Court Opinion

ID: 1013685
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:04:53.227649+00
Date Added: 2024-06-11T09:40:04.918392
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
               FOR THE FOURTH CIRCUIT

In re: KIMBERLY DOANE, a/k/a          
Kimberly Harig,
                            Debtor.

EDUCATIONAL CREDIT MANAGEMENT
CORPORATION,
                Plaintiff-Appellee,
                v.                             No. 03-2458

KIMBERLY DOANE, a/k/a Kimberly
Harig,
             Defendant-Appellant,
               and
REBECCA CONNELLY; U.S. TRUSTEE,
                         Trustees.
                                      
           Appeal from the United States District Court
         for the Western District of Virginia, at Roanoke.
              Samuel G. Wilson, Chief District Judge.
                (CA-03-84-7; BK-96-1907-RKR-7)

                     Submitted: May 28, 2004

                     Decided: June 28, 2004

     Before WIDENER and WILLIAMS, Circuit Judges, and
         Robert R. BEEZER, Senior Circuit Judge of the
      United States Court of Appeals for the Ninth Circuit,
                     sitting by designation.

Affirmed by unpublished per curiam opinion.
2                           IN RE: DOANE
                            COUNSEL

Gary M. Bowman, Roanoke, Virginia, for Appellant. Julie K. Swed-
back, St. Paul, Minnesota, for Appellee.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                             OPINION

PER CURIAM:

   Kimberly Doane appeals a district court order issued pursuant to
Federal Rule of Civil Procedure 60(b) (West 1992) relieving Educa-
tional Credit Management Corporation (ECMC) from a bankruptcy
court discharge order that purported to discharge Doane’s student
loans. Finding no error, we affirm.

                                  I.

   On June 14, 1996, Doane filed for bankruptcy protection from her
creditors. At that time, Doane owed a balance on student loans owned
by ECMC. Doane did not seek to have her student loans discharged
during the bankruptcy, but she did list ECMC as a creditor in her
bankruptcy petition, and ECMC filed a proof of claim. Doane’s bank-
ruptcy plan did not purport to affect Doane’s debt to ECMC in any
way.

   Doane made the payments required of her under the bankruptcy
plan, and on September 10, 1999, the bankruptcy court discharged
Doane’s debts. For reasons that are not entirely clear, the bankruptcy
court issued a discharge order that purported to discharge Doane’s
student loans, even though such discharge was neither sought by
Doane nor authorized by the bankruptcy code.1 See 11 U.S.C.A.
    1
   The bankruptcy court appears to have used an outdated form dis-
charge order. The form discharge order that the bankruptcy court used
                               IN RE: DOANE                                 3
§§ 523(a)(8), 1328(a)(2) (West 1993 & Supp. 2004) (prohibiting the
discharge of student loans in bankruptcy unless the debtor proves in
an adversary proceeding that excepting the debt from discharge would
impose an undue hardship).

   Sometime after the discharge order became final, ECMC attempted
to collect the balance of Doane’s student loans. Doane then filed an
action in the bankruptcy court alleging that ECMC’s collection activi-
ties violated the discharge order. The bankruptcy court agreed and
enjoined ECMC from attempting to collect the debt, rejecting
ECMC’s contention that the discharge of Doane’s debt to ECMC vio-
lated due process. ECMC appealed to the United States District Court
for the Western District of Virginia. The district court relieved ECMC
from the discharge order pursuant to Federal Rule of Civil Procedure
60(b), finding that the discharge of Doane’s debt to ECMC violated
due process because ECMC had not received adequate notice in the
form of a properly initiated adversary proceeding. Doane now
appeals.

                                     II.

   When a district court acts in its capacity as a bankruptcy appellate
court, we review the bankruptcy court’s decision independently. See
Kielisch v. Educ. Credit Mgmt. Corp. (In re Kielisch), 258 F.3d 315,
319 (4th Cir. 2001). We review the bankruptcy court’s factual find-
ings for clear error, and we review its legal conclusions de novo. Id.

was created at a time when the strictures applicable to the discharge of
student loans were set to expire on October 1, 1996, pursuant to a sunset
provision in the legislation creating the strictures. See Pub. L. No. 101-
508 §§ 3007(b)(1), 3008. The form order provided that "the debtor [wa]s
discharged from all debts . . . except any debt . . . for a student loan . . .
in which discharge is granted prior to October 1, 1996." (J.A. at 5.) In
1992, Congress repealed the sunset provision, and the strictures became
permanent. See Pub. L. No. 102-325 § 1558. When the sunset provision
was repealed, a new form discharge order without a date restriction on
the student loan exception was created, but the bankruptcy court here
appears to have erroneously used the old order.
4                              IN RE: DOANE
   A party may be relieved from an adverse judgment if "the judg-
ment is void." Fed. R. Civ. P. 60(b)(4). "[A] judgment is not void
merely because it is erroneous. It is void only if the court that ren-
dered it lacked jurisdiction of the subject matter, or of the parties, or
if it acted in a manner inconsistent with due process of law." Eber-
hardt v. Integrated Design & Constr., Inc., 167 F.3d 861, 871 (4th
Cir. 1999) (internal quotation marks omitted). "[W]hether [a dis-
charge] violate[s] a creditor’s due process rights [is] [a] legal ques-
tion[ ] we review de novo." Banks v. Sallie Mae Servicing Corp. (In
re Banks), 299 F.3d 296, 300 (4th Cir. 2002).

   We have held that, in the bankruptcy context, "due process
entitle[s] the creditor to receive notice . . . as provided by the Bank-
ruptcy Rules." Banks, 299 F.3d at 302. "The Bankruptcy Code and
Rules require Debtors to bring an adversary proceeding to determine
the dischargeability of their student loans." Id. at 300; Fed. R. Bankr.
P. 7001(6) (West Supp. 2004). "Student loans are nondischargeable
in bankruptcy unless the Debtor can prove excepting the debt from
discharge would impose an undue hardship." Banks, 299 F.3d at 300.
When a student loan debtor "fail[s] to initiate an adversary proceeding
to establish undue hardship[,] . . . [the creditor] d[oes] not receive the
requisite notice of . . . intent to discharge . . . [the] student loan debts.
For lack of adequate notice, . . . discharge orders discharging the
[debt] are not entitled to preclusive effect." Id. at 302-03 (footnote
omitted).

   In this case, it is undisputed that Doane did not initiate an adver-
sary proceeding to establish undue hardship. Thus, ECMC did not
receive adequate notice, and the bankruptcy court’s discharge order
violated ECMC’s due process rights. Id. at 303. Because the bank-
ruptcy court’s discharge order is "inconsistent with due process of
law," the order is void as to ECMC, and the district court properly
relieved ECMC from the order. Eberhardt, 167 F.3d at 871.

                                    III.

   We agree with the district court that ECMC did not receive ade-
quate notice of intent to discharge and that the bankruptcy court order
discharging Doane’s student loans is therefore void. Accordingly, we
                          IN RE: DOANE                         5
affirm the judgment of the district court relieving ECMC from the
effect of the erroneous discharge order.

                                                     AFFIRMED