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In Re v. Union Adjustment Co.

February 1, 2011

IN RE:
HATEM YEHIA YOUSSEF,
DEBTOR. HATEM YEHIA YOUSSEF, APPELLANT,
v.
UNION ADJUSTMENT CO., INC., APPELLEE.



Appeal from the United States Bankruptcy Court for the Central District of California Honorable Theodor C. Albert, Bankruptcy Judge, Presiding Bk. No. 09-22595-TA

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

MEMORANDUM*fn1

Argued and Submitted on January 21, 2011 at Pasadena, California

Filed - February 1, 2011

Before: PAPPAS, DUNN and KIRSCHER, Bankruptcy Judges.

Chapter 7*fn2 debtor Hatem Yehia Youssef ("Youssef") appeals the bankruptcy court's denial of his request for an award of punitive damages, and the amount awarded to him for attorney's fees, resulting from the willful violation of the automatic stay committed by creditor Union Adjustment Co., Inc. ("UAC"). We AFFIRM the decision to deny punitive damages, but we VACATE the attorney's fee award and REMAND that issue to the bankruptcy court for a determination of the reasonableness of the attorney's fees requested.

FACTS

In May 2007, UAC obtained a judgment against Youssef in Orange County Superior Court for $5,826.00. UAC obtained a wage withholding order, and began to garnish Youssef's wages, in the amount of $50 per pay period.

On November 13, 2009, Youssef filed a chapter 7 petition along with supporting schedules. Both UAC and its state court attorney were properly listed on Schedule F, in which Youssef acknowledged he owed an undisputed debt to UAC of $5,826.00. To stop the garnishment, on November 17, Youssef's bankruptcy counsel faxed a document entitled "Notice of Stay of Proceedings and Notice of Bankruptcy Filing" to UAC; an electronic confirmation stamp appearing on the document shows it was received by UAC at 6:58 p.m. that same day. The sworn declaration of Debbie Rubenfield ("Rubenfield Declaration"), the legal/administrative 1 manager of UAC, states that UAC received the Notice of Stay "on or 2 about 18 November 2009." In addition, on November 18, 2009, the 3 bankruptcy court mailed a notice of the Youssef bankruptcy filing 4 to UAC. An additional notice concerning the bankruptcy case was 5 filed with the state court by Youssef's attorney on November 23, 6 2009, and a copy was served on the attorney for UAC.

7 The Rubenfield Declaration states that "on or about" 8 November 18, 2009, she prepared a Notice of Bankruptcy Filing 9 which she sent to the Orange County Sheriff directing him to halt 10 the garnishment, along with a copy of the Stay of Proceedings she 11 received from Youssef's attorney (the "Garnishment Termination 12 Notice").

13 Despite its knowledge of the bankruptcy case, on December 22, 14 2009, UAC cashed a $40 garnishment check it received from the 15 Orange County Trust Revolving Fund. The check shows UAC's 16 internal reference number for Youssef's account on its face. UAC 17 cashed additional Youssef garnishment checks on December 28, 2009, 18 January 15 and 17, and February 9 and 22, 2010. The total 19 withheld from Youssef's paychecks for these six garnishments was 20 $300.00.

21 On January 15, 2010, Youssef filed a Motion for Order 22 Enforcing Automatic Stay and Awarding Actual and Punitive Damages 23 Pursuant to 11 U.S.C. § 362(k) (the "Enforcement Motion") in the 24 bankruptcy court. In the motion, Youssef alleged that, in 25 repeatedly garnishing his wages, UAC had knowledge of the 26 bankruptcy filing, had deliberately violated the automatic stay, 27 and had refused to desist from the violation, even after receiving 28 multiple notices about the bankruptcy filing. Youssef sought awards of actual damages in the sum of $200,*fn3 punitive damages, and attorney's fees. A copy of the Enforcement Motion was served on UAC and its attorney on January 15, 2010.

On January 22, 2010, Youssef's attorney's office contacted the Orange County Sheriff's office and was advised that UAC's garnishment of Youssef's wages was still active, and that the Sheriff's office had not received any documents from UAC terminating the garnishment. Youssef's attorney contacted the Orange County Sheriff again on January 27 and January 29, 2010, and was advised that the garnishment had not been withdrawn.

Youssef's counsel contacted UAC on January 27, 2010, informing its representative that the Sheriff's office was continuing to garnish Youssef's pay. In response, a UAC employee informed him that it had sent the Garnishment Termination Notice to the Sheriff on November 20, 2009.

The bankruptcy court conducted its first hearing on the Enforcement Motion on February 23, 2010. In its tentative ruling issued prior to the hearing, the court wrote: "Award actual damages of $200. Continue [hearing] to evaluate willfulness and whether imposition of punitive damages is also appropriate." UAC did not appear at this hearing; Youssef was represented by counsel. The bankruptcy court continued the hearing to April 6 to allow UAC to appear, to consider increasing the actual damages to $300 to compensate for the latest garnishments, and to consider whether attorney's fees and punitive damages were appropriate.

At the continued hearing on April 6, 2010, UAC and Youssef 1 were represented by counsel. The bankruptcy court ordered UAC to 2 pay $300 in actual damages to Youssef within 72 hours of entry of 3 its order. The hearing was continued yet again to May 11 ...


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