United States District Court, D. New Jersey
M. MCDOWELL MCDOWELL LAW, PC Attorney for Appellant Joy
A. SNYDER LAW OFFICE OF DAVID A. SNYDER Attorney for
Appellees Nu2u Auto World and Pine Valley Motors
L. HILLMAN, U.S.D.J.
appeal arises from the Bankruptcy Court's order denying
Appellant Joy Denby-Peterson's (“Appellant”
or “Denby-Peterson”) sanctions request,
concerning an alleged violation of an automatic stay by
Appellees Nu2u Auto World (“Nu2u”) and Pine
Valley Motors (“PVM” and, collectively,
“Appellees”). For the reasons expressed below,
the decision of the Bankruptcy Court will be affirmed, and
this appeal will be dismissed.
Court takes its brief recitation of facts from the briefs and
notes any factual disputes where applicable. On July 21,
2016, Denby-Peterson purchased a 2008 Chevrolet Corvette (the
“Vehicle”) from PVM. On the same day,
Denby-Peterson entered into a Retail Installment Contract
(the “Contract”) which required her to make
certain down payments and installment payments. This was
assigned to Nu2u.
contract required (1) an initial $3, 000 down payment, (2)
installment payments of $200 per week for 212 weeks, and (3)
a deferred $2, 491 down payment on or before August 11, 2016.
Under the Contract, if Denby-Peterson did not make the
deferred down payment, any excess payments would be applied
to it. Denby-Peterson paid the initial down payment, did not
pay the deferred down payment, and began to miss installment
payments. Appellees did not apply her installment payments to
the deferred down payments. Regardless, Nu2u (through a
third-party) repossessed the Vehicle. After the repossession of
the Vehicle, Denby-Peterson lost work because she could not
travel to the patients she treated as a licensed practical
March 21, 2017, Denby-Peterson filed the underlying Chapter
13 bankruptcy petition. Denby-Peterson, through her
attorneys, notified Nu2u of the bankruptcy proceeding and
demanded Nu2u return the vehicle to Denby-Peterson. Nu2u did
not return the vehicle and Denby-Peterson filed a Motion for
Turnover (the “Motion”) on March 24, 2017. The
Motion included a request for sanctions for Nu2u's
alleged violation of the automatic stay under 11 U.S.C.
resisted the Motion on April 3, 2017 by asserting that
although Denby-Peterson had purchased the Vehicle she had
surrendered all rights in the Vehicle when she signed a
document on February 22, 2017 allegedly waiving her right to
redeem the Vehicle (the “Waiver Document”). Nu2u
alleged this document was signed when Denby-Peterson visited
Nu2u to retrieve her personal property from the Vehicle after
repossession. Additionally, Nu2u filed a Proof of Claim,
asserting a security interest in the Vehicle.
August 16 and 17, 2017, the United States Bankruptcy Court
for the District of New Jersey (the “Bankruptcy
Court”) held a plenary hearing on the Motion.
Post-hearing memoranda were filed. On October 20, 2017, the
Bankruptcy Court issued an Order and Opinion.
relevance, the Opinion held that Denby-Peterson was the
lawful owner of the Vehicle, the Waiver Document was invalid
under New Jersey law, and Nu2u was not liable for sanctions
for retaining possession of the Vehicle after the automatic
stay was instituted. The contents of the hearing and the
Bankruptcy Court Opinion and Order will be discussed in
further detail infra where relevant.
filed a timely notice of appeal on October 30, 2017. The
issues presented infra were fully briefed by both
parties. On May 4, 2018, the Bankruptcy Court dismissed the
underlying bankruptcy case. On October 3, 2018, this Court
issued an Order to Show Cause why this appeal was not mooted
by the dismissal of the underlying case. Denby-Peterson
timely responded to the Order to Show Cause on October 13,
2018. This appeal is ripe for adjudication.
Subject Matter Jurisdiction
Court has jurisdiction over the appeal from the Bankruptcy
Court's October 20, 2017 order pursuant to 28 U.S.C.
§ 158(a), which provides in relevant part: “The
district courts of the United States shall have jurisdiction
to hear appeals from final judgments, orders and decrees . .
. of bankruptcy judges entered in cases and proceedings
referred to the bankruptcy judges under section 157 of this
title. An appeal under this subsection shall be taken only to
the district court for the judicial district in which the
bankruptcy judge is serving.”
Court, sua sponte, ordered Appellant to show cause
why this appeal was not mooted by the May 4, 2018 dismissal
of the underlying bankruptcy case. Appellant responded to
this Order to Show Cause within the allotted time. This Court
is satisfied with Appellant's response that this matter
is not moot.
coming to this conclusion, this Court considered the
following. “In the bankruptcy context, the
determination of whether a case becomes moot on the dismissal
of the bankruptcy hinges on the question of how closely the
issue in the case is connected to the underlying
bankruptcy.” Tellewoyan v. Wells Fargo Home
Mortg., No. 05-4653 (FLW), 2006 U.S. Dist. LEXIS 55558,
at *3 (D.N.J. Aug. 10, 2006) (quoting In re
Pattullo, 271 F.3d 898, 901 (9th Cir. 2001)). The appeal
concerns issues related to an alleged violation of the
automatic stay. This question is an ancillary issue not
closely intertwined with the underlying bankruptcy.
law agrees with this assessment. In cases where damages under
11 U.S.C. § 362(k) are at issue and the bankruptcy has
been dismissed, the § 362(k) controversy generally
survives. Javens v. City of Hazel Park (In re
Javens), 107 F.3d 359, 364 n.2 (6th Cir. 1997). See
also Lawson v. Tilem (In re Lawson), 156 Bankr.
43, 45 (B.A.P. 9th Cir. 1993); In re Carraher, 971
F.2d 327, 328 (9th Cir. 1992); In re Morris, 950
F.2d 1531, 1534 (11th Cir. 1992); Price v. Rochford,
947 F.2d 829, 830-31 (7th Cir. 1991); In re Smith,
866 F.2d 576, 580 (3d Cir. 1989). As Appellant points out,
“[a] Court must have the power to compensate victims of
violations of the automatic stay and punish the violators,
even after the conclusion of the underlying bankruptcy
case.” Johnson v. Smith (In re
Johnson), 575 F.3d 1079, 1083 (10th Cir. 2009) (citing
Davis v. Courington (In re Davis), 177 B.R.
907, 911 (B.A.P. 9th Cir. 1995)). This Court finds this
appeal is not moot and will decide it on the merits.
Standard of Review
reviewing a determination of the bankruptcy court, the
district courts “review the bankruptcy court's
legal determinations de novo, its factual findings
for clear error and its exercise of discretion for abuse
thereof.” Reconstituted Comm. of Unsecured
Creditors of the United Healthcare Sys., Inc. v. State of
N.J. Dep't of Labor (In re United Healthcare
Sys.), 396 F.3d 247, 249 (3d Cir. 2005) (quoting
Interface Grp.-Nev. v. TWA (In re TWA), 145
F.3d 124, 130-31 (3d Cir. 1998)).
central question presented by this appeal is what path this
Court will take in the face of a split between the Circuit
Courts - and no Third Circuit case law explicitly deciding
the split - over the imposition of sanctions in cases of
pre-petition repossession of vehicles. Surrounding this
central legal question are a number of other legal and
factual arguments ...