Vu v. Lin (In re Vu)

Citation: 591 B.R. 596Docket: Case No. 14-13852REF; Adv. No. 15-61

Court: United States Bankruptcy Court, E.D. Pennsylvania; November 7, 2018; Us Bankruptcy; United States Bankruptcy Court

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Defendant's actions in preventing Plaintiff from accessing his restaurant constituted a willful violation of the automatic stay, leading to actual damages of $9,250 for property damage ($7,250) and emotional distress ($2,000). Additionally, Plaintiff was awarded approximately $3,500 in attorney's fees, bringing the total actual damages to $12,750. Due to the egregious nature of Defendant's conduct, punitive damages of $5,000 were imposed, resulting in a total judgment of $17,750 against Defendant. 

The case originated when Plaintiff Tam Q. Vu filed an adversary proceeding against Defendant Yung Lin on February 18, 2015, following a bankruptcy petition filed on May 13, 2014, which stayed an eviction action initiated by Defendant's company, DFY Realty Management, Inc. After experiencing financial difficulties and sporadic rent payments, Plaintiff decided to surrender the leased premises by January 31, 2015. However, Defendant unlawfully changed the locks on January 28, 2015, preventing Plaintiff from retrieving his personal property. Despite a letter from Plaintiff's counsel notifying Defendant of the stay violation, Defendant's counsel did not respond, prompting Plaintiff to seek damages under 11 U.S.C. § 362(k)(1).

The discussion also noted a misrepresentation by Plaintiff, who claimed that the Chapter 7 Trustee had abandoned the restaurant assets prior to Defendant's actions, a claim that was not definitively pled in the proceedings.

Plaintiff's claim of violation of the automatic stay under 11 U.S.C. § 362(a)(3) hinges on whether the assets were abandoned from the estate. If the assets were indeed abandoned on January 7, 2015, no stay violation could occur, as the stay only protects property of the estate. Plaintiff initially asserted that all assets were abandoned but has since retracted this statement, clarifying that the Chapter 7 Trustee filed a "no asset" report on that date without formally abandoning the property. Plaintiff now argues that property was deemed abandoned under 11 U.S.C. § 544(c) upon the closure of the main bankruptcy case.

The court had previously ordered supplemental briefs on the abandonment issue, to which Plaintiff responded by identifying § 362(a)(3) as the basis for his claim. Importantly, property claimed as exempt by a debtor is no longer part of the bankruptcy estate unless an objection is filed within 30 days of the creditors' meeting. Since no objections were made by February 6, 2015, the property became exempt and removed from the estate on February 7, 2015. However, any actions taken by the Defendant prior to this date regarding the disputed property are still relevant.

Defendant is found to have violated the automatic stay by changing the locks and failing to allow Plaintiff access to retrieve his property. The automatic stay is a crucial protection for debtors, halting all collection activities and maintaining the status quo between debtors and creditors. Therefore, Plaintiff's request for sanctions against Defendant for these violations remains valid, as the restaurant and other personal property were still considered property of the estate at the time of Defendant's actions.

Section 362(k)(1) of the Bankruptcy Code allows individuals injured by willful violations of an automatic stay to recover actual damages, including costs and attorneys' fees, with the potential for punitive damages in appropriate cases. A violation is considered willful if a creditor acts with knowledge of a bankruptcy filing, which does not require intent to violate the stay but necessitates intentional actions that breach it. The defendant had actual knowledge of the plaintiff's bankruptcy from May 14, 2014, through January 2015, including when he changed the locks on the property and failed to respond to access requests from the plaintiff's counsel. This behavior was deemed a willful violation of the automatic stay as it involved obtaining possession and control over the estate's property.

The defendant contended that the personal property involved belonged to another entity, DFY, and attempted to introduce a 2006 lease in his defense. However, the lease was not admitted into evidence and was irrelevant since the plaintiff’s lease assumption was from 2009 with no personal property included. The plaintiff was found to have acquired all personal property upon purchasing the restaurant assets from Mr. Lee.

The plaintiff is awarded $12,750 for actual damages due to loss of property, attorneys' fees, and emotional distress directly resulting from the defendant's actions. Under Section 362(k)(1), actual damages must be proven with reasonable certainty, and speculative claims are insufficient. The plaintiff has the burden of proof regarding all aspects of his actual damages claim.

Plaintiff claims actual damages due to Defendant's violation of the automatic stay, seeking: (1) $21,200 for restaurant equipment and food left in the premises when Defendant changed the locks; (2) $8,500 for a security deposit that was never refunded; (3) an unspecified amount for emotional distress; and (4) unspecified attorneys' fees. Plaintiff asserts that various items remained in the premises during the lockout, having purchased some new equipment, but he did not provide specific details, such as manufacturer's names or purchase dates. Defendant contends the equipment was old and of little value, similarly failing to provide detailed information about it. Plaintiff mentioned an auctioneer's agreement to purchase the equipment for $13,000 to $16,000, which was disrupted by the lockout, but could not substantiate this with documentation. Ultimately, the court found that Plaintiff did not prove the value claimed and assessed it at $7,250, awarding this amount as actual damages. Regarding the security deposit, although Defendant conceded he had not returned it, Plaintiff did not address Defendant's claims of owing additional rent or damages, leading the court to conclude that Plaintiff was not entitled to recover any part of the deposit. For emotional distress, Plaintiff did not provide a quantified amount but described his poor health and caretaking responsibilities during his testimony, which did not suffice to establish a claim for damages.

Plaintiff, living on social security income and behind on his mortgage, experienced significant emotional distress following a lockout that resulted in the loss of financial records and income, complicating his financial situation and tax obligations. The Third Circuit allows for recovery of emotional distress damages due to violations of the automatic stay under Section 362(k)(1), without a strict requirement for medical evidence, emphasizing case-by-case assessments. The court noted that credible testimony could suffice, especially in egregious cases. Here, the Plaintiff demonstrated emotional distress linked to the lockout, particularly from losing opportunities to generate income and the burden of recreating lost financial records. However, much of his distress stemmed from pre-existing financial and health issues. As a result, he was awarded $2,000 in damages for the emotional distress specifically attributable to the defendant's actions. Regarding attorneys' fees, while Plaintiff's counsel sought compensation, there was no specific amount provided. The request was based on the legal fees of the Defendant, approximately $7,000, but courts typically require proof of an obligation to pay attorneys' fees to recover them as damages under Section 362(k)(1).

Plaintiff's counsel demonstrated commendable professionalism by not charging her financially struggling client additional fees. The court rejects the notion that attorneys must bill impoverished clients and aligns with the reasoning in In re Parks, which states that pro bono representation does not preclude the award of attorney's fees under fee-shifting statutes. Although Plaintiff's counsel did not provide a clear breakdown of the fees or time spent, the court determined a reasonable attorney's fee award of $3,500. 

Plaintiff is also entitled to punitive damages of $5,000 for a violation of the automatic stay, as permitted by 11 U.S.C. § 362(k)(1) under appropriate circumstances. The decision to impose punitive damages considers factors such as the nature of the Defendant's conduct, the Defendant's ability to pay, motives, and any provocation by the Plaintiff. While there was no evidence regarding the Defendant's ability to pay or provocation by the Plaintiff, the Defendant's motives were evident, as he deliberately prevented the Plaintiff from accessing his property and immediately leased it to a third party. The Defendant's actions, including traveling to seize possession before the agreed-upon date and changing the locks, were deemed particularly egregious, warranting the punitive damages award.

Defendant failed to respond to a January 29, 2015 letter from Plaintiff's counsel, which stated that changing the locks constituted a violation of the automatic stay. Plaintiff attempted to enter the premises to retrieve his personal property but was denied access. Despite Defendant's vague claims of communication regarding the return of property, the testimony was rejected, and it was determined that Defendant's actions were willful violations of the automatic stay under Section 362(a)(3) of the Bankruptcy Code. The court found Defendant's conduct excessively egregious, justifying punitive damages of $5,000. Additionally, Plaintiff was awarded $7,250 for actual damages, $2,000 for emotional distress, and $3,500 for attorneys' fees, totaling $17,750 in judgment against Defendant. A minor dispute regarding the exact date of the lockout was deemed inconsequential to the ruling. An order was entered for judgment in favor of Plaintiff on November 7, 2018.

Plaintiff reported visiting the Premises during a lockout, where he observed Defendant and others inside, who ignored his knock. Following the lockout, No Trespassing signs were posted, and a new restaurant opened within weeks. Plaintiff’s counsel acknowledged in a letter that the remaining food in the Premises was likely unusable. Testimony related to an auction was deemed admissible but weak, with both parties, experienced in restaurant operations, presenting conflicting values for the property: Plaintiff at $21,200 and Defendant asserting it was worthless. An estimated value of $7,250 was determined as a compromise. Defendant confirmed that Plaintiff owed approximately $13,000 for unpaid rent and utilities. The Third Circuit's precedent on emotional distress damages was referenced, indicating that financial injury could support such claims, as seen in a related case. Concerns were raised about the ethical implications of attorneys potentially misrepresenting fees, emphasizing the need for integrity within the profession. The judge noted a divergence from the opinion of a respected colleague, ultimately choosing to follow a different legal reasoning despite the latter's influence. Defendant's credibility was repeatedly questioned, describing their testimony as shifty.