Opinion
BAP NO. MB 20-029 Bankruptcy Case No. 17-12526-FJB
2021-05-27
Ginger SIRIKANJANACHAI, a/k/a Wanpen Florentine, a/k/a Penny Collins Siridee, Debtor. Ginger Sirikanjanachai, Appellant, v. Town of Hingham, Massachusetts, Appellee.
Ginger Sirikanjanachai, pro se, on brief for Appellant. John D. Finnegan, Esq., on brief for Appellee.
Ginger Sirikanjanachai, pro se, on brief for Appellant.
John D. Finnegan, Esq., on brief for Appellee.
Before Lamoutte, Finkle, and Harwood, United States Bankruptcy Appellate Panel Judges.
Harwood, U.S. Bankruptcy Appellate Panel Judge.
Ginger Sirikanjanachai (the "Debtor") appeals pro se from the bankruptcy court's order denying her motion for contempt, seeking the imposition of sanctions against the Town of Hingham, Massachusetts (the "Town") for its alleged violation of the discharge order entered in her chapter 7 case and the order avoiding the Town's judicial lien. As the record discloses that the Town did not act in contempt of either order, we AFFIRM . BACKGROUND
All references to "Bankruptcy Code" or to specific statutory sections are to 11 U.S.C. §§ 101 -1532. All references to "Bankruptcy Rule" are to the Federal Rules of Bankruptcy Procedure.
I. Pre-Bankruptcy Events
In August 2008, the Debtor acquired title to an affordable housing unit in the Town (the "Unit"). The deed conveying the Unit to the Debtor gave the Town the right of first refusal. In June 2013, when the Town attempted to exercise that right, the Debtor failed to convey title on the scheduled closing date. Thereafter, the Town commenced an action against the Debtor in the Massachusetts state court to enforce its right to purchase the Unit (the "State Court Action"). The State Court Action resulted in the entry of judgment in favor of the Town in June 2017 (the "State Court Judgment"). Among other things, the State Court Judgment required the Debtor to: (1) convey the Unit to the Town for $181,750 within 60 days; and (2) pay $70,155 to the Town as reasonable attorney's fees plus $478 in costs. The State Court Judgment authorized the Town to offset the attorney's fees and costs against the purchase price of the Unit (the "Offset Provision"). The Debtor appealed the State Court Judgment, and the judgment was affirmed in December 2018.
II. Post-Petition Events
A. The Bankruptcy Filing and Order Granting Relief from Stay
In July 2017, the Debtor filed a chapter 7 petition. Several months later, the Town moved for an order under § 362(j) declaring that the State Court Judgment was not subject to the automatic stay. Alternatively, the Town requested an order granting it relief from the automatic stay to enforce the State Court Judgment. The bankruptcy court declined to rule that the automatic stay did not apply to the State Court Judgment but granted the Town relief from stay "to proceed with its defense of the Debtor's previously filed appeal" of the State Court Judgment. The court further ordered that, if successful on appeal, the Town could "complete the specific performance aspects" of the State Court Judgment (i.e., the conveyance of the Unit) without further court order, but could "not proceed with the collection of money damages against the Debtor without further order."
B. The Adversary Proceeding
In October 2017, the Town commenced an adversary proceeding against the Debtor with a two-count complaint. In Count I, the Town sought a declaration that its judgment for specific performance was not a "claim" as that term is defined in the Bankruptcy Code and therefore was not subject to her chapter 7 discharge. In Count II, the Town sought a determination under § 523(a)(2)(A) and/or 523(a)(2)(B) that the Debtor's obligation under the State Court Judgment to pay the Town's attorney's fees was excepted from discharge as a debt arising from the Debtor's misrepresentation. The Debtor filed counterclaims against the Town, but the court dismissed the claims due to the Debtor's lack of standing, reasoning: "[A]ll of the events that give rise to the counterclaims occurred prepetition. Thus, the claims ... are assets of the estate and therefore belong to the chapter 7 trustee."
After trial, the bankruptcy court entered judgment in favor of the Town on November 7, 2018 (the "Bankruptcy Court Judgment"), declaring "all debts and other obligations" owed by the Debtor to the Town were "excepted from discharge." As to Count I, the court ruled in its accompanying memorandum of decision that the "Town's right to compel the Debtor to follow through on her obligation to sell the Unit back to the Town [wa]s not a right to payment" but, rather, the right to the equitable remedy of specific performance. This right was, according to the court, "not a claim at all and not subject to the discharge the Debtor has received." The Town was, therefore, "free to enforce the judgment for specific performance." On Count II, the court ruled that the Debtor had made several misrepresentations to the Town that provided a "basis for excepting the judgment obligations" from discharge under § 523(a)(2)(A).
As discussed infra, occasionally the Town and the court did not distinguish between the concepts "excepted from discharge" and "not subject to discharge." We presume here that the bankruptcy court intended to specify that the damages portion of the State Court Judgment was excepted from discharge under § 523(a)(2)(A), as it had already ruled that the Debtor's specific performance obligation was "not subject to" discharge.
The Debtor appealed the Bankruptcy Court Judgment to the Panel and the Panel affirmed in December 2019.
C. The Lien Avoidance Motion
In December 2018, the Debtor filed a Motion to Avoid the Judicial Lien of the Town of Hingham (the "Lien Avoidance Motion"), alleging that the Offset Provision in the State Court Judgment constituted a judicial lien that impaired a homestead exemption to which she was entitled. The Town opposed the Lien Avoidance Motion arguing, among other things, that the Offset Provision did not amount to a lien at all but was merely an equitable remedy or reduction of the price the Town must pay for the Unit. The Town further argued that even if the Offset Provision qualified as a lien, it still did not constitute a judicial lien. In an order entered on February 14, 2019 (the "Lien Avoidance Order"), the bankruptcy court overruled the Town's objection and granted the Lien Avoidance Motion. In its accompanying proceeding memorandum, the court concluded that the Offset Provision constituted a lien, reasoning in pertinent part:
"Lien" is defined for purposes of the Bankruptcy Code to mean "charge against or interest in property to secure payment of a debt or performance of an obligation." 11 U.S.C. § 101(37). The provision of the [S]tate [C]ourt [J]udgment that is at issue permits the Town to appropriate proceeds that would otherwise be payable to the Debtor in satisfaction of the Debtor's obligation to the Town for attorney's fees and costs. This is a charge against property to secure payment of a debt. It is not quantification or adjustment of the purchase price: the judgment specifies that the purchase price is $181,750.00, not that amount less $70,633.
The court also rejected the Town's assertion that the Offset Provision did not qualify as a judicial lien, ruling: "The lien is in this instance a creature of the [State Court] [J]udgment, a judicial lien within the meaning of 11 U.S.C. § 101(36) and 522(f)(1)(A)." Accordingly, the court ruled that the Lien Avoidance Motion "stated good cause under ... § 522(f) to avoid the lien in its entirety[.]"
D. The Motion for Contempt
The Debtor received her chapter 7 discharge on January 17, 2018. Thereafter, the Town sent the Debtor a letter dated May 29, 2020 (the "May 2020 letter"), seeking to schedule the conveyance of the Unit in accordance with the State Court Judgment. The May 2020 letter provided, in part:
This is to follow up with the Judgment that was issued in the above referenced case. As you probably know, the appeals you took concerning the Judgment, both in the State Court and in the Bankruptcy Court, have now concluded. As you may recall, pursuant to the Judgment, you are obligated to sell the property at Ridgewood Crossing Condominium to the Town or its designee and the purchase price was set in the Judgment at $181,750. You should confirm with Rockland Federal Credit Union the current amount you owe. Once the closing occurs, it would appear that you are entitled to the difference between the two amounts. Our goal would be to work with you to arrange a closing date and address the remaining items from the Judgment.
On June 17, 2020, the Debtor filed a Motion for Contempt against the Town, asserting that the May 2020 letter violated the discharge injunction and the Lien Avoidance Order. The Town opposed the Motion for Contempt arguing, among other things, that the Debtor's State Court Judgment obligations were excepted from discharge by virtue of the Bankruptcy Court Judgment, which the Panel had affirmed. The Town further maintained that the May 2020 letter did not violate the discharge injunction as it was merely "sent in an effort to begin enforcement of the specific performance and non-monetary aspects" of the State Court Judgment. Additionally, the Town noted that it had received relief from the automatic stay to "pursue and complete the specific performance and non-monetary aspects" of the State Court Judgment, "which ha[d] been excepted from discharge."
In fact, as noted elsewhere in this opinion, the bankruptcy court had ruled that the specific performance aspect of the State Court Judgment was "not subject to" discharge.
Following a hearing, the bankruptcy court entered an order denying the Motion for Contempt (the "Order Denying Contempt Motion") on July 21, 2020. In its accompanying proceeding memorandum, the court explained:
As to the discharge, the Town has obtained a judgment from this Court in which the Court ordered and declared that the debts and specific performance obligations of the Debtor to the Town are excepted from the discharge she received in this case. In short, the discharge has been determined not to apply to the Debtor's obligations to the Town. The Town cannot be in contempt of an order that does not apply to the Town.
As to the lien avoidance order, the order was self-effecting. It did not obligate the Town to take action or to refrain from taking action. Civil contempt is a means by which a court, or an affected party, can compel compliance with an existing court order by a party found to have failed to comply with that order. Where the underlying order requires no action of, and puts no obligation on, the alleged contemnor, as is the case here with the Town, contempt is impossible.
This appeal followed.
POSITIONS OF THE PARTIES
I. The Debtor
The Debtor's appellate brief is difficult to follow, even after the entry of our November 24, 2020 order striking portions of it. Construing the brief liberally given the Debtor's pro se status, see Chorney v. Weingarten, No. 93-1094, 1993 WL 372751, at *3 (1st Cir. Sept. 23, 1993), we distill the Debtor's remaining arguments to several themes. First, the Debtor argues that the issuance of the May 2020 letter violated the discharge injunction. Second, she asserts that the issuance of the May 2020 letter also violated the Lien Avoidance Order. Third, the Debtor maintains that, during the July 21, 2020 hearing on the Motion for Contempt, the Town misstated that she "failed to deliver the [Unit] at the closing on June 10, 2013." According to the Debtor, the Town refused to buy the Unit. The Debtor does not support any of these claims with relevant legal authority or record references.
Additionally, the Debtor accuses the bankruptcy court of "racial bias" and the Town of "elder abuse." Not only are these claims wholly unsupported with cogent, developed argument, see Velázquez Rodríguez v. Municipality of San Juan, 659 F.3d 168, 175 (1st Cir. 2011) (stating claims "unaccompanied by developed argument" are deemed waived), they are made for the first time on appeal. See Abdallah v. Bain Capital LLC, 752 F.3d 114, 120 (1st Cir. 2014) (stating arguments made for the first time on appeal are waived). Accordingly, the claims are waived. Nonetheless, we note that the Debtor could not prevail on the merits of her racial bias claim even if we were to consider it, as there is virtually no support in the record to substantiate such a charge. In fact, the transcript of the hearing on the Motion for Contempt reflects that the bankruptcy court went to extra lengths to explain the proceedings to the Debtor. Moreover, the Debtor's claim of bias seems to stem exclusively from her dissatisfaction with the bankruptcy court's unfavorable rulings, which does not constitute a valid basis for a bias claim. See Liteky v. United States, 510 U.S. 540, 555, 114 S.Ct. 1147, 127 L.Ed.2d 474 (1994).
II. The Town
The Town counters that there is "no basis for disturbing" the Order Denying Contempt Motion, as the Bankruptcy Court Judgment—affirmed by the Panel—provided "all debts and other obligations" of the Debtor to the Town were excepted from discharge. The Town maintains that the challenged letter only sought to enforce the specific performance portion of the State Court Judgment and made no reference to the Offset Provision. In addition, the Town disputes the Debtor's claim that it violated the Lien Avoidance Order by sending the May 2020 letter. Citing Rand v. Lombardo (In re Lombardo), 224 B.R. 774, 784 (Bankr. S.D. Cal. 1998), among other cases, the Town contends that where, as here, a debtor is successful in avoiding a creditor's judicial lien, the underlying debt would still be an allowed unsecured claim which may be excepted from discharge.
With respect to the Debtor's complaints about the Town's conduct in connection with the closing of the Unit, the Town asserts that the Debtor previously raised those issues not only in state court but also in her counterclaims which the bankruptcy court dismissed in the adversary proceeding.
Finally, the Town maintains in its appellate brief that the instant appeal is frivolous, arguing that the Debtor has failed to address the issues on appeal properly and to cite applicable authority. The Town further contends the Debtor "has made unsubstantiated factual assertions" and has "misrepresented the record." It asks us to affirm the Order Denying Contempt Motion and, without citing any authority, seeks an order directing the Debtor "to reimburse the Town for the costs of defending this appeal."
JURISDICTION
We have jurisdiction to hear appeals from final orders. See 28 U.S.C. § 158(a), (c) ; see also Ritzen Grp., Inc. v. Jackson Masonry, LLC, ––– U.S. ––––, 140 S. Ct. 582, 587, 205 L.Ed.2d 419 (2020) ; Bullard v. Blue Hills Bank, 575 U.S. 496, 135 S. Ct. 1686, 1692, 191 L.Ed.2d 621 (2015). "A bankruptcy court's determination as to a violation of the discharge injunction is a final order." Best v. Nationstar Mortg. LLC (In re Best), 540 B.R. 1, 7 (B.A.P. 1st Cir. 2015) (citation omitted). An order denying contempt is also a final, appealable order. Ramirez Rosado v. Banco Popular de P.R. (In re Ramirez Rosado), 561 B.R. 598, 604 (B.A.P. 1st Cir. 2017) (citations omitted). Therefore, we have jurisdiction over the matters encompassed by the Order Denying Contempt Motion.
STANDARDS OF REVIEW
We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Jeffrey P. White & Assocs., P.C. v. Fessenden (In re Wheaton), 547 B.R. 490, 496 (B.A.P. 1st Cir. 2016) (citation omitted). The applicability of the discharge injunction is a question of law that is reviewed de novo. Martinez v. Olague (In re Martinez), Adv. Pro. No. LA 10-03133-ER, 2011 WL 6934474, at *4 (B.A.P. 9th Cir. Oct. 11, 2011) (citing Watson v. Shandell (In re Watson), 192 B.R. 739, 745 (B.A.P. 9th Cir. 1996) ). The denial of a motion for contempt is reviewed for abuse of discretion. In re Ramirez Rosado, 561 B.R. at 604 (citations omitted).
DISCUSSION
I. The Town Did Not Violate the Discharge Injunction
A. The Discharge Injunction under § 524(a)(2)
"Generally, a discharge in bankruptcy relieves a debtor from all pre-petition debt, and § 524(a) permanently enjoins creditor actions to collect discharged debts." Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439, 444 (1st Cir. 2000) (emphasis added) (citations omitted). Section 524(a)(2) specifically provides, in relevant part, that a discharge "operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any [discharged] debt as a personal liability of the debtor ...." 11 U.S.C. § 524(a)(2). "It follows that the discharge injunction only applies to debts that are discharged." Smith v. Lachter (In re Smith), 293 B.R. 220, 224 (B.A.P. 9th Cir. 2003) (citing Ruvacalba v. Munoz (In re Munoz), 287 B.R. 546, 556 (B.A.P. 9th Cir. 2002) ; In re Venegas, 257 B.R. 41, 46 (Bankr. D. Idaho 2001) ); see also United States v. White, 466 F.3d 1241, 1246 (11th Cir. 2006) (stating the discharge injunction "prohibits collection only with respect to dischargeable debts and does not apply to nondischargeable debts").
B. Section 524(a)(2) Applied
Here, the Bankruptcy Court Judgment provided that "all debts and other obligations" of the Debtor to the Town under the State Court Judgment were "excepted" from discharge under § 523(a)(2)(A). Courts have held that " § 524 does not enjoin creditors who have successfully invoked § 523 ... from taking action." Ackerman v. Eber (In re Eber), 687 F.3d 1123, 1128 (9th Cir. 2012) (citation omitted); see also Kvassay v. Kvassay (In re Kvassay), 711 F. App'x 411, 412 (9th Cir. 2018) (holding that the bankruptcy court did not abuse its discretion by denying contempt motion where discharge "injunction was not applicable to the debts at issue, as [creditor] had filed a timely dischargeability action" under § 523(a)(4) and (6)) (citations omitted); Mo. Dep't of Soc. Servs. v. Spencer (In re Spencer), 868 F.3d 748, 751 (8th Cir. 2017) (ruling agency did not violate the discharge injunction by attempting to collect a domestic support obligation, which was excepted from discharge under § 523(a)(5)); McKay v. Ingleson, 558 F.3d 888, 891 (9th Cir. 2009) (ruling that, because debtor's student loan obligation was excepted from discharge under § 523(a)(8), the defendant could not have violated the discharge injunction by attempting to collect it). In light of the foregoing authorities, the Town could not have violated the discharge injunction by sending the May 2020 letter in an effort to enforce any obligations under the State Court Judgment that were excepted from discharge. The same conclusion applies with equal force for any obligations that were declared not subject to discharge. See Boeing N. Am., Inc. v. Ybarra (In re Ybarra), 424 F.3d 1018, 1027 n.11 (9th Cir. 2005) (holding that creditor did not violate the discharge injunction by attempting to collect attorney's fees and costs incurred post-petition which were not subject to discharge); In re Ebbrecht, 451 B.R. 241, 247 (Bankr. E.D.N.Y. 2011) (stating that a post-petition obligation of a chapter 7 debtor arising under an assumed personal property lease was not subject to discharge under § 727 and therefore was not within scope of the § 524(a) discharge injunction). "Significantly, the discharge injunction prohibits collection only with respect to dischargeable debts and does not apply to nondischargeable debts." Fla. Dep't of Revenue v. Diaz (In re Diaz), 647 F.3d 1073, 1088 (11th Cir. 2011) (citation omitted) (internal quotation marks omitted). Moreover, "once a discharge has been granted, holders of nondischargeable debts generally may attempt to collect from the debtor personally for such debts." United States v. Monahan (In re Monahan), 497 B.R. 642, 649 (B.A.P. 1st Cir. 2013) (quoting In re Diaz, 647 F.3d at 1088 ).
We presume, although it is unclear, that by the phrase "all debts and other obligations" the bankruptcy court meant all monetary obligations, as the Debtor's specific performance obligations were "not subject to" discharge.
Applying the above principles here, the discharge injunction did not bar the Town's efforts to enforce any obligation under the State Court Judgment—be it the specific performance component or the monetary aspect—by sending the May 2020 letter. Therefore, the bankruptcy court did not err in concluding that the Debtor failed to establish a violation of the discharge injunction. See In re Ramirez Rosado, 561 B.R. at 605 ("The burden of proof is on the former debtor to establish by clear and convincing evidence that [the] creditor violated the post-discharge injunction.") (quoting In re Best, 540 B.R. at 9 ). Nor did the bankruptcy court abuse its discretion in declining to impose sanctions against the Town for any such alleged violation.
Notwithstanding this conclusion, we are unpersuaded by the Town's argument that the May 2020 letter addressed only the specific performance aspect of the State Court Judgment. The record reflects that the letter specifically referenced "the remaining items from the Judgment"—i.e., the award of attorney's fees and costs. This discrepancy is of small moment, however, as the discharge injunction does not apply to any obligation under the State Court Judgment.
II. The Town Did Not Violate the Lien Avoidance Order
By its terms, the Lien Avoidance Order nullified the lien represented by the Offset Provision. The Debtor's argument that the Town violated the Lien Avoidance Order by sending the May 2020 letter reflects a misapprehension concerning the effect of lien avoidance. The "avoidance of a lien does not destroy the underlying debt but rather changes the status of a creditor from a secured to an unsecured position." United Bank of Mich. v. Falconer (In re Falconer), 79 B.R. 283, 287 (W.D. Mich. 1987) (citations omitted); see also Backlund v. Stanley-Snow (In re Stanley-Snow), 405 B.R. 11, 16 (B.A.P. 1st Cir. 2009) (stating avoidance of judicial lien converts a secured claim into a general unsecured claim). Lien avoidance and dischargeability of debts are not dependent on each other. See In re Lombardo, 224 B.R. at 784 (acknowledging that "whether or not [a] judicial lien is avoided has nothing to do with the dischargeability of the debt"); In re Ash, 166 B.R. 202, 204-05 (Bankr. D. Conn. 1994) (ruling the ability to avoid a lien is not dependent on dischargeability of debt); In re D'Amelio, 142 B.R. 8, 9 (Bankr. D. Mass. 1992) (rejecting creditors' contention that a judicial lien securing nondischargeable debt may not be avoided). Thus, a creditor whose judgment lien has been avoided under § 522(f), but whose claim is nondischargeable, may seek to recover from non-exempt property after the debtor's discharge. See In re Willoughby, 212 B.R. 1011, 1018 (Bankr. M.D. Fla. 1997) (stating the underlying debt was "not affected" by avoidance of lien and remained "fully enforceable" other than against homestead property); Ewiak v. Ebner (In re Ewiak), 75 B.R. 211, 213 (Bankr. W.D. Pa. 1987) (stating a creditor whose judgment lien has been avoided but whose claim is nondischargeable may seek to recover from non-exempt property after debtor's discharge is entered and the case is closed). Here, there is no dispute that the Debtor's non-specific performance obligations (i.e., the debt for attorney's fees and costs) have been excepted from discharge. Thus, to the extent the May 2020 letter referenced that debt—either obliquely or explicitly—the letter did not run afoul of the Lien Avoidance Order.
It follows from the foregoing analysis that the bankruptcy court did not err when it ruled the Town did not act in contempt of either the discharge injunction or the Lien Avoidance Order by sending the May 2020 letter. As there were no violations of the discharge injunction or the Lien Avoidance Order, it also follows that the court did not abuse its discretion in refusing to impose sanctions against the Town.
We need not delve into the bankruptcy court's ruling concerning the "impossibility" of contempt where the subject order is "self-effecting" as the Debtor has waived the issue by failing to identify it in her statement of issues or to brief it. See United States v. Bayard, 642 F.3d 59, 63 (1st Cir. 2011) (stating an appellant's failure to brief an issue waives it).
The Debtor's argument regarding the Town's misconduct in allegedly refusing to close on the Unit does not alter this analysis. Under the doctrine of res judicata, "a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Banco Santander de P.R. v. Lopez-Stubbe (In re Colonial Mortg. Bankers Corp.), 324 F.3d 12, 16 (1st Cir. 2003) (citation omitted). Accordingly, the Bankruptcy Court Judgment and the State Court Judgment bar the Debtor's attempt to relitigate these claims against the Town.
III. The Town's Request for Reimbursement of Costs is Procedurally Flawed
In its appellate brief, the Town asserts that the Debtor "should be required to reimburse the Town for the costs of defending this appeal" because the appeal is "frivolous." Yet the Town neglects to specify whether its reimbursement request is made under Bankruptcy Rule 8020 or under Bankruptcy Rule 8021. Compare Fed. R. Bankr. P. 8020 (authorizing the imposition of damages and costs for a frivolous appeal), with Fed. R. Bankr. P. 8021 (authorizing the taxing of certain costs against the appellant if a judgment is affirmed). Because the reimbursement request is embedded in the Town's argument that the appeal is frivolous, it appears that it is made pursuant to Bankruptcy Rule 8020. To the extent that the request for costs is construed as one under Bankruptcy Rule 8020, it is denied due to the Town's failure to comply with the rule's separate motion requirement. See Fed. R. Bankr. P. 8020 (stating if the "BAP determines that an appeal is frivolous, it may, after a separately filed motion ... award just damages and single or double costs to the appellee"); see also Aziz v. U.S. Bank, N.A. (In re Aziz), BAP No. AZ-16-1133-BTaF, 2017 WL 3494805, at *4 (B.A.P. 9th Cir. Aug. 3, 2017) (denying sanctions request under Bankruptcy Rule 8020 in the absence of a separately filed motion); Reyes Rivera v.Bracetty Matos (In re Reyes Rivera), 494 B.R. 101, 107 (B.A.P. 1st Cir. 2013) (stating a "prerequisite to awarding sanctions under Bankruptcy Rule 8020" is compliance with the rule's separate motion requirement) (citation omitted).
Nothing in this decision prevents the Town from seeking reimbursement of costs in the bankruptcy court under Bankruptcy Rule 8021.
CONCLUSION
For the foregoing reasons, the Order Denying Contempt Motion is AFFIRMED . The Town's request for reimbursement of costs is DENIED.