In re Weidenbenner
521 B.R. 74
| Bankr. S.D.N.Y. | 2014Background
- Debtors filed Chapter 7 on March 7, 2014, claiming exempt balances under 11 U.S.C. § 522(d)(5).
- Wells Fargo placed an administrative pledge on all four Debtors’ accounts totaling $6,923.54 on March 12, 2014.
- Pledged funds were frozen; Debtors faced bounced checks and incurred a $25 penalty to Kohl’s due to insufficient funds.
- Trustee was informed; on March 17, 2014 the trustee directed the release of the estate funds to the Debtors, which Wells Fargo later notified they had done.
- Debtors filed a motion on March 23, 2014, alleging stay violation; Wells Fargo opposed, asserting funds were not payable to Debtors and turnover under § 542(b) applied.
- Court held evidentiary hearing, including testimony that Wells Fargo freezes only those accounts with aggregate estate property of $5,000 or more.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Wells Fargo’s administrative freeze violate the automatic stay? | Morris: stay was violated by exercising control over estate property. | Wells Fargo: no stay violation because funds were payable to trustee and turnover required under § 542(b). | Yes; administrative pledge violated § 362(a)(3). |
| Does § 542(b) excuse a stay violation? | § 542(b) does not authorize withholding post-petition estate funds. | Policy complies with § 542(b) and could justify withholding funds. | No; § 542(b) does not excuse the stay violation. |
| Do Debtors have standing to pursue stay-violation damages? | Debtors have constitutional and statutory standing under § 362(k). | Standing may belong only to the trustee or be derivative. | Debtors have standing to prosecute and recover under § 362(k). |
| What damages are recoverable for a willful stay violation? | Debtors are entitled to actual damages, costs, and attorneys’ fees under § 362(k). | Damages limited or contested based on prior authorities. | Debtors awarded $25.00 plus costs and attorneys’ fees. |
Key Cases Cited
- In re Fugazy Express, Inc., 982 F.2d 769 (2d Cir.1992) (stays protect property and prevent control over estate assets)
- Amplifier Research Corp. v. Hart, 144 B.R. 693 (E.D. Pa. 1992) (interpretation of ‘exercise control’ over property of the estate)
- In re Albion Disposal, Inc., 217 B.R. 394 (W.D.N.Y. 1997) (poses interpretation of stay provisions on possession/controls)
- In re Mwangi, 432 B.R. 812 (9th Cir. BAP 2010) (illustrates stay violation analysis where funds re-vested)
- In re Megan-Racine Assocs., Inc., 203 B.R. 873 (Bankr. N.D.N.Y. 1996) (bankruptcy exemptions and stay interactions)
- Wells Fargo Bank, N.A. v. Jimenez, 406 B.R. 935 (D. N.M. 2008) (standing to bring § 362(k) claims)
- Strumpf, 516 U.S. 16 (1995) (limits on Strumpf to setoff scenarios within stay context)
- Eastern Refractories Co. v. Forty Eight Insulations Inc., 157 F.3d 169 (2d Cir.1998) (automatic stay protections are fundamental)
- Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 77 (1981) (demonstrates judiciary’s restraint in expanding remedies absent statutory language)
- Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994) (statutory interpretation of securities and remedies)