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Craig v. Corbin

United States District Court, D. Maryland, Southern Division

July 28, 2016

ROBERT S. CRAIG, et al., Appellants,
MICHAEL P. CORBIN, et al., Appellees.



         Creditors Robert S. Craig and Barbara Craig (the "Craigs") and debtors Michael P. Corbin and Beth Anne Corbin (the "Corbins") have filed 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, et al. v. Corbin, et al., No. 13-00679 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 affirms the rulings related to all other issues presented.


         The Bankruptcy Court had subject matter jurisdiction over the complaints filed by Appellants pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. According to 28 U.S.C. § 157(b)(2)(I), a proceeding to determine the dischargeability of debts is a core proceeding that bankruptcy courts may hear and determine so long as such matters are referred to the bankruptcy court by 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 decrees of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges. 28 U.S.C. § 158(a)(1) (2012).


         A. State Court Proceedings

         After four years of missed mortgage payments by the Corbins led 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. 2010. A. 76.[1] On November 3. 2010. the Corbins, self-represented, filed a Request for Hearing of Exceptions to Foreclosure Sale, which they amended with the assistance of counsel on December 1. 2010. A. 77. The filing included allegations of unclean hands by the Craigs and that Mr. Craig had obtained confidential documents belonging to the Corbins. A. 77. The Craigs intervened on December 7. 2010 and deposed Mr. Corbin, who conceded that the allegedly confidential documents were publicly available. A. 77.

         On December 28. 2010, the Corbins, the Craigs. and their respective attorneys, Mr. Garza and Ms. Powell, met to put an "agreement on the record and to make sure that everybody understands the terms and that everybody is agreed to the terms of this settlement." A. 109. According to the Corbins, Mr. Garza did not outline the terms of the agreement prior to the meeting but merely advised that he had reached an agreement that they should agree to. A. 240.

         During the meeting, Ms. Powell, who represented the Craigs. stated 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 period."[2] A. 109-10. After 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. It's just a clarification of what we discussed before. The monthly rent that we discussed was going to be accrued also retroactive, I thought, during that period that this forbearance is occurring. That if they don't move out in time, that also accrues.
Mr. Garza: That's what she said.
Mr. Craig: Well, no. the way she presented it was from the 12lh on the rent would be accrued. What I'm clarifying is that the rent actually accrues from the sale date up to that date.
Ms. Powell: Oh. 1 see what you are saying. Yes.
Mr. Craig: And if. in fact, they move out. that doesn't come onto the table. If. 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 11"' -
Ms. Powell: Right.
Mr. Garza: - and go forward.
Mr. Craig: There you go. Thank you very much. That's a much more eloquent clarification.

A. 116-17. Mrs. Craig then agreed to the settlement without further qualification and the meeting was adjourned. A. 117.

         Following this meeting, on January 7. 2011. the Corbins filed another set of exceptions without the assistance of counsel. A. 77. In a January 11. 2011 hearing before the Circuit Court for Frederick County. Maryland. Ms. Powell denied the existence of any settlement agreement citing a failure to meet the condition precedent of obtaining bank approval to waive interest. ECF No. 22 at 5 (citing A. A-5. 7:20-8:3). Additionally. Ms. Powell's January 19. 2011 letter to Mr. Garza stated the following:

With respect to any purported settlement, as you know, the lender's consent was a necessary prerequisite to any agreement. Further, it was my client's intent that any waste by your client would also result in accrual of rent. In addition, when I received (not by service) the additional exceptions filed by your clients it was painfully clear that they had absolutely no intention of carrying out any agreement had one been reached. Accordingly, any settlement offer by my client is withdrawn. I am sorry that things have transpired this way but it was not of our doing.

Opp'n ex re!. Beth Anne Corbin, Michael P. Corbin. Ex. C. Craig v. Corbin. No. 13-00679 (Bankr. D. Md. Mar. 11, 2014).

         A ruling granting final ratification of the foreclosure sale was entered in favor of the Craigs on February 23. 2011. and the Craigs attempted to close on the property on March 3. 2011. A. 78. However, the Corbins filed a Motion to Alter. Amend, or Revise Judgment that halted the closing. A. 78.

         On May 26. 2011. the Circuit Court for Frederick County. Maryland granted a motion for sanctions against the Corbins. finding that the "Corbins have "abused the legal procedure' and filed meritless exceptions for the improper purpose of delaying these proceedings."" A. 81 (citation omitted). The July 20. 2011 Order awarded sanctions in the amount of SI 3.004.14. which included $11.806.50 for attorney's fees and $1.197.64 for disbursements. A. 83-84. ...

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