In re Martin
| Decision Date | 07 March 2012 |
| Docket Number | No. 11–8052.,11–8052. |
| Citation | 474 B.R. 789 |
| Parties | In re Tammy S. MARTIN, Debtor. |
| Court | U.S. Bankruptcy Appellate Panel, Sixth Circuit |
OPINION TEXT STARTS HERE
Appeal from the United States Bankruptcy Court for the Northern District of Ohio, Eastern Division at Cleveland. No. 09–13675.
ON BRIEF:Daniel D. Wilt, Willoughby Hills, Ohio, for Appellant. Shorain L. McGhee, Anthony J. Amato, Parma Heights, Ohio, for Appellee.
Before: EMERSON, FULTON, and PRESTON, Bankruptcy Appellate Panel Judges.
The appellant in this case, John Hayes, appeals a July 18, 2011 bankruptcy court order imposing sanctions against him in the amount $4,045.00 for violating the debtor's discharge injunction. The sanctions are based on a March 16, 2011 memorandum opinion and order in which the bankruptcy court concluded that Hayes had violated the discharge injunction by filing a state court lawsuit against the debtor to collect a discharged debt. For the reasons that follow, we affirm the order of the bankruptcy court.
The issues presented by this appeal are whether the bankruptcy court erred in (1) finding John Hayes in contempt of the discharge injunction and (2) awarding the debtor $4,045.00 in damages for said violation. Implicit in both of these issues is the determination of whether the bankruptcy court erred in concluding that (1) the debtor had not reaffirmed the debt and (2) the parties had not entered into a new, post-petition contract for payment of the debt.
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Northern District of Ohio has authorized appeals to the Panel and no party has timely elected to have this appeal heard by the district court. 28 U.S.C. § 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, a final order “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989) (citations omitted).
Although the bankruptcy court in this case originally found John Hayes in contempt on March 16, 2011, that order was not final until the sanctions were imposed on July 18, 2011. Wicheff v. Baumgart ( In re Wicheff ), 215 B.R. 839, 843 (B.A.P. 6th Cir.1998) (citing U.S. Abatement Corp. v. Mobil Exploration & Producing U.S., Inc. ( In re U.S. Abatement Corp.), 39 F.3d 563, 567 (5th Cir.1994). Consequently, the July 18, 2011 order imposing sanctions against John Hayes completely resolved the contempt issues between the parties and made the order of contempt, as well as the imposition of sanctions, final and appealable. U.S. Abatement Corp., 39 F.3d at 567;Official Comm. of Subordinated Bondholders v. Integrated Res., Inc. ( In re Integrated Res., Inc. .), 3 F.3d 49, 53 (2nd Cir.1993). The notice of appeal filed by John Hayes on July 26, 2011 was, therefore, timely.
A bankruptcy court's finding of contempt and imposition of sanctions are reviewed for an abuse of discretion. Liberte Capital Grp., LLC v. Capwill, 462 F.3d 543, 550 (6th Cir.2006); Badovick v. Greenspan ( In re Greenspan ), No. 10–8019, 2011 WL 310703, *1 (B.A.P. 6th Cir. Feb. 2, 2011) (unpublished table decision) (). “An abuse of discretion occurs only when the [trial] court relies upon clearly erroneous findings of fact or when it improperly applies the law or uses an erroneous legal standard.” Kaye v. Agripool, SRL (In re Murray, Inc.), 392 B.R. 288 (B.A.P. 6th Cir.2008); See also Mayor of Balt., Md. v. W. Va. (In re Eagle–Picher Indus., Inc.), 285 F.3d 522, 529 (6th Cir.2002) () (internal citation omitted). “The question is not how the reviewing court would have ruled, but rather whether a reasonable person could agree with the bankruptcy court's decision; if reasonable persons could differ as to the issue, then there is no abuse of discretion.” Barlow v. M.J. Waterman & Assocs. Inc. ( In re M.J. Waterman & Assocs., Inc.), 227 F.3d 604, 608 (6th Cir.2000).
A bankruptcy court's application and interpretation of 11 U.S.C. § 524 poses a mixed question of law and fact. Ford Motor Credit Co., LLC v. Morton ( In re Morton ), 410 B.R. 556, 559 (B.A.P. 6th Cir.2009). The court's interpretation of § 524 is reviewed de novo. Id. “Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination.” Menninger v. Accredited Home Lenders (In re Morgeson), 371 B.R. 798, 800 (B.A.P. 6th Cir.2007). The court's determination that the parties did not enter into an enforceable reaffirmation agreement or a new post-petition contract is a question of fact which is reviewed for an abuse of discretion. Rajotte v. Carter ( In re Rajotte ), 81 Fed. App'x 29, 32 (6th Cir.2003).
In December 2006, Tammy Martin (“Debtor”) and John Hayes (“Appellant”) entered into an agreement whereby Debtor agreed to purchase a business called “The Sea Level Lounge” (“Lounge”) in Cleveland, Ohio, from Appellant's corporation, Eagle Bar, Inc. The purchase price of $210,000 included the building, real estate, equipment, inventory and liquor license. Debtor paid $30,000 of the purchase price as a down payment and agreed to pay Appellant the remaining balance in monthly installments of $1,700.00. Debtor signed a promissory note and executed a mortgage granting Eagle Bar, Inc., a lien on the real estate.
In January 2009, Debtor began having financial difficulties and offered to give the Lounge back to Appellant. Appellant did not want the business back and instead offered to lower the monthly payment to $800.00. Debtor agreed.
Debtor filed a chapter 7 petition for bankruptcy relief on April 29, 2009. She listed Appellant among her creditors for the debt on the Lounge. After filing bankruptcy, Debtor again expressed her desire to give the Lounge back to Appellant. Appellant refused to take the property back. The parties did not enter into a reaffirmation agreement for the Lounge. Debtor did, however, continue to make post-petition payments to Appellant. Debtor voluntarily paid Appellant $800 in June, July, August, September, October, November and December 2009 and in January, March and April 2010. Debtor received her chapter 7 discharge on August 10, 2009.
On September 30, 2010, Appellant sued Debtor in the Court of Common Pleas of Cuyahoga County, Ohio, for the outstanding balance of the debt on the Lounge. In his state court complaint, Appellant alleged that Debtor had voluntarily entered into an oral agreement with him in June 2009 to continue paying for the Lounge. Appellant asserted this new agreement was “supported by consideration and is independent and apart from the old agreement” which was discharged in bankruptcy. ( ” at 3–4, Bankr.Case No. 09–13675, ECF No. 30). Appellant also alleged that Debtor had voluntarily advised Appellant that she did not intend to discharge her liability on the Lounge debt.
On November 3, 2010, Debtor filed a motion to reopen her chapter 7 case for the purpose of enforcing her chapter 7 discharge against Appellant. The court granted her motion and the case was reopened on December 8, 2010. Thereafter, Debtor filed a motion seeking an order requiring Appellant to show cause why he should not be held in contempt for filing the state court lawsuit. Debtor denied Appellant's allegation that she intended not to discharge the obligation for the Lounge. She also denied that she had entered into a new agreement with him to repay the debt.
Appellant filed a response to Debtor's motion to show cause on January 20, 2011, in which he reiterated the arguments from his state court complaint that Debtor had entered into a new agreement post-petition to continue paying for the Lounge and that she had expressed an intent not to discharge the debt thereon. In support of his “new agreement” argument, Appellant stated that a discharge entered under 11 U.S.C. § 524 does not prohibit a creditor from “instituting proceedings to collect on a debt” if a debtor makes a post-petition agreement to repay a pre-petition debt. ( ” .
The bankruptcy court granted Debtor's motion for an order to show cause on January 27, 2011, and ordered Appellant to appear and show cause on March 11, 2011, why he should not be held in contempt for violating the discharge injunction.
At the show cause hearing, Appellant reiterated his arguments that Debtor told him she did not intend to discharge the debt and that she had orally agreed to enter into a new contract on the Lounge. (March 11, 2011 Tr. of Hr'g at 32, Bankr.Case No. 09–13675, ECF No. 64). Appellant asserted that the monthly checks satisfied the Statute of Frauds and that these checks were adequate consideration for the new agreement. The Appellant also alleged that these payments indicated an assent on Debtor's part to make the new agreement to pay for the Lounge. “It shows that Ms. Martin knew of the oral understanding, agreed to the oral understanding and paid for the oral understanding.” (March 11, 2011 Tr. of Hr'g at 51, Bankr.Case No. 09–13675, ECF No. 64). Appellant went on to assert that pursuant to 11 U.S.C. § 524(f), Debtor's voluntary post-petition payments obligated her to continue making the payments until the debt was paid in full.
On March 16, 2011, the bankruptcy court issued a memorandum opinion and order in which it concluded that (1) the parties had not...
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