In re Moon

642 B.R. 27

IN RE: Willie N. MOON and Adnette M. Gunnels-Moon, Debtors.

Case No.: 13-12466-MKN

United States Bankruptcy Court, D. Nevada.

Signed June 13, 2022

Date: January 13, 2022

Christopher Patrick Burke, Las Vegas, NV, for Debtors.

Rick A. Yarnall, Las Vegas, NV, Trustee, Pro Se.

MEMORANDUM DECISION ON REMAND¹

Honorable Mike K. Nakagawa, United States Bankruptcy Judge

On January 13, 2022, this case came before the court on a variety of matters after appellate remand. The appearances of counsel were noted on the record. After arguments were presented, the matters were taken under submission.

BACKGROUND

On February 25, 2020, the court entered its Memorandum Decision After Evidentiary Hearing ("Contempt Decision").² (ECF No. 157). That Contempt Decision set forth the court's findings of fact and conclusions of law on the Motion to Hold Creditor, Rushmore Loan Management in Contempt for Violation of the Automatic Stay Under § 362(a) and for Violation of the Discharge Injunction Under 11 U.S.C. § 524(a)(2) and to Hold Creditor SN Servicing Corporation in Contempt for Violating the Discharge Injunction Under 11 U.S.C. § 524(a)(2) and for Actual Damages, Emotional Distress Damages, Punitive Damages and Attorney Fees and Sanctions Against Both Creditors, Rushmore Loan Management and SN Servicing Corporation ("Contempt Motion"). The Contempt Motion was brought by debtors Willie N. Moon ("Willie Moon") and Adnette M. Gunnels-Moon ("Adnette Moon"), who had commenced the above-captioned Chapter 13 proceeding on March 26, 2013, and whose Chapter 13 discharge was entered on September 28, 2016.

After conducting a two-day evidentiary hearing, the court entered a written decision finding that Rushmore Loan Management Services, LLC ("Rushmore") willfully violated the automatic stay under Section 362(k) as to both Willie Moon and Adnette Moon. After a detailed discussion of the evidence presented, the court found that Rushmore had received notice of the Debtors’ bankruptcy case on December 20, 2014, through a telephone call to the Debtors’ residence that Rushmore's representative had with Willie Moon.³ The court also found that Rushmore thereafter willfully violated the automatic stay on multiple occasions until the Debtors’ discharge under Chapter 13 was entered on September 28, 2016. From December 20, 2014, through September 28, 2016, the court found that Rushmore made sixty-eight telephone calls to the Debtors’ residence, mailed thirty Account Information and Mortgage Statements and other correspondence to the Debtors’ residence, and even physically posted on the door of the Residence a notice advising the Debtors to call Rushmore's collection department. Based on that history of willful violations of the automatic stay, the court awarded in favor of Willie Moon and Adnette Moon (jointly, the "Debtors") pecuniary damages in the amount of $742.10 for fees incurred in reopening the Chapter 7 proceeding, emotional distress damages to Willie Moon in the amount of $100,000, punitive damages in the amount of $200,000.00, and attorney's fees in an amount to be determined. Based on the evidence presented, the court also found that Rushmore⁴ violated the discharge injunction under Section 524(a)(2), but declined to award damages for civil contempt under Section 105(a)⁵ due to an insufficient evidentiary basis to establish the date that Rushmore received notice of the Debtors’ discharge.

On May 29, 2020, the court entered its Order on Motion for Attorney Fees and Costs from Order on Motion for Contempt (DKT.# 158) ("First Fee Decision"). (ECF No. 231). That First Fee Decision set forth the court's award of attorney's fees in the amount of $56,150.00 and costs in the amount of $10,857.94 in favor of the Debtors against Rushmore. Debtors’ request for an enhancement of the fee award, however, was denied.

On July 21, 2020, the court entered its Order on Supplemental Fee Application to Amended Motion for Attorney Fees (Dkt. #179) ("First Fee Supplement Decision"). (ECF No. 289). That First Fee Supplement Decision set forth the court's award of additional attorney's fees in the amount of $3,500.00 in favor of the Debtors against Rushmore.

On July 21, 2020, the court entered its Order on Second Motion for Attorney Fees and Costs for Rushmore's Continuing Stay Violation in Filing Adversary No. 19-01090-MKN ("Second Fee Decision"). (ECF No. 291). That Second Fee Decision denied the Debtors’ request for attorney's fees and costs incurred in responding to a separate adversary proceeding brought by Rushmore ("Rushmore Adversary").⁶

On July 21, 2020, the court entered its Final Order on Motion for Contempt Against Rushmore Loan Management Services for Violation of the Courts Order Confirming Plan #2 Against Creditor, Rushmore Loan Management Services, LLC and for its Continuing Violation of the Stay and Damages for Both and to Confirm Avoidance of Rushmores Second Mortgage under FRBP 5009(d) ("Second Contempt Decision"). (ECF No. 295). That Second Contempt Decision denied the Debtors’ request to hold Rushmore in civil contempt for violation of their Chapter 13 discharge.

Entry of the Contempt Decision, First Fee Decision, First Fee Supplement Decision, Second Fee Decision, and Second Contempt Decision, led to a series of appeals and cross-appeals to both the Bankruptcy Appellate Panels for the Ninth Circuit ("BAP") as well as the Ninth Circuit Court of Appeals ("Ninth Circuit").

Rushmore appealed the Contempt Decision to the BAP. On January 7, 2021, the BAP entered its memorandum decision ("BAP Contempt Decision Memorandum")⁷ affirming in part, reversing in part, vacating and remanding.⁸ As the BAP observed, Rushmore did not appeal this court's "ruling that it willfully violated the automatic stay with its collection efforts or the award of compensatory damages of $742.10." See BAP Contempt Decision Memorandum at 10. Rushmore did appeal the award of emotional distress damages to Willie Moon, the award of punitive damages to Willie Moon, and the admission of testimony of the Debtors’ expert. The BAP concluded that Rushmore did not violate the automatic stay with respect to Willie Moon because only Adnette Moon was the borrower. Id. at 10-16.⁹ The BAP affirmed as to the admission of the expert testimony. Debtors cross-appealed the court's ruling denying any award of damages for Rushmore's violation of the discharge injunction. The BAP affirmed the court's denial of damages with respect to the discharge violation. The BAP therefore reversed and vacated the award of any damages as to Willie Moon, but remanded for a reconsideration of punitive damages as to Adnette Moon. Both Rushmore and the Debtors appealed the BAP decision to the Ninth Circuit. On or about April 19, 2021, the Ninth Circuit entered an order dismissing the appeals for lack of jurisdiction. Both Rushmore and the Debtors sought reconsideration from the Ninth Circuit. On or about July 23, 2021, the Ninth Circuit denied the motions for reconsideration. On August 2, 2021, the Ninth Circuit issued the mandate on its order dismissing the appeals for lack of jurisdiction.¹⁰

Rushmore and the Debtors appealed the First Fee Decision to the BAP. On January 7, 2021, the BAP entered its memorandum decision ("BAP First Fee Decision Memorandum")¹¹ affirming in part, vacating and remanding in part.¹² The BAP affirmed the award of attorney's fees for violation of the automatic stay, vacated the amount awarded, and remanded for an explanation of the amount for an automatic stay violation rather than a discharge violation. Both Rushmore and the Debtors appealed the BAP decisions to the Ninth Circuit. On or about April 19, 2021, the Ninth Circuit entered an order dismissing the appeals for lack of jurisdiction. On May 11, 2021, the Ninth Circuit issued the mandate on its order dismissing the appeals for lack of jurisdiction.

Rushmore appealed the First Fee Supplement Decision to the BAP. On February 4, 2021, the BAP entered its memorandum decision ("BAP First Fee Supplement Decision Memorandum")¹³ vacating the award of attorney's fees and remanded for an explanation of the amount consistent with the BAP's ruling on the First Fee Decision.

Debtors appealed the Second Fee Decision to the BAP. On February 4, 2021, the BAP entered its memorandum decision ("BAP Second Fee Decision Memorandum")¹⁴ vacating and remanding. The BAP vacated the denial of attorney's fees incurred by the Debtors in responding to Rushmore's separate adversary proceeding, and remanded for a determination of the amount appropriate under Section 362(k)(1). Neither the Debtors nor Rushmore appealed the BAP's decision to the Ninth Circuit.

Debtors appealed the Second Contempt Decision to the BAP. On February 4, 2021, the BAP entered its memorandum decision affirming the Second Contempt Decision ("BAP Second Contempt Decision Memorandum").¹⁵ Neither the Debtors nor Rushmore appealed the BAP's decision to the Ninth Circuit.

In light of the multiple appeals and cross-appeals sought by both Rushmore and the Debtors, the BAP entered a series of orders on February 25, 2021, with respect to the Debtors’ requests for appellate attorney's fees under Section 362(k)(1). In each of those orders, the BAP directed this court to "decide the appropriate amount of appellate fees with its consideration of the damages and fees already remanded to the bankruptcy court."¹⁶ As a result of the mandates and orders issued by the BAP, the court is required to address the following matters in connection with the Contempt Decision, First Fee Decision, First Fee Supplement Decision, and Second Fee Decision:

1. To determine the amount of punitive damages to be awarded for a willful violation of the automatic stay, given the reduction of compensatory damages. See BAP Contempt Decision Memorandum at 29-30. The BAP expressly stated that the "bankruptcy court may consider the amount of attorney's fees and costs in determining the size of a punitive damages award under § 362(k)(1

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