Johnson v. Redstone Fed. Credit Union

• Decision Date: 24 September 2018
• Docket Number: Case No.: 5:14-cv-2378-MHH
• Parties: GEORGE H. JOHNSON, III, et al., Plaintiffs, v. REDSTONE FEDERAL CREDIT UNION, et al., Defendants.
• Court: U.S. District Court — Northern District of Alabama

GEORGE H. JOHNSON, III, et al., Plaintiffs, v. REDSTONE FEDERAL CREDIT UNION, et al., Defendants.

Case No.: 5:14-cv-2378-MHH

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA NORTHEASTERN DIVISION

September 24, 2018

MEMORANDUM OPINION AND ORDER

This case concerns a state court-ordered levy and sale of plaintiffs George Johnson and Gloria Johnson's property in Limestone County, Alabama. In 1997, the Johnsons defaulted on consumer debt held by defendant Redstone Federal Credit Union. Redstone obtained and recorded a judgment against the Johnsons, and the judgment became a lien on the Johnsons' property in Limestone County. In 2013, Redstone sold the judgment lien to defendants Danny Adcock and Heath Emerson. Mr. Adcock and Mr. Emerson petitioned the Limestone County Circuit Court for a writ of execution to satisfy the judgment lien. The Limestone County Circuit Court ordered the sheriff to levy and sell the Johnsons' property. Mr. Adcock and Mr. Emerson bought the property at auction.

The parties' disputes have resulted in litigation in Limestone County state court, the Bankruptcy Court for the Northern District of Alabama, the United States District Court for the Northern District of Alabama, and the Eleventh Circuit Court of Appeals. In this action, the Johnsons seek to hold Redstone, Mr. Adcock, and Mr. Emerson in contempt of a bankruptcy discharge injunction pursuant to which the Johnsons contend the judgment lien was satisfied. The Johnsons also seek a declaration that the Bankruptcy Code preempts Alabama state law regarding creation of and execution on judgment liens. The Johnsons assert Fair Debt Collection Practices Act claims against Mr. Adcock and Mr. Emerson. In addition, the Johnsons assert state law claims against all three defendants for negligence, wantonness, conversion, trespass to real property, and trespass to personal property.

On January 17, 2017, the magistrate judge, pursuant to Federal Rule of Civil Procedure 12(b)(6), entered a report in which she recommended that the Court dismiss this action with prejudice. (Doc. 42).¹ The magistrate judge advised the parties of their right to file objections within 14 days. (Doc. 42, pp. 37-38). The Johnsons filed objections. (Doc. 43). Redstone filed a response. (Doc. 46). The Johnsons filed a reply in support of their objections. (Doc. 47). Because the parties have not consented unanimously to dispositive jurisdiction by a magistratejudge, the magistrate judge's report and recommendation and the Johnsons' objections are before the undersigned for review.

I. STANDARD OF REVIEW

A district court "may accept, reject, or modify, in whole or part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C). When a party objects to a report and recommendation, the district court must "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." Id. The Court reviews for plain error proposed factual findings to which no objection is made, and the Court reviews propositions of law de novo. Garvey v. Vaughn, 993 F.2d 776, 779 n. 9 (11th Cir. 1993); see also United States v. Slay, 714 F.2d 1093, 1095 (11th Cir. 1983) (per curiam), cert. denied, 464 U.S. 1050 (1984) ("The failure to object to the magistrate's findings of fact prohibits an attack on appeal of the factual findings adopted by the district court except on grounds of plain error or manifest injustice.") (internal citation omitted); Macort v. Prem, Inc., 208 Fed. Appx. 781, 784 (11th Cir. 2006).

Under Rule 12(b)(6), a defendant may move to dismiss a complaint for "failure to state a claim upon which relief can be granted." See FED. R. CIV. P. 12(b)(6). To survive a Rule 12(b)(6) motion to dismiss, a complaint—or in this case, an amended complaint—must contain "a short and plain statement of theclaim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). In considering a defendant's motion to dismiss a complaint, a district court generally accepts the plaintiff's allegations as true and asks whether the plaintiff alleges facts that allow the district court to "draw the reasonable inference that the defendant is liable for the misconduct alleged." Aschcroft v. Iqbal, 556 U.S. 662, 678 (2009); see Maledy v. City of Enter., 2012 WL 1028176, at *1 (M.D. Ala. Mar. 26, 2012). The Court must construe the allegations in the complaint in the light most favorable to the plaintiff. Miljkovic v. Shafritz & Dinkin, P.A., 791 F.3d 1291, 1297 (11th Cir. 2015) (quoting Hill v. White, 321 F.3d 1334, 1335 (11th Cir. 2003)) (per curiam) (internal marks omitted). A district court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678; Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted).

II. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

From 1990 to 1994, George and Gloria Johnson entered into several credit agreements with Redstone for personal, family, or household purposes. (Doc. 14, ¶ 8). The Johnsons defaulted on these loans, and Redstone filed a lawsuit against the Johnsons in the Circuit Court of Limestone County, Alabama. (Doc. 14, ¶¶ 9-10;see also Redstone Federal Credit Union v. Johnson, et al., CV-97-134).² On June 9, 1997, the Limestone County Circuit Court entered a consent judgment in favor of Redstone and against the Johnsons in the amount of $27,715.08. (Doc. 1, p. 3 in CV-97-134). The Johnsons allege that when the judgment was recorded on June 26, 1997, the judgment "became a lien on all property" that they owned in Limestone County. (Doc. 14, ¶¶ 12, 13; see also Doc. 1, p. 14 in CV-97-134).

On April 6, 1998, the Johnsons filed for Chapter 7 bankruptcy in the Northern District of Alabama. (Doc. 14, ¶ 14). The Johnsons listed the $27,715.08 Redstone judgment as a general unsecured, nonpriority claim. (Doc. 14, ¶ 15). In Schedule A of their petition, the Johnsons listed a mobile home and approximately one acre of land. The Johnsons valued this property at $20,350.00. (Doc. 14, ¶ 14). In Schedule A of their bankruptcy petition, the Johnsons stated that Green Tree had a secured claim on the property in the amount of $23,000.00. (Doc. 14, ¶ 14). In their petition, the Johnsons claimed a homestead exemption on the property, and the Johnsons stated their intention to reaffirm the debt. (Doc. 14, ¶ 14).

On July 14, 1998, the Johnsons received a discharge from bankruptcy. (Doc. 14, ¶ 16). The discharge notice states:

This discharge prohibits any attempt to collect from the debtors a debt that has been discharged. For example, a creditor is not permitted to contact a debtor by mail, phone, or otherwise, to file or continue a lawsuit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtors. A creditor who violates this order can be required to pay damages and attorney's fees to the debtor.

However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtors' property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case.

(Doc. 5-6, p. 2 in 15-cv-150-LSC).³

On May 3, 2007, pursuant to Alabama Code Sections 6-9-190 through 192, Redstone filed in Limestone County Circuit Court a motion for revival of the June 9, 1997 judgment. (Doc. 14, ¶ 18; Doc. 1, p. 12 in CV-97-134).⁴ Redstone stated that it filed the motion "for the purpose of lien continuity on real estate" that theJohnsons owned. (Doc. 1, p. 12 in CV-97-134). In their first amended complaint, the Johnsons state that Redstone's motion "recognized that the debt owed to Redstone had been discharged in bankruptcy." (Doc. 14, ¶ 18). In the motion, Redstone acknowledged that the Johnsons had filed and been discharged from bankruptcy, but Redstone asserted that "the lien passed through the bankruptcy unaffected." (Doc. 1, p. 12 in CV-97-134) (citing Dewsnup v. Timm, 112 S. Ct. 773 (1993), and In re Wrenn, 40 F.3d 1162 (11th Cir. 1994)). In the motion, Redstone stated that the Johnsons had not paid the judgment and "that the judgment lien is still fully valid." (Doc. 1, p. 12 in CV-97-134). Redstone asked the Court to revive the judgment for an additional 10 years. (Doc. 1, p. 12 in CV-97-134).

Without hearing testimony regarding the facts underlying Redstone's motion, on May 9, 2007, the Limestone County Circuit Court entered an order granting Redstone's motion and reviving the June 9, 1997 judgment. (Doc. 14, ¶ 18; Doc. 1, p. 12 in CV-97-134). On June 7, 2007, Redstone filed in the Probate Court of Limestone County, Alabama a certificate of judgment, as revived. (Doc. 14, ¶ 18). The Johnsons allege that upon the recording of the revived judgment, the judgment "continued the lien on all property" that the Johnsons owned in Limestone County. (Doc. 14, ¶ 19). The Johnsons contend that because of the revived lien, Redstone "asserted control" over the Johnsons' real and personalproperty and "impaired the Johnsons' rights and ownership to their property." (Doc. 14, ¶ 20).

On July 25, 2013, Redstone sold the judgment debt and the judgment lien to Heath Emerson and Danny Adcock. (Doc. 14, ¶¶ 21, 22; Doc. 6 in CV-97-134). According to the Johnsons, after the transfer, Redstone did not participate in the Limestone County state court action. (Doc. 14, ¶ 24). The Johnsons allege that as a result of the transfer, Mr. Emerson and Mr. Adcock "asserted control" over the Johnsons' real and personal property and "impaired the Johnsons' rights and ownership to their property." (Doc. 14, ¶ 23).

On July 29, 2013, Mr. Emerson and Mr. Adcock filed an application for writ of execution in Limestone County Circuit Court. (Doc. 14, ¶ 25; Doc. 5 in CV-97-134). The application states that Mr. Emerson and Mr. Adcock seek "a writ of execution against the real property which the Lien Holders retain a perfected judgment in rem." (...