In re: Schwartz-Tallard

Summarized by:

  • Court: 9th Circuit Court of Appeals Archives
  • Area(s) of Law: Bankruptcy Law
  • Date Filed: 04-16-2014
  • Case #: 12-60052
  • Judge(s)/Court Below: Senior District Judge Huck for the Court; Circuit Judge Gould; Dissent by Circuit Judge Wallace
  • Full Text Opinion

Attorneys’ fees incurred by a bankruptcy debtor in defense of a creditor’s appeal of a ruling that the creditor had violated the automatic stay requirement are actual damages recoverable by the debtor.

Schwartz-Tallard owned a house serviced by an America’s Servicing Company’s (“ASC”) mortgage when she filed for Chapter 13 bankruptcy. Although Schwartz-Tallard continued to make mortgage payments, ASC moved for relief from the automatic stay to foreclose on the property. On ASC’s motion, the bankruptcy court removed the stay but later orally granted Schwartz-Tallard’s motion to reinstate. ASC then sold the house. Following the sale, the bankruptcy court entered its order reinstating the stay. Schwartz-Tallard sent ASC notification of the stay with two additional payments. ASC rejected the payments. The bankruptcy court held that ASC violated the stay, awarded Schwartz-Tallard attorneys’ fees, and ordered the property transferred back to Schwartz-Tallard. ASC appealed to the district court but reconveyed the property. The district court affirmed the bankruptcy court’s findings and Schwartz-Tallard moved to recover the attorney’s fees incurred as a result of ASC’s appeal. The bankruptcy court denied the motion and Schwartz-Tallard appealed to the Bankruptcy Appellate Panel (“BAP”). BAP held that the attorneys’ fees were actual damages. On appeal, the Ninth Circuit held that the attorneys’ fees Schwartz-Tallard incurred defending ASC’s appeal were actual damages. The panel also affirmed Schwartz-Tallard’s attorneys’ fees award. The panel found that the automatic stay has both financial and non-financial purposes. The financial purpose is to protect a bankruptcy debtor from spending funds on litigation that could be used to pay creditors. The non-financial purpose is to allow the debtor time to reorganize her finances. The award of attorneys’ fees as actual damages deters stay violators from continuing to disrupt these purposes. The panel held that attorneys’ fees incurred by a bankruptcy debtor in defense of a creditor’s appeal of a ruling that the creditor had violated the automatic stay requirement are actual damages recoverable by the debtor. AFFIRMED.

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