586 B.R. 337
Bankr. D. Idaho2018Background
- Debtor Jon Dana Cowan filed chapter 7 in Sept. 2008 and received a discharge Dec. 29, 2008; Lessor (Pine Business Center, LLC) was not listed on schedules but was orally informed by Debtor.
- Debtor and partner had a commercial lease (Dec. 2006–Dec. 2009) with scheduled rent increases; in Jan. 2009 parties signed a “First Amendment to Lease” extending the term and reverting rent, stating the Lease remained in full force and that the Amendment plus Lease constituted the entire agreement.
- Debtor vacated the premises mid‑2009 after his partner left; Lessor sued Debtor in state court (Oct. 2009) alleging breaches of the “lease documents” (Lease + Amendment) and obtained a money judgment, later enforced by garnishments and writs.
- Debtor argued the Lease obligations had been discharged in bankruptcy and the Amendment was an unenforceable attempt to revive discharged debt; he reopened his bankruptcy case (Oct. 2017) and sought sanctions for violating the discharge injunction.
- The bankruptcy court found (1) the Amendment functioned as a reaffirmation/revival of discharged obligations but did not comply with § 524(c)/(d), (2) Lessor’s state suit and judgment attempted to collect discharged debt and thus violated the discharge injunction, and (3) the state court judgment is void.
Issues
| Issue | Cowan's Argument | Lessor's Argument | Held |
|---|---|---|---|
| Whether the Amendment created new, enforceable post‑bankruptcy obligations | Amendment was an attempt to revive discharged Lease obligations and is unenforceable without §524 formalities | Amendment created a new postpetition obligation distinct from the discharged Lease | Held for Cowan: Amendment was an unenforceable reaffirmation that failed §524 requirements and did not revive discharged debt |
| Whether prosecuting the state action and enforcing the judgment violated the discharge injunction | Lessor prosecuted and enforced a void judgment to collect discharged debt; sanctionable | Lessor claimed it was enforcing postpetition obligations under the Amendment, not discharged prepetition debt | Held for Cowan: Commencing/prosecuting/enforcing the state action violated §524(a)(2); the judgment is void under §524(a)(1) |
| Standard and proof for sanctions for violating the discharge injunction | Lessor acted willfully and had knowledge; Cowan sought compensatory sanctions and attorneys’ fees | Lessor denied willfulness or claimed good faith/legal distinctions; sought to avoid sanctions | Held for Cowan: Clear and convincing evidence showed Lessor (through counsel) knew of discharge and intended the actions; compensatory fees/costs in bankruptcy court awarded; state‑court fees denied as inadequately substantiated |
| Remedy: scope of recoverable sanctions | Cowan sought fees for state and bankruptcy litigation and other costs to be made whole | Lessor opposed broad award | Held: Awarded reasonable attorneys’ fees and costs incurred to obtain compliance in bankruptcy (including reopening), to be detailed by Cowan’s counsel; fees for state‑court litigation denied due to lack of proof and strategic questions |
Key Cases Cited
- Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) (willful violation standard and contempt remedies for discharge injunction)
- Renwick v. Bennett (In re Bennett), 298 F.3d 1059 (9th Cir. 2002) (reaffirmation agreement doctrine; §524(c) requirements enforceable)
- Espinosa v. U.S. Aid Funds, Inc., 553 F.3d 1193 (9th Cir. 2009) (bankruptcy court must make debtor whole for willful discharge violations)
- Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir. 2002) (compensatory civil contempt remedies for discharge violations)
- Beezley v. California Land Title Co. (In re Beezley), 994 F.2d 1433 (9th Cir. 1993) (debts in no‑asset chapter 7 cases are discharged even if creditor not scheduled)
- Getzoff (In re Getzoff), 180 B.R. 572 (9th Cir. BAP 1995) (reaffirmation rules applied strictly; state law cannot trump §524 requirements)