JTS/Simms, LLC v. Simms Building, Inc.

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
JTS/SIMMS, LLC
a New Mexico Limited Liability Company,
Debtor. 	No 7-07-12153 SA
JTS/SIMMS, LLC,
Plaintiff,
v. 	Adv. No. 07-1132 S
SIMMS BUILDING, INC.,
a New Mexico Corporation,
Defendant.
MEMORANDUM OPINION AFTER TRIAL
This matter came before the Court for trial on the merits of
Plaintiff’s complaint for damages and injunctive relief. 	After
trial Plaintiff’s secured creditor obtained relief from the
automatic stay and substantially all of Debtor’s assets were
abandoned. 	The case then converted to Chapter 7 and a Chapter 7
Trustee is now completing administration of what remains. 	For
the reasons set forth below, the Court finds that this adversary
proceeding should be dismissed.
FACTS
1. 	Defendant and Plaintiff executed a Purchase and Sale
Agreement that transferred a building in downtown
Albuquerque to Plaintiff. 	Defendant was the seller.
2. 	Plaintiff failed to prove damages resulting from any
violations of the automatic stay.
3. 	Plaintiff failed to prove that Defendant converted any
property belonging to the estate or from the estate. 	At
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most, Plaintiff proved that certain unknown third parties
took some personal property “from the estate.” 	The property
taken had not been purchased from Defendants as part of the
Purchase and Sale Agreement.
4. 	Plaintiff failed to prove any damages flowed from
Defendant’s actions relating to tenant leases. 	In fact,
Defendant collected approximately $11,000 from tenants and
turned that money over to Plaintiff.
5. 	The related bankruptcy case converted from Chapter 11 to
Chapter 7 and ceased business operations. 	The injunctive
relief sought is therefore moot.
6. 	The Chapter 7 Trustee has not intervened in or substituted
in as a party in this adversary proceeding.
7. 	Defendant alleged no counterclaim.
CONCLUSIONS OF LAW
1. 	This adversary proceeding, when it was commenced, was a core
proceeding. 	28 U.S.C. § 157(b)(2).
2. 	The primary focus of Plaintiff’s complaint is for sanctions
for Defendant’s alleged automatic stay violations. 	See 11
U.S.C. § 362.
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1There is a split in the Courts whether a corporation or
partnership is an “individual” that can seek relief under §
362(k)(1). 	See, e.g., Maritime Asbestosis Legal Clinic v. LTV
Steel Co., Inc. (In re Chateaugay Corp.), 920 F.2d 183, 185 (2 nd
Cir. 1990). 	The Court does not need to decide the issue in this
case because it finds no damages.
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3. 	Section 362(k)(1) provides, in part, “an individual 1 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.”
4. 	The function of the automatic stay is to stop
collection efforts against a debtor, outside of
the bankruptcy proceeding: It gives the debtor a
“breathing spell” in order to reorganize her
financial affairs. 	And, it prohibits harassment
of the debtor. 	See, Budget Service Co. v. Better
Homes of Virginia, Inc., 804 F.2d 289, 292 (4th
Cir.1986). 	But, the stay does not shield the
debtor from all the vicissitudes, aggravations and
anxiety of everyday life. (When it rains, debtors
protected by the automatic stay get wet). Thus,
the Code prescribes a sanction only in two
conjunctive circumstances: (1) injury to the
debtor; (2) caused by a “willful” violation of the
stay. 	In re Hamrick, 175 B.R. 890, 893 (W.D. N.C.
1994).
In re Peterson, 297 B.R. 467, 470 (W.D. N.C. 2003).
Therefore, it is appropriate to determine if there are any
injuries before delving into the willfulness of an alleged
stay violation.
5. 	Proving no damages, Plaintiff is entitled to no relief. 	See
In re Dunn, 202 B.R. 530, 531 (Bankr. D. 	N.H. 1996)(“The
movants, the debtors herein, have the burden of proof with
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regard to showing that there was a violation of the
automatic stay, that the violation was willful, that the
willful violation caused the movants to suffer harm and
incur damages, and then to show what relief is
appropriate.”)
6. 	A stay violation damage award cannot be based on “mere
speculation, guess, or conjecture.” 	Archer v. Macomb County
Bank (In re Archer), 853 F.2d 497, 499 (6 th Cir. 1988)
(quoting John E. Green Plumbing & Hearing Co v. Turner
Construction Co., 742 F.2d 965, 968 (6 th Cir. 1984), cert.
denied, 471 U.S. 1102 (1985)). 	In this case, Plaintiff
proved no damages and any damage calculation would be
speculative.
7. 	A bankruptcy court has jurisdiction over disputes
regarding alleged property of the bankruptcy estate at
the outset of the case. 	In re Xonics, Inc., 813 F.2d
127, 131 (7th Cir. 1987). 	When property leaves the
bankruptcy estate, however, the bankruptcy court's
jurisdiction typically lapses, In re Hall's Motor
Transit Co., 889 F.2d 520, 523 (3d Cir. 1989); In re
Xonics, Inc., 813 F.2d at 131; In re Muller, 72 B.R.
280, 284 (C.D. Ill. 1987), aff'd, 851 F.2d 916 (7th
Cir. 1988), cert. denied, 490 U.S. 1007, 109 S.Ct.
1645, 104 L.Ed.2d 160 (1989), and the property's
relationship to the bankruptcy proceeding comes to an
end. 	See In re Hall's Motor Transit Co., 889 F.2d at
523. 	Thus, the bankruptcy court lacks related
jurisdiction to resolve controversies between third
party creditors which do not involve the debtor or his
property unless the court cannot complete
administrative duties without resolving the
controversy. 	In re Shirley Duke Assocs., 611 F.2d 15,
18 (2d Cir.1979).
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Gardner v. United States (In re Gardner), 913 F.2d 1515,1518
(10 th Cir. 1990). 	Any issues from this adversary proceeding
that are still alive are between Defendant and Debtor’s
secured creditor. 	The bankruptcy court lacks jurisdiction
to determine third party disputes. 	This adversary
proceeding should be dismissed.
CONCLUSION
The Court will enter an Order dismissing this adversary
proceeding.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	October 14, 2009
copies to:
David T Thuma
500 Marquette Ave NW Ste 650
Albuquerque, NM 87102-5309
Jennie D Behles
PO Box 7070
Albuquerque, NM 87194-7070
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