Nolan v. Smith (In Re Smith)
321 B.R. 542
Bankr.D. Colo.2012Background
- Nolans, James, and Smiths co-own Bluestone Meadows properties with water shares and easements for irrigation.
- Easements were exchanged in 1999 to define Smiths' ingress/egress and McClaskey water-system maintenance rights across properties.
- Nolans purchased the McClaskey property in 2001, subject to existing easements.
- Plaintiffs sued Smiths in state court (Mesa County) on Jan 29, 2002 for multiple torts, seeking damages and fees.
- State court trial on July 11, 2003 found Smiths violated easement rights and interfered with irrigation, trespassed, and engaged in actions constituting a campaign of terror, awarding damages ($11,100 to Nolans, $1,400 to James) and issuing injunctions.
- State court also found Smiths’ defense was substantially groundless, frivolous, and vexatious, awarding attorney fees ($31,485.69) and costs ($1,088.10); Smiths contend these fees are dischargeable in bankruptcy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the underlying judgment is nondischargeable under § 523(a)(6). | Noland/James argue willful, malicious injury supports nondischargeability. | Smiths concede the underlying conduct supports nondischargeability but dispute fee treatment. | Yes; underlying damages are nondischargeable. |
| Whether attendant attorney fees and costs awarded in the state judgment are nondischargeable under § 523(a)(6). | Fees tied to nondischargeable conduct are nondischargeable. | Fees may not be nondischargeable if not integrally tied to underlying conduct. | Yes; attendant fees are nondischargeable. |
| Whether fees awarded under a separate state statute are nondischargeable under § 523(a)(6). | Separate statutory award should follow same nondischargeability. | Statutory distinction could separate dischargeability. | Yes; fee award nondischargeable under § 523(a)(6). |
| Whether the court should assess the reasonableness of the attorney fee award in this dischargeability action. | Court should review reasonableness de novo. | Rooker-Feldman prevents review of state court judgment. | No; cannot review reasonableness; denied. |
Key Cases Cited
- Cohen v. de la Cruz, 523 U.S. 213 (U.S. 1998) (nondischargeability under § 523(a)(2)(A); attendant damages recoverable when underlying debt nondischargeable)
- In re Auffant, 268 B.R. 689 (Bankr.M.D.Fla.2001) (fees under Florida Offer of Judgment statute nondischargeable with underlying debt)
- In re Scheller, 265 B.R. 39 (Bankr.S.D.N.Y.2001) (attorney fees tied to underlying nondischargeable conduct nondischargeable)
- In re Kovler, 249 B.R. 238 (Bankr.S.D.N.Y.2000) (attorneys' fees flowing from tortious acts nondischargeable under § 523(a)(6))
- In re Chaires, 249 B.R. 101 (Bankr.D.Md.2000) (fees awarded under separate statute nondischargeable; aligns with Cohen logic)
- In re Stokes, 150 B.R. 388 (W.D.Tex.1992) (fee awards under underlying judgment nondischargeable; pre-Cohen authority)
- In re Behn, 245 B.R. 444 (Bankr.W.D.N.Y.2000) (attorney fees recoverable under non-bankruptcy law nondischargeable when underlying debt nondischargeable)
- In re Beale, 253 B.R. 644 (Bankr.D.Md.2000) (analysis of dischargeability of fees linked to nondischargeable debt)
- In re McGuffey, 145 B.R. 582 (Bankr.N.D.Ill.1992) (majority view: fees arising from nondischargeable debt may be nondischargeable)