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return the vehicle, and on the eve of hearing had insisted that if the debtors wanted the vehicle they
should travel to another state to pick it up. Characterizing the violation as knowing, intentional,
deliberate and egregious, the court upheld the bankruptcy court’s discharge of
the debtors’ $6,127.54 debt to the creditor as an award under the punitive
damages clause of 11 U.S.C. § 362(k). It rejected an argument that the debtors
had not shown “actual damages” as a prerequisite to the award of punitive
damages. While the damage from loss of use of the vehicle had not been
quantified, the debtors showed that they had incurred attorney fees and costs in
bringing the stay-violation motion, and these suffice as actual damages for
purposes of § 362(k), the court said.

Reopening Bankruptcy Doesn’t Avoid Judicial Estoppel

A debtor’s reopening of his bankruptcy case and belated disclosure of his cause of action therein
does not avoid the judicial estoppel effect of his previous non-disclosure upon his action for the
undisclosed claim in state court, the Supreme Court of Idaho has held.

In McCallister v. Dixon, 2013 WL 427437 (Idaho 2013), the Chapter 13 debtor
failed to disclose a potential medical malpractice claim but then filed suit upon it
after his plan had been confirmed. When his suit was met with a defense invoking
the judicial estoppel doctrine, he attempted to avoid that doctrine by reopening the
bankruptcy and making the disclosure. The Idaho court said that was not enough,
and it rejected an argument that the tort defendants had not been prejudiced by
the omission. “Judicial estoppel protects the integrity of the judicial system, not
the litigants; therefore, it is not necessary to demonstrate individual prejudice,” the court said. See
also Sharp Thinking No. 81 (Jan. 2013); No. 57 (Feb. 2012).

$1.3 Million Punitive Damage Award Affirmed

Punitive damages of more than $1.3 million have been affirmed against a mortgagee that
incorrectly but apparently routinely misapplied Chapter 13 plan payments to pre- and post-petition
charges that it imposed without notice to the debtor or leave of court.

The federal district court, sitting as a court of appeal from a bankruptcy court’s ruling, said the
improper treatment of the charges violated the automatic stay of 11 U.S.C. § 362 and justified
punitive damages of 10 times the actual damages. Jones v. Wells Fargo Home Mortgage, Inc., 489
B.R. 645 (E.D. La. 2013). It also said the mortgagee’s practices violated the Chapter 13 plan.

Noting that Wells Fargo “is a sophisticated lender . . . familiar with the provisions of the
Bankruptcy Code, particularly those regarding automatic stay”; that lesser resolutions had been
ineffective; and that Wells Fargo’s own representatives had admitted the misapplications were
routinely made, the court said the multiplier of 10 was not improper.

– John T. Hundley, Jhundley@lotsharp.com, 618-242-0246

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