Hann v. Educ. Credit Mgmt. Corp. (In re Hann)

• Decision Date: 07 August 2012
• Docket Number: BAP No. NH 11–084.,Bankruptcy No. 04–13901–JMD.,Adversary No. 11–01046–JBH.
• Parties: Barbara J. HANN, Debtor. Barbara J. Hann, Plaintiff–Appellee, v. Educational Credit Management Corporation, Defendant–Appellant.
• Court: U.S. Bankruptcy Appellate Panel, First Circuit

476 B.R. 344

Barbara J. HANN, Debtor.Barbara J. Hann, Plaintiff–Appellee,

v.Educational Credit Management Corporation, Defendant–Appellant.

BAP No. NH 11–084.

Bankruptcy No. 04–13901–JMD.

Adversary No. 11–01046–JBH.

United States Bankruptcy Appellate Panel of the First Circuit.

Aug. 7, 2012.

Christopher J. Pyles, Esq., and Adam C. Trampe, Esq., on brief for Defendant–Appellant.

Richard D. Gaudreau, Esq., Salem, NH, on brief for Plaintiff–Appellee.

Before HILLMAN, FEENEY, and HOFFMAN, United States Bankruptcy Appellate Panel Judges.

Hoffman, Bankruptcy Judge.

Educational Credit Management Corporation (“ECMC”) appeals from the following determinations of the United States Bankruptcy Court for the District of New Hampshire: (1) the October 20, 2011 order granting the motion of Barbara J. Hann (“Hann”) for summary judgment against ECMC based on its post-discharge efforts to collect a fully paid student loan obligation; (2) the October 20, 2011 order denying ECMC's cross-motion for summary judgment; and (3) the November 18, 2011 Final Judgment imposing sanctions on ECMC in the amount of $9,134.72, pursuant to Bankruptcy Code § 105¹ (collectively “the Orders”). For the reasons discussed below, the Orders are AFFIRMED.

BACKGROUND

Hann filed a voluntary petition for chapter 13 bankruptcy relief on November 2, 2004.² On Schedule F accompanying her petition, she listed National Asset Management as the holder of a disputed, contingent claim in the approximate amount of $55,000.00. She described the consideration for the claim as “Student Loans 1990–1993 Law School.” In February 2005, ECMC filed a proof of unsecured claim in the approximate amount of $55,000.00 (“the Claim”), based on Hann's allegedly unpaid student loans. ECMC attached three $7,500.00 Stafford Loan promissory notes (“the Stafford Notes”) as exhibits to the Claim, which notes were executed by Hann on May 10,1990, April 30, 1991, and May 20, 1992, respectively.³ ECMC also attached to the Claim its calculation of Hann's indebtedness, which purported to demonstrate that Hann owed a principal balance of approximately $31,000.00 on the Stafford Notes, plus collection costs of approximately $10,000.00, and unpaid interest of approximately $12,000.00.

In November 2005, Hann filed and served on ECMC an objection to the Claim (“the Claim Objection”), together with a proposed order and notice of hearing indicating a hearing date of January 10, 2006.⁴ In the Claim Objection, Hann asserted both that ECMC failed to adequately document the Claim, and that, in any event, she had already paid more than what was due under the Stafford Notes. Accordingly, in her prayer for relief, she asked the court to disallow the Claim, or, to allow it in an amount proved by ECMC's payment history records.

ECMC neither filed a response to the Claim Objection, nor attended the January 10, 2006 hearing. Despite the absence of a response, the bankruptcy court held an evidentiary hearing. Hann, who was represented by counsel at the hearing, testified at length regarding her payment history and her efforts to obtain an account reconciliation from ECMC in 1998 and 1999. She testified that between November 1998 and June 1999, she wrote to ECMC six times, informing it that she “thought [its] numbers were wrong.” She testified further that ECMC ignored her communications, that in September 1999, it garnished her federal tax refund, and that her subsequent efforts to resolve the dispute regarding the amount of the indebtedness were equally unsuccessful. In order to facilitate the disposition of the Claim Objection, the court asked Hann to submit an affidavit. She, in turn, offered to explain her payment history, “loan by loan.” In the context of this exchange, the court made the observation which, at least in part, fuels this dispute: “... to the extent there's anything out there, it's still excepted from discharge.”

The affidavit which Hann subsequently furnished (“the 2006 Hann Affidavit”) showed that from September 1990 to April 1993, she had borrowed a total of $84,089.00 in various student loans to fund law school tuition and related expenses. According to Hann, only $34,500.00 of that amount represented Stafford loans, which were originally obtained from Society Bank and later assigned to ECMC. In the 2006 Hann Affidavit, Hann chronicled her complicated student loan payment history. Significantly, she averred that on May 16, 1995 (“the May 1995 correspondence”), she received correspondence from Society Bank stating that the Stafford Notes had been paid. In the May 1995 correspondence, Society Bank enclosed one $7,500.00 Stafford Note marked “paid,” and a lost note affidavit from Society indicating that another note in the amount of $15,000.00, although lost, had been “settled in full.” ⁵ What emerges with clarity from the 2006 Hann Affidavit is her contention that she paid all of her student loans, including those arising from the Stafford Notes, in full prior to the commencement of her chapter 13 case.

On June 9, 2006, after due consideration, the bankruptcy court entered an order which provided, without explanation: “Debtor's [O]bjection to Claim [ ] 1 filed by ECMC is sustained. This [c]ourt allows the claim of ECMC in the amount of $0.00” (“the June 2006 Order”).⁶ ECMC did not appeal the June 2006 Order.

On March 2, 2010, Hann received a discharge after completion of her confirmed chapter 13 plan (“the Plan”).⁷ The discharge order specifically provided, in pertinent part:

The chapter 13 discharge order eliminates a debtor's legal obligation to pay a debt that is discharged. Most, but not all, types of debts are discharged if the debt is provided for by the chapter 13 plan or is disallowed by the court pursuant to [§ ] 502 of the Bankruptcy Code.

The discharge order further indicated that “[d]ebts for most student loans” are excepted from discharge. Shortly thereafter, on May 28, 2010, the court entered an order closing Hann's chapter 13 case.

On April 12, 2010, less than a month after the entry of the discharge order, ECMC wrote to Hann, advising her that it had received an assignment of three of her student loans, and that the loans were not discharged. The letter demanded that Hann establish a repayment schedule immediately. On April 22, 2010, Hann received another demand from ECMC. By letter of even date, Hann's counsel informed ECMC that Hann had completed her plan payments and had received her discharge, and requested ECMC to cease collection activity. In May 2010, ECMC wrote to Hann yet again, this time warning that her “prolonged refusal to establish a repayment schedule on [her] defaulted student loan(s) [could] not continue.” In March 2011, Hann received notice from the Department of the Treasury that her social security payments had been applied to her student loan debt.

On February 8, 2011, Hann filed a motion to reopen her bankruptcy case, which the court granted the following day. Two months later, she filed a four-count adversary complaint against ECMC (“the Complaint”).

In Count I of the Complaint, Hann sought injunctive relief, barring ECMC from continuing collection efforts on the subject student loans; in Count II, she sought a declaratory judgment that the June 2006 Order precluded ECMC from collecting the Stafford Notes; in Count III, she requested a finding of contempt pursuant to § 105; and in Count IV, she sought a determination that ECMC violated the automatic stay, thereby causing her “emotional damages.” ⁸ In her prayer for relief, she requested, inter alia, a finding that ECMC was in contempt of the June 2006 Order and sought an award of actual damages in the amount of $15,000.00, punitive damages, attorneys' fees, costs, and other appropriate relief.

In its answer, ECMC challenged the accuracy of the 2006 Hann Affidavit and denied that the June 2006 Order reflected or included a specific finding that Hann owed ECMC nothing. ECMC admitted that it continued to send Hann post-discharge collection letters, contending that the June 2006 Order did not discharge Hann's obligations under the Stafford Notes.

In September 2011, Hann filed a motion for summary judgment on the limited issue of liability (“Summary Judgment Motion”), in which she framed the underlying issue as follows: “[I]s ECMC entitled to continue to collect student loans after conclusion of her chapter 13 in which Judge Vaughn after an evidentiary hearing ruled that ECMC was owed $0.00.” Answering her own question in the negative, she argued:

[ ] To the extent ECMC seeks to now raise the possibility of a payment dispute in opposition to this motion, that ship has sailed ... The only issue for the court here is whether Judge Vaughn's orders were dispositive, and entitled to collateral estoppel effect.

In her accompanying memorandum of law, Hann further argued that the Plan specifically provided that “unsecured claims would only be paid if they were ‘allowed’ claims,” and that “ECMC's claim was not allowed as the amount owed was $0.00.” She also raised the four elements of collateral estoppel articulated in Keystone Shipping Co. v. New England Power Co., 109 F.3d 46, 51 (1st Cir.1997). While Hann did not address the application of all of those elements, she focused on the “actually litigated” requirement, maintaining that her presentation of “ample evidence” during the claims objection process satisfied that element.

ECMC filed an opposition to the Summary Judgment Motion and a cross-motion for summary judgment (“the Cross–Motion”), together with a supporting memorandum of law. In the Cross–Motion, ECMC asserted the position that dominates this appeal, namely, that “[c]hapter 13 disallowance does not extinguish a nondischargeable debt, and does not collaterally estop subsequent collection of the full amount.” It also argued that the discharge order of March 2010 similarly failed to discharge Hann's student loan debt.

In its supporting memorandum, ECMC asserted that the bankruptcy...