Wcislak v. The Northern Ohio Investment Company

OCR transcription for search; preserved printed pages are authoritative

AUTHENTICATED /
US. GOVERNMENT

}

UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

In Re: )
) JUDGE RICHARD L. SPEER
Martin A. and Laura L. Wcislak )
) Case No. 11-3010
Debtor(s) )
) (Related Case: 08-35944)
Martin A. Wcislak )
)
Plaintiff(s) )
)
V. )
)
The Northern Ohio Investment Company )
)
Defendant(s) )
DECISION AND ORDER

This cause comes before the Court after a Hearing on the Court’s Order to Show Cause for
Dismissal. The Show Cause Hearing was set by the Court to address a single issue: whether the
Plaintiff was eligible to file this complaint since his underlying Chapter 13 Case had been Dismissed.
At the conclusion of the Hearing, the Court took the matter under advisement so as to afford the
opportunity to further consider the matter. The Court has now had this opportunity, and for the
reasons explained, finds that the Plaintiff is not eligible to maintain this proceeding, and thus his

complaint will be Dismissed.

-03010-rls Doc5 FILED 02/09/11 ENTERED 02/09/11 15:47:25 Page 1 of 7

11

Martin A. Weislak v. The Northern Ohio Investment Company
Case No. 11-3010

BACKGROUND

On October 31, 2008, the Plaintiff, Martin Wcislak, and his wife, Laura Wcislak, filed a
petition in this Court for relief under Chapter 13 of the United States Bankruptcy Code. During the
progression of their Chapter 13 case, the Standing Chapter 13 Trustee filed a Motion to Dismiss their
case. The Trustee’s Motion to Dismiss was based, inter alia, on the Debtors’ inability to formulate
a confirmable plan, delinquencies on payments as proposed under their plan, failing to disclose and
then retaining a tax refund, and a failure to make contractually due mortgage payments to the
Defendant, the Northern Ohio Investment Company.

On August 25, 2010, the Trustee’s Motion to Dismiss was granted by the Court. At the
Hearing held on this matter, neither of the Debtors appeared. In the Order dismissing the Debtors’
case, the Court, pursuant to 11 U.S.C. § 109(g), enjoined the Debtors from again seeking bankruptcy
relief for a period of 180 days. . oO

On January 11, 2011, after their case had been dismissed, the Plaintiff commenced an
adversary proceeding in this Court, alleging a violation of the automatic stay by the Defendant. After
commencing this proceeding, the Court, based upon the lack of an underlying bankruptcy case,

issued its Order to Show Cause for Dismissal.
DISCUSSION

Alleging the Defendant violated the automatic stay of 11 U.S.C. § 362(a), the Plaintiff filed
this adversary proceeding seeking actual and punitive damages pursuant to § 362(k). The complaint
commencing this adversary proceeding was filed after the Plaintiff's bankruptcy case had been

dismissed.

Page 2

-03010-rls Doc5 FILED 02/09/11 ENTERED 02/09/11 15:47:25 Page 2 of 7

Martin A. Weislak v. The Northern Ohio Investment Company
Case No. 11-3010

The effect of a case being dismissed is governed by § 349. Under this provision, the estate
is dissolved, with those entities having a prepetition interest in estate property revested of that
interest. 11 U.S.C. § 349(b). The prepetition rights of creditors against the debtor are also restored.
Id. In short, § 349 seeks, “to undo the bankruptcy case, as far as practicable, and to restore all
property rights to the position in which they were found at the commencement of the case.” Jn re
Plata, 958 F.2d 918, 923 (9" Cir. 1992), citing S.Rep. No. 989, 95" Cong., 2" Sess. 49 (1978),
reprinted in 1978 U.S.C.C.A.N. 5787, 5835; Webb Mtn, LLC v. Executive Realty Partnership, LP.
(Inre Webb Min, LLC), 420 B.R. 418, 429 (Bankr. E.D.Tenn. 2009).

Based upon the operation of § 349, it is generally recognized that when a case is dismissed,
the bankruptcy court no longer retains jurisdiction over matters related to the debtor’s bankruptcy
case. This is because often “a bankruptcy court’s jurisdiction over such related proceedings depends
on the proceedings’ nexus to the underlying bankruptcy case.” Porges v. Gruntal & Co. (In re
Porges), 44 F.3d 159, 162 (2™ Cir. 1995). Nothing in § 349, however, compels such a result, with
§ 349 conspicuously failing to mandate the automatic termination of a court’s jurisdiction over all

matters related to the dismissed case. In re Carraher, 971 F.2d 327, 328 (9" Cir.1992).

As a result, so long as there still exists an otherwise valid basis for a bankruptcy court’s
jurisdiction, matters related to the dismissed case may still be heard by the court despite the
termination of the underlying case. Matter of Querner, 7 F.3d 1199, 1201 (5 Cir. 1993). In fact, it
has been recognized that retaining jurisdiction may be particularly appropriate in the type of action
the Plaintiff has brought before the Court — where damages are sought pursuant to § 362(k) for a
violation of the automatic stay. Johnson v. Smith (In re Johnson), 575 F.3d 1079, 1083 (10" Cir.
2009). This is because such a proceeding still serves to compensate for losses that are not
extinguished by the termination of the bankruptcy case and the proceeding can vindicate the
authority of the statutory stay. Jd.

Page 3

11

-03010-rls Doc5 FILED 02/09/11 ENTERED 02/09/11 15:47:25 Page 3 of 7

11

Martin A. Weislak v. The Northern Ohio Investment Company
Case No. 11-3010

Yet, even assuming a valid jurisdictional basis exists, once a debtor’s bankruptcy case has
been dismissed, the exercise of jurisdiction by the court over a related matter is not mandatory.
Instead, it is recognized that the decision of whether to exercise jurisdiction is left to the sound
discretion of the bankruptcy court. In re Porges, 44 F.3d at 162; In re Querner, 7 F.3d at 1201-02.
This discretion springs from § 349, itself, which begins by setting forth that “unless the court, for

cause, orders otherwise...”

In this matter, the Court declines to exercise jurisdiction for a couple of reasons. First, in
order to sustain an award of damages under § 362(k), a debtor must show that they suffered an actual
injury. In re Russell, — B.R. — , 2010 WL 5392879 *3 (Bankr. N.D.Ohio 2010), citing Archer v.
Macomb County Bank, 853 F.2d 497, 500 (6" Cir. 1988). The Court, however, questions whether

the Plaintiff can make this required showing.

In his Complaint, the Plaintiff cites to just one incident as giving rise to a stay violation: That
“subsequent to filing their bankruptcy case and prior to defendant receiving relief from stay from the
court, the debtors received communication from [the defendant], that mortgage loan [sic] had been
accelerated.” (Doc. No. 1, at pg. 2). While this communication potentially constitutes a stay
violation, it appears to be nothing more than a technical violation. Consequently, it is difficult to
discern how the Plaintiff could have sustained any economic damages on account of this single
communication. This is particularly true considering that, alone, the acceleration of a mortgage
obligation, when accomplished pursuant to the terms of the underlying note, does not necessarily
constitute a stay violation. In the Matter of LHD Realty Corporation, 726 F.2d 327 (7*
Cir.1984); In re Policy Realty Corp., 242 B.R. 121 (S.D. N.Y. 1999); Petroleum & Franchise
Funding, LLC v. Dhaliwal, 688 F. Supp. 2d 844 (E.D. Wis. 2010). But see In re Davidson Lumber
Co., Inc., 24 B.R. 49 (Bankr. S.D. Fla. 1982).

Page 4

-03010-rls Doc5 FILED 02/09/11 ENTERED 02/09/11 15:47:25 Page 4 of 7

11

Martin A. Weislak v. The Northern Ohio Investment Company
Case No. 11-3010

The particular relief sought by the Plaintiff also raises a concern. It is a basic facet of
bankruptcy law that § 362 was intended to be used only as a shield, protecting debtors and their
estates; it was not intended to operate as a sword to be used by debtors for their monetary gain. See,
e.g.,Inre Rivera, 345 B.R. 229, 237 (Bankr. E.D.Cal. 2005). Yet, contrary to the function served
by § 362(a), the Plaintiff in this matter clearly seeks to profit at the expense of the Defendant who
likely committed no more than a technical violation of the stay. In his Complaint, the Plaintiff seeks
actual damages totaling $141,600.00, representing the value of Defendant’s mortgage, plus punitive

damages. In essence, the Plaintiff is seeking a free house.

Even setting aside the above issues, a more fundamental concern lends itself to the
conclusion that it would be improper for this Court to exercise jurisdiction over the Plaintiffs
Complaint. In this Court’s order dismissing the bankruptcy case of the Plaintiff and his wife, it was
set forth that their case was dismissed under 11 U.S.C. § 109(g). In relevant part, this provision

provides:

Notwithstanding any other provision of this section, no individual or family
farmer may be a debtor under this title who has been a debtor in a case
pending under this title at any time in the preceding 180 days if—

(1) the case was dismissed by the court for willful failure of the

debtor to abide by orders of the court, or to appear before the court in

proper prosecution of the case[.]
Accordingly, the Plaintiff's underlying bankruptcy case was dismissed based upon his failure to
abide by court orders and/or prosecute his case. This is consistent with the Trustee’s Motion to
Dismiss which was based, in part, upon the Plaintiff's inability to formulate a confirmable plan,

delinquencies on payments as proposed under their plan, and failing to disclose and then retaining

a tax refund.

Page 5

-03010-rls Doc5 FILED 02/09/11 ENTERED 02/09/11 15:47:25 Page 5 of 7

Martin A. Wcislak v. The Northern Ohio Investment Company
Case No. 11-3010

A dismissal under § 109(g), and its 180-day bar to refiling, serves to deny bankruptcy relief
to debtors who have not fulfilled their duties under the Bankruptcy Code. Yet, now, the Plaintiff,
despite his bankruptcy case having been dismissed for failing to comply with his obligations, seeks
to invoke the jurisdiction of the Court to punish another entity based upon that entity’s alleged failure
to have followed its obligations under the Code. Under these conditions, the exercise of discretionary

jurisdiction is particularly inappropriate.

In conclusion, the Court, for the reasons set forth herein, declines to exercise jurisdiction over

the Complaint brought by the Plaintiff.
Accordingly, it is

ORDERED that this adversary proceeding, as brought by the Plaintiff, Martin A. Wcislak,
be, and is hereby, Dismissed.
Dated: February 9, 2011

LY

CA Richard L“Speer

United States
Bankruptcy Judge

Page 6

11-03010-rls Doc5 FILED 02/09/11 ENTERED 02/09/11 15:47:25 Page 6 of 7

Certificate of Service

A copy of the foregoing Decision and Order has been sent this 9" day of February 2011
by ordinary US Mail to:

The Northern Ohio Investment Company
5700 Monroe Street

Suite 300a

Sylvania, OH 43560

Martin and Laura Wcislak

165 Birchcrest Drive
Perrysburg, OH 43551

ata

ZU?

11-03010-rls Doc5 FILED 02/09/11 ENTERED 02/09/11 15:47:25 Page 7 of 7