In re Egleston
| Decision Date | 05 May 2006 |
| Docket Number | No. 04-31113.,04-31113. |
| Parties | In the Matter of: Leon Alan EGLESTON, Debtor. Vicki Marie Egleston, Appellant-Cross-Appellee, v. Leon Alan Egleston, Appellee-Cross-Appellant. In the Matter of: Leon Alan Egleston; Sharon L. Michaels Egleston, Debtors. Vicki Marie Egleston, Appellant-Cross-Appellee, v. Leon Alan Egleston; Sharon L. Michaels Egleston, Appellees-Cross-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Curtis Ray Shelton (argued), Cook, Yancey, King & Galloway, Shreveport, LA, for Vicki Egleston.
James A. Rountree (argued), Rountree Law Offices, Monroe, LA, for L. Alan and Sharon L. Michaels Egleston.
Appeals from the United States District Court for the Western District of Louisiana.
Before GARWOOD, CLEMENT and PRADO, Circuit Judges.
Vicki Marie Egleston appeals the summary judgment in her adversary proceeding to except from discharge various Pennsylvania state court judgments rendered against her ex-husband, a Chapter 7 debtor, Leon Alan Egleston. We affirm in part, reverse in part, and remand.
The ceaseless litigation following the 1993 divorce of Vicki Marie Egleston (Vicki) and Leon Alan Egleston (Alan) has once again reached this court. On September 14, 1993, the Court of Common Pleas of Westmoreland County, Pennsylvania (state court) entered a consent order to enforce a marital settlement agreement (settlement order) between the Eglestons. The settlement order provided, inter alia, for the payment of alimony and the distribution of property.1
Six months after the settlement order, on March 14, 1994, Alan filed a Chapter 7 bankruptcy petition in the Western District of Louisiana. In response, Vicki moved to lift the automatic stay as to her claims for alimony and she filed an adversary proceeding under 11 U.S.C. § 523(a)(5) to contest the discharge of certain obligations under the settlement order. On July 18, 1994 the automatic stay was lifted only for Vicki's claims for the alimony payments described in paragraph nine of the settlement order. On September 27, 1994, Vicki obtained a state court order that adjudged Alan in contempt for failure to comply with the settlement order and directed him to pay $51,400 in alimony arrearages and $3,000 in attorneys' fees.
Meanwhile, in her adversary proceeding in the bankruptcy court, Vicki argued that the payments provided for in paragraph eight of the settlement order should also be excepted from Alan's discharge. The eventual result of that proceeding—after an appeal that provided the first opportunity for this court to address the Egleston dispute, see Egleston v. Egleston, No. 95-30641 (5th Cir. Feb.5, 1996) (unpublished)—was the bankruptcy court's judgment on April 16, 1996, that 136 monthly payments of $4,000 were excepted from Alan's discharge as alimony under section 523(a)(5). These payments included all 131 of the payments provided for in paragraph nine of the settlement order, see supra (note 1), and an additional five payments considered to be alimony under the provisions of paragraph eight.2 The balance of payments under paragraph eight did not constitute alimony, and therefore Vicki's claim to that amount was discharged.
Alan did not always timely pay his nondischarged monthly alimony obligations of $4,000, and Vicki subsequently relied on Pennsylvania state court contempt proceedings to force payment.3 A review of the docket entries for the Egleston divorce case reveals various state court efforts to ensure that Alan met his alimony obligations including orders, wage attachments, and even imprisonment for contempt. Alan generally found himself on the losing side of the state court's judgments. Specifically, on January 16, 1998, the state court again adjudged Alan in contempt of court and noted that Vicki "lost the marital home through mortgage foreclosure" due to Alan's failure to pay alimony "for a considerable period of time." The court was unable to determine Vicki's damages at that time and so it granted leave for the parties to present additional testimony of losses or credits. The court also noted that Alan had failed to pay to Vicki the sum of $77,900 for the sale of his medical practice pursuant to paragraph eight of the settlement order.4 The state court was apparently not informed that the only obligation under paragraph eight that was not discharged by Alan's bankruptcy was the sum of $20,000 in the form of five additional monthly alimony payments of $4,000. As a result, the state court ordered Alan to pay $77,900 with interest from January 1, 1994. Then on June 18, 1998, following a hearing that Alan did not attend and at which he presented no evidence,5 the state court again adjudged Alan in contempt of court and ordered Alan, inter alia, to pay to Vicki the following sums: (a) $42,275 in attorneys' fees that Vicki incurred in attempts to enforce the settlement order, (b) $65,000 for Vicki's lost equity in real property, (c) $20,000 for Vicki's lost equity in her automobile that was repossessed, (d) $10,000 for the value of Vicki's lost personal property (some apparently taken by Alan and some sold by Vicki when Alan's alimony payments were not made), and (e) $6,000 for Vicki's costs associated with traveling to Louisiana to defend the property settlement agreement in Alan's bankruptcy. Although the litigation has continued to the present day, resulting in many additional orders from the state court,6 the current dispute primarily involves the bankruptcy court's treatment of the abovedescribed amounts first awarded by the state court in January and June of 1998.
On October 12, 2001, at Alan's request, the bankruptcy court reopened Alan's 1994 bankruptcy, and, on November 28, 2001, Alan filed an adversary proceeding alleging that Vicki violated the injunction of 11 U.S.C. § 524(a)(2) by bringing state court proceedings to collect Alan's discharged debts. Alan asked the bankruptcy court to (1) void portions of the state court judgments, (2) enjoin Vicki from future attempts to collect the now-discharged obligations of the settlement agreement, (3) find Vicki in contempt of court, and (4) award damages and attorneys' fees. On June 4, 2002, Alan and his current wife, Sharon, filed a new bankruptcy petition, which was consolidated with Alan's 1994 bankruptcy. On September 6, 2002, Vicki filed an adversary proceeding in the new case, claiming that the state court judgments against Alan are not dischargeable. Alan's adversary proceeding of November 28, 2001 and Vicki's adversary proceeding of September 6, 2002 were consolidated and Alan moved for summary judgment on December 12, 2003.
Meanwhile, on September 17, 2003, the state court issued an order that finally acknowledged the 1994 bankruptcy and its effect on the earlier state court judgments.7 This order (1) set Alan's alimony arrearage at $96,405.15; (2) concluded that the January 16, 1998 state court order to Alan to pay Vicki the sum of $77,900 was related to the settlement agreement's equitable distribution provisions that had been discharged in bankruptcy; (3) recognized that the judgment for interest accrued on the discharged equitable distribution obligation was similarly defective; and (4) noted that the bankruptcy court would have to determine the validity of the other components of the state court judgment of June 18, 1998.
On May 17, 2004, the bankruptcy court granted Alan's motion and ruled that Alan's prior bankruptcy discharge caused all of Vicki's claims, except for the claim for non-discharged alimony, to be barred by res judicata. The bankruptcy court set $36,405.15 as the balance remaining on Alan's non-discharged alimony, enjoined the parties from taking actions contrary to its ruling, annulled the state court orders to the extent they are contrary to the bankruptcy court's Reasons for Decision, and dismissed with prejudice all of the parties' remaining claims, including Alan's claim for the damages caused by Vicki's contempt of court.
Vicki appealed to the district court, which affirmed the bankruptcy court's judgment. Specifically, the district court concluded that Alan's obligation to pay any of the proceeds from the sale of the medical practice was discharged in the 1994 bankruptcy and Vicki cannot revive her claim to these proceeds. This conclusion dispensed with the amounts awarded in the state court's January 16, 1998 order. In its analysis of the amounts awarded by the state court on June 18, 1998, the district court considered the award for compensatory damages separately from the award for attorneys' fees. For the compensatory damages, the district court held that the bankruptcy court's conclusion that this portion of the award was barred by res judicata was a conclusion of fact that was not clearly erroneous. For the attorneys' fees, however, the district court explicitly declined to adopt the bankruptcy court's reasoning and instead affirmed the decision to annul the attorneys' fees by applying the equitable doctrine of unclean hands. In discussing Vicki's "unclean hands," the district court noted that Vicki's actions in state court "went far beyond an attempt to recover alimony and constituted an attempt to re-litigate issues that were finalized in the 1994 bankruptcy."
Alan also appealed to the district court, attempting to revive his claim for damages caused by Vicki's violation of the permanent injunction of section 524(a)(2). The district court affirmed the dismissal with prejudice of this claim, noting that Alan provided no support for his claim for damages and also noting that, because Vicki's state-court awards were annulled, Alan's only remedy is the injunctive relief provided by the bankruptcy court.
Vicki appeals from the judgment of the district court.8
Our jurisdiction to hear this appeal from the district court's judgment affirming the bankruptcy court is provided under 28 U.S.C. § 158(d)....
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