IN RE STAINTON, (B.A.P. 9th Cir. 1992)

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Docket Number

Bankruptcy No. 590-03304-JRG. BAP No. NC-91-1479-MePeR. Adv. No. 900261.

Attorney(S)

Michael W. Malter, San Jose, Cal., for Geoffrey Cindy Stainton. Robert Sturges, San Jose, Cal., for Kyung Anne Lee. Daniel T. Paris, in pro per.

Acts

Bankruptcy — Case Administration — Administrative Powers — Automatic Stay

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Smart Summary

Factual and Procedural Background

Geoffrey Paul Stainton operates an auto body shop on property owned by Kyung C. Lee and Anne C. Lee. Prior to filing for bankruptcy under Chapter 13 on July 13, 1990, the Lees, through their attorney Daniel T. Paris, initiated an unlawful detainer action against Stainton in state court, with a trial scheduled for July 16, 1990. Despite the Debtors' attorney notifying the state court and Paris of the automatic stay triggered by the bankruptcy filing, the state court ruled the stay did not apply and proceeded with the trial, ultimately entering judgment in favor of the Lees.

On July 30, 1990, the Debtors filed a complaint in bankruptcy court alleging a willful violation of the automatic stay under 11 U.S.C. § 362(h), seeking actual and punitive damages. The bankruptcy court granted summary judgment in favor of the Debtors, finding willful violation and awarding $6,973.10 in attorneys' fees and costs, but ordered only $1,495 to be paid by the Lees and Paris, with the remainder charged to the bankruptcy estate. The Debtors appealed this allocation.

Legal Issues Presented

Whether, under 11 U.S.C. § 362(h), the bankruptcy court has discretion to allocate reasonably incurred attorneys' fees and costs between the violating parties and the injured individual, despite the statute's language that the injured individual shall recover actual damages.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
In re Smith Corset Shops, Inc., 696 F.2d 971 (1st Cir. 1982)	Requirement that every judgment in adversary proceedings be set forth on a separate document.	Supported the conclusion that the bankruptcy court violated the separate document rule but jurisdiction was proper as parties did not object.
In re Pederson, 78 B.R. 264 (9th Cir. BAP 1987), aff'd 875 F.2d 781 (9th Cir. 1989)	Separate document rule and consequences of its violation.	Provided discretion to dismiss or remand for failure to comply, but parties may waive the rule.
Bankers Trust Co. v. Mallis, 435 U.S. 381 (1978)	Parties may waive the separate document rule requirements.	Supported the Panel’s assumption of jurisdiction despite the rule violation.
In re Johnson, 62 B.R. 24 (9th Cir. BAP 1986)	Jurisdiction over appeal despite violation of the separate document rule when no objection is made.	Confirmed the Panel’s jurisdiction over this appeal.
In re Pacific Far East Lines, Inc., 889 F.2d 242 (9th Cir. 1989)	Standard of review for bankruptcy court's legal conclusions is de novo.	Guided the Panel’s de novo review of the bankruptcy court’s interpretation of § 362(h).
In re Globe Inv. and Loan Co., Inc., 867 F.2d 556 (9th Cir. 1989)	De novo review standard for legal conclusions in bankruptcy cases.	Supported the Panel’s review approach.
Hallstrom v. Tillamook County, 493 U.S. 20 (1989)	Statutory interpretation begins with the plain language of the statute.	Used to emphasize reliance on the plain meaning of § 362(h).
United States v. Ron Pair Enterprises, Inc., 489 U.S. 235 (1989)	Plain language of a statute is generally conclusive unless it produces an absurd result.	Supported the conclusion that § 362(h) requires full recovery of actual damages by the injured party.
In re Seidel, 752 F.2d 1382 (9th Cir. 1985)	Principles of statutory interpretation applied to bankruptcy code provisions.	Referenced in the context of interpreting § 362(h).

Court's Reasoning and Analysis

The court began with the statutory language of 11 U.S.C. § 362(h), which states that an individual injured by a willful violation of the automatic stay shall recover actual damages, including attorneys' fees and costs. The court emphasized that the plain language of the statute is conclusive except in rare cases where literal application conflicts with legislative intent. Here, the court found no such conflict.

The bankruptcy court had discretion to determine the reasonableness of fees and costs, but not to allocate payment of those fees between the violating parties and the injured individual. Allocating part of the damages to the bankruptcy estate was inconsistent with the mandatory language of the statute. Consequently, the Panel reversed the bankruptcy court's order and remanded for entry of judgment consistent with this interpretation.

Holding and Implications

The bankruptcy court's order allocating only a portion of attorneys' fees and costs to the violating parties and charging the remainder to the bankruptcy estate is REVERSED and REMANDED.

The court held that under 11 U.S.C. § 362(h), an injured individual is entitled to recover the full amount of actual damages, including attorneys' fees and costs, resulting from a willful violation of the automatic stay. The decision directly affects the parties by requiring the violating parties to bear the entire amount of reasonable fees and costs awarded. No new precedent beyond the interpretation of § 362(h) and enforcement of the separate document rule was established.

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In re Geoffrey Paul STAINTON and Cindy L. Stainton dba Stainton Auto Body, Debtors. Geoffrey Paul STAINTON and Cindy L. Stainton dba Stainton Auto Body, Appellants, v. Kyung C. LEE and Anne C. Lee, indi

OPINION

MEYERS, Bankruptcy Judge:

Geoffrey Paul Stainton and Cindy L. Stainton ("Debtors") appeal from two orders of the bankruptcy court which awarded them $1,495 in damages for attorneys' fees and costs incurred as the result of the Appellees' violation of the automatic stay. We REVERSE.

Every judgment entered in an adversary proceeding or contested matter must be set forth on a separate document. Fed.R.Bankr.P. 9021; Fed.R.Civ.P. 58. "Separate document" means that the judgment or order must be separate from an opinion or memorandum of the court. In re Smith Corset Shops, Inc., 696 F.2d 971, 975 (1st Cir. 1982); In re Pederson, 78 B.R. 264, 266 (9th Cir. BAP 1987), aff'd, 875 F.2d 781 (9th Cir. 1989).
On April 8, 1991, the bankruptcy court filed a Memorandum Decision and Order. Under the separate document rule, the bankruptcy court should have entered the Order separately from the Memorandum.
Failure to comply with the rule gives the reviewing court the discretion to dismiss or remand. Pederson, supra, 78 B.R. at 266. The parties, however, are free to waive the requirements of the rule. Bankers Trust Co. v. Mallis, 435 U.S. 381, 384, 98 S.Ct. 1117, 1119, 55 L.Ed.2d 357 (1978). If the decision is intended as the final decision, and the appellee has not objected to the taking of the appeal in the absence of a separate order, the Panel may properly assume jurisdiction over the appeal. In re Johnson, 62 B.R. 24, 27 (9th Cir. BAP 1986). Accordingly, the Panel has jurisdiction over this appeal, notwithstanding a violation of the separate document rule.

II FACTS

Geoffrey Paul Stainton ("Stainton") operates an auto body shop in Milpitas, California, which is located on property owned by Appellees Kyung C. Lee and Anne C. Lee ("Lees"). On July 13, 1990, the Debtors filed a petition under Chapter 13 of the Bankruptcy Code ("Code"). Prior to the filing of the petition, the Lees, through their attorney, Appellee Daniel T. Paris ("Paris"), filed an unlawful detainer action in state court against Stainton. The state court trial was scheduled for July 16, 1990.

Prior to trial, Stainton's attorney submitted a copy of the Debtors' bankruptcy petition to the state court and to Paris and informed them of the application of the automatic stay. Nevertheless, the state court ruled that the automatic stay did not apply to the unlawful detainer action and that the trial could proceed. Upon conclusion of the trial, judgment was entered in favor of the Lees.

On July 30, 1990, the Debtors filed a complaint in the bankruptcy court against the Lees and Paris alleging a violation of the automatic stay. The Debtors requested actual and punitive damages pursuant to Section 362(h) of the Code.

Section 362(h) provides: "An 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." 11 U.S.C. § 362(h).

On December 10, 1990, the bankruptcy court held that the Lees and Paris had willfully violated the automatic stay and it granted the Debtors' motion for summary judgment. The court determined that the reasonable amount of attorneys' fees and costs incurred by the Debtors in prosecuting the violation of the stay amounted to $6,973.10. However, the court ordered the Lees and Paris to pay only $1,495.00 of the fees with the balance to be borne by the bankruptcy estate. The Debtors appeal.

III STANDARD OF REVIEW

The bankruptcy court's interpretation and application of Section 362(h) is a conclusion of law subject to de novo review. In re Pacific Far East Lines, Inc., 889 F.2d 242, 245 (9th Cir. 1989); In re Globe Inv. and Loan Co., Inc., 867 F.2d 556, 559 (9th Cir. 1989).

IV DISCUSSION

The issue before us is whether, under Section 362(h), the bankruptcy court has discretion to allocate reasonably incurred attorneys' fees and costs between the violating parties and the injured individual even though the language of Section 362(h) states that the injured individual shall recover actual damages.

The task of resolving the dispute over the meaning of a statute begins with the language of the statute itself. Hallstrom v. Tillamook County, 493 U.S. 20, 25, 110 S.Ct. 304, 308, 107 L.Ed.2d 237 (1989); United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989); In re Seidel, 752 F.2d 1382, 1384 (9th Cir. 1985). Referring to the Bankruptcy Code, the Supreme Court has stated that "as long as the statutory scheme is coherent and consistent, there generally is no need for a court to inquire beyond the plain language of the statute." Ron Pair Enterprises, supra, 489 U.S. at 240-41, 109 S.Ct. at 1030. Thus, the plain meaning of the statute should be conclusive except in the rare cases in which the literal application of the statute would produce a result demonstrably at odds with the intention of its drafters. 489 U.S. at 242, 109 S.Ct. at 1031.

Section 362(h) expressly states that "[a]n individual injured by any willful violation of a stay . . . shall recover actual damages, including costs and attorneys' fees. . . ." 11 U.S.C. § 362(h) (emphasis added). The plain language of the statute requires that the injured party be awarded the entire amount of actual damages reasonably incurred as a result of a violation of the automatic stay. Under the circumstances of this case, allocating a portion of the actual damages as an expense to be borne by the bankruptcy estate is inconsistent with the plain language of the statute.

It is well established that the bankruptcy court has discretion to determine the reasonableness of the fees and costs and to set the amounts accordingly. Once the court makes such a determination, however, it should award the fees to the injured party. There is nothing in Section 362(h) or in the case law to support the proposition that the bankruptcy court has discretion to allocate payment of reasonable fees between the violating parties and the injured individual.

REVERSED and REMANDED.