Ojiegbe v. Walter (In re Ojiegbe)

539 B.R. 474

In re : Vitalis Ojiegbe, DebtorVitalis Ojiegbe, Movant

v.Judith L. Walter, Respondent

Case No. 11–11426–TJC

United States Bankruptcy Court, D. Maryland, at Greenbelt .

Signed September 29, 2015

Edward V. Hanlon, Edward V. Hanlon, Greenbelt, MD, for Debtor.

Stay Violation

MEMORANDUM OF DECISION

THOMAS J. CATLIOTA, UNITED STATES BANKRUPTCY JUDGE

The debtor Vitalis Ojiegbe (the “Debtor”) filed a motion seeking sanctions for violating the automatic stay against Judith L. Walter, Esq. (“Ms.Walter”), who holds a judgment against the Debtor for attorneys' fees incurred in representing the Debtor's former spouse in divorce proceedings. Through summary judgment and after a trial, the court concluded that Ms. Walter violated the automatic stay by garnishing the Debtor's bank accounts at Bank of America and Capital One bank. The court also concluded that Ms. Walter did not violate the automatic stay by garnishing the Debtor's two bank accounts at State Employees Credit Union or by garnishing the cash held by a limited liability company owned by the Debtor.

Now before the court is the Debtor's claim for damages for the stay violations. For the reasons stated herein, the court awards damages of $255 for bank fees incurred by the Debtor, and denies the Debtor's request for emotional and punitive damages. In support of his claim for attorneys' fees, the Debtor has submitted fee statements showing all legal work provided, including the services provided to address Ms. Walter's actions that the court has determined did not violate the automatic stay. The Debtor will be given twenty-one days to submit fee statements or other appropriate support for the fees he seeks for Ms. Walter's actions that the court has determined violated the automatic stay.

Jurisdiction

The court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a) and Local Rule 402 of the United States District Court for the District of Maryland. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(1).

Findings of Fact

On January 25, 2011, the Debtor filed a petition for relief under Chapter 13 of the Bankruptcy Code. His plan was confirmed on August 29, 2011. See ECF 49.

The Debtor and his wife obtained a limited divorce in the Circuit Court of Prince George's County, Maryland, on September 27, 2012. The divorce judgment awarded attorneys' fees to Ms. Walter in the amount of $13,000. The fee award was reduced to a judgment against the Debtor in favor of Ms. Walter (the “Fee Judgment”) in the amount of $13,000 on December 10, 2012.

On January 29, 2013, Ms. Walter requested writs of garnishment on the Debtor's personal bank accounts at Bank of America, N.A. (the “BOA Account”), Capital One Bank (the “Capital One Account”), and two accounts at State Employees Credit Union (“SECU”) (the “SECU Accounts”). On February 15, 2013, the Clerk of the Circuit Court issued writs of garnishment of property to Bank of America, Capital One, and SECU. All three institutions filed a garnishee's confession of assets.

After the Debtor received notice that Ms. Walter garnished the bank accounts, his domestic relations attorney, Anitha Johnson, unsuccessfully attempted to have the garnishments removed. The Debtor's bankruptcy counsel, Edward Hanlon, then wrote to Ms. Walter by letter dated March 13, 2013, memorializing a phone conversation between the two from earlier that day. Debtor's Ex. 9. In the conversation, Mr. Hanlon, among other things, requested that Ms. Walter immediately unfreeze all of the bank accounts that were subject to a writ of garnishment, and agree to immediately suspend all further efforts to collect on the judgment.

After several phone conversations, Ms. Walter formally responded by letter dated March 25, 2013. Debtor's Ex. 19. Ms. Walter, who is not well versed in bankruptcy law, conducted substantial research on the issues raised in the March 13 letter. She concluded—correctly—that the Fee Judgment was a domestic support obligation. She further concluded—incorrectly—that a domestic support obligation is “exempt from the automatic stay.” Id.¹ Ms. Walter's blanket conclusion, that a domestic support obligation is exempt from the automatic stay, without regard to the important distinctions the Bankruptcy Code makes under § 362(b)(2)(B), is the cause of a substantial amount of the litigation between the parties.²

Although she believed the automatic stay did not apply, she nevertheless sent by facsimile a request to Bank of America, Capital One, and SECU seeking to release the funds from the garnishment. Ultimately, the holds on the accounts were released.

In her March 25 letter, Ms. Walter did not commit to suspending all further efforts to collect on the Fee Judgment, as requested by Mr. Hanlon in the letter of March 13. Because she continued to assert that the Fee Judgment was exempt from the automatic stay, Mr. Hanlon was concerned she would take further collection efforts. The Debtor is a physician who conducts his practice from a clinic that is owned and operated by Sunrise Medical Clinic, LLC (“Sunrise”). Sunrise is a limited liability company of which the Debtor is the sole member. On April 10, 2013, a sheriff's deputy appeared at the Sunrise medical office and served a writ of execution for all cash on hand. The writ had been requested by Ms. Walter on February 1, 2013. She had attempted to release the writ, but her efforts failed for whatever reason and the writ was served.

Once the sheriff's deputy served the writ on Sunrise, Mr. Hanlon concluded that Ms. Walter would not cease her collection efforts. He filed the motion seeking a determination that she violated the stay and a request for sanctions soon thereafter. ECF 55.

Procedural History

In the motion for stay violation, the Debtor claimed that Ms. Walter committed violations of the automatic stay by obtaining the writs of garnishment on the BOA Account, the Capital One Account, the SECU Accounts, and by obtaining the writ of execution on Sunrise's cash on hand. After a lengthy discovery period, the parties filed cross-motions for summary judgment.³ In a Memorandum of Decision resolving the cross-motions, the court concluded, among other things, that (1) Ms. Walter did not violate the automatic stay by obtaining the writ of execution on Sunrise's cash, because the cash on hand was not property of the Debtor's bankruptcy estate, ECF 146 at 9–11; (2) the Fee Judgment was a domestic support obligation and, therefore, whether Ms. Walter violated the automatic stay by serving the garnishments on the bank accounts depended on whether the funds in the accounts were property of the estate, as provided by § 362(b)(2)(B), id. at 12–13; (3) Ms. Walter violated the automatic stay by obtaining the writ of garnishment on the Capital One Account because the funds in that account were property of the estate, id. at 19–20; (4) whether Ms. Walter violated the automatic stay by obtaining the writ of garnishment on the BOA Account or the SECU Accounts needed to be resolved at trial because the issue of whether the funds in those accounts were exempt property or property of the estate could not be resolved on summary judgment, id. at 20–21; and (5) the amount of any damages for the stay violation needed to be resolved at trial. Id. at 21–22.

Subsequently, upon the conclusion of a two-day trial, the court issued a partial ruling from the bench. Specifically, for the reasons stated on the record, the court concluded that the funds in the BOA Account were property of the estate. Therefore, Ms. Walter violated the stay by garnishing those funds. The court also concluded that the funds in the SECU Accounts were exempt funds. Therefore, Ms. Walter did not violate the stay by garnishing those funds.⁴ The court took under advisement the determination of the amount of damages for the stay violations.

Conclusions of Law

As stated above, the court previously determined that Ms. Walter willfully violated the automatic stay by obtaining the writ of garnishment on the BOA Account and the Capital One Account. The only issue here is whether, and to what extent, the court should award damages.

The Bankruptcy Code provides debtors significant remedies against creditors who willfully violate the stay. Section 362(k)(l) provides that “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. § 362(k)(1). “The award of actual damages is mandatory upon a finding of a willful violation of § 362. However, the burden is on the debtor to demonstrate the extent of any damages” by a preponderance of the evidence. In re Clayton, 235 B.R. 801, 810 (Bankr.M.D.N.C.1998) (citations omitted). Actual damages must be “founded on concrete, non-speculative evidence.” In re Seaton, 462 B.R. 582, 595 (Bankr.E.D.Va.2011) (citing In re Rawles, 2009 WL 2924005 at *2 (Bankr.D.Md. June 18, 2009) ).

The Debtor seeks damages for bank fees incurred as a result of the garnishments, emotional distress damages, punitive damages, and attorneys' fees. The court will address each category of damages in turn.

General Compensatory Damages, Other than Attorneys' Fees

Courts traditionally view “actual damages” as a broad umbrella term, including, but not limited to, lost time damages, out-of-pocket expenses, and emotional damages. See In re Green Tree Servicing, LLC v. Taylor, 369 B.R. 282, 288 (S.D.W.Va.2007) (emotional damages); In re Hafer, 2013 WL 5925167 at *7 (Bankr.E.D.Va. Nov. 5, 2013) (lost time damages); and In re Ellett, 2014 WL 4926006 at *4 (Bankr.S.D.Ind. Sept 30, 2014) (out-of-pocket damages). In order to recover actual damages the debtor must establish by a preponderance of the evidence that a willful violation occurred, that damages were suffered, and that the amount of relief requested is appropriate.

In this case, the actual damages suffered by the Debtor are $255, without regard to...