IN RE JOHNSON, (Bankr.C.D.Ill. 2003)

THOMAS PERKINS, Bankruptcy Judge

This matter came before the Court for trial on the Complaint to Determine Dischargeability of Debt pursuant to 11 U.S.C. § 523(a)(2)(A) and (a)(6), brought by D's Paint Auto Body, Inc., (D'S) against the Debtor, William E. Johnson (DEBTOR). In September 2001, the DEBTOR towed his 1998 Ford F-150 pickup truck, which had been involved in an accident, to D'S for repairs. The DEBTOR signed a repair estimate for $3,453.61. D'S ultimately charged the DEBTOR $4,855.00 for the repairs. Denny Boulton (BOULTON), D'S owner, testified that the DEBTOR authorized the additional repairs but the DEBTOR denied ever having been advised of them. When the repairs were completed, BOULTON called the DEBTOR and advised him that the repairs would have to be fully paid before the vehicle would be released. The DEBTOR was not happy with this condition, as he disputed the amount of the final bill to the extent that it exceeded the original estimate and, in addition, he only had about $2,100.00 available to pay toward the bill.

At this point, the path turns crooked. Based upon the testimony of BOULTON, the DEBTOR and his mother, Melba Johnson, the Court concludes that the Johnson family concocted a scheme to obtain possession of the vehicle from D'S without paying for the repairs. The scheme was executed as follows. On December 18, 2001, the DEBTOR and his mother were dropped off at D'S by the DEBTOR'S father and his brother, who waited outside in their car. The DEBTOR and his mother went inside and advised BOULTON that the DEBTOR'S mother was going to loan the DEBTOR the money to pay for the repairs but that she wanted to test drive the vehicle first. BOULTON agreed but stipulated that he would ride along. The "test drive" commenced with Mrs. Johnson at the wheel, the DEBTOR in the front passenger seat and BOULTON in the back seat. As the Ford F-150 motored through the streets of Peoria Heights, it was being followed by the DEBTOR'S father and brother in their vehicle. After several minutes, Mrs. Johnson pulled the Ford into an alley, that, as it turned out, runs behind the DEBTOR'S residence, whereupon she turned off the ignition and announced to BOULTON that this was "the end of the ride for you."

Here, the parties' respective versions of the events diverge. BOULTON testified that the DEBTOR then stated "Possession is nine tenths of the law. Now you'll have to try to collect from me, sucker," and that the DEBTOR then exited the passenger seat, opened the rear door, grabbed his shoulder and yanked him from the vehicle. It was then, according to BOULTON, that he saw that the car containing the DEBTOR'S father and brother had pulled into the alley behind the Ford F-150. At that point, he became fearful for his safety and fled on foot.

The DEBTOR denied touching BOULTON. Instead, he and his mother claimed that they handed BOULTON a copy of a small claims complaint that had been filed the day before seeking damages of $4,855.00 against BOULTON and D'S. Mrs. Johnson testified that she explained to BOULTON that they were keeping possession of the Ford F-150 and that the matter would be resolved in the court system. She testified that BOULTON exited the vehicle voluntarily, whereupon they offered to drive him back to his place of business, which he declined. BOULTON reported the incident to the Peoria Heights police, but no criminal charges were filed.

BOULTON took no action to enforce a lien claim against the vehicle. Rather, he filed a counterclaim against the DEBTOR in the state court case. A default judgment was entered on the counterclaim in favor of D'S and against the DEBTOR for the amount of $4,855.00, plus punitive damages of $4,500.00 and attorney fees of $750.00. On the same day, prior to entry of the default judgment, the DEBTOR filed his bankruptcy petition.

On Schedule B, the DEBTOR listed the 1998 Ford F-150 as having 107,000 miles with a current market value of $5,500.00. On Schedule D, the DEBTOR listed Union Planters Bank as holding a security interest in the vehicle securing a debt of $8,000.00. The DEBTOR'S Statement of Intention states an intent to surrender the vehicle to the Union Planters Bank and the DEBTOR testified at trial that the vehicle was, in fact, surrendered to Union Planters Bank during the course of his bankruptcy case. The DEBTOR scheduled D'S as holding an unsecured claim in the amount of $4,800.00. The claim was not shown as disputed.

At trial, the DEBTOR was asked his opinion of the value of the Ford F-150. His initial response was that the vehicle was worth $12,000.00 to $13,000.00. Upon further examination, he stated that he really did not know what the vehicle was worth.

D'S asserts alternative claims under Sections 523(a)(2)(A) and (a)(6). D'S argues that the DEBTOR'S conduct in leading BOULTON to believe that the vehicle was merely being taken for a test drive when, in fact, it was being "stolen" constitutes false pretenses, a false representation or actual fraud for purposes of Section 523(a)(2)(A). D'S also argues that the evidence proves that the DEBTOR acted willfully and maliciously for the purpose of Section 523(a)(6). D'S position is that loss of possession of the truck deprived D'S of the ability to enforce its lien against the vehicle. D'S asserts three grounds for its claim of lien. In addition to claiming a contractual lien and a common law lien, D'S claims a statutory lien pursuant to 770 ILCS 45/1, 770 ILCS 50/1, and 770 ILCS 90/1.

The DEBTOR denies that D'S was harmed by the DEBTOR retaking possession of his truck. Characterizing his conduct as rising only to the level of breach of contract, the DEBTOR denies that D'S suffered any injury cognizable under Sections 523(a)(2)(A) or (a)(6).

D'S claim of a contractual lien is based upon the following language contained in the repair authorization signed by the DEBTOR:

8. In addition to any and all other legal remedies available, I authorize D's Paint Body Shop to have a lien on the vehicle described herein for all charges, including labor and parts, storage and/or towing, and to enforce such lien, D's Paint Body Shop is hereby expressly authorized to sell said vehicle at public auction after giving a twenty (20) day written notice by certified mail to the legal owner, registered owner, and Department of Motor Vehicles of intent to do so. On the sale date, the vehicle shall be sold to the highest cash bidder and the proceeds of sale shall be used first to satisfy the lien plus storage costs and costs incident to sale, and the balance shall be forwarded to the legal owner, or if none, to the registered owner, or if the address is unknown, it shall be forwarded to the Department of Motor Vehicles. Said expenses for sale shall also include a reasonable attorney's fee.

Illinois also recognizes a common law possessory lien in favor of repairmen. The common law lien is available notwithstanding the existence of statutory liens in favor of repairmen. National Bank of Joliet v. Bergeron Cadillac, Inc., 66 Ill.2d 140, 361 N.E.2d 1116, 5 Ill. Dec. 588 (1977). Such liens are fundamentally consensual in nature and can be created only by agreement, by some fixed rule of law, or by usage of trade or commerce. Deitchman v. Korach, 330 Ill. App. 365, 369, 71 N.E.2d 367 (1947). The common law lien has no provision for forfeiture or sale, but is limited to the right to possession of the chattel until all charges are paid. Navistar Financial Corp. v. Allen's Corner Garage and Towing Service, Inc., 153 Ill. App.3d 574, 505 N.E.2d 1321, 106 Ill. Dec. 530 (1987). If the repairman voluntarily relinquishes possession of the chattel to the owner, the lien is lost. Nathan M. Stone Co. v. Ellerson, 230 Ill. App. 593, 1923 WL 3345 (Ill.App. 1 Dist. 1923). A valid common law possessory lien takes priority over an earlier perfected security interest under the Uniform Commercial Code. 810 ILCS 5/9-333; National Bank of Joliet v. Bergeron Cadillac, Inc., supra.

The statutory lien available to D'S is provided by the Labor and Storage Lien Act, 770 ILCS 45/1 et seq. This statutory lien is not a possessory lien, and remains in effect for one year after completion of the work notwithstanding the fact that possession of the chattel has been returned to the owner. 770 ILCS 45/1. However, the lien terminates sixty days after delivery of the chattel to the owner unless the lien claimant files a Notice of Lien in the County Recorder's Office. 770 ILCS 45/2. Unlike the common law lien, this statutory lien is subject to the prior lien of any bona fide security interest in the chattel. 770 ILCS 45/4. The statutory lien may be foreclosed by sheriff's sale or by judicial action. 770 ILCS 45/6.

Loss of possession of the Ford F-150 did not affect D'S lien and foreclosure rights under the Labor and Storage Lien Act. The same is not true, however, with respect to the common law possessory lien. Under Illinois law, the common law lien exists only so long as the repairman retains possession of the chattel. Once the owner reacquires possession, the lien terminates. There is no recognized exception where possession is lost through force or trickery. In addition, because only the common law possessory lien takes priority over a prior security interest, when possession of the Ford F-150 was taken from D'S, D'S lost the most valuable lien available to it under Illinois law. Accordingly, the Court determines that loss of possession of the Ford F-150 caused substantial harm to D'S of a kind cognizable under 11 U.S.C. § 523.

The Court turns now to the question of whether that harm was caused by the willful and malicious conduct of the DEBTOR. Section 523(a)(6) of the Bankruptcy Code provides that an individual debtor is not discharged from any debt "for willful and malicious injury by the debtor to another entity or to the property of another entity. ". In order to be entitled to a determination of nondischargeability under Section 523(a)(6), a plaintiff must prove three elements by a preponderance of the evidence: 1) that the defendant caused an injury, 2) that the defendant's actions were willful, and 3) that the defendant's actions were malicious. In re Carlson, 224 B.R. 659, 662 (Bankr. N.D. Ill. 1998), aff'd 2000 WL 226706 (N.D.Ill.), aff'd 2001 WL 1313652 (7th Cir.). "Willful" means intent to cause injury, not merely the commission of an intentional act that leads to injury. Kawaauhau v. Geiger, 523 U.S. 57, 118 S.Ct. 974, 140 L. Ed2d 90 (1998). Under Geiger, to prove nondischargeability of a debt under Section 523(a)(6), a plaintiff must show that the debtor actually intended to harm him and not merely that the debtor acted intentionally and he was thus harmed. Id. at 61-62. Injuries either negligently or recklessly inflicted do not come within the scope of Section 523(a)(6). Id. at 64.

To prove malice, a creditor must show that the debtor's willful, injurious conduct was undertaken in conscious disregard of one's duties or without just cause or excuse. Matter of Thirtyacre, 36 F.3d 697, 700 (7th Cir. 1994). In a case involving conversion of collateral, a creditor must show that a debtor, when converting collateral, did so with the specific intent of depriving the creditor of its collateral or did so knowing, with substantial certainty, that the creditor would be harmed by the conversion. In re Kidd, 219 B.R. 278, 285 (Bankr. D. Mont. 1998). The key in conversion cases is to analyze each set of circumstances on a case-by-case basis to determine whether the conversion is in the nature of an intentional tort or whether the conversion is the result of a negligent or reckless tort, but not willful and malicious. Id. at 284.

As discussed above, it has been established that D'S suffered an injury through loss of possession of the Ford F-150 and that this injury was caused by the DEBTOR'S intentional conduct, in concert with his family. The evidence compels the conclusion that the DEBTOR'S conduct was willful. There is no question that the DEBTOR intended to harm D'S by depriving it of possession of the vehicle. Although the DEBTOR was almost certainly unaware of the specifics of Illinois lien law, he clearly understood that D'S retained possession of the vehicle for the purpose of collecting the repair bill and that, without the vehicle, D'S ability to collect would be impaired, which is the result intended by the DEBTOR.

The DEBTOR'S conduct was also malicious. Even though he was disputing the amount of the repair bill, the DEBTOR understood that D'S had a right to retain possession of the vehicle as security for payment. The fact that the DEBTOR disputed the amount of the repair bill does not justify involuntarily depriving D'S of its rightful possession of the vehicle. The DEBTOR acted without just cause or excuse when he wrongfully deprived D'S of possession of the vehicle and this Court has no doubt that the DEBTOR appreciated that his actions were wrongful. This is not a situation where the DEBTOR acted negligently or recklessly. D'S has sustained its burden of proof under Section 523(a)(6) and has proved that an injury to its interest in property was caused by the willful and malicious conduct of the DEBTOR.

The loss suffered by D'S as a result of the DEBTOR'S willful and malicious conduct is measured by the value of D'S common law, first-priority, possessory lien interest in the Ford F-150. See, In re Baietti, 189 B.R. 549 (Bankr.D.Me. 1995). Based on the record before the Court, the fair market value of the vehicle is $5,500.00, the value placed on the vehicle by the DEBTOR in his bankruptcy schedules. Since D'S had a collateral interest in the vehicle, the amount of damages is correctly calculated as the lesser of the value of the vehicle or the balance due on the debt. Here, the alleged repair bill amount is less, so that amount of $4,855.00 sets a cap on the actual damages.

But, here, the amount of the debt is undetermined. The state court judgment entered after the bankruptcy filing in violation of the automatic stay is void. Far Out Productions, Inc. v. Oskar, 247 F.3d 986 (9th Cir. 2001). The debtor disputes the amount of the bill for $4,855.00. The correct amount of the repair bill was not litigated by the parties and is not necessary to resolution of this proceeding. Under these circumstances, a judgment of nondischargeability will be entered without a determination as to the amount of the nondischargeable debt. The parties must return to state court for that determination.

Neither is it necessary for this Court to determine whether D'S is entitled to an award of punitive damages or attorney fees, which are questions of state law and should be determined by the state court. Punitive damages and attorney fees, if awarded, are nondischargeable. Cohen v. de la Cruz, 523 U.S. 213, 118 S.Ct. 1212, 140 L.Ed.2d 341 (1998); In re McGuffey, 145 B.R. 582 (Bankr.N.D.Ill. 1992).

This Opinion constitutes this Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. A separate Order will be entered.

For the reasons stated in an Opinion entered this day, IT IS HEREBY ORDERED that the Court determines that the debt of the Defendant, William E. Johnson, to the Plaintiff, D's Paint Auto Body Shop, Inc., is nondischargeable pursuant to 11 U.S.C. § 523(a)(6) and that Plaintiff is awarded costs of $150.00.