DENBY-PETERSON v. NU2U AUTO WORLD PINE VALLEY MOTORS
Filing
14
OPINION. Signed by Judge Noel L. Hillman on 11/1/2018. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
JOY DENBY-PETERSON,
Civil No. 17-9985 (NLH)
Appellant,
OPINION
v.
NU2U AUTO WORLD and PINE
VALLEY MOTORS,
Appellees.
APPEARANCES:
ELLEN M. MCDOWELL
MCDOWELL LAW, PC
46 WEST MAIN ST.
MAPLE SHADE, NJ 08052
Attorney for Appellant Joy Denby-Peterson
DAVID A. SNYDER
LAW OFFICE OF DAVID A. SNYDER
11 WEST ORMOND AVENUE
SUITE 150 C
CHERRY HILL, NJ 08002
Attorney for Appellees Nu2u Auto World and Pine Valley
Motors
HILLMAN, District Judge
This appeal arises from the Bankruptcy Court’s order
denying Appellant Joy Denby-Peterson’s (“Appellant” or “DenbyPeterson”) sanctions request, concerning an alleged violation of
an automatic stay by Appellees Nu2u Auto World (“Nu2u”) and Pine
Valley Motors (“PVM” and, collectively, “Appellees”).
For the
reasons expressed below, the decision of the Bankruptcy Court
will be affirmed, and this appeal will be dismissed.
BACKGROUND
This Court takes its brief recitation of facts from the
briefs and notes any factual disputes where applicable.
On July
21, 2016, Denby-Peterson purchased a 2008 Chevrolet Corvette
(the “Vehicle”) from PVM.
On the same day, Denby-Peterson
entered into a Retail Installment Contract (the “Contract”)
which required her to make certain down payments and installment
payments.
This was assigned to Nu2u.
The contract required (1) an initial $3,000 down payment,
(2) installment payments of $200 per week for 212 weeks, and (3)
a deferred $2,491 down payment on or before August 11, 2016.
Under the Contract, if Denby-Peterson did not make the deferred
down payment, any excess payments would be applied to it.
Denby-Peterson paid the initial down payment, did not pay the
deferred down payment, and began to miss installment payments.
Appellees did not apply her installment payments to the deferred
down payments.
Regardless, Nu2u (through a third-party)
repossessed the Vehicle. 1
After the repossession of the Vehicle,
1
The date of repossession was disputed strenuously at the
hearing mentioned infra, as it was central to the underlying
dispute of the parties concerning the signing of a waiver and
whether turnover was warranted. Except for chronological
purposes, the date of repossession is not particularly important
to this dispute. For the sake of completeness, Appellees assert
February 19, 2017 was the date of repossession and Appellant
asserts it was on March 12, 2017. Both dates are before the
2
Denby-Peterson lost work because she could not travel to the
patients she treated as a licensed practical nurse.
On March 21, 2017, Denby-Peterson filed the underlying
Chapter 13 bankruptcy petition.
Denby-Peterson, through her
attorneys, notified Nu2u of the bankruptcy proceeding and
demanded Nu2u return the vehicle to Denby-Peterson.
Nu2u did
not return the vehicle and Denby-Peterson filed a Motion for
Turnover (the “Motion”) on March 24, 2017.
The Motion included
a request for sanctions for Nu2u’s alleged violation of the
automatic stay under 11 U.S.C. § 362(k).
Nu2u resisted the Motion on April 3, 2017 by asserting that
although Denby-Peterson had purchased the Vehicle she had
surrendered all rights in the Vehicle when she signed a document
on February 22, 2017 allegedly waiving her right to redeem the
Vehicle (the “Waiver Document”).
Nu2u alleged this document was
signed when Denby-Peterson visited Nu2u to retrieve her personal
property from the Vehicle after repossession. 2
Additionally,
Nu2u filed a Proof of Claim, asserting a security interest in
the Vehicle.
On August 16 and 17, 2017, the United States Bankruptcy
filing of the underlying bankruptcy petition.
2
Denby-Peterson stated in the underlying proceeding that she
never visited Nu2u and never received her personal property on
that date.
3
Court for the District of New Jersey (the “Bankruptcy Court”)
held a plenary hearing on the Motion.
were filed.
Post-hearing memoranda
On October 20, 2017, the Bankruptcy Court issued an
Order and Opinion.
Of relevance, the Opinion held that Denby-Peterson was the
lawful owner of the Vehicle, the Waiver Document was invalid
under New Jersey law, and Nu2u was not liable for sanctions for
retaining possession of the Vehicle after the automatic stay was
instituted.
The contents of the hearing and the Bankruptcy
Court Opinion and Order will be discussed in further detail
infra where relevant.
Denby-Peterson filed a timely notice of appeal on October
30, 2017.
parties.
The issues presented infra were fully briefed by both
On May 4, 2018, the Bankruptcy Court dismissed the
underlying bankruptcy case.
On October 3, 2018, this Court
issued an Order to Show Cause why this appeal was not mooted by
the dismissal of the underlying case.
Denby-Peterson timely
responded to the Order to Show Cause on October 13, 2018.
This
appeal is ripe for adjudication.
DISCUSSION
A.
Subject Matter Jurisdiction
This Court has jurisdiction over the appeal from the
Bankruptcy Court’s October 20, 2017 order pursuant to 28 U.S.C.
§ 158(a), which provides in relevant part: “The district courts
4
of the United States shall have jurisdiction to hear appeals
from final judgments, orders and decrees . . . of bankruptcy
judges entered in cases and proceedings referred to the
bankruptcy judges under section 157 of this title.
An appeal
under this subsection shall be taken only to the district court
for the judicial district in which the bankruptcy judge is
serving.”
B.
Mootness
This Court, sua sponte, ordered Appellant to show cause why
this appeal was not mooted by the May 4, 2018 dismissal of the
underlying bankruptcy case.
Appellant responded to this Order
to Show Cause within the allotted time.
This Court is satisfied
with Appellant’s response that this matter is not moot.
In coming to this conclusion, this Court considered the
following.
“In the bankruptcy context, the determination of
whether a case becomes moot on the dismissal of the bankruptcy
hinges on the question of how closely the issue in the case is
connected to the underlying bankruptcy.”
Tellewoyan v. Wells
Fargo Home Mortg., No. 05-4653 (FLW), 2006 U.S. Dist. LEXIS
55558, at *3 (D.N.J. Aug. 10, 2006) (quoting In re Pattullo, 271
F.3d 898, 901 (9th Cir. 2001)).
The appeal concerns issues
related to an alleged violation of the automatic stay.
This
question is an ancillary issue not closely intertwined with the
underlying bankruptcy.
5
Circuit law agrees with this assessment.
In cases where
damages under 11 U.S.C. § 362(k) are at issue and the bankruptcy
has been dismissed, the § 362(k) controversy generally survives.
Javens v. City of Hazel Park (In re Javens), 107 F.3d 359, 364
n.2 (6th Cir. 1997).
See also Lawson v. Tilem (In re Lawson),
156 Bankr. 43, 45 (B.A.P. 9th Cir. 1993); In re Carraher, 971
F.2d 327, 328 (9th Cir. 1992); In re Morris, 950 F.2d 1531, 1534
(11th Cir. 1992); Price v. Rochford, 947 F.2d 829, 830-31 (7th
Cir. 1991); In re Smith, 866 F.2d 576, 580 (3d Cir. 1989).
As
Appellant points out, “[a] Court must have the power to
compensate victims of violations of the automatic stay and
punish the violators, even after the conclusion of the
underlying bankruptcy case.”
Johnson v. Smith (In re Johnson),
575 F.3d 1079, 1083 (10th Cir. 2009) (citing Davis v. Courington
(In re Davis), 177 B.R. 907, 911 (B.A.P. 9th Cir. 1995)).
This
Court finds this appeal is not moot and will decide it on the
merits.
C.
Standard of Review
In reviewing a determination of the bankruptcy court, the
district courts “review the bankruptcy court’s legal
determinations de novo, its factual findings for clear error and
its exercise of discretion for abuse thereof.”
Reconstituted
Comm. of Unsecured Creditors of the United Healthcare Sys., Inc.
v. State of N.J. Dep’t of Labor (In re United Healthcare Sys.),
6
396 F.3d 247, 249 (3d Cir. 2005) (quoting Interface Grp.-Nev. v.
TWA (In re TWA), 145 F.3d 124, 130-31 (3d Cir. 1998)).
D.
Analysis
The central question presented by this appeal is what path
this Court will take in the face of a split between the Circuit
Courts – and no Third Circuit case law explicitly deciding the
split - over the imposition of sanctions in cases of prepetition repossession of vehicles.
Surrounding this central
legal question are a number of other legal and factual arguments
specific to this case.
This Court will address each of
Appellant’s arguments in the order presented.
Before addressing Appellant’s arguments, some background on
the specific statutory provision at issue is instructive.
Once
a Chapter 13 petition is filed in a bankruptcy court, it
“operates as a stay, applicable to all entities.”
362(a).
11 U.S.C. §
Of relevance, this automatic stay applies against “any
act . . . to exercise control over property of the estate.”
U.S.C. § 362(a)(3).
11
This clause was only added to the
Bankruptcy Code in 1984.
See PL 98 Stat 353, July 10, 1984.
Subsection (k) provides the relevant rules for imposition
of penalties resulting from a violation of an automatic stay.
If the violation is “willful” then “actual damages, including
costs and attorneys’ fees” must be awarded and punitive damages
may be awarded.
If the violation is “taken by the entity in the
7
good faith belief that subsection (h) applies to the debtor”
then recovery is limited to “actual damages.”
The property that should be turned over from creditors to
the estate is delineated by 11 U.S.C. § 542.
This part of the
Bankruptcy Code requires turnover of “property that the trustee
may use, sell, or lease.”
11 U.S.C. § 542(a).
No party here disputes that (1) the Vehicle was property
Denby-Peterson could have used, (2) the Vehicle was eventually
turned over to Denby-Peterson, and (3) Nu2u did not violate the
Bankruptcy Court’s Order requiring turnover of the Vehicle.
Instead, the parties dispute which rule governs return of a
vehicle repossessed pre-petition and not returned upon the
institution of an automatic stay.
a. The Bankruptcy Court’s Adoption of the Minority
Position
Appellant asserts there is a Circuit split on the issue
presented supra and that the Third Circuit has not decided which
position it will take.
Appellant argues the Bankruptcy Court
chose the position of the minority and that the majority
position is more consonant with the intent and purpose of the
Bankruptcy Code.
Appellees agree the Bankruptcy Court applied
the minority position.
But, Appellees assert even if this
Circuit has not determined which side of the split it will
choose – if either - this District has consistently employed the
8
minority position.
As a result, Appellees argue there is no
legal error evidenced in the Bankruptcy Court’s application of
the minority rule.
The split has been ably described by the Bankruptcy Court
and the parties.
The majority position, which is followed in
the Second, Seventh, Eighth, and Ninth Circuit Courts of Appeals
advises that a creditor violates the automatic stay when it
fails to affirmatively and immediately return qualifying
property of the debtor that was seized pre-petition.
Weber v.
SEFCU (In re Weber), 719 F.3d 72 (2d Cir. 2013); Thompson v.
Gen. Motors Acceptance Corp., LLC, 566 F.3d 699 (7th Cir. 2009);
Cal. Emp’t Dev. Dep’t. v. Taxel (In re Del Mission), 98 F.3d
1147 (9th Cir. 1996); Knaus v. Concordia Lumber Co. (In re
Knaus), 889 F.2d 773 (8th Cir. 1989).
These courts interpret
the 1984 addition to the Bankruptcy Code to broaden the scope of
the automatic stay to require affirmative action.
The minority position, on the other hand, has only been
followed in the Tenth and District of Columbia Circuit Court of
Appeals.
This position finds no violation of the automatic stay
as long as the creditor merely maintains the status quo in
effect at the time of the automatic stay.
WD Equip., LLC v.
Cowen (In re Cowen), 849 F.3d 943 (10th Cir. 2017); United
States v. Inslaw, Inc., 932 F.2d 1467 (D.C. Cir. 1991).
The
minority position interprets the 1984 addition to the Bankruptcy
9
Code to reach out to previously unaddressed actions to exercise
control that do not result in actual possession.
This District, according to the Bankruptcy Court, has
followed the minority position for the past twenty years. 3
Appellant argues in her brief that the Bankruptcy Court is
incorrect, and that New Jersey courts “have uniformly followed
the majority rule,” citing In re Sussex SkyDive, LLC, No. 1430236-ABA, 2016 Bankr. LEXIS 1862 (Bankr. D.N.J. Apr. 27, 2016)
and In re Stamper, No. 03-49235, 2008 Bankr. LEXIS 733 (Bankr.
D. N.J. Mar. 17, 2008).
As the Bankruptcy Court explained in
its Opinion, this characterization is incorrect.
Both In re Sussex SkyDive, LLC and In re Stamper involve
wrongful post-petition action not maintenance of the status quo.
In re Sussex SkyDive, LLC concerned a landlord who refused to
allow debtor to retrieve an airplane.
at *10-13.
2016 Bankr. LEXIS 1862,
The landlord had no argument that it had any
interest in the airplane at any point in time.
Id. at *20.
This is distinguishable from the instant case, where there
appeared to be a genuine dispute over the interest held by the
3
Unfortunately, neither the litigants nor the Bankruptcy Court
was able to provide citation to case law evidencing this
practice. This Court was able to find one case, Carr v. Sec.
Sav. & Loan Ass’n, 130 B.R. 434, 435 (D.N.J. 1991), in which
there was a factual citation to this practice. This provides
some evidence for the practice and the rule in this District,
which requires return of a vehicle pursuant to the automatic
stay once proof of insurance is provided.
10
parties in the Vehicle.
Regardless, considering that the
bankruptcy judge in this matter wrote the opinion in the In re
Sussex SkyDive, LLC matter there is no reason to doubt his
interpretation of its meaning.
In re Stamper involved a settlement between a pro se debtor
and a creditor after a Chapter 13 bankruptcy was instituted.
2008 Bankr. LEXIS 733, at *5.
When newly-retained counsel
discovered the settlement had been erroneously paid and demanded
the creditor to refund the payment, the creditor refused.
at *6.
Id.
While In re Stamper cites the majority rule, it does not
apply it, as the case involved post-petition – not pre-petition
– action violating the stay.
Id. at *16-17.
Examining the law de novo, this Court finds the minority
position more persuasive.
First, the language used in 11 U.S.C.
§ 362 is prospective in nature.
The relevant statutory
provision states that it “operates as a stay” of “any act . . .
to exercise control over property of the estate.”
362(a)(3) (emphasis added).
11 U.S.C. §
As is clear from the statutory
text, the exercise of control is not stayed, but the act to
exercise control is stayed.
Considering there is no case law
cited before 1984 showing the other clause in this subsection –
which is subject to the same prospective prefatory language reaches pre-petition action, there is no reason to treat the
added language any differently.
See Cohen v. De La Cruz (In re
11
Cohen), 106 F.3d 52, 58 (3d Cir. 1997) (“[T]he Supreme Court has
observed that a court should ‘not read the Bankruptcy Code to
erode past bankruptcy practice absent a clear indication that
Congress intended such a departure.’” (quoting Pa. Dep’t of Pub.
Welfare v. Davenport, 495 U.S. 552, 563 (1990))).
Second, Congress is able to craft statutory text that
imposes affirmative duties.
are too numerous to count.
The examples of laws which do this
Yet, when Congress had the
opportunity in 1984 to insert an affirmative turnover duty into
§ 362(a), it did not do so.
Congress could have stated under §
362(a) that creditors must turnover property in their possession
upon institution of the automatic stay. 4
Instead, it added
language to broaden prohibitions on actions taken post-petition
that do not reach the level of possession but still amount to an
exercise of control.
Third, the majority rule’s reading of broader protections
into 11 U.S.C. § 362(a)(3), especially in the absence of clear
statutory language or legislative history (of which there is
none) reaches impermissibly beyond the text of the statute.
4
In
The citation by Appellant to 11 U.S.C. § 542 is unavailing.
Just as Congress is able to draft language creating affirmative
duties, it is also able to insert cross-citations. It did not
do that in § 362. It would be unwise – not to mention unfair –
to insert that cross-citation for Congress in the absence of
clear evidence Congress intended to do so. This Court will not
take on the role of legislator here.
12
re Cowen presents a more faithful reading of the addition of the
“control” clause into § 362(a)(3) which suffers none of the
infirmities of the majority’s position:
“Since an act designed to change control of property
could be tantamount to obtaining possession and have
the same effect, it appears that § 362(a)(3) was
merely tightened to obtain full protection.” In re
Bernstein, 252 B.R. 846, 848 (Bankr. D.D.C. 2000).
“[U]se of the word ‘control’ in the 1984 amendment to
§ 362(a)(3) suggests that the drafters meant to
distinguish the newly prohibited ‘control’ from the
already-prohibited acts to obtain ‘possession,’ in
order to reach nonpossessory conduct that would
nonetheless interfere with the estate’s authority over
a particular property interest.” Ralph Brubaker,
Turnover, Adequate Protection, and the Automatic Stay
(Part II): Who is “Exercising Control” Over What?, 33
No. 9 Bankruptcy Law Letter NL 1 (September 2013).
It's not hard to come up with examples of such “acts”
that “exercise control” over, but do not “obtain
possession of,” the estate’s property, e.g., a
creditor in possession who improperly sells property
belonging to the estate. Similarly, “intangible
property rights that belong to the estate, such as
contract rights or causes of action are incapable of
real possession unless they are reified. Yet, (a)(3)
preserves and guards against interference with them by
staying any act to exercise control over estate
property.” In re Hall, 502 B.R. 650, 665 (Bankr.
D.D.C. 2014). If Congress had meant to add an
affirmative obligation — to the automatic stay
provision no less, as opposed to the turnover
provision — to turn over property belonging to the
estate, it would have done so explicitly. The
majority rule finds no support in the text or its
legislative history.
849 F.3d at 949-50.
This Court refuses to read the statute more
broadly than its plan language permits.
Moreover, this reading of the language has been adopted in
13
both the District of New Jersey and the Eastern District of
Pennsylvania.
See Larami Ltd. v. Yes! Entm’t Corp., 244 B.R.
56, 59 (D.N.J. 2000) (“In 1984, this section was amended to add
the language ‘or exercise control over.’
The apparent purpose
of the amendment was to prevent industrious plaintiffs from
avoiding the prohibition on ‘possessing’ property by assuming
control over the property.”); Amplifier Research Corp. v. Hart,
144 B.R. 693, 694 (E.D. Pa. 1992) (“Congress evidently believed
that the purpose of staying acts for possession was defeated if
plaintiffs were still free to try to control or otherwise direct
how the debtor used his property.”).
Fourth, this rule provides adequate protections for both
debtors and creditors.
Appellant is correct: “[t]he primary
goal of reorganization bankruptcy is to group all of the
debtor’s property together in his estate such that he may
rehabilitate his credit and pay off his debts . . . .”
Thompson, 566 F.3d at 702.
But, as the previous sentence
suggests, this is only the “primary” goal – not the only goal.
Bankruptcy also operates to ensure the debtor “pay[s] off his
debts.”
The minority rule wisely balances both sides.
The minority
rule still prohibits creditors from taking post-petition action
that would give them possession or control over qualifying
property.
This ensures that the property will remain a part of
14
the estate and allows for a bankruptcy court to distribute those
assets to all claimants in an orderly and just manner.
It also
still allows damages for wrongful post-petition conduct.
Debtor’s may still request a creditor to return property
repossessed pre-petition and may still move for a turnover of
the property before a bankruptcy court.
This allows a
bankruptcy court to fully consider a creditor’s defenses to
turnover before a creditor has to turnover property to the
estate. 5
Most importantly, as the Bankruptcy Court pointed out here,
an affirmative duty still exists in certain circumstances.
If
the creditor demands proof of insurance for a vehicle, naming it
as loss payee, and the debtor complies, the creditor will be in
violation of the automatic stay unless the vehicle is returned
to the debtor.
This protects both the interest of the debtor
and creditor, as it assures both that in case of accident,
insurance will cover the loss. 6
5
It is also important to note that if a creditor engages in
abusive litigation behavior to evade turnover, then a bankruptcy
court still has inherent power to hold the creditor in contempt
or impose sanctions. See Theokary v. Shay (In re Theokary), 592
F. App’x 102, 106 (3d Cir. 2015) (stating it has long been held
that a court has “the ability to do whatever is reasonably
necessary to deter abuse of the judicial process.” (quoting
Eash v. Riggins Trucking Inc., 757 F.2d 557, 567 (3d Cir. 1985)
(en banc))).
6
This Court will not separately address Appellant’s policy
arguments, as it has done so here. Those policies arguments do
15
Reviewing this legal issue de novo, this Court finds no
reason to disturb the ruling of the Bankruptcy Court.
Court will apply the minority position.
This
Specifically, in this
case, the Court finds a creditor has not violated an automatic
stay for retaining a vehicle lawfully seized pre-petition as
long as the debtor has not produced an insurance policy denoting
the creditor as the loss payee.
b. The Bankruptcy Court’s Decision Finding No Violation
of the Automatic Stay under the Minority Position
In the alternative, Appellant argues if the minority rule
is applied to this case, then the Bankruptcy Court still
committed error in its application of the rule to these facts.
Appellant cites the case of In re Cowen, 849 F.3d 943 (10th Cir.
2017) asserting it is factually similar to this case thus
compelling imposition of sanctions.
Appellees disagree, arguing
the facts allowing imposition of sanctions in In re Cowen differ
significantly from the facts presented by the present case.
In re Cowen is a unique case with exceptional facts.
case involved two trucks owned by Jared Cowen.
The
Id. at 945.
After one truck broke down, Mr. Cowen borrowed money in exchange
for a lien on the broken truck in order to repair it.
other truck was also subject to a lien.
Id.
Id.
The
The truck broke
not persuade this Court to alter its decision that the minority
rule should apply in this case.
16
down again and Mr. Cowen was unable to make his payments on
either truck involved.
Id.
At least one of the trucks was
repossessed under dubious circumstances.
Id.
Mr. Cowen filed a
voluntary Chapter 13 petition and requested immediate return of
both the trucks.
Id. at 946.
The creditors in this action, Aaron Williams and his sonin-law Bert Dring, refused to return the trucks.
Id.
at 945.
Mr. Cowen successfully moved the bankruptcy court to issue
turnover orders against the creditors for both of the trucks.
Id. at 946.
Mr. Williams and Mr. Dring still refused to comply
and were then made defendants in an adversary proceeding for
violation of an automatic stay.
Id.
The defendants to the
adversary proceeding asserted that they had terminated Mr.
Cowen’s rights in the trucks before the bankruptcy petition was
ever filed.
Id.
The bankruptcy court found, explicitly, that
the defendants “manufactured the paperwork . . . after the
bankruptcy filing,” “likely forged documents,” likely “gave
perjured testimony,” and “coached their witnesses on what to
testify to during [] breaks.”
Id.
Appellees here are correct: In re Cowen is distinguishable.
Appellant argues that the basis for sanctions in In re Cowen was
the manufacture of documents, perjured testimony, and coaching
of witnesses.
Unlike the bankruptcy court in In re Cowen, the
Bankruptcy Court here did not find that any of these acts
17
occurred – either pre- or post-petition.
On that basis alone,
this case and In re Cowen are distinguishable.
Reviewing the record, this Court finds no clear error upon
which it could overturn the Bankruptcy Court’s factual findings.
The Bankruptcy Court ably summed up the testimony presented to
it: “the parties presented very different stories through
unconvincing testimony of unbelievable witnesses, focusing on
issues the court did not find relevant.”
While witnesses may
have been “unbelievable,” this Court can find no clear evidence
of the manufacture of documents, perjury, or the coaching of
witnesses.
At worst, this Court’s review of the testimony finds
interested witnesses viewing their foggy memory through the lens
This is not In re Cowen. 7
of their present circumstance.
This
Court, finding no clear error, will not disturb the Bankruptcy
Court’s findings on this matter.
c. The Bankruptcy Court’s Finding that Denby-Peterson’s
True Interest in the Vehicle Was Unknown at the Date
of Bankruptcy Filing
Appellant also argues that the Bankruptcy Court’s finding
that the true interest in the Vehicle was unknown at the date of
the bankruptcy filing was erroneous.
Appellant appears to
present three arguments: (1) Appellees’ litigation position was
contradictory, which is evidence that it never truly believed
7
The Court also notes that In re Cowen, coming out of the Tenth
Circuit, is only controlling so far as it is persuasive.
18
Denby-Peterson voluntarily surrendered all right to the Vehicle;
(2) Appellant claims it was clear as a matter of law that the
Waiver Document was ineffective in surrendering Denby-Peterson’s
interest in the Vehicle; (3) even if there was a bona fide
dispute, Appellees were still required to turnover over the
Vehicle because of the automatic stay.
Appellees counter that the minority rule permits a creditor
who has repossessed property pre-petition to retain that
property until insurance is presented designating the creditor
as loss payee.
Appellees also argue that the factual
circumstances which became clear at trial were not clear at the
time the proceeding commenced.
In other words, Appellant
unfairly presents the facts in hindsight.
Appellant’s first argument is unavailing.
Litigants
commonly take contradictory positions in litigation. 8
In fact,
even the Federal Rules of Civil Procedure allow a plaintiff to
plead in the alternative.
See FED. R. CIV. P. 8(d)(2).
This is
not uncommon nor indicative of the Appellees’ true belief.
It
appears Appellees’ counsel was merely attempting to protect his
clients’ interests by ensuring, no matter what the Bankruptcy
Court may rule, his clients would be protected.
8
In fact, even Appellant’s argument suffers from this infirmity.
On one hand, Appellant argues there was no bona fide dispute,
while on the other, she argues – even if there was – turnover
was required.
19
Appellant’s second argument also misses the mark.
Appellant is correct, as a matter of law, that the Waiver
Document did not effectuate a surrender of the Vehicle by DenbyPeterson.
No party disputes that holding.
But, that does not
mean that Appellant is entitled to damages under 11 U.S.C. §
362(k).
Under the minority rule, these circumstances do not
present a violation of the stay as Appellees merely maintained
the status quo – regardless of whether their waiver argument was
well or poorly reasoned. 9
If Appellant wanted sanctions, she
could have appealed to the Bankruptcy Court’s equitable powers
for redress of this alleged litigation abuse.
Those same
sanctions do not arise under § 362(k). 10
Appellant’s third argument also does not persuade this
Court that the Bankruptcy Court committed error.
The cases
Appellant cites refer to the scope of the automatic stay.
Appellant is right: property only arguably a part of the estate
is subject to the automatic stay.
But, in light of this Court’s
9
Appellant does suffer from hindsight bias in this argument.
Even determining whether there was an equitable interest in this
case took an evidentiary hearing and multiple witnesses. The
source: a lack of information flowing from client to counsel on
both sides.
10
Again, the Court notes here that Appellant could have avoided
this conundrum entirely if Appellant would have produced to
Appellees insurance designating them as the loss payee. She
never did so. If she did, and Appellees still refused to return
the Vehicle, Appellant may have had grounds for damages based on
a willful violation of the automatic stay.
20
holding that the minority rule applies, Appellees conduct is not
sanctionable.
d. The Bankruptcy Court’s Finding that No Proof Was
Offered at Trial that the Vehicle Was Insured 11
Finally, Appellant contests the Bankruptcy Court’s finding
that no evidence was offered at the plenary hearing to prove
Appellant’s car was insured.
Specifically, the Bankruptcy Court
found in its Opinion that “there was no proof at trial that
[Denby-Peterson] had any insurance at the time of filing . . .
.”
This is a question of fact and this Court will not reverse
the Bankruptcy Court absent clear error.
error here.
There was no clear
To contest the Bankruptcy Court’s finding,
Appellant offers one piece of her testimony stating her
“insurance was intact” at the time of the bankruptcy filing and
“the insurance company . . . sent [Nu2u and PVM] the information
from their own office via fax.”
But, other evidence was elicited during cross-examination
bringing that statement into doubt.
11
Even though Denby-Peterson
Appellant argues in her reply brief that Appellees’ argument
concerning insurance is a red herring. In short, Appellant
argues the Appellees would not have turned over the vehicle even
if they were presented with insurance. But, Appellees noted in
their first response that no insurance had been presented. This
should have spurred Appellant into action to provide proof.
Appellant did not respond to that argument and has given this
Court no citation to the record showing she ever provided
adequate, documentary proof.
21
claimed she had insurance at the time, she never produced a
document showing the insurance.
This in spite of the fact that
it was specifically requested by Nu2u and PVM prior to trial.
Ultimately, when contradictory facts are presented to a
factfinder, the factfinder must rely on his credibility
determination of the witness.
It is particularly appropriate to
rely on the trial court’s credibility determinations absent
clear error.
Here, it is undisputed that the Bankruptcy Court
found Denby-Peterson’s testimony on this point not credible.
This finding, combined with the conflicting testimony and lack
of documentation provides ample reasoning for the Bankruptcy
Court’s factual finding.
Thus, there is no clear error.
This
Court will not disturb the Bankruptcy Court’s finding. 12
CONCLUSION
This Court, having reviewed the briefs of both parties and
the record presented, finds no legal or factual reason to
disturb the ruling of the Bankruptcy Court.
The Bankruptcy
Court will be affirmed and this appeal will be dismissed.
An appropriate Order will be entered.
Date: November 1, 2018
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
12
Even if this finding constituted clear error, it was harmless.
There is no testimony on the record that the insurance named
Nu2u as loss payee.
22
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