Chanute Production Credit Ass'n v. Schicke

9 P.3d 561, 27 Kan. App. 2d 769, 2000 Kan. App. LEXIS 747
CourtCourt of Appeals of Kansas
DecidedJuly 21, 2000
DocketNo. 83,818
StatusPublished

This text of 9 P.3d 561 (Chanute Production Credit Ass'n v. Schicke) is published on Counsel Stack Legal Research, covering Court of Appeals of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Chanute Production Credit Ass'n v. Schicke, 9 P.3d 561, 27 Kan. App. 2d 769, 2000 Kan. App. LEXIS 747 (kanctapp 2000).

Opinion

Rulon, J.:

Plaintiff Chanute Production Credit Association appeals the district court’s order dismissing plaintiff s claims for lack of jurisdiction and assessing sanctions against the plaintiff under K.S.A. 1999 Supp. 60-211. We affirm in part, reverse in part, and remand with directions.

The facts distilled to their essence are as follows:

In April 1984, the plaintiff received a judgment against the defendant, Michael C. Schicke, in the amount of $583,186.39. Subsequently, the defendant filed a petition in the United States Bankruptcy Court for the District of Kansas and was granted a discharge from the debts listed in the bankruptcy schedule. The plaintiff was listed as a creditor on Schedule F of the bankruptcy petition, but the creditor’s address was listed as “Chanute Production Credit Assn., c/o Coombs & Hull, P.O. Box 306, Chanute, KS 66720.”

[770]*770When the debt remained unpaid, the plaintiff filed an Application for Examination of the defendant in state court to determine what assets defendant possessed that could be applied to satisfy the judgment. The district court issued an order which directed defendant to appear for a hearing in aid of execution on the plaintiff s judgment.

The defendant failed to appear at the hearing; instead his counsel sent a letter to the district court indicating that the debt claimed by the plaintiff had been discharged in bankruptcy. Upon motion by the plaintiff, the district court issued a show cause order to defendant for contempt in failing to appear at the hearing. As we understand, the district court was unaware of the letter in the court file explaining the discharge. The defendant responded to the show cause order by filing a motion for sanctions against the plaintiff for violating an order of the bankruptcy court, requesting $133 in attorney fees. The plaintiff then filed a motion for sanctions for violation of the hearing order, arguing the defendant’s debt to the plaintiff was not discharged in bankruptcy because the plaintiff never received proper notice.

After conducting a hearing, the district court found that it could be in contempt of the bankruptcy court’s order if the plaintiff was permitted to pursue its judgment against the defendant. The district court deferred to the judgment of the bankruptcy court in determining the dischargeability of the plaintiff s claim. The district court imposed sanctions against the plaintiff for failing to inform the court of the defendant’s position regarding the debt when it sought contempt proceedings for the defendant’s failure to appear at the hearing.

The plaintiff appeals the order of the district court deferring judgment to the bankruptcy court and imposing sanctions upon the plaintiff.

JURISDICTION

The plaintiff frames its first contention on appeal as a jurisdictional question, claiming the district court was required to consider the effect of lack of notice upon the discharge of the debt owed to the plaintiff.

[771]*771As the plaintiff properly contends, jurisdiction is a question of law, and this court has unlimited review over the position taken by the district court. See State v. Snelling, 266 Kan. 986, 988, 975 P.2d 259 (1999).

We understand the plaintiff seeks to collaterally attack the bankruptcy court’s jurisdiction in granting the defendant’s discharge of the debt owed to the plaintiff, claiming the bankruptcy court never effected proper notice. However, this case does not present the factual basis for a collateral attack upon the bankruptcy court’s judgment. Nothing in the record, or the plaintiff s allegations, suggests the bankruptcy court failed to follow the rules for notifying creditors of a pending bankruptcy established within the Bankruptcy Code and Rules. The plaintiff alleges the defendant improperly scheduled his debt to the plaintiff. As such, according to plaintiff, the defendant cannot raise his discharge in bankruptcy as an affirmative defense against the plaintiff s attempts to collect the judgment.

In First Discount Corp. v. Applegate, 104 Ohio App. 84, 143 N.E.2d 868 (1957), the Ohio Court of Appeals held:

“We are not advised by the record that the trial judge had any different view on this subject. He gave effect to the discharge regardless of the failure of die defendant to duly schedule the plaintiff s debt, because of his conclusion that this would constitute a collateral attack upon die action of the Bankruptcy Court in granting die discharge. His conclusion failed to take account of die limited issue raised by an application for a discharge in bankruptcy. The only issue is whether die applicant is a bankrupt. If he is found to occupy that status, the court so declares and grants him a discharge. Thereafter, he occupies that status. The effect is not determined. As is said in 6 American Jurisprudence, 981 et seq., Section 744: ‘The right to a discharge is determined in the bankruptcy court; die effect of die discharge when obtained is ordinarily determined whenever and wherever die enforcement of a debt is attempted against the bankrupt.’ ” 104 Ohio App. at 86-87.

The Bankruptcy Code, 11 U.S.C. § 523 (1994) provides exceptions to a discharge in bankruptcy. A determination of the applicability of those exceptions, however, is limited to a federal court of bankruptcy only if the creditor claims an exception under section 523(a)(2), (a)(4), or (a)(6). Adam Glass Service, Inc. v. Federated Dept. Stores, Inc., 173 Bankr. 840, 843 (E.D.N.Y. 1994). See also [772]*772In re Burns, 357 F. Supp. 176, 177 (D. Kan. 1972) (finding exclusive bankruptcy jurisdiction for a claim of dischargeability brought for fraud or false representation). Jurisdiction for a determination of dischargeability is concurrent between the bankruptcy court and a court of competent jurisdiction with the exception of creditor claims brought under § 523(a)(2), (a)(4), and (a)(6). In re Marriage of Salisbury, 13 Kan. App. 2d 740, 742, 779 P.2d 878 (1989).

However, determining that the district court could properly exercise jurisdiction does not dispose of this appeal. The district court refused to exercise jurisdiction over the claim, deferring to the bankruptcy court’s determination of dischargeability of the plaintiff s claim. When a court possesses concurrent jurisdiction in an issue involving bankruptcy, refusal to exercise that jurisdiction is reviewed for an abuse of discretion. See In re Thaggard, 180 Bankr. 659, 662-63 (M.D. Ala. 1995).

Although Thaggard involved a bankruptcy court’s abstention from determining whether debt obligations between a husband and wife were dischargeable in deference to a state court, there is no reason to apply a different standard of review when analyzing the action of the district court. See Harwood v. Glacier Electric Co-op, 285 Mont. 481, 486, 949 P.2d 651

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Mullane v. Central Hanover Bank & Trust Co.
339 U.S. 306 (Supreme Court, 1950)
Harwood v. Glacier Electric Cooperative, Inc.
949 P.2d 651 (Montana Supreme Court, 1997)
Saucedo v. Winger
850 P.2d 908 (Supreme Court of Kansas, 1993)
In Re the Marriage of Sailsbury
779 P.2d 878 (Court of Appeals of Kansas, 1989)
Walker v. State
988 P.2d 283 (Court of Appeals of Kansas, 1999)
State v. Snelling
975 P.2d 259 (Supreme Court of Kansas, 1999)
State Ex Rel. Bell Atlantic-West Virginia, Inc. v. Ranson
497 S.E.2d 755 (West Virginia Supreme Court, 1997)
In Re Burns
357 F. Supp. 176 (D. Kansas, 1972)
First Discount Corp. v. Applegate
143 N.E.2d 868 (Ohio Court of Appeals, 1957)

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9 P.3d 561, 27 Kan. App. 2d 769, 2000 Kan. App. LEXIS 747, Counsel Stack Legal Research, https://law.counselstack.com/opinion/chanute-production-credit-assn-v-schicke-kanctapp-2000.