Craig et al v. Corbin et al

Filing 31

MEMORANDUM OPINION. Signed by Judge George Jarrod Hazel on 7/28/2016. (kns, Deputy Clerk)

FILED
U.S. OIS rRlCT COURT
DISTRICT OF MARYLAND

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Soutltem Db.;s;ou

ZOlb JUl28

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CLERK'S OFFIC'AT r:1"1~"'uc;;:-1 ~I
~."r,~r.n,
~

ROBERT S. CRAIG, et aI.,

BY
. ,w., T"
Civil Appeal No.: G.JH-15-i656 .'
I

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Appellants,

P I: ijq

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v.

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MICHAEL

1'. CORBIN, et al.,

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Appellees.

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*

MEMORANDUM

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OPINION

Creditors Robert S. Craig and Barbara Craig (the "Craigs") and debtors Michael P.
Corbin and Beth Anne Corbin (the "Corbins") have tiled cross-appeals of the rulings of the
United States Bankruptcy Court for the District of Maryland (the "Bankruptcy Court") entered
on June 12, 2015 and August 27, 2015 in the matter of Craig. el al. \'. Corhil1, el af.. No. 1300679 WIL. The Craigs argue that the Bankruptcy Court erred by: finding that there was no
settlement agreement between the parties: not including post-judgment interest on the sanctions
judgment as part of the Craigs' damages: and granting the Corbins' motion for reconsideration,
The Corbins argue that the Bankruptcy Court erred by: determining that the debts owed to the
Craigs are non-dischargeable:

granting an award of damages to the Craigs for loss of use and/or

rent: and granting an award of damages for unpaid property tax, For the reasons discussed below,
this Court remands the issue of post-judgment interest to the Bankruptcy Court and aftinns the
rulings related to all other issues presented.

I.

JURISDICTION
The Bankruptcy Court had subject matter jurisdiction over the complaints tiled by

Appellants pursuant to 28 U.S.c.

* 1334 and 28 U.S.c. * 157. According to 28 U.S.c. *

157(b )(2)(1). a proceeding to determine the dischargcability of debts is a core proceeding that
bankruptcy courts may hear and detemlinc so long as such matters are referred to the bankruptcy
cOUl1by the district court. Pursuant to Local Rule 402. this Court referred such matters to the
bankruptcy judges of this District.
This Court has jurisdiction to hear appeals from final judgments. orders. and dccrecs of
bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges. 28 U.s.C.

* I 58(a)( 1)(2012).
II.

BACKGROUND

A. State Court Proceedings
Aller four years of missed mortgage payments by the Corbins \cd to foreclosure on the
property located at 4540 Delauter Road. Frederick. Maryland 21702. the Craigs successfully bid
for the property at a foreclosure sale held on September 8. 20 10. A. 76.1 On November 3.20 IO.
the Corbins. self-represented. tiled a Request for Hearing of Exceptions to Foreclosure Sale.
which they amended with the assistance of counsel on December L 2010. A. 77. The filing
included allegations of unclean hands by the Craigs and that Mr. Craig had obtained confidcntial
documents belonging to the Corbins. A. 77. Thc Craigs intervened on December 7.2010 and
deposed Mr. Corbin. who concedcd that the allegedly conlidential documcnts were publicly
available. A. 77.

1 Unless stated othcnvise.
the facts are taken from the documents and the Bankruptcy Court's trial transcripts
provided by the Appellants in their Appendix (ECF No. 19-1-19-8). The citations are consistent with the pagination
printed on the Appendix.

2

On December 28. 2010. the Corbins. the Craigs. and their respectivc attorncys. Mr. Garza
and Ms. Powell. mct to put an "agreemcnt on thc record and to make surc that cvcrybody
understands the ternlS and that evcrybody is agrced to the terms of this scttlement." A. 109.
According to the Corbins. Mr. Garza did not outline the terms of the agrecmcnt prior to the
meeting but mcrely advised that he had reached an agreement that they should agree to. 1\. 240.
During the meeting. Ms. Powell. who represented thc Craigs. statcd that the Corbins
could remain on the property until May 12.2011. but the offer was "contingent on the bank

,
agreeing not to charge the Craigs interest on the loan for that additional four-month pcriod:'- A.
109-10. Aftcr the Corbins agreed to the settlement on the record. Ms. Powell asked Mr. Craig if
he understood the terms of the agreement. which led to the following exchange:
Mr. Craig: I do. We agree to them with the one qualification. My understanding
was - oh. no. It is not a modification. 1t"sjust a clarification of what we discussed
before. The monthly rent that we discussed was going to hc accrued also
retroactive. I thought. during that period that this forbearance is occurring. That if
they don'tmovc out in time. that also accrues.
Mr. Garza: That's what she said.
Mr. Craig: Well. no. the way she presented it was from thc 121h on the rent would
be accrued. What rm clarifying is that the rent actually accrues from the sale date
up to that date.
Ms. Powcll: Oh. I scc what you arc saying. Ycs.
Mr. Craig: And iL in fact. thcy move out. that doesn't come onto the tablc. II: in
fact. they do. that gets accelerated.
Mr. Garza: Let me be - the agreement is that the rent would accrue if they don't
move out as of January 1 Ilh_
Ms. Powcll: Right.
Mr. Garza: - and go forward.
Mr. Craig: There you go. Thank you very much. That's a much more eloqucnt
clarification.

::!

Mrs. Craig stated in her testimony that this condition was met. See A. 190.
3

A. 116-17. Mrs. Craig then agreed to the settlement without further qualitication and thc
meeting was adjourned. A. 117.
Following this meeting. on January 7. 2011. the Corbins tiled another sct ofcxccptions
without the assistancc of counsel. A. 77. In a January 11.20 I I hearing beforc the Circuit Court
for Frederick County. Maryland. Ms. Powell dcnied thc existence of any settlcment agrccmcnt
citing a failurc to meet thc condition prcccdent of obtaining bank approval to waive intcrcst. ECF
No. 22 at 5 (citing A. A-5. 7:20-8:3). Additionally. Ms. Powcll"s January 19.201 I Icttcr to Mr.
Garza stated the following:
With respect to any purported settlcmcnt. as you know. the lendcr' s
consent was a nccessary prerequisitc to any agreement. Furthcr. it was my c1icnt's
intent that any waste by your client would also result in accrual of rent. In
addition. whcn I received (not by service) the additional cxceptions tilcd by your
c1icnts it was painfully clear that thcy had absolutely no intention of carrying out
any agreement had onc been rcached. Accordingly. any settlement offer by my
client is withdrawn. I am sorry that things havc transpircd this way but it was not
of our doing.
Opp'nex reI. Beth Anne Corbin. Michael P. Corbin. Ex. C. Craig \'. Corhin. No. 13-00679
(Bankr. D. Md. Mar. 11. 2014).
A ruling granting tinal ratification ofthc foreclosurc salc was entered in favor of the
Craigs on February 23. 2011. and thc Craigs attemptcd to close on the property on March 3.
20 I I. A. 78. However. thc Corbins tiled a Motion to Alter. Amcnd. or Revisc Judgmcnt that
haltcd the closing. A. 78.
On May 26. 201 I. the Circuit Court for Frcdcrick County. Maryland granted a motion t(lr
sanctions against the Corbins. finding that the "Corbins have 'abuscd thc Icgal procedure' and
filcd meritless cxceptions tor the improper purposc of delaying these proceedings .... A. 81
(citation omitted). Thc July 20. 201 I Ordcr awardcd sanctions in the amount of $13.004.14.
which included $1 1.806.50 for attorney's tees and $1. I97.64 t(lr disburscments. A. 83-84. Thc

4

Court of Special Appeals of Maryland dismisscd the Corbins' appeal for lack of jurisdiction. A.
99A-4.
The Craigs filed a sccond motion for sanctions on December 18.2012. this time against
the Corbins and their attorney at the time. Mr. Solnik. A. 135. During the February 5. 2013
hearing in which sanctions were ultimately granted. A. 140. Mr. Solnik requested that the
sanctions be awarded against him and not the Corbins. A. 477. Prior to the hearing scheduled to
detennine the amount of sanctions. the Craigs resolved their dispute with Mr. Solnik and
withdrew their second motion for sanctions. ECF No. 19 at 10-11; A. 142.
B. The Bankruptcy Court's Rulings
After thc Corbins tiled their bankruptcy case. the Craigs filed their I\dversarial Claim and
Request lor Summary Judgment on November 8. 2013. asking that the debt owed to them by the
Corbins be deemed non-dischargeable

in bankruptcy. 1\. 14. The Corbins Ii\cd their response on

January 2, 2014. 1\. 34-38. Both parties tiled without the assistance of counsel. A. 32. 38. In
addition to their response. the Corbins tiled a Schedule of Exhibits. which included a "Letter of
settlement between the Craigs and Mr. Solnik (the Corbins attorney)'" A. 39.
I. The Bankruptcy Court's June 9. 2015 Ruling
On June 8. 2015. the Bankruptcy Court conducted a two-day bench trial. with both sides
represented by counsel. ultimately concluding that the Corbins' debt owed to the Craigs was
non-dischargeable.

A. 184-306. The Bankruptcy Court determined that the Corbins "abused the

legal procedure and filed meritless exceptions with [the] improper purpose of delaying the
proceeding'" A. 302 ("That is an act that they would know the consequences of: that the delay
was going to cause cost expense and that the delay was intentional. I heard her testimony. She
wanted to save her property"'). The Bankruptcy Court also found that the Corbins made

5

allegations "in bad faith in an attempt to mislead the Court and delay the foreclosure proceedings
as well as the Court's action in this matter:' A. 302. As a result ... the Craigs. have incurred
substantial attorney's fees, unfounded delays in taking possession of the property they purchased
at foreclosure sale, and thc Trustee has refused to complete the closing of the property until the
present matter is resolved:' A. 302.
The Bankruptcy Court also notcd that the statc court "made a determination that there
was something sanctionable" and the laetthat the Craigs ehosc to withdraw their motion for
sanctions and "come into this court and prosecute it here docsn'tmcan

that the Court didn't tind

that there was something sanetionable, they did:' A. 304. In rcsponse to the Corbins pointing out
that the docket does not indicate whether the sanctions werc against thc Corbins, thcir lawycr. or
both, the Bankruptcy Court explained. "I understand. What I am saying is that whether it was
against the attorney and I have no, I don't know who the attorney was at that point intimc or
anything. There is nothing in the record ....

It doesn't matter. What I am saying is thcre was an

award of sanctions because of thc conduct:' A. 304.
The Craigs also asked the Bankruptcy Court to tind that thc Corbins had breached a
settlemcnt agreemcnt entered on December 28; 201 0 and, as a result. owed additional damages to
the Craigs. A. 288. When determining whether there was a settlement agreement. the Bankruptcy
Court looked "at this alier the tact to see whether or not the parties believed that there was an
agreemcnt," A. 303, and found that there was no agreement. A. 302. The Bankruptcy Court
noted that there "were opportunities later to go before the Court and say we have an agreement.
they've breached it. and therefore I want to enforce it:' A. 302, but neither party did so or acted
as if there was an agreement. The Corbins demonstrated that they did not believe there was an
agreement by tiling additional exceptions alier the alleged contract was formed, and the Craigs

6

communicated they did not believe there was an agreement when their lawyer sent a letter to the
COI'bins' lawyer and asserted that there was no agreement. A. 302.
In calculating damages. the Bankruptcy Court assessed the Craigs' loss or use/rem I<Jrthe
property and the issue of unpaid taxes. Regarding the loss of usc/rent. the Bankruptcy Court
noted that there was a co1ll1order that says that they are entitled to loss or use because orthe
actions of the Debtors. and found '"that the balance of the rent 01'$25.423.87 is appropriate
damages. That was part of the supersedeas bond:' A. 303. However. the Bankruptcy Court
decided against granting damages for the inability to rent the house. noting that the testimony did
not indicate that the Craigs were going to rent the property and generate money. so the
Bankruptcy Court detennined that the Craigs would be compensated for '"the loss or the use of
the property and the lact that they had to pay rent of their own. And that has already been
granted. So I am not awarding the $72.493.15:' A. 305. Regarding taxes. the Bankruptcy Court
stated that:
The taxes pursuant to the bond order looked like what was leli over in terms of
my math - and 1 went through it a couple of times - was actually $1.374.02 .... I
did the math based on what the supersedeas bond order was where the judge
found lhat the taxes that they were entitled to lor this period. And that I also lind
to be appropriate because these people own the property and would otherwise be
required to pay taxes. but they didn't have the right to go into the property. And
that is a consequence or the delay. the intentional delay. The desire of the Debtors
to stay in the property as long as they could. Well they got to stay there. they have
to pay the taxes during that period or time where they did in fact cause the delay
and stayed in the property. So that is an additional. as I said. it looks like it is
$1.3 74.02.
A. 303. Alier adding the balance for the taxes. loss of use/rent. and attorney's rees. the
Bankruptcy C01ll1determined the totalnon-disehargeable

claim was $82.038.63. A. 305.

2. The Bankruptev Court's Au!!ust 19.2015 Ruling
The Corbins filed a Motion to Vacate Judgment and the Bankruptcy Court held a hearing
on the motion on August 19. 2015. A. 358. The hearing locused on whether the ruling regarding
7

damages for sanctions should be vacated in light of"new" evidence that the sanction was
resolved between the Craigs and the Corbins' fonner attorney. Mr. Solnik. Upon becoming
aware that the Craigs settled their sanctions claim with Mr. Solnik and agreed to "give up the
claim against the Debtors in this particular case and just look to Mr. [Solnik] for that remedy:' A.
399-400, the Bankruptcy Court found that the part of the judgment addressing the same damages
should be vacated. because it was "no longer outstanding:' and "should not be the basis of an
award in this case:' A. 416-17. Alier hearing both parties. the Bankruptcy Court reasoned that
the parties were "surprised" that the Bankruptcy Court "went in a different tangent and therefore.
because of that. neither party was necessarily prepared to present to this Court evidence that was
relevant to my decision. Both sides had the inlonnation. Neither side presented it. It looks like it
was a surprise to both:' A. 397. The Bankruptcy Court's ruling that "damages should be based
on prior rulings of the State Court. including the sanctions award by the State Court and not on
the Plaintiffs' request lor damages under a contract that this Court determined not to exist:'
presented an unanticipated issue that both parties were unprepared for during trial. A. 415-16.
Explaining further. the Court noted:
The Defendants could not have anticipated that this Court was going to award
damages in the manner that it did. so they would not have known to obtain thc
evidence that the second sanctions motion had been resolved. Thercfore. there
was no failure to use due diligence because the issue was not raised as part of the
trial. It was raised by this Court subsequent to the dischargeability ruling and as
part of the damage analysis.
A. 416. In the alternative. the Bankruptcy Court reasoned that it "must act to prevent a mani fest
injustice" because the "attorney's fees sought through the second sanctions motion has been paid
and satistied:' A. 416.

8

Additionally,
post-judgment
judgment

the Craigs asked the Bankruptcy

interest. The Bankruptcy

interest is usually requested

III.

Court to amend the prior order to include

Court brietly addressed
in the complaint.

the issue. noting that post-

A. 400.

DISCUSSION
A. Standard of Review
Pursuant

to Federal Rules of Bankruptcy

Procedure

("Bankruptcy

district courts may affirm, modi(y. remand, or reverse a bankruptcy
Bankr. P. 8001. 8013. Acting as an appellate

(4th Cir. 2005)): Rillnl'.
also Ulliled Slales
tried without ajury
to the opportunity

1'.

'\/eJ'l)'-Go-Rollnd

EII/ers .. Inc .. 400 F.3d 219. 224

First Union iVaI'I Bank. 176 B.R. 401. 407 (Bankr. D. Md. 19(5):

u.s. GYPSIlIl1Co.. 333

U.S. 364. 394 (1948) ("[F]indings

of the trial court to judge of the credibility

tinding is clearly erroneous

'when although

there is evidence

and due regard shall be given

of the witnesses."'J.

"A factual

to support it. the reviewing

is leli with a linn and definite conviction

GJ1}SIllIl Co.. 333 U.S. at 3(5). Conversely.

court's

court

that a mistake has been
U.S.

de novo review requires the Court to consider "an

issue as if it had not been decided previously:'
246 (4th Cir. 2009). A bankruptcy

.11'1'

of fact in actions

committed .... Lakefi'onl fln,'r LLC \'. Clarksoll. 484 B.R. 72. 80 (D. Md. 2012) (quoting

discretion,

192

2014 U.S. Dist. LEXIS 38890.

'shall not be set aside unless clearly erroneous.

on the entire evidence

court

of law de novo. In re Dellldllllan.

F.3d 457. 459 (4th Cir. 1999); Rase \'. LOKan. No. RDB-13-3592.
1'1'

order. See Fed. R.

court. district courts review bankruptcy

tindings of fact lor clear error and review conclusions

at *12 (D. Md. Mar. 25. 2014) (citing In

judge's

Rulc") 800 I and 8013.

Slone \'. IlIsll'llll/elllalionl.ah.

application

which exists where the bankruptcy

Co.. 591 F.3d 239.

of law to fact is reviewed

for abuse of

eOUl1's decision rests upon a clearly erroneous

9

finding of fact, conclusion of law, or application of law to fact. Rose I'. Logoll, 2014 U.S. Dist.
LEXIS 38890, at

* 12-13.

B. The Craigs' Appeal
I. The Bankruptcy Court's finding that there was no settlement agreement
The Craigs assert that the Bankruptcy Court erred when it determined that the parties did
not enter into a settlement agreement that was breached by the COI.bins.The Bankruptcy Court
based its determination that there was no agrcement on the actions of the parties aner the alleged
agreement, including a letter Irom the Craigs' attorney asserting there was no agreement. and the
failure to place the agreement on the record at future proceedings despite multiple opportunities
to do so. A. 303: 83:13-85:2.
In Maryland, a eontract "is formed when an unrevoked offer made by one person is
accepted by another. An 'offer' is the 'manifestation of willingness to enter into a bargain, so
made as to justify another person in understanding that his assent to that bargain is invited and
will conclude it.''' Prillce George '.1' y. \'. Sih'el'lIIall, 58 Md. App. 4 L 57 (1984) (quoting I
O
Restatement Contracts (2d)

S 24 (1979)).

An acceptance "can be accomplished by acts as \wll as

words: no fonnal aeceptance is required." It!. at 57. "The validity of contracts which require
perfonnance by one party to the satisfaction of the other is well established because there is
always the implied obligation upon the party to be satisfied that the privilege be exercised in
fairness and good faith." Ullited Wholesalers. fllc.

I'.

A. .I. Arlllstrollg

Co., 251 F.2d 860, 862 (4th

Cir. 1958).
The Craigs claim that a settlement was reached belore and during the December 28. 2010
meeting. Although the purported agreement was transcribed by a court-reporter at the meeting.
the agreement was never placed on the record in a court proceeding. The Craigs argue that this is

10

not fatal to their claim because while "Bankruptcy Rulc 9019 rcquires court approval of certain
compromises in disputes pending before the Bankruptcy Courtl. t1hc Maryland Rules have no
similar requirement for disputes that are pending in state court." ECF No. 19 at 25. Thus. if"the
parties had written down the tcrms on a piece of paper and signed the paper. there would be no
doubt that an agreement was reached notwithstanding that the Agreement was not placed on the
record before a Judge." ECl' No. 19 at 30.
Conversely. the Corbins contend that there was no agrecment because they "did not know
what terms had been discusscd prior to the parties going on the record:' ECF 30 at 6. But evcn if
true. this does not negate the existence of an agreement between the parties because an
agreement can be accepted by counsel on behalf of its client. See. e.g. While Flint Really Grp.
Ltd. I' 'ship. LLLI' v. Bainbridge St. Elmo Bethesda Apls .. LLC. No. 362334- V. 2014 Md. Cir. Ct.
LEXIS 3. at *4 (Cir. Ct. Md. Apr. 3. 2014) (describing the court's acceptance ofa settlement
agreed upon by counsel for each of their client's behalt): see also Bissada v. Ark. Children's
Ho.\p.• 639 l'Jd 825. 831 (8th Cir. 2011) (linding that the plaintiff agreed to the language that his
lawyer communicated and the other party's lawyer accepted. forming a contract): Elustra ".
Mineo, 595 FJd 699, 709 (7th Cir. 2010) ("Given the record we have before us. the district court
had no choice but to conliml the magistrate judge's Iinding that the Elustras -directly or through
their lawyer-accepted

the agreement:").

Nonetheless. the transcribed dialogue between the parties during the allempt to reach an
agreement, coupled with the parties behavior alier the attempted agreement demonstrate that the
Bankruptcy Court was correct in finding that there was no meeting of the minds and thus no
agreement. As indicated at the opening of the December 28. 2010 meeting. the purpose of the
meeting was to put their "agreement on the record and to make sure that everybody understands

11

the terms and that everybody is agreed to the terms of this settlement:' A. 109. However, rather
than making an unqualified acceptance of an ofTer, Mr. Craig made a ""clarification:' which
constituted a counter-offer. In Maryland. "[q]ualified or conditional acceptance are counter
offers and reject the original offer. A conditional acceptance is in effect a statement that the
offeree is willing to enter into a bargain differing in some respect from that proposed in the
original offer:' Ebline

I'.

Campbell. 209 Md, 584. 590 (1956) (citation omitted). Whilc the Craigs

deny that Mr. Craig prescnted the counter-offer, A. 209. Mr. Craig's qualifieation potentially
added a significant amount of debt to that which was owed to the Craigs and thus rcllects a
material change to the tcrms of the agreemcnt. Critically. the record rellects no mutual assent to
the tem1S of the alleged contract after Mr. Craig proposed the eounter offer. See A. 116-17: ECl'
No. 22 at 21.
To the extent there is ambiguity as to whether or not an agreement existed. the acts and
statements made after the December 28. 20 I0 meeting indicate that the parties did not havc an
agrecment. When detcnnining whether there was an agreemcnt. the Bankruptey COUl1looked ""at
this after the fact to see whethcr or not the parties believcd that there was an agrcement and it
just doesn't look like they acted that way."" A. 303. Thc Bankruptey Court noted that there was a
sanetions order that was ""entered on July 25. 2011 in the amount 01'$13.414 for attorney's fecs
and eosts"" that did not include any mention of a prior agrcement. A. 303. The COI'bins
demonstrated that they did not believe there was an agreemetit by filing additional exccptions
after the alleged contract was fom1ed. See A. 302. Thc Craigs communicated they did not believe
there was an agreement when their lawyer sent a letter to the Corbins' lawyer and assert cd that
there was no agreement. A. 302: Opp'n ex rei. Beth Anne Corbin. Michael/'. Corbin. Ex. C.
Craig

1'.

Corbin. No. 13-00679 (Bankr. D. Md. Mar. 11. 2014). As the Fourth Circuit has

12

explained, "sometimes even eireumstanccs of a negative character such as the failure of both
parties to take any steps looking toward perfom1ance may amount to a mani festation of mutual
assent to rescind." Uniled Wholesalers. Inc., 251 F.2d at 862. If there was an agreement. the
Craigs' attorney's denial of its existence and the lailure of both parties to take any steps toward
perlormance would be enough to establish that the parties mutually opted not to honor the
agreement. Ms. Powell representations at the January 11, 2011 hearing and her Jan. 19.2011
letter to Mr. Garza support the notion that there was no contract. Accordingly. the Bankruptcy
Court's finding that there was no settlement agreement is affirmed.
2. Post-judgment Interest on the Craigs' Sanction Award
The Craigs request that this Court lind that the Bankruptcy Court erred in not including.
post-judgment interest in its award for sanctions, arguing thal "as a matter of law. the Craigs
were entitled to receive post-Judgment interest at the rate often percent (10%) per annum from
July 25, 2011, until the Judgment was paid in full." Eel' No. 19 at 32. For post-judgment
interest. Maryland Rule 2-604(b) states, a "money judgment shall bear interest at the rate
prescribed by law from the date of entry," .lied. .III/I. Liab. 111.1'.
Soc), \'. Daris, 389 Md. 95, 99
n.2 (2005). Except as provided by Md. Code ~ 11-106, the legal rate of interest on a judgment is
ten percent per annum on the amount of judgment. Id. at 106 n.6.
The Craigs raised this issue lor the tirst time at the hearing on the Motion to Alter,J but
under 28 V.S.c. ~ 1961, "every money judgment bears interest from the date of its entry, so there
is never any need to demand post-judgment interest as relicf." Greal Poilll ImernlOdal. LLC \'.
NOIfolk S. COIl)' (In re Greal Poim Inlel'lllodal. LLC). 334 B.R. 359. 362 (B.R. E.D. Pa. 20(5)

3 The Bankruptcy COllrt appears to have rejected the request by noting that a request for interest is usually included
in the Complaint. A. 400. and not including the interest in the final award.

13

(quoting 10 Moore's Federal Practice.

* 54.72[ IHal (Matthew Bender 3d cd.)). As noted by the

Bankruptcy Court in the Eastern District of Pennsyl vania:
With the exception of default judgments. Rule 54(c) provides that every final
judgment should grant to the prevailing party all the relief to which the party is
entitled. irrespcctive of whether the pleadings demanded that reliee Rule 54(c)
ensures that the demand for judgment will not be read to rigidly control the relief
that is ultimately awarded in the action. Essentially. Rule 54(c) ensures that the
substance will prevail over form. If the course of the action as litigated by the
parties shows that relief of a particular kind or scope is warranted. that rclief
should be awarded. regardless of the state of the pleadings. The available relief is
determined by the proof: not by the pleadings, and it is the duty of thc court to
grant all relief to which a party is entitled on that proof.
/£1. Finding that post-judgment interest is warranted. this Court remands to the Bankruptcy Court
the determination of the appropriate post-judgment intercst.
3. The Bankruptcv Judge Granting the Corbin's Motion for Reconsideration
The Craigs appeal the Bankruptcy Court's decision to reconsider and ultimately vacate
part of its earlier decision, This Court reviews the Bankruptcy Court's ruling on a motion to
reconsider for abuse of discretion. Rose, 2014 U,S. Dist. LEXIS 38890, at * 13. Courts are given
"considerable discretion in deciding whether to modify or amend a judgment:'
Reliance

Slandard

Life
.

IllS.

Gagliano

\'.

Co .. 547 F.3d 230. 241 n.8 (4th Cir. 2008): ./acoh.l' \'. Elec. Dala S)'.I'.
.

COlli .. 240 F.R.D. 595, 599 (M.D. Ala. 2007) (quoting Am. Home A.I'.I'/lr.Co. \'. Glenn

1:'.1'1('.1',\'

&

Assoc.l' .. /nc., 763 F.2d 1237, 1238-39 (11th Cir. 1985») ("Rule 59(e) providcs no specific

grounds tor reliee and 'the decision to alter or amend judgment is committed to the sound
discretion of the [trial] judge,''').
Under Federal Rule ofCivill'rocedure

59(e). a judgment may be amended to

accommodate an intervening change in law, account for new evidencc. or correct a clear crror of
law or prevent manifest injustice. Rose. 2014 U.S. Dist. LEXIS 38890, at *28-29. "A party may
move to alter or amend a final judgment under Rule 59 within twenty-eight days of the

14

judgment's issuance ... :' Due Forni LLC

1'.

Euro Res/. So/s .. Inc.. No. PWG-13-3861. 2014

U.S. Disl. LEXIS 157870. at *2 (D. Md. Nov. 6. 2014) (citing AILC Au/o .. HC \'. TO\l'no(So.
Pines. 532 FJd 269. 277-80 (4th Cir. 2008)). "In general. reconsideration ofajudgment

aner its

entry is an extraordinary remedy which should be used sparingly:' /'ac. Ins. Co. \'. Am. Na/'/
Fire Ins. Co.. 148 FJd 396. 403 (4th Cir. 1998). However. Rule 59(e) enables courts to "correct
its own errors. 'sparing the parties and the appellate courts thc burden of unnecessary appellate
Id at 403 (citation omitted).

proceedings:"

Manifest injustice may be found "where a court 'has patcntly misunderstood a party. or
has made a decision outside the adversarial issucs presentcd to the Court by the partics. or has
made an error not of reasoning but of apprehension .... Wagner \'. IVan/en. No. ELH-14-7lJ I.
2016 U.S. Disl. LEXIS 39160. at *7 (D. Md. Mar. 24. 2016) (citation omitted). Manilest
injustice is an error by the court that is direct. obvious. and observable. Id at *7-8 (citation
omitted); Von Kah/e

1'.

Roelllme/e (In re Roelllllle/e). 466 B.R. 706. 712 (Bankr. E.D.Pa. 2012).

When a party secks reconsideration on the basis of manifest injustice. the prior decision must bc
"dead wrong:' See TFWS. Inc.

1'.

Francho/. 572 F.3d 186. IlJ4 (4th Cir. 2009): In re Roelllmele.

466 B.R. at 712 (""Inorder for a court to rcconsider a decision due to 'manilCst injustice.' the
record presented must be 'so patently unfair and taintcd that the error is manilCstly clear to all
who view it:").
Upon becoming aware that the Craigs settled their sanctions claim with Mr. Solnik and
agreed to "give up the claim against the Debtors in this particular casc and just look to Mr.
[Solnik] for that remedy:' A. 399-400. the Bankruptcy Court lound that the part of the judgment
addressing the same damages. thc $42.000. should bc vacatcd. because it was "no longcr
outstanding:'

and "should not bc the basis of an award in this case:' A. 416-17. The Bankruptcy

15

Court did not abuse its discretion by finding that this was a manifest injustice requiring a
correction in the judgment. finding no abuse of discretion. the Bankruptcy Court" s dccision to
vacate part of its ruling is affirmed.
C. The Corhins'

Appclll

I. Dischargeabilitv of Debts Under 11 U.S.c.

S 523(a)(6)

The Bankruptcy Court ruled that the obligation due to the Craigs tram the Corbins was
non-dischargeable under 11 U.S.c. ~ 523(a)(6). Section 523(a)(6) of the Bankruptcy Code
provides that a general discharge of debt in bankruptcy does not discharge a debtor Irom any
debt arising from a "willful and malicious injury by the debtor to another entity or the property
of another entity," II U.S.c. ~ 523(a)(6) (2012). "The discharge exceptions are to be narrowly
construed in favor of the debtor since the aim of the Bankruptcy Code is to give the debtor a
fresh start," Miller v. .J.D. Abrams. 156 fJd 598. 602 (5th Cir. 1998). In order to establish that a
debt is nondischargeable under 11 U.S.c. ~ 523(a)(6). a creditor must prove by a preponderance
of the evidence that the act that gave rise to the debt was both willful and malicious. Grogan ".
Garner, 498 U.S. 279. 291 (1991): .lohmon \'. Dads (In re Davis), 262 B,R. 663.669 (Bankr.
E,D. Va, 2001): In re lfigginolham.

117 R.R. 211. 214 (Bankr. 1:.0. Va. 1990). Reviewofa

bankruptcy court's order "regarding nondischargeability

is a mixed question of law and fact,"

Van Aken v. Van Aken (In re Van A ken). 320 B.R. 620. 622 (R.A.P. 6th Cir. 2005). Typically.
decisions involving mixed questions of law and tilct are reviewed de novo. Rinn. 176 RR. at
407.
a.

Willfulness

"An injury is willtiIl when a court can determine 'that a debtor intended the act and by his
or her conduct intended to cause injury .... Deserl Palace. Inc. ,'. Rich. No. G.lH-15-0091. 2015

16

U.S. Dist. LEXIS 132580. at

* 10 (D.

Md. Sept. 30. 2015) (citation omitted). To dcterminc

whether a debtor intended to injure a creditor. courts may use the "objectively substantial
certainty tesC or the "subjective motive" test. ['arsolls

I'.

Parks (111 ['arks).
re

91 1', App'x 817.

819 (4th Cir. 2003), Whether the debtor intended to injure the creditor can be established by
demonstrating that the debtor took action that caused. or was substantially certain to cause. the
injury, Deserl ['a/ace, 11Ic'. 2015 U,S, Dist. LEXIS 132580, at

* 10, The

Court considers the

debtor's "subjective state of mind" and not whether a "reasonable debtor" should have known
that his act would adversely affect another's rights. Id. at

* 1I

(If/lOlill~ 111 Slall/ey.
re

66 F.3d at

.668), Debts arising from recklessly or negligently inllicted injuries do not fall within ~ 523(a)(6).
Kall'aa/lha/l

1'.

Geiger.

523 U,S, 57, 64 (1998 J,

After a two-day bench trial. the Bankruptcy Court determincd that the COI'bins "abused
the legal procedure and filed merit less exceptions with [the 1 impropcr purpose of delaying thc
proceeding, That is an act that they would know the consequences oC that the delay was going to
cause cost expense and that the delay was intentional. I heard her tcstimony, She wanted to sm'e
her property," A, 302, The Corbins note that Ms, Corbin ..testified that she provided in\<mnation
to her attorney and that her attorney raised the unclean hands defensc" without being instructcd
to do so, ECF No. 22 at 42, The Corbins also highlight that the Circuit Court granted the
sanctions against Mr. Solnik and not the Corbins. ECF No. 22 at 43. In rcsponse. the Bankruptcy
Court explained. "1 understand. What 1am saying is that whether it was against the attorney and
1have no, 1don't know who the attorney was at that point in time or anything. There is nothing
in the record. , .. It doesn't matter. What I am saying is thcre was an award of sanctions because
of the conduct." A, 304, This Court agrees. The record shows that the Corbins filed multiple
motions. including motions on thcir own behalC see, e.g. A, 77. and the Circuit Court originally

17

indicated that sanctions would be granted against the Corbins before accepting Mr. Solnik's
request that sanctions be exclusively against him, A. 477.
The evidence demonstrates that the Corbins willfully delayed the case as long as possible
in order to stay in the property and prevent the Craigs li'om taking possession. Thus, it is clear
that the Corbins intended both the act and to cause the injury and that their action was thercfi.lre
will ful.
b. Malice
Likewise, the Bankruptcy Court was correct in its finding of malice. When evaluating the
dischargeability of debt under 11 U.S.c.

* 523(a)(6), malice is defined as "causing injury

without just cause or excuse:' Desert Palace. /nc .. 2015 U.S. Dist. LEXIS 132580, at *16
(quoting /n re Dads, 262 B.R. at 670). A debtor may act with malice "without bearing any
subjective ill will toward plaintiff creditor and without having any specific intent to injure the
creditor:' 1d. Specific malice is not required on the part of the debtor. SI. I'alll Fire & Marine
Ins. Co. v. Vallghn, 779 F.2d 1003, 1008 (4th Cir. 1985).lfmalice

is not express, implied malice

"may be shown by the acts and conduct of the debtor in the context of their surrounding
circumstances" to establish malice under

* 523(a)(6).1d.

at 1010. The creditor can establish

malice on an implied basis, through facts evidencing the debtor's behavior and surrounding
circumstances. In re Dads, 262 B.R. at 671.
Here, based on the evidence befi.)re it. the Bankruptcy Court correctly lilUnd that the
Corbins made allegations "in bad faith in an attempt to mislead the Court and delay the
foreclosure proceedings as well as the Court's action in this matter:' A. 302. The Corbins tactic
of filing multiple motions to delay the Craigs from taking possession of the property is certainly

18

enough to lind implied malice. ifnot express. The Bankruptcy Court's ruling that the Corbins'
debt owed to the Craigs is nondischargeable is aftllllled.
2. The Craigs' award for loss of useirent
For the first time. the Corbins argue that the award given by the Bankruptcy Court Ii.)rthe
loss of use/rent was improper because they were special damages not pled in the Amended
Complaint. "'[Q]uestions not raised and properly preserved in the trial Ii.mull will not be noticed
on appeal in the absence of exceptional circumstances .... Long Term Care Parlners. LLC \'.
Uniled Slales. 516 F.3d 225. 237 (4th Cir. 2008) (citation omitted). Because the argument that
this award constituted special damages was not raised befi.)re the Bankruptcy Court. it is not
properly belore this Court. Even if the issue was properly raised and preserved. it would fail.
The Corbins assert that the Bankruptcy Court erred in awarding damages for loss of
usc/rent because loss of usc/rent constitutes special damages but was not requested in the
Amended Complaint. ECF No. 22 at 27. The only mention of rent in the Amended Complaint is
in the faets section. which states that the Craigs agreed to pay them pursuant to the alleged
settlement agreement. ECF No. 22 at 27-28. The Corbins assert that this "omission greatly
prejudiced the Corbins because without adequate notice that loss of use would be an clement of
damages sought at trial. the Corbins were robbed of their opportunity to investigate and defend a
claim for loss of use and/or rent before. during. and alier trial:' ECF No. 22 at 27. Additionally.
according to the Corbins. the Craigs never pleaded that ..the basis of their claim fi.)rreliefwas
based on the decision of the State Court and thereforc the relief granted was outsidc the scope of
the Complaint:'

ECF No. 22 at 38.

To support the proposition that loss of usc/rent is a spccial damage. the Corbins point to
Chesapeake & 0. R. Co. v. Elk Refining Co.. which hcld that "rental reasonably and necessarily

19

paid for the lise orother property to take the place of that which has been damaged. until it can
bc repaired or replaccd. is a fair measurc of such special damage:' Chesapeake & 0. R. Co. ".
Elk Refining Co.. 186 F.2d 30. 32-33 (4th Cir. 1950) (emphasis added), The Corbins also cite a
Maryland case that "asserted damages stemming from the contamination of their water supply.
other consequential effects. and alleged misrepresentations by Exxon:' E\".wn l'v/ohil COli',

I'.

Albright. 433 Md. 303. 317 (Md. App. 2012), Neither case is instructive. "By contract.
consequential damages 'arise from the intervention of "special circumstances" not ordinarily
predictable and are compensable only ifit is determined that the special circumstances were
within the contemplation of the parties to the contract. ... Camell Const. Corp. \'. Dal1\'ille
Redel'elopmel1/ & HOllS,AlIth.. 745 F.3d 703. 725 (4th Cir. 2014) (citation omitted). The
"ordinarily predictable" consequence of the Corbins improperly delaying the Craigs !I'om taking
possession of the property was to deny them the use of the property. precisely the damages
awarded by the State court in the Supersedeas Order. Thus, they are not special damagcs. While
there will be circumstances in which loss of usc/rent would bc special damages-and
Chesapeake and Euol1 arc two examples-loss

of use/rent was a predictable byproduclofthe

Corbins' acts. making Rule 9(g) inapplicable,
The Corbins also argue that the Bankruptcy Court's ruling was erroneous because the
loss of use/rent award was based on the sanctions assessed against the Corbins' counsel and not
the Corbins, ECF No. 22 at 34 ("IIO\vever. sanctions were not awarded against the Corbins.
Instead the sanctions were awarded against their prior counsel."), As indicated earlier. the
Bankruptcy Court found bad faith in the efforts of the Corhins to delay the foreclosure
proceedings, Thus. the Bankruptcy Court did not abuse its discretion in awarding damages for
the loss of use/rent.

20

3. The Craigs' award lor unpaid taxes
The Corbins also challenge the award lor unpaid taxes because "the Craigs took
possession of the property on February 5, 2013. which is the same date as the hearing on the
Craigs' Motion to Release Supersedeas Bond in the Circuit Court'" ECF No. 22 at 38-39. The
Bankruptcy Court awarded damages lor unpaid taxes because ..the funds !i'om thc bond were not
sutlicient to cover all of the expenses that were awarded by the Circuit Court in the Order'" ECI'
No. 26 at 46. Based on its review of the facts presented at trial and to the Circuit Court. the
Bankruptcy Court calculated the taxes that remained outstanding as of the trial of the adversary
proceeding. This Court finds no error in the Bankruptcy Court's determination.
Furthermore. as with the issue of loss of usc/rent. if an award fi.)rtaxes was improper. the
issue cannot be considered as part of this appeal because the Corbins did not raise the issue at the
trial level, as an initial matter. or as a Motion f()r Reconsideration. and '''questions not raised and
properly preserved in the trial forum will not be noticed on appeal in the absence of exceptional
circumstances .... Long Term Care Partners. Ll.C. 516 FJd at 237 (citation omitted): see also
Wilson v. Dlyvit'<')s .. 71 F. App'x 960. 962 (4th Cir. 2003) (quoting lIol/and v. Big Rilw Corp ..
181 F.3d 597. 605 (4th Cir. 1999) ("'Generally. issues that were not raised in the district court
will not be addressed on appeal ..•.). The Bankruptcy Court's decision to award taxes is aflirmed.
IV.

Conclusion
Based on the loregoing. this Court remands the issue of post-judgment interest to the

Bankruptcy Court and affirms the rulings related to all other issues presented. A separate Order
follows.

Dated:

Julv

,&/1--

71. 2016

GEORGE J. IIAZEL
United States District .Judge

21