FILED
APR 22 2016
1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
2
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. EC-14-1581-KuDTa
)
6 DARRYL CHADWICH CARTER, ) Bk. No. 13-34802
)
7 Debtor. ) Adv. No. 14-02144
______________________________)
8 )
DARRYL CHADWICH CARTER, )
9 )
Appellant, )
10 )
v. ) MEMORANDUM*
11 )
RON L. BARBER, )
12 )
Appellee.** )
13 ______________________________)
14 Submitted Without Oral Argument
on March 17, 2016
15
Filed – April 22, 2016
16
Appeal from the United States Bankruptcy Court
17 for the Eastern District of California
18 Honorable David E. Russell, Bankruptcy Judge, Presiding
19
Appearances: Appellant Darryl Chadwich Carter, pro se, on
20 brief.
21
Before: KURTZ, DUNN and TAYLOR, Bankruptcy Judges.
22
23
24
*
This disposition is not appropriate for publication.
25 Although it may be cited for whatever persuasive value it may
26 have (see Fed. R. App. P. 32.1), it has no precedential value.
See 9th Cir. BAP Rule 8024-1.
27
**
Appellee Ron L. Barber neither appeared nor participated
28 in this appeal.
1 INTRODUCTION
2 Former chapter 131 debtor Darryl Chadwich Carter appeals
3 from the bankruptcy court’s judgment on his complaint seeking
4 sanctions for an alleged violation of the automatic stay. The
5 judgment denied Carter’s requests for injunctive relief,
6 emotional distress damages, punitive damages and attorney’s fees.
7 Carter’s appeal from the bankruptcy court’s denial of
8 injunctive relief is moot. The activity he sought to enjoin,
9 the continuation of a state court unlawful detainer proceeding,
10 has been completed. Consequently, we cannot offer Carter any
11 meaningful or effective relief with respect to that ruling even
12 if we were to conclude that the bankruptcy court erred in denying
13 Carter injunctive relief.
14 On the other hand, the bankruptcy court’s ruling on damages
15 still presents a live controversy, and the bankruptcy court erred
16 in making that ruling. In the process of making the ruling, the
17 bankruptcy court denied Carter the opportunity to present his own
18 testimony regarding the damages he suffered as a result of the
19 stay violation.
20 Furthermore, the ruling was based on the incorrect premise
21 that Barber’s willful stay violation was limited to a very short
22 period of time, during which little occurred in the unlawful
23 detainer action. The ruling did not account for the fact that
24 the filing of the unlawful detainer action and service of the
25
1
26 Unless specified otherwise, all chapter and section
references are to the Bankruptcy Code,
11 U.S.C. §§ 101-1532, and
27 all "Rule" references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037. All “Civil Rule” references are to
28 the Federal Rules of Civil Procedure.
2
1 summons and complaint both occurred before the bankruptcy court
2 granted the unlawful detainer plaintiff, Ron L. Barber, relief
3 from the automatic stay. As a result, the acts of filing and
4 serving the complaint were stay violations and were void ab
5 initio.
6 Barber was under a continuing duty to rectify his stay
7 violations once he learned of Carter’s bankruptcy case. Barber
8 indisputably was aware of the case by no later than June 6, 2014,
9 when he signed and filed a declaration in support of his motion
10 for relief from stay. But Barber never remedied his stay
11 violations, nor did he ever seek annulment of the stay to
12 retroactively validate the violative actions he took in the
13 unlawful detainer action.
14 Accordingly, we DISMISS as moot the portion of this appeal
15 challenging the bankruptcy court’s denial of injunctive relief.
16 The remainder of the bankruptcy court’s judgment is VACATED, and
17 we REMAND with the instruction that the bankruptcy court give
18 both sides the opportunity to further develop the record on the
19 questions of causation, actual damages and punitive damages.
20 When the court next considers Carter’s damages claims, it should
21 keep in mind that Barber’s willful stay violation began no later
22 than June 6, 2014 (perhaps earlier) and did not end when the
23 bankruptcy court granted Barber relief from stay, as the
24 bankruptcy court ruled.
25 FACTS
26 Carter commenced his chapter 13 bankruptcy case in November
27 2013. In or around May 2014, Carter failed to make his
28 residential rent payment, so his landlord, Barber, commenced an
3
1 unlawful detainer action in the Solano County Superior Court on
2 May 13, 2014.
3 There is no evidence in the record that Barber had notice or
4 knowledge of Carter’s bankruptcy filing at the time the unlawful
5 detainer action was commenced. Carter did not include Barber, or
6 Barber’s property management company, or any of the property
7 management company’s employees on his bankruptcy mailing list or
8 on the schedules he filed with his bankruptcy petition.
9 The record suggests that Barber might have learned of
10 Carter’s bankruptcy filing as early as mid-May 2014, from papers
11 Carter filed in the unlawful detainer action, in which Carter
12 argued that the filing and service of the unlawful detainer
13 complaint violated the Bankruptcy Code and the automatic stay.
14 In any event, Barber definitely knew about the bankruptcy
15 filing (and the automatic stay) by no later than early June 2014,
16 because he filed in the bankruptcy court on June 6, 2014, a
17 motion to modify the automatic stay to permit him to pursue his
18 rights under state law to recover possession of the leased
19 premises from Carter. The relief from stay motion was
20 accompanied by Barber’s personal declaration, also dated June 6,
21 2014.
22 Notably, the relief from stay motion did not seek to annul
23 the stay in order to retroactively validate Barber’s filing and
24 service of the unlawful detainer complaint, which both took place
25 in May 2014. In fact, none of Barber’s moving papers, including
26 his personal declaration, even mentioned the actions Barber had
27 taken in violation of the stay in May 2014. Without any
28 knowledge of the pending unlawful detainer action, the bankruptcy
4
1 court entered an order on June 30, 2014 granting Barber relief
2 from the stay to permit him to take steps to obtain possession of
3 the property. Pursuant to Rule 4001(a)(3), that order became
4 effective on July 14, 2014.
5 Meanwhile, on May 28, 2014, Carter filed, in pro se, an
6 adversary complaint against Barber for violation of the automatic
7 stay, seeking injunctive relief, actual damages, emotional
8 distress damages, punitive damages and attorney’s fees. While
9 not artfully pled, Carter did allege in the complaint that
10 “Defendant Barber improperly brought his UD action in violation
11 of the stay” and that “Barber sought continuation in the
12 [unlawful detainer] action despite Carter’s contentions for
13 dismissal of the action.” Complaint (May 28, 2014) at ¶¶ 22, 24.
14 Immediately following this allegation, Carter cited Eskanos &
15 Adler, P.C. v. Leetien,
309 F.3d 1210 (9th Cir. 2002), for the
16 proposition that “‘sanctions were appropriate under 11 U.S.C.
17 § 362(h) [now § 362(k)] because Eskanos knew of the bankruptcy
18 filing on September 6, 2000, and unjustifiably delayed in
19 dismissing the state action until September 29, 2000.’”
20 Complaint (May 28, 2014) at ¶ 24.
21 According to the proof of service Carter filed in the
22 bankruptcy court, Carter served Barber and the Barber trust at
23 two addresses, one in Alamo, California and the other in
24 Fairfield, California.2 When Barber failed to respond to the
25
26 2
These are the same two addresses that Carter listed in his
27 notice of appeal for Barber. Carter apparently obtained these
two addresses for Barber from exhibits that Barber filed in
28 support of his relief from stay motion.
5
1 adversary complaint, Carter requested and obtained entry of
2 default and then filed a motion for entry of default judgment.
3 Carter’s default judgment motion was accompanied by a declaration
4 and exhibits. While the evidence was thin, there were at least
5 some statements in his declaration regarding the emotional
6 distress he claims to have suffered and at least one of the
7 exhibits submitted therewith suggests that Carter was treated for
8 depression throughout the course of the unlawful detainer
9 proceedings. At the first hearing on the default judgment
10 motion, the bankruptcy court ruled that Carter had pled a
11 sufficient claim for relief for violation of the automatic stay.
12 According to the court, “[Barber’s] willful violation of
13
11 U.S.C. § 362(a) . . . occurred between May 14, 2014 and
14 July 14, 2014.” Civil Minutes (Oct. 7, 2014), at p. 1. In
15 addition, the bankruptcy court continued the matter for an
16 evidentiary hearing so that Carter could give evidence to “prove
17 up” his damages.
18 However, at the final hearing, the bankruptcy court did not
19 allow Carter (again, appearing in pro se) to present any
20 testimony. The court apparently did permit Carter to present a
21 package of exhibits containing at least some evidence regarding
22 the amount of Carter’s alleged damages, but the court was
23 convinced that Carter did not incur much in the way of actual
24 damages or emotional distress damages. Nor did the bankruptcy
25 court see any evidence reflecting egregious conduct or any other
26 type of conduct that might justify punitive damages.
27 Carter attempted to persuade the bankruptcy court that the
28 entire prosecution of the unlawful detainer action was a
6
1 violation of the automatic stay. Among other things, Carter
2 asserted that “[e]verything associated with this case as well as
3 the initiation of the unlawful detainer in the state court” was
4 predicated on a violation of the automatic stay. Hr’g Tr.
5 (Dec. 5, 2014) at 24:18-25:7. But the bankruptcy court opined,
6 in response, that the willful stay violation was of very limited
7 duration and that not much occurred during that time period –
8 other than service of the unlawful detainer complaint. According
9 to the court, the stay violation ceased as soon as Barber
10 obtained relief from the automatic stay. Hr’g Tr. (Dec. 5, 2014)
11 at 25:1-13.
12 Having reviewed Carter’s exhibits, the bankruptcy court
13 concluded that Carter was entitled to a default judgment of no
14 more than $500. The bankruptcy court entered judgment in
15 Carter’s favor in the amount of $500, and Carter timely appealed.
16 JURISDICTION
17 The bankruptcy court had “arising under” jurisdiction
18 pursuant to
28 U.S.C. §§ 1334 and 157(b)(1). See Aheong v.
19 Mellon Mortg. Co (In re Aheong),
276 B.R. 233, 244 (9th Cir. BAP
20 2002). We have jurisdiction under
28 U.S.C. § 158.
21 ISSUE
22 Did the bankruptcy court correctly consider and assess
23 Carter’s damages claims allegedly arising from Barber’s willful
24 stay violation?
25 STANDARDS OF REVIEW
26 We review for an abuse of discretion the amount of damages
27 awarded under § 362(k) for a willful violation of the automatic
28 stay. See Eskanos & Adler, P.C.,
309 F.3d at 1213.
7
1 The bankruptcy court abused its discretion if it applied an
2 incorrect legal standard or its findings of fact were illogical,
3 implausible or without support in the record. United States v.
4 Hinkson,
585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).
5 DISCUSSION
6 1. The appeal from the denial of injunctive relief is moot.
7 A claim for relief becomes constitutionally moot when “the
8 issues presented are no longer ‘live’ or the parties lack a
9 legally cognizable interest in the outcome.” Murphy v. Hunt,
10
455 U.S. 478, 481 (1982). In the context of appellate review,
11 “an appeal is moot if no present controversy exists as to which
12 an appellate court can grant effective relief.” Vegas Diamond
13 Props., LLC v. F.D.I.C.,
669 F.3d 933, 936 (9th Cir. 2012).
14 Carter has admitted that the unlawful detainer action no
15 longer is pending and that he no longer is in possession of the
16 leased premises. More to the point, the acts Carter sought to
17 enjoin – Barber’s continued prosecution of the state court
18 unlawful detainer action – already have been completed. Given
19 the nature and scope of Carter’s adversary complaint, the scope
20 of this appeal, and the completion of the acts Carter sought to
21 enjoin, we cannot provide any meaningful relief to Carter. “This
22 action is moot because the activities sought to be enjoined have
23 already occurred and can no longer be prevented.” Id.; see also
24 Center For Biological Diversity v. Lohn,
511 F.3d 960, 963-64
25 (9th Cir. 2007); Seven Words LLC v. Network Solutions,
260 F.3d
26 1089, 1095 (9th Cir. 2001). In short, the portion of Carter’s
27 appeal seeking review of the bankruptcy court’s denial of
28 injunctive relief is moot.
8
1 2. The bankruptcy court’s damages analysis incorrectly presumed
that Barber’s willful stay violation ended when the order
2 granting relief from the automatic stay became effective.
3 Upon the commencement of Carter’s bankruptcy case, a stay
4 automatically went into effect that, in relevant part, enjoined
5 all entities from engaging in “any act to obtain possession of
6 property of the estate or of property from the estate or to
7 exercise control over property of the estate . . . .” 11 U.S.C.
8 § 362(a)(3); see also State of Cal. Emp. Dev. Dep't v. Taxel
9 (In re Del Mission Ltd.),
98 F.3d 1147, 1151 (9th Cir. 1996). As
10 we previously have explained:
11 The scope of the automatic stay is quite broad, and is
designed to immediately maintain the status quo by
12 precluding and nullifying postpetition actions, whether
judicial or nonjudicial, in nonbankruptcy forums
13 against the debtor and property of the estate.
Exceptions to the automatic stay are read narrowly, and
14 actions taken in violation of the stay are void rather
than voidable.
15
16 Dunbar v. Contractors' State License Bd. of Cal. (In re Dunbar),
17
235 B.R. 465, 470-71 (9th Cir. BAP 1999) (citations omitted),
18 aff'd,
245 F.3d 1058 (9th Cir. 2001). The voidness of acts and
19 judicial proceedings pursued in violation of the stay is a
20 critical feature of one of the most important provisions of the
21 Bankruptcy Code, because it helps to ensure that the stay is
22 self-executing. See Gruntz v. County of Los Angeles
23 (In re Gruntz),
202 F.3d 1074, 1081-82 (9th Cir. 2000) (en banc).
24 For voidness purposes, it makes no difference whether the
25 stay violator was aware of the stay when he or she violated the
26 stay. See Knupfer v. Lindblade (In re Dyer),
322 F.3d 1178, 1188
27 (9th Cir. 2003). Regardless, all acts and judicial proceedings
28 undertaken in violation of the stay are void. In re Gruntz,
9
1
202 F.3d at 1082.
2 Frequently, there is a disconnect between the violative acts
3 on the one hand and the formal acknowledgment and effectuation of
4 their voidness on the other hand. See, e.g., In re Dyer,
5
322 F.3d at 1192; Eskanos & Adler, P.C.,
309 F.3d at 1214-15;
6 In re Del Mission Ltd.,
98 F.3d at 1151-52. When this occurs,
7 the stay violation is continuing, and it is incumbent on the stay
8 violator to take affirmative steps to remedy the stay violation
9 by attempting to unwind the violative acts or proceedings. See
10 Sternberg v. Johnston,
595 F.3d 937, 944-45 (9th Cir. 2010) (as
11 amended), partially overruled on other grounds by, America's
12 Servicing Co. v. Schwartz–Tallard (In re Schwartz-Tallard),
13
803 F.3d 1095 (9th Cir. 2015) (en banc); In re Dyer,
322 F.3d at
14 1192; In re Del Mission Ltd.,
98 F.3d at 1151-52.
15 If the stay violator knows of the bankruptcy case but fails
16 to take affirmative steps to unwind the violative acts or
17 proceedings, he or she is willfully violating the automatic stay.
18 Sternberg,
595 F.3d at 945; In re Dyer,
322 F.3d at 1192; Eskanos
19 & Adler, P.C.,
309 F.3d at 1215.
20 Here, Barber knew of Carter’s bankruptcy case and knew about
21 the automatic stay, at the very latest, when he prepared and
22 filed his relief from stay motion in early June 2014. It also is
23 quite possible that Barber knew of the bankruptcy case and the
24 stay two or three weeks earlier – in mid-May 2014 – after Carter
25 filed papers in the unlawful detainer action complaining that the
26 unlawful detainer action violated the Bankruptcy Code and § 362.
27 Sternberg, Dyer and Eskanos all stand for the proposition that,
28 once Barber knew of the stay, his failure to take affirmative
10
1 steps to remedy the acts he took in violation of the stay
2 constituted a continuing willful violation of the stay.
3 The Bankruptcy Code does provide an “out” for inadvertent
4 stay violators facing the threat of damages for willful violation
5 of the stay if they don’t unwind the effects of their inadvertent
6 stay violations: the stay violator may file a motion to annul
7 the stay under § 362(d). Such motions, in effect, seek
8 retroactive stay relief so as to validate actions that otherwise
9 would be void as stay violations. See Schwartz v. United States
10 (In re Schwartz),
954 F.2d 569, 573 (9th Cir. 1992).
11 We previously have examined the standards for granting
12 annulment of the stay,3 but we need not linger on those standards
13 here. Barber filed a relief from stay motion in the bankruptcy
14 court in June 2014, but he never requested annulment of the stay
15 in order to retroactively validate the void acts he took in May
16 2014 to recover possession of the leased property from Carter.
17 These actions included the filing and service of his unlawful
18 detainer complaint. These actions also included Barber’s
19 attempted termination of Carter’s leasehold interest for non-
20 payment of rent.
21 Additionally, Barber neglected to disclose in his relief
22 from stay motion that he had filed and served his unlawful
23 detainer complaint in violation of the stay. If Barber had
24 disclosed these facts to the bankruptcy court, we are convinced
25 the bankruptcy court either would have directed Barber to amend
26
3
27 See, e.g, Gasprom, Inc. v. Fateh (In re Gasprom, Inc.),
500 B.R. 598, 607 (9th Cir. BAP 2013); Fjeldsted v. Lien
28 (In re Fjeldsted),
293 B.R. 12, 25 (9th Cir. BAP 2003).
11
1 his relief from stay motion to seek annulment of the stay or
2 would have denied the relief from stay motion to the extent
3 Barber was seeking permission to proceed with the unlawful
4 detainer action he commenced in violation of the stay.
5 Under § 362(k)(1), “. . . an individual injured by any
6 willful violation of a stay provided by this section shall
7 recover actual damages, including costs and attorneys' fees, and,
8 in appropriate circumstances, may recover punitive damages.”
9 Those actual damages should include costs and attorney’s fees, as
10 well as emotional distress damages, provided that the injured
11 individual proves, among other things, that the stay violation
12 caused his or her damages. See Dawson v. Wash. Mutual Bank, F.A.
13 (In re Dawson),
390 F.3d 1139, 1149 (9th Cir. 2004) (holding that
14 injured individual has burden of proof to establish both
15 causation and damages). And to recover punitive damages, the
16 injured individual must prove the stay violator’s “reckless and
17 callous disregard for the law or the rights of others” or make a
18 showing of “malicious, wanton, or oppressive” conduct. Snowden
19 v. Check Into Cash of Wash. Inc. (In re Snowden),
769 F.3d 651,
20 657 (9th Cir. 2014)
21 Here, the bankruptcy court essentially ruled that Carter
22 could not possibly prove actual damages in excess of $500, nor
23 any emotional distress or punitive damages, because virtually
24 nothing of significance happened during the short span of time
25 that Barber was in willful violation of the stay. However, the
26 court’s damages assessment did not account for the fact that
27 Barber’s willful stay violation (and hence his potential exposure
28 for damages under § 362(k)(1)) did not end when the court granted
12
1 Barber relief from the stay. At that time, Barber had neither
2 obtained an annulment of the stay nor otherwise remedied his stay
3 violation.
4 We note that the documentary evidence Carter was prepared to
5 present on the issues of causation and damages was very thin.
6 Furthermore, we did not see much evidence in the record that
7 might demonstrate the type of conduct from which punitive damages
8 might arise. Nonetheless, we do not know what Carter might have
9 said if the court had given him the chance to testify at the
10 final evidentiary hearing. The bankruptcy court preempted his
11 evidentiary presentation based on its incorrect view regarding
12 the limited duration of Barber’s willful stay violation. On
13 remand, both sides should be given the opportunity to further
14 develop the record on the issues of causation, actual damages
15 (including emotional distress damages) and punitive damages.
16 One issue that does not need to be addressed on remand is
17 the issue of attorney’s fees. Pro se litigants cannot recover
18 attorney’s fees as an item of actual damages in an action under
19 § 362(k). See In re Figuera,
2014 WL 4923078, at *10 (Bankr.
20 E.D. Cal. July 28, 2014) (citing Elwood v. Drescher,
456 F.3d
21 943, 947–48 (9th Cir. 2006)).
22 CONCLUSION
23 For the reasons set forth above, we DISMISS as moot the
24 portion of this appeal challenging the bankruptcy court’s denial
25 of injunctive relief. The remainder of the bankruptcy court’s
26 judgment is VACATED, and we REMAND with the instruction that the
27 bankruptcy court give both sides the opportunity to present
28 additional evidence on the questions of causation, actual damages
13
1 (including emotional distress damages) and punitive damages.
2 Additionally, when the court next considers Carter’s damages
3 claims, it should keep in mind that Barber’s willful stay
4 violation began no later than June 6, 2014 (perhaps earlier) and
5 did not end when the bankruptcy court granted Barber relief from
6 the stay.
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