ACEVEDO TACORONTE v. DORAL BANK

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO
IN RE: 	:
:
HILDA L. ACEVEDO TOCORONTE, 	: 	CASE NO. 04-05068 (GAC)
:
Debtor 	: 	CHAPTER 13
___________________________________:
:
HILDA L. ACEVEDO TOCORONTE, 	:
:
Plaintiff 	:
:
v. 	:
: 	ADV. NO. 05-00148
DORAL BANK, JOHN DOE and 	:
RICHARD DOE, 	:
:
Defendants 	:
___________________________________:
DECISION AND ORDER
I. Procedural Background
Pending 	before 	the 	Court 	is 	a 	motion 	for 	summary 	judgment
filed 	by 	the 	debtor 	Hilda 	L. 	Acevedo 	Tocoronte 	("debtor")(Docket
#15) and a cross motion for summary judgment filed by the defendant
Doral Bank (“Doral”)(Docket #26). On May 13, 2004, the debtor filed
a 	voluntary 	petition 	under 	Chapter 	13 	of 	the 	Bankruptcy 	Code
(Docket #1, legal case). The debtor’s schedules provided that Doral
held 	an 	unsecured 	non 	priority 	claim 	in 	the 	amount 	of 	$3,000.00
(Docket #1, Schedule F in legal case). On June 17, 2005, the debtor
filed the present adversary case contending that Doral violated the
automatic 	stay 	by 	filing 	a 	complaint 	in 	the 	local 	court 	(Docket
#1). 	On 	November 	23, 	2005, 	the 	debtor 	filed 	a 	motion 	for 	summary
judgment (Docket #15) and on January 3, 2006, Doral filed a cross
motion for summary judgment (Docket #26). After these two motions
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were filed, the debtor and Doral have collectively filed fourteen
(14) motions in replies and sur-replies to the original motion for
summary judgment (Dockets #27, #32, #36, #41, #56, #57, #65, #66,
#67, #69, #75, #76, #78 and #79). On March 10, 2006, the Court held
a 	pretrial 	hearing 	and 	ordered 	that 	once 	all 	the 	motions 	were
filed, the matter would be taken under advisement (Docket #46).
II. Position of the Parties
A. Debtor
The debtor maintains that Doral violated the automatic stay by
filing a complaint for collection of monies in the First Instance
Court 	of 	San 	Juan, 	for 	which 	it 	is 	entitled 	to 	recover 	damages
pursuant 	to 	§ 	362(h). 	The 	debtor 	asserts 	that 	Doral 	was 	duly
notified by the Chapter 13 Trustee of the petition for bankruptcy
filed on May 13, 2004. The address upon which Doral was served with
the Notice of the Chapter 13 Bankruptcy Case was "Doral Bank Div.
Legal 	Box 	191191, 	San 	Juan, 	PR 	00919-1191" 	(Docket 	#1, 	Creditors
Matrix in legal case). It also asserts that on May 25, 2004, Doral
filed 	the 	Proof 	of 	Claim 	#2 	in 	the 	amount 	of 	$5,202.00 	(Claims
Register 	in 	legal 	case). 	The 	debtor 	contends 	that 	although 	Doral
knew 	of 	the 	petition 	and 	had 	filed 	the 	Proof 	of 	Claim 	#2, 	on
February 14, 2005, Doral filed a complaint for collection of monies
under 	Rule 	60 	of 	the 	Puerto 	Rico 	Rules 	of 	Civil 	Procedure. 	The
debtor maintains that Doral’s actions constitute a violation of the
automatic stay.
The 	debtor 	also 	asserts 	that 	Doral’s 	affiliates 	and 	agents
should 	have 	been 	informed 	by 	Doral 	that 	the 	debtor 	had 	filed 	a
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petition 	for 	bankruptcy. 	The 	debtor 	maintains 	that 	if 	one 	of 	its
affiliates by error filed the complaint it is imputed to Doral. The
debtor 	contends 	that 	although 	Doral 	argues 	that 	the 	debtor’s
multiple 	filings 	are 	what 	confused 	Doral 	to 	make 	the 	error 	of
referring the case to a law firm and filing a complaint, the debtor
equates 	this 	argument 	with 	“a 	computer 	did 	it 	excuse.” 	Thus, 	the
debtor 	requests 	that 	the 	Court 	grant 	its 	motion 	for 	summary
judgment and then schedule a hearing to determine actual damages,
punitive damages, cost and attorney’s fees.
B. Doral
Doral 	contends 	that 	it 	did 	not 	violate 	the 	automatic 	stay
because it had no notice that the debtor filed the present petition
for 	bankruptcy. 	Doral 	argues 	that 	the 	debtor, 	by 	abusing 	the
bankruptcy process, provoked a technical violation of the automatic
stay and that thus, the debtor is not entitled to damages.
Doral maintains that the address “Div. Legal Box 191191, San
Juan, PR 00919-1191" has never been its address, and that for such
reason Doral did not know of the debtor’s petition for bankruptcy,
but instead had to consult a publication known as the “Boletin de
Puerto 	Rico” 	to 	obtain 	knowledge 	(Docket 	#57, 	page 	4). 	It 	admits
that it filed Proof of Claim #2 (Docket #57, page 4), but contends
that even if actual knowledge could be imputed to it, the technical
violation 	in 	this 	case 	occurred 	because 	of 	debtor’s 	own 	acts 	and
its abuse of the bankruptcy process. It alleges that it was Doral
Financial, who had notice of the bankruptcy petition and it filed
Proofs of Claim #1 and #10. It also contends that Doral Financial
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is a different and independent institution. Although, Doral in its
answer 	to 	the 	complaint 	admits 	“filing 	by 	mistake 	an 	action 	for
collection of monies for approximately $5,000.00” (Docket #9, page
8), it asserts that it did not make any collection efforts and that
once 	it 	found 	out, 	it 	filed 	a 	motion 	requesting 	the 	voluntary
dismissal of the action KCM05-0207 (Docket #33, Exhibit #1). Thus,
Doral alleges that sanctions are inappropriate for a mere technical
violation of the automatic stay and/or because Doral has acted in
good faith.
Doral asserts that in the case of In re Soares, 107 F.3d 969
(1st 	Cir. 	1997), 	the 	bankruptcy 	court 	lifted 	the 	automatic 	stay
retroactively, thereby validating actions which otherwise would be
void. Doral argues that when a creditor inadvertently violates the
automatic 	stay 	because 	of 	debtor’s 	misuse 	of 	the 	bankruptcy
process, 	courts 	sometimes 	have 	afforded 	retroactive 	relief,
especially when debtors who act in bad faith create situations that
make 	such 	relief 	appropriate 	under 	the 	totality 	of 	the
circumstances. Doral contends that the debtor abused the bankruptcy
process 	by: 	filing 	three 	bankruptcy 	petitions; 	by 	not 	including
Doral’s debt in the second petition; by voluntarily dismissing the
second 	case 	and 	later 	filing 	another 	one, 	although 	the 	debtor’s
circumstances had not changed; by not only filing and voluntarily
dismissing multiple bankruptcy petitions of a frivolous nature, but
also dismissing a second one pending recommendation by the trustee.
Doral also asserts that the complaint filed for collection of
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monies in the local court, was a direct result of debtor’s misuse
and 	abuse 	of 	the 	bankruptcy 	process. 	It 	argues 	that 	an 	employee
that 	worked 	at 	Doral’s 	collections 	department 	received 	notice 	of
the debtor’s voluntary dismissal of the second bankruptcy petition
and that thus, Doral referred the action for collection of monies
to 	a 	law 	firm 	known 	as 	Bufete 	Sanabria. 	Doral 	asserts 	that 	it
referred 	the 	case 	to 	Bufete 	Sanabria 	in 	view 	of 	plaintiff’s
voluntary dismissal of her second bankruptcy petition and that for
such 	reason 	it 	was 	not 	until 	it 	was 	served 	with 	the 	summons 	and
complaint 	of 	this 	adversary 	case, 	that 	Doral 	gained 	knowledge 	of
the 	confusion 	created 	by 	the 	debtor’s 	multiple 	filings 	and
dismissals, and the technical violation in which it had incurred.
Doral maintains that the debtor’s actions prevented it from being
duly 	notified 	by 	the 	Chapter 	13 	Trustee 	of 	the 	filing 	of 	the
present 	bankruptcy 	petition 	and 	concludes 	that 	in 	view 	of 	the
uncontested 	facts 	and 	applicable 	standard, 	Doral 	is 	entitled 	to
retroactive relief from the automatic stay.
III. Discussion
A. Summary Judgment Standard
Under Federal Rule of Civil Procedure 56(c) made applicable in
bankruptcy 	by 	Federal 	Rule 	of 	Bankruptcy 	Procedure 	7056, 	summary
judgment 	is 	available 	“if 	the 	pleadings, 	depositions, 	answers 	to
interrogatories, 	and 	admissions 	on 	file, 	together 	with 	the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as
a 	matter 	of 	law.” 	Fed. 	R. 	Civ. 	P. 	56(b); 	Celotex 	Corporation 	v.
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Catrett, 	477 	U.S. 	317 	(1986) 	(citing 	Anderson 	v. 	Liberty 	Lobby,
Inc., 477 U.S. 242, 250 (1986)). 	As to issues on which the movant,
at trial, would be compelled to carry the burden of proof, it must
identify 	those 	portions 	of 	the 	pleadings 	which 	it 	believes
demonstrate that there is no genuine issue of material fact. 	In re
Edgardo 	Ryan 	Rijos 	v. 	Banco 	Bilbao 	Vizcaya 	& 	Citibank 	(In 	re
Rijos), 263 B.R. 382, 388 (B.A.P. 1st Cir. 2001). 	Once the movant
makes 	a 	prima 	facie 	showing 	that 	there 	are 	no 	genuine 	issues 	of
material fact, the burden of proof shifts to the party opposing the
motion for summary judgment to establish that there are questions
of fact. 10 Collier on Bankruptcy, ¶ 7056.04, p. 7056-8 (15th ed.
2006). The Court must view the evidence in the light most favorable
to 	the 	nonmoving 	party. 	In 	re 	Rijos, 	263 	B.R. 	at 	388 	(B.A.P. 	1st
Cir. 	2001). 	Therefore, 	summary 	judgment 	is 	“inappropriate 	if
inferences are necessary for the judgment and those inferences are
not mandated by the record.” Id.
B. The Automatic Stay
The automatic stay provision is one of the fundamental debtor
protections 	in 	the 	Bankruptcy 	Code. 	It 	gives 	the 	debtor 	a
“breathing 	spell” 	from 	creditors 	and 	it 	stops 	all 	collection
efforts, all harassment, and all foreclosure actions. H.R.Rep. No.
95-595, 	95th 	Cong. 	1st 	Sess. 	340-342 	(1977); 	S. 	Rep. 	No.989, 	95 th
Cong., 2d Sess. 54-55 (1978), reprinted in 1978 U.S.C.C.A.N. 5787,
5840, 	6296-97. 	“It 	allows 	the 	debtor 	to 	attempt 	a 	repayment 	or
reorganization 	plan 	or 	simply 	to 	be 	relieved 	of 	the 	financial
pressures that drove him into bankruptcy.” Id.
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The automatic stay provision specifically outlines those acts
which are prohibited, including:
the 	commencement 	or 	continuation, 	including
the 	issuance 	or 	employment 	of 	process, 	of 	a
judicial, 	administrative, 	or 	other 	action 	or
proceeding 	against 	the 	debtor 	that 	was 	or
could 	have 	been 	commenced 	before 	the
commencement of the case under this title, or
to 	recover 	a 	claim 	against 	the 	debtor 	that
arose 	before 	the 	commencement 	of 	the 	case
under this title.
11 U.S.C. § 362(a)(1).
When a creditor willfully acts after the filing of a petition
under 11 U.S.C. § 301, and without authorization from the Court, to
collect 	a 	pre-petition 	claim 	against 	the 	debtor 	and 	the 	action
causes 	the 	debtor 	injury, 	the 	debtor 	may 	recover 	actual 	damages,
including 	costs 	and 	attorney's 	fees, 	and, 	in 	appropriate
circumstances, may recover punitive damages. 	11 U.S.C. § 362(h).
Although, the Bankruptcy Code does not define the term "willful,"
the United States Court of Appeals for the First Circuit has held
that 	a 	creditor 	willfully 	violates 	the 	automatic 	stay 	if 	it: 	(1)
has 	notice 	of 	the 	automatic 	stay, 	and 	(2) 	the 	act 	or 	acts 	of 	the
defendant were intentional. Fleet Mortgage Group, Inc. v. Kenneth
A. 	Kaneb 	(In 	re 	Kaneb), 	196 	F.3d 	265, 	269 	(1st 	Cir. 	1999). 	There
can be no violation of the automatic stay if creditor was not given
actual notice of the filing of the petition. Id. The debtor has the
burden of providing the creditor with actual notice and then, the
burden 	shifts 	to 	the 	creditor 	to 	prevent 	violations 	of 	the
automatic stay. Id. at 270.
In 	the 	present 	case, 	the 	debtor 	asserts 	that 	Doral 	filed 	a
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complaint in the local court for collection of monies after it had
notice 	that 	the 	debtor 	had 	filed 	a 	petition 	for 	bankruptcy. 	If
Doral 	had 	notice 	of 	the 	debtor’s 	bankruptcy 	petition 	and
nonetheless, filed a complaint in the local court, Doral’s action
would 	go 	against 	the 	plain 	meaning 	of 	§ 	362(a)(1) 	and 	would
constitute 	a 	violation 	of 	the 	automatic 	stay. 	Thus, 	the 	first
question 	before 	the 	Court 	is 	whether 	Doral 	had 	notice 	of 	the
debtor’s 	petition 	for 	bankruptcy 	when 	it 	filed 	the 	action 	for
collection of monies in the local court.
C. Notice of the Bankruptcy Filing
The United States Court of Appeals for the First Circuit in In
re Mc Mullen, 386 F.3d 320 (1st Cir. 2004), found no violation of
the automatic stay in a case where the creditor did not have actual
knowledge nor notice of the debtor’s bankruptcy petition. The court
stated 	that 	“absent 	such 	knowledge 	on 	the 	part 	of 	the 	creditor,
however, 	the 	violation 	is 	merely 	‘technical,’ 	and 	no 	damages 	are
awarded.” 	Id. 	at 	330. 	See 	also 	In 	re 	Will, 	303 	B.R. 	357, 	364
(Bankr. N.D.Ill. 2003).
“[A] technical violation occurs when a creditor violates the
provisions of § 362(a) without knowledge that an active bankruptcy
case 	is 	pending.” 	In 	re 	Will, 	303 	B.R. 	357, 	364 	(Bankr. 	N.D.Ill.
2003)(citing In re Skeen, 248 B.R. 312, 317(Bankr. E.D.Tenn 2000)).
In In re Will, 303 B.R. 357, 364 (Bankr. N.D.Ill. 2003), the court
defined 	the 	concept 	“actual 	knowledge” 	of 	a 	bankruptcy 	case. 	The
court 	states 	that 	an 	“unofficial 	oral 	or 	written 	notice 	of 	a
bankruptcy filing is legally sufficient to convey knowledge of the
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automatic stay.” Id. at 364.
In 	the 	present 	case, 	the 	debtor 	asserts 	that 	Doral 	was 	duly
notified 	by 	the 	Chapter 	13 	Trustee 	of 	the 	bankruptcy 	filing 	by
sending notice to "Doral Bank Div. Legal Box 191191, San Juan, PR
00919-1191” 	(Docket 	#1, 	Creditors 	Matrix 	in 	legal 	case). 	Doral
challenges 	the 	accuracy 	of 	the 	address 	listed 	in 	the 	schedules.
Doral 	asserts 	that 	it 	was 	not 	given 	notice 	of 	the 	filing 	of 	the
petition and that it became aware of the debtor’s bankruptcy when
it received the summons in the present adversary proceeding.
On the other hand, despite the fact that Doral contends that
it did not have notice of the debtor’s petition, it filed Proof of
Claim 	#2 	on 	May 	25, 	2004, 	twelve 	days 	after 	the 	debtor 	filed 	the
petition for bankruptcy. Doral also admits that it became aware of
the debtor’s petition through the “Boletin de Puerto Rico” (Docket
#57, 	page 	4). 	Thus, 	the 	Court 	concludes 	that 	although 	Doral
contends 	that 	the 	address 	listed 	is 	incorrect, 	Doral 	acquired
knowledge of the debtor’s petition for bankruptcy, then filed Proof
of Claim #2 and thus, it had actual knowledge of the petition for
bankruptcy.
D. Retroactive Relief from the Automatic Stay
The 	First 	Circuit 	Court 	of 	Appeals 	has 	recognized 	that
bankruptcy 	courts 	are 	authorized 	to 	annul 	the 	automatic 	stay
retroactively, 	when 	equitable 	considerations 	warrant 	it, 	to
validate actions which otherwise would be void. In re Bright, 338
B.R. 530 (1st Cir. 2006) and In re Soares, 107 F.3d 969. But, “when
a 	creditor 	seeks 	post 	facto 	annulment 	of 	the 	stay, 	it 	must 	show
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extreme 	circumstances, 	with 	facts 	both 	‘unusual’ 	and 	‘unusually
compelling.’” In re Bright, 338 B.R. at 535 citing In re Soares at
977. In In re Soares, the First Circuit Court of Appeals provided
two examples of “unusual and unusually compelling” circumstances in
which 	a 	court 	may 	exercise 	its 	limited 	discretion 	to 	grant
retroactive relief: (1) where a creditor inadvertently violated the
automatic 	stay 	because 	it 	lacked 	knowledge 	of 	the 	bankruptcy, 	or
(2) 	where 	a 	debtor 	acted 	in 	bad 	faith. 	In 	re 	Soares, 	107 	F.3d 	at
977.
Doral argues that it inadvertently violated the automatic stay
because of debtor’s misuse of the bankruptcy process specifically:
by filing three bankruptcy petitions; by not including Doral’s debt
in the second petition; by voluntarily dismissing the second case
and later filing another one, although the debtor’s circumstances
had 	not 	changed; 	by 	not 	only 	filing 	and 	voluntarily 	dismissing
multiple 	bankruptcy 	petitions 	of 	a 	frivolous 	nature, 	but 	also
dismissing 	a 	second 	one 	pending 	recommendation 	by 	the 	trustee.
Doral argues that because the debtor has acted in bad faith, it has
created 	the 	kind 	of 	situation 	that 	makes 	such 	relief 	appropriate
under the totality of the circumstances.
The 	Court 	finds 	that 	the 	facts 	in 	In 	re 	Bright, 	supra, 	are
distinguishable 	from 	the 	facts 	of 	the 	present 	case. 	In 	In 	re
Bright, 	the 	debtor 	failed 	to 	disclose 	her 	interest 	in 	property.
Although, 	the 	debtor 	failed 	to 	disclose 	it, 	she 	immediately
asserted her claim to a portion of the surplus funds generated by
the 	foreclosure 	sale 	of 	the 	property. 	Then, 	the 	debtor 	failed 	to
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notify 	the 	bankruptcy 	court 	or 	the 	Chapter 	13 	Trustee 	of 	her
claims, 	nor 	did 	she 	invoke 	the 	automatic 	stay 	or 	make 	any
allegation of damage resulting from the violation of the stay for
almost 	two 	years, 	when 	she 	finally 	filed 	a 	counterclaim 	in 	an
interpleader 	action. 	Moreover, 	the 	debtor 	thought 	soon 	after 	she
talked to her attorney, that her petition would be filed, but her
attorney 	filed 	the 	petition 	eight 	months 	after 	and 	when 	she
inquired 	about the case, the attorney lied to her about filing the
petition 	and 	gave 	her 	a 	bogus 	bankruptcy 	case 	number 	to 	give 	to
creditors. 	Also, 	while 	the 	debtor's 	bankruptcy 	case 	was 	pending,
her attorney was suspended from the practice of law and ultimately
disbarred.
The 	Court 	concludes 	that 	the 	above 	described 	facts 	are
different from to the facts in the present case. The First Circuit
Court of Appeals considered that the facts in In re Bright, supra,
were ‘unusual’ and ‘unusually compelling’ as to give the creditor
retroactive 	relief 	from 	the 	automatic 	stay. 	The 	facts 	in 	the
present case are not ‘unusual’ and ‘unusually compelling.’ In the
present case, the undisputed facts are that: the debtor filed the
petition 	for 	bankruptcy 	on 	May 	13, 	2004 	(Docket 	#1, 	legal 	case);
the debtor scheduled Doral in Schedule F as having an unsecured non
priority claim in the amount of $3,000.00 (Docket #1, legal case);
an address for Doral was listed in the Creditors Matrix (Docket #1,
legal case); Doral filed Proof of Claim #2 on May 25, 2004 (Claims
Register in legal case); Doral admits that it obtained knowledge of
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the debtor’s bankruptcy through a publication known as “Boletin de
Puerto 	Rico” 	(Docket 	#57, 	page 	4) 	and 	on 	August 	31, 	2004 	Doral
filed a motion requesting the voluntary dismissal of action KCM05-
0207 because the debtor filed bankruptcy (Docket #33, Exhibit #1).
Doral had knowledge of the debtor’s bankruptcy and by arguing
that 	an 	employee 	that 	worked 	at 	Doral’s 	collections 	department
received notice of the debtor’s voluntary dismissal of the second
bankruptcy petition, and that thus, it mistakenly thought that the
case had been voluntarily dismissed and this is why it referred the
action 	for 	collection 	of 	money 	to 	Bufete 	Sanabria, 	does 	not
persuade the Court to hold that this case is unusual and unusually
compelling 	to 	warrant 	the 	retroactive 	relief 	from 	the 	automatic
stay.
The Court finds that the facts in the present case show that
Doral 	was 	equipped 	with 	knowledge 	of 	the 	debtor’s 	bankruptcy 	and
timely filed Proof of Claim #2. The Court concludes that the first
requisite 	of 	a 	willful 	violation 	is 	met 	because 	Doral 	obtained
knowledge of the debtor’s bankruptcy. The Court also concludes that
Doral’s actions were willful because after obtaining knowledge of
the 	petition 	it 	filed 	Proof 	of 	Claim 	#2, 	and 	then 	it 	filed 	the
complaint in local court, which it should have prevented.
III. Summary
In 	the 	present 	case, 	the 	debtor 	filed 	a 	motion 	for 	summary
judgment 	and 	Doral 	opposed 	the 	request 	and 	also 	filed 	a 	motion 	for
summary judgment. The legal documents introduced by both parties in
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their 	respective 	motions 	do 	not 	raise 	substantial 	issues 	of 	fact
regarding whether Doral willfully violated the automatic stay. This
Court 	concludes 	that 	the 	debtor 	has 	met 	her 	burden 	of 	showing 	that
there 	are 	no 	genuine 	issues 	of 	material 	fact. 	Likewise, 	the 	Court
concludes 	that 	Doral 	has 	not 	met 	its 	burden 	of 	proving 	that 	it 	did
not 	willfully 	violate 	the 	automatic 	stay 	or 	that 	the 	debtor 	is 	not
entitled 	to 	damages. 	Accordingly, 	the 	debtors’ 	motion 	for 	summary
judgment against Doral will be granted.
ORDER
WHEREFORE 	IT 	IS 	ORDERED 	that 	the 	Debtor’s 	Motion 	for 	Summary
Judgment 	(Docket 	#15) 	shall 	be, 	and 	it 	hereby 	is, 	GRANTED. 	An
evidentiary hearing is scheduled for September 4, 2007 at 1:30 a.m.
in 	the 	United 	States 	Bankruptcy 	Court. 	The 	Court 	will 	consider 	the
debtor’s entitlement to damages at that time.
Doral 	Bank’s 	Motion 	for 	Summary 	Judgment 	and 	Opposition 	to
Plaintiff’s Motion for Summary Judgment (Docket #26) shall be, and it
hereby is, DENIED.
SO ORDERED.
San Juan, Puerto Rico, this 17th day of July 2007.
s/ Gerardo A. Carlo-Altieri
_____________________________
GERARDO A. CARLO-ALTIERI
Chief, U.S. Bankruptcy Judge
Case:05-00148-ESL Doc#:82 Filed:07/17/07 Entered:07/17/07 14:01:25 Desc: Main
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