In re Paeplow, Bankruptcy No. 82-30928-RKR

• Citation: 119 BR 610
• Decision Date: 24 September 1990
• Docket Number: Adv. No. 90-3085.,Bankruptcy No. 82-30928-RKR
• Parties: In re William Douglas PAEPLOW, Debtor. William D. PAEPLOW, Plaintiff, v. Edmond W. FOLEY, R. Kent Rowe, R. Kent Rowe, III, Jerry E. Huelat, V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen, Defendants.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Indiana

119 B.R. 610 (1990)

In re William Douglas PAEPLOW, Debtor William D. PAEPLOW, Plaintiff, v. Edmond W. FOLEY, R. Kent Rowe, R. Kent Rowe, III, Jerry E. Huelat, V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen, Defendants.

Bankruptcy No. 82-30928-RKR, Adv. No. 90-3085.

United States Bankruptcy Court, N.D. Indiana, South Bend Division.

September 24, 1990.

Henry A. Hoover, South Bend, Ind., for plaintiff.

Edmond W. Foley, South Bend, Ind., for defendants.

AMENDED ORDER

ROBERT K. RODIBAUGH, Senior Bankruptcy Judge.

On July 25, 1990, William Douglas Paeplow, the debtor herein, filed his Verified Complaint for Injunction under 11 U.S.C. Section 524 against Edmond W. Foley, R. Kent Rowe, R. Kent Rowe III, Jerry E. Huelat, V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen. The defendants filed their Verified Motion to Strike and Request for Expedited Hearing on August 14, 1990, to which the debtor responded on August 27, 1990. The court held a hearing on the defendants' motion on August 28, 1990, and took the matter under advisement on September 7, 1990, after giving the parties the opportunity to file briefs.

At the pre-trial conference on the debtor's complaint on September 12, 1990, the parties advised the court that they have no further evidence to submit concerning the complaint unless the court grants attorney's fees to either party as a form of sanction, in which case the parties will need to present additional evidence to establish the necessary amount of the fees. Defendants' motion and the debtor's complaint thus are ripe for decision.

Background

William Douglas Paeplow filed his petition under Chapter 7 of the Bankruptcy Code on September 3, 1982. In his complaint the debtor alleges that on October 17, 1988, the defendants filed an Amended Complaint in the St. Joseph Superior Court, St. Joseph County, Indiana, to collect an obligation which has been discharged. The debtor indicates that he listed the obligation in his bankruptcy schedules and that this court discharged the same along with the debtor's other debts on January 6, 1984. The defendants' Amended Complaint is captioned V.L. Beagles, et al., v. Janis A. Paeplow in Cause No. R-4348 in the St. Joseph Superior Court. According to the debtor, defendants Edmond W. Foley, R. Kent Rowe, R. Kent Rowe III, and Jerry E. Huelat, who are attorneys, filed the Amended Complaint on behalf of defendants V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen, who are creditors of the debtor. The debtor contends that the defendants filed the complaint although they were aware that the debtor's obligation to them had been discharged in the debtor's Chapter 7 case. The debtor notes that the state court complaint concerns certain residential property which the debtor and his wife, Janice A. Paeplow, own as tenants by the entirety, subject to a purchase money mortgage lien. The debtor submits that he and Mrs. Paeplow have paid each mortgage installment payment due and payable on the property thereby increasing their equity in the real estate. Inasmuch as the trial on the defendants' complaint is scheduled for September 26, 1990, the debtor requests an injunction. The debtor asserts that he has no adequate remedy at law and that unless the court grants the relief which he has requested, he will suffer irreparable harm. The debtor also requests a monetary judgment against defendants along with attorney's fees and expenses, punitive damages, and sanctions.

In their Verified Motion to Strike and Request for Expedited Hearing the defendants ask the court to strike the debtor's complaint for injunction pursuant to Federal Rule of Civil Procedure 11. They allege that the debtor's complaint is not grounded in fact or law and that the debtor has filed his complaint in order to delay and harass them. The defendants request the court to sanction the debtor and at least to require him to reimburse them for their reasonable expenses in this matter. In support of their motion the defendants allege the following pertinent facts:

1. That on the 5th day of October, 1981, the plaintiff, William Paeplow, together with his wife, Janet, executed a joint note payable to the First Interstate Bank at its offices in Roswell, New Mexico, in the sum of Sixty Thousand ($60,000.00) Dollars to be paid in full on or before April 5, 1982.

2. That on or about the aforesaid date, the defendants, V.L. Beagles, Betty Beagles, Pete Cassen and Karen Cassen executed an agreement subordinating their rights to certain inventory and other property owned by the plaintiff, to the rights of the First Interstate Bank of Roswell, New Mexico arising out of the aforesaid note.

3. That Mr. and Mrs. Paeplow defaulted on said note and Mr. Paeplow filed a petition in bankruptcy on September 3, 1982. In order to protect their interests in the property they had subordinated to First Interstate Bank, the Beagles and the Cassens assumed liability on said note.

4. That on December 12, 1983, a motion for relief from automatic stay, was filed by First Interstate Bank of Roswell seeking permission for leave to file an action in state court against Mr. Paeplow solely for the purpose of obtaining a joint judgment against William Paeplow and his wife so that execution might obtain against certain real estate owned by Mr. and Mrs. Paeplow as tenants by the entireties. . . .

5. That on January 16, 1984, this court granted First Interstate Bank the right to proceed in rem on its joint claim against Mr. and Mrs. Paeplow in State Court, and to enforce any subsequent Judgment lien against the aforesaid real estate. . . .

7. That First Interstate Bank assigned its rights in and to said note to V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen, all of whom have now stepped into the shoes of First Interstate Bank, and are in a position to seek a joint judgment lien on the aforesaid entireties property.¹

8. That on September 28, 1987, the Beagles and the Cassens filed their own motion for relief from stay for purposes of proceeding in State Court against William Paeplow in order to obtain a joint judgment with regard to the aforesaid note: Mr. Paeplow never objected to this motion for relief from automatic stay.

9. That on September 30, 1987, this court entered an order noting that a discharge had been issued as to Mr. Paeplow on January 6, 1984, at which time the stay was lifted as to all creditors.

10. That on October 19, 1988, a Motion for Leave to File an Amended Complaint was filed in the state court action pending against Mrs. Paeplow on the aforesaid note, requesting leave to add William Paeplow as a named defendant in order to proceed against the real property held by Janice and William Paeplow as tenants by the entireties; and on October 21, 1988, Judge Brook of the St. Joseph Superior Court granted the motion and allowed William Paeplow to be joined as an additional party defendant. Neither Mr. Paeplow or sic his counsel ever objected to this request.

11. That on October 31, 1988, defendants, Beagles and Cassens filed their amended complaint adding William Paeplow as a named defendant without objection by either Mr. or Mrs. Paeplow; and that matter is now being pursued in the St. Joseph Superior Court, Cause No: R-4348. . . .

12. That on November 28, 1988, William Douglas Paeplow answered the complaint in the aforesaid proceeding in state court and never pled discharge in bankruptcy as an affirmative defense in that matter even though he would have been required to do so by .T.R. 8 of the Indiana Rules of Trial Procedure.

13. That the Beagles and Cassens filed a motion for summary judgment in the above action and the matter was briefed and argued by both parties (Judge Brook of the St. Joseph superior Court currently has said motion under advisement); and at no time in briefing or arguing that motion did plaintiff or his attorney ever object to Judge Brook exercising jurisdiction over this claim; nor did they ever argue or plead that Mr. Paeplow\'s obligations were discharged in bankruptcy.

14. That it has been almost two (2) years since plaintiff filed his answer to the amended complaint naming him as a party in the state court action and not once was the trial court in that matter, even up to the present time, ever asked to consider the effect of Mr. Paeplow\'s discharge on the pending state court action.

15. That during this entire time, plaintiff made no request of this Honorable Court with regard to this issue, but rather plaintiff and his counsel permitted an amended complaint to be filed, without objection, against Mr. Paeplow; permitted that matter to proceed through summary judgment without any suggestion that the action was improper; and permitted the case to be set for trial without ever asking this court to intervene. . . .

Defendants' motion at 1-5 (August 14, 1990).

The defendants argue that by his conduct the debtor has waived any objection he may have to the continuance of the proceeding in the St. Joseph Superior Court. In addition, the defendants argue that applicable law permits them to proceed in the state court despite the debtor's discharge because they "are not seeking an order of personal liability against the debtor, but are merely attempting to obtain a joint judgment against Mr. and Mrs. Paeplow so that execution against the aforementioned entireties property can be made." Defendants' motion at 5 (citing this court's decision in In re Jeffers, 3 B.R. 49, 52-53 (Bank.N.D.Ind.1980)). The defendants contend that the debtor has set forth insufficient facts to support his claim for bad faith and punitive damages against them. As the trial in the state court is set for September 26, 1990, the defendants assert that the debtor merely attempts in bad faith to delay the state court trial by filing his complaint for injunction in this court.

In his response to the defendants' motion filed on August 27, 1990, the debtor submits that he has set forth a substantive...