Opinion
Case No. 94-14835, Adversary Proceeding No. 95-1087-AB
July 12, 1996
Sam J. Alberts, Esquire, Akin, Gump, Strauss, Hauer Feld, L.L.P., Washington, D.C. for the plaintiff
Arthur Lander, Esquire, Arlington, Virginia for the debtor-defendant
MEMORANDUM OPINION
Before the court is the plaintiff's motion under Federal Rule of Bankruptcy Procedure 9023 to alter or amend this court's judgment dated June 7, 1996 determining that the debtor's liability to hold the plaintiff harmless from certain credit card debt is nondischargeable under Sections 523(a)(5) and (a)(15), Bankruptcy Code. Specifically, the plaintiff seeks to have this court reconsider its ruling that a money judgment for the amount of the debt excepted from discharge was not appropriate at this time, since the plaintiff had not paid the liabilities.
Discussion
The facts and the proceedings to date are set forth in the court's prior memorandum opinion dated June 7, 1996, and will not be repeated. On June 7, 1996, the court signed an order, consistent with the memorandum opinion, determining that the debtor's liability to indemnify the plaintiff, his former wife, from liability on three credit card accounts was excepted from discharge under §§ 523(a)(5) and (a)(15), Bankruptcy Code. That order was entered on the docket on June 10, 1996. On June 14, 1996, the plaintiff filed the present motion under Federal Rule of Civil Procedure 59(e), as incorporated by Bankruptcy Rule 9023, to alter or amend the order to provide, in addition, for the entry of a money judgment in favor of the plaintiff against the debtor in the aggregate amount of the balances due on the three credit cards, which the parties had stipulated to be $11,099.91.
"A motion to alter or amend the judgment shall be served not later than 10 days after entry of the judgment."
"Rule 59 F.R.Civ.P. applies in cases under the Code, except as provided in Rule 3008." F.R.Bankr.P. 3008 deals exclusively with reconsideration of an order allowing or disallowing a claim, as permitted by § 502(j), Bankruptcy Code, and is not subject to the 10 day limit.
The court advised the parties that under Local Rule 109(L) the motion would be decided without oral argument. The debtor did not file an opposition or memorandum within 10 days as permitted by Local Rule 109(H)(3), and the matter is now ripe for determination.
This issue was discussed, and the authorities collected, at pages 9 to 13 of the court's prior memorandum opinion. Briefly summarized, a cause of action for indemnity in Virginia does not arise until the party entitled to indemnity pays the claim, since prior to that time any loss is speculative. However, Virginia courts have recognized two limited exceptions to that rule: first, as in the case of a standard automobile liability insurance policy, where a party has agreed to indemnify not merely against loss, but against liability for a claim; and the second, where a party has by contract expressly agreed to assume a particular debt. It is the latter exception, as articulated in Linbrook Realty Corp. v. Rogers, 158 Va. 181, 163 S.E. 346 (1932) (deed of trust assumed in connection with sale of real estate) that the plaintiff relies upon.
On a motion under Federal Rule of Civil Procedure 59(e) to alter or amend a judgment, the moving party must generally show (1) that there has been an intervening change in controlling law, (2) that there exists new evidence not available at trial, or (3) that amendment of the judgment is required to correct a clear error of law or to prevent manifest injustice. Hutchinson v. Staton, 994 F.2d 1076, 1081 (4th Cir. 1993). Here the plaintiff argues, and the court concurs, that the court's prior ruling did not take into account the agreed order of October 17, 1994, entered in the state court proceedings.
That order was entered after the debtor had been incarcerated for failure to obey the May 6, 1994, order. In the order, which was endorsed by debtor's counsel, the court, consistent with what was recited to be "a temporary agreement on the issues," directed, among other provisions,
See p. 6-7 of this court's prior memorandum opinion.
that Marvin David Speaks shall transfer all balances on credit accounts with the Bank of New York, NationsBank and the Independent Bank of Manassas to separate credit accounts in his own name, removing the name of the complainant completely from said accounts.
The plaintiff urges that this language in the agreed order amounts in substance to an agreement to assume and pay the debt, essentially indistinguishable from the agreement to assume and pay the deed of trust in Linbrook Realty Corp. v. Rogers, supra. While that very well may be, there is an important distinguishing circumstance: although the plaintiff in Linbrook Realty had not paid the debt that the defendant had agreed to assume, the debt had been reduced to judgment. In the present case, the plaintiff, although apparently the subject of demand letters, has not been sued, and her own liability for the sums alleged to be due on the three credit cards has not been fixed by judgment. Suppose, for example, that for whatever reason, one of the creditors should fail to bring an action against Ms. King within the period required by the statute of limitations. To grant her a judgment against the debtor for amounts that the plaintiff may never be required to pay the credit card issuer would result in a windfall to her. Had Ms. King already suffered a judgment against her on account of the liabilities, this court would find — based on the October 17, 1994, agreed order D that her situation came within the narrow exception articulated in Linbrook Realty. Since she has not, the court concludes that, consistent with the general rule in Virginia, she has not yet suffered the kind of loss that would entitle her to a money judgment.
Of course, as noted in the court's prior opinion, if Ms. King is sued by one or more of the card issuers, she may, under Va. Code Ann. § 8.01-249(5), file a third-party claim against the debtor and obtain a judgment against him in that proceeding for such sums as she is found to be liable to the creditor.
For the foregoing reasons, although the court agrees that the prior memorandum opinion was in error in determining that there was no agreement by the debtor to assume liability for the three credit cards, the court, nevertheless, having carefully considered the matter, concludes that the plaintiff is not entitled to a money judgment at this time since her own liability has not been reduced to judgment. Accordingly, the motion to alter or amend the judgment will be denied.
A separate order will be entered consistent with this opinion.