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Reed v. Griffin

United States District Court, E.D. Wisconsin

March 22, 2016

LINDA REED, Appellant-Plaintiff,
v.
JOSEPH L. GRIFFIN, JR., Appellee-Debtor. Adversary No. 15-02259

DECISION AND ORDER

HON. RUDOLPH T. RANDA U.S. District Judge.

Pro se Appellant Linda Reed appeals the July 17, 2015, Order of the bankruptcy court, which dismissed her adversary complaint in the above-captioned action. Pro se appellee Joseph L. Griffin, Jr. filed a motion to dismiss the appeal (ECF No. 10), contending that any debt he owed to Reed was discharged in an earlier bankruptcy proceeding.

Standard of Review

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 158, which allows district courts to hear appeals from final judgments, orders, and decrees of the bankruptcy courts. District courts apply a dual standard of review in bankruptcy appeals-the bankruptcy judge’s findings of fact are reviewed for clear error, while conclusions of law are reviewed de novo. In re Midway Airlines, 383 F.3d 663, 668 (7th Cir. 2003); In re Smith, 286 F.3d 461, 464-65 (7th Cir. 2002). However, where the bankruptcy code commits a decision to the discretion of the bankruptcy court, that decision is reviewed only for an abuse of discretion. See Wiese v. Cmty Bank of Cent. Wis., 552 F.3d 584, 588 (7th Cir. 2009). “[A] court abuses its discretion when its decision is premised on an incorrect legal principle or a clearly erroneous factual finding, or when the record contains no evidence on which the court rationally could have relied.” Id. (Citation omitted.)

Background[1]

This matter involves two bankruptcy filings in the Eastern District of Wisconsin by Appellee-Debtor Joseph L. Griffin, Jr. and his wife, Latoya. The first case, No. 05-27208 (Griffin I), was filed under chapter 13 in April 2005 and converted to chapter 7 in April 2008.

Reed had a 2005 small claims money judgment against the Griffins. The Griffins listed Reed and the debt owed her on Schedule F in the Griffin I bankruptcy. Reed did not file a complaint seeking a determination that the debt owed to her was nondischargeable, and the Griffins received a chapter 7 discharge of indebtedness on August 8, 2008.

The second case, No. 15-24529 (Griffin II), was filed in April 2015. In June, Reed filed an adversary complaint (No. 15-2259) in relation to Griffin II, seeking declaration that the small claims debt the Griffins owed her was nondischargeable under 11 U.S.C. § 523(a)(2). (Bankr. R. #1.) Reed also requested that the bankruptcy court waive her filing fee. (Bankr. R. #2.)

By a June 15, 2015, Order, the bankruptcy court informed Reed that the debt she sought to have determined nondischargeable appeared to have been discharged in Griffin I and therefore Reed’s motion to waive the filing fee was denied for lack of success on the merits of her complaint. (Bankr. R. # 6.) The order also stated that the court would not issue a summons and would dismiss Reed’s complaint with prejudice on July 14 unless she showed a good faith basis to maintain that the debt owed to her was not discharged in Griffin I.

On July 8, Reed filed a response to the court’s order. (Bankr. R. # 8.) The gist of Reed’s response was that the debt owed to her was not discharged in Griffin I because her claim had not accrued yet, and she relied on Wisconsin’s discovery rule for torts, which states that a claim accrues when the victim first discovers her injury. She contended that her claim first arose when she discovered that the debt owed to her was the result of fraud, which she stated was not until the filing of the 2015 bankruptcy.

The bankruptcy court held that the basis for Reed’s claim was the money judgment she obtained in state court in 2005, establishing that Reed discovered her injury - the loss of money due to the Griffins’ failure to repay her loan to them - before the Griffins’ 2005 bankruptcy. The court further noted that Reed did not argue nor did the record show that she was not listed as a creditor in Griffin I or that she did not receive notice of that bankruptcy. Additionally, the court indicated that Reed had conceded her debt was discharged, quoting Reed’s statement: “[t]he new filing of the Griffins[’] 2015 bankruptcy has triggered [Reed] to investigate their current bankruptcy and the previous one [in] which the wrongdoers discharged [Reed’s] debt.” (Bankr. R. #9, 2-3.) The court held that the facts Reed presented confirmed that her debt was discharged on August 8, 2008, because she failed to timely file an adversary complaint in Griffin I to contest its dischargeability, citing 11 U.S.C. § 523(c)(1) and Fed.R.Bankr.P. 4007(c).

On July 17, the bankruptcy court dismissed Reed’s adversary proceeding, holding that she failed to show a good faith basis to maintain that the debt owed to her was not discharged in Griffin I and that she did not make any allegation that would have afforded her standing to allege that the Griffins were not entitled to a discharge in Griffin II. The bankruptcy court held “now that her debt has been discharge[d] she is forever enjoined from seeking to collect on it. 11 U.S.C. § 524(a)(1) & (2).” (Id. at 3.)

Analysis

Reed contends that the bankruptcy court erred when it did not provide her relief.[2] (Appellant Opening Br. 4, ECF No. 5.) Griffin seeks dismissal of the appeal for the following reasons: (1) the debt was discharged in 2008, as reflected by the July 2015, satisfaction of judgment in Reed’s underlying state small claims action; (2) Reed has used the legal process to harass the Griffins and their friends and family, which can be verified by a search of Illinois and Wisconsin state court records; and (3) Reed is retaliating against the ...


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