Linda Lane v. Saran Dean; Kevin Dean (In re Lane)

Case Type:
Case Status:
Adversary Proceedings Nos. 18-8038/8040; Bankruptcy Case No. 3:17-bk-32227; File Name: 19b0008p.06 (6th Circuit, Aug 30,2019) Published
Bankruptcy Appellate Panel of the Sixth Circuit Court of Appeals affirmed two rulings by the bankruptcy court which found creditors in contempt and issued sanctions against creditors for: (i) filing a settlement demand covered by FRE 408 with the court; and (ii) for filing an adversary proceeding to revoke an order confirming a Chapter 13 Plan despite having raised the same issues before the court at confirmation. BAP also affirmed an order denying a motion for reconsideration of one of the sanctions' rulings.
Procedural context:
Debtor filed a Chapter 13 petition to address a state court judgment obtained by creditors arising out of the sale of debtor's residence to creditors and the discovery by creditors of mold contamination in the residence. The bankruptcy court confirmed the Chapter 13 Plan over the creditors' objection which Plan paid the creditors in full with interest over the life of the Plan due to the judgment lien on the debtor's new residence filed by the creditors. Creditors continued an onslaught against the debtor by filing an adversary proceeding for damages for conduct they considered to be non-dischargeable. That was dismissed. Creditors then moved to dismiss the bankruptcy post-confirmation which was denied. Creditors appeal of that dismissal was dismissed for lack of standing. Debtor wrote creditors a settlement letter noting it was covered by FRE 408. Creditors filed the letter with the clerk. Debtor moved for sanctions for the filing of the letter which was granted and $5,000 awarded to debtor. Creditors then filed an adversary proceeding to revoke confirmation of the Plan. Debtor moved to dismiss and then moved for sanctions again - which were granted - and the adversary proceeding was dismissed. Creditors moved for reconsideration which was denied
After the debtor sold her residence to the creditors they discovered mold in the basement. An arbitrator awarded the creditors $126,895.57 which was confirmed by the state court and a judgment lien for that amount wasp laced against the debtor's new residence. The Chapter 13 followed. The BAP painstakingly laid out the procedural posture set forth above. The BAP addressed a number of errors that were set forth on appeal and it refused to consider several errors not preserved for appeal. The filing of the settlement letter was clearly intended to harm the debtor and the BAP found no basis for its filing. The BAP found the creditors did not show any proof of their inability to pay sanctions and the creditors had refused to cash any distribution checks sent to them by the Chapter 13 Trustee- despite the Plan paying their claim at 100% with interest! The adversary proceeding was duplicative of other arguments previously made and rejected. in its conclusion the BAP warned the creditors that the sanctions imposed might be take out of future distributions to the creditors.
Buchanan, Dales and Wise, Bankruptcy Appellate Judges

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