Opinion
Case No. 03-66402-PWB
July 18, 2003
ORDER ON MOTION FOR SANCTIONS FOR WILLFUL VIOLATION OF AUTOMATIC STAY
Burnetta Mae Johnson ("Debtor"), the debtor in this chapter 13 case, contends that Camrush Auto Sales, Inc. ("Camrush Auto"), which had repossessed her car prior to the filing of her petition, sold it after receiving telephonic notice of the bankruptcy filing. She asserts that the postpetition sale was a willful violation of the automatic stay of 11 U.S.C. § 362 (a) and seeks actual and punitive damages pursuant to 11 U.S.C. § 362 (h). This is a core proceeding as defined in 28 U.S.C. § 157 (b) over which this Court has jurisdiction pursuant to 28 U.S.C. § 1334.
The Court conducted an evidentiary hearing on July 16, 2003. The findings of fact and conclusions of law announced in open court at the conclusion of the hearing, as explained and supplemented by this Order, constitute the Court's findings of fact and conclusions of law pursuant to FED. R. CIV. P. 52(a), applicable to this contested matter pursuant to FED. R. BANKR. P. 7052 and 9014(c).
FINDINGS OF FACT
Camrush Auto held a security interest in a 1989 Honda that the Debtor purchased from it in June 2002. Because of Debtor's default in payments, Camrush Auto repossessed the car on April 24, 2003.
On Sunday, May 4, 2003, the Debtor filed a chapter 13 bankruptcy petition through the Electronic Case Filing procedures available to attorneys practicing in this Court. The bankruptcy courts, of course, are open at all times, and the Court's Electronic Case Filing procedures facilitate such after-hours filing. FED. R. BANKR. P. 5001(a); BLR 5005-5 ND Ga. Camrush Auto sold the car on Monday, May 5, for $1,606.58. Camrush Auto asserts that the amount due was $1,165.34, which included a repossession fee of $250 and storage charges of $250. Although the amount realized ($1,606.58) upon disposition of the collateral exceeded the amount of Camrush Auto's claim ($1,165.34) by $441.24, it did not remit the surplus to the Debtor.
Camrush Auto's owner, Craig Thomas, testified at the evidentiary hearing. Mr. Thomas apparently thought that, because ten days had passed after repossession of the car, the Debtor had no rights in the car and Camrush Auto had no obligation to remit the surplus realized upon its disposition. He also testified that the business was not open on Sundays and that, therefore, no representative of Camrush Auto could have received notice. Mr. Thomas denied receiving notice of the bankruptcy filing until Wednesday, May 7.
A legal assistant employed by Debtor's law firm, whose normal duties include contacting creditors who have repossessed cars of the law firm's bankruptcy clients, testified that on Sunday, May 4, she was working at the law firm and advised an employee of Camrush Auto by telephone of the Debtor's bankruptcy filing. She testified that it was her regular practice to note the date and fact of such telephone calls on the client's file and referred to such a notation on the Debtor's file to refresh her recollection during her testimony.
After considering the testimony and demeanor of Mr. Thomas and the legal assistant, the Court finds the legal assistant's testimony to be more credible. Although she is an employee of Debtor's law firm, the Court perceives no reason for her to make up a telephone conversation with Camrush Auto. Lawyers are properly zealous advocates for their clients, but they risk disbarment or criminal prosecution for even the presentation of false evidence; it is highly unlikely that lawyers would completely fabricate testimony. Mr. Thomas, of course, has a direct economic interest in denying receipt of notice, and his total lack of concern about remitting the surplus from the sale to the Debtor indicates a general lack of proper regard for legal rights of Camrush Auto's borrowers. The Court finds that his testimony on this point is suspect.
The Court finds, therefore, that Camrush Auto received telephonic notice of the bankruptcy filing on Sunday, May 4, which was prior to disposition of the car the next day. Other than the denial of receipt of that telephonic notice, the only justification Camrush Auto offers for selling the car is that ten days had run from the repossession. Camrush Auto apparently thinks that, after ten days, it can do whatever it pleases with a repossessed car, including ignoring the effects of the owner's bankruptcy filing and keeping the surplus from the improper sale. Such blatant disregard for the law clearly demonstrates that Camrush Auto's conduct was willful.
The Debtor testified that the retail value of the car was $2,650. Mr. Thomas did not offer an opinion as to value, but the price for which it was sold, $1,606.58, provides some evidence that it was not worth as much as the Debtor thinks. The Court finds the value of the car to be $2,000.
Debtor contends she has suffered damages, in addition to the loss of value of her car, of $650 in car rental she has had to pay and $20 a week she has paid for 12 weeks to a co-worker for transportation to work. She has also incurred attorney's fees of at least $300, based on at least three hours of her attorney's time at a more than reasonable hourly rate of $100.
CONCLUSIONS OF LAW
The Eleventh Circuit in separate decisions has held that, under Florida law and under Alabama law, the repossession of a motor vehicle by a secured creditor terminates any ownership interest of a debtor in the car; that it is, therefore, not property of the debtor's estate under 11 U.S.C. § 541 (a); and that, accordingly, the creditor's postpetition disposition of a car repossessed prior to the filing of the petition does not violate the automatic stay. Bell-Tel Federal Credit Union v. Kalter (In re Kalter,), 292 F.3d 1350 (11th Cir. 2002); Lewis v. Charles R. Hall Motors, Inc. (In re Lewis), 137 F.3d 1280 (11th Cir. 1998). Because of differences between the laws of those States and the laws of the State of Georgia, bankruptcy and district judges in the Middle District of Georgia have held that those holdings are not applicable to the repossession of a car in Georgia. Rozier v. Motors Acceptance Corp. (In re Rozier,), 283 B.R. 810 (Bankr. M.D. Ga. 2002), aff'd 290 B.R. 910 (M.D. Ga. 2003); Bonner v. Purser Truck Sales (In re Bonner), 286 B.R. 917 (Bankr. M.D. Ga. 2002); see American Honda Finance Corp. v. Littleton (In re Littleton), 220 B.R. 710 (Bankr. M.D. Ga. 1998).
Rozier and Bonner correctly state the applicable law in this State. The decision of the Supreme Court in United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309 (1983), establishes that property that is in possession of a creditor to enforce a lien, but has not yet been disposed of, remains property of the debtor's bankruptcy estate. Id. at 209. Under Georgia law, unlike the laws in Florida and Alabama as construed in Kalter and Lewis, repossession of collateral in Georgia does not automatically transfer title to a secured creditor. Jeweler's Financial Services, Inc., v. Chapes, Ltd., 181 Ga. App. 872, 354 S.E.2d 200 (1987).
Under the principles of Whiting Pools, therefore, as applied in Rozier and Bonner, Camrush Auto's repossession of Debtor's vehicle did not terminate her ownership interest, and the car was property of her estate when she filed her chapter 13 petition. Camrush Auto's sale of the Debtor's car after the filing violated the automatic stay of 11 U.S.C. § 362 (a). Because that violation occurred after Camrush Auto received notice of the filing and a demand for return of the car, and because Camrush Auto has shown no mitigating circumstances whatsoever (and, in fact, has demonstrated a disregard for the law generally), Camrush Auto's violation was willful. Consequently, the Debtor is entitled to actual and punitive damages under 11 U.S.C. § 362 (h).
The Court will award damages as follows. First, the Court will deny Camrush Auto the right to recover repossession fees and storage charges and will limit its recovery on the amount of the debt to the actual amount owed. The Court imposes this remedy due to Camrush Auto's misconduct in accounting for the surplus from the sale and as part of punitive damages for its willful violation of the stay. Thus, the Debtor is entitled to recover the value of the car, which the Court has found to be $2,000, less the amount due, exclusive of repossession fees and storage charges, of $665.34, for a recovery of $1,344.66.
The Debtor may be entitled to some recovery of damages due to the loss of use of her vehicle. However, given the car's value, it is difficult to justify an award of damages in the amount she seeks. The Court believes that the elimination of repossession fees and storage costs is sufficient to provide adequate recognition of an appropriate amount of damages in this regard.
The Debtor is also entitled to attorney's fees in the amount of $300. The Court notes that this is extremely generous to Camrush Auto.
Finally, the Court will award punitive damages in the amount of $750. The Court believes that this award, also, is extremely generous to the Camrush Auto and is almost nominal in view of the circumstances. The automatic stay is an important and integral part of the bankruptcy laws of the United States, and the system cannot function if creditors ignore it with impunity. The facts of this case could justify a much higher award of punitive damages. Certainly an institutional lender engaging in such conduct could expect substantially greater punishment. Nevertheless, given the value of the car and the elimination of repossession fees and storage costs, the Court deems this award to be appropriate.
In summary, the Debtor is entitled to recover actual and punitive damages of $2,394.66 on account of Camrush Auto's willful violation of the stay.
CONCLUSION
Based on, and in accordance with, the foregoing, it is hereby ORDERED AND ADJUDGED that the Debtor recover of the Camrush Auto the sum of $2,394.66.
IT IS SO ORDERED.