Ammons et al v. Eddy Federal Credit Union

1The Court has subject matter and personal jurisdiction
pursuant to 28 U.S.C. §§1334 and 157(b); this is a core
proceeding pursuant to 28 U.S.C. §157(b)(2)(A) and/or (O); and
these are findings of fact and conclusions of law as may be
required by Rule 7052 F.R.B.P.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
JEFFREY H. AMMONS and
LISA M. AMMONS,
Debtors. 	No. 7-08-11290 SR
JEFFREY H. AMMONS and
LISA M. AMMONS,
Plaintiffs,
v. 	Adv. No. 11-1082 S
EDDY FEDERAL CREDIT UNION,
Defendant.
MEMORANDUM OPINION ON PLAINTIFFS’
MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on Jeffrey H. Ammons’ and
Lisa M. Ammons’ (“Plaintiffs’”) Motion for Summary Judgment (doc
17). 	Plaintiffs appear through their attorney Sanders, Bruin,
Coll & Worley, P.A. (Clark C. Coll). 	Eddy Federal Credit Union
(“Defendant”) appears through its attorney Rodey, Dickason,
Sloan, Akin & Robb, P.A. (Theresa W. Parrish and Charles R.
Hughson). 1 	This adversary proceeding was brought seeking an
order of civil contempt, injunctive relief, and damages for
alleged violations of the discharge injunction. 	The facts are
generally not in dispute. 	For the reasons set forth below, the
Court finds that the motion is well taken in part and will be
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granted in part and denied in part. 	The Court will enter a
partial summary judgment for Plaintiffs.
SUMMARY JUDGMENT
In adversary proceedings Summary Judgment is governed by
Fed.R.Bankr.P. 7056, which incorporates Fed.R.Civ.P. 56, which in
turn provides, in relevant part:
Rule 56. Summary Judgment
(a) Motion for Summary Judgment or Partial Summary
Judgment. 	A party may move for summary judgment,
identifying each claim or defense--or the part of each
claim or defense--on which summary judgment is sought.
The court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as
a matter of law. 	The court should state on the record
the reasons for granting or denying the motion.
(b) ...
(c) Procedures.
(1) Supporting Factual Positions. 	A party asserting
that a fact cannot be or is genuinely disputed must
support the assertion by:
(A) citing to particular parts of materials in the
record, including depositions, documents,
electronically stored information, affidavits or
declarations, stipulations (including those made
for purposes of the motion only), admissions,
interrogatory answers, or other materials; or
(B) showing that the materials cited do not
establish the absence or presence of a genuine
dispute, or that an adverse party cannot produce
admissible evidence to support the fact.
(2) Objection That a Fact Is Not Supported by
Admissible Evidence. 	A party may object that the
material cited to support or dispute a fact cannot be
presented in a form that would be admissible in
evidence.
(3) Materials Not Cited. 	The court need consider only
the cited materials, but it may consider other
materials in the record.
(4) Affidavits or Declarations. 	An affidavit or
declaration used to support or oppose a motion must be
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2The version of Rule 56 quoted became effective on December
1, 2010. 	See Fed. R. Civ. P. 56 (2010 Advisory Committee
comments). 	Material formerly contained in former Rule 56(c) now
appears in rule 56(a).
Page -3-
made on personal knowledge, set out facts that would be
admissible in evidence, and show that the affiant or
declarant is competent to testify on the matters
stated.
(d) ...
(e) Failing to Properly Support or Address a Fact. 	If
a party fails to properly support an assertion of fact
or fails to properly address another party's assertion
of fact as required by Rule 56(c), the court may:
(1) give an opportunity to properly support or address
the fact;
(2) consider the fact undisputed for purposes of the
motion;
(3) grant summary judgment if the motion and supporting
materials--including the facts considered
undisputed--show that the movant is entitled to it; or
(4) issue any other appropriate order.
(f) ...
(g) Failing to Grant All the Requested Relief. 	If the
court does not grant all the relief requested by the
motion, it may enter an order stating any material
fact--including an item of damages or other
relief--that is not genuinely in dispute and treating
the fact as established in the case.
Fed.R.Civ.P. 56. 2 	Additionally, New Mexico Local Rule 7056-1
regulates the required procedure:
SUMMARY JUDGMENT
(a) 	Memoranda. 	The movant shall file with the motion
a memorandum containing a 	concise statement in support
of the motion with a list of authorities. 	A motion for
summary judgment filed without a memorandum may be
summarily denied. 	A party opposing the motion shall,
within 21 days after service of the motion, file a
memorandum containing a concise statement in opposition
to the motion with a list of authorities. 	If no
response is filed, the court may grant the motion. 	The
movant may, within 14 days after the service of a
response, file a reply memorandum.
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(b) 	Undisputed Facts. 	The memorandum in support of
the motion shall set out as its opening a concise
statement of all of the material facts as to which
movant contends no genuine issue exists. 	The facts
shall be numbered and shall refer with particularity to
those portions of the record upon which movant relies.
(c) 	Disputed Facts. 	A memorandum in opposition to the
motion shall contain a concise statement of the
material facts as to which the party contends a genuine
issue does exist. 	Each fact in dispute shall be
numbered, shall refer with particularity to those
portions of the record upon which the opposing party
relies, and shall state the number of the movant's fact
that is disputed. 	All material facts set forth in
movant's statement that are properly supported shall be
deemed admitted unless specifically controverted.
NM LBR 7056-1.
The United States District Court for the District of New
Mexico recently presented a complete overview of the legal
standards for deciding Motions for Summary Judgment in the Tenth
Circuit:
Rule 56(c) states that summary judgment “should be
rendered if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there
is no genuine issue as to any material fact and that
the movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(c)(2). 	The movant bears the initial
burden of “show[ing] that there is an absence of
evidence to support the nonmoving party's case.”
Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d
887, 891 (10th Cir. 1991)(internal quotation marks
omitted). 	See Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986)(“Of course, a party seeking summary judgment
always bears the initial responsibility of informing
the district court of the basis for its motion, and
identifying those portions of the [record], together
with the affidavits, if any, which it believes
demonstrate the absence of a genuine issue of material
fact .”) (internal quotation marks omitted). 	Once the
movant meets this burden, rule 56(e) requires the
non-moving party to designate specific facts showing
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that there is a genuine issue for trial. 	See Celotex
Corp. v. Catrett, 477 U.S. at 324; Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 256 (1986); Vitkus v.
Beatrice Co., 11 F.3d 1535, 1539 (10th Cir. 1993)
(“However, the nonmoving party may not rest on its
pleadings but must set forth specific facts showing
that there is a genuine issue for trial as to those
dispositive matters for which it carries the burden of
proof.”)(internal quotation marks omitted).
The party opposing a motion for summary judgment
must “set forth specific facts showing that there is a
genuine issue for trial as to those dispositive matters
for which it carries the burden of proof.” 	Applied
Genetics Int'l, Inc. v. First Affiliated Secs., Inc.,
912 F.2d 1238, 1241 (10th Cir. 1990). 	Rule 56 provides
that “an opposing party may not rely merely on
allegations or denials in its own pleading; rather, its
response must—by affidavits or as otherwise provided in
this rule—set out specific facts showing a genuine
issue for trial.” 	Fed.R.Civ.P. 56(e)(2). 	It is not
enough for the party opposing a properly supported
motion for summary judgment to “rest on mere
allegations or denials of his [or her] pleadings.”
Anderson v. Liberty Lobby, Inc., 477 U.S. at 256. 	See
Abercrombie v. City of Catoosa, 896 F.2d 1228, 1231
(10th Cir. 1990); Otteson v. United States, 622 F.2d
516, 519 (10th Cir. 1980)( “However, ‘once a properly
supported summary judgment motion is made, the opposing
party may not rest on the allegations contained in his
complaint, but must respond with specific facts showing
the existence of a genuine factual issue to be tried.’”
(citation omitted)). 	Nor can a party “avoid summary
judgment by repeating conclusory opinions, allegations
unsupported by specific facts, or speculation.” 	Colony
Nat'l Ins. Co. v. Omer, No. 07–2123, 2008 WL 2309005,
at *1 (D. Kan. June 2, 2008)(citing Fed.R.Civ.P. 56(e)
and Argo v. Blue Cross & Blue Shield of Kan., Inc., 452
F.3d 1193, 1199 (10th Cir. 2006)). 	“In responding to a
motion for summary judgment, ‘a party cannot rest on
ignorance of facts, on speculation, or on suspicion and
may not escape summary judgment in the mere hope that
something will turn up at trial.’” 	Colony Nat'l Ins.
Co. v. Omer, 2008 WL 2309005, at *1 (quoting Conaway v.
Smith, 853 F.2d 789, 794 (10th Cir. 1988)).
To survive summary judgment, genuine factual
issues must exist that “can be resolved only by a
finder of fact because they may reasonably be resolved
in favor of either party.” 	Anderson v. Liberty Lobby,
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3In Plaintiffs’ Motion, counsel did not cite to the record
to establish facts. 	Usually, this Court simply denies summary
judgment motions that lack citations to the record. 	Without a
citation to the record, there is no fact before the Court that
the non-movant needs to dispute. 	However, the proposed
undisputed facts in this case are essentially a copy of the facts
in the complaint and all were admitted. 	The Court will overlook
(continued...)
Page -6-
Inc., 477 U.S. at 250. 	A mere “scintilla” of evidence
will not avoid summary judgment. 	Vitkus v. Beatrice
Co., 11 F.3d at 1539. 	Rather, there must be sufficient
evidence on which the fact-finder could reasonably find
for the nonmoving party. 	See Anderson v. Liberty
Lobby, Inc., 477 U.S. at 251 (quoting Schuylkill &
Dauphin Improv. Co. v. Munson, 81 U.S. 442, 448
(1871)); Vitkus v. Beatrice Co., 11 F.3d at 1539.
“[T]here is no evidence for trial unless there is
sufficient evidence favoring the nonmoving party for a
jury to return a verdict for that party. 	If the
evidence is merely colorable ... or is not
significantly probative, ... summary judgment may be
granted .” 	Anderson v. Liberty Lobby, Inc., 477 U.S.
at 249 (internal citations omitted). 	Where a rational
trier of fact, considering the record as a whole, could
not find for the non-moving party, there is no genuine
issue for trial. 	See Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986).
When reviewing a motion for summary judgment, the
court should keep in mind three principles. 	First, the
court's role is not to weigh the evidence, but to
assess the threshold issue whether a genuine issue
exists as to material facts requiring a trial. 	See
Anderson v. Liberty Lobby, Inc., 477 U.S. at 249.
Second, the court must resolve all reasonable
inferences and doubts in favor of the non-moving party
and construe all evidence in the light most favorable
to the non-moving party. 	See Hunt v. Cromartie, 526
U.S. 541, 550–55 (1999). 	Third, the court cannot
decide any issues of credibility. 	See Anderson v.
Liberty Lobby, Inc., 477 U.S. at 255.
Bhandari v. VHA Southwest Community Health Corp., 2011 WL 1336525
at *10-11 (D. N.M. 2011) (citing former Rule 56).
UNDISPUTED FACTS3
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3(...continued)
the lapse in this motion. 	Defendant’s Additional Facts mostly
cited to exhibits that would have been admissible at trial.
Page -7-
Defendant agreed that the following facts in Plaintiff’s
Statement of Undisputed Facts were, in fact, undisputed:
4. 	On April 24, 2008, Plaintiffs filed a voluntary petition for
relief under chapter 7 of the United States Bankruptcy Code, 11
U.S.C. §§ 101, et seq.
5. 	Eddy Federal was listed as a creditor of the bankruptcy
estate in Plaintiffs Voluntary Petition.
6. 	On August 26, 2008, this Court entered its Discharge Order.
7. 	The month following the entry of the Discharge Order, on
September 25, 2008, Plaintiffs signed a Loanliner Open-End Credit
Plan with Eddy Federal, which purported to advance "new money"
and additionally agreed to pay the previous balance owed to Eddy
Federal.
8. 	On August 5, 2009, Plaintiffs executed an Open End Plan
Agreement to pay all indebtedness owed to Eddy Federal on any
account or subaccount.
9. 	On March 2, 2010, Lisa Ammons signed a Loan Modification
Agreement to the loan of September 25, 2008, which extended the
time for payment and agreed to repay the "entire unpaid balance"
of $16,034.45 by paying $394.70 every month.
10. 	The Note that Eddy Federal sued on was titled Open-End
Voucher and Security Agreement. 	That Note was "secured by
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[Plaintiffs’] shares, all property securing other plan advances
and loans received in the past or in the future" in addition to a
2000 Ford Explorer.
11. 	The Note secured a previous balance of $11,331.47, which was
discharged in bankruptcy, in addition to a new advance of
$6,149.00.
12. 	At no point did Eddy Federal file this Note, which purported
to reaffirm previously discharged debt, with this Court.
13. 	This Note had none of the disclosures required for
reaffirmation agreements by Section 524 of the Bankruptcy Code.
14. 	Eddy Federal obtained a Default Judgment on December 8,
2010, awarding it the payoff balance on the Note plus interest,
fees, costs, and attorney's fees in addition to an unpaid sum of
credit card debt with interest, fees, costs, and attorney's fees.
15. 	Eddy Federal thereafter began its garnishment efforts.
16. 	By letter dated March 22, 2011, counsel for Plaintiffs
contacted counsel for Defendant Eddy Federal and notified counsel
of the violation of the discharge injunction, specifically
outlining the violation of 524(c) of the Code. 	Plaintiffs'
counsel requested that Defendant Eddy Federal cease garnishment
efforts and return amounts already collected and/ or garnished.
17. 	Plaintiffs thereafter instituted this adversary proceeding
after Defendant Eddy Federal failed to remedy its violation of
the discharge injunction as requested by Plaintiffs' counsel.
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Plaintiffs agreed that the following facts in Defendant’s
Statement of Undisputed Facts were, in fact, undisputed:
2. 	Following the filing of the petition referenced in paragraph
4 of Plaintiffs' statement of undisputed material facts,
Plaintiffs continued to use their credit card account with
Defendant to make new purchases or to obtain cash advances, all
as detailed in the credit card statements (which were attached as
Exhibit A for 2008, Exhibit B for 2009 and Exhibit C for 2010.)
The purchases, among other things, included the charging in the
spring of 2009 of approximately $2,500 in connection with a trip
to Disneyland in Anaheim, California. 	Plaintiffs ceased using
the credit card when they reached their credit limit of $8,500,
as shown by the 2010 statements (in Exhibit C.)
3. 	Defendant filed its Complaint to collect the new money due
on the promissory note and credit card account in state court
(the "state court Lawsuit") on October 29, 2010. 	(Attached as
Exhibit E.)
4. 	Defendant obtained its Default Judgment against Plaintiffs
on December 8, 2010. 	(Attached as Exhibit F.)
5. 	Defendant collected $1,176.98 in garnished funds between
March 8, 2011 and May 16, 2011, according to the recap (attached
as Exhibit D.)
6. 	Defendant filed its Release of Garnishment against
Plaintiffs on June 20, 2011. (Attached as Exhibit G.)
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7. 	Defendant was represented by counsel in Carlsbad throughout
the state court proceedings.
8. 	Plaintiffs filed their Complaint for Civil Contempt,
Injunctive Relief and Damages for Violation of Discharge
Injunction on May 13, 2011, and mailed a copy of it on May 23,
2011 to Defendant and its Carlsbad counsel (Docs. 1, 2 and 3).
9. 	Defendant filed its Answer and Counterclaim on July 8, 2011
(Doc. 8), seeking a Declaratory Judgment regarding the advances
of new money to the Plaintiffs, asserting affirmative defenses
regarding Plaintiffs' lack of good faith, their voluntary
repayment of otherwise discharged debts and issues regarding the
new money generally, and seeking a declaration that the
referenced amounts in Defendant's counterclaim were not
discharged and could properly be collected and assigned to the
payment of the new post-discharge credit card debt.
10. 	Plaintiff Lisa Ammons is a former employee of the
Defendant's.
DISCUSSION
Bankruptcy Code section 524, Effect of discharge, provides
in part:
(a) A discharge in a case under this title--
(1) voids any judgment at any time obtained, to
the extent that such judgment is a determination
of the personal liability of the debtor with
respect to any debt discharged under section 727,
944, 1141, 1228, or 1328 of this title, whether or
not discharge of such debt is waived;
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(2) operates as an injunction against the
commencement or continuation of an action, the
employment of process, or an act, to collect,
recover or offset any such debt as a personal
liability of the debtor, whether or not discharge
of such debt is waived; and
(3) operates as an injunction against the
commencement or continuation of an action, the
employment of process, or an act, to collect or
recover from, or offset against, property of the
debtor of the kind specified in section 541(a)(2)
of this title that is acquired after the
commencement of the case, on account of any
allowable community claim, except a community
claim that is excepted from discharge under
section 523, 1228(a)(1), or 1328(a)(1), or that
would be so excepted, determined in accordance
with the provisions of sections 523(c) and 523(d)
of this title, in a case concerning the debtor's
spouse commenced on the date of the filing of the
petition in the case concerning the debtor,
whether or not discharge of the debt based on such
community claim is waived.
(b) ...
(c) 	An agreement between a holder of a claim and the
debtor, the consideration for which, in whole or in
part, is based on a debt that is dischargeable in a
case under this title is enforceable only to any extent
enforceable under applicable nonbankruptcy law, whether
or not discharge of such debt is waived, only if--
(1) such agreement was made before the granting of
the discharge under section 727, 1141, 1228, or
1328 of this title;
(2) the debtor received the disclosures described
in subsection (k) at or before the time at which
the debtor signed the agreement;
(3) such agreement has been filed with the court
and, if applicable, accompanied by a declaration
or an affidavit of the attorney that represented
the debtor during the course of negotiating an
agreement under this subsection, which states
that--
(A) such agreement represents a fully
informed and voluntary agreement by the
debtor;
(B) such agreement does not impose an undue
hardship on the debtor or a dependent of the
debtor; and
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(C) the attorney fully advised the debtor of
the legal effect and consequences of--
(I) an agreement of the kind specified
in this subsection; and
(ii) any default under such an
agreement;
(4) the debtor has not rescinded such agreement at
any time prior to discharge or within sixty days
after such agreement is filed with the court,
whichever occurs later, by giving notice of
rescission to the holder of such claim;
(5) the provisions of subsection (d) of this
section have been complied with; and
(6) ...
(d) 	...
(e) 	...
(f) Nothing contained in subsection (c) or (d) of this
section prevents a debtor from voluntarily repaying any
debt.
Section 524(a)(2) is referred to as the “discharge
injunction.” 	In re Martin, 2012 WL 907090 at *4 (6 th Cir. BAP
2012). 	“A creditor violates the discharge injunction (or
automatic stay) when it (1) has notice of the debtor's discharge
(or, in the case of the automatic stay, has notice of the
bankruptcy filing); (2) intended the actions which constituted
the violation; and (3) acts in a way that improperly coerces or
harasses the debtor.” 	Lumb v. Cimenian (In re Lumb), 401 B.R. 1,
6 (1 st Cir. BAP 2009)(Citations omitted.) 	Courts use an
objective test to determine whether a creditor’s actions were
improperly coercive under the circumstances. 	Id. (Citations
omitted.) 	An action is coercive where it is tantamount to a
threat or it places a debtor “between a rock and hard place”.
Id. at 7 (Citations omitted.)
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The Bankruptcy Code specifically provides for remedies for
an intentional violation of the automatic stay provisions of
section 362. 	See 11 U.S.C. § 362(k)(1) (“[A]n individual injured
by any willful violation of a stay provided by this section shall
recover actual damages, including costs and attorneys' fees, and,
in appropriate circumstances, may recover punitive damages.”)
Unlike section 362, however, section 524 does not set forth a
remedy for violations of the discharge injunction.
However, because
[s]ection 524(a)(2) not only prohibits but also
enjoins [law]suits, as well as other collection
actions, ... the creditor who attempts to collect
a discharged debt is violating not only a statute
but also an injunction and is therefore in
contempt of the bankruptcy court that issued the
order of discharge.
Cox v. Zale Del., Inc., 239 F.3d 910, 915 (7th Cir.
2001) (citing Pertuso v. Ford Motor Credit Co., 233
F.3d 417, 421 (6th Cir. 2000) (recognizing that no
private right of action exists for violations of §
524(a), but that “the traditional remedy for violation
of [the discharge] injunction lies in contempt
proceedings....”)). 	Pursuant to 11 U.S.C. § 105(a), a
bankruptcy court has the power to issue civil contempt
orders when a creditor has violated one of Bankruptcy
Code's substantive provisions. 	McClatchey v. Parsons
(In re Lazy Acres Farm, Inc.), 134 F.3d 371 (6th Cir.
1997) (unpublished table decision). 	The purpose of
civil contempt is “to compel or coerce obedience to a
court order or to compensate a party for another's
noncompliance with a court order.” 	In re Moohaven
Dairy LLC, 461 B.R. 22, 27 (Bankr. E.D. Mich. 2011).
A court may remedy a violation of § 524(a)(2) by
awarding damages to the injured debtor pursuant to 11
U.S.C. § 105(a). 	Paul v. Iglehart (In re Paul), 534
F.3d 1303, 1306 (10th Cir. 2008); Gunter [v. O’Brien &
Assocs. Co., LPA (In re Gunter)], 389 B.R. [67] at 72
[(Bankr. S.D. Ohio 2008)]. 	In order to recover
damages, a debtor must suffer an actual injury. 	Id.
(concluding that bankruptcy court “cannot award damages
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Page -14-
for violations of the discharge injunction that are
technical or inadvertent and do not rise to the level
of contempt.”) 	A debtor must prove his injury by a
preponderance of the evidence. 	McCool v. Beneficial
(In re McCool), 446 B.R. 819, 823–24 (Bankr. N.D. Ohio
2010). 	“[A] debtor cannot rely on ‘undue conjecture’
or speculation, but instead must support its claim of
actual injury with ‘adequate proof.’” 	McCool, 446 B.R.
at 824 (citing Archer v. Macomb Cnty. Bank, 853 F.2d
497, 499–500 (6th Cir. 1988)). 	In addition to an award
of actual damages, a debtor may also be entitled to an
award of attorney fees “where necessary to effectuate
the purposes of the discharge injunction....” 	Miles v.
Clarke (In re Miles), 357 B.R. 446, 450 (Bankr. W.D.
Ky. 2006).
Martin, 2012 WL 907090 at *5.
Under Tenth Circuit law, the bankruptcy courts look at the
alleged violation’s substance, not only its form. 	Paul, 534 F.3d
at 1308.
Notwithstanding the facial permissibility of a
lawsuit or some other action taken by a creditor vis a
vis a discharged debtor, a violation of § 524(a)(2) may
still be found if the debtor proves “the creditor acted
in such a way as to ‘coerce’ or ‘harass' the debtor
improperly,” i.e., so as to obtain payment of the
discharged debt. 	Pratt v. Gen. Motors Acceptance Corp.
(In re Pratt), 462 F.3d 14, 19 (1st Cir. 2006); see In
re Schlichtmann, 375 B.R. 41, 95–97 (Bankr. D. Mass.
2007) (applying Pratt with extensive discussion); see
also In re Jones, 367 B.R. 564, 570 & n. 3 (Bankr. E.D.
Va. 2007); 3 Norton Bankruptcy Law & Practice 3d §
58:5, at 58–24 & n. 13 (noting that discharge
injunction precludes otherwise permissible actions
against third parties if “designed to collect the debt
from the discharged debtor”). 	The inquiry is
objective; the question is whether the creditor's
conduct had the practical, concrete effect of coercing
payment of a discharged debt, and bad faith is not
required. 	In re Pratt, 462 F.3d at 19; In re
Schlichtmann, 375 B.R. at 95. 	By the same token, the
presence of some other procedural impropriety or error
in connection with the creditor's action will not give
rise to a violation of the discharge injunction if the
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Page -15-
objective effect is not to coerce payment of a
discharged debt:
[T]he discharge prohibits prepetition creditors
only from collecting their prepetition debts. It
is not [a] lifelong shield against other
acts—including ... assertions of claims, and
litigation—by those same creditors, even where
these other acts are undertaken wrongfully and in
bad faith. 	If an act is not in fact one to
collect or enforce a prepetition debt, then
whatever its faults, it is not a violation of the
discharge, even though undertaken by the holder of
a discharged debt.
In re Schlichtmann, 375 B.R. at 97 (emphasis added).
Accordingly, a debtor may establish that a creditor who
has taken an action not overtly prohibited by §
524(a)(2) nevertheless violated the discharge
injunction, but to do so the debtor must “prove not
merely that [the creditor's] act is not what it appears
to be, but that the act in question is one to collect a
discharged debt in personam.” 	Id.
Id. (Footnote omitted.)
The discharge injunction obviously does not apply to debts
that arise post-petition. 	Id. at 1306 and n.4. 	Nor does it
apply to non-dischargeable debts. 	11 U.S.C. § 542(a) (Section
applies to “any debt discharged under section 727, 944, 1141,
1228, or 1328 of this title.”)(Emphasis added.) 	And, the
discharge injunction does not apply to reaffirmed debts. 	11
U.S.C. § 524(c).
ANALYSIS
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4The Court has taken judicial notice of the docket in the
main bankruptcy case and finds that no adversary proceedings were
filed before the entry of discharge on August 26, 2008. 	Nor were
any reaffirmation agreements filed.
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From Defendant’s perspective, Plaintiffs debt to Defendant
consisted of both pre- and post-petition debts. 	However, the
pre-petition debt was discharged in Plaintiffs’ bankruptcy case 4
.
Plaintiffs have established a prima facie case for violation
of the discharge injunction. 	First, Defendant had notice of the
debtor's discharge. 	Defendant was listed as a creditor.
Second, Defendant intended to include the discharged debt in
the opening balance of the September 25, 2008 note. 	Defendant
intended to collect the total debt (both pre- and post-petition)
when it obtained its default judgment against the Plaintiffs.
So, whether the actual violation was inclusion of the discharged
debt in the new note or the subsequent collection action, the act
was intentional.
Third, Defendant’s actions improperly coerced or harassed
the Plaintiffs into paying a discharged debt. 	A garnishment is a
court order to a third party who is indebted to the debtor to
turn over to the creditor any of the debtor's property (such as
wages or bank accounts) held by that third party. 	Blacks Law
Dictionary 	(9th ed. 2009). 	This is coercion. 	It is not a
voluntary payment.
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5The Court has considered Defendant’s affirmative defense in
reaching this decision. 	Affirmative defense 1 questions whether
the Plaintiffs’ own actions should defeat their entitlement to
damages. 	This is unrelated to the question of whether the
Defendant knowingly violated a court order. 	The Court finds that
affirmative defense 2, voluntary payment, also is unrelated to
the violation of the discharge order that resulted in a
garnishment. 	Voluntary payment may be a defense, however, to the
amount of damages, to the issue of the interim payments on the
loans and credit cards, or to assessment of punitive damages.
Affirmative defense 3 also goes to damages, not to whether the
discharge injunction was violated. 	Affirmative defense 4 (the
right to collect the debt arising from the “new money”) is a
correct statement of the law, but irrelevant to whether Defendant
violated the discharge injunction as to the discharged debt.
Finally, affirmative defense 5 seeks to offset any amounts
awarded to Plaintiffs against the amounts Plaintiffs borrowed
post-petition. 	This defense is premature because it is possible
that Plaintiffs will not receive any award.
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Therefore, the Court can find and declare that there was a
violation of the discharge injunction. 	The Court will enter a
partial summary judgment to that extent 5. 	What the Court cannot
do, however, is determine the amount of damages, punitive
damages, costs or attorney’s fees which may be due. 	The Court
will schedule an evidentiary hearing on those issues.
At trial, the burden is squarely on Plaintiffs to prove
their actual damages. 	As an aside, this may be difficult. 	For
example, to the extent Plaintiffs claim attorney fees in
defending the state court collection action, the Court questions
the necessity or benefit considering that a default judgment was
entered for the amount requested.
Plaintiffs will also need to establish their right to
punitive damages. 	On this issue, the Court has many questions.
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Page -18-
For example, 1) how did the discharged debt appear as the opening
balance on the new credit application –– was this at the Debtor’s
request or at the Credit Union’s insistence? 	2) was Debtor
threatened with revocation of the credit union membership and, if
so, what were the ramifications of that? 	3) Debtor was an
employee of the credit union, how did that influence the
agreement to repay the discharged debt? 	4) to what degree was
Debtor cooperating with the credit union in attempting to re-
establish liability on the debt? 	5) how desperate was Debtor in
approaching the credit union one month after discharge and asking
to borrow $6,149 more, and how aware was the credit union of
Debtor’s financial need? 	6) did Debtor have another source of
funds that would have enabled a $6,000 loan elsewhere without
adding over $11,000 as an upfront charge? 	The Court has reviewed
numerous cases from other jurisdictions and finds that the
assessment of punitive damages is a very fact intensive decision.
Compare, e.g., In re Arnold, 206 B.R. 560 (Bankr. N.D. Ala. 1997)
(The bankruptcy court found that a credit union was in willful
and malicious violation of the discharge injunction. 	The credit
union revoked the debtor’s membership when he discharged a debt
owed to it. 	He later was in desperate need of money to allow his
wife to finish her education and the credit union agreed to
reinstate him as a member and extend new credit if he added the
discharged loan balance to the new credit. 	The Court awarded
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Page -19-
actual damages (all repayments plus interest) and $15,000 of
punitive damages.) with Lindale Nat’l Bank f. Artzt (In re
Artzt), 145 B.R. 866, 867 and 870 (Bankr. E.D. Tex. 1992) (The
Court refused to award any attorney fees to debtors for
prosecuting a violation of the discharge injunction because of
their participation with the bank in the “attempts by both
parties to manipulate the bankruptcy process” by attempting to
avoid the requirements of a reaffirmation agreement.).
CONCLUSION
The Court will enter a separate Order in conformity with the
above, granting Plaintiff’s Motion for Summary Judgment in part
(liability) and denying it in part (damages). 	The Court finds
that Defendant is in civil contempt for violating the discharge
injunction of 11 U.S.C. § 524(a)(2) by attempting to collect a
discharged debt. 	The Court also finds Defendant liable to the
Plaintiffs for remedial and compensatory damages, punitive
damages if appropriate, costs and attorney’s fees if appropriate,
all in amounts to be determined at trial. 	The Court also finds
that the request for injunctive relief is now moot as the
garnishment has been withdrawn (at least for now).
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	April 13, 2012
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Page -20-
Copies to:
Clarke C Coll
PO Box 550
Roswell, NM 88202-0550
Charles R. Hughson
Rodey, Dickason, Sloan, Akin & Robb, P.A
P.O. Box 1888
Albuquerque, NM 87103-1888
Theresa W Parrish
Rodey, Dickason, Sloan, Akin & Robb, PA
PO Box 1888
Albuquerque, NM 87103-1888
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