In re Meadows, Bankruptcy No. 05-50086-PWB

CourtUnited States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia
Citation428 B.R. 894
Docket NumberBankruptcy No. 05-50086-PWB,Adversary No. 07-04033
PartiesIn re Darrell Ryan MEADOWS, Debtor. Darrell Ryan Meadows, Plaintiff, v. Carter Hagler, d/b/a Hagler Personal Properties, Defendant.
Decision Date08 April 2010
428 B.R. 894

In re Darrell Ryan MEADOWS, Debtor.
Darrell Ryan Meadows, Plaintiff,
Carter Hagler, d/b/a Hagler Personal Properties, Defendant.

Bankruptcy No. 05-50086-PWB.
Adversary No. 07-04033.

United States Bankruptcy Court,
N.D. Georgia,
Rome Division.

April 8, 2010.

428 B.R. 897

Robert S. Toomey, Law Office of Robert S. Toomey, PC, Cartersville, GA, for Debtor, Darrell Ryan Meadows.

Findings of Fact and Conclusions of Law

PAUL W. BONAPFEL, Bankruptcy Judge.

This adversary proceeding concerns the effect under 11 U.S.C. § 524(a) of a chapter 7 debtor's discharge on a landlord's claim for rent due on a prepetition lease of real property and on a judgment for rent the landlord obtained.

For reasons set out below, the Court concludes that the landlord sought and obtained judgment on the basis of a prepetition claim against the debtor that was

428 B.R. 898
discharged in his bankruptcy case, that his doing so violated the discharge injunction of 11 U.S.C. § 524(a)(2), and that the judgment is void under 11 U.S.C. § 524(a)(1). Further, the Court concludes that the neither the Rooker-Feldman doctrine nor the full faith and credit statute, 28 U.S.C. § 1738, precludes granting relief to the debtor. The Court declines, however, to award any sanctions against the Landlord.

This Order constitutes the Court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a), applicable under Fed. R. Bankr.P. 7052. 1

I. Facts

Darrell Meadows, the plaintiff in this action (the "Debtor"), and his wife, Candice, entered into a lease dated July 1, 2004, for residential property with the defendant, Carter B. Hagler (the "Landlord").2 The lease was for a term of 24 months, ending on June 30, 2006, with rent of $985 per month, due in advance, and a $25 late charge if rent was not paid in full by the fifth day of each month. The Landlord held a $500 security deposit.

The Debtor and his wife had been leasing the property since March 2003 under a lease that had expired.3 As of the date of the new lease on July 1, 2004, the Debtor and his wife owed $985 in rent, and the Landlord held a $500 security deposit. Both items were carried over in the accounting with regard to the new lease.4

On March 17, 2005, the Debtor filed a chapter 7 petition in this Court. He listed the lease as an unexpired lease on Schedule G and the security deposit as an asset on Schedule B. He also listed the Landlord on the list of creditors he filed in the case, and the Landlord's name and address thus appears on the list of creditors who received notice of the case.5 The Debtor did not, however, list any debt as owing to the Landlord on his schedules. The Landlord knew about the bankruptcy filing around the time it was filed. 6

According to the Landlord's records,7 the amount due on the lease at the time of the filing of the bankruptcy petition was $3,470, representing rent and late fees due for a portion of December 2004, and all of

428 B.R. 899
the rent for January through March 2005, about three and a half months.

Because assumption of the lease did not occur in the case, it was automatically deemed rejected under 11 U.S.C. § 365(d)(1). The Debtor did not reaffirm any obligation to the Landlord under 11 U.S.C. § 524(c). The Debtor received a discharge on June 30, 2005.

The Landlord asserts that the Debtor and his wife contacted him before the Debtor filed his bankruptcy case to inform him of the upcoming filing and to assure him that they intended to stay in the premises and would continue to pay rent.8 The Landlord further asserts that the Debtor never indicated that they intended to surrender the property or to discharge any rent obligation to him. The Landlord reviewed the Debtor's petition and schedules, noting that he did not list any amount due to him as a debt and did not list the lease in his statement of intention. The Landlord concluded that the Debtor's statements in his petition and schedules coincided with his earlier statements regarding his treatment in the bankruptcy case, so he saw no need to seek legal counsel.9

After the filing of the bankruptcy case, the Landlord continued to receive payments of rent. During the 15 months after the filing of the Debtor's case (April 2005—June 2006) until the lease expired, the Landlord received payments totaling $14,550.10 The Landlord's accounting shows charges for this period of $15,000. Although the rent for 15 months at $985 per month is only $14,775, the Landlord also charged a late fee of $15 for each of the months ($10 less than the lease permitted). The late fee arose because the Landlord applied the payments he received to the oldest amounts due, so all of the payments following the Debtor's bankruptcy case were not timely under the terms of the lease.

It appears that, of the 15 payments made during the period, five were made by checks with the Debtor's name that the wife signed 11 and two in cash that the Debtor delivered.12 During all this time, the Landlord points out, the Debtor continued to live in the premises and never indicated that he intended to discharge any obligation.13

At the end of the lease term, therefore, the Landlord's accounting shows $3,920 due, which is consistent with the initial, pre-bankruptcy amount due of $3,470 plus $450, the amount by which post-bankruptcy charges exceeded post-bankruptcy receipts. In the last month of the lease term, the Landlord and the Debtor met for an accounting of rent payments. The Debtor agreed that he owed rent for four months (February—June 2006), paid rent for February 2006, and agreed to pay the remaining amount due in one payment, all without indicating that the obligation had been discharged in bankruptcy.14

428 B.R. 900

After unsuccessful attempts to contact the Debtor after he and his wife moved out of the premises at the expiration of the lease term, the Landlord succeeded in reaching the Debtor's wife in November. The Debtor's wife told the Landlord that in her view the Debtor's bankruptcy filing had discharged the obligation. The Landlord asserts this was the first time he had heard this contention.15 After the Landlord received no response to his demand letter offering to accept payment of rent without late fees of $600 and charges of $307 for cleaning and repair of a window,16 the Landlord filed a complaint in December 2006 in the Magistrate Court of Bartow County against the Debtor and his wife.

The complaint asserted a claim for rent of $985 for each of March through June in the amount of $3,940 plus $407 representing the amount due for late fees after credit for the security deposit remaining after deductions for damages and cleaning,17 for a total of $4,347, plus court costs of $69. 18 The Debtor's wife filed an answer on behalf of both of them, which attached copies of the Debtor's discharge in his case and of a cover sheet indicating the filing of her bankruptcy case.19

The matter came on for trial, at which only the Landlord appeared.20 After a trial, the Magistrate Court entered judgment in favor of the Landlord and against both the Debtor and his wife in the principal amount of $4,347, plus interest and costs of $69.21 The Magistrate Court noted that the Debtor and his wife had filed the bankruptcy information just mentioned, but concluded that it did not preclude prosecution of the claim or entry of judgment. The Magistrate Court stated: 22

No other information was available with regard to Candice Meadows' bankruptcy filing, but Plaintiff introduced into evidence a complete copy of Darrell Meadows' bankruptcy petition. The indebtedness sued upon by Plaintiff is not scheduled in Mr. Meadows' petition, and there is no evidence that such debt was scheduled in Mrs. Meadows' petition. Bankruptcy being an affirmative defense, the Court finds that the Defendants
428 B.R. 901
have not met their burden of proving that the instant action is barred by any Bankruptcy Stay or Discharge.

After entry of judgment, and apparently in response to a wage garnishment action, the Debtor filed this adversary proceeding asserting a willful violation of the discharge injunction and seeking actual and punitive damages.

II. Claims and Defenses of the Parties

The Debtor contends that the Landlord's actions were to collect a prepetition debt that was discharged in his bankruptcy case and that, therefore, the Landlord violated the discharge injunction of 11 U.S.C. § 524(a)(2) and the judgment is void under 11 U.S.C. § 524(a)(1). The Debtor seeks a determination that the judgment is void and an award of actual and punitive damages.

The Landlord asserts that he sued on a post-petition obligation of the Debtor, i.e., rent he owed for March through June 2006 and, therefore, the discharge injunction does not apply. The postpetition obligation, he asserts, arises from a tenancy at will that arose following the Debtor's bankruptcy case based on his continued occupancy of the premises after the filing of his bankruptcy case, his post-petition payment of rent, and his representations to the Landlord that he was obligated to pay the rent.

The Landlord correctly points out that, under Georgia law, an obligation to pay rent is generally implied when a party occupies real property owned by another, O.C.G.A. § 44-7-5, and that a tenancy at will arises when a tenant orally agrees to pay rent on premises he occupies, O.C.G.A. § 44-7-6. See, e.g., Diner One, Inc. v. Bank South N.A., 219 Ga.App. 702, 466 S.E.2d 234 (1995); Erfani v. Bishop, 251 Ga.App. 20, 22, 553 S.E.2d 326 (2001).

An alternative defense to the Debtor's complaint is that the Magistrate Court judgment determined that the Debtor's discharge did not bar the action for rent 23 and that the Debtor cannot challenge that determination in this Court under the doctrine of claim preclusion (traditionally referred to as res judicata 24). This argument implicates the Rooker-Feldman doctrine, which holds that a federal District Court lacks subject-matter jurisdiction to entertain a challenge, on federal...

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