501 F.3d 1163 (10th Cir.) (automatic‑stay willfulness standard: debtor must show creditor knew of stay and intended the act; good‑faith belief irrelevant)
- Paul v. Iglehart (In re Paul), 534 F.3d 1303 (10th Cir.) (discusses contempt remedy under §105 for violations of discharge injunction)
- Adams v. Adams (In re Adams), 373 B.R. 116 (10th Cir. BAP) (discussion of Chapter 13 eligibility and related timing issues)
- Ramirez v. Fuselier (In re Ramirez), 183 B.R. 583 (9th Cir. BAP) (evidentiary standard and commentary regarding punitive damages under §362)
- Otero v. Green Tree Servicing (In re Otero), 498 B.R. 313 (Bankr. D.N.M.) (use of §105 contempt power to enforce discharge injunction and available remedies)