448 B.R. 389
Bankr. E.D. Va.2011Background
- Rountree's complaint seeks a discharge injunction violation finding against Nunnery and Klein for continuing a NC fraudulent transfer action against Rountree.
- Nunnery previously obtained a judgment against Rountree on prepetition Privacy Claims, later discharged in the bankruptcy.
- The NC Fraudulent Transfer Proceeding was filed in Randolph County, North Carolina, alleging the same conveyance as the Trustee's earlier action and was enjoined by the bankruptcy court pending resolution of the §523 action.
- The transfer at issue occurred postpetition (September 2002); Nunnery seeks to recover under NC UFTA against Rountree and DeWolfs.
- The court granted summary judgment in part, holding the NC Proceeding violates the discharge injunction as to Rountree individually, but not as to the DeWolfs; the contempt and sanctions issue remains to be tried.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does continuation of the NC proceeding violate the discharge injunction as to Rountree personally? | Rountree argues the NC action is an in personam claim on prepetition debt. | Nunnery/Klein contend NC action is a postpetition tort claim independent of discharged debt. | Yes; continuation violates discharge injunction as to Rountree personally. |
| Does the discharge injunction prohibit enforcement against the DeWolfs in NC proceeding? | Discharge should bar any action against nondebtors if it enforces the discharged debt. | NC action against DeWolfs may proceed; discharge does not bind nondebtors under §524(e). | No; NC action against DeWolfs may proceed; no injunction against them. |
| Should the court enjoin the NC proceeding against the DeWolfs to protect the debtor's discharge? | Enjoin to prevent hindrance to Rountree's discharge. | No basis to enjoin nondebtor proceedings; insufficient showing of impact on estate. | No injunction against DeWolfs at this time. |
| Does Rountree's alleged fraud to schedule and other assets bar relief? | Alleged fraud undermines the entitlement to relief. | Allegations insufficient to defeat summary judgment or relief. | Fraud allegations do not preclude relief; summary judgment still appropriate on discharge issues. |
| What sanctions, if any, for contempt should follow the discharge violation? | Nunnery and Klein should be held in contempt with damages and fees. | Contempt and sanctions should be deferred pending evidentiary hearing. | Sanctions and contempt to be determined at a later evidentiary hearing. |
Key Cases Cited
- Cherry v. Arendall (In re Cherry), 247 B.R. 176 (Bankr.E.D.Va.2000) (discharge injunction governs collection against debtor; in rem vs. in personam nuance)
- Johnson v. Home State Bank, 501 U.S. 78 (Supreme Court 1991) (discharge extinguishes personal liability; liens survive in rem)
- In re Handy, 624 F.3d 19 (1st Cir.2010) (constructive-trust remedies do not create in rem claims absent liens)
- Kathy B. Enterprises v. United States, 779 F.2d 1413 (9th Cir.1986) (section 524(e) does not shield nondebtors from creditor actions against them)
- In re Conston, Inc., 181 B.R. 769 (D.Del.1995) (discusses § 524(e) preservation of rights of claimants against nondebtors)