Opinion
Adv. No. 98-5722-SD, Case No. 95-5-2261-SD
July 1999
MEMORANDUM OPINION AND ORDER GRANTING, IN PART, AND DENYING, IN PART, CROSS MOTIONS FOR SUMMARY JUDGMENT
I. Background
Ten days after Debtor David Therrien (Therrien) filed a petition in Chapter 7, Defendant Chicago Title Insurance Company (Chicago) commenced a suit in state court naming Therrien as a co-defendant. In that suit, Chicago sought damages for various misdeeds that Therrien and his co-defendants allegedly committed prior to Therrien's bankruptcy. Chicago maintained its suit during Therrien's bankruptcy and beyond the date of his discharge. Both Chicago and Therrien have filed motions for summary judgment, presenting the court with two basic issues: (1) whether Chicago's refusal to dismiss a complaint filed in state court against Therrien constituted willful violations of the automatic stay and the discharge injunction, and (2) if Chicago willfully violated either the automatic stay or the discharge injunction, whether Therrien was injured as a result of such violation(s).
Therrien's motion is for partial summary judgment on the issues of Chicago's liability, Chicago's affirmative defenses of limitations and laches, and the proper measure damages. Chicago's cross-motion seeks summary judgment declaring Chicago not liable for willful violations of the automatic stay and the discharge injunction.
The court holds that there is no genuine issue of material fact as to the following propositions: (1) Chicago's actions constituted a willful violation of the automatic stay, (2) Chicago's actions constituted a willful violation of the discharge injunction; (3) Chicago's willful violations of the automatic stay and the discharge injunction did not cause a delay in the processing of Therrien's application to the Maryland State Bar; (4) Therrien's attorney's fees incurred in explaining his predicament to the Character Committee of the Maryland State Bar were not caused by Chicago's willful violations of the automatic stay and the discharge injunction; (5) Therrien's attorney's fees incurred in defending certain state and federal court litigation were not caused by Chicago's willful violations of the automatic stay and the discharge injunction; and (6) Therrien did not suffer damage to his reputation as a result of Chicago's willful violations of the automatic stay and the discharge injunction. The court finds, however, that there are genuine issues of fact as to the following issues: (1) whether Chicago's willful violation of the automatic stay caused Therrien to be terminated from his position with Allview Title, Inc.; (2) whether Therrien is entitled to attorney's fees incurred in prosecuting this adversary proceeding; and (3) whether Therrien's complaint against Chicago in this proceeding is barred by laches.
Consequently, the court will grant Chicago's motion for summary judgment in part, holding that Therrien was not damaged as a result of Chicago's willful violation of the discharge injunction, but will deny the remainder of Chicago's motion for summary judgment. Therrien's motion for summary judgment will be granted, in part, to declare that Chicago willfully violated the automatic stay and discharge injunction and to preclude Chicago from asserting limitations as an affirmative defense to liability for having willfully violated the automatic stay and the discharge injunction, but the remainder of Therrien's motion for summary judgment will be denied.
II. Summary Judgment Standard
Pursuant to Fed.R.Civ.P. 56(c), made applicable by Fed.R.Bankr.P. 7056, summary judgment is proper where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). A material fact is one that might affect the outcome of the suit, see id. at 248; a genuine issue of material fact exists where "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id. at 248-49.
In determining the facts for summary judgment purposes, the court may rely on affidavits made with personal knowledge that set forth specific facts otherwise admissible in evidence and sworn or certified copies of papers attached to such affidavits. See Fed.R.Civ.P. 56(e).
As to the parties' burdens on summary judgment, the Supreme Court has held that a summary judgment movant has the burden of showing the absence of a genuine issue of material fact, but that this does not always require the movant to support the motion with affidavits or other materials that negate the non-moving party's claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.E.2d 265 (1986). Where a movant makes a proper motion for summary judgment, Fed.R.Civ.P. 56(e) requires the non-moving party to "go beyond the pleadings and by her own affidavits, or by `the depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324 (quoting Fed.R.Civ.P. 56(e)).
Where the non-moving party has the burden of persuasion at trial, the movant can satisfy its summary judgment burden of production in either of two ways. The movant may submit evidence that negates an essential element of the non-moving party's claim, or it may show that the non-moving party's evidence is insufficient to establish an essential element of the non-moving party's claim. See Celotex, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.E.2d 265 (1986). A conclusory assertion that the non-moving party has no evidence to support its claim will not satisfy the movant's summary judgment burden of production. See id. at 328 (White, J., concurring), 332 (Brennan, J., dissenting).
III. Facts
The undisputed facts are as follows. Therrien was vice-president and 33% owner of Academy Title Group, Inc. (Academy) See Therrien Aff. 6 7. Therrien filed a petition under Chapter 7 on March 31, 1995, and he received a discharge on July 19, 1995. See id. at 66 27, 29. The court entered a final decree and closed Therrien's Chapter 7 case on August 1, 1995.
Chicago commenced a suit on or about April 11, 1995, in the Circuit Court for Anne Arundel County (the State Case), case number C-95-201240C, against Therrien, Academy, and Lumbermens Mutual Casualty Company (Lumbermens). See DeWeese Aff. 6 4. Lumbermens was Academy's surety. See Therrien Ex. 2. In the State Case, Chicago asserted breach of contract and breach of duty claims against Academy and Therrien. See Chicago Ex. B. Chicago became aware of Therrien's bankruptcy on or about April 18, 1995, but it did not dismiss its suit against him. See DeWeese Aff. 6 4.
Chicago claims, and Therrien does not dispute, that upon learning of Therrien's bankruptcy it "treated its claims against Therrien in the State Case as stayed and took no further action against Therrien in the case." Id. In October, 1995, Therrien sent a letter to Chicago requesting that he be dismissed from the suit, see Therrien Aff. 6 35; Chicago refused, contending that Therrien's inclusion in the suit was necessary in for Chicago to recover from Therrien's insurers. See DeWeese Aff. 6 5.
Chicago did not move for relief from the automatic stay. Neither Therrien nor Chicago filed a suggestion of Therrien's bankruptcy in the State Case.
In January, 1996, Academy's errors and omissions insurer, Executive Risk Indemnity, Inc., sued Therrien, Academy, and Chicago in the U.S. District Court for the District of Maryland (case number 95-3749 CCB), seeking recission of the errors and omissions insurance policy that it had issued to Academy on the ground that the policy was issued on the basis of a material misrepresentation. See Therrien Aff. 6 43, Chicago Exh. D. In August, 1996, Chicago, Therrien, Academy, and Executive Risk entered into a settlement agreement whereby Chicago agreed to release its claims against Therrien, Academy, and Executive Risk in exchange for Executive Risk's payment of $100,000 to Chicago. See Chicago Ex. E. The settlement also provided that Executive Risk would dismiss its action against Academy, Therrien, and Chicago with prejudice. See id.
On April 7, 1998, Therrien moved to reopen his Chapter 7 bankruptcy case and filed the complaint that initiated this adversary proceeding.
IV. Discussion
A. Chicago's Violation of the Automatic Stay
The first issue before the court is whether Chicago's refusal to dismiss Therrien from the State Case upon learning of his bankruptcy case constituted a willful violation of the automatic stay under 11 U.S.C. § 362(a)(1). Section 362(a)(1) provides, in relevant part, that the commencement of a bankruptcy case operates as a stay of "the commencement or continuation, including the issuance or employment of process, of a judicial . . . proceeding against the debtor that was or could have been commenced before the commencement of the case under the title. . . ." 11 U.S.C. § 362(a)(1). The consequences of a violation of the automatic stay are prescribed by § 362(h). Section 362(h) provides as follows:
An 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.
Id. at § 362(h).
A violation of the automatic stay is willful when a creditor acts intentionally and with knowledge of the bankruptcy. See Budget Service Company v. Better Homes of Virginia, Inc., 804 F.2d 289, 292-93 (4th Cir. 1986). Where a violation initially is not willful because the creditor does not have knowledge of a debtor's bankruptcy, such violation will become willful upon the creditor's learning of the bankruptcy and refusing to remedy its violation. See Abrams v. Southwest Leasing and Rental, Inc. (In re Abrams), 127 B.R. 239, 244 (B.A.P. 9th Cir. 1991); Miller v. Savings Bank of Baltimore (In re Miller), 10 B.R. 778 (Bankr. D. Md. 1981), aff'd, 22 B.R. 479 (D.Md. 1982).
The court finds that Chicago's refusal to dismiss Therrien from the State Case upon learning of his bankruptcy constituted a willful violation of the automatic stay as provided by § 362(a)(1). Because Chicago's filing of the State Case on or about April 11, 1995 was void ab initio against Therrien, Chicago was obligated to reverse its action and restore the status quo. See Miller, 10 B.R. at 780. The status quo consisted of the state of affairs in which Therrien was not a defendant to a lawsuit in state court. Chicago's refusal to dismiss Therrien from the state case put the burden on Therrien to file either an answer or a suggestion of bankruptcy. The former would prevent the entry of a default judgment against him; the latter would stay the proceedings. Such burden, however slight, is inconsistent with the objectives of the automatic stay to afford the debtor relief from pressure by creditors and to provide breathing space to permit the debtor to focus on its rehabilitation or reorganization. See S. REP. NO. 95-989, at 54-55 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5840-41. Moreover, Chicago's refusal to dismiss Therrien from the State Case affected the public records inasmuch as they indicated that Therrien was an active defendant to a lawsuit. That Chicago proceeded in the State Case as if its actions against Therrien were stayed is of no consequence. The public records did not reflect Chicago's intent. Having failed to seek relief from the automatic stay, Chicago's duty to remedy its inadvertent violation of the automatic stay required that Chicago dismiss its claims against Therrien. See In re Taylor, 190 B.R. 459 (Bankr.S.D.Fla. 1995) (holding that an attorney willfully violated § 362(a)(1) where the attorney refused to vacate a post-petition default judgment after being informed of the debtor's bankruptcy).
Although Therrien's petition was filed under Chapter 7, this does not warrant the conclusion that the "breathing room" objective of the automatic stay was wholly inapplicable in his case. Chapter 7 debtors enjoy wide latitude in converting their cases to Chapter 11, see § 706(a), and the automatic stay generally does not distinguish between debtors in Chapter 11 and debtors in Chapter 7.
Chicago argues that its violation should not be found willful because existing legal precedent is unsettled as to whether the failure to dismiss a debtor from a case commenced in violation of the automatic stay constitutes a willful violation. This argument is unpersuasive. Section 362's command is clear: the filing of a petition in bankruptcy operates as a stay of "the . . . continuation . . . of a judicial action or proceeding against the debtor. . . ." 11 U.S.C. § 362(a)(1). Moreover, this court has expressly stated that a creditor who inadvertently files an action in violation of the automatic stay may be required to dismiss such action upon learning of the debtor's bankruptcy. See Miller, 10 B.R. at 780.
B. Chicago's Violation of the Discharge Injunction
The second issue before the court is whether Chicago's refusal to dismiss Therrien from the State Case after Therrien's bankruptcy discharge constituted a violation of the discharge injunction as provided by § 524(a)(2). Section 524, in relevant part, provides:
(a) A discharge in a case under this title —
. . .
(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 [debt discharged under § 727] as a personal liability of the debtor, whether or not discharge of such debt is waived; . . .
The scope of the discharge injunction provided by § 524(a)(2) does not extend to instances where a creditor sues a discharged debtor in that debtor's nominal capacity for the sole purpose of effectuating a recovery from the debtor's insurer, provided that the suit does not subject the debtor to personal expense or liability that would imperil the debtor's fresh start. See In re Jason Pharmaceuticals, 224 B.R. 315 (Bankr. D. Md. 1998). In such instances, the creditor is not attempting to collect a discharged debt from the debtor. Consequently, a creditor that seeks to collect a debt from a discharged debtor's insurer need not seek an order modifying the discharge provided by § 524(a)(2) in order to nominally sue the discharged debtor. See Hendrix v. Page (In re Hendrix), 986 F.2d 195, 199 (7th Cir. 1993).
Citing the terms of Academy's errors and omissions policy (the EO policy) and Maryland law, Chicago contends that Therrien was an insured party under the EO policy and that Chicago's suit against him was solely directed at collecting a debt from Academy's insurer. Therrien argues, however, that because he was not an insured party under the EO policy, Chicago could not have been attempting to collect a debt solely from his insurer.
In determining whether Chicago was, in fact, proceeding against Therrien in the State Case solely to collect a debt from Executive Risk, Academy's errors and omissions insurer, the court must begin by examining the complaint that Chicago filed in the State Case. In that complaint, Chicago asserted three counts against Therrien: Count I was a breach of contract action directed at Academy and Therrien; Count II was a breach of fiduciary duty action directed at Academy and Therrien; and Count III sought injunctive relief against Academy and Therrien. See Chicago Ex. B.
With regard to Count III, it cannot be said that Chicago was proceeding against Therrien solely to collect a debt from Therrien's insurer because that Count does not seek monetary relief.
Consequently, Chicago's continued pursuit of Count III after Therrien's discharge is not protected by the principle that was applied in In re Jason Pharmaceuticals. Nonetheless, Chicago's refusal to dismiss Therrien from Count III after Therrien's discharge did not violate the discharge injunction provided by § 524(a)(2) because the relief sought by Count III was not part of an action "to collect, recover or offset any [discharged] debt as a personal liability of the debtor. . . ." 11 U.S.C. § 524(a)(2). The injunction sought by Chicago in Count III would have required Therrien and Academy to provide Chicago access to Academy's files and records. Chicago needed this access to ascertain and mitigate the harm that Academy had allegedly inflicted upon purchasers of title insurance to whom Chicago would ultimately be liable. This injunction is not a form of equitable relief that gives rise to a right to payment, and therefore it is neither a claim nor a debt as those terms are respectively defined in 11 U.S.C. § 101(5) and (12). Thus, because the injunction sought in Count III was not an action to collect a debt, Chicago's continued pursuit of Count III after Therrien's discharge did not violate the discharge injunction provided by § 524(a)(2).
Count I alleges that Academy breached the agency contract between it and Chicago, and that Therrien, by virtue of Academy's breach, breached a personal guaranty that he had executed in favor of Chicago. See Chicago Ex. B at p. 9. Count II alleges that Academy and Therrien breached their fiduciary duties to Chicago by "violating the rules, regulations, ethical standards, and the standards of care required in the State of Maryland of title insurance agents." Id. at 10. Therefore, to the extent the breaches asserted in Counts I and II occurred prior to Therrien's bankruptcy, both Counts I and II are actions to collect a discharged debt from Therrien. However, whether Counts I and II were brought against Therrien in his nominal capacity solely for the purpose of collecting from Therrien's insurers requires an examination of the relevant insurance policies: the suretyship bond issued by Lumbermens and the EO policy issued by Executive Risk.
Academy was the only principal to the suretyship bond issued by Lumbermens. See Therrien Ex. 2. The obligees to the suretyship bond included the State of Maryland and "any unknown third party." Id. Therefore, in order to collect from Lumbermens, Chicago had to establish the liability of Academy only. Consequently, where Chicago's suit was directed against Therrien individually, without effort to limit the capacity in which Therrien was sued, it cannot be said that the claims asserted in the State Case against Therrien were instituted solely for the purpose of collecting from Lumbermens.
The EO policy issued by Executive Risk, however, covers a broader range of parties. The EO policy defined the insured party as "the person or entity stated in Item 1 of the Declarations, and any natural person who was, is, or shall become a director, officer, employee or partner thereof, but only while such person was, is, or shall be acting within the scope of his or her duties as such." Therrien Ex. 1, Part II(D). Academy is the entity stated in Item 1 of the EO policy. See id., Item 1. Thus, as Therrien was an officer of Academy, both Academy and Therrien were insured parties under the EO policy. Consequently, it was possible for Chicago to have sued Therrien individually as an officer of Academy for the sole purpose of collecting from Executive Risk. However, the complaint in the State Case was not so limited.
Chicago's contention that it was proceeding against Therrien in his nominal capacity solely to collect under the EO policy fails in light of the nature of the counts asserted against Therrien and the EO policy's coverage. The EO policy excluded from coverage any claim "based on . . . or resulting from any criminal, fraudulent, dishonest, or discriminatory act, error, or omission committed with knowledge of its wrongful nature. . . ." Therrien Ex. 1, Part III(A). Count I of the complaint asserted that Academy's misappropriation constituted a breach of the agency contract between Academy and Chicago. See Chicago Ex. B at p. 8. Therrien's liability under Count I, which would arise out of his personal guaranty, would thus derive from Academy's misappropriation. Count II of the complaint directly accused Therrien of violating Maryland's ethical standards for title insurance agents. See id. at p. 10. The EO policy thus did not cover Therrien's potential liability under Counts I and II.
Therefore, on the basis of the exclusions in the EO policy and the allegations in Chicago's complaint, the court concludes that Chicago violated the discharge injunction as provided in 11 U.S.C. § 524(a)(2).
C. Damages
To recover under § 362(h), a plaintiff must establish that the defendant's willful violation of the automatic stay injured the plaintiff. See Adams v. Hartconn Associates, Inc. (In re Adams, 212 B.R. 703, 708 (Bankr. D. Mass. 1997). While there is no statutory remedy for violation of the discharge injunction, such violations are punishable by civil contempt. See Mickens v. Waynesboro Dupont Employees Credit Union, Inc. (In re Mickens), 229 B.R. 114, 118 (Bankr.W.D.Va. 1999). The remedies for an action in civil contempt for violation of the discharge injunction include damages and all other expenses incurred in securing the benefit of the discharge. See id. at 118-19; Szostek v. Hart (In re Szostek), 114 B.R. 890, 898 (Bankr.E.D.Pa. 1990).
Having found that Chicago's actions constituted willful violations of the automatic stay and the discharge injunction, the court now turns to the issue of whether Therrien was injured by Chicago's violations. Therrien's motion for summary judgment does not seek a determination of the amount of damages to which he is entitled, but rather seeks summary judgment as to the methodology for computing such damages. Chicago's motion goes to the entirety of its liability to Therrien, arguing that Therrien cannot establish that his damages were proximately caused by Chicago's actions.
Therrien contends that Chicago's violations of the automatic stay and the discharge injunction caused him to sustain four categories of damages: (1) lost income resulting from termination of his employment as CEO of Allview Title, Inc. (Allview) which was a title insurance company that employed Therrien after he wound up Academy's operations; (2) lost income as an attorney due to the delay in the processing of his application for admission to the Maryland State Bar; (3) damage to his reputation; and (4) various fees paid to attorneys. As evidence of these damages, Therrien offers his own affidavit, where he states that the president of Allview, Robert Fila (Fila), terminated Therrien's employment with Allview in May of 1995. Therrien contends that Fila terminated him because Chicago's State Case named Therrien as a defendant in his individual capacity. Therrien also argues that his application to the Maryland State Bar was delayed on account of Chicago's having sued him personally. Therrien states that an interviewer for the Character Committee of the Maryland State Bar, Charles Hollman, Esq., informed him that the serious nature of Chicago's allegations against Therrien required that the Committee postpone its processing of Therrien's application until Chicago's allegations were resolved. See Therrien Aff. 6 46.
In response, Chicago argues that Therrien's damages were not caused by Chicago's violations of the automatic stay and the discharge injunction per se, but rather that the damages stem from the facts that served as the basis for the State Case. As evidence of this position, Chicago refers to three evidentiary items. The first item is an Order and Consent Agreement entered into between the Maryland Insurance Commissioner, Therrien, and Academy on September 19, 1995, in which the latter two parties consented to the revocation of their certificates of qualification. As part of the Order and Consent Agreement, Therrien and Academy also agreed that their actions, which were described in the Order and Consent Agreement, constituted violations of then-applicable Maryland Code Article that governed title insurance agents and brokers, viz., MD. ANN. CODE of 1957, Art. 48A §§ 168A(c) (1994 Repl. Vol.) (conversion or misappropriation), 175(4) (misappropriation, conversion, or unlawful withholding), 175(6) (fraudulent or dishonest practices), and 175(12) (lack of trustworthiness or competence). See Chicago Exh. A.
Title insurance agents in Maryland are required to obtain a certificate of qualification from the Maryland Insurance Commissioner. See Md. Code Ann., Ins. § 10-103 (1997).
As its second evidentiary item, Chicago refers to Charles Hollman's deposition testimony:
Q: Assuming that Mr. Therrien had not been named as a party in the case but that the allegations that were made in Chicago Title's complaint were otherwise identical, would that have made any difference to you in terms of the concerns that you had about the Chicago Title case?
A: No.
Q: Why is that?
A: Well, whether Mr. Therrien was a party or whether Mr. Therrien was a witness, he was a principal in Academy and my interest relates to Mr. Therrien's character, that's the ultimate issue, and matters that are facts as to whether Mr. Therrien was involved with some of the problems with Academy Title as I have noted in my report, items concerning escrow difficulties and what-have-you. Again, not to enumerate them other than what's in my report. My inquiry is whether he was involved and what the facts and circumstances were surrounding his involvement as I see it.
Hollman Dep. at 26.
Hollman also testified as to the State Case's effect on the speed of his investigation:
Q: And my question to you is that assuming that after the case that Chicago Title filed against Mr. Therrien and Academy Title, after that was filed, let's say three months later — the case was filed, I believe, in April, let's say in July of 1995-Chicago Title had dismissed Mr. Therrien personally from the case as a result of his personal bankruptcy but otherwise continued to prosecute the case against Academy making the same allegations that were made in the Complaint, would that have enabled you to have concluded your investigation into your concerns about the allegations raised in that complaint more quickly than you have been able to conclude them? Was that question more clear?
A: Well, I'm not sure that that would have made any difference. My focus was if at some point there was going to be a trial wherein Mr. Therrien would be called as a witness or wherein Mr. Therrien's specific conduct was going to be an issue or evidence was going to be produced concerning that conduct, those things were of interest to me as part of my investigation.
Hollman Dep. at 28-29.
Chicago's third evidentiary item is Mr. Fila's affidavit. Fila avers that he hired Therrien and certain of Academy's employees in early 1995, and that his decision to terminate Therrien "was based solely upon the poor quality of the work performed by the former Academy employees and the poor quality of Therrien's supervision." Fila aff. 66 3, 6. Fila also states that although he was aware of Therrien's involvement in the State Case, Fila's decision to terminate Therrien's employment with Allview "was not based in any way upon the existence of the Chicago lawsuit or the fact that Therrien was a party to the lawsuit." Fila aff. 6 7.
1. Damages Relating to Therrien's Loss of Employment at Allview
Allview terminated Therrien during the pendency of his Chapter 7 case, prior to the entry of his discharge. Damages associated with such termination would thus have arisen, if at all, from Chicago's willful violation of the automatic stay, not from a violation of the discharge injunction. In his affidavit, Therrien described the circumstances of his termination from Allview as follows:
In May 1995, I was called into Mr. Fila's office and was told that my relationship with Allview was being terminated because of the lawsuit initiated by Chicago Title. He said it made Allview's primary insurance underwriter, Security, uncomfortable. He stated that since Chicago had sued me personally, Security did not have confidence in me as CEO. Mr. Fila stated that if I were to remain as CEO of Allview, Security would cancel their agency agreement with Allview. I was fired.
Therrien Aff. 6 32.
In comparing Mr. Fila's statement with Therrien's, the court finds that a genuine issue of material fact exists as to whether Therrien incurred damages as a consequence of Chicago's willful violation of the automatic stay. Therrien's statement could reasonably be construed as indicating that Mr. Fila's concern went to Therrien's ability to perform his duties as CEO of Allview while he was the defendant to an existing lawsuit. Under such a construction, Therrien's affidavit conflicts with Mr. Fila's affidavit and thus raises a genuine issue of material fact. See Anderson, 477 U.S. at 252 (stating that, in the context of a motion for summary judgment, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor."). Therefore, the court will deny Chicago's motion for summary judgment to the extent that it seeks and order declaring it not liable for damages under § 362(h).
2. Damages Relating to Therrien's Bar Application
In his affidavit, Therrien described his encounter with the Character Committee of the Maryland State Bar as follows:
For several years, I had been attending night school at the University of Baltimore. I graduated with a juris doctor agree [sic] in December, 1995. In the normal routine, my application for admission to the bar was submitted in late 1995.
. . .
In approximately September 1996, I met initially with Mr. Charles Hollman (Hollman). He interviewed me for my bar application for admission as an attorney. Mr. Hollman observed that the continuing allegations against me personally by Chicago Title were very serious with the potential of keeping me from being licensed as an attorney until fully explained and resolved. In the complaint, Chicago Title alleged that I personally misappropriated Academy funds. Mr. Hollman stated that he needed to wait and see what came out of the suit against me for theft. In the meantime, Mr. Hollman would not complete processing my bar application further.
Therrien Aff. 66 45, 46.
Accepting Therrien's affidavit as true, these events occurred after the automatic stay had terminated and the bankruptcy case has been closed. Consequently, Therrien has not raised a genuine issue to the fact that Chicago's willful violation of the automatic stay did not cause a delay in the processing of Therrien's bar application.
Therrien has also failed to raise a genuine issue to the fact that Chicago's willful violation of the discharge injunction did not cause a delay in the processing of Therrien's bar application. Although a bankruptcy discharge under 11 U.S.C. § 727(b) protects a debtor from personal liability on discharged debts, such discharge operates prospectively-not retrospectively. That is, the discharge does not vacate the fact that the debtor was liable on a debt; it simply extinguishes the debtor's personal liability commencing with the date the discharge is entered. See 11 U.S.C. § 727(b). Thus, while Chicago was prohibited from suing Therrien to collect on its pre-petition debt, the discharge injunction did not affect the nature of Chicago's allegations against Therrien. Therrien's statements in his affidavit, taken as true, do not raise a genuine issue as to the fact that Mr. Hollman's concern was caused by the underlying facts that gave rise to Chicago's contingent claim, and not by the fact that Chicago wrongfully refused to dismiss the State Case and maintained it beyond the date of Therrien's discharge. Therrien's affidavit does not raise a genuine issue as to Hollman's contention that his concern went to Therrien's character, and that Therrien's character would have been in issue regardless of whether Chicago had dismissed him from the State Case.
Chicago commenced the State Case on April 11, 1995, before it knew that Therrien had filed his bankruptcy case. Chicago did not learn of Therrien's bankruptcy until a week later, and Therrien did not request that Chicago dismiss him from the State Case because of his bankruptcy until June, 1995. See DeWeese Aff. 6 4, Therrien Aff. 6 33. As stated in Parts IV. A and B supra, Chicago's violations of the automatic stay and the discharge injunction stemmed not from its commencement of the State Case, but rather from its refusal to dismiss the case after it learned of Therrien's bankruptcy and its maintaining the case beyond the date of Therrien's discharge. The Character Committee's inquiry was triggered, viewed most favorably for Therrien, by the fact that Chicago had named Therrien as a defendant to the State Case, not by the fact that Chicago wrongfully refused to dismiss the case and maintained it beyond the date of Therrien's discharge. For this reason, there is no genuine issue of material fact and Chicago is entitled to partial summary judgment that its willful violations of the automatic stay and the discharge injunction did not proximately cause Therrien compensable damages in connection with his bar application.
3. Damages to Therrien's Reputation
Therrien alleges that Chicago's violations of the automatic stay and the discharge injunction caused injury to Therrien's reputation. As the movant on a cross-motion for summary judgment, Chicago's burden on this issue is to show that Therrien's evidence is insufficient to establish the element of causation. See Celotex, 477 U.S. at 323, 106 S.Ct. at 2553. Although Therrien alleges that he suffered injuries to his reputation as a result of Chicago's violations, the court finds that Chicago has met its summary judgment burden of production because as it has shown that any injury to Therrien's reputation resulted from the facts underlying Chicago's claims in the State Case, and not from the fact that Chicago improperly took action to collect on these claims. Therrien has not raised a genuine issue of fact to the conclusion that his reputation was not injured as a result of Chicago's willful violations of the automatic stay and the discharge injunction.
4. Attorney's Fees
Therrien asserts that Chicago's violations of the automatic stay and the discharge injunction caused him to incur three categories of attorney's fees: (1) attorney's fees incurred in defending the State Case and the related case in the U.S. District Court (case no. 95-3749 CCB), (2) attorney's fees incurred in explaining his predicament to the Character Committee of the Maryland State Bar, and (3) attorney's fees incurred in bringing this adversary proceeding. With respect to the first category of attorney's fees, to the extent they were incurred during the automatic stay, the court notes that all of such fees could have been avoided had Therrien merely filed a suggestion of bankruptcy in the appropriate courts.
Therrien did not file a suggestion of bankruptcy in either the State Case or in the related case that was in the U.S. District Court, but rather decided to participate in the litigation. The same can be said for the attorney's fees incurred after the entry of Therrien's discharge: rather than asserting the discharge injunction as a defense while the state and federal cases were active, Therrien decided to participate in those cases and thereby waived the protection of the discharge injunction. It is thus evident that Therrien's attorney's fees arose out of his choice to participate in the State Case and the related federal case. His attorney's fees in those cases were not caused by Chicago's willful violations of the automatic stay and the discharge injunction.
With regard to the second category of attorney's fees, the court has already found that there is no genuine issue to the fact that Chicago's willful violations of the automatic stay and the discharge injunction did not cause injury to Therrien in connection with his bar application. Consequently, the attorney's fees that Therrien incurred in explaining Chicago's allegations to the Character Committee were not caused by Chicago's willful violations of the automatic stay and the discharge injunction.
With regard to the third category of attorney's fees, those incurred in bringing the instant adversary proceeding, there is a genuine issue of material fact on the issue of Therrien's entitlement to such fees. Because there is a genuine issue of material fact whether Chicago's willful violation of the automatic stay caused Therrien's employment by Allview to be terminated, there is also a genuine issue of material fact as to whether Therrien is entitled to the attorney's fees that he incurred in securing redress for such injury. See 11 U.S.C. § 362(h).
D. Chicago's Affirmative Defenses
Therrien has moved for partial summary judgment on Chicago's affirmative defenses of laches and statute of limitations. Chicago has conceded that there is no statute of limitations for assertion of a claim under § 362(h), but in its cross-motion for summary judgment Chicago argues that it should be entitled to summary judgment on the entirety of Therrien's claims on account of laches. The issue remaining, therefore, is whether Therrien is entitled to summary judgment to preclude Chicago from asserting laches and limitations as affirmative defenses to liability for having violated the automatic stay and the discharge injunction.
Laches is an affirmative defense that is sustainable upon the proof of two elements: (1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense. See Costello v. U.S., 365 U.S. 265, 282, 81 S.Ct. 534, 543, 5 L.Ed.2d 551 (1961). Lack of diligence exists where the plaintiff's delay in filing suit is inexcusable or unreasonable. See White v. Daniel, 909 F.2d 99, 102 (4th Cir. 1990). A delay in filing suit becomes inexcusable or unreasonable "only after the plaintiff discovers or with reasonable diligence could have discovered the facts giving rise to his cause of action." Id. at 103. Prejudice, in this context, "contemplates the dispersal and inaccessibility of witnesses, the dimming of recollections and other disadvantages incident to the lapse of time." Giddens v. Isbrandtsen Co., 355 F.2d 125, 127 (4th Cir. 1966). Prejudice may also exist where the defendant has relied to his detriment on the plaintiff's conduct. See White, 909 F.2d at 102.
With regard to Therrien's cause of action under § 362(h), the court will deny both parties' motions on the issue of laches. Therrien's burden is to affirmatively show that Chicago's evidence is insufficient to establish that it was prejudiced or to affirmatively show that his delay was not unreasonable. Chicago's burden is to offer evidence that shows that there is no genuine issue to the fact that Chicago was prejudiced by Therrien's delay and that such delay was unreasonable. Initially, the court finds that Therrien's delay in prosecuting the § 362(h) action was unreasonable because he commenced the action more than thirty-two months after Chicago's violation of the automatic stay ceased. See Adams, 212 B.R. at 712 (holding that a debtor's cause of action under § 362(h) was barred by laches where the debtor waited sixteen months after the violation ceased to file suit). Neither party, however, has offered evidence on the issue of whether Chicago was prejudiced by Therrien's delay.
Consequently, Therrien's motion for summary judgment to preclude Chicago from asserting laches as an affirmative defense to liability under § 362(h) will be denied. Likewise, Chicago's motion for summary judgment on the issue of its liability under § 362(h), to the extent that it rests on the affirmative defense of laches, will also be denied.
As to Therrien's motion for summary judgment to preclude Chicago from asserting laches as a defense to liability for having violated the discharge injunction, the court will deny Therrien's motion because Therrien has failed to affirmatively show that Chicago was not prejudiced by his delay in bringing suit and that his delay was not unreasonable. Although the fact that Therrien asked Chicago to dismiss him from the State Case in October, 1995, suggests that Chicago was on notice of Therrien's intent to assert his rights, Therrien has offered no evidence on whether Chicago was not prejudiced through the kinds of disadvantages that are incident to the lapse of time (e.g., dispersal and inaccessibility of witnesses). Further, the fact that Therrien commenced the instant adversary proceeding less than two years after Chicago's violation of the discharge injunction ceased does not establish that Therrien's delay was reasonable under the circumstances. In applying the doctrine of laches, the reasonableness of any given delay is determined by reference to the circumstances of the specific case. See Akin v. Evans, 221 Md. 125, 156 A.2d 219 (1959) (holding that an eighteen month delay was sufficient to call for the application of laches where principal witness had died during the interim); 4 JOHN NORTON POMEROY, POMEROY'S EQUITY JURISPRUDENCE § 1441 (4th ed. 1919) (discussing rule that laches may be available as a defense even though delay is shorter than that which is allowed by an analogous statute of limitations). Therefore, the court will deny Therrien's motion to the extent that it seeks to preclude Chicago from asserting laches as an equitable defense.
Chicago's violation of the discharge injunction ceased in August, 1996, which was the time when Chicago, Therrien, Academy, and Executive Risk entered into a settlement agreement. Therrien filed his complaint in the instant adversary proceeding in April, 1998.
To the extent that Chicago's motion for summary judgment on the issue of its liability for having violated the discharge injunction rests on the affirmative defense of laches, it will be denied because Chicago has not shown affirmatively that it was prejudiced and that Therrien's delay was unreasonable.
The court will grant summary judgment in favor of Therrien on the issue of limitations. The Bankruptcy Code does not provide a statute of limitations for actions to recover damages for violations of the discharge injunction. Therefore, there can be no genuine issue of material fact that would preclude summary judgment in favor of Therrien that his action for damages for Chicago's violation of the discharge injunction is not barred by limitations.
E. Conclusion
In summary, the court finds that Chicago's refusal to dismiss its claims against Therrien in the State Case constituted a willful violation of both the automatic stay and the discharge injunction. A genuine issues of material fact exists as to whether Chicago's willful violation of the automatic stay caused Therrien's termination from Allview Title, Inc. No genuine issue of material fact exists in relation to the conclusion that Chicago's willful violations of the automatic stay and the discharge injunction did not cause Therrien compensable damages in connection with his bar application. Likewise, the court finds that Chicago's violations of the automatic stay and the discharge injunction did not cause injury to Therrien's reputation, nor did they cause Therrien to incur attorney's fees in defending the State Case and related litigation in the U.S. District Court. No genuine issue of fact exists in relation to the conclusion that Chicago's violations of the automatic stay and the discharge injunction did not cause Therrien to incur attorney's fees in explaining Chicago's allegations to the Character Committee of the Maryland State Bar. Therrien's entitlement to attorney's fees incurred in bringing this adversary proceeding will depend on whether he can establish that he was injured by a violation of the automatic stay by Chicago. Chicago is precluded from asserting limitations as an affirmative defense to liability for having violated the automatic stay and the discharge injunction, but it is not precluded from asserting laches.
Therefore, it is, this ______ day of July, 1999, by the United States Bankruptcy Court for the District of Maryland,
ORDERED, that Plaintiff's motion for summary judgment is granted, in part, and denied in part; and it is further
ORDERED, that Defendant's motion is granted, in part, and denied in part; and it is further
DECLARED, the Defendant's refusal to dismiss Plaintiff from the State Case, Chicago Title Insurance Company v. Academy Title Group, Inc. et al., Case No. C-95-201240C in the Circuit Court for Anne Arundel County, constituted a willful violation of the automatic stay as provided by 11 U.S.C. § 362(a)(1); and it is further
DECLARED, that Defendant's maintenance of the State Case against Plaintiff after July 19, 1995, constituted a willful violation of the discharge injunction as provided by 11 U.S.C. § 524(a)(2); and it is further
DECLARED, that a genuine issue of fact for trial exists as to whether Defendant's willful violation of the automatic stay caused Plaintiff to be terminated from his position as CEO of Allview Title, Inc.; and it is further
DECLARED, that Chicago's willful violations of the automatic stay and the discharge injunction did not cause the Character Committee of the Maryland State Bar to delay in the processing of Plaintiff's application for admission to the Maryland State Bar; and it is further
DECLARED, that Defendant's willful violations of the automatic stay and the discharge injunction did not damage Plaintiff's reputation; and it is further
DECLARED, that Defendant's willful violations of the automatic stay and the discharge injunction did not cause Plaintiff to incur attorney's fees in defending the State Case and related litigation in the U.S. District Court, Executive Risk Indemnity, Inc. v. Academy Title Group, Inc., et al., Case No. 95-3749 CCB; and it is further
DECLARED, that Defendant's willful violations of the automatic stay and the discharge injunction did not cause Plaintiff to incur attorney's fees in explaining Defendant's allegations to the Character Committee of the Maryland State Bar; and it is further
DECLARED, that a genuine issue of fact for trial exists as to whether Defendant's willful violations of the automatic stay caused Plaintiff to incur attorney's fees in bringing the instant adversary proceeding; and it is further
DECLARED, that Defendant may not assert limitations as an affirmative defense to liability for having violated the automatic stay and the discharge injunction; and it is further
DECLARED, that a genuine issue of fact exists for trial as to whether Plaintiff's complaint is barred by laches.
cc: F. Thomas Rafferty, Esquire Blum, Yumkas, Mailman, Gutman, Denick, P.A. 1200 Mercantile Bank Trust Building 2 Hopkins Plaza Baltimore, MD 21201-2914
James T. Heidelbach, Esquire Gebhardt Smith LLP The World Trade Center, 9th Floor Baltimore, MD 21202
Office of the U.S. Trustee 300 West Pratt Street Suite 350 Baltimore, Maryland 21201