Jeffery Watson Potter and Associated Case in US District Court

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
Jeffery Watson Potter,
Debtor. 	No. 7-05-14071 MS
ORDER AWARDING DAMAGES FOR CIVIL CONTEMPT
THIS MATTER is before the Court on the Order to Show Cause requiring creditor
Martin S. Friedlander to appear October 19, 2007 at 2:30 pm before to show cause why he
should not be held in civil contempt for violation of the automatic stay. The Court granted the
motion by La Vista Homeowners Association (LVHA) for an Order to Show Cause (the
“Order”) finding that Friedlander filed a cause of action in state court in California while this
bankruptcy proceeding was pending. The Order was issued and a hearing was conducted on
October 19, 2007 at which time the Court took the matter under advisement. After hearing the
evidence, the Court finds that Friedlander knowingly violated the automatic stay in this
bankruptcy and that damages for civil contempt are appropriate. In connection therewith the
Court makes the following findings of fact and conclusions of law:
1. On May 19, 2005, Debtor, Jeffrey Potter, filed this Chapter 11 bankruptcy proceeding.
In November 2006 the case was converted to Chapter 7. On Schedule A, Debtor lists his
residence at 53 La Vista, Santa Fe, New Mexico (“53 La Vista”), and on Schedule C, Debtor
claims a homestead exemption in 53 La Vista. 	LVHA filed a lien against 53 La Vista based on
unpaid homeowner’s association dues.
2. On or about January 28, 2007, Friedlander filed an action in Superior Court of the
State of California, County of Los Angeles, Case No. BC 365432 (the “California action”)
against La Vista asking inter alia for a declaratory judgment that LVHA cannot enforce certain
covenants governing 53 La Vista, and also asking for an injunction preventing La Vista from
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1 Section 105 provides, “[t]he court may issue any order, process, or judgment that is
necessary or appropriate to carry out the provisions of this title.” 11 U.S.C. § 105.
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enforcing the covenant.
3. As the Court ruled in the Order, when he filed the California action, Friedlander
violated the automatic stay in bankruptcy because the California action was an attempt “to
exercise control over property of the estate.” See 11 U.S.C. § 362(a)(3).
4. Under 11 U.S.C. § 105, the Court may award damages to LVHA that resulted from a
violation of the stay. See A & J Auto Sales, inc. v. United States (In re A & J Auto Sales, Inc.),
210 B.R. 667, 671 (Bankr. D.N.H. 1997), aff’d, 223 B.R. 839 (D.N.H. 1998). An award of
damages under 11 U.S.C. § 1051 for a violation of the stay requires a finding that the party (1)
knew the automatic stay was invoked and (2) intended the actions which violated the stay. In re
Jove Engineering, Inc. v. IRS, 92 F.3d 1539, 1555-56 (11 th Cir. 1996).
5. In the early stages of the bankruptcy proceeding on January 10, 2006, Friedlander
filed a motion to intervene in response to a motion to lift stay as to 53 La Vista filed by Bank of
America. See Dockets 54 (stay motion), 105 (motion to intervene). In the motion to intervene, as
well as in his response to the Motion for Contempt, Friedlander argued that the Debtor’s transfer
of 53 La Vista to a trust prevented 53 La Vista from becoming part of the bankruptcy estate. At
the hearing on contempt, however, Friedlander testified that he knew that this Court was
exercising jurisdiction over 53 La Vista regardless of the Debtor’s transfer of 53 La Vista to the
trust. Thus, Friedlander had knowledge of the stay when he filed the California action.
6. Friedlander also exhibited an intent to violate the stay because when he filed the
California action he knew that this Court was exercising jurisdiction over all of the Debtor’s
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property, including 53 La Vista as evidenced by the Court’s ruling on the motion to lift stay filed
by Bank of America. See Docket 148 (Order Denying Bank of America’s Motion for Relief
From Stay).
7. Compensatory damages are recoverable for civil contempt and may include
reasonable attorney’s fees and costs. See Reliance Ins. Co. v. Mast Const. Co., 159 F.3d 1311,
1318 (10 th Cir. 1998) (stating that compensatory damages for civil contempt must be proven by
preponderance of evidence.); In re Reed, 11 B.R. 258, 276 (Bankr. Utah 1981) (stating that
attorney’s fees may be part of compensatory damages “equation”) (citing, Allied Materials Corp.
v. Superior Products Co., Inc., 620 F.2d 224, 227 (10 th Cir. 1980) (awarding attorney’s fees for
civil contempt).
8. LVHA’s counsel, Mr. Clifford Gramer, testified as to attorney’s fees and costs
incurred by LVHA to pursue the Order to Show Cause and to defend the California action.
Gramer also offered into evidence his fee statements. See Exhibit 1. 	Mr. Gramer requests a total
of $8,180,28 as damages sustained as a result of Mr. Friedlander’s actions, consisting of
attorneys’ fees in the amount of $7,460.00 for 37.3 hours of work billed at $200.0 per hour, tax
on fees in the amount of $511.01, and costs in the amount of $208.27. Id.
9. After reviewing the attorney’s fee affidavit submitted by LVHA, and the attorney fee
bills supporting the amounts in the affidavit, the Court finds that the amounts requested are
excessive. The Court will award LVHA $3,500.00 in attorney’s fees, plus applicable New
Mexico gross receipts taxes in the amount of $239.75, and $208.27 in costs incurred as a result
of the contempt. See Reed, 11 B.R. at 277 (awarding reasonable attorney’s fee for civil
contempt).
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THEREFORE, THE COURT HEREBY ORDERS that Friedlander pay to La Vista the
amount of $3,948.02.
MARK B. McFEELEY
UNITED STATES BANKRUPTCY JUDGE
Date entered on docket: April 16, 2008
Copy to:
Cliff Gramer
Attorney for LVHA
3733 Eubank Blvd NE
Albuquerque, NM 87111-3536
Martin S. Friedlander, pro se
10350 Wilshire Blvd Ste 603
Los Angeles, CA 90024-4717
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