Bank sanctioned for violating automatic stay

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Where Bank of the West violated an automatic stay, sought to collect a deficiency balance after the expiration period and willfully made repeated contact with the debtors despite requests from their counsel to stop, the bank was sanctioned and counsel for the debtors were awarded attorneys’ fees.

Background

The debtors filed a Chapter 13 petition on March 12, 2014. Bank of the West filed a motion for relief from the automatic stay and co-debtor stay on Aug. 6, 2014. On Sept. 9, 2014, the court entered a consent order granting Bank of the West relief from the automatic stay and co-debtor stay, modifying the automatic stay to allow Bank of the West to enforce its rights under its security agreement to lawfully repossess and liquidate certain personal property.

The consent order provided “[a]ny amended unsecured claim for a deficiency (which claim must include documents proving that it has liquidated its collateral and applied the proceeds of sale in accordance with applicable state law) must be filed by the Movant within 180 days from the date on which the collateral is liquidated, or such claim against the bankruptcy estate shall be forever barred.”

According to the contempt motion, after liquidating the security for its debt, Bank of the West notified the debtors of a deficiency. However, Bank of the West failed to file an amended proof of claim to account for any such deficiency in a timely manner.

The contempt motion states that on several occasions, counsel for Bank of the West was contacted and notified of the failure and refusal of Bank of the West and its agents to cease and desist from contacting the debtors regarding the deficiency.

Analysis

The court finds, by clear and convincing evidence, that Bank of the West violated the automatic stay of 11 U.S.C. § 362(a). Bank of the West sought to collect the deficiency balance after the 180-day expiration period in the consent order for filing an amended proof of claim reflecting the deficiency balance had expired. Bank of the West’s repeated contacts to both Mr. Morgan and Susan Morgan were willful. After repeated attempts by counsel for the debtors to inform Bank of the West of the Bank’s and its agent’s violations of the automatic stay, Bank of the West failed to cease communications with Mr. Morgan and Susan Morgan. Bank of the West has been given ample opportunity to appear and be heard, and for whatever reason, has chosen not to do so.

However, the issue of damages is less persuasive. Mr. Morgan testified that he had not suffered any out of pocket losses as a result of Bank of the West’s actions or as a result of having to appear in court, and he offered no other evidence of damages, including any evidence of lost income. The court finds that evidence of damages was not proven by a preponderance of the evidence, and no such damages will be awarded. In addition, no evidence was adduced at trial that Mr. Morgan is actually responsible for any of the attorneys’ fees incurred by his counsel in this matter, such that those fees would be recoverable. Thus, the court finds damages and attorneys’ fees are not appropriate in this case under Section 362(k)(1) on the record before it.

Despite the failure of proof under Section 362(k)(1), there is an additional basis for relief—as the court has the inherent authority to enforce its own orders. Courts in the Fourth Circuit hold that Section 105(a) authorizes a bankruptcy court to hold a party in civil contempt for failing to comply with a previous order.

The court finds the actions of Bank of the West are in violation of the consent order, and Bank of the West shall be sanctioned $500 for willful violation of the consent order, which sum shall be paid to David J. Morgan and Susan Morgan in the amount of $250 each. Further, counsel for the debtors shall be awarded $500 in attorneys’ fees from Bank of the West as reasonable and necessary in enforcing the terms of the consent order.

Debtors’ contempt motion granted.

In re David J. Morgan, No. 14-60461, March 25, 2016. WDVA Bankr. at Lynchburg (Black). VLW No. 019-4-024, 8 pp.