1 IN THE UNITED STATES BANKRUPTCY COURT 5 FOR THE DISTRICT OF PUERTO RICO 4 || IN RE: : > ROSA I. PIZARRO ESCALERA Case No. 07-01249 (ESL) 6 : Chapter 13 Debtor. : 7 : 8 OPINION AND ORDER ? This case is before the court on the request for actual damages, attorney’s fees and sanctions for the willful violation of the automatic stay filed by Rosa Pizarro Escalera (the 12 “Debtor”) and the opposition thereto filed by the Puerto Rico Department of State. 13 Background 14 The Debtor filed this bankruptcy petition under Chapter 13 on March 12, 2007. The plan IS dated April 3, 2007 was confirmed on May 29, 2001. The Debtor was employed at the P.R.
Department of State (the “State Department”) at the time of the filing-of the petition and
18 subsequently. The plan was funded through payroll deductions from the State Department. 19 On March 5, 2009 the State Department sent the Debtor a letter informing her that as of 20 || December 31, 2008 she had a negative balance in her annual and sick leave of 29 days, 3 hours 21 and 46 minutes equal to $3,129.28. The State Department also informed the Debtor that they would be retaining the checks for the second bi-weekly payments from March to May 2009, equal to 30 working days, and that the remaining 3 hours and 44 minutes would be paid through 25 || special payroll deduction. The State Department failed to request court authorization prior to 26 || the garnishment of the Debtor’s salary. 27 On July 31, 2009 the Debtor filed an urgent motion for violation of stay (the “Urgent 28 Motion”) requesting this court to direct the State Department to reimburse the Debtor all of the
! | monies withheld from her paycheck. The Debtor explained that she is a single mother, that her 2 son suffers from Asperger Autism syndrome and he needs special care and special education. The Debtor states that she had to pay $445.00 for extended hours and tutoring on June 30, 2009 when
5 she started receiving her paychecks regularly after three and a half months. Debtor’s paycheck 6 || every 15 days is $541.64 after deductions and the plan payments of $200.00 are deducted from 7 || her paycheck, thus the Debtor’s employer knew of the bankruptcy filing. The motion was 8 granted as unopposed on August 11, 2009. The Debtor filed a motion for post confirmation modification of chapter 13 plan dated August 3, 2009 due to her inability to comply with both the plan and mortgage payments caused
12 || by the withholdings by the Department of State. The motion for post confirmation modification 13 || was granted on August 11, 2009. 14 On August 11, 2009 the Debtor filed a Memorandum in Support of Urgent Motion 15 Requesting Remedy alleging that her employer’s actions led her to fall into depression, and to incur in arrears with the Chapter 13 plan and the post-petition mortgage payments. The Debtor...
18 requests actual damages caused; loss of income for a period of 7 weeks, arrears with the plan and 19 || the post petition mortgage payments causing the Debtor to file a post confirmation modification 20 || to cure arrears, and prayed for the reimbursement of the monies withheld or $3,129.28, punitive 21 damages and/or sanctions in the sum of $500.00 for the willful violation of the automatic stay, $5,000 in damages, and $2,000 for attorney’s fees and costs. On September 14, 2009 the State Department responded stating that the withholding had 75 || been a clerical mistake due to inadvertence and that the monies had been reimbursed already. 26 || The Debtor replied on September 16, 2009 stating that before the Urgent Motion was filed she 27 || tried to meet with the person in the Payroll Division, Irma, who refused to receive her and 28 oO.
1 || indicated that any communication should be made through e-mail, which the Debtor did to no 2 avail. The reimbursement was made on September 15, 2009 after many attempts to request the reimbursement pursuant to the order entered by this court. □ 5 In the joint pre-trial report filed on October 18, 2009 the parties stipulated that the above 6 || factual exposition was uncontested. The Debtor further stated that she is single and 18 weeks 7 || pregnant, with 2 children; that her employer’s actions caused so much stress that her blood 8 pressure became elevated causing Arterial Hypertension and continuous contractions; and that she was forced to be absent from her work from Sept 9 - 11, 14 - 19, 22 -29, for which period she 10 received no paycheck inasmuch as she does not have any accumulated sick or annual leave. The
12 || State Department alleges that the withholding of monies from Debtor’s salary was a clerical 13 |] mistake due to “excusable negligence”. The State Department stated that the mistake was caused 14 by a change of public policy by the “central government” on allowing the use of working hours 15 for personal matters. 16 Trial 17 18 The trial was held on July 14, 2010. The court denied the State Department’s defense of 19 || excusable neglect and determined that there was a willful violation of the automatic stay. The 20 || parties were granted 10 days to supplement their position regarding the damages award which is 21 the only issue pending disposition. 22 Ms. Rosa Pizarro testified that she received the letter from the State Department 23 informing of the garnishment and after receipt of the letter she wrote an e-mail to her supervisor 25 || informing her of the payroll deductions in payment of the Chapter 13 plan. The garnishment 26 || made her nervous because the payments to the Chapter 13 plan were not being made. She said 27 || she did not try to stop the garnishment for fear of losing her job. The plan was affected, the 28
1 || arrears to the plan were $1,900, and to the mortgage, $2,500. A motion to lift stay was filed and 2 the Debtor filed the Urgent Motion. The Debtor stated that she took the order on the Urgent Motion with copy of a letter drafted by her attorneys to stop the garnishment to the State
5 Department and they said they would discuss the matter with their attorneys. She received 6 || reimbursement on September 15, 2009, 30 days after delivery of the letter and the order. This 7 || situation caused her high blood pressure and severe depression as she was worried about the 8 | health of her kids. She was absent from work due to emotional distress. She became pregnant in ° August 2009 and due to the stress caused by the garnishment, delivered her baby at 36 weeks. Ms. Nivea Esther Torres Ocasio, Human Resources Director of the State Department, 12 || testified that the Debtor’s gross salary was $2,298 per month, net salary $1,042.50 and her bi- 13 || weekly payments were $521.25. Three bi-weekly payments were garnished; March, April and 14 May. During these months the Debtor only received one bi-weekly payment. In March 2009 the 15 Debtor had a negative balance of 45 days, and from January 2008 until January 2010, 96 days negative. balance which equal to $10,176. The State Department did not garnish any more wages 18 after May 2009. 19 The Debtor is requesting $5,272.36 in economic losses including: $350.00 in attorney’s 20 || fees in relation to the modification of confirmed plan, $2,920.96 in mortgage arrears, $401.40 in 21 attorney’s fees and expenses charged by the mortgage creditor, BPPR, in relation to its motion for relief from stay, $1,600 in arrears with the plan, $2,000 in emotional and physical damages including distress, pregnancy, premature labor, $2,000 in attorney’s fees for the Urgent Motion 45 || and memorandum of law, joint pre-trial report and trial, and $500.00 in sanctions for the willful 26 || violation of the automatic stay. 27 28 _4.-
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1 IN THE UNITED STATES BANKRUPTCY COURT 5 FOR THE DISTRICT OF PUERTO RICO 4 || IN RE: : > ROSA I. PIZARRO ESCALERA Case No. 07-01249 (ESL) 6 : Chapter 13 Debtor. : 7 : 8 OPINION AND ORDER ? This case is before the court on the request for actual damages, attorney’s fees and sanctions for the willful violation of the automatic stay filed by Rosa Pizarro Escalera (the 12 “Debtor”) and the opposition thereto filed by the Puerto Rico Department of State. 13 Background 14 The Debtor filed this bankruptcy petition under Chapter 13 on March 12, 2007. The plan IS dated April 3, 2007 was confirmed on May 29, 2001. The Debtor was employed at the P.R.
Department of State (the “State Department”) at the time of the filing-of the petition and
18 subsequently. The plan was funded through payroll deductions from the State Department. 19 On March 5, 2009 the State Department sent the Debtor a letter informing her that as of 20 || December 31, 2008 she had a negative balance in her annual and sick leave of 29 days, 3 hours 21 and 46 minutes equal to $3,129.28. The State Department also informed the Debtor that they would be retaining the checks for the second bi-weekly payments from March to May 2009, equal to 30 working days, and that the remaining 3 hours and 44 minutes would be paid through 25 || special payroll deduction. The State Department failed to request court authorization prior to 26 || the garnishment of the Debtor’s salary. 27 On July 31, 2009 the Debtor filed an urgent motion for violation of stay (the “Urgent 28 Motion”) requesting this court to direct the State Department to reimburse the Debtor all of the
! | monies withheld from her paycheck. The Debtor explained that she is a single mother, that her 2 son suffers from Asperger Autism syndrome and he needs special care and special education. The Debtor states that she had to pay $445.00 for extended hours and tutoring on June 30, 2009 when
5 she started receiving her paychecks regularly after three and a half months. Debtor’s paycheck 6 || every 15 days is $541.64 after deductions and the plan payments of $200.00 are deducted from 7 || her paycheck, thus the Debtor’s employer knew of the bankruptcy filing. The motion was 8 granted as unopposed on August 11, 2009. The Debtor filed a motion for post confirmation modification of chapter 13 plan dated August 3, 2009 due to her inability to comply with both the plan and mortgage payments caused
12 || by the withholdings by the Department of State. The motion for post confirmation modification 13 || was granted on August 11, 2009. 14 On August 11, 2009 the Debtor filed a Memorandum in Support of Urgent Motion 15 Requesting Remedy alleging that her employer’s actions led her to fall into depression, and to incur in arrears with the Chapter 13 plan and the post-petition mortgage payments. The Debtor...
18 requests actual damages caused; loss of income for a period of 7 weeks, arrears with the plan and 19 || the post petition mortgage payments causing the Debtor to file a post confirmation modification 20 || to cure arrears, and prayed for the reimbursement of the monies withheld or $3,129.28, punitive 21 damages and/or sanctions in the sum of $500.00 for the willful violation of the automatic stay, $5,000 in damages, and $2,000 for attorney’s fees and costs. On September 14, 2009 the State Department responded stating that the withholding had 75 || been a clerical mistake due to inadvertence and that the monies had been reimbursed already. 26 || The Debtor replied on September 16, 2009 stating that before the Urgent Motion was filed she 27 || tried to meet with the person in the Payroll Division, Irma, who refused to receive her and 28 oO.
1 || indicated that any communication should be made through e-mail, which the Debtor did to no 2 avail. The reimbursement was made on September 15, 2009 after many attempts to request the reimbursement pursuant to the order entered by this court. □ 5 In the joint pre-trial report filed on October 18, 2009 the parties stipulated that the above 6 || factual exposition was uncontested. The Debtor further stated that she is single and 18 weeks 7 || pregnant, with 2 children; that her employer’s actions caused so much stress that her blood 8 pressure became elevated causing Arterial Hypertension and continuous contractions; and that she was forced to be absent from her work from Sept 9 - 11, 14 - 19, 22 -29, for which period she 10 received no paycheck inasmuch as she does not have any accumulated sick or annual leave. The
12 || State Department alleges that the withholding of monies from Debtor’s salary was a clerical 13 |] mistake due to “excusable negligence”. The State Department stated that the mistake was caused 14 by a change of public policy by the “central government” on allowing the use of working hours 15 for personal matters. 16 Trial 17 18 The trial was held on July 14, 2010. The court denied the State Department’s defense of 19 || excusable neglect and determined that there was a willful violation of the automatic stay. The 20 || parties were granted 10 days to supplement their position regarding the damages award which is 21 the only issue pending disposition. 22 Ms. Rosa Pizarro testified that she received the letter from the State Department 23 informing of the garnishment and after receipt of the letter she wrote an e-mail to her supervisor 25 || informing her of the payroll deductions in payment of the Chapter 13 plan. The garnishment 26 || made her nervous because the payments to the Chapter 13 plan were not being made. She said 27 || she did not try to stop the garnishment for fear of losing her job. The plan was affected, the 28
1 || arrears to the plan were $1,900, and to the mortgage, $2,500. A motion to lift stay was filed and 2 the Debtor filed the Urgent Motion. The Debtor stated that she took the order on the Urgent Motion with copy of a letter drafted by her attorneys to stop the garnishment to the State
5 Department and they said they would discuss the matter with their attorneys. She received 6 || reimbursement on September 15, 2009, 30 days after delivery of the letter and the order. This 7 || situation caused her high blood pressure and severe depression as she was worried about the 8 | health of her kids. She was absent from work due to emotional distress. She became pregnant in ° August 2009 and due to the stress caused by the garnishment, delivered her baby at 36 weeks. Ms. Nivea Esther Torres Ocasio, Human Resources Director of the State Department, 12 || testified that the Debtor’s gross salary was $2,298 per month, net salary $1,042.50 and her bi- 13 || weekly payments were $521.25. Three bi-weekly payments were garnished; March, April and 14 May. During these months the Debtor only received one bi-weekly payment. In March 2009 the 15 Debtor had a negative balance of 45 days, and from January 2008 until January 2010, 96 days negative. balance which equal to $10,176. The State Department did not garnish any more wages 18 after May 2009. 19 The Debtor is requesting $5,272.36 in economic losses including: $350.00 in attorney’s 20 || fees in relation to the modification of confirmed plan, $2,920.96 in mortgage arrears, $401.40 in 21 attorney’s fees and expenses charged by the mortgage creditor, BPPR, in relation to its motion for relief from stay, $1,600 in arrears with the plan, $2,000 in emotional and physical damages including distress, pregnancy, premature labor, $2,000 in attorney’s fees for the Urgent Motion 45 || and memorandum of law, joint pre-trial report and trial, and $500.00 in sanctions for the willful 26 || violation of the automatic stay. 27 28 _4.-
1 Post Trial Memoranda 2 The Department of State argued that the damages’ request should be denied because the damages were minimal, the deduction on the plan was eventually made, garnishment was for 5 three payments and stopped in May while the health problems were in September and thus were 6 || not related to the garnishment. The Department of State maintained that the pregnancy health 7 || issues could not have been related to the garnishment. In the post trial memorandum of law the 8 | Debtor argued that sanctions may be recovered against a governmental unit in violation of automatic stay cases, but punitive damages may not. Conversely, the State Department argues in 10 its memorandum of law that the Debtor is not entitled to punitive damages as the Department of
12 || State is an arm of the Government of Puerto Rico and thus a government agency. 13 Discussion 14 Sovereign Immunity 11 U.S.C. § 362(k)(1) provides that “an individual injured by any willful violation ofa 16 stay provided by this section shall recover actual damages, including costs and attorney’s fees, 17 18 and, in appropriate circumstances, may recover punitive damages.” However, the contested 19 || matter before the court is the willful violation of the automatic stay action by a governmental 20 || entity, the State Department. The statutory waiver of sovereign immunity in 11 U.S.C. § 106 ap- 71 plies to actions brought under 11 U.S.C. 362(k)(1). Section 106 provides in its pertinent part 22 that: 23 (a) Notwithstanding an assertion of sovereign immunity, sovereign immunity is 24 abrogated as to a governmental unit to the extent set forth in this section with respect to 25 the following: 26 (1) Sections 105, ... 362, 523, 524, ... 27 (3) The court may issue against a governmental unit an order, process, or judgment under 28 such sections or the Federal Rules of Bankruptcy Procedure, including an order or
5.
1 judgment awarding a money recovery, but not including an award of punitive damages. 2 A waiver of immunity must be “unequivocally expressed” Dep’t of the Army v. Blue Fox, Inc., 525 U.S. 255, 261, 119 S.Ct. 687, 142 L.Ed.2d 718 (1999), and must be strictly
5 construed in favor of the sovereign. Orff v. United States, 545 U.S. 596, 601-02, 125 S.Ct. 2606, 6 || 162 L.Ed.2d 544 (2005). Ambiguities must be resolved in favor of immunity. United States v. 7 || Williams, 514 U.S. 527, 530, 115 S.Ct. 1611, 131 L.Ed.2d 608 (1995). The 1994 amendments to 8 § 106(a) specifically abrogate sovereign immunity as to a governmental unit with respect to actions pursuant to § 362. The broad definition of governmental unit, 11 U.S.C. § 101(27) includes the State Department of the Government/Commonwealth of Puerto Rico. Moreover, 12 after the Supreme Court’s decisions in Tennessee Student Assistance Corp. v. Hood, 541 U.S. 13 || 440 (2004) and Central Virginia Community College v. Katz, 546 U.S. 356 (2006), a waiver of 14 sovereign immunity is valid as to in rem proceedings. Automatic stay proceedings are in rem. In IS re Pro-Fit Holdings Ltd., 391 B.R. 850 (Bankr. C. D. Cal. 2008). A state sovereign immunity is not a defense or excuse to a violation of the automatic stay. In re Omine, 485 F.3d 1307 (11®
18 Cir. 2007). 19 Punitive and Emotional Distress Damages 20 The statute is clear that punitive damages may not be assessed against a governmental 21 unit. However, the question remains if the same holds true regarding emotional distress 2 damages, that is, if Section 362(k)’s “actual damages”, for which sovereign immunity is expressly waived, encompasses emotional distress damages. 25 The First Circuit in In re Rivera Torres, 432 F. 3d 20 (1* Cir. 2005) held that § 106 is an 26 || express waiver of sovereign immunity, and a waiver, in appropriate circumstances, for money 27 recovery. However, the court concluded that the term “money recovery” does not include 28 -6-
1 || emotional distress damages. The First Circuit acknowledged that in Fleet Mortgage Group v. 2 Kaneb, 196 F.3d 265 (1* Cir. 1999) there is dicta suggesting that emotional distress damages may be available as actual damages, but finds that the Panel in Kaneb did not specifically reach
5 the question of whether emotional distress damages are authorized under § 362(h). The court 6 || further noted that in Bessette v. Avco Financial Services, Inc., 230 F.3d 439 (1* Cir. 2000), the 7 || Panel found that “actual damages” may be authorized under §105 for violations of §524, but did 8 || not discuss whether emotional distress damages were encompassed within the term “actual ? damages”. 10 This court concludes that pursuant to §106 and First Circuit case law, the Debtor is
12 barred from an award of punitive damages or emotional distress damages as the action was 13 || brought against a governmental entity. See, Rivera Torres, 432 F.3d 20; In re Duby, 2010 WL 14 || 9867447 (Bankr. D.N.H.); In re King, 396 B.R. 242 (Bankr. D-Mass 2008)(“the Court holds that 15 the government has not “definitively and unequivocally” waived its sovereign immunity for emotional distress damages awards under § 106(a) for willful violation of the automatic stay
18 actions brought pursuant to § 362(k)(1), [c]onsequently, the Court shall dismiss Count I against 19 || the IRS and United States.”’) 20 Other Damages 21 The State Department’s willful violation of the automatic stay by withholding three salary payments caused the Debtor to incur in attorney’s fees for the modification of the confirmed plan, the filing of the Urgent Motion and Memorandum of law, the Joint Pre-Trial Report, the
75 || trial and the Memorandum of Law in Compliance with Order. The Debtor requests the amount 26 |) of $2,350.00 in attorney’s fees which this court finds reasonable. The Debtor also requests 27 || $401.40 in the creditor’s attorney’s fees for the filing of the motion for relief of stay, which this 28 □□
1 || court also finds reasonable. This court finds that the Debtor is not entitled to damages for her pregnancy complications which included high blood pressure and premature labor, because in her testimony
5 the Debtor recognized that she became pregnant in August 2009, at which time the 6 || reimbursement of her salary payments was in process, and the pregnancy complications arose 7 || after the monies were reimbursed. It must be noted that the post confirmation modification was 8 approved in August 2009. Furthermore, the arrears the Debtor incurred with the mortgage and the plan do not constitute “actual damages” as the salary payments withheld were subsequently reimbursed. 12 Conclusion 13 In view of the aforestated the Debtor is awarded the amount of $2,751.40 in attorney’s 14 || fees for the State Department’s willful violation of the automatic stay. The Debtor’s request for 15 punitive and emotional distress damages, for the mortgage arrears and plan arrears incurred, and for the damages due to the pregnancy complications, is hereby denied.
18 SO ORDERED. 19 Dated this 18" day of January, 2011, in San Juan, Puerto Rico. 20 71 a 2 53 United States Bankruptey Court 24 25 26 27 28 -R-