Opinion
3:00-CV-104 (DF)
January 18, 2002
Thomas W. Joyce, Macon, Ga, for Appellant.
Anne M. Bernstein, Athens, Ga; Camille Hope, Macon, Ga, for Appellee.
ORDER
This case is before the Court on appeal from a decision of the United States Bankruptcy Court for the Middle District of Georgia, Athens Division. The bankruptcy court, after denying Appellant's motion for relief from the discharge order under Fed.R.Civ.P. 60, found that Appellant willfully violated the discharge injunction provided in the Bankruptcy Code and therefore awarded damages, attorney fees, and costs in the amount of $4,257.04, plus post-judgment interest. For the following reasons, the decision of the bankruptcy court is affirmed in part and vacated and remanded with instructions in part.
I. FACTS
The genesis of this case dates back to February 23, 1995, when Appellee filed a petition under Chapter 13 of the Bankruptcy Code. In her petition, Appellee included among her debts a student loan that had been assigned to Appellant by the United States Department of Education in 1994. On March 22, 1995, Appellant filed a proof of claim in the amount of $7,838.51 for the loan. The bankruptcy court confirmed Appellee's Chapter 13 plan in an order entered on June 6, 1995. One year later, on June 7, 1996, the bankruptcy court entered an order disallowing Appellant's claim. Soon thereafter, Appellee completed her Chapter 13 plan, and the bankruptcy court entered an order on January 15, 1997, discharging certain of her debts, including her student loan debt. The discharge order also provided that "[a]ll creditors are prohibited from attempting to collect any debt that has been discharged in this case."
In April 1999, the Internal Revenue Service withheld Appellee's 1998 tax refund because Appellant had certified that she owed an outstanding student loan debt. In response, Appellee filed a motion to reopen her bankruptcy case, which the bankruptcy court granted. Appellee then filed a complaint to determine the dischargeability of the student loan debt and for damages on the ground that Appellant violated the discharge order. After the bankruptcy court denied Appellant's motion for judgment on the pleadings, Appellant filed on May 15, 2000, a motion for relief from the discharge order pursuant to Rule 60 of the Federal Rules of Civil Procedure. On June 20, 2000, the bankruptcy court held a hearing on Appellant's motion as well as on Appellee's request for damages. On September 1, 2000, the bankruptcy court entered an order (1) denying Appellant's motion, (2) finding that the discharge order discharged Appellee's student loan debt, (3) finding that Appellant willfully violated the discharge injunction provided in the Bankruptcy Code, and (4) awarding Appellee $4,257.04, plus post-judgment interest, for her 1998 tax refund offset (plus 12% interest), attorney fees, costs, and missed time from work. This appeal followed.
Rule 60 applies to bankruptcy proceedings. See Fed.Bankr.R. 9024.
II. DISCUSSION
Appellant has enumerated five issues for appeal: (1) whether the bankruptcy court erred in deciding that Rule 60(a) afforded it no relief from the discharge order, (2) whether the bankruptcy court erred in deciding that Rule 60(b)(4) afforded it no relief from the discharge order, (3) whether the bankruptcy court erred in deciding that Rule 60(b)(6) afforded it no relief from the discharge order, (4) whether the bankruptcy court erred in finding that it willfully violated the discharge injunction provided in the Bankruptcy Code, and (5) whether the bankruptcy court erred in awarding Appellee attorney fees, costs, and damages for missed time from work. Appellee basically argues that Appellant is not entitled to relief from the discharge order because its motion was not timely.
A. Standard of Review
When reviewing a decision of a bankruptcy court, the district court must accept the bankruptcy court's findings of fact unless they are clearly erroneous. See Fed.Bankr.R. 8013. A bankruptcy court's conclusions of law, however, are reviewed de novo. See Rush v. JLJ Inc. (In re JLJ Inc.) , 988 F.2d 1112, 1116 (11th Cir. 1993).
Because Rule 60(b) motions are committed to the sound discretion of the trial court, appellate review of an order denying a Rule 60(b) motion is typically limited to determining whether the trial court abused its discretion. See Burke v. Smith , 252 F.3d 1260, 1263 (11th Cir. 2001). "However, `[u]nlike motions pursuant to other subsections of Rule 60(b), Rule 60(b)(4) motions leave no margin for consideration of the [trial] court's discretion as the judgments themselves are by definition either legal nullities or not.'" Id. (quoting Carter v. Fenner , 136 F.3d 1000, 1005 (5th Cir. 1998)). Thus, Rule 60(b)(4) motions are reviewed de novo because they involve the purely legal question of the validity of a judgment. See id. Like most Rule 60(b) motions, Rule 60(a) motions are also reviewed for abuse of discretion. See Kelly v. Matlack, Inc ., 903 F.2d 978, 981 (3d Cir. 1990).
B. The Bankruptcy Court's Denial of Appellant's Motion for Relief from Discharge Order
To demonstrate that the bankruptcy court abused its discretion, Appellant "must prove some justification for relief." Solaroll Shade Shutter Corp. v. Bio-Energy Sys., Inc ., 803 F.2d 1130, 1132 (11th Cir. 1986). However, "it is not enough that a grant of the motion might have been permissible or warranted; rather, the decision to deny the motion must have been sufficiently unwarranted as to amount to an abuse of discretion." Griffin v. Swim-Tech Corp ., 722 F.2d 677, 680 (11th Cir. 1984). Appellant argues that it has established a meritorious defense because the bankruptcy court's discharge order contains a clear error of law. As Appellant points out, student loan debts were dischargeable in Chapter 13 cases prior to 1990. See 8 Collier on Bankruptcy ¶ 1328.02[3][d] (15th ed. rev. 2001). In 1990, however, Congress amended the Bankruptcy Code such that most student loan debts were not dischargeable in Chapter 13 cases, but that amendment contained a sunset provision under which it would cease to be effective on October 1, 1996. See Omnibus Budget Reconciliation Act of 1990, Pub.L. No. 101-508, §§ 3007(b)(1), 3008, 104 Stat. 1388, 1388-28 to -29. Under this scheme, student loan debts would be dischargeable only if the discharge order was entered on or after October 1, 1996. That scheme was altered in 1992 when Congress repealed the sunset provision, see Higher Education Amendments of 1992, Pub.L. No. 102-325, § 1558, 106 Stat. 448, 841, thus reinstating the nondischargeable status of most student loans that existed between 1990 and 1992. The problem in this case arose because the form provided by the Administrative Office of the United States Courts for discharge orders, which is what the bankruptcy court used in this case, did not reflect the repeal of the sunset provision. Therefore, when the bankruptcy court entered the discharge order in this case, it erroneously discharged Appellee's student loan debt. Neither the bankruptcy court nor Appellee dispute Appellant's contention that the discharge order was contrary to the law at the time it was entered. Based on these circumstances, the Court finds that Appellant has established a meritorious defense. Accordingly, the Court turns to the merits of Appellant's arguments.
Proving a meritorious claim or defense is not a precondition to relief under Rule 60(b)(4). See Battle v. Liberty Nat'l Life Ins. Co ., 770 F. Supp. 1499, 1512 (N.D.Ala. 1991).
Student loan debts are dischargeable only if "excepting such debt from discharge . . . will impose an undue hardship on the debtor and the debtor's dependents." 11 U.S.C.A. § 523(a)(8) (West Supp. 2001).
1. Rule 60(a)
Appellant first argues that the error of law contained in the discharge order constitutes a clerical mistake that may be corrected under Rule 60(a). Rule 60(a) provides that a court may correct clerical mistakes in "judgments, orders or other parts of the record and errors therein arising from oversight or omission . . . at any time." Fed.R.Civ.P. 60(a). Under this rule, a trial court may "correct clerical errors to reflect what was intended at the time of ruling." Weeks v. Jones , 100 F.3d 124, 128 (11th Cir. 1996) (per curiam). "Errors that affect substantial rights of the parties, however, are beyond the scope of rule 60(a)." Mullins v. Nickel Plate Mining Co ., 691 F.2d 971, 973 (11th Cir. 1982); see also United States v. Whittington , 918 F.2d 149, 150 (11th Cir. 1990) (noting that Rule 60(a) is concerned only with "`mistakes which do not really attack the party's fundamental right to the judgment at the time it is entered'"); Weeks , 100 F.3d at 129 ("`A [trial] court is not permitted, however, to clarify a judgment pursuant to Rule 60(a) to reflect a new and subsequent intent because it perceives its original judgment to be incorrect.'"). Thus, for purposes of Rule 60(a), an error of law is not a clerical mistake, oversight, or omission as long as it accurately reflects the intention of the court. See Weeks , 100 F.3d at 129; Warner v. City of Bay St. Louis , 526 F.2d 1211, 1212 (5th Cir. 1976). Because the bankruptcy court intended to discharge Appellee's student loan debt in the discharge order, its error of law in doing so was not a clerical mistake that can be corrected under Rule 60(a).
The Eleventh Circuit has adopted as binding precedent all decisions issued by the former Fifth Circuit prior to October 1, 1981. See Bonner v. City of Prichard , 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
Appellant's attempts to avoid this result are unpersuasive. First, Appellant argues that it is unreasonable and absurd to think that the bankruptcy court intended to enter a discharge order that was contrary to the Bankruptcy Code at the time it was entered. This statement is unassailable insofar as no court would ever enter an order that it knew to be contrary to the law, but Appellant's argument distorts the proper inquiry. Simply stated, the proper inquiry is whether the bankruptcy court intended to discharge Appellee's student loan debt, not whether it intended to enter an order containing an error of law. Because the answer to that inquiry is that the bankruptcy court intended to discharge Appellee's student loan debt in the discharge order, there is no clerical mistake to be corrected. Second, Appellant argues that the error of law contained in the discharge order was not an error that affects the substantial rights of the parties because Appellee had no substantive right to have her student loan debt discharged. Again, Appellant has distorted the proper inquiry. Although it is true that Appellee had no legal right to have her student loan debt discharged under the law as it existed on January 15, 1997, there is no doubt that the discharge order affected Appellant's rights. Indeed, the effect of the discharge order is that Appellant cannot collect on the debt. Finally, Appellant argues that the error of law contained in the discharge order was a clerical mistake because it was caused by a drafting oversight by the Administrative Office. While, it is true that the Administrative Office failed to amend the form discharge order after the sunset provision was repealed in 1992, that omission has no bearing on whether the bankruptcy court intended to discharge Appellee's student loan debt. Because the discharge order accurately reflects the intent of the bankruptcy court, it just does not matter for purposes of Rule 60(a) that it was founded on an error of law. The bankruptcy court did not abuse its discretion in denying relief under Rule 60(a).
2. Rule 60(b)(4)
Appellant next argues that it is entitled to relief under Rule 60(b)(4), which authorizes a court to relieve a party from an order or final judgment that is void. See Fed.R.Civ.P. 60(b)(4). Although Rule 60(b) motions must be made "within a reasonable time," the Eleventh Circuit has held that there is no time limit for bringing a motion under Rule 60(b)(4). See Hertz Corp. v. Alamo Rent-A-Car, Inc ., 16 F.3d 1126, 1129-31 (11th Cir. 1994). "A judgment is `void' under Rule 60(b)(4) if it was rendered without jurisdiction of the subject matter or the parties or in a manner inconsistent with due process of law." Oakes v. Horizon Fin., S.A ., 259 F.3d 1315, 1319 (11th Cir. 2001) (per curiam). Appellant concedes that the bankruptcy court had subject-matter and personal jurisdiction in this case, but contends that the discharge order is void because it constituted a usurpation of Congress's authority and was rendered without due process. In this regard, the Eleventh Circuit recently held that "[a] judgment also is void for Rule 60(b)(4) purposes if the rendering court was powerless to enter it." Burke , 252 F.3d at 1263. Although this holding "most obviously allude[s] to a jurisdictional defect, [it] allow[s] enough room to capture within [its] reach situations where the parties' failure to follow relevant law or procedure in securing the judgment will undermine its ultimate validity." Carter v. Fenner , 136 F.3d 1000, 1006 (5th Cir. 1998).
In Burke , the Eleventh Circuit held that an order or judgment in contravention of the law is void. See 252 F.3d at 1265-66 (affirming the district court's decision that the judgment of dismissal was void under Rule 60(b)(4) because of the failure to conduct a hearing to determine the fairness of a settlement, which was required by the applicable state substantive law). Both the Fifth Circuit and the Seventh Circuit are in accord. See Carter , 136 F.3d at 1007-09; Great Am. Trading Corp. v. I.C.P. Cocoa, Inc ., 629 F.2d 1282, 1287-88 (7th Cir. 1980); but see William Skillings Assocs. v. Cunard Transp., Ltd ., 594 F.2d 1078, 1081 (5th Cir. 1979) ("A judgment is not void because it is erroneous."). The bankruptcy court did not have the benefit of the Eleventh Circuit's opinion in Burke because it issued its order in this case approximately nine months before Burke was decided. Therefore, the Court finds that it is appropriate to vacate the portion of the bankruptcy court's order dealing with Rule 60(b)(4) and remand the case with instructions for the bankruptcy court to reconsider its holding in light of Burke .
3. Rule 60(b)(6)
Finally, Appellant argues that it is entitled to relief under Rule 60(b)(6), which is a catch-all provision that authorizes a court to relieve a party from an order or final judgment for "any other reason justifying relief from the operation of the judgment." See Fed.R.Civ.P. 60(b)(6). The problem that Appellant cannot overcome is that the Eleventh Circuit "consistently has held that 60(b)(1) and (b)(6) are mutually exclusive. Therefore, a court cannot grant relief under (b)(6) for any reason which the court could consider under (b)(1)." Solaroll Shade Shutter Corp ., 803 F.2d at 1133. Because an order or judgment that contains an error of law is more appropriately challenged under Rule 60(b)(1), Appellant may not seek relief under Rule 60(b)(6). The bankruptcy court did not abuse its discretion in denying relief under Rule 60(b)(6).
C. The Bankruptcy Court's Findings that Appellant Willfully Violated the Discharge Injunction and that Appellee Was Therefore Entitled to Recover Damages
In light of Part II.B.2 of this order, the Court must also vacate the bankruptcy court's findings that Appellant willfully violated the discharge injunction and that Appellee was therefore entitled to recover damages.
III. CONCLUSION
For the foregoing reasons, the decision of the bankruptcy court is AFFIRMED IN PART and VACATED AND REMANDED WITH INSTRUCTIONS IN PART.