United States District Court, D. Maryland
THEODORE D. CHUANG UNITED STATES DISTRICT JUDGE
Graybar Electric Company, Inc. ("Graybar") has
appealed orders of the United States Bankruptcy Court for the
District of Maryland denying its Motion for Summary Judgment
and granting the Motion for Summary Judgment filed by
Appellee Brandi Brand. The Appeal is fully briefed and ripe
for disposition. No hearing is necessary to resolve the
issues. See D. Md. Local R. 105.6. For the reasons
set forth below, the orders of the bankruptcy court are
REVERSED, and the case is REMANDED for further proceedings.
August 28, 2012, Electric Power Services, Inc.
("EPS"), an electrical contractor, submitted a
commercial credit application to Graybar, a supplier of
electrical material and equipment. Brand, in what she
identified as her capacity as President of EPS, signed that
agreement as a guarantor. The guaranty obligated Brand to:
absolutely, unconditionally and personally guarantee to
Graybar ... the performance of all obligations of [EPS]
arising under this credit agreement, including without
limitations, the payment of all indebtedness as the same are
due or come to be due or accelerated whether such
indebtedness and obligations exist on the date of this
instrument or are incurred after such date.
Appendix ("J.A.") 13 (Credit Application), ECF No.
4-1. As a result of that application, Graybar extended a line
of credit to EPS to allow EPS to make purchases from Graybar.
For larger purchases, Graybar also required EPS to enter into
joint-check agreements through which a general contractor
paying for supplies and equipment ordered by EPS from Graybar
would make its checks payable to both EPS and Graybar, to
facilitate Graybar's receipt of the funds.
March 4, 2014, Brand filed a petition for Chapter 7
bankruptcy with the United States Bankruptcy Court for the
District of Maryland ("the bankruptcy court").
Graybar was not listed as a creditor on any of Brand's
schedules, so it received no notice of those proceedings.
Brand had no non-exempt property for distribution, so on
April 25, 2014, the bankruptcy trustee recommended that her
debts be discharged without payment as a "no asset"
case. On June 11, 2014, the bankruptcy court issued an order
discharging Brand's debts. On June 16, 2014, a final
decree was issued, and Brand's bankruptcy case was
December 30, 2014, Brand placed an email order with Graybar,
on behalf of EPS, for supplies relating to EPS projects
entitled Cultural Vistas and Global Ties. In the email,
Brand's signature line identified her as EPS's Office
Manager. Between January 2015 and April 2015, EPS ordered
$123, 405.58 worth of supplies from Graybar for the Cultural
Vistas project. As part of the Cultural Vistas project, EPS
submitted the required joint-check agreement, purportedly
entered into by EPS and a general contractor, signed on
behalf of the general contractor under the name of
"Scott A. Masse." The signature, however, was a
forgery. To date, EPS has paid only $10, 000 of its
outstanding balance to Graybar, in two payments of $5, 000
made on August 27, 2015 and September 24, 2015.
December 9, 2015, Graybar initiated an adversary proceeding
with the bankruptcy court seeking a declaratory judgment
stating that Brand's bankruptcy did not discharge the
debts owed by Brand to Graybar, pursuant to the guaranty, for
materials ordered by EPS after March 4, 2014, the date on
which Brand filed for bankruptcy. The parties filed
cross-motions for summary judgment. Graybar argued that
because Brand could have revoked the guaranty at any time,
any debt arising from orders placed with Graybar after the
filing of Brand's bankruptcy petition on March 4, 2014
was a post-petition debt not discharged by the bankruptcy.
Brand framed the case differently, asserting that because her
bankruptcy was a "no asset" case, any obligation
she had to Graybar was discharged. See In re
Stecklow, 144 B.R. 314, 318 (Bankr. Md. 1992) (noting
that in a "no asset" case, the claim of an
unscheduled, unsecured creditor is discharged unless the debt
falls into certain enumerated exceptions). Brand did not
address whether the money owed to Graybar pursuant to the
guaranty was the result of pre-petition or post-petition
hearing on the cross motions, the bankruptcy court granted
summary judgment to Brand based on its conclusion that the
debt to Graybar arising from the orders placed after the
bankruptcy discharge was a pre-petition debt. In so ruling,
the bankruptcy court applied that the "conduct test,
" adopted by the United States Court of Appeals for the
Fourth Circuit, under which a debt is considered a
pre-petition debt, and thus dischargeable, "so long as
the debtor's conduct giving rise to the creditor's
right to payment occurs prior to the petition." J.A.
119. Noting that Fourth Circuit case law on the conduct test
generally involved tort claims rather than contract claims,
the bankruptcy court instead relied on the factually similar
case of In re Lipa, 433 B.R. 668 (Bankr. E.D. Mich.
2010), in which the court concluded that a debtor's
personal guaranty signed pre-petition was a contingent right
to payment that was discharged in his bankruptcy.
Id. at 671. Based on In re Lipa, the
bankruptcy court determined that the conduct giving rise to
Graybar's right to payment was Brand's execution of
the guaranty, which could be construed as a contingent right
to payment, and that this conduct occurred before Brand filed
for bankruptcy. As a result, the bankruptcy court concluded
that although the debt to Graybar arose from orders placed
after Brand filed for bankruptcy, the debt was nevertheless a
pre-petition claim that had been discharged at the conclusion
of the bankruptcy proceedings. The bankruptcy court noted,
however, that such a result was "uncomfortable, "
but appeared to be mandated by the Fourth Circuit's broad
application of the conduct test. J.A. 121. The Court
accordingly denied Graybar's motion for summary judgment
and granted summary judgment to Brand. Graybar filed a Notice
asserts that the bankruptcy court erred in deciding that
Brand's new obligations to Graybar under the guaranty
were pre-petition debts discharged by her bankruptcy because
the conduct giving rise to the debts, the submission of
purchase orders to Graybar and the failure to pay for the
acquired items, occurred after both the filing of Brand's
bankruptcy petition and the discharge of her bankruptcy.
Brand counters that any debt she owed to Graybar was
discharged through her bankruptcy because, as the bankruptcy
court held, the operative conduct was Brand's
pre-petition conduct of signing the guaranty. In the
alternative, draybar argues that discharge of the debts
incurred through post-petition purchase orders would be
unconstitutional as a matter of due process, because Graybar
received no notice of Brand's bankruptcy.
Court has jurisdiction over this appeal because the
bankruptcy court's order granting summary judgment to
Brand is a final order. 28 U.S.C. § 158(a)(1) (2012);
see also Gold v. Guberman (In re Computer Learning Ctrs.,
Inc.),407 F.3d 656, 660 (4th Cir. 2005) (stating that
"orders in bankruptcy cases may be immediately appealed
if they finally dispose of discrete disputes within the
larger case") (quoting In re Saco Local Dev.
Corp.,711 F.2d 441, 444 (1st Cir. 1983)). This appeal
challenges the bankruptcy ...