Lee Wendell Loder v. Icemakers, Inc.

• Court: Court of Appeals for the Eleventh Circuit
• Decided: February 25, 2020
• Docket: 19-10891
• Status: Unpublished

Opinion

Case: 19-10891 Date Filed: 02/25/2020 Page: 1 of 8

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 19-10891 Non-Argument Calendar ________________________

D.C. Docket Nos. 2:18-cv-00812-LSC; 2:07-bkc-01261-DSC-7

In re:

LEE WENDELL LODER,

Debtor,

__________________________________________________________________

LEE WENDELL LODER, Plaintiff-Appellant,

versus

ICEMAKERS, INC.,

Defendant-Appellee.

________________________

Appeal from the United States District Court for the Northern District of Alabama ________________________

(February 25, 2020) Case: 19-10891 Date Filed: 02/25/2020 Page: 2 of 8

Before WILSON, GRANT, and ANDERSON, Circuit Judges.

PER CURIAM:

Lee Loder appeals the district court’s judgment affirming the bankruptcy

court’s denial of his motion for contempt sanctions against one of his creditors,

Icemakers, Inc. Loder alleges that Icemakers’s efforts to collect on a state court

judgment violated his Chapter 7 bankruptcy discharge order and 11 U.S.C. § 524.

After a careful review of the record and the parties’ briefs, we conclude that there

was an objectively reasonable basis for Icemakers to believe that its collection

efforts were lawful. We therefore affirm.

I.

Icemakers sued Loder and his business in Jefferson County, Alabama, in a

dispute over leased equipment. The parties reached a settlement, and in March

2007, the state court entered a consent judgment in favor of Icemakers in the

amount of $5,652.22 (to be paid in installments) plus $296 in court costs. The

judgment provided that, in the event of default on the installment payments,

postjudgment interest would accrue at the state statutory rate of 12% per annum

from the date of default. Loder defaulted almost immediately on the installment

payments.

Less than a month after Loder and Icemakers executed their consent

judgment in state court, Loder filed a Chapter 7 bankruptcy action, listing

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Icemakers as an unsecured creditor. Icemakers filed an adversary proceeding in

the bankruptcy action, objecting to the dischargeability of Loder’s debt to it. With

the consent of the parties, the bankruptcy court entered an order stating that

“judgment is hereby entered against Lee Loder in the amount of $5,652.22” and

further stating that “said judgment is non-dischargable pursuant to the provisions

of 11 U.S.C. § 523(a)(6).”1

Several years later, Icemakers made efforts to collect on the state court

judgment, seeking $5,652.22 plus $296 in costs and 12% postjudgment interest.

Loder filed a motion for civil contempt and sanctions in the bankruptcy court,

arguing that Icemakers’s attempts to collect on the state court judgment violated

the bankruptcy discharge injunction. Loder contended that the consent judgment

in the dischargeability proceeding replaced the state court judgment, and that the

state court judgment—with its associated 12% postjudgment interest rate and state

court costs and fees—was discharged in bankruptcy.

The bankruptcy court found that the federal consent judgment did not

replace the state court judgment, but merely determined that the debt embodied in

the state court judgment was nondischargeable. Accordingly, the bankruptcy court

concluded that Icemakers’s attempts to collect the debt had not violated the

1 Section 523(a)(6) provides an exception from discharge for debt “for willful and malicious injury by the debtor to another entity or to the property of another entity.” 3 Case: 19-10891 Date Filed: 02/25/2020 Page: 4 of 8

discharge injunction and denied Loder’s motion for contempt and sanctions. The

district court affirmed, and this appeal followed.

II.

In bankruptcy cases, we sit as a “second court of review,” independently

examining the bankruptcy court’s decision and applying the same standards of

review as the district court. In re Issac LeaseCo, Inc., 389 F.3d 1205, 1209 (11th

Cir. 2004) (citation omitted). We review the bankruptcy court’s denial of Loder’s

motion for contempt and sanctions for an abuse of discretion. See In re Roth, 935

F.3d 1270, 1274 (11th Cir. 2019); In re Diaz, 647 F.3d 1073, 1082 (11th Cir.

2011). “A bankruptcy judge abuses his discretion if he commits an error of law or

relies on factual findings that are clearly erroneous.” Diaz, 647 F.3d at 1082.

III.

A “court may hold a creditor in civil contempt for violating a discharge

order if there is no fair ground of doubt as to whether the order barred the

creditor’s conduct. In other words, civil contempt may be appropriate if there is no

objectively reasonable basis for concluding that the creditor’s conduct might be

lawful.” Taggart v. Lorenzen, 139 S. Ct. 1795, 1799 (2019) (emphasis in the

original). Loder does not dispute that he owed Icemakers $5,652.22, or that that

amount was nondischargeable pursuant to 11 U.S.C. § 523(a)(6). He therefore

concedes, as he must, that Icemakers’s attempts to collect the sum of $5,652.22 did

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not violate the discharge injunction. See Diaz, 647 F.3d at 1088 (the discharge

injunction in 11 U.S.C. § 524(a)(2) “does not apply to nondischargeable debts”;

accordingly, “holders of nondischargeable debts generally may attempt to collect

from the debtor personally for such debts” (emphasis in the original) (citation

omitted)). But Loder contests Icemakers’s right to collect additional sums

referenced in the state court judgment, including interest at the state statutory rate

and costs and fees imposed by the state court.

It was objectively reasonable for Icemakers to believe that it could legally

collect the interest, costs, and fees imposed by the state court, for two reasons.

First, at least one federal circuit court has concluded that where a prior state court

judgment fixes liability for a debt, “the bankruptcy court, in an adversary

proceeding to determine whether the debt is dischargeable, cannot issue its own

judgment on the debt to replace the state court judgment previously obtained. All

the bankruptcy court is called upon, or authorized to do, is to determine whether or

not the state judgment is dischargeable.” In re Heckert, 272 F.3d 253, 257 (4th

Cir. 2001). While we have not yet addressed this precise issue in a published

opinion, it is well established that collateral estoppel principles bar the relitigation

in bankruptcy dischargeability proceedings of issues previously litigated by the

same parties and resolved in a state court judgment. See Grogan v. Garner, 498

U.S. 279, 284 n. 11 (1991); In re St. Laurent, 991 F.2d 672, 675 (11th Cir. 1993);

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see also Unum Life Ins. Co. of Am. v. Wright, 897 So. 2d 1059, 1082 (Ala. 2004).

Because the amount owed to Icemakers, including postjudgment interest and court

costs, was litigated by the parties and resolved in the state court consent judgment,

Icemakers had at least an objectively reasonable basis for concluding that that issue

was not subject to relitigation in the bankruptcy court. Cf. In re Bulic, 997 F.2d

299, 304 (7th Cir. 1993) (full faith and credit statute required bankruptcy court to

find that the validity and amount of the creditor’s claim was established in a prior

state court judgment).

Second, because the bankruptcy court determined—with Loder’s consent—

that Loder’s debt to Icemakers in the amount of $5,652.22 was nondischargeable

debt “for willful and malicious injury by the debtor to another entity or to the

property of another entity” under 11 U.S.C. § 523(a)(6), Icemakers had some legal

basis to conclude that costs and interest applicable to that debt by agreement or by

operation of state law also were nondischargeable. “If a creditor is able to

establish the requisite elements of Section 523, the creditor is entitled to collect

‘the whole of any debt’ he is owed by the debtor.” TranSouth Fin. Corp. of Fla. v.

Johnson, 931 F.2d 1505, 1507 (11th Cir. 1991) (citation omitted). “Debt”

excepted from discharge under § 523(a)(6) is construed broadly to mean “any

liability arising from” the operative “willful and malicious injury by the debtor.”

Cohen v. de la Cruz, 523 U.S. 213, 220 (1998) (emphasis added).

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In TranSouth, we considered the “broad and expansive reading” given to the

term “debt” under the Bankruptcy Code and concluded that “the ‘debt’ excused

from discharge in a successful Section 523 action would appear to include a

debtor’s contractual obligation to pay a creditor’s attorney’s fees.” 931 F.2d at

1507 (citation omitted). It follows that debt that is nondischargeable under

§ 523(a)(6) could include the debtor’s agreed-upon obligation to pay postjudgment

interest at a specified rate.

Supreme Court precedent also supports the conclusion that debt excepted

from discharge under § 523(a) may include collateral losses arising from the

debtor’s wrongful conduct, such as attorney’s fees and costs. See Cohen, 523 U.S.

at 220, 222. In Cohen, the Supreme Court held that § 523(a)’s discharge exception

for fraud “bars the discharge of all liability arising from fraud,” including state

statutory treble damages, attorney’s fees, and court costs associated with a lawsuit

to establish the debtor’s wrongful conduct. Id. at 223. While not conclusive, these

precedents support Icemakers’s conclusion that the costs and postjudgment interest

provided in the state court consent judgment were also nondischargeable and

subject to collection.

IV.

Given the state court consent judgment establishing the amount of Loder’s

debt to Icemakers—including court costs and postjudgment interest—and the

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bankruptcy court’s determination that Loder’s debt to Icemakers was

nondischargeable, we cannot say that Icemakers had “no objectively reasonable

basis for concluding that” its attempts to collect the state court costs and interest

“might be lawful.” Taggart, 139 S. Ct. at 1799. We therefore conclude that the

bankruptcy court did not abuse its discretion when it found that civil contempt

sanctions against Icemakers were not warranted. We affirm.

AFFIRMED.