644 B.R. 149
Bankr. W.D. Va.2022Background
- Morton and Laurie Skaggs filed Chapter 7; discharge entered June 25, 2019.
- A 2000 judgment (Virginia Cellular One) against Morton Skaggs was recorded but, at discharge, he owned no real property so the judgment was unsecured and voided by the discharge.
- Skaggs inherited a 20% interest in Rockingham County real property in September 2019 (post-discharge) and listed it for sale.
- Title issues arose when the recorded 2000 judgment appeared to block closing; Skaggs contacted the Gooch law firm.
- Gooch’s firm sent a payoff letter and offered to settle the judgment; Skaggs informed them the debt had been discharged.
- The title attorney’s inquiry was resolved by Skaggs’s bankruptcy counsel, the sale closed, and the defendants admit the judgment never attached to Skaggs’s inherited interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the defendants violated the bankruptcy discharge injunction (11 U.S.C. §524) | Skaggs: the judgment was voided by the discharge and any collection attempts violated §524(a)(2). | Gooch: they were enforcing in rem rights based on a judgment lien they reasonably believed existed. | Court: Defendants violated the discharge injunction as a matter of law because no lien existed at discharge and attempts to collect a voided judgment were in personam. |
| Standard for civil contempt for discharge violations | Skaggs: urges a stricter, almost strict-liability standard (analogous to willful stay violations). | Gooch: asserts subjective good-faith belief the lien survived bars contempt. | Court: Applies Taggart — contempt only where there is no objectively reasonable basis to conclude the conduct might be lawful; subjective belief insufficient. |
| Whether defendants meet Taggart’s objective-reasonableness defense | Skaggs: defendants had no objectively reasonable basis to collect. | Gooch: claims an innocent, shared misunderstanding and reliance on title inquiry. | Court: Defendants failed to show any objectively reasonable basis; may be held in civil contempt as a matter of law. |
| Appropriate sanctions/remedy | Skaggs: seeks compensatory and punitive damages. | Gooch: opposes sanctions. | Court: Focus on remedial damages to compensate for the violation; punitive or coercive sanctions are not appropriate here; a hearing will be set to determine the specific remedial sanctions. |
Key Cases Cited
- Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) (supreme court articulating the objective-reasonableness standard for contempt of discharge orders)
- Green Point Credit, LLC v. McLean (In re McLean), 794 F.3d 1313 (11th Cir. 2015) (discussing §105 enforcement of discharge injunction)
- Roth v. Nationstar Mortg., LLC (In re Roth), 935 F.3d 1270 (11th Cir. 2019) (same)
- News & Observer Publ’g Co. v. Raleigh-Durham Airport Auth., 597 F.3d 570 (4th Cir. 2010) (summary judgment/genuine-dispute standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (movant’s burden on summary judgment)
- Int’l Union v. Bagwell, 512 U.S. 821 (1994) (distinction between remedial and punitive contempt sanctions)
- McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949) (civil contempt remedies enforce compliance and compensate losses)
- Gompers v. Buck’s Stove & Range Co., 221 U.S. 418 (1911) (contempt may coerce compliance)