Virginia Lawyers Weekly VA Lawyers Weekly
Where a woman sued the debtor for breaching a prior settlement agreement, the debtor’s filing of a Chapter 13 petition before she obtained an award did not prevent her from asserting her claim was non-dischargeable under 28 U.S.C. § 1328(a)(4). Contrary to the debtor’s position, § 1328(a)(4) does not require a claimant to have obtained a pre-petition award in these circumstances.
Background
On or about July 5, 2013, Ms. Yagi and the debtor, Lee Andrew Hilgartner, entered into a settlement agreement. Under the terms of the agreement, Mr. Hilgartner agreed to pay Ms. Yagi $415,000, some of which was payable to her attorneys, in monthly installments.
On Oct. 10, 2019, Ms. Yagi alleged that Mr. Hilgartner defaulted in his payments under the settlement agreement and moved for a default judgment against Mr. Hilgartner. The motion was set for a hearing on March 6, 2020.
On March 4, 2020, Mr. Hilgartner filed a voluntary petition under Chapter 13 with this court. In his schedules, Mr. Hilgartner listed Ms. Yagi as an unsecured creditor with a claim in the amount of $353,071.21. Mr. Hilgartner filed a Chapter 13 plan under which he proposed to pay $1,250.00 per month for 60 months, for an estimated distribution to his unsecured creditors of 15%.
The Chapter 13 trustee filed objections to the debtor’s plan on the grounds of good faith, disposable income, the liquidation test and feasibility. Ms. Yagi also objected on the ground that it was not proposed in good faith, arguing that her claim was nondischargeable as a personal injury claim resulting from the debtor’s willful or malicious conduct under 28 U.S.C. § 1328(a)(4).
On July 23, 2020, Ms. Yagi filed a complaint in this court to determine the dischargeability of the debt owed to her. The debtor filed a motion to dismiss or in the alternative for summary judgment.
Award
The debtor argues that Ms. Yagi’s claim cannot be covered by § 1328(a)(4) because she did not obtain an award of damages in a civil action before he filed his bankruptcy case. The debtor’s position is supported by two cases. Both of these courts relied on what they viewed to be the “plain language” of § 1328(a)(4) and its use of the word “awarded” as being purportedly employing the past tense.
Ms. Yagi, on the other hand, argues that a pre-petition award of damages is not necessary, relying on a third case. The court finds that the holding of this decision is the better-reasoned interpretation.
First, the use of the term “awarded” does not necessarily require a pre-petition award of damages. The word standing alone could mean either “previously awarded” or “to be awarded,” or both. We routinely say in conversation that the date and time for a meeting is “to be determined,” and nobody understands the word “determined” to mean that the date and time of the meeting has already been set. Congress did not precede the word “awarded” with the phrase “to be,” but at the same time, it did not add the word “pre-petition” after the word awarded.
Congress has set forth with clarity when the pre-petition or post-petition nature of certain debts is determinative of the parties’ rights in a bankruptcy case. There is no basis to imply the term “pre-petition” immediately after the word “awarded” in § 1328(a)(4). While the court agrees that it should look to the plain meaning of a statute, it also should avoid implying terms in a statute that are not there.
The court also agrees with the court cited by Ms. Yagi that the debtor’s interpretation of the statute could lead to absurd results. An aggrieved party could litigate with a tortfeasor for years, only to see him or her file a bankruptcy case on the eve of a jury verdict in a civil case. There is no evidence to suggest that Congress intended to create such a tilted playing field.
Agreement
The debtor alternatively argues that because the parties entered into a settlement agreement the issue of nondischargeability is “over,” that is, that the allegedly willful or malicious nature of Ms. Yagi’s claim essentially has been merged into the agreement. The court finds that the debtor’s argument is precluded by two Supreme Court cases.
Debtor’s objections to Yagi’s claim overruled.
In re Hilgartner, No. 20-10695, Aug. 5, 2020. EDVA Bankr. at Alexandria (Kenney). VLW No. 020-4-011. 9 pp.
