Bugg v. Gray (In re Gray)

Summarized by William Wallo , Bakke Norman, S.C.
11 years 3 months ago

Citation:

Bugg v. Gray (In re Gray), 2014 WL 6611089 (8th Cir. BAP November 24, 2014)

Tag(s):

Ruling:

Bankruptcy court order awarding damages for willful violation of the automatic stay was affirmed as to actual damages but reversed as to punitive damages because there was no evidence of egregious, intentional misconduct.

Procedural context:

Debtor alleged that landlord's eviction action constituted a willful violation of the automatic stay and sought both actual and punitive damages. After a hearing, the bankruptcy court awarded both forms of damages. On appeal, the Eighth Circuit Bankruptcy Appellate Panel concluded the the landlord willfully violated the stay, but there was no evidence of egregious, intentional misconduct on the part of the landlord to support an award of punitive damages. Affirmed as to the award of actual damages, and reversed as to the award of punitive damages.

Facts:

The debtor lived in a rental property at the time his chapter 13 case was filed. The landlords filed a motion for relief from stay. After several continuances, the parties reached a stipulation to modify the stay effective 14 days after entry of the order. Prior to entry of the order, the landlords evicted the debtor, removed his personal property, and damaged his truck during the process of towing it from the residence. The debtor sought damages for a willful violation of the stay. The bankruptcy court awarded a variety of actual damages, ordered the return of the debtor's personal property, and directed payment of $2,000 in punitive damages. On appeal, the landlords advanced a variety of arguments, including (i) they did not violate the stay because it had terminated by operation of law under Section 362(e); (ii) their actions were not willful; and (iii) punitive damages were not appropriate. The BAP found that although a preliminary hearing was not conducted within 30 days of the landlords' initial motion, they waived this right by acting inconsistently with the statutory time constraints. The landlords had knowledge of the petition and acted deliberately when evicting the debtor; a specific finding of intent is not necessary. As such, the finding of a willful violation of the stay was warranted and there was no evidence that the actual damage award was improper. However, punitive damages in the Eighth Circuit may be awarded in circumstances of "egregious, intentional misconduct." No such misconduct was identified by the bankruptcy court; therefore, the award of punitive damages was improper. Affirmed as to the actual damage award; reversed as to the punitive damages.

Judge(s):

Federman, Kressel, and Schermer

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