Court Opinion

ID: 2966069
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:48:26.081206+00
Date Added: 2024-06-11T11:43:08.051415
License: Public Domain

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<pre>                 United States Court of Appeals <br>                     For the First Circuit <br> <br> <br> <br> <br> <br>No. 98-9012 <br> <br>                   FLEET MORTGAGE GROUP, INC., <br> <br>                      Defendant, Appellant, <br> <br>                                v. <br> <br>                        KENNETH A. KANEB, <br> <br>                       Plaintiff, Appellee. <br> <br> <br> <br>No. 98-9014 <br> <br>                   FLEET MORTGAGE GROUP, INC., <br> <br>                      Defendant, Appellant, <br> <br>                                v. <br> <br>                        KENNETH A. KANEB, <br> <br>                       Plaintiff, Appellee. <br> <br> <br>No. 98-9017 <br> <br>                        KENNETH A. KANEB, <br> <br>                      Plaintiff, Appellant, <br> <br>                                v. <br> <br>                   FLEET MORTGAGE GROUP, INC., <br> <br>                       Defendant, Appellee. <br> <br> <br> <br>            APPEAL FROM THE BANKRUPTCY APPELLATE PANEL <br>                      FOR THE FIRST CIRCUIT <br> <br>                                  <br> <br>                              Before <br> <br>                     Torruella, Chief Judge, <br>                     Lipez, Circuit Judge, <br>                  and Fust, District Judge.* <br>                                 <br>                                 <br>                                 <br>                                 <br>          Kirk J. Cedja, with whom Lawson Williams and Shapiro & <br>Kreisman were on brief for Fleet Mortgage Group, Inc. <br>          Carl D. Aframe, Aframe & Barnhill, for Kenneth A. Kaneb. <br> <br> <br> <br> <br> <br>November 8, 1999 <br> <br> <br> <br>                                 <br>                       <br>     *Of the District of Puerto Rico, sitting by designation.

                    LIPEZ, Circuit Judge.  Fleet Mortgage, Inc. ("Fleet"), <br>          appeals from the order of the Bankruptcy Appellate Panel <br>          for the First Circuit affirming an award of damages and <br>          attorneys' fees by the bankruptcy court to Kenneth A. <br>          Kaneb pursuant to 11 U.S.C. 362(h).  We review directly <br>          the bankruptcy court's findings of fact and conclusions <br>          of law.  See Brandt v. Repco Printers & Lithographics, <br>          Inc. (In re Healthco Intl'l, Inc.), 132 F.3d 104, 107 <br>          (1st Cir. 1997).  The bankruptcy court found that Fleet <br>          willfully violated the automatic stay provision of the <br>          Bankruptcy Code and awarded Kaneb $25,000 for emotional <br>          distress and $18,220.68 for attorneys' fees and costs on <br>          appeal.  Fleet contests the finding that the violation of <br>          the automatic stay was willful and challenges the award <br>          of damages for emotional distress.  Fleet also seeks <br>          relief from its pretrial stipulation relating to a <br>          violation of the stay.  We affirm the decision of the <br>          Bankruptcy Appellate Panel ("BAP").   <br>                              I.   <br>     In 1993, Kaneb filed a voluntary petition for bankruptcy under <br>Chapter 13 of the Bankruptcy Code.  An eighty-five year old retiree <br>and widower, Kaneb spent the cold-weather months in Florida and the <br>balance of the year in Massachusetts.  After the sale of his <br>Massachusetts residence to pay secured creditors, he converted to <br>Chapter 7 bankruptcy.  Shawmut Bank, N.A. ("Shawmut"), was the <br>original mortgagee of Kaneb's second residence, a Florida <br>condominium.  <br>     Shawmut sought relief from the automatic stay in order to <br>initiate foreclosure proceedings.  The bankruptcy court denied <br>Shawmut's petition.  Kaneb and Shawmut entered into settlement <br>negotiations without success.  After the failed negotiations, <br>Shawmut forwarded Kaneb's file to the Florida law firm of Shapiro <br>& Fishman ("Fleet's counsel") to initiate foreclosure proceedings.  <br>Shawmut and Fleet merged on November 15, 1995.   <br>     The file forwarded from Shawmut contained the order of <br>discharge, dated January 31, 1996, which relieved Kaneb from <br>personal liability for all debts dischargeable under 11 U.S.C. <br> 523.  The file also contained an unsigned order granting relief <br>from the automatic stay.  The attorney from Shapiro & Fishman <br>testified that she knew Kaneb was in bankruptcy but she thought <br>that the unsigned order for relief from the automatic stay meant <br>that the bankruptcy judge had granted relief.  Further, she <br>erroneously believed that Fleet could initiate foreclosure <br>proceedings lawfully because the bankruptcy court had issued an <br>order of discharge.  On behalf of Fleet, Shapiro & Fishman filed <br>a complaint for foreclosure in Florida state court on June 4, 1996. <br>     Shortly after the initiation of the foreclosure, Kaneb's <br>attorney informed Fleet's counsel of the automatic stay and faxed <br>documents confirming this information.  Fleet's counsel placed <br>Kaneb's file on "hold" status.  Six weeks later, in response to a <br>letter from Kaneb strenuously protesting the violation of the <br>automatic stay, Fleet's counsel dismissed the foreclosure suit.   <br>     During the six weeks that Fleet allowed the foreclosure suit <br>to languish on "hold" status, Kaneb's neighbors learned of the <br>foreclosure proceeding.  As a result of a foreclosure notice <br>published in a local Florida newspaper, Kaneb received a barrage of <br>colorful mail offering legal and investment services.  These <br>solicitations, known as "dayglow mail," accumulated in Kaneb's <br>Florida mailbox.  Neighbors who regularly held his mail for him <br>when he was in Massachusetts learned of the foreclosure action.  In <br>addition, one of Kaneb's neighbors erroneously received a <br>solicitation addressed to Kaneb. <br>     Once Kaneb's neighbors learned of the foreclosure suit, they <br>began to avoid him.  The condominium where Kaneb lived is a "gated <br>community" populated by affluent retirees.  Prior to the initiation <br>of the foreclosure, he socialized frequently with his neighbors.  <br>As a widower and retiree, Kaneb's life in Florida revolved around <br>recreational activities within the condominium complex.  After his <br>neighbors became aware of the legal proceedings, they stopped <br>inviting him to social outings.  <br>     Kaneb brought suit for compensatory and punitive damages for <br>willful violation of the automatic stay in the District of <br>Massachusetts Bankruptcy Court.  The court awarded him damages for <br>emotional distress and attorneys' fees, and the Bankruptcy <br>Appellate Panel affirmed.  On appeal, Fleet argues for the first <br>time that there was no violation of the automatic stay despite its <br>pretrial stipulation to the contrary.  Fleet seeks relief from its <br>pretrial stipulation and contests the sufficiency of the evidence <br>of Kaneb's emotional suffering.  <br>                              II.  <br>     In examining Fleet's pretrial stipulation, we find that Fleet <br>stipulated to a set of uncontested facts from which the bankruptcy <br>judge found a violation of the automatic stay.  However, the <br>stipulation merely recites historical facts.  Nowhere in the <br>agreement does Fleet concede that, as a legal matter, it violated <br>the automatic stay.  Fleet's request for relief from its supposed <br>stipulation to a violation is, in reality, a request for permission <br>to argue a legal issue that it failed to raise below.  That is, <br>Fleet raises on appeal Judge Votolato's sua sponte argument in his <br>dissent to the decision of the Bankruptcy Appellate Panel that <br>there was no violation because the foreclosure occurred after <br>Kaneb's discharge from bankruptcy and the automatic stay does not <br>apply because Kaneb excluded the Florida property from the <br>bankruptcy estate by claiming it as exempt.  We will not address <br>issues raised for the first time on appeal.  See Teamsters Local <br>No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992) <br>("If any principle is settled in this circuit, it is that, absent <br>the most extraordinary circumstances, legal theories not raised <br>squarely in the lower court cannot be broached for the first time <br>on appeal.").  We decline to address Fleet's "no violation" <br>argument.   <br>     Instead, we accept the conclusion that there was a violation <br>of the automatic stay and review the trial court's determination <br>that this violation was willful.  The trial court found that, <br>"Despite knowing that the stay was still in force, on April 26, <br>1996 Shawmut forwarded its file to the law firm of Shapiro & <br>Fishman . . . for the purpose of initiating foreclosure on the <br>property."  Fleet argues that this action was simply an innocent <br>mistake.  Further, Fleet contends that its actions were not willful <br>because they were not taken with "flagrant or reckless disregard" <br>for its legal obligations. <br>     Fleet cites no authority for its "flagrant or reckless <br>disregard" standard and our research discloses none.  We decline to <br>create a new standard for willfulness.  We similarly reject Fleet's <br>argument that it is immune from sanctions because it made a <br>mistake.  A good faith belief in a right to the property is not <br>relevant to a determination of whether the violation was willful.  <br>See Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478, 483 (9th Cir. <br>1989), (quoting INSLAW, Inc. v. United States (In re INSLAW, Inc.), <br>83 B.R. 89, 165 (Bankr. D.D.C. 1988)). A willful violation does not <br>require a specific intent to violate the automatic stay.  The <br>standard for a willful violation of the automatic stay under  <br>362(h) is met if there is knowledge of the stay and the defendant <br>intended the actions which constituted the violation.  See Goichman <br>v. Bloom (In re Bloom), 875 F.2d 224, 227 (9th Cir. 1989); see also <br>Crysen/Montenay Energy Co. v. Esselen Assocs., Inc. (In re <br>Crysen/Montenay Energy Co.), 902 F.2d 1098, 1105 (2d Cir. 1990); <br>Cuffee v. Atlantic Bus. and Community Dev. Corp. (In re Atlantic <br>Business and Community Corp.), 901 F.2d 325, 329 (3d Cir. 1990).  <br>In cases where the creditor received actual notice of the automatic <br>stay, courts must presume that the violation was deliberate.  See <br>Homer Nat'l Bank v. Namie, 96 B.R. 652, 654 (W.D. La. 1989).  The <br>debtor has the burden of providing the creditor with actual notice.  <br>Once the creditor receives actual notice, the burden shifts to the <br>creditor to prevent violations of the automatic stay.  See Mitchell <br>Constr. Co., Inc. v. Smith (In re Smith), 180 B.R. 311, 319 (Bankr. <br>N.D. Ga. 1995).   <br>     The parties do not contest that Shawmut received actual <br>notice of the automatic stay.  Indeed, the record reveals that <br>Shawmut unsuccessfully filed a motion for relief from the stay.  <br>After the bankruptcy court's denial of the motion for relief, <br>Shawmut retained the law firm of Shapiro & Fishman to initiate <br>foreclosure proceedings.  Although Fleet received notice of a <br>violation when Kaneb's attorney informed Shapiro & Fishman of the <br>stay, Fleet's counsel failed to dismiss the suit for six weeks.  <br>Under the applicable standard, Fleet's actions constitute a willful <br>violation of the automatic stay. <br>                              III. <br>      Fleet challenges generally the sufficiency of the evidence of <br>harm and causation for the $25,000 award for mental anguish and <br>argues specifically that a showing of mental anguish requires <br>physical injury or corroborating medical testimony.  We decline to <br>address Fleet's specific arguments about evidentiary requirements <br>because Fleet has once again waived these arguments by failing to <br>raise them below.  The BAP majority noted: "Our examination of the <br>lengthy record shows Fleet did not question the appropriateness of <br>the [damages award] on grounds that there was no corroborating <br>evidence.  Therefore, Fleet is precluded from raising the issue of <br>corroboration now . . . ."  Similarly, our review of the record <br>reveals that Fleet did not raise before the lower court the <br>argument that a plaintiff must have suffered concomitant physical <br>harm in order to receive damages for mental anguish.  <br>      In responding to Fleet's general challenge to the sufficiency <br>of the damages evidence, we note that emotional damages qualify as <br>"actual damages" under  362(h).  See Holden v. IRS (In re Holden), <br>226 B.R. 809, 812 (Bankr. D. Vt. 1998)("Emotional distress is an <br>actual injury . . . . Legitimate human emotions are brought to bear <br>when one's rights are trampled on."); In re Carrigan, 109 B.R. 167, <br>170 (W.D.N.C. 1989)("The debtor's actual injury here is somewhat <br>imprecise, but it is real -- and, it is certainly the result of <br>[the creditor's actions].); but see In re McPeck, 1991 WL 8405 at <br>*3 (Bankr. D. Minn. Jan. 29, 1991).  In the instant case, Kaneb <br>provided specific information about the sharp decline in social <br>invitations and outings following Fleet's violation of the <br>automatic stay rather than "generalized assertions" of his <br>emotional state.  See In the Matter of Robinson, 228 B.R. 75, 85 <br>(Bankr. E.D.N.Y. 1998)(finding insufficient evidence of debtor's <br>claim of emotional harm based on unsworn and generalized assertion <br>that debtor was concerned and upset).  He then testified about the <br>emotional distress he experienced because of these changes in his <br>life: "[I]ts very irritating.  I don't sleep well.  My eating <br>habits have changed.  I -- I don't feel that ambitious about <br>getting out and doing things and meeting people.  It's -- it's not <br>a pleasant situation to be in . . . . I'm worried concerning where <br>am I going to live."  An honest accounting of actual damages under <br> 362(h) must include the psychological suffering of this eighty- <br>five year old retired widower.  We affirm the bankruptcy court's <br>award of damages for mental anguish. <br>                               IV. <br>     In his cross-appeal, Kaneb challenges the Bankruptcy Appellate <br>Panel's deferment of an award of attorneys' fees pending appeal, <br>arguing that  362(h)'s mandate that an injured individual "shall <br>recover actual damages" requires a prompt award of attorneys' fees.  <br>Further, Kaneb asserts that deferment of fees discourages attorneys <br>from filing suits to vindicate debtors' rights under the automatic <br>stay provision and creates a burdensome cycle of "satellite" <br>appeals over fees.  However, Kaneb cites no authority for the <br>proposition that an award by the trial court of attorneys' fees may <br>not be held in abeyance under  362(h) until the trial court's <br>determination that there was a willful violation of the automatic <br>stay is affirmed on appeal.  The BAP's order was within its <br>discretion and not contrary to law. <br>     Affirmed.</pre>

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