4 IN RE: : 5 MIGUEL ANGEL CATALA MORALES : Case No. 03-12453-ESL 6 : Chapter 13 Debtor. : 7 : 8 MIGUEL ANGEL CATALA MORALES 9 : Plaintiff : Adv. Proc. No. 07-34 10 : v. : il 12 CONSEJO DE TITULARES DEL COND. : BOULEVARD DEL RIO UU, ET ALS : 13 ; Defendants : 14 15 17 This adversary proceeding is before the court on the motion for summary judgment filed 18 by Consejo De Titulares Del Condominio Boulevard Del Rio II (the “Defendant’”) on July 9, 19 2007. (Dkt. 15)’ (“Defendant’s Motion”). Miguel Angel Catala Morales (the “Plaintiff” or 20 “Debtor”’), filed an opposition to Defendant’s Motion and a cross-motion for partial summary 39 judgment on October 29, 2007. (Dkt. 37) (“Plaintiffs Cross-Motion”). On November 27, 2007, 23 the Defendant filed its reply in opposition to Plaintiff’s Cross-Motion for summary judgment. 24 (Dkt. 44) (“Defendant’s Reply”). Plaintiff was granted leave to file a reply to Defendant’s 25 opposition to Plaintiff's Cross-Motion, which was filed on January 28, 2008. (Dkt. 50) 26 37 (“Plaintiff’s Reply”). The parties submitted their opposing statements of uncontested facts and 28 ! Matters in the docket of the case will be referred to as “Dit”.
1 responses thereto, as required under Local Rule 56. (Dkt. 15, 38 & 44).? (“Plaintiff's Facts” and 2 “Defendant’s Facts’). The Plaintiff's Cross-Motion secks to impose lability on Defendant for willful violation of the automatic stay provisions in 11 U.S.C. § 362 of the Bankruptcy Code (the 5 “Code”’). For the reasons set forth below, Defendant’s Motion is hereby denied and Plaintiffs 6 Cross-Motion for partial summary judgment is hereby granted. 7 Factual Background 8 Debtor filed a chapter 13 petition on November 10, 2003 and the instant action on March 5, 2007. The Defendant was listed as a creditor in the petition schedules under the name of its 10 previous management company and duly authorized administrator as follows: McDougall ll 12 Management, Condominio Boulevard Del Rio II, 500 Avenida Los Filtros, Apt. 85, Guaynabo, 13 P.R. 00971-0228. (Dkt. 1 4 8-9; Dkt. 15 Defendant’s Facts § 3).* Defendant’s current 14 management company is American Management Maintenance Corp. (“AMMC”)., The 15 □□ . . Defendant’s current administrator is Francisco Pagan Colon. (“Mr, Pagan”).° (Dkt. 15 16
18 * References to the parties’ reply briefs will be to “Dkt.__ Plaintiff's Reply” and “Dkt. _ Defendant’s Reply”. References to the parties’ opposing statements of uncontested facts shall be to “Dkt. _ Plaintiff Facts” and “Dkt. _ 19 jj Defendant’s Facts”, followed by the paragraph and/or page number. References to the single exhibit filed by Plaintiff will also say “Exhibit at 0000__”; references to Defendants’ exhibits will say “Exh.__”. 20 > Debtor filed a plan and a post-confirmation modification which has been confirmed and is currently in 21 compliance. 22 “For purposes of this decision, the acts of any management company, administrator, attorney or employee of Defendant's managers named in the pleadings, that was acting pursuantto authority granted by Defendant, will be treated 23 as ifthe acts were committed by, or the person is, the Defendant itself. Defendant has not disclaimed liability for the acts of these agents, as well it can’t since it is settled law that Defendant is bound by, and is liable for, the acts of its agents. 24 See, In re Michaud, 2007 WL 135902 (Bkrtcy.D.N.H. 2007); in re MeCormack, 2003 B.R. 521 (Bkrtcy.D.N.H. 1996), There is no dispute that Defendant has the authority to appoint and/or employ the agents identified in the pleadings tc 25 conduct its business, or that Defendant has standing to sue and be sued on behalf of the Condominium. (Dkt. 15 Motion {] 2-4, 8; Dkt 44 Defendant’s Facts, Exh. 9 (By-laws, art. 30 et. seq.)). 26 > Defendant’s administrator, Mr. Pagan, is the owner of Defendant’s current management company, AMMC. 27 He has been involved with Defendant’s management since late 2004, when he was employed by Caribbean Housing Management Services, Inc. (“Carribean Management”), Defendant’s previous manager. (Dkt. 44 Defendant’s Facts J 28 43, Exh. 13 at 1). _O.
1 Defendant’s Facts § 4). After McDougall Management’s tenure but before AMMC’s current 2 tenure, Defendant’s management company was Carribean Management. Defendant is listed in the petition as a secured creditor for $700 dollars in condominium maintenance fees.° (the “pre-
5 petition debt”) (Dkt. 1 {] 7-9). The Defendant’s accounts show that at the time of the petition, 6 Debtor owed $711 dollars in maintenance fees, and Debtor agrees with that amount. (Dkt 15 7 Defendant’s Facts { 6, Exh. II; Dkt. 38 Plaintiff's Facts 21). There is no record that Defendant 8 ! filed a proof of claim in Debtor’s bankruptcy. ? After the petition was filed, Defendant accounted for the pre-petition debt in the ordinary course, and applied Debtor’s post-petition payments to the pre-petition debt. Debtor specifically 2 notified Defendant that Defendant was accounting for and collecting the pre-petition debt on at 13 least three occasions through a series of letters dated in March and September 2004, and June 14 2005. (the “Letters”) (Dkt. 38 Plaintiff's Facts J] 22, 23, & 25; Exhibit at 000023-25). 15 Defendant admits having received the Letters. (Dkt. 44 Defendant’s Facts {J 22, 23 & 25, Exh. : I}. The Letters indicated that payment for the post-petition fees was enclosed, and that the
18 outstanding balance was not paid because it represented the pre-petition debt scheduled in 19 bankruptcy. The Letters dated March 19, 2004 and June 25, 2005, included a copy of Debtor’s 20 petition. (Dkt. 44 Defendant’s Facts {] 22, 23, 25, 43; Exh. I; Dkt. 38 Plaintiff's Facts, Exhibit at 71 000014-18). Mr. Pagan admitted having seen the Letters at around the time when the collection complaint was filed. (Dkt. 38 Plaintiff's Facts, Exhibit at 000018). At all times relevant to this action, Defendant’s account ledgers reflected the pre-petition debt as currently due. (Dkt. 44 25 Defendant’s Facts, Exh. I-V), Defendant admits that it did not separately account for the pre- 26 27 6 See Case No. 03-12452-ESL at Dkt. 1, Schedule D. Despite being listed as a creditor, Defendant did not file 28 ! a proof of claim.
1 petition debt and that it applied Debtor’s post-petition payments to his pre-petition debt. (Dkt. 44 2 Defendant’s Facts f{] 3-4, 31, 56). Defendant’s management company, AMMC, uses the “yeachtree” accounting software in its computerized accounting system. (Dkt. 44 Defendant’s 5 Facts {{ 3, 31). The Defendant’s accounting software can be programmed to separately account 6 for Debtor’s other obligations, such as special assessment fees or “derramas”. (Dkt. 38 □□□□□□□□□□□ 7 Facts 956, Exhibit at 000054; admitted at Dkt. 44 Defendant’s Facts { 56). 8 On February 8, 2006, Defendant’s attorney sent Debtor a collection letter demanding prompt payment of $1,002 dollars plus legal interests, and threatening legal action. The 10 collection letter refers to post-petition arrears purportedly accumulated between February 2005
2 and February 2006 (excluding August 2005, no explanation is given). (Dkt. 44 Defendant’s Facts 13 43, Exh. U; Dkt. 15 Defendant’s Facts 9, Exh. V). On or about April 12, 2006, Defendant filed 14] complaint for collection of money against Plaintiff before the General Court of Justice of the 15 . Commonwealth of Puerto Rico, First Instance, Guaynabo Part. (alternatively referred to as the 16 “collection complaint” or the “collection action”) Defendant’s complaint sought the payment of 17 18 91,207.35 for arrears up to April 2006, plus legal interests and fees. (Dkt. 15 Defendant’s Facts 19 {]10-11; Dkt. 44 Defendant’s Facts J 37, Exh. VIT).’ The amounts owed as provided in the 20 collection letter and complaint, included the pre-petition debt, plus post-petition arrears. (Dkt. 38 71 plaintiff's Facts 4] 9, 11, 36-39, Exhibit at 000055-56; admitted at Dkt. 44 Defendant’s □□□□□ 22 3-4, 36-39). 23 According to Defendant’s account ledger for Debtor, on February 1, 2005, Debtor had a 75 total debt of $584 dollars. By April 2006, the date of the collection action, Debtor’s total debt 26 ? The Dkt. 15 Motion, 11, erroneously states that the mitial demand in the collection complaint was for 27 3 1,720. However, the collection complaint demanded payment of $1,207 in maintenance fees, and $1,720 was the total debt owed by Debtor as of September 2006, when Defendant moved for default judgment. (Dkt. 15 Defendants Facts, 28 Exh. VI, XI, XIV at 3-4; Dkt 44 Defendant’s Facts, Exh. V).
1 was $1,207 dollars. Debtor was obligated to pay monthly maintenance fees at the rate of $102.55 2 per month. Between February 2005 and April 2006, the time relevant to the collection action, Defendant received approximately $812 dollars in post-petition maintenance payments from
5 Debtor. (Dkt. 44 Defendant’s Facts 4 5, Exh. V). 6 On or about July 31, 2006, Debtor’s lawyer faxed a letter to Defendant’s attorney in the 7 collection action to notify Defendant’s attorney of Debtor’s bankruptcy proceeding and included 8 ia copy of the Notice of Stay issued by this court. In that communication, Debtors’s lawyer also ° threatened to seek relief in bankruptcy court if Defendant did not drop the collection action. (Dkt. 38 Plaintiff's Facts { 44, Exhibit at 000031-32). Defendant admits that its attorney received the
12 July 31, 2006 letter from Debtor’s attorney and the copy of the Notice of Stay. (Dkt. 44 13 ) Defendant’s Facts { 44; Dkt. 15 Defendant’s Facts { 13, Exh. VII). On August 23, 2006, 14 Defendant’s attorney served Debtor’s attorney with a copy of Defendant’s complaint and notice 1S of hearing in the collection action. (Dkt. 38 Plaintiff's Facts 4] 45; Exhibit at 000033; admitted at Dkt. 44 Defendant’s Facts J 45). This communication threatened to seek an order of default
18 judgment if Debtor did not appear at the collection action hearing scheduled for September 25, 19 2006. (Dkt. 38 Plaintiff's Facts, Exhibit at 000033). 20 By September 2006, Debtor’s total arrears had increased to $1,720 dollars. (Dkt. 44 21 Defendant’s Facts, Exh. XIV; XV at 3-4; Exh. V). On September 21, 2006, Debtor sent a letter to Defendant reminding Defendant that Debtor was in bankruptcy. This letter included payment of $1,025.50 dollars corresponding to post-petition arrears. Based on Debtor’s calculations, he
35 excluded from payment approximately $695 dollars representing the pre-petition debt. The next 26 day, September 22, 2006, Debtor’s attorney faxed a letter to Defendant’s counsel to inform him 27 ! of the payment, and sent him copies of the letter and check sent to Defendant and copies of 28
1 petition papers. (Dkt. 38 Plaintiff's Facts {] 46-47, Exhibit at 000034-43). Defendant admitted 2 receiving these communications in September 2006. (Dkt. 44 Defendant’s Facts {| 46-47; Dkt. 15 Defendant’s Facts § 14, Exh. IX & X). On or about September 25, 2006, Defendant moved
5 for default judgment against Debtor in the collection action, In October 2006, Defendant's lawyer 6 filed a form of order of default and obtained an order of default judgment against Debtor for 7 $872 dollars, as follows: $695 in maintenance fee arrears, $167 in statutory penalties allowed by 8 law, and $10 in legal interests. Plus an additional award of $500 in legal costs and expenses. (Dkt 44 Defendant’s Facts {[] 52-53, Exh. VOI, XIV & XV; Dkt. 15 Defendant’s Facts ] 15-17, Exh. XI, XII-XIV). The default judgement against Debtor has not been vacated. (Dkt. 50 Plaintiff s 12 Reply at 5). 13 The parties’ motions for summary Judgment 14 The background to Debtor’s complaint and Cross-Motion is that Debtor sent Defendant 15 three Letters between March 2004 through June 2005, giving wnitten notice of his bankruptcy, prior to Defendant’s filing of the collection complaint. (Dkt. 38 Plaintiff's Facts 22, 23, 25).
18 The Letters also advised Defendant that its account statements improperly included the pre- 19 petition debt. According to Debtor, the Defendant can program its accounting software to 20 distinguish between operating accounts and special accounts. (Dkt. 38 Plaintiff's Facts { 56; 21 Exhibit at 000008; 54; Dkt. 50 Plaintiffs Reply at 3-4). Notwithstanding the Letters, on February 8, 2006, the Defendant mailed Debtor a collection letter demanding payment of $1,002 dollars for post-petition arrears plus $57 in legal interests allegedly accumulated since February 2005, 35 and threatening legal action. (Dkt. 38 Plaintiff's Facts { 33, Exhibit at 000026-27). In April 26 2006, the Defendant filed the collection action demanding payment of $1,207 in arrears up to 27 April 2006, plus legal interests and costs. (Dkt. 38 Plaintiff's Facts Exhibit at 000028-30). 28 -6-
! || According to Debtor, the amounts demanded were the result of applying his post-petition fee 2 payments during the period in question to his pre-petition debt. As such, Debtor’s actual post- petition debt was substantially less than the amounts demanded in the collection complaint. (Dkt.
5 1 § 15). Defendants evidence and pleadings support Debtor’s allegations. (Dkt. 44 Defendant’s 6 Facts ff 3-5, Exh. V). 7 The gravamen of Debtor’s complaint and Cross-Motion is that in response to the 8 I collection action, Debtor sent written notice of the bankruptcy to Defendant and a copy of the Notice of Stay to Defendant’s counsel in July and September of 2006; fully paid the post-petition debt in September 2006; and gave Defendant’s attorney a fair warning that this action would
12 || ensue if they did not desist. (Dkt. 38 Plaintiff's Facts "| 44-47; Exhibit 000031-43). Debtor 13 alleges that in response to these communications, and despite his warning and payment of the 14 post-petition fees, Defendant obtained an order of default judgment in state court for the unpaid 15 balance of the pre-petition debt, plus interests and an award of legal costs and expenses. (Dkt 1 : 44 20-25; Dkt. 38 Plaintiff's Facts {{{ 52-53; Exhibit at 000044-51). As added proof of
18 Defendant’s willful violation of the stay, Debtor points out that, to this day, Defendant has not 19 vacated the state court default judgment. (Dkt. 50 Plaintiff’s Reply at 5). 20 The crux of the argument in Defendant’s Motion is that everything alleged in the 21 complaint flows from Defendant’s lawful efforts to collect post-petition debt. According to Defendant, “[t]here is no evidence supporting Plaintiffs allegations of a collection of a pre- petition debt.” (Dkt. 15 Motion at 7). Furthermore, Defendant argues that suing to enforce post- 45 petition debt generally does not violate the stay. Defendant argues that it did not violate the stay 26 because Defendant never sought to enforce the default judgment and Debtor voluntarily paid 27 before judgment was entered in October 2006. (Dkt. 15 Motion at 8). 28 _F.
1 The Defendant changes its defensive posture in its Reply to Plaintiffs Cross-Motion. 2 (Dkt. 44). Defendant’s Reply presents a strategy of “confess and avoid”. Defendant admits that it sued to collect the pre-petition debt, but argues that Defendant did not violate the stay because it
5 only intended to enforce Debtor’s post-petition debt. The Defendant’s Reply puts forth a two- 6 pronged defensive theory based on, 1) reasserting Defendant's subjective belicf in the propriety 7 of its legal actions (Dkt. 44 Defendant’s Reply J 19-21); and 2) asserting Defendant’s lack of 8 malicious or wrongful intent to violate the stay because it was relying and suing on ° “inadvertently” erroneous accounts. (Id. {[] 20, 22, 29). Defendant makes the following contentions to bolster its defenses: a) that the literal terms of Defendant’s collection letter and
12 complaint only refer to post-petition debt accumulated since February 2005 (Id. at { 20); b) that 13 || collecting post-petition debt is not prohibited by the automatic stay (Id. at | 25); and c) that 14 Defendant’s “unintentional” acts do not reach the requisite level of willfulness required for a 15 violation, especially considering the minimal $711 dollar amount in question and, therefore, : Debtor cannot claim any damages. (Id. at 28-30).
18 The Defendant’s defense of “inadvertent mistake” is premised on what Defendant depicts 19 as an accounting error committed by its management company. The inadvertent accounting error 20 was allegedly caused by the “peachtree” accounting software used by the management company, 71 which was programmed to automatically apply post-petition payments to reduce the pre-petition debt. (Dkt. 44 Defendant’s Facts 3; Defendant’s Reply {| 21). This “involuntary clerical error” induced Defendant to believe at all times that it was collecting post-petition debt. Defendant 45 admits that the collection letter demanded “an aggregate amount” that included the pre-petition 26 debt, and that the collection action also included the pre-petition debt, but claims it was due to 27 the alleged accounting error. (Dkt. 44 Defendant’s Facts 3-7, 31, 38). 28 _Q_
1 Summary Judgment 2 Rule 56 of the Federal Rules of Civil Procedure, made applicable to this proceeding by ° Rule 7056 of the Federal Rules of Bankruptcy Procedure, provides that summary judgment should be entered “if the pleadings, depositions, answers to interrogatories, and admissions on
6 file, together with the affidavits, if any, show that there is no genuine issue as to any material fact 7 and that the moving party is entitled to a judgment as a matter of law.” Fed. R. Bankr. P. 7056; 8 see also, In re Colarusso, 382 F.3d 51 (1* Cir. 2004), citing Celotex Corp. v. Catrett, 477 U.S. 9 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “The summary-judgment procedure authorized by Rule 56 is a method for promptly disposing of actions in which there is no genuine
12 issue as to any material fact or in which only a question of law is involved.” 10A Wright and 13 Miller, Federal Practice and Procedure § 2712 (3d ed. 1998). “Rule 56 provides the means by 14 which a party may pierce the allegations in the pleadings and obtain relief by introducing outside 15 evidence showing that there are no fact issues that need to be tried.” /d. Summary judgment is not a substitute for a trial of disputed facts; the court may only determine whether there are issues
18 to be tried, and it is improper if the existence of a material fact is uncertain. Jd. 19 For there to be a "genuine" issue, facts which are supported by substantial evidence must 20 be in dispute thereby requiring deference to the finder of fact. Furthermore, the disputed facts 21 must be "material" or determinative of the outcome of the litigation. Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir. 1975), cert. denied, 425 U.S. 904 (1976). When considering a petition for summary judgment, the court must view the evidence in the light most favorable to the
5 nonmoving party. Poller v. Columbia Broadcasting Systems, Inc., 368 U.S. 464, 473 (1962); 26 Daury v. Smith, 842 F.2d 9, 11 (ist Cir. 1988). 27 The moving party invariably bears both the initial as well as the ultimate burden in 28 _9-
1 demonstrating its legal entitlement to summary judgment. Adickes v. Kress & Co., 398 U.S. 144, 157 (1970). See also Lopez v. Corporacion Azucarera de Puerto Rico, 938 F.2d 1510, 1516 (1st Cir. 1991). It is essential that the moving party explain its reasons for concluding that the record
5 does not contain any genuine issue of material fact in addition to making a showing of support 6 for those claims for which it bears the burden of trial. Bias v. Advantage International, Inc., 905 7 F.2d 1558, 1560-61 (D.C. Cir. 1990), cert. denied, 498 U.S. 958 (1990). 8 The moving party cannot prevail if any essential element of its claim or defense requires trial. Lépez, 938 F.2d at 1516. In addition, the moving party is required to demonstrate that there is an absence of evidence supporting the nonmoving party's case. Celotex, 477 U.S. at 325.
12 See also, Prokey v. Watkins, 942 F.2d 67, 72 (ist Cir. 1991); Daury, 842 F.2d at 11. In its 13 opposition, the nonmoving party must show genuine issues of material facts precluding summary 14 judgment; the existence of some factual dispute does not defeat summary judgment. Kennedy v. 1S Josepthal & Co., Ine., 814 F.2d 798, 804 (1st Cir. 1987). See also Kauffman v. Puerto Rico Telephone Co., 841 F.2d 1169, 1172 (1st Cir. 1988); Hahn, 523 F.2d at 464. A party may not
18 rely upon bare allegations to create a factual dispute but is required to point to specific facts 19 contained in affidavits, depositions and other supporting documents which, if established at trial, 20 could lead to a finding for the nonmoving party. Over the Road Drivers, Inc. v. Transport 21 insurance Co., 637 F.2d 816, 818 (1st Cir, 1980). The moving party has the burden to establish that it is entitled to summary judgment; no defense is required where an insufficient showing is made. Lopez, 938 F.2d at 1517. The
25 nonmoving party need only oppose a summary judgment motion once the moving party has met 26 its burden. Adickes, 398 U.S. at 159. The court must interpret the record in the light most 27 favorable to the nonmoving party, reconciling all competing inferences in that party’s favor. 28 Aan,
1 However, “[nJeither wishful thinking ... nor conclusory responses unsupported by evidence will 2 serve to defeat a properly focused Rule 56 motion.” Velazquez-Garcia v. Horizon Lines of Puerto Rico, Inc., 473 F.3d 11 (1" Cir. 2007) citing Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir.
5 1990). 6 Discussion Debior claims that Defendant’s collection action was pursued with knowledge of the stay, willfully violated the stay provisions in § 362 of the Code, and caused him damages. The
19 Defendant admits that it received notice of the petition and had knowledge of the stay. 11 Defendant’s Motion seeks to dismiss the complaint on the basis that none of Defendant’s actions 12 l rise to the level of “willfulness” required to find a violation of the stay. Defendant claims that any B acts constituting violations of the stay were committed “unintentionally” and without “punishable knowledge of wrongdoing”, based on an “involuntary clerical error” committed by its
16 management firm’s accounting department. Due to this accounting error, Defendant admits it made efforts to collect the pre-petition debt because it was acting “under the belief” that it was 18 only pursuing post-petition debt. (Dkt. 44 Defendant’s Facts ff 3-7; Defendant’s Reply □□□ 26, 19 29-30). Debtor countered by filing the Cross-Motion on the issue of liability for willful violation of the stay. According to Debtor, the defenses raised by Defendant are legally insufficient to
> avoid liability for damages for willful violation of the stay. We agree with Debtor.
23 The Automatic Stay Section 362(a)(1) of the Bankruptcy Code provides for a stay, applicable to all entities, of 25 the commencement or the continuation of any proceeding against the Debtor that was or could 26 have been commenced prior to the bankruptcy, or to recover a claim against the Debtor that arose a7 pre-petition. Section 362(a)(6) prohibits “any act to collect, assess or recover a claim against the 28 44
debtor that arose before the commencement of the case under this title”. Furthermore, “[t]he 2 automatic stay provides a debtor with one of the fundamental protections under federal bankruptcy law—it gives Debtor’s ‘breathing room’ from the pressures of their creditors.” In re
5 Heghmann, 316 B.R. 395, 404 (1* Cir. BAP 2004). In order to bring a claim for a section 362(h) 6 violation, “the debtor has the burden of providing the creditor with actual notice [of the stay]. 7 Once the creditor receives actual notice, the burden shifts to the creditor to prevent violations of 8 the automatic stay.” Fleet Mortgage Group, Inc. v. Kaneb, 196 F.3d 265, 269 (1* Cir. 1999). If ° notice of the automatic stay is given and a violation by a creditor is established, the debtor must prove by a preponderance of the evidence that he suffered damages as a result of the stay 2 violation. Heghmann, 316 B.R. at 404-05, 13 Willful Violation 14 In a section 362(h) action, the debtor bears the burden of establishing the following
16 elements by a preponderance of the evidence: 1) that the bankruptcy petition was filed; 2) that the 17 debtor is an “individual” under the automatic stay provision; 3) that the creditors received notice 18 of the petition; 4) that a violation occurred; 5) that the violation was committed willfully; and 6) b that the debtor suffered damages. See, In re Rijos (“Rijos I’), 260 B.R. 330, 336 (Bkrtcy. D.P.R. 2001) (Order reversed and the case remanded for an evidentiary hearing on damages by, /n re
Rijos (“Rijos I”), 262 B.R. 382 (1* Cir. BAP 2001)). On the other hand, creditors bear the same 33 }| burden to establish defenses such as immunities, lack of jurisdiction or inapphicability of the stay 24 to their actions. Rijos f, 260 B.R. at 336. 25 in the First Circuit “a willful violation does not require a specific intent to violate the stay.” Rijos Hf, 262 B.R. at 392 (citing Kane). Neither does it require a finding that the creditor
2g || acted with “malice aforcthought”. In re McCormack, 203 B.R. 521, 525-26 (Bkricy.D.N.H. WY
1 1996). The test for willfulness, as articulated by the First Circuit in Kaned, is “namely knowledge 2 of the automatic stay and an intent to do those acts that constitute a violation of the stay[.]” Jn re Ocasio, 272 B.R. 815, 824 (1" Cir. BAP 2002) (citing and quoting Kaneb). “In cases where the
5 creditor received actual notice of the automatic stay, courts must presume that the violation was
6 deliberate.” Rijos I7, 262 B.R. at 392 (citing Kaneb); Ocasio, 272 B.R. at 824 (finding that the 7 trial court was correct to presume the stay violation was deliberate once creditor’s knowledge of 8 the stay was established). 10 All of the elements for a stay violation set out in Rijos J are present in this case. The
11 Debtor is an individual. Defendant admitted that it received notice of the petition and had 12 knowledge of the stay when it committed the acts complained of and moved for default judgment 13 in the collection action. (Dkt. 44 Defendant’s Reply #f 19, 20, 29; Dkt. 38 Plaintiff's Facts is 22, 23, 25, 44-47, admitted at Dkt. 44 Defendant’s Facts 22, 23, 25, 44-47). Therefore, we must presume that Defendant’s violations were deliberate. Rijos If, 262 B.R. at 392. We now
7 review the record to see if Defendant has stated a valid defense to avoid the imposition of 18 damages. Rijos /, 260 B.R. at 336. Absent any valid defenses to the violation, the only issue 19 remaining before the court is the determination of Debtor’s damages. 20 In this case, Defendant’s defenses of mistake and inadvertence are similar to the defenses
2 to violation raised by the defendant in Kaneb. In Kaneb, the debtor’s chapter 13 case was 93 converted to chapter 7 and debtor had already been discharged when he complained that a bank 24 holding a pre-petition claim filed a foreclosure action over debtor’s “exempt” Florida property 25 while the stay was still in place. Apparently, the debtor had some equity in the property and claimed it for the estate. The defendant bank filed the foreclosure action erroneously believing . that the case was over because there was an order of discharge in the debtor’s file. The bank also
1 ) thought that the court had granted it relief from the stay, because there was an unsigned order for 2 relief from the automatic stay in the debtor’s file. 196 F.3d at 267. Once the debtor’s attorney informed the bank’s attorney of the violation, the bank put the case on hold, but did not dismiss
5 it. Six weeks later and in response to a letter from debtor strenuously protesting the violation, the
6 bank dismissed the action. Jd. Nevertheless, the First Circuit found that putting the foreclosure 7 case on hold and waiting six weeks to dismiss it after receiving notice of the stay and the 8 violation, constituted a willful violation of the stay. The Circuit Court upheld the award for 9 damages for emotional distress and attorney’s fees granted by the bankruptcy court. 10 11 The defendant in Kaneb claimed that its actions “were an innocent mistake” because the 12 bank thought and believed they could proceed with foreclosure, and denied any causal 13 connection between the acts complained of and the damages claimed by the debtor. 196 F.3d at 6 268-69. In this case, the Defendant also raises its subjective belief and inadvertent error as defenses to liability, by alleging that it was proper to pursue what it thought was post-petition
17 debt. However, the Defendant admitted receiving each of Debtor’s notices of the bankruptcy, 18 before and after filing the collection action. (Dkt. 44 Defendant’s Facts ff 22, 23, 25, 44, 47, 51). 19 The Defendant blames its accounting software for the mistake in suing for the pre-petition debt 20 and claims that its administrator, Mr. Pagan, referred the case for collection to the attorney not knowing how the attorney would proceed. (Dkt. 44 Defendant’s Facts J 31, 42; Dkt. 44
34 Defendant’s Reply § 27). In another statement Defendant claims that Mr. Pagan did not have
74 notice of the petition but admits that soon after filing the collection action, Mr. Pagan “explained 25 [to Defendant’s attorney] that there was a comment regarding a bankruptcy petition filed by 26 Plaintife”. (Dkt. 44 Defendant’s Facts 41). Additionally, Mr. Pagan admitted having seen the a Letters at around the time when the collection action was filed. (Dkt. 38 Plaintiff's Facts, Exhibit 28 1A
I } at 000018). Defendant does not claim that its attorney was unable to inquire whether there was 2 pre-petition debt involved in the collection action. Instead, Defendant proceeded to collect the debt despite the Letters in Debtor’s file indicating that he was in bankruptcy.
5 Similar to the situation in Kaneb, Defendant asserts that it is immune from liability 6 because it thought its actions were lawful and was acting on inadvertently erroneous accounting 7 data, by mistake, and without malicious intent. (Dkt. 44 Defendant’s Reply { { 23, 26, 29-30). In that regard, Defendant claims that “plaintiff may recover damages when the defendant acted with actual knowledge that he was violating a federally protect right or with reckless disregard that he
11 was doing so.” (Dkt. 44 Defendant’s Reply { 30). Defendant misapprehends the standard 12 applicable to finding a willful violation of the stay in the First Circuit. In Kaneb, the First Cireuit 13 specifically declined “to create a new [flagrant or reckless disregard] standard for willfulness.” M4 Kaneb, 196 F.3d at 268. The First Circuit held that a creditor is not “immune from sanctions because it made a mistake. A good faith belief in a right to the property is not relevant to a
7 determination of whether the violation was willful. A willful violation does not require a specific 18 intent to violate the automatic stay.” Jd. at 268-69. (citations omitted). In that regard, the 19 Defendant’s knowledge of the stay and its ongoing failure to dismiss the default judgment is 20 critical to finding willfulness on its part. The standard “is met if there is knowledge of the stay and the defendant intended the actions which constituted the violation.” /d. at 269.
23 Notwithstanding Defendant’s claims of computer and clerical errors and its self-righteous 24 allegations of mistaken belief and lawful intent, Debtor has a well-pleaded case of willful 25 violation. The record makes it clear that Defendant acted willfully in pursuing the collection 76 action with knowledge of the stay. In Kaneb, the creditor waited six weeks to dismiss the law □□ once it received notice of the violation of the stay from the debtor. In this case, the Defendant
I | litigated the collection action through default judgment despite multiple notices from Debtor that ? Defendant was collecting the pre-petition debt. But unlike the defendant in Kane, the Defendant in this case has not dismissed its two-year-old collection action, a year after Debtor filed the 5 instant proceeding. Consequently, Defendant’s allegations of mistaken belief and inadvertent
6 computer errors are insufficient as a matter of law to avoid liability for willfully violating the 7 } stay. 8 4: In fact, the Defendant’s “peachtree” version of the “computer did it” defense has been 10 rejected as a “non-starter” by a court in this circuit in a § 362(h) proceeding. McCormack, 203
11 B-R. at 524. In McCormack, a defendant bank blamed its accounting system for that defendant’s 12 repeated failure to reverse or credit in its books, the excess attorneys fees disallowed by the 13 bankruptcy court and wipe the excess fees off of the account statements sent to the debtor in that 14 . . . case. The McCormack court held that such accounting practices violated the stay and awarded 15 punitive and other damages to a debtor. The court held that a creditor who persists in sending 16 7 account statements after having “clear knowledge of the bankruptcy” in an apparent effort to 18 collect amounts no longer presently due except under the terms of a plan, and collect fees 19 disallowed in bankruptcy, can be presumed to be acting with knowledge that the creditor “was picy P 8 violating federally protected rights, or at the very least acting with reckless disregard as to 21 whether it was doing so.” /d. (citations omitted).* Contrary to the facts in McCormack, in this 22 53 case Mr. Pagan testified that they could program their accounting software to distinguish betweer
4 certain accounts, such as those for operating accounts and those for special “derrama” fees owed 25 8 The McCormack court rejected an argument similar to Defendant’s argument that there cannot be □□□□□□□□□ for damages because Defendant did not seek to enforce the debt embodied in the default judgment. The issue must □ 26 ) viewed from Debtor’s point of view, and Debtor had every right to believe that Defendant would enforce it. 203 B.R at 525. This defense is inapt because it is undisputed that Defendant collected the pre-petition debt well before th: 27 collection action, and that the default judgment corresponds to pre-petition debt mentally accounted for by Debtor and under the Horizontal Property Law of Puerto Rico, the obligation to pay arrears in maintenance fees becomes a lien ove! 28 Debtor’s apartment. (31 L.P.R.A. 1293(e)). Defendant’s collection complaint prays for such lien to attach, and its By- laws provide for such a lien. (Dkt. 44 Defendant’s Facts, Exh. VII at 2 (par. c); Exh. IX, By-Laws at 15, art. 67).
1 by Debtor. (Dkt. 50 Plaintiff's Reply at 4; Dkt. 38 Plaintiff's Facts Exhibit at 000008; Dkt. 2 44 Defendant’s Facts J 56). Regardless of the “peachtree” software capabilities, once Debtor complained of the improper accounting, Defendant had to prevent the violation, even if it meant
5 “setting a quill pen and ledger book to keep track of the effects of a chapter 13 [case] in progress 6 if indeed it was beyond the powers of mortal men and women to re-program their computer.” 7 McCormack 203 B.R. at 524, fm. 2. Therefore, we find that Defendant’s allegation that it acted 8 induced by an inadvertent accounting mistake is not a proper defense to a claim for wiliful violation, and does not withstand scrutiny under the facts of this case. 10 1 The pleadings and exhibits suggest that after filing the petition, Debtor would pay the 12 bulk of the post-petition fees that accumulated periodically, while mentally keeping track of the 13 pre-petition debt and not paying that amount. (Dkt. 44 Defendant’s Facts, Exh. III-V). However, section 362 does not impose a burden on debtors to keep a mental record of pre-petition debt, while creditors demand and collect the pre-petition debt with total disregard for the stay. The law
7 is clear, once creditors have actual notice of the stay, they bear the burden to “prevent violations 18 of the automatic stay.” Kaneb, 196 F.3d at 269. 19 There being no valid defenses to the Debtor’s allegations of stay violations, we now turn to the record to see “if the pleadings, depositions [...] and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving 43 party is entitled to a judgment as a matter of law.” Fed. R. Bankr. P. 7056; Jn re Colarusso, supra 24 382 F.3d at 51. 25 The Defendant raises a point of law in the Motion in order to avoid liability. Defendant 26 37 argues that “proceedings or claims arising post-petition are not subject to the automatic stay”... 9g || (Dkt 15 Motion at 4) citing In re Gull Air, Inc., 890 F.2d 1255, 1263 (1" Cir. 1989). The Motion
1 goes on to explain that application of the “conduct theory” is required to determine whether a 2 claim arises pre- or post-petition and, furthermore, that such post-petition claims are generally not subject to discharge and therefore, not subject to the stay. (Dkt. 15 Motion at 4) citing Jn re
5 Parker, 313 F.3d 1267 (10 Cir. 2002). Defendant argues that only enforcement of the state court
6 default judgment obtained against Debtor would trigger the provisions of the stay, if executed 7 without prior authorization and approval from this court. (Id. at 4-5) (citations omitted). 8 Defendant denies enforcing the default judgment at any time relevant to this action. 10 Defendant’s argument regarding the inapplicability of the stay to post-petition claims, is
11 correct. However, the same is legally unavailing, misplaced and irrelevant to the facts of this 12 case. The conduct theory adopted by the Tenth Circuit in Parker “concerns [the] determination o! 13 ) the date on which a claim arose for purposes of classifying it as a pre- or post-petition claim.” is 313 F.3d at 1269. The date of a claim is determined by the date of the conduct giving rise to the claim. The conduct theory ts different from the accrual theory, “which determmes the date of a
7 claim pursuant to the state law under which liability for the claim arose.” Jd. 18 The date when a claim arises is important in determining which debts are discharged and 19 which debts are subject to the automatic stay provisions of section 362(a) of the Code. The automatic stay applies to claims against the debtor as of the commencement of the case. There is
57 2° question that the violation of the stay alleged by Debtor in this case is for a pre-petition claim, 93 be it under the conduct or accrual theory. 24 The issue facing Defendant in this proceeding is to avoid liability given the facts constituting Defendant’s multiple instances of willful violations of the stay regarding the pre-
7 petition debt, to wit: sending invoices charging pre-petition debt; actually collecting pre-petition 3g || debt; failing to separately account for Debtor’s pre-petition debt; sending a collection letter
1 demanding pre-petition debt and threatening legal action; filing and prosecuting the collection 2 action to collect pre-petition debt, despite having notice of the stay; and, finally, Defendant’s inexplicable failure to dismiss the default judgment in light of the instant action filed by Debtor.
5 Consequently, Debtor’s point of law regarding the inapplicability of the stay to post-petition 6 claims is inapplicable in this case. 7 The Defendant also raises several factual disputes to avoid liability which are not “genuine” and do not concern any fact “material” to the issues under consideration. The Defendant focuses much attention on Debtor’s allegation that interests were improperly charged 11 a8 part of the collection action. (Dkt. 44 Defendant’s Reply §] 21, 24-25, Exh. I, VII). The 12 Defendant argues that charging interests is not a violation because these are allowed pursuant to 13 Defendant’s By-laws and were charged as part of the collection letter and complaint, but not as 14 part of Debtor’s maintenance fee account statement. However, Plaintiff only alleged that interests were charged by Defendant as part of the amount demanded in the collection action. (Dkt. 1 {{
7 14, 15). Thus, there is no dispute as to the place or account where the interests were computed, 18 and any such dispute would be immaterial to the issue of Defendant's liability for violating the 19 stay. 20 Defendant also implies that Debtor’s reliance on the deposition testimony of Mr. Pagan is
misplaced because Mr. Pagan is not the person in charge of the management firm’s accounting. 93 (Dkt 44 Defendant’s Reply § 22; Dkt. 44 Defendant’s Facts {J 54-55, Exh. 17). This argument is 24 anon sequitur. Debtor does not raise any dispute concerning the identity of Defendant’s 25 accountant. According to Mr. Pagan, the accountant works for AMMC and her name is “Brenda”. She also worked for Caribbean Management, as did Mr, Pagan. Caribbean Management kept Defendant’s books and accounts in much the same way as AMMC does and
1 } turned them over to AMMC when the management changed. (Dkt. 38 Plaintiff's Facts, Exhibit at 2 000014; Dkt. 44 Defendant’s Facts ] 55, Exh. 13 at 1). The record reveals that Debtor wrote Brenda at Caribbean Management in September 2004, and again wrote Caribbean Management
5 in June 2005 to discuss his bankruptcy situation and the improper accounting that included his
6 pre-petition debt. (Dkt. 38 Plaintiff's Facts § 23, 25, Exh. I at 2-3; Dkt. 38 Plaintiff's Facts, 7 Exhibit at 000024-25). Therefore, Debtor’s reliance on Mr. Pagan’s deposition testimony is not 8 misplaced in view of Defendant’s own admissions in the record, and any dispute as to the ° identity of Defendant’s accountant would be immaterial to the inquiry at hand.’ 10 ll The parties disagree on Debtor’s fact allegation that Mr. Pagan “openly discussed” 12 Debtor’s bankruptcy with Defendant’s attorney at around the time when the collection action was 13 filed. (Dkt. 38 Plaintiff's Facts J§ 42-43, Exhibit at 000016-18; 000023-25), The Defendant denies that Mr. Pagan “openly discussed” Debtor’s bankruptcy with the attorney. (Dkt. 44 Defendant’s Facts Jf 41-42). As previously discussed, Defendant has admitted receiving notice
17 of the petition before and after filing the collection complaint. (Dkt. 38 Plaintiff's Facts □□□ 22, 18 23, 25, 44, 46-47, 51; admitted at Dkt. 44 Defendant’s Facts ff] 22, 23, 25, 44, 46-47, 51, Exh. I; 19 Dkt. 15 Motion ff 13-14, Exh. VII, EX). It is undisputable that Defendant’s attorney was put on 20 notice of the stay on July 31, 2006, prior to moving for default.'? Consequently, any discussion of the bankruptcy between Defendant and its attorney for purposes of filing or prosecuting the
74 collection action would constitute an aggravating factor of the conduct at issue, but will not add
24 to the main violation complained of by Debtor, which is Defendant’s obstinate prosecution of the 25 collection action with knowledge of the stay. 26 Ina printout of Debtor’s account ledger dated November 10, 2004, it appears that someone, possibly Brenda 27 made a handwritten notation acknowledging Debtor’s bankruptcy. (Dkt. 44 Defendant's Facts, Exh. IV). 28 . '0 The Dkt. 15 Motion { 13 reads June 31, 2006, but should read July 31, 2006, per Dkt. 15 Defendant’s Facts Exh. VHL.
1 Finally, Debtor claims that Defendant’s attorney purposefully misinformed and deceived the state court into granting the default judgment against Debtor, notwithstanding the attorney’s actual knowledge of the stay and that Debtor had paid the post-petition fees. (Dkt. 37 Cross-
5 Motion at 13, 15-16; Dkt. 38 Plaintiff's Facts 52). The Defendant denies the fact “as alleged” 6 but does little more than ignore the charge of deception. (Dkt. 44 Defendant’s Facts □ 52). As 7 previously discussed, the Defendant is bound by and is liable for the acts of its agents. Without 8 question, the actions taken by Defendant’s counsel in state court where “on behalf of Consejo.” ° (Dkt. 15 Motion { 8). The Defendant (Consejo) admits that its attorney “had knowledge of the bankruptcy petition” when Defendant and the attorney proceeded to collect the pre-petition debt
2 and moved for default judgment, even though they “knew [that] the automatic stay” was in place. 13 (Dkt. 44 Defendant’s Reply {J 19-20, 29). It was then when Defendant’s actions in violation of 14 the stay reached the “willfulness” point of no return. Therefore, consideration of Debtor’s IS allegations of deceit of a sister court in violation of the stay is best withheld for the damages 16 phase of this proceeding. 17 18 Summary 19 Over the course of more than two years between March 2004 and September 2006, Debtor sent Defendant several notices of his bankruptcy proceeding and copies of the petition
> notifying the stay. Throughout this period, Debtor also notified Defendant that its accounting 93 included the pre-petition debt. Actual notice of the bankruptcy and the stay notwithstanding, 24 Defendant filed and prosecuted a collection action for Debtor’s pre-petition debt. Defendant 2) claims that it acted involuntarily and without wrongful intent to violate the stay, due to its own 26 accounting error, but admits collecting and suing for the pre-petition debt. Construing the evidence and the allegations in the light most favorable to Defendant, nevertheless we must
1 conclude that it was within Defendant’s exclusive power to correct the “erroneous” computerized 2 accounting after receiving repeated notices from Debtor to that effect, starting in March 2004. The erroneous computerized accounting is depicted by Defendant as the foundation and trigger
5 for the collection letter and complaint improperly filed against Debtor. Also, after filing the
6 collection action, Defendant pursued the case all the way to default with clear knowledge of the 7 bankruptcy. Defendant did so, despite payment of the post-petition debt and a fair warning from 8 Debtor that he would file this action if Defendant did not relent. Such conduct constitutes a ° willful violation of the stay. To this day, Defendant maintains the propriety of its actions, despite facing this proceeding for damages for violating the stay. The least that can be said about this
12 case is that Debtor gave Defendant repeated opportunities and ample time to investigate whether 13 Defendant was violating Debtor’s federally protected rights. 6 On the other hand, applying the same standards to Plaintiff's Cross-Motion, Plaintiff has . established that the Defendant willfully violated the automatic stay by sending him account
7 statements with pre-petition amounts, by applying Plaintiff's post-petition payments to his pre- 18 petition debt, by sending him a coercive collection letter threatening Plaintiff to pay or face legal 19 action, and by pursuing a collection action in a state court to the point of obtaining a default 20 judgment against Plaintiff for the pre-petition debt, plus interests and an award of legal fees and 21 expenses. 22 23 Conclusion 24 In view of the foregoing, Defendanit’s Motion for summary judgment is hereby denied. Plaintiffs Cross-Motion for partial summary judgment on the issue of Defendant’s liability for . willful violation the automatic stay, is hereby granted. Pursuant to section 362(h) of the Code and
2g | applicable case law, the case will be scheduled for an evidentiary hearing on the issue of
1 Plaintiff's damages. SO ORDERED. th 4 In San Juan, Puerto Rico, this E day of April 2008. 6 7 Perrrsll 8 ENRIQUE 8. LAMOUTTE 9 U.S. Bankruptcy Judge 10 ll 12 13 . 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28