Moseley v. Smith

• Decision Date: 02 December 2014
• Docket Number: No. 2013–CA–01205–COA.,2013–CA–01205–COA.
• Citation: 180 So.3d 667
• Parties: Jeremy MOSELEY, Appellant v. Tiffiny (Moseley) SMITH, Appellee.
• Court: Mississippi Court of Appeals

180 So.3d 667

Jeremy MOSELEY, Appellant

v.Tiffiny (Moseley) SMITH, Appellee.

No. 2013–CA–01205–COA.

Court of Appeals of Mississippi.

Dec. 2, 2014.

Rehearing Denied April 14, 2015.

Certiorari Dismissed Dec. 17, 2015.

R. Hayes Johnson Jr., Gulfport, attorney for appellant.

Thomas E. Payne, Biloxi, James L. Farrior III, attorneys for appellee.

Before LEE, C.J., ROBERTS, CARLTON and MAXWELL, JJ.

MAXWELL, J., for the Court:

¶ 1. As part of the property-settlement agreement incorporated in their divorce judgment, Jeremy Moseley was required to hold his ex-wife, Tiffiny Smith, harmless for any debt associated with their 1998 Chevy Camaro, which Moseley got to keep. But Moseley did not meet this requirement. Instead, he had his car debt discharged in federal bankruptcy, which led the bank to go after Smith, who was ordered to pay the remaining debt plus interest.

¶ 2. Despite this clear failure to abide by the hold-harmless provision, Moseley argues he should not have been found in contempt and ordered to reimburse Smith. Citing both his bankruptcy discharge and the statute of limitations, he asserts the hold-harmless provision was no longer enforceable by the time Smith filed her contempt action.

¶ 3. We find neither reason creates a barrier to Smith's contempt action. First, the only debt discharged in the bankruptcy was Moseley's debt to the bank. The discharge order did not cover Moseley's separate debt to Smith, arising out of the hold-harmless provision in the divorce judgment, as Moseley neither listed this debt on his bankruptcy schedules nor otherwise notified Smith he had filed bankruptcy. Second, Smith's contempt action was timely. Smith's action sought enforcement of a provision of the property-settlement agreement, which by operation of statute became a part of the chancery court's final judgment of divorce.¹ Because her action was "founded on [a] judgment ... rendered by [a] court of record in this state," the seven-year statute of limitations applied.² And because Smith filed for contempt within seven years of learning that the bank was pursuing her for the remaining debt on the Camaro, her contempt complaint was not barred by the statute of limitations.

¶ 4. Because we also find the record supports the amount of the contempt judgment, $36,036.18—the amount Smith had to pay the bank, plus attorney's fees and expenses to make her whole—we affirm.

Procedural History

¶ 5. On September 7, 2000, the Harrison County Chancery Court entered a final judgment of divorce for Moseley and Smith. This judgment incorporated their property-settlement agreement, which gave Moseley "exclusive use and possession of the 1998 Chevrolet Camaro" in exchange for requiring he be "solely responsible for the payment of all debt, insurance and taxes associated with said vehicle." Moseley also had "to hold [Smith] harmless for any debt associated with said vehicle."

¶ 6. Less than a year later, Moseley, who had moved to Arizona, filed for Chapter 7 bankruptcy in Arizona. Moseley had listed Trustmark National Bank as a secured creditor for "monies owed on 1998 Camaro." But Moseley did not indicate on his bankruptcy schedule that Smith was a co-debtor on the Camaro. Nor does the record show he separately listed Smith as an unsecured creditor, based on the hold-harmless provision, or otherwise notified his ex-wife about the bankruptcy. Moseley received a bankruptcy-discharge order on July 3, 2001.

¶ 7. Trustmark eventually sued Smith to collect the remaining debt owed on Moseley's Camaro. While Trustmark filed its collection action on September 19, 2003, Smith was not served with process until September 2006, when she returned from active service in the United States Air Force. On October 4, 2007, Trustmark received a final judgment against Smith for $15,252.96, plus interest accruing from September 19, 2003, at a rate of 11.4%.

¶ 8. Three and a half years later, on February 25, 2011, Smith filed a complaint against Moseley for contempt, asserting Moseley had violated the divorce judgment's provision that he would hold her harmless for any debt associated with the Camaro.

¶ 9. Moseley moved to dismiss.³ He claimed any obligation related to the Camaro had been discharged by his 2001 bankruptcy. He also asserted Smith's claim was barred by the three-year statute of limitations to enforce contracts or, alternatively, the seven-year statute of limitations to enforce judgments, as their final divorce judgment had been entered eleven years earlier.

¶ 10. The chancellor denied Moseley's motion to dismiss on September 6, 2012. In doing so, he found the seven-year statute for actions founded on a judgment applied. And because this action was based on Trustmark's 2007 judgment against Smith, the complaint for contempt was timely. Finally, the chancellor found the discharge of Moseley's debt to Trustmark did not affect his obligation to Smith to hold her harmless for the debt.

¶ 11. A week later, Moseley filed a motion to reconsider. In this motion, he suggested the seven-year statute of limitations began running as soon as Smith learned Moseley had filed bankruptcy in 2001 or, at the latest, by the time Trustmark sued her in 2003 and served her with process. Because all of these events occurred more than seven years before she filed her complaint, he insisted it was untimely. Moseley also urged the chancellor to recognize that his debt to Smith, like his debt to Trustmark, had been discharged in bankruptcy, as it was a non-domestic support obligation, which, prior to the 2005 bankruptcy-code amendments, was dischargeable.

¶ 12. In her response, Smith asserted that Moseley failed to notify her of his 2001 bankruptcy. And because she had been serving in the Air Force, Trustmark did not serve her with process until March 2006, which was well within seven years of her contempt complaint. Smith renewed her request that the chancellor award her money damages and other relief based on Moseley's "willful and wanton contempt."

¶ 13. After a hearing, the chancellor denied Moseley's motion for reconsideration and granted Smith's request for contempt-based damages. The chancellor awarded Smith $36,036.18, which included the money and interest Smith had paid Trustmark through wage garnishment, $4,000 for attorney's fees, and $1,337.78 for travel and lodging to attend a hearing in June 2011.

¶ 14. Moseley then filed a Rule 59 motion to alter or amend, claiming Smith never presented any evidence to support the chancellor's damage award. See M.R.C.P. 59(a), (e). But the chancellor never addressed the damages issue, as the motion to alter or amend was dismissed by agreed order.

¶ 15. Moseley then timely appealed. On appeal, he raises the same defenses of statute of limitations and bankruptcy discharge. He also claims the record did not support the amount of damages awarded to Smith.

Discussion

I. No Bankruptcy Discharge

¶ 16. We begin with the bankruptcy issue. Moseley seems to treat his financial obligations involving the Camaro as a singular debt—a debt he owed to Trustmark, which was discharged in his Chapter 7 bankruptcy. But Moseley actually had two debts connected to the Camaro—(1) the debt to Trustmark bank to repay the car loan, and (2) the contingent debt to Smith, which would arise if Trustmark went after her for repayment of the car loan. While Moseley listed the first debt to Trustmark on his bankruptcy petition, he omitted his second debt to Smith. He also failed to otherwise notify Smith that her rights as a creditor may be affected by his bankruptcy petition. Thus, his debt to Smith was not covered by his bankruptcy discharge. See In re Hill, 251 B.R. 816, 821 (Bankr.N.D.Miss.2000).

A. Separate Debt to Smith

¶ 17. In bankruptcy terms, the provision in the property-settlement agreement that Moseley would hold Smith harmless for any debt associated with the Camaro "create[d] a ‘new’ debt, running solely between the former spouses." In re Jaeger–Jacobs, 490 B.R. 352, 357 (Bankr.E.D.Wis.2013) (citing In re Schweitzer, 370 B.R. 145, 150 (Bankr.S.D.Ohio 2007) ). Under the version of the United States Bankruptcy Code in effect during Moseley's 2001 bankruptcy, this type of debt was presumptively non-dischargeable as a non-alimony debt "incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record[.]" In re Clark, 207 B.R. 651, 655 (Bankr.E.D.Mo.1997) (quoting 11 U.S.C. § 523(a)(15) (1994) ).

¶ 18. But there was a catch. Prior to the 2005 amendments, the creditor ex-spouse had to timely request the bankruptcy court apply the presumption of non-dischargeability to the hold-harmless-agreement debt. In re Clark, 207 B.R. at 655. If the creditor ex-spouse failed to do this, then the hold-harmless-agreement debt was discharged. But if the ex-spouse creditor timely intervened, then the debtor ex-spouse would have the burden to overcome the presumption of non-dischargeability. ⁴

Id. at 655–56 (citing 11 U.S.C. § 523(a)(15)(A), (B) (1994) ).

B. Lack of Notice

¶ 19. In light of this pre–2005 rubric, Moseley argues his debt to Smith had been discharged because she "apparently did not object" to discharge in the Arizona bankruptcy court. Though Moseley carefully tries to avoid the reason why Smith did not object, we cannot. Instead, what is apparent from the record is that Smith did not object because she was never notified she needed to object. And this lack of notice leads to a lack of dischargeability. See In re Hill, 251 B.R. at 821.

¶ 20. Nowhere does the record indicate Moseley listed Smith as a creditor in his bankruptcy (or even co-debtor on the Trustmark loan), which would have put her on notice to intervene in the bankruptcy to prevent her right to be held harmless from being discharged in the bankruptcy. Nor did Moseley try to refute Smith's claim that she did not learn about Moseley's bankruptcy until 2006, when she was finally served with Trustmark's lawsuit against her. Instead,...