Kenneth Charles Nixon and Shelieah Oneida Devore-Nixon

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF PENNSYLVANIA
IN RE: KENNETH CHARLES NIXON and : Chapter 13
SHELIEAH ONEIDA DEVORE-NIXON, :
:
Debtor(s) : Bky. No. 09-11567 ELF
M E M O R A N D U M
I. INTRODUCTION
Presently before me is the Debtors’ Motion to Redress Willful Violation of Automatic
Stay (“the Motion”). The Debtors assert that Philadelphia Gas Works (“PGW”) willfully
violated the automatic stay, 11 U.S.C. §362(a), by misapplying their post-petition payment to
their pre-petition account and by terminating their residential gas service. They seek damages
and attorney’s fees under §362(k) of the Bankruptcy Code, 11 U.S.C. §362(k). PGW contests1
liability and the damages claimed by the Debtors.
An evidentiary hearing was held and concluded on September 22, 2009. Neither party
offered any testimonial evidence (perhaps due to the relatively small amount of money at stake in
this dispute). Instead, the parties agreed that the court could rule on the motion based upon both
In their Motion, the Debtors cite 11 U.S.C. §362(h). However, it is clear that they	1
intended to cite 11 U.S.C. §362(k). Former section 362(h) was amended and recodified as §362(k) by the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23
(2005), effective October 17, 2005 (“BAPCPA”). Section 362(k) provides:
(1) Except as provided in paragraph (2), an individual injured by any willful
violation of a stay provided by this section shall recover actual damages,
including costs and attorneys’ fees, and, in appropriate circumstances, may
recover punitive damages.
(2) If such violation is based on an action taken by an entity in the good faith
belief that subsection (h) applies to the debtor, the recovery under paragraph (1)
of this subsection against such entity shall be limited to actual damages.
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counsel’s factual recitations.2
As explained below, I find that PGW willfully violated the automatic stay and that the
Debtors are entitled to relief insofar as PGW applied their post-petition payment to their pre-
petition account. However, the Debtors did not meet their burden of proof with respect to the3
additional damages they claim they suffered as a result of the termination of their gas service.
Therefore, it is unnecessary to determine whether the termination of service violated the
automatic stay or was “willful” within the meaning of 11 U.S.C. §362(k). Consequently, I will
deny the Debtors’ request for an award of additional damages for the out-of-pocket expenses they
incurred after the termination of their gas service. Finally, the Debtors will be awarded counsel
fees of $1,000.00.4
II. FACTS
1. Kenneth Charles Nixon and Shelieah Oneida Devore-Nixon, the Debtors in this bankruptcy
case, are individuals who reside at 6114 Newtown Avenue, Philadelphia, PA 19111 (“the
In its Response to the Motion, PGW argued that the Debtors should have asserted their	2
claim by filing an adversary complaint. See Fed. R. Bankr. P. 7001. PGW did not press this asserted
procedural irregularity at the hearing and consented to the resolution of the dispute as a contested matter.
I note that there is a division of authority on the question whether the standard of proof	3
under 11 U.S.C. §362(k) is “preponderance of” or “clear and convincing” evidence. See, e.g., In re
Wingard, 382 B.R. 892, 900 (Bankr. W.D. Pa. 2008). Here, because the facts are undisputed, I need
not reach the issue.
PGW has not contested the reasonableness of the attorney’s fees the Debtors requested.	4
Based on my independent review, I find the requested fees reasonable. Therefore, I will not discuss the
issue further in this Memorandum.
2
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Property”).
2. PGW is a collection of real and personal property owned by the City of Philadelphia (“the
City”) that provides gas service to City residents. It is managed by the Philadelphia
Facilities Management Corporation.5
3. At all relevant times, the Debtors have been residential customers of PGW, and PGW
supplied gas service to the Property.
4. The Debtors use gas to heat their home and for hot water (but not for cooking).
5. The Debtors filed this chapter 13 bankruptcy case on March 4, 2009.
6. As of the commencement of the case, the Debtors’ PGW account was delinquent in the
approximate amount of $600.00. (See Debtors’ Schedule F, Docket Entry No. 1).6
7. When the case was filed, neither the Debtors nor their counsel immediately notified PGW
of its commencement.
8. PGW learned of the bankruptcy filing on or about March 23, 2009, when it received Notice
of the §341 Meeting of Creditors. (See Docket Entry No. 17).
9. After it received notice of the bankruptcy filing, PGW closed the Debtors’ pre-bankruptcy
account (“the Pre-Petition Account”) retroactive to March 4, 2009, i.e., the date of the
bankruptcy filing, and opened a new account (“the Post-Petition Account”) effective the
Neither party offered evidence at the hearing regarding PGW’s legal status. I have	5
described PGW as it has been described consistently in numerous judicial decisions. See Brennon v.
Philadelphia Gas Works, 605 A.2d 475, 476 (Pa. Commw. Ct. 1992), alloc. denied, 621 A.2d 582 (Pa.
1993); see also Hendrickson v. Philadelphia Gas Works, 672 F. Supp. 823, 825 (E.D. Pa. 1987); Dawes
v. Philadelphia Gas Comm'n, 421 F. Supp. 806, 811 n. 1 (E.D. Pa. 1976); Sphere Drake Ins. Co. v.
Philadelphia Gas Works, 782 A.2d 510, 511-12 (Pa. 2001); Public Advocate v. Philadelphia Gas
Comm'n, 674 A.2d 1056, 1058 (Pa. 1996).
I do not understand PGW to dispute this.	6
3
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same date.
10. On March 11, 2009, before PGW received notice of the bankruptcy case, the Debtors made
a payment of $523.01 through an electronic, on-line payment program (“the March 11th
Payment”).
11. PGW credited the $523.01 March 11 Payment to the Debtors’ Pre-Petition Account.th
12. On March 26, 2009, PGW sent the Debtors a bill for the Post-Petition Account in the
amount of $353.86 (“the March 26 Bill”). This bill consisted of $119.86 for the Debtors’th
post-bankruptcy gas service (from March 4, 2009 through March 23, 2009) and $234.00 for
a security deposit PGW requested as adequate assurance of future payment.
13. Payment of the March 26 Bill was due by April 21, 2009.th
14. The Debtors did not pay the March 26 Bill by April 21, 2009.th
15. On April 27, 2009, PGW sent the Debtors a notice advising them that their gas service
would be terminated due to nonpayment if the March 26 Bill were not paid within tenth
(10) days.
16. Eight (8) days later, on May 5, 2009, the Debtors made another electronic, on-line payment
to PGW. This payment was in the amount of $353.86 (“the May 5 Payment”), the fullth
amount of the March 26 Bill.th
17. PGW credited the May 5 Payment to the Pre-Petition Account instead of the Post-Petitionth
Account.
18. At the time PGW credited the May 5 Payment to the Pre-Petition Account, it had alreadyth
received notice of the Debtors’ bankruptcy filing.
4
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19. PGW credited the May 5 Payment to the Pre-Petition Account due to PGW’s “error.”th 7
20. Because it mistakenly believed that the Debtors had not paid the post-bankruptcy
obligations reflected in the March 26 Bill, PGW effected a curb-side shut-off of theth
Debtors’ gas service on June 12, 2009.8
21. PGW’s termination of service manifested itself to the Debtors when they experienced a
lack of hot water in the Property.9
22. The Debtors assumed that the lack of hot water was caused by a defective hot water heater,
rather than termination of their gas service.
23. On June 15, 2009, the Debtors replaced their existing hot water heater. They purchased a
new hot water heater and installed it themselves. The Debtors spent a total of $531.05 for
the hot water heater and some hardware necessary for the installation.
24. After installing the new hot water heater, for a now-obvious reason (i.e., the lack of gas
service), the Debtors found that they still lacked hot water.
25. On June 17, 2009, the Debtors called PGW. As a result of that phone call, PGW
In his factual recitation regarding this issue at the hearing, PGW’s counsel could not	7
explain why the Debtors’ May 5 payment was credited to the “closed” Pre-Petition Account when there	th
was an “open” Post-Petition Account other than to say it was as an “error” and a “mistake.” He stated
that a “person” at PGW “didn’t do it right,” having been taught to apply payments to the customer’s
oldest bill. Obviously, the PGW employee did not take into account that the bankruptcy filing
necessitated that this general practice be varied.
When gas service is shut off at the curb, PGW’s employees do not need to enter the	8
subject premises. Thus, the termination may occur without the knowledge of the occupant of the
premises.
The gas termination occurred in June, when the Debtors would not have been utilizing	9
gas to heat their home.
5
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discovered that it had mistakenly failed to apply the May 5 Payment to the Post-Petitionth
Account.
26. On June 19, 2009, PGW restored the Debtors’ gas service.
27. The Debtor’s counsel expended four (4.0) hours in prosecuting the Motion and has a
customary hourly rate of $250.00.
III. CONCLUSIONS OF LAW
1. PGW is a utility subject to 11 U.S.C. §366.
2. PGW willfully violated the automatic stay, 11 U.S.C. §362(a)(6), when it applied the May 5th
Payment to the Debtor’s Pre-Petition account and when it shut off the Debtors’ gas service on
June 12, 2009.
3. PGW is liable to the Debtors under 11 U.S.C. §362(k) for actual damages and attorney’s
fees.10
IV. DISCUSSION
A. Statutory Provisions
Upon the filing of a bankruptcy case, a utility such as PGW is subject to the automatic
stay provisions of the Bankruptcy Code. The automatic stay restrains creditors from, inter alia,:
(6) any act to collect, assess, or recover a claim against the debtor that arose before
the commencement of the case under this title . . . .
11 U.S.C. §362(a)(6).
11 U.S.C. §362(k) also authorizes the award of punitive damages “in appropriate	10
circumstances.” The Debtors have not sought punitive damages.
6
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In addition to the general constraints of the automatic stay, the Bankruptcy Code also
addresses utilities more specifically in 11 U.S.C. §366. Section 366, which governs the
respective rights of debtors and utilities with respect to the alteration, continuation or termination
of utility service, provides, in pertinent part:
(a) Except as provided in subsections (b) and (c) of this section, a utility may not
alter, refuse, or discontinue service to, or discriminate against, the trustee or the
debtor solely on the basis of the commencement of a case under this title or that a
debt owed by the debtor to such utility for service rendered before the order for
relief was not paid when due.
(b) Such utility may alter, refuse, or discontinue service if neither the trustee nor
the debtor, within 20 days after the date of the order for relief, furnishes adequate
assurance of payment, in the form of a deposit or other security, for service after
such date. On request of a party in interest and after notice and a hearing, the court
may order reasonable modification of the amount of the deposit or other security
necessary to provide adequate assurance of payment.
(c)(1)(A) For purposes of this subsection, the term “assurance of payment”
means—
(i) a cash deposit;
(ii) a letter of credit;
(iii) a certificate of deposit;
(iv) a surety bond;
(v) a prepayment of utility consumption; or
(vi) another form of security that is mutually agreed on between the utility and
the debtor or the trustee.
11 U.S.C. §366(a), (b), (c)(1).
Simply put, §366(a) prohibits a utility from, inter alia, terminating service during the first
twenty (20) days of a bankruptcy case based on a pre-petition debt. See In re Whittaker, 882 F.2d
791, 793-94 (3d Cir. 1989). After the expiration of that initial twenty (20) day period, §366(b)
prohibits the utility from terminating service if the debtor has timely furnished adequate
7
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assurance of payment for post-petition service by the means outlined in §366(c)(1)(A). Id. If11
the debtor fails to provide timely adequate assurance, the utility may terminate service and such
action will not violate 11 U.S.C. §362(a). See In re Marion Steel Co., 35 B.R. 188, 196-97
(Bankr. N.D. Ohio 1983). If the debtor timely posts adequate assurance under §366(b), but
thereafter fails to pay bills for post-bankruptcy service, the utility may terminate service in
accordance with applicable state law procedures. See Begley v. Philadelphia Elec. Co., 760 F.2d
46, 49 (3d Cir. 1985); In re Jones, 369 B.R. at 752; In re Weisel, 400 B.R. 457 (Bankr. W.D. Pa.
2009).
B. The Parties’ Contentions
The Debtors’ position is straightforward. While the automatic stay was in effect, PGW
applied the Debtors’ May 5 Payment of their post-petition bill to their pre-petition debt. Thisth
was an act to collect a claim that arose before the case was filed and violated §362(a)(6). As a
direct consequence of this action, PGW treated the Post-Petition Account as delinquent and
terminated the Debtors’ gas service. From the Debtors’ perspective, PGW’s actions constituted a
unified course of conduct that violated the automatic stay to their detriment.
PGW responds with three (3) arguments.
First, PGW contends that the termination of the Debtor’s gas service did not violate the
stay because the termination was not based on an attempt to collect the unpaid pre-petition debt.
The purpose of the provision was well-expressed by one court: “Congress sought to	11
strike a balance, in enacting § 366, between the general right of a creditor to refuse to do business with a
debtor post-petition, and the debtor's need for utility service.” In re Jones, 369 B.R. 745, 748 (B.A.P. 1st
Cir. 2007).
8
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Rather, in PGW’s view, the termination was based on the Debtors’ post-petition obligations –
specifically, PGW’s mistaken belief that the Debtors had not paid either: (1) the requested
adequate assurance of future payment; and (2) their first bill for post-bankruptcy gas service.12
Second, PGW contends that the application of the Debtors’ post-petition payment to the
Pre-Petition Account and subsequent termination of the Debtors’ gas service were not “willful”
violations of the automatic stay as required by §362(k) because those acts were caused by
employee “error.”
Third, PGW challenges the reasonableness of the Debtors’ conduct following the June 12,
2009 termination of service, i.e., their assumption that their existing hot water heater was
defective and the purchase of a new one. PGW argues that the Debtors’ gas service could have
been restored expeditiously and the unnecessary purchase of a new hot water heater avoided had
the Debtors simply called PGW to inquire why they had no hot water in their home. I interpret
PGW’s argument to be that, absent what PGW considers to be “unreasonable” conduct on the
Debtors’ part, the Debtors would have suffered no out-of-pocket damages after the gas shut-off.
In effect, PGW argues, in the alternative that (1) the Debtors’ own conduct was a superseding
cause of their claimed post-termination damages, relieving PGW of any liability for such
damages, or (2) if not a superseding cause, the Debtors’ conduct reflects a failure to take
reasonable steps to mitigate damages and avoid unnecessary expenses, and the Debtors should
not be permitted to recover expenses they could have avoided incurring.
The Debtors’ obligation to post adequate assurance is a post-bankruptcy obligation that	12
PGW likely could have imposed even if there were no pre-petition debt. See generally In re Hanratty,
907 F.2d 1418, 1421 (3d Cir. 1990) (treating the adequate assurance requirement as an exception to the
rights afforded debtors under §366(a)).
9
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C. Violation of the Automatic Stay
The first issue I consider is whether PGW violated the automatic stay.
PGW does not directly address the question whether its misapplication of the May 5th
Payment violated the automatic stay. Rather, PGW focuses exclusively on its act of terminating
the Debtors’ gas service, arguing that the termination should not be viewed as a violation of the
automatic stay because PGW’s decision to terminate was based on its mistaken belief that the
Debtors had not paid their March 26 post-petition bill. In other words, PGW argues that it didth
not terminate the Debtor’s service to collect a pre-petition debt (prohibited conduct under
§362(a)(6)) because it terminated service based on the presumed non-payment of a post-petition
debt, conduct that is not prohibited by §362(a)(6).
I have no difficulty concluding that PGW’s act of crediting the Debtors’ May 5 post-th
petition payment on their post-petition bill to the Pre-Petition Account violated §362(a)(6). See,
e.g., In re Levitt, 37 B.R. 908 (Bankr. E.D. Pa. 1984). The conduct falls within the literal terms
of §362(a)(6). Thus, the Debtors have established that a violation of the automatic stay occurred.
As for the subsequent termination of the Debtors’ gas service, for the reasons discussed in
Part IV.E, infra, I find it unnecessary to decide whether that act violated §362(a)(6).
D. “Willfulness” Under 11 U.S.C. §362(k)
The next issue I consider is whether PGW’s act of misapplying the Debtors’ post-petition
payment to their Pre-Petition Account was “willful” within the meaning of 11 U.S.C. §362(k).
The automatic stay plays a central role in the bankruptcy system. See, e.g., In re Krystal
Cadillac Oldsmobile GMC Truck, Inc.,142 F.3d 631, 637 (3d Cir. 1998) (describing the
10
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automatic stay as a “one of the fundamental debtor protections provided by the bankruptcy
laws”). Consequently, bankruptcy policy favors enforcement of the stay and affording a remedy
to a debtor damaged by a violation of the stay. This policy finds expression in 11 U.S.C.
§362(k). However, not every violation of the stay gives rise to a claim under §362(k). To be
actionable under §362(k), the conduct violating the stay must be “willful.”
Under §362(k), conduct that violates the automatic stay is willful if the creditor knew of
the stay and if the creditor’s conduct that violated the automatic stay was intentional. In re Atl.13
Bus. & Cmty. Dev. Corp., 901 F.2d 325, 329 (3d Cir. 1990) (citing In re Bloom, 875 F.2d 224,
227 (9th Cir. 1989)); accord Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. Gen. Motors
Corp., 337 F.3d 314, 320 n. 8 (3d Cir. 2003); In re Univ. Med. Ctr., 973 F.2d 1065,1087-88 (3d
Cir. 1992). Significantly, the Court of Appeals has recognized that “willfulness” under §362(k)14
does not require that the creditor have a “specific intent” to violate the stay. E.g., In re Krystal
Cadillac-Oldsmobile GMC Truck, Inc., 337 F.3d at 320 n.8; In re Atl. Bus. & Cmty. Dev. Corp.,
901 F.2d at 329; see also In re Johnson, 501 F.3d 1163, 1171-72 (10 Cir. 2007).th
Consistent with the principles discussed above, courts have also regularly held that a
“good faith” mistake of law or a “legitimate dispute” as to the creditor’s right to take the action
Knowledge of the existence of the bankruptcy case is treated as knowledge of the	13
automatic stay for these purposes. See, e.g., In re Knaus, 889 F.2d 773, 775 (8 Cir. 1989); In re	th
Johnston, 321 B.R. 262, 280 (D. Ariz. 2005); In re Ozenne, 337 B.R. 214, 220 (B.A.P. 9th Cir. 2006); In
re Welch, 296 B.R. 170, 172 (Bankr. C.D. Ill. 2003); In re Wagner, 74 B.R. 898, 904 (Bankr. E.D. Pa.
1987).
Some courts have suggested that where the creditor received actual notice of the	14
automatic stay, courts should presume that the violation was deliberate. Fleet Mortgage Group, Inc. v.
Kaneb, 196 F.3d 265, 268-69 (1 Cir. 1999); In re Spinner, 398 B.R. 84, 94 (Bankr. N.D. Ga. 2008)	st
11
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that violates the stay generally does not relieve a willful violator of the consequences of his act.
See, e.g., Atl. Bus. & Cmty. Dev. Corp., 901 F.2d at 329; Fed. Home Loan Mortgage Corp. v.
McCormack, 1996 WL 753938, at *4 (D.N.H. Sept. 3, 1996).15
This case presents a “mistake” of a different sort – a creditor acting voluntarily and
intentionally and violating the stay due to what may be characterized as a “clerical” or
“ministerial” error. The PGW employee who processed the Debtors’ May 5 Payment shouldth
have applied it to the Post-Petition Account, but instead applied it to the Pre-Petition Account.
As a result of the error, PGW not only applied the Debtors’ payment to the wrong account, but
subsequently (and intentionally) cut off the Debtors’ gas service.
There is some legal authority to support PGW’s position that an “innocent clerical error”
is not willful under 11 U.S.C. §362(k). See, e.g., In re Hamrick, 175 B.R. 890, 893-894
(W.D.N.C. 1994); In re Peterson, 297 B.R. 467, 471 (Bankr. W.D.N.C. 2003). These cases
suggest that creditor action in violation of the stay, arising from employee error and remedied
promptly after the error has been brought to the attention of the creditor, is not “willful” and
should not result in §362(k) liability. However, most courts that have considered the issue have
held that a violation of the automatic stay occurring from intentional creditor action following
human clerical or computer error is nonetheless a “willful” violation remediable under §362(k).
In University Medical Center, our Court of Appeals recognized a limited exception to the	15
general standard described above for “willfulness” under §362(k) in its prior incarnation as §362(h).
The court held that a violation of the automatic stay may not be “willful” if the creditor’s action is based
on persuasive legal authority indicating that his or her actions do not violate the stay and the law on the
issue is sufficiently unsettled. 973 F.2d at 1088. A number of courts have concluded that the University
Medical Center good faith exception was legislatively overruled by the BAPCPA amendments to
§362(k). See In re Douglas Young Builder, Inc., 2009 WL 2827959, at *4 (Bankr. E.D. Pa. Sept. 1,
2009); In re Lightfoot, 399 B.R. 141, 149-50 (Bankr. E.D. Pa. 2008); In re McWilliams, 384 B.R. 728,
730 (Bankr. D.N.J. 2008); In re Mu’min, 374 B.R. 149, 167-70 (Bankr. E.D. Pa. 2007).
12
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See In re Price, 42 F.3d 1068, 1071 (7 Cir. 1994); Wingard, 382 B.R. at 902; In re Orman, 2006th
WL 4470839, at *3 (Bankr. E.D. Okla. Sept. 18, 2006); In re Kinsey, 349 B.R. 48, 51-52 (Bankr.
D. Idaho 2006); In re Saratoga Springs Plastic Surgery, P.C., 2005 WL 357207, at *4-5
(N.D.N.Y. Feb. 11, 2005), aff’d, 172 Fed. Appx. 339 (2d Cir. Mar. 2, 2006); see also In re
Lofton, 385 B.R. 133, 138-41 (Bankr. E.D.N.C. 2008) (failure of creditor’s employee to note the
bankruptcy filing in both hard copy and computer account records); In re Parker, 279 B.R. 596,
603-04 (Bankr. S.D. Ala. 2002) (when one (1) IRS employee has been given notice of the
bankruptcy filing, all IRS employees are chargeable with notice); In re Stamps, 2000 WL
1706897, at *5 (Bankr. N.D. Ill. Nov. 14, 2000) (willfulness found based on a clerical error, but
influenced by creditor’s four (4) day delay before returning wrongfully repossessed automobile);
In re Hill, 222 B.R. 119, 123-24 (Bankr. N.D. Ohio 1998) (finding willfulness in case involving
clerical error under §524(a)(2)); In re Brown, 1995 WL 776920, at *2 (Bankr. S.D.Ga. Oct.
30,1995) (suggesting that error in coding computer is willful, but finding record inadequate for
grant of summary judgment); Matter of Cowart, 128 B.R. 492, 497 (Bankr. S.D. Ga. 1990)
(dictum, in light of the court’s holding that sovereign immunity barred the damage claim).
I will follow the cases that I have characterized as representing the majority line. These
decisions are more consistent with binding appellate precedent in this circuit. The repeated
instruction of the Court of Appeals has been that the concept of willfulness in §362(k) goes to the
voluntariness and intentional nature of the action taken by the creditor that violates the stay, not
to any specific awareness that the stay is being violated (provided that the creditor is on notice of
the bankruptcy case). The fact that the creditor’s conduct was triggered by human or computer
error, causing the creditor to misperceive the status of the bankruptcy debtor’s account, tends to
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establish only that the creditor was unaware that its (debt collection) actions violated the stay.
But that is beside the point because there is no “specific intent” requirement embedded in
§362(k). By equating the “innocent” clerical error with a lack of willfulness, the “minority” line
of cases veers toward the imposition of a specific intent requirement, a requirement that has been
unequivocally rejected by the Court of Appeals. See Atl. Bus. & Cmty. Dev. Corp., 901 F.2d at
329.16
Here, it is undisputed that PGW was on notice of the bankruptcy case and the automatic
stay at the time the Debtors made their May 5 Payment. It is also undisputed that PGWth
voluntarily applied the Debtors’ May 5 Payment of the March 26 Bill for post-petition serviceth th
and adequate assurance to the Debtors’ Pre-Petition Account, albeit due to human error. This
voluntary conduct, with knowledge of the stay, was willful within the meaning of 11 U.S.C.
§362(k).17
As a result, I find that the Debtors’ claim for damages under 11 U.S.C. §362(k) for the
misapplied May 5 Payment is meritorious and that the Debtors were damaged in the amount ofth
The discussion in the text is not intended to suggest that §362(k) imposes a system of	16
strict liability. There is a scienter requirement under §362(k). The creditor must have knowledge of the
stay and then engage in voluntary (debt collection) activity in violation of the stay. A stay violation is
not actionable unless both the knowledge and voluntariness requirements are satisfied. Not every stay
violation will satisfy both of those requirements.
I note that, unlike the Debtors’ May 5 Payment, the Debtors’ $523.01 March 11	17 th th
payment was made before PGW had notice of the bankruptcy case and the automatic stay. The Debtors
do not appear to be claiming that PGW’s application of the $523.01 March 11 Payment to the Pre-	th
Petition Account gives rise to §362(k) liability. Nor have the Debtors argued that PGW willfully violated
the automatic stay by failing to correct the misapplication of the March 11 Payment after receiving	th
notice of the earlier bankruptcy filing. See. e.g., Commercial Credit Corp. v. Reed, 154 B.R. 471
(E.D.Tex. 1993); In re Weatherford, 2009 WL 2900265 (Bankr. D.S.C. Apr. 6, 2009); In re Thorne, 2008
WL 2385991 (Bankr. M.D.N.C. June 11, 2008).
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$353.86 as a result of PGW’s willful stay violation.
E.
The other defenses PGW raises, some of which have already been briefly discussed
above, relate solely to PGW’s alleged liability for terminating the Debtors’ gas service (rather
than the misapplication of the Debtors’ May 5 Payment). PGW argues that it did not violate theth
automatic stay by terminating the Debtors’ gas service, its actions were not willful and that, in
any event, it is not liable for the damages the Debtors allege resulted from the termination of
service.18
I find it unnecessary to resolve these issues. As explained below, even if I were to reject
all of PGW’s arguments, the Debtors have not met their burden of sufficiently quantifying the
damages they assert that they suffered as a result of the termination of their gas service.
The Debtors contend that, by virtue of PGW’s termination of their gas service, they were
damaged in an amount equal to their out-of-pocket expenditure for the purchase of a new hot
water heater, i.e., $531.05. PGW argues that reimbursing the Debtors for their entire out-of-
pocket expense would more than compensate them for their loss and would provide them with a
windfall. I agree with PGW.
By spending $531.05, the Debtors replaced a used hot water heater with a new hot water
heater. Because the Debtors’ outlay of $531.05 provided them with “upgraded” equipment, full
As explained in Part IV.B., supra, PGW argues that; (1) the termination of service did	18
not violate the stay because PGW’s intent was to enforce its right to payment of the Debtors’ post-
petition obligations, not their pre-petition obligations; and (2) the Debtors’s purchase of a new hot water
heater was unnecessary and unreasonable, making the Debtors more responsible than PGW for that
expense.
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reimbursement would put the Debtors in a better position than they were before the asserted stay
violation. Therefore, it would be inappropriate to award the Debtors their entire out-of-pocket
expense. If the Debtors were damaged, it is because the amount of their expenditure ($531.05)
exceeded the benefit they obtained (the increased value of the new equipment). To measure the
difference between what the Debtors paid and the benefit obtained, it is necessary to subtract the
fair market value of the “old” appliance from the cost (and fair market value) of the new
appliance.19
As a general principle, actual damages under 11 U.S.C. §362(k) “must be prove[n] with
reasonable certainty, and mere speculation, guess or conjecture will not suffice.” Aiello v.
Providian Fin. Corp., 257 B.R. 245, 249 (N.D. Ill. 2000), aff’d, 239 F.3d 876 (7 Cir. 2001);th
accord In re Heghmann, 316 B.R. 395, 405 (B.A.P. 1 Cir. 2004) (“actual damages should best
awarded only if there is concrete evidence supporting the award of a definite amount”); In re
Sculky, 182 B.R. 706, 708 (Bankr. E.D. Pa. 1995) (“[d]amages may not be awarded based upon
speculation, guess and conjecture”). The burden of proof on the issue is on the Debtors. See,
e.g., Main, Inc. v. Blatstein, 1999 WL 424296, at *5 (E.D. Pa. June 23, 1999); In re Lord, 270
B.R. 787, 794 (Bankr. M.D. Ga. 1998); see generally In re FRG, Inc., 121 B.R. 451, 458 (Bankr.
In cases involving damage to personal property caused by negligence, damages are	19
typically measured by the cost of repair if the injury is remediable, by the depreciation in the value of the
property if the injury is permanent or, if the cost of repair exceeds the pre-injury value of the property, by
the total value of the property. See, e.g., Bogar v. Sperry Rand Corp., 504 F.Supp. 872, 876 (E.D. Pa.
1980), aff’d, 671 F.2d 495 (Table) (3d Cir. 1981); In re Marianni, 21 B.R. 228, 231 (Bankr. E.D. Pa.
1982); Pa. Dept. of Gen. Serv. v. U.S. Mineral Prod. Co., 898 A.2d 596, 612-23 (Pa. 2006). This case is
a little different because it involves the purchase of a new item of personal property that is allegedly
caused by an improper, intentional act, rather than tortious damage or destruction of an existing item.
However, the methodology set out in the text is consistent with the approach used by the courts under the
more common fact pattern.
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E.D. Pa. 1990).
Here, there is nothing in the record that would permit any finding regarding the
comparative values of the “old” and “new” hot water heaters. I know nothing about them other
than the cost of the new heater. The Debtors produce no evidence concerning the original cost,
age or life expectancy of the “old” hot water heater. I do not know if the two (2) pieces of
equipment were equivalent in terms of their storage capacity. Nor do I know if any of the cost of
the “new” equipment included a warranty. It is therefore, impossible to determine the extent of
the Debtors’ damages. Any award of damages would necessarily be based on pure,
impermissible speculation. As the Debtors bear the burden of proof on the issue, no damages
may be awarded. Because no damages may be awarded, it is immaterial whether the termination
of gas service constituted a willful stay violation.
V. CONCLUSION
For the reasons set forth above, the Motion will be granted. An Order consistent with this
Memorandum will be entered.
Date: October 26, 2009
ERIC L. FRANK
U.S. BANKRUPTCY JUDGE
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