Vaidya v. Choudhary (In re Vaidya)

IN RE: PRAGATI VAIDYA Debtor

PRAGATI VAIDYA Plaintiff v. AMIT CHOUDHARY Defendant

CASE NO: 18-36401

ADVERSARY NO. 19-3592

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

February 3, 2021

CHAPTER 13

MEMORANDUM OPINION

Much like a Jenga tower, bankruptcy cases and the processes governing them are carefully structured for the protection of both debtors and creditors. Such cases are fortified by the Bankruptcy Code's automatic stay, which promotes the orderly distribution of a debtor's assets by placing those assets outside the reach of creditors. When a creditor willfully violates the stay and grabs for a debtor's assets, it disturbs the cautiously ordered process and threatens to send the whole case tumbling. Pragati Vaidya, acting pro se, is before this Court seeking damages for the admittedly willful violation of the automatic stay perpetrated by her ex-husband and creditor, Amit Choudhary. Because Amit Choudhary admits that he willfully, although not intentionally, violated the automatic stay, the only issue before the Court is determining the appropriate amount of damages to be awarded in this case. On January 19, 2021, the Court concluded a two-day trial, took the matter under advisement, and now issues this Memorandum Opinion.

For the reasons stated herein, the Court finds that Plaintiff shall be awarded actual damages in the amount of $2,100 and punitive damages in the amount of $21,000 for a total award of $23,100 for Defendant's willful violation of the automatic stay under 11 U.S.C. § 362(k)(1), which shall accrue post-judgment interest from the date of the entry of this Court's judgment until paid. The post-judgment interest rate that will be in effect on the date of the entry of the judgment will be .09 percent (0.09%) per annum.¹ Plaintiff's claim for attorney's fees and pre-judgment interest is denied. Plaintiff's claims for recovery of post-petition transfers under 11 U.S.C. §§ 549 and 550 and claim for turnover of property under 11 U.S.C. § 542 were mooted by this Court's order retroactively annulling the automatic stay validating the Rendition and Final Decree of the State District Court and are therefore denied. The Court further finds Defendant in civil contempt of this Court's Stay Modification Order but declines to issue any sanctions against Defendant.

I. Jurisdiction and Venue

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334, which provides "the district courts shall have original and exclusive jurisdiction of all cases under title 11." Section 157 allows a district court to "refer" all bankruptcy and related cases to the bankruptcy court, wherein the latter court will appropriately preside over the matter.² This Court determines that pursuant to 28 U.S.C. § 157(b)(2)(A), (E), and (G), this proceeding contains core matters.

Furthermore, this Court may only hear a case in which venue is proper.³ Pursuant to 28 U.S.C. § 1408, a case under title 11 may be commenced where a debtor has been domiciled, resided, or maintained its principal place of business for 180 days immediately preceding debtor's petition date. Venue is proper here because, Pragati Vaidya, resided within the Southern District of Texas for the 180 days immediately preceding her petition date.⁴ Venue is also proper pursuant to 28 U.S.C. § 1409(a) because Debtors' bankruptcy case is presently pending in thisCourt.

II. Constitutional Authority to Enter a Final Order

This Court must evaluate whether it has constitutional authority to enter a judgment in this case. In Stern, which involved a core proceeding brought by the debtor under 28 U.S.C. § 157(b)(2)(C), the Supreme Court held that a bankruptcy court "lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim."⁵ The pending dispute before this Court is a core proceeding pursuant to § 157(b)(2)(A), (E), and (G). The ruling in Stern was limited to the one specific type of core proceeding involved in that dispute, which is not implicated in this case. Accordingly, this Court concludes that the narrow limitation imposed by Stern does not prohibit this Court from entering a final judgment here.⁶ Alternatively, even if Stern applies to all of the categories of core proceedings brought under § 157(b)(2),⁷ this Court still concludes that the limitation imposed by Stern does not prohibit this Court from entering a final judgment in this dispute. In Stern, the debtor filed a counterclaim based solely on state law; conversely, this dispute involves the intentional violation of the automatic stay pursuant to 11 U.S.C. § 362(k). Similar provisions do not exist under state law.

Finally, this Court has constitutional authority to enter a final judgment in this adversaryproceeding because both parties have consented to adjudication of this dispute by this Court.⁸ Defendant consented on December 19, 2019,⁹ and Plaintiff consented on November 23, 2020.¹⁰ Thus, this Court wields the constitutional authority to enter a final judgment here.

III. Findings of Fact

A. Background History

Pragati Vaidya ("Plaintiff") originally filed a chapter 11 bankruptcy on November 13, 2018,¹¹ while the divorce case between her and her ex-husband, Amit Choudhary ("Defendant"), was still pending in the 311^th Judicial District Court, Harris County Texas ("State District Court").¹² Plaintiff's bankruptcy case was later converted to a chapter 13 case.¹³ Pursuant to the final divorce decree ("Final Decree") pronounced and rendered on November 14, 2018 ("Rendition") but not signed until December 19, 2018,¹⁴ the property located at 5531 Pine Street #S, Houston, Texas 77081 ("Property") was awarded to Defendant subject to Plaintiff's option to retain the Property.¹⁵ The Final Decree stipulated that if Plaintiff paid Defendant the total amount of $99,000 no later than seven days before the Final Decree was signed, the Property would be awarded to Plaintiff.¹⁶ It is undisputed that Plaintiff did not pay Defendant the $99,000 as ordered.¹⁷ At the time the Final Decree was pronounced and rendered, the automatic stay wasalready in effect.¹⁸

On December 12, 2018, Defendant filed an expedited motion to modify the automatic stay¹⁹ and on December 18, 2018, this Court entered an order modifying the stay ("Stay Modification Order"), permitting the State District Court to enter final orders "respecting the division of community property."²⁰ The Stay Modification Order, however, required that "orders pertain[ing] to property that has not been determined to be exempt property under the Bankruptcy Code . . . may not be enforced except as further ordered by this Court."²¹ It is undisputed that the Property was property of the Bankruptcy Estate.²²

On January 18, 2019, Plaintiff filed the self-styled "Respondent's Motion for New Trial, Motion for Rehearing and Motion to Set Aside or Modify Final Decree of Divorce Signed De-cember 19, 2018" ("Motion for New Trial"), in the State District Court.²³ Five days later, Defendant filed a "Petition for Enforcement of Property Division" ("Motion to Enforce") in the State District Court to enforce the Final Decree.²⁴ Defendant admits that the intent of the Motion to Enforce was to force Plaintiff to deed the Property to Defendant.²⁵ Plaintiff thereafter deeded the Property to Defendant.²⁶ On May 8, 2019, Defendant sold the Property for $379,000.²⁷ This sale was in direct violation of the automatic stay and this Court's Stay Modification Order.²⁸ After closing costs and fees were paid, Defendant netted $44,970.94.²⁹ Defendant's failure to seek pre-clearance prevented this Court from entering final orders regarding the Final Decree as it pertained to the division of non-exempt community assets.

On August 20, 2019, Plaintiff filed a complaint in this Court seeking: (1) to avoid the transfer pursuant to 11 U.S.C. § 549 and obtain a money judgment for any avoided transfer; (2) to recover actual damages, attorney's fees, and punitive damages for willful violation of the automatic stay pursuant to 11 U.S.C. § 362(k)(1); (3) turnover of all amounts owed and all proceeds, profits, and interest derived therefrom pursuant to 11 U.S.C. § 542; (4) a finding by this Court that Defendant was in civil contempt by violating the Court's Stay Modification Order; and (5) pre- and post-judgment interest on the value of the transfer plus reasonable attorney's fees.³⁰ In her initial disclosures pursuant to Federal Rule of Civil Procedure 26(a),³¹ however, Plaintiff only asked for pre- and post-judgment interest on the value of the transfer, reasonableattorney's fees, and punitive damages pursuant to § 362(k)(1).³²

On November 2, 2020, this Court, after notice and a hearing, granted Defendant's motion to annul the automatic stay as to the Rendition, retroactive to the filing date of Plaintiff's bankruptcy.³³ Therefore, the marital property has been deemed divided by the entry of the Rendition and Final Decree of Divorce in the State District Court. That annulment also mooted Plaintiff's claims for turnover of the Property pursuant to § 542, and her claim for recovery of post-petition transfers pursuant to §§ 549 and 550.

Defendant cedes that, by definition, his conduct amounted to a willful violation of the automatic stay.³⁴ Based on Defendant's concession, this Court's Order Annulling the Automatic Stay,³⁵ which mooted certain of Plaintiff's claims as stated above, and arguments made on the record, the issues for trial were limited to (1) what damages, if any, Plaintiff suffered from Defendant's admitted violation of the automatic stay and (2) whether Defendant should be held in civil contempt of this Court's orders.³⁶

B. Witness Testimony and Credibility

While two other witnesses were called,³⁷ the facts of this case are heavily dependent on testimony elicited from Plaintiff and Defendant. The Court summarizes the testimony as follows:

Defendant testified that:

1. He willfully,

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