United States Bankruptcy Appellate Panel

For the Eighth Circuit

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No. 14-6027

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In re: Cyril M. Gray

lllllllllllllllllllllDebtor

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Eldon K.. Bugg; Danny Bugg

lllllllllllllllllllllCreditors - Appellants

v.

Cyril M. Gray

lllllllllllllllllllllDebtor - Appellee

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Appeal from United States Bankruptcy Court 

for the Western District of Arkansas - Hot Springs

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Submitted: October 7, 2014

Filed: November 24, 2014

(corrected on December 15, 2014)

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Before FEDERMAN, Chief Judge, KRESSEL and SCHERMER, Bankruptcy

Judges.

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KRESSEL, Bankruptcy Judge

The appellants, Eldon Bugg and Danny Bugg, appeal from an order of the

bankruptcy court finding that they had willfully violated the automatic stay and
awarding actual and punitive damages. For the reasons below, we affirm the award

of actual damages but reverse the award of punitive damages. 

BACKGROUND 1

On October 14, 2013, the debtor, Cyril M. Gray, filed a Chapter 13 petition. 

At the time of filing, the debtor was living in rental property owned by the Buggs.

According to the Buggs, the debtor had failed to pay any rent since May 2013. On

November 13, 2013, the Buggs filed a motion to “Terminate Stay, Alternatively for

Order of Possession, and Motion for Declaration of Non-Stay and for Immediate

Hearing on Both Motions.” A hearing was set for December 18, 2013.

On December 17, 2013, the debtor filed a motion requesting that the

December 18 hearing be continued. We cannot tell from the record whether the

Buggs either consented to or objected to this continuance. In any case, the hearing

was continued to January 23, 2014. Then, on January 21, 2014, the Buggs made

their own motion to continue the hearing. The court granted the request and the

hearing was postponed again to February 20, 2014. 

A hearing on the motion was finally held on February 20, 2014. Apparently

the continuances allowed the parties time to negotiate because when they appeared

in court they announced that a settlement had been reached. They agreed to

modify the stay as to the Buggs, effective fourteen days after the entry of the order. 

1

In reciting the background we are hampered by the incomplete record, including

the lack of complete transcripts.

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It was not until March 19, 2014 that the bankruptcy court issued a written

order regarding the parties’ agreement . The order specified that the stay was

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terminated in regards to the debtor’s interest in his principal residence. The order

also stated that Federal Rule of Bankruptcy Procedure 4001(a)(3) applied,

therefore, the order was not effective until fourteen days after its entry. 

Meanwhile, the Buggs apparently believed that the stay terminated on March

6, 2014. They decided that the fourteen day period began running on February 20,

the date of the hearing. Accordingly, on March 8, 2014, the Buggs evicted the

debtor. They changed the locks and five days later they removed his personal

property and towed his truck from the premises, damaging it in the process. 

On April 4, 2014, the debtor filed a “Motion for Contempt for Violation of

the Automatic Stay.” After some procedural delays a trial was held on June 10,

2014. Danny Bugg appeared personally. Eldon Bugg did not appear but an

attorney appeared on his behalf for the limited purpose of requesting a

continuance. The request for a continuance was denied and Eldon Bugg’s attorney

was excused. The matter proceeded to trial and at its conclusion a ruling was read

onto the record.

 

On June 16, 2014, the bankruptcy judge issued an order granting the

debtor’s motion. The order is entitled “Order Granting Motion for Contempt for

Violation of the Automatic Stay at § 362(a).” This is a misnomer. Contempt is not

a remedy for a violation of the automatic stay. Contempt is a remedy for violating

 The delay in issuing this order was due to the parties’ delay in submitting a 2

proposed order regarding their agreement.

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court orders, not statutes. See Sosne v. Reinert & Duree, P.C. (In re Just Brakes

Corp. Sys., Inc.), 108 F.3d 881, 885 (8th Cir. 1997) (citing Moratzka v. VISA (In re

Calstar, Inc.), 159 B.R. 247 (Bankr. D. Minn. 1993)). The bankruptcy court did

not hold the Buggs in contempt. Instead, it is clear that the court awarded the

debtor damages under § 362(k). The Buggs were ordered to (1) return the debtor’s

truck or pay $7,000, jointly and severally, for its value, (2) pay $422, jointly and

severally, for damage sustained to the truck during towing, (3) return all of the

debtor’s personal property or pay $100 per day, jointly and severally, until the

property is returned, (4) pay $300, jointly and severally, for damages incurred from

the disposition of the personal property, (5) pay $2,500, jointly and severally, for

the debtor’s attorney’s fees, and lastly (6) Eldon Bugg was ordered to pay $2,000

to the debtor as punitive damages. The bankruptcy court also reserved the right to

hold the Buggs in contempt at a later time if they did not comply with the order. 

On June 24 and June 27, 2014, Danny Bugg and Eldon Bugg, respectively,

filed motions for relief from the June 16, 2014 order. Both motions were denied. 

On July 7, 2014, the Buggs filed a timely notice of appeal. 

STANDARD OF REVIEW

A bankruptcy court’s findings of fact are reviewed for clear error and its

conclusions of law are reviewed de novo. Johnson v. Fors (In re Fors), 259 B.R.

131, 135 (B.A.P. 8th Cir. 2001) (citing Snyder v. Dewoskin (In re Mahendra), 131

F.3d 750, 754 (8th Cir. 1997)). An award of sanctions is reviewed for an abuse of

discretion. Garden v. Central Nebraska Housing Corp., 719 F.3d 899 (8th Cir.

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2013) (citing Schwartz v. Kujawa (In re Kujawa), 270 F.3d 578, 581 (8th Cir.

2001)). 

JURISDICTION 

The Buggs first argue that the bankruptcy court did not have jurisdiction

over the debtor’s motion for contempt. According to the Buggs, their actions only

affected exempt personal property and bankruptcy courts do not have jurisdiction

over property that does not belong to the estate. The Buggs are mistaken. 

Subject matter jurisdiction is governed by 28 U.S.C. § 1334, which

provides:

(a) .... the district court shall have original and exclusive

jurisdiction of all cases under title 11. 

(b) ....notwithstanding any Act of Congress that confers

exclusive jurisdiction on a court or courts other than the

district courts, the district courts shall have original but

not exclusive jurisdiction of all civil proceedings arising

under title 11, or arising in or related to cases under title

11.

Pursuant to the delegation powers in 28 U.S.C. § 157(a), “[e]ach district

court may provide that any or all cases under title 11 and any or all proceedings

under title 11 or arising in or related to a case under title 11 shall be referred to the

bankruptcy judges for the district.” “Bankruptcy judges may hear and determine

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all cases under title 11 and all core proceedings arising under title 11, or arising in

a case under title 11 ...” 28 U.S.C. § 157(b)(1). 

In this case, the bankruptcy court had both the jurisdiction and the authority

to decide the debtor’s motion. The debtor initiated an action that hinged solely on

whether there was a willful violation of the automatic stay. This action is created

by 11 U.S.C § 362(k). Thus, it clearly arises under title 11. The bankruptcy court

has jurisdiction to hear “all civil proceedings arising under title 11.” 28 U.S.C. §

1334(b). Additionally, this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2),

which the bankruptcy court had the authority to determine . 

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SECTION 362(e)

The Buggs argue that the bankruptcy court could not have properly found

them in violation of the automatic stay because the stay had lapsed by operation of 

11 U.S.C. § 362(e)(2) long before they evicted the debtor. Specifically, the Buggs

argue that the stay lapsed on January 12, 2014, 60 days after their November 13,

2013 motion was filed. As a matter of law, if the stay terminated on January 12

then their actions to evict the debtor on March 8 could not have constituted a

violation of the stay. 

Section 362(e) provides:

 Because the bankruptcy court conclusively decided that the automatic stay

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had been violated, we are confident that the appealed order is a final order. The

fact that the bankruptcy court reserved the right to hold the Buggs in contempt at

the later time bears no effect on the finality of the order. However, even if this is

not a final order, we grant the Buggs leave to appeal.

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(1) Thirty days after a request under subsection (d) of this

section for relief from the stay of any act against property

of the estate under subsection (a) of this section, such

stay is terminated with respect to the party in interest

making such request, unless the court, after notice and a

hearing, orders such stay continued in effect pending the

conclusion of, or as a result of, a final hearing and

determination under subsection (d) of this section....

(2) Nothwithstanding paragraph (1), in a case under

chapter 7, 11, or 13 in which the debtor is an individual,

the stay under subsection (a) shall terminate on the date

that is 60 days after a request is made by a party in

interest under subsection (d), unless –

(A) a final decision is rendered by the court during the

60-day period beginning on the date of the request; or 

(B) such 60 day period is extended ---

(i) by agreement of all parties in

interest; or 

(ii) by the court for such specific

period of time as the court finds is

required for good cause, as described

in findings made by the court. 

Pursuant to § 362(e)(1), the failure to hold a preliminary hearing within

thirty days of the date of a request for relief would have the effect of terminating

the stay. See Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th

Cir. 1982). Section 362(e)(2) provides for the automatic termination of the stay in

an individual case if a final decision on the motion is not rendered within 60 days

after a request for relief is made. See In re Aulicino, 400 B.R. 175, 179 (Bankr.

E.D. Pa. 2008). 

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Section 362(e) was enacted to protect creditors. The legislative history

highlights Congress’ intent: 

“[s]ubsection (e) provides a protection for secured

creditors that is not available under present law. The

subsection sets a time certain within which the

bankruptcy court must rule on the adequacy of protection

provided of the secured creditor’s interest.”

H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 344 (1977) (emphasis added). One

court has stated, “[s]ection 362(e) was enacted to prevent the practice under the old

Bankruptcy Act of ‘injunction by continuance.’” Grundy Nat’l Bank v. Virginia

Banker’s Ass’n. (In re Looney), 823 F.2d 788, 792 (4th Cir. 1987). 

Waiver

However, this protection for creditors is not absolute. Many courts have

held that it can be waived by the creditor, explicitly or implicitly. An implicit

waiver is generally found when the creditor takes some action which is inherently

inconsistent with adherence to the time constraints of §362(e). For example, the

Eleventh Circuit held that a creditor had implicitly waived his rights when the

creditor failed to object to the absence of a preliminary hearing and also attended

the final hearing beyond the time limits set forth in § 362(e). Borg-Warner

Acceptance Corp. v. Hall, 685 F.2d at 1308; see also In re Ramos, 357 B.R. 669,

673, n.2 (Bankr. S.D. Fla. 2006) (a lender’s request to submit a brief was implicit

consent to hold a final hearing more than thirty days after the motion to modify the

stay was filed); Iseberg v. Exchange Nat’l Bank and Trust Co. of Chicago (In re

Wilmette Partners), 64 B.R. 958, 961 (Bankr. N.D. Ill. 1983) (creditor implicitly

waived its right to object to the timeliness of the hearings when it did not oppose

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the continuance of the hearing beyond the 30 day time limit); Small v. Barclay

Properties (In re Small) 38 B.R. 143, 147 (Bankr. D. Md. 1984) (implied waiver

where creditor filed discovery request to which responses were due beyond the

thirty day period); In re McNeely, 51 B.R. 816, 821 (Bankr. D. Utah 1985) (a

creditor who fails to schedule a final hearing within the 30-day period may

impliedly waive its right to automatic termination under § 362(e)); J.H. Streiker &

Co., Inc. v. SeSide Co., Ltd. (In re SeSide Co. Ltd.), 155 B.R. 112, 117 (E.D. Pa.

1993) (creditor waived the timeliness provisions of § 362(e) by agreeing to a

briefing schedule which prevented the court from ruling within time frame

provided by § 362(e)); In re Aulicino, 400 B.R. 175 (Bankr. E.D. Pa. 2008)

(creditor was deemed to have implicitly consented to the tolling of the § 362(e)

time period when he agreed to a briefing schedule that was beyond of when the

stay was set to expire); Wedgewood Investment Fund, Ltd. v. Wedgewood Realty

Group, Ltd. (In re Wedgewood Realty Group, Ltd.), 878 F.2d 639 (3rd Cir. 1989)

(recognizing implicit waiver when creditor takes some action which is inherently

inconsistent with adherence to the time constraints of section 362(e)). 

After a careful review of the record it is clear that the Buggs acted

inconsistently with the time constraints of § 362(e). First, the Buggs did not object

to the debtor’s request for a continuance. While failing to object to a continuance

may seem innocuous, it was enough to convince both the court and the debtor that

the Buggs believed they were still bound by the stay. Their later conduct also

demonstrated that they believed that the stay was still in effect. Not only did the

Buggs continue to work on resolving the matter but they also eventually made their

own motion for a continuance. The Buggs’ request for a continuance, in and of

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itself, flies directly in the face of the argument that the stay had lapsed on January

12. Why would the Buggs ask for a continuance if the motion was moot by

operation of § 362(e)?

After both continuances were granted the Buggs continued to negotiate with

the debtor. As a result, by the time of the final hearing a settlement had been

reached. Again, why did the Buggs come to an agreement with the debtor if the

stay had already terminated? In fact, why did they participate in the hearing at all?

The Buggs cannot suddenly, months later, to the surprise of the court and the

debtor, argue that the stay had expired due to the continuances, one of which they

requested themselves. 

Only after the contempt proceedings were initiated did the Buggs argue that

the stay had expired by operation of § 362(e). They are too late. Their actions

were inconsistent with an intent on their part to insist that the court enter either a

final order or an order continuing the stay pending conclusion of the final hearing

within the § 362(e) timeframe. If the Buggs believed that the stay had lapsed on

January 12 then they should have moved to enforce their rights at that time. They

failed to do so and therefore the Buggs have waived any right they may have once

possessed under § 362(e). 

Judicial Estoppel

The Buggs are also barred by judicial estoppel from claiming that the stay

had expired under § 362(e). The doctrine of judicial estoppel “protects the

integrity of the judicial process.” Total Petroleum, Inc., v. Davis, 822 F.2d 734,

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738 n. 6 (8th Cir. 1987). Judicial estoppel is an equitable doctrine invoked by a

court at its discretion. New Hampshire v. Maine, 532 U.S. 742, 750 (2001)

(quoting Russell v. Rolfs, 893 F.2d 1033, 1037 (C.A.9 1990)). 

The Supreme Court has laid out three non-exhaustive factors for determining

the applicability of judicial estoppel: (1) the party’s position is clearly inconsistent

with its earlier position; (2) the party succeeded in persuading a court to accept that

party’s earlier position, so that judicial acceptance of an inconsistent position in a

later proceeding would create the perception that either the first or the second court

was misled; and (3) the party seeking to assert an inconsistent position would

derive an unfair advantage or impose an unfair detriment on the opposing party if

not estopped. Id.

The Buggs moved for a continuance and in doing so they represented to the

court that more time was necessary. The court accepted this position and granted

the request. The continuance allowed the Buggs the benefit of extra time to

successfully negotiate with the debtor. On appeal they now inconsistently argue

that they stay had automatically lapsed. Unfortunately for the Buggs, they cannot

change their minds according to what is beneficial for them at the moment. 

It seems obvious that the debtor would not have asked for a continuance and

certainly would have objected to the Buggs’ request for a continuance if they were

aware that the Buggs were planning to invoke their rights under § 362(e). To allow

the Buggs to suddenly argue § 362(e) would impose an unfair detriment on the

debtor. For these reasons, the Buggs are barred by judicial estoppel from asserting

their rights under § 362(e). 

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DAMAGES FOR VIOLATION OF THE STAY 

The Bankruptcy Code provides for the recovery of damages for an

individual injured by a violation of the automatic stay. Specifically, § 362(k)(1)

states, “an individual injured by any willful violation of a stay provided by this

section shall recover actual damages, including costs and attorneys’ fees, and, in

appropriate circumstances, may recover punitive damages.”

 

A debtor seeking damages under § 362(k) must demonstrate, by a

preponderance of the evidence, that a creditor acted willfully in violation of the

stay and that an injury resulted from that conduct. Carter, et. al., v. First Nat’l

Bank of Crosett (In re Carter), 502 B.R. 333 (B.A.P. 8th Cir. 2013). The Eighth

Circuit has held that “[a] willful violation of the automatic stay occurs when the

creditor acts deliberately with knowledge of the bankruptcy petition.” Knaus v.

Concordia Lumber Co. (In re Knaus), 889 F.2d 773 (8th Cir. 1989) (citing Aponte

v. Aungst (In re Aponte), 82 B.R. 738, 742 (Bankr. E.D. Pa. 1988)). A willful

violation does not require a finding of specific intent. In re Carter, 502 B.R. at

336 (quoting Associated Credit Servs. v. Campion (In re Campion), 294 B.R. 313,

316 (B.A.P. 9th Cir. 2003)). In other words, if the creditor is aware of the

bankruptcy filing, any intentional act that results in a violation of the stay is

willful. See 3 COLLIERS ON BANKRUPTCY ¶ 362.12 (Alan N. Resnick &

Henry J. Sommer eds., 16th ed.) 

The Buggs argue that the bankruptcy court’s decision is erroneous because

the act of “safely storing debtor’s personal property and having his truck towed

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both fall under the specific exception of § 362(b)(4).” However, § 362(b)(4)

permits a governmental unit to commence or continue an action or proceeding to

enforce such governmental unit’s police and regulatory power regardless of §

362(a). Obviously, the Buggs are not a governmental unit, and therefore, this

exception does not apply to them. 

The bankruptcy court had to determine two things: (1) whether the Buggs

had knowledge of the bankruptcy petition, and (2) whether the Buggs acted

deliberately. Both of these elements are easily met. First, it is clear that the Buggs

had knowledge of the debtor’s bankruptcy petition. The Buggs themselves do not

argue otherwise. They participated in the proceedings and even filed a motion for

relief from the stay. 

Second, it is also undisputed that the Buggs acted deliberately when they

evicted the debtor. A willful violation of the stay does not require a specific

finding of intent to violate the stay, therefore, it is irrelevant that the Buggs were

mistaken as to whether the stay had terminated at the time they evicted the debtor. 

It is enough that they acted deliberately when they changed the locks, took

possession of the debtor’s personal property and towed his truck. The bankruptcy

court’s finding that the Buggs willfully violated the automatic stay is not clearly

erroneous.

Actual Damages 

The Eighth Circuit has articulated, “[t]o be clearly erroneous, a decision

must strike us as more than just maybe or probably wrong; it must .... strike us as

wrong with the force of a five-week-old, unrefrigerated dead fish.” Papio Keno

Club, Inc. v. City of Papillion (In re Papio Keno Club, Inc.), 262 F.3d 725, 729

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(8th Cir. 2001) (quoting Parts and Elec. Motors, Inc. v. Sterling Elec., Inc., 866

F.2d 228, 233 (7th Cir. 1988)). In this case, the Buggs have not presented any

evidence that the bankruptcy court’s factual findings as to actual damages were

clearly erroneous. In fact, the Buggs provided an incomplete record with no

exhibits and only partial transcripts. With the incomplete record provided, we

cannot say that the bankruptcy court’s finding of actual damages was clearly

erroneous. 

Punitive Damages

If the elements of a willful violation are met “the court must award

compensatory damages then decide whether punitive damages are appropriate.” In

re Anderson, 430 B.R. 882 (Bankr. S.D. Iowa 2010). The Eighth Circuit has held

that appropriate circumstances to award punitive damages requires “egregious,

intentional misconduct on the violator’s part.” Id. (quoting United States v.

Ketelsen (In re Ketelsen), 880 F.2d 990, 993 (8th Cir. 1989)). In determining

whether punitive damages are appropriate, the court may consider “the nature of

the creditor’s conduct, the nature and extent of harm to the debtor, the creditor’s

ability to pay damages, the level of sophistication of the creditor, the creditor’s

motives, and any provocation by the debtor.” In re Anderson, 430 B.R. at 889. 

The bankruptcy court ordered Eldon Bugg to pay punitive damages in the

amount of $2,000. In its oral ruling, the bankruptcy court stated that the punitive

damages had been

“occasioned by Mr. Eldon Bugg’s consistent abdication

of responsibility....He’s not here today. He does not get

the benefit of the doubt on credibility for his reasons for

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not being here, given his constant assertions that he can’t,

his assertions of not knowing about prior hearings for

which it is quite evident that he was very much aware,

and his refusal to be here today, leaving his son

essentially hung out to accept responsibility or, when

appropriate, defer responsibility to Mr. Eldon Bugg,

reflects clearly that he knew exactly what he was

doing....”

The court did not make specific findings of fact as to Eldon Bugg’s motive

or egregious conduct in violating the stay. Eldon Buggs failure to appear at the

June 10 trial does not satisfy the Eighth Circuit test of egregious, intentional

misconduct. For these reasons, we conclude that the bankruptcy court abused its

discretion in awarding punitive damages. 

CONCLUSION

The bankruptcy court’s determination that the stay had been violated and its

award of actual damages is affirmed. Its award of punitive damages against Eldon

Bugg is reversed. 

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