Lightfoot v. Borkon (In Re Lightfoot)Lightfoot v. Borkon (In Re Lightfoot)
Opinion
Introduction.
Before the Court is the Debtor/Plaintiff s Complaint Seeking Damages for Violation of the Automatic Stay. The Motion is opposed by the Defendant, Jerry Borkon. After hearing held July 29, 2008, briefs were submitted and the Court took the matter under advisement. For the reasons set forth below, judgment will be entered in favor of Plaintiff and against the Defendant in the amount of $1,000.
Factual Background
The Debtor and her husband operated an unincorporated hauling business known as Double SS Trucking. Over an eighteen month period starting in January 2006, they acquired a fleet of five trucks from Jerry Borkon, d.b.a. Borkon Truckarama.
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Borkon provided the financing for the purchases. As of July 2007, the Debtor and her husband had defaulted on the truck loans. Efforts toward working out the defaults were unavailing and in September 2007 Borkon repossessed two of the trucks. Because the Debtor’s hus
Applicable Law
The automatic stay under § 362(a) of the Bankruptcy Code arises upon the filing of a bankruptcy petition. 11 U.S.C. § 362;
In re Hardy,
The automatic stay applies,
inter alia,
to “any act to obtain possession of property of the estate ...” 11 U.S.C. § 362(a)(3). Upon filing a bankruptcy petition, an estate is created. 11 U.S.C. § 541(a)(1). The estate contains “all legal or equitable interests of the debtor in property as of the commencement of the case.”
Id.
A debtor’s interest in property is defined by state law.
Butner v. United States,
In Pennsylvania, a certificate of title is prima facie evidence of the facts appearing on the certificate.
See
75 Pa. C.S. § 1106(c). This places the burden of proof upon a claimant to prove some own
While the Debtor asserts an ownership interest in all five trucks (T-34), the legal basis for the claim is unclear. At one point, she stated that Borkon required her signature as a guarantor of her husband’s obligаtions. T-32-33. At another she contends that as an owner of the business
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for which the trucks were purchased, she was required to sign the repayment Agreement drafted by Borkon. T-34, 49. Whichever it was, neither necessarily indicates an ownership interest. Guarantor status does not imply ownership; a guarantee is a contract, a collateral agreement for performance of another’s undertaking.
See Stevenson Funeral Home v. Kraynok,
53 Pa. D.
&
C.2d 256,
The Stay as it Relates to Collection Activity
But proceeding against estate property is not the only way by which the Debtor maintains that the Defendant violated the bankruptcy stay. In the Complaint, it is alleged that the recovery and sale of the trucks constituted impermissible acts to collect a prepetition debt. Complaint, ¶ 28. The automatic stay unquestionably applies also to “any 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). As stated in the legislative history of § 362, “the stay: ... gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits a debtor to attempt a repayment or reorganization plan, or simply be relieved of the financial pressures that drove him into bankruptcy.”
See
H.R.Rep. No. 595, 95th Cong., 1st Sess. 340 (1978),
reprinted in
1978 U.S.C.C.A.N. 5787, 5963, 6296-97. The focus, in other words, is not on estate preservation, but rather allowing
As might be expected, the Debtor herself insists that she was liable for the debt relative to the trucks in question. T-33 Because her testimony — as well as the Defendant’s — is self-serving on the point, the documentary evidence, such as it is, becomes particularly important. Although this part of the record could be clearer, there is enough to piece together the parties’ history and to make a finding on the essential question. The Court begins with the certificate of title for the 1996 Freight-liner. D-3. The title to that truck was issued in April 2006 and lists both the Debtor’s husband and the Debtor as registered owners. Next comes the title to the 1998 Kenworth truck. D-4. That Certificate of Title was issued in December 2006 and is likewise registered in the name of husband and wife. On June 27, 2007, the Defendant drafted a handwritten instrument on what аppears to be his business stationery. It is titled “Agreement between Borkon Truckarama and Double S Trucking, Shawn Hamiel and Sandra Hamiel.” See Ex. D-9. It references payments due on a Yellow Tractor (identified as one of the two 2000 Freightliners, T-6), a Maroon Tractor (another 2000 Freightliner, T-8, 50-51) as well as “(2) Original Tractors.” 7 Id. Both the Debtor and her husband signed this document. Certificates of title were issued for both 2000 Freightliners naming only the Debtor’s husband as registered owner. See D-1, D-2. On July 17, the Defendant wrote a letter addressed to both “Shawn and Sandra Hamiel” informing them that they were in default. See Ex. D-12. One month later, the fifth truck (a 2001 Freightliner) was transferred and the title to that vehicle was registered under the name of the couple’s business. See D-5. On September 6, Defendant wrote another letter addressed to “Sandra and Shawn Hamiel.” This letter purports to memorialize the previous day’s conversation regarding arrearages on the trucks and other related issues. See D-10 The question is whether all of this establishes that the Debtor was liable to Defendаnt for the payment of the debt on the entire fleet of trucks.
Borkon says no, insisting that he was not in privity with the Debtor as to the repossessed trucks. T-7. He maintains that the writings of June 27, July 17, and September 6, served only to give an “overview” of the entire arrangement between the parties. T-5 That arrangement, he goes on, limited the Debtor’s involvement to the three vehicles which he did not repossess: i.e., the 1996 Freightliner, the 1998 Kenworth and the 2001 Freightliner. T-8, 10, 26. The Debtor sees it differently, and stresses that the writings in question nowhere limit her liability to certain trucks. T-7.
The record supports the Debtor on this point. The first two trucks which the Debtor and her husband purchased were titled in both of their names. On June 27, after he sold them another two trucks, Borkon decided to memorialize their agreement. D-9 But that writing nowhere limits the Debtor’s liability to fewer than
Is the Violation Actionable?
Having determined that there has been a violatiоn of the stay, the next question becomes the consequences which flow from it. Section 362(k) provides:
(1) Except as provided in paragraph (2), an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.
11 U.S.C. § 362(k)(l). The provisions of the statute thus come into effect upon the Debtor showing that: (1) a violation of the automatic stаy has occurred; (2) the violation was willful; and (3) the willful violation has caused injury to the debtors.
In re Wingard,
Willfulness
Violation of the stay occurred when the Defendant repossessed the trucks postpetition. “Willful” conduct has been defined as deliberate or intentional conduct.
In re B. Cohen & Sons Caterers, Inc.,
Good Faith and Willfulness
The Defendant maintains that there can be no finding of willfulness where there is a bona fide question of law regarding the applicability of the stay. Defendant’s Brief, 9. Although he does not specifically say as much, Defendant appears to be alluding to a limited exception to the general willfulness standard. The Third Circuit has recognized such an exception “if a creditor’s action was based on persuasive legal authority indicating that their conduct did not violate thе stay and that the law was unsettled.”
See In re University Medical Center,
When University Medical Center was decidеd, there was no express, statutory good faith exception to liability for intentional actions taken in violation of the automatic stay with knowledge of the bankruptcy case set forth in then § 362(h). As a result, University Medical Center can be considered as a judicial gloss on the text of the preBAPCPA Code, designed to effectuate a Congressional intent that conduct with a certain type of scienter (i.e., good faith) should not be subject to the damages remedy provided in § 362(h) (now § 362(k)).
In enacting BAPCPA, Congress modified thе Code provision addressed in University Medical Center and expressly addressed the issue of good faith. In doing so, Congress provided for only a limited, statutory good faith exception to the § 362(k) damage remedy. The express, statutory good faith exception is more limited than the one expressed in University Medical Center in two distinct ways: (1) the limitation applies only to good faith violations of § 362(h), which relates only to action taken in the good faith belief that the automatic stay has terminated because a debtor fails to рerform his or her obligations under § 521(a)(2) in a timely manner; and (2) it precludes only the imposition of punitive damages and in no situation restricts the imposition of “actual damages” for willful violations of the automatic stay.
With Congress having addressed the issue of a good faith exception to § 362(k) liability expressly through the BAPCPA, the plain language of § 362(k)’s exception does not encompass other types of arguably good faith conduct that Congress could have chosen to exempt from liability. Given this carefully constructed exception drawn by Congress, I conclude that University Medical Center is inconsistent with § 362(k), insofar as the case held that a party is not subject to actual damages for voluntary acts taken with knowledge of the bankruptcy casein violation of the automatic stay when a party relies upon “persuasive legal authority” and the law on the issue is sufficiently unsettled.
In re Mu’min,
Actual Damages
That leaves the question of the damages, if any, which were sustained as a result of the stay violation. Defendant submits that the Debtor failed to establish that she suffered any resulting damages. The Defendant- is correct. While there was oral testimony as to the loss of certain contracts because of the repossession, it was never quantified. There was no evidence, for instanсe, of a written contract, neither was their discrete proof of what that contract might have netted after expenses.
The Debtor’s testimony was that because the two trucks were repossessed, her company lost business from a customer known as Olympia Steel and ultimately folded. T-38 As to what this contract might have been worth, however, the Debtor merely speculated that it might be $625,000. T-40. No contract or invoices were produced. Neither could the Debtor give an accurate sense of the company’s cost of operations. She simply guessed that her overhead was about $300,000. T-47 In sum, there is simply no credible evidence from which to conclude that the Debtor suffered some quantifiable harm as a result of Defendant’s violation of the Bankruptcy stay.
Punitive Damages
Turning from the question of actual damages to sanctions, the Court observes that it has discretion to impose punitive damages in “appropriate circumstances.”
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Solfanelli v. Corestates Bank, N.A,
The Court finds the Defendant’s conduct to implicаte the circumstances for which an exemplary award of damages is reserved. The Defendant’s conduct is certainly more than a bare or technical violation of the bankruptcy stay. Despite knowledge of this bankruptcy, the Defendant sold collateral which secured an obligation of the Debtor. Defendant contends that the Debtor was not indebted to him as to that collateral but, as discussed above, the evidence supports a contrary finding. The Defendant’s actions do not appear to
It was logical for the Defendant to obtain the liability of both husband and wife on all of the trucks sold, and the Court has concluded he did so. As to whose name would be on which titles, it may be — -just as Defendant testified — that he left that up to the Debtor’s husband. 10 T-60-62. But after they defaulted, and after he had to obtain stay relief in the husband’s bankruptcy, only to have the Debtor file bankruptcy the next day, the question of whose name was on which certificate of title becamе very important to the Defendant. He elected to act on the premise that, because the Debtor’s name wasn’t on a title, the automatic stay simply did not apply. T-28, 29. As discussed, this reasoning fails.
The Defendant’s tone and demeanor at the July 29, 2008 hearing reflected anger and a palpable sense of frustration. His sarcastic use of the words “cute” and “sweet” to describe the Debtor’s decision to file bankruptcy when she did suggests that he felt duped by the Debtor and her husband. He reсalls “terrible delays in payment and lies” on their part. T-28. The Defendant’s patience was exhausted and he apparently wanted quick vindication.
That does not excuse flouting the law. The Debtor was within her rights to have filed bankruptcy when she did. The Defendant might have quickly pursued modification of the bankruptcy stay as to the two trucks he repossessed. By Defendant’s own assessment, the Debtor would not have survived a motion for stay relief. Defendant’s Brief, 8. She and her husband were in arrears and thе trucks were not insured as required. Rather than seeking relief, the Defendant took matters into his own hands by keeping and selling the two trucks he had already repossessed. His conduct demonstrates a disregard for the law which the Court cannot countenance. The Court finds that a modest monetary sanction of $1,000.00 is warranted under the circumstances.
UDAP
The Debtor’s remaining cause of action 11 is her claim under the Unfair Trade Practices and Consumer Protection Law 12 (UDAP). Specifically, it is alleged that “Defendant’s tactics are fraudulеnt and or deceptive and were done to create the likelihood of confusion or misunderstanding.” Complaint, ¶ 41.
In order to succeed in her claim under UDAP, the debtor must meet three criteria. First, the debtor must show that the Defendant’s business (that is, the sale of trucks on a secured basis) constitutes a “trade” or “commerce” within the act, 73 P.S. § 201-3. Second, she must show that the act grants her a private cause of action
The Court finds that the Debtor cannot succeed under her UDAP claim because she lacks a private right of action. The statute pertains to the purchase of goods or services primarily for personal, family or household purposes. 73 P.S. § 201-9.2. These purchases were made in the course of the business of the Debtor and her husband.
See Waldo v. North American Van Lines, Inc.,
Summary
The Court finds that the Debtor has willfully violated the bankruptcy stay. For the reasons stated, judgеment shall be entered in favor of Debtor and against the Defendant in the amount of $1,000.00. The Debtor’s state law consumer protection claim is denied.
An appropriate Order follows
Order
And Now, upon consideration of the Debtor’s Complaint Seeking Damages for Violation of the Automatic Stay, the Answer in Opposition filed by the Defendant, Jerry Borkon, thereto, and after trial held July 29, 2008, it is hereby:
Ordered, that for the reasons set forth in the attached Opinion, judgment shall be and hereby is entered in favor of Plaintiff and against the Defendаnt in the amount of $1,000.
Notes
. Mr. Borkon is the sole proprietor of the business. See Joint PreTrial Statement, II A.
. The parties dispute when — exactly—Borkon was apprised of the Debtor’s filing.
. The trucks have since been resold. T-31.
. See Schedule B, listing her interest in SS Trucking, Inc. [sic ]
. Although her schedules characterize the business as a corporation, the parties have stipulated that it is a partnership. See Joint PreTrial Statement ¶ II. This is confirmed by their having registered a fictitious name (T-33).
. T-4.
. Because the 1996 Freightliner and the 1998 Kenworth were the only trucks heretofore sold to the Debtor and her husband, they are the "original two tractors.” T-6.
. As an aside, even assuming, for argument purpоses that the writings in question are vague, the writings were drafted by the Defendant. Principles of contract construction accordingly require the Court to give the Debtor the benefit of any doubt.
See In re Eastern Continuous Forms, Inc.,
. Defendant argues that once a court finds no actual damages, that thereby precludes an award of punitive damages. See Defendant’s Brief, 11. That argument is based, however, on "persuasive” authority, i.e., case law outside this circuit. There is no Third Circuit authority conditioning the imposition of punitive damage upon a finding that actual harm was suffered.
. The Debtor’s husband did not appear at trial or otherwise testify.
. The complaint originally pleaded a violation of the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692; however, it is not listed among the legal issues presented in the Joint PreTrial Statement so it appears to have been waived. See
In re Williams,
.73 P.S. § 201-1 et seq. Like most American jurisdictions, Pennsylvania has enacted a statute which is generically known as a law prohibiting and punishing "unfair or deceptive acts and practices,” i.e., a UDAP statute, specifically the Unfair Trade Practices and Consumer Protection law, 73 P.S. § 201-1, et seq. (referred to hereafter as "UDAP”).