Bankruptcy: Great Decision: In re Evans

Information that should and should not be reported where there is a bankruptcy.
David A. Szwak

Bankruptcy: Great Decision: In re Evans

Postby David A. Szwak » Tue Oct 25, 2005 8:54 pm

In re Evans,
289 B.R. 813, Bankr.E.D.Va., Sep 09, 2002

On rule to show cause why bank and its counsel should not be held in contempt for violating discharge injunction, the Bankruptcy Court, Robert G. Mayer, J., held that: (1) where bank's replevin action was filed in face of clear evidence suggesting that debtor no longer had possession of leased property, replevin action would be treated as subterfuge to recover discharged prepetition debt, which exposed bank to sanctions for willfully violating discharge injunction; and (2) monetary awards that were entered against bank, for violating discharge injunction by trying to use replevin action as subterfuge to collect discharged prepetition debt, would be assessed jointly and severally against both bank and its counsel.
Judgment against bank and counsel.

As damages for bank's violation of discharge injunction, in using replevin action as subterfuge to attempt to recover discharged prepetition debt for sums owing under motor vehicle lease, debtor was entitled to compensatory damages in amount of $1,000, based on four days of wages he lost to attend hearings both in replevin action and in bankruptcy court, but was not entitled to award based on his alleged pain and suffering, due to lack of evidence to support such a claim or to permit court to quantify debtor's loss, or based on speculation that, but for adverse credit report traceable to replevin action, debtor allegedly would have obtained better paying job.

Although bank's violation of discharge injunction, in using replevin action as subterfuge to attempt to recover discharged prepetition debt, entitled debtor to reasonable attorney fees, fees would be reduced from the $41,117.51 sought to $24,954.00, due to excess time entries resulting from fact that debtor was represented by two attorneys in bankruptcy court, both of whom were present throughout trial.

Bank's violation of discharge injunction, in using replevin action as subterfuge to attempt to recover discharged prepetition debt, was sufficiently egregious to warrant award of punitive damages, in amount of $2,500, in order to vindicate orders of bankruptcy court and to act as deterrent to similar conduct in future, even though bank and its counsel were not shown to have engaged in similar misconduct in past.

Punitive damages are not restricted to cases involving multiple violations of discharge injunction.

Monetary awards that were entered against bank, for violating discharge injunction by trying to use replevin action as subterfuge to collect discharged prepetition debt, would be assessed jointly and severally against both bank and its counsel, where counsel was architect of this misconduct, having controlled replevin action and manner in which it was pled and prosecuted.

David A. Szwak

Postby David A. Szwak » Tue Oct 25, 2005 8:58 pm

Here the conduct was egregious and in clear disregard of the provisions of the Bankruptcy Code. What may appear on the surface to have been proper was, at bottom, an intentional effort to circumvent the discharge order entered by this court by falsely cloaking efforts to collect a pre-petition debt in the legitimacy of a suit in replevin. Unlike Cherry, the bank is an institutional creditor which has frequently confronted this scenario and is likely to face it again. While it has not been shown that the bank and counsel have engaged in similar conduct in any other case, punitive damages are not restricted to cases involving multiple violations of the discharge injunction. A mild warning to counsel and the bank is in order to deter future conduct intended to circumvent the bankruptcy discharge injunction. Punitive damages *828 in the amount of $2,500 should be sufficient in deliver this warning.


Return to “Bankruptcy Reporting”

Who is online

Users browsing this forum: No registered users and 4 guests