Graham v. Graham

Filing 6

ORDER affirming the decision of the Bankruptcy Court re 1 Bankruptcy Appeal filed by Carey Graham. Signed by Judge William T. Moore, Jr. on 03/30/2012. (lmm)

U.S. DIS TRICT COURT

IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF GEORGIA 2J12 MAR 3Q PH 4: 00
SAVANNAH DIVISION

CLE)'7'7OOI4J

CAREY GRAHAM,

Appellant,
V.

CASE NO. CV411-090

KURT GRAHAM and GRAHAM
FORESTRY, INC.,

Appellees.
OP

ION

This case is before the Court on appeal (Doc. 1) from
the January 23, 2009 Memorandum and Order of Bankruptcy
Court Judge Lamar W. Davis, Jr. (Doc. 1 at 962-971).
Jurisdiction over appeals from orders of bankruptcy courts
is vested in the district courts by 28 U.S.C. § 158(a). For
the reasons that follow, the order of the bankruptcy court
is AFFIRMED. The Clerk of Court is DIRECTED to close this
case.
BACKGROUND
This matter is once again before this Court on appeal
of the Bankruptcy Judge's decision awarding Appellee' Kurt
Graham attorney's fees and punitive damages. Previously,
this Court affirmed the Bankruptcy Judge's conclusion that

' Due to the nature of this case, the term "Appellee" refers
to Kurt Graham individually.

Appellant Carey Graham violated the Automatic Bankruptcy
Stay ("Stay") and decision to award actual damages,
attorney's fees, and punitive damages.

(CV409-128, Doc.

15.) However, this Court reversed the Bankruptcy Judge's
calculation of actual damages, finding that they were too
speculative under Georgia law when based on future lost
profits.

(Id. at 11-24.)

The Court remanded the case to

the Bankruptcy Court to recalculate damages.

(Id. at 25-

26.) In addition, this Court stated that, on remand, the
Bankruptcy Judge may modify his award of attorney's fees and
punitive damages based on his calculation of actual damages.
(Id.)
On remand, the Bankruptcy Court concluded that Appellee
failed to sufficiently prove lost profits or any other
measure of loss, awarding no damages based on any losses.
(Doc. 1 at 964.) In addition, the Bankruptcy Court
reimposed its prior award of $30,000 for attorney's fees,
adding an additional $8,202.49 in appellate attorney's fees,
for a total of $38,202.49. (Id. at 964-69.) Finally, the
Bankruptcy Court also reimposed its award of $5,000 in
punitive damages. (Id. at 8-9.)
While this case was on remand, the Bankruptcy Court
dismissed Appellee's Chapter 12 petition. (Doc. 1 at 273961.) As the basis for dismissal, the Bankruptcy Court cited

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a litany of fraudulent and misleading acts with respect to
his bankruptcy petition. (Id. at 2741-55.) Despite its
decision to dismiss the petition, the Bankruptcy Court
elected to exercise its discretion and retain jurisdiction
over the adversary proceeding that forms the basis of this
appeal.

(Id. 2759-60.)

On April 5, 2011, Appellant filed his Notice of Appeal
from the Bankruptcy Judge's order awarding Appellee no lost
profits, but awarding $38,202.49 in attorney's fees and
$5,000.00 in punitive damages. (Doc. 1.) on appeal,
Appellant argues that the Bankruptcy Court abused its
discretion when retaining jurisdiction over the adversary
proceeding after dismissing the underlying bankruptcy
petition for fraud. (Doc. 3 at 9-16.) Second, Appellant
contends that the Bankruptcy Court incorrectly concluded
that the adversary proceeding was necessary to deter
Appellant from violating the Stay. (Id. at 16-19.) Third,
Appellant reasons that an award of attorney's fees and
punitive damages is improper absent any award of actual
damages. (Id. at 19-25.) Fourth, Appellant claims that
Appellee is estopped from alleging that Appellant violated
the Stay because of Appellee's own fraud during the
bankruptcy proceedings.

(Id. at 26.)

Finally, Appellant

avers that the Bankruptcy Court incorrectly ordered the

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payment of attorney's fees to Appellee's counsel, violating
Appellant's right of set-off

.2

(Id. at 37-39.)

ANALYSIS

On review from an order of a bankruptcy court, the
district court will only set aside findings of fact if they
are found to be "clearly erroneous." Fed. R. Bankr. P.
8013. During this review, this Court will give due regard
to the "opportunity of the bankruptcy court to judge the
credibility of the witnesses." (Id.) The district court is
not "authorized to make independent factual findings; that
is the function of the bankruptcy court." In re Sublett,
895 F.2d 1381, 1384 (11th Cir. 1990). The clearly erroneous
standard of review also applies to awards of damages,
attorneys fees, and punitive damages. See Holmes v. Gen.
Elec. Capital Corp., 387 B.R. 896, 903 (M.D. Ga. 2008),
Jankowski v. Marine Contracting Corp. (In re Rose Marine,
Inc.), 1993 WL 13004542, at *10_*11 (S.D. Ga. Dec. 27, 1993)
(unpublished).

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In his brief, Appellant raises three additional issues: (1)
that the Bankruptcy Court incorrectly concluded that
Appellant violated the Stay (Doc. 3 at 27-31); (2) that the
award of punitive damages was inappropriate (id. at 31-34);
and (3) that the award of attorney's fees was improper (id.
at 34-37). As this Court previously affirmed the Bankruptcy
Judge's decision with respect to these threshold issues
(CV409-128, Doc. 15), the Court will not entertain these
arguments again as part of Appellant's second appeal.
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In contrast, the Bankruptcy Court's conclusions of law
are subject to de novo review. Chira v. Saal (In re Chira),
567 F.3d 1307, 1310 (11th Cir. 2009) . Mixed questions of
fact and law are also reviewed de novo. Bishara v. Gulf star
Indus. (In re Gulfstar Indus.), 236 B.R. 75, 77 (M.D. Fla.
1999)
I. BANKRUPTCY COURT'S RETENTION OF JURISDICTION
Appellant argues that the Bankruptcy Court abused its
discretion by retaining jurisdiction over this adversary
proceeding despite dismissing the underlying Bankruptcy
Petition due to Appellee's fraud. (Doc. 3 at 9-16.) The
Eleventh Circuit Court of Appeals has previously concluded
that "the dismissal of an underlying bankruptcy case does
not automatically strip a federal court of jurisdiction over
an adversary proceeding which was related to the bankruptcy
case at the time of its commencement." In re Morris, 650
F.2d 1531, 1534 (11th Cir. 1992) . The decision of whether
to retain jurisdiction is left to the sound discretion of
the Bankruptcy Court. Id.
In this case, Appellant bases his argument that the
Bankruptcy Court abused its discretion on the fact that the
underlying petition had been dismissed due to Appellee's
fraud. Specifically, Appellant seems to contend that as a
reward for him bringing before the Bankruptcy Court the

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numerous instances of Appellee's fraud, the Bankruptcy Court
should have dismissed the adversary proceeding against him.
(Doc. 3 at 14 ("By retaining jurisdiction, the bankruptcy
court is penalizing the one individual who painstakingly
proved the numerous instances of fraud practiced by the
debtor/appellee on the bankruptcy court and
debtor/appellee's creditors over the course of three years
and is rewarding debtor/appellee for his fraud.").) While
Appellant would like to fashion himself as the White Knight
coming to rescue the Bankruptcy Court from Appellee, the
Bankruptcy

Judge's

factual

conclusions

belie

that

characterization. For example, the Bankruptcy Court
concluded that the commencement of the adversary proceeding
was the only way to insure that Appellant would not violate
the Stay. (Doc. 1 at 963.) Indeed, that court concluded
Appellant knew of the pending bankruptcy case, and
intentionally violated the Stay by entering onto Appellee's
land and digging up the fields Appellee had prepared for his
peanut crop. (Id. at 164-65.) Even after being hand
delivered a letter from Appellee's attorney informing
Appellant that his actions violated the Stay, Appellant
resumed plowing the prepared field, rendering it unsuitable
for planting Appellee's peanut crop. (Id. at 165.)

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Based on these facts, the Court concludes that the
Bankruptcy Judge acted within his discretion in retaining
jurisdiction over the adversary proceeding. To the extent
that Appellant is arguing for a blanket rule that the
Bankruptcy Court cannot retain jurisdiction where the
underlying bankruptcy petition has been dismissed because of
the debtor's fraud, the Court is unable to find any legal
support for this position and declines to create such a
broad exception. Accordingly, the Court AFFIRMS the
decision of the Bankruptcy Court with respect to this issue.
II. BANKRUPTCY COURT'S CONCLUSION THAT ADVERSARY PROCEEDING
WAS NECESSARY TO DETER APPELLANT FROM VIOLATING THE
AUTOMATIC BANKRUPTCY STAY
Appellant argues that the Bankruptcy Court erroneously
concluded that the adversary proceeding was necessary to
deter Appellant from violating the Stay. (Doc. 3 at 16-19.)
In support of this argument, Appellant contends that the
"record is devoid of any facts which would lead to this
conclusion."

(Id. at 17.)

In this respect, Appellant is

clearly incorrect. The Bankruptcy Court found and the
record supports that Appellant continued to ruin Appellee's
preparations for planting even after being informed by
Appellee's attorney that such action would violate the Stay.
Based on these facts, the Bankruptcy Court's finding that
the adversary proceeding was necessary to deter Appellant is

VA

not clearly erroneous. Accordingly, the Court AFFIRMS the
decision of the Bankruptcy Court with respect to this issue.
III. AWARD OF ATTORNEY'S FEES AND PUNITIVE DAMAGES ABSENT
ANY AWARD OF ACTUAL DAMAGES
Appellant argues that the Bankruptcy Court cannot award
either attorney's fees or punitive damages if it concludes
that there was no harm suffered. (Doc. 3 at 19-25.) The
statute authorizing the assessment of damages for a willful
violation of an automatic bankruptcy stay provides that the
injured individual 'shall recover actual damages, including
costs

and

attorneys'

fees,

and,

in

circumstances, may recover punitive damages."

appropriate
11 U.S.C.

§ 362(k) (1). The language of this section makes clear that
part of the actual damages a debtor suffers for a violation
of an automatic stay is attorney's fees. Indeed, the intent
of Congress to incorporate attorney's fees as part of actual
damages becomes quite apparent when compared with other
attorney fee statutes. Compare 11 U.S.C. § 362(k) (1) ("[A]n
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."), with 42
U.S.C. § 19731(e) (listing attorney's fees separately from

8

actual damages), 42 U.S.C. § 1988(b)

(same), 42 U.S.C.

§ 2000e-5(k) (same)
Based on these provisions, it appears congress knew how
to make an award of attorney's fees separate and distinct
from an award of actual damages. However, Congress did not
do so with respect to the award of damages for violations of
automatic stays. The Court concludes, therefore, that
attorney's fees and costs are recoverable as actual damages
under 11 U.S.C. § 362(k) (1). As a result, the Bankruptcy
Court correctly awarded Appellee attorney's fees and was
within its discretion in assessing punitive damages.
Accordingly, the Court AFFIRMS the decision of the
Bankruptcy Court with respect to this issue.
IV. EFFECT OF APPELLEE'S FRAUD ON APPELLANT'S VIOLATION OF
AUTOMATIC BANKRUPTCY STAY
Appellant argues that Appellee is estopped from
contending that Appellant violated the Stay because Appellee
perpetrated fraud during the course of the bankruptcy
proceedings. (Doc. 3 at 26.) Appellant offers no
supporting case law or statute for this position, and the
Court has been unable to locate any. Normatively,
Appellant's argument makes little sense. As best the Court
can discern, Appellant is claiming that the resulting damage
from any violation of the Stay was against Graham Farms, an

entity not a party to this case and in which Appellee
fraudulently denied any ownership interest. According to
Appellant, Appellee cannot now claim that he suffered injury
based on the injury to Graham Farms because he fraudulently
disclaimed any ownership interest in the farm during the
bankruptcy proceedings.
After consideration of Appellant's argument, the Court
can find no reason to reverse the decision of the Bankruptcy
Court, which explicitly found that Appellee suffered damages
as a result of Appellant's willful violation of the Stay.
To the extent Appellant is arguing that the Bankruptcy Court
was incorrect in concluding that Appellee was the injured
party, the Court finds no merit to that contention.
Accordingly, the Court AFFIRMS the decision of the
Bankruptcy Court with respect to this issue.
V. PAYMENT OF ATTORNEY'S FEES TO APPELLEE'S COUNSEL
Appellant argues that the Bankruptcy Court incorrectly
ordered that the award of attorney's fees be paid directly
to Appellee's counsel. (Doc. 3 at 37-39.) According to
Appellant, he is entitled to set-off the amount of the award
against the money he claims he is owed by Appellee. (Id. at
37,) However, the former Fifth Circuit Court of Appeal S3 has

Decisions of the former Fifth Circuit handed down before
October 1, 1981 are binding precedent in this circuit.
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determined that courts should have discretion to fashion
schemes for payment of attorney's fees. Carrv. Blazer Fin.
Servs., Inc. of Ga., 598 F.2d 1368, 1370 (5th Cir. 1979);
see Panola Land Buying Ass'n v. Clark, 844 F.2d 1506, 1521
(11th Cir. 1988) (recognizing that courts frequently award
attorney's fees directly to counsel). After reviewing the
limited case law on this issue, the Court can find no direct
prohibition on the Bankruptcy Judge's decision to award
attorney's fees directly to Appellee's counsel. In
addition, Appellant offers no argument that to the extent
the Bankruptcy Judge had discretion to fashion such an
award, he abused that discretion. Finding no error in fact
or in law, the Court AFFIRMS the decision of the Bankruptcy
Court with respect to this issue.
CONCLUSION
For the reasons above, the decision of the bankruptcy
court is AFFIRMED. The Clerk of Court is DIRECTED to close
this case.
SO ORDERED this

30

day of March 2012.

WILLIAM
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
Banner v. City of Prichard, 661 F.2d 1206, 1209 (11th
Cir.1981) (en banc).

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