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Jackson v. Crow

Supreme Court of Idaho

March 4, 2019

KERMIT JACKSON, Plaintiff-Appellant,
v.
JENNIFER CROW, Defendant-Respondent.

          Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada County. Hon. Nancy A. Baskin, District Judge.

         Judgment of the district court vacated and remanded.

          Seiniger Law, Boise, for appellant. William Breck Seiniger, Jr. argued.

          Elam & Burke, P.A, Boise, for respondent. Joshua S. Evett argued.

          BURDICK, CHIEF JUSTICE.

         In Ada County during 2010, Kermit Jackson ("Jackson") filed a complaint against Jennifer J. Crow ("Crow") arising from a 2008 automobile collision. No substantive action took place in the trial court until 2016 when Crow moved for summary judgment.

         In the interim, Crow filed for bankruptcy in 2014 listing Jackson as a potential unsecured creditor with a claim of unknown value. Jackson filed a proof of claim with the bankruptcy court and eventually received his pro rata share of the distribution of Crow's assets. Crow received a bankruptcy discharge in 2014, releasing her from personal liability on the claim. Afterwards, Jackson proposed to move forward with this case against Crow as a nominal defendant, seeking to secure a judgment in order to recover from Crow's insurer, rather than Crow personally.

         Crow's motion for summary judgment argued that: (1) allowing Jackson's case to go forward against her violates the permanent discharge injunction of 11 U.S.C. §§ 524 and 727; (2) even if this procedure does not violate the Bankruptcy Code's permanent injunction, naming her as a nominal defendant is (a) not permitted by Idaho case law, the Idaho Rules of Civil Procedure, and Idaho's no-direct-action rule, and (b) violates the Bankruptcy Code's policy of providing her a financial "fresh start."

         In a case of first impression, the district court ruled in favor of Crow, reasoning that allowing the case to proceed against Crow would violate 11 U.S.C. § 524 by impermissibly causing negative economic consequences for Crow. The district court further reasoned that allowing Jackson to proceed directly against Crow's insurer would violate the no-direct-action rule and permitting Jackson to proceed against Crow nominally was not permitted by the Idaho Rules of Civil Procedure or this Court's precedent. Jackson moved the district court to reconsider, but his motion was denied. Jackson timely appeals. We vacate and remand for further proceedings.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         This case stems from an automobile collision on October 5, 2008, near what is now Kristin Armstrong Municipal Park in Boise, Idaho. The collision occurred while Jackson was operating a tractor with an attached lawn vacuum while working for the City of Boise. Crow was operating a personal motor vehicle.

         Nearly two years after the collision, on August 5, 2010, Jackson filed a complaint in Ada County district court alleging that Crow's negligence was the cause of the collision and personal injuries. After the summons and complaint were served on Crow, she filed an answer and demand for jury trial. The matter was set for a jury trial to begin on April 9, 2012.

         The 2012 trial date was continued in order to allow Crow to file a motion to exclude evidence of Jackson's workers' compensation claim. Jackson then filed a motion to substitute the City of Boise as the real party in interest. Granting Crow's motion to exclude and denying Jackson's motion to substitute, the district court again set the matter for trial-this time to take place in September 2013.

         Before the 2013 trial date, Crow filed a motion to continue the trial setting on the basis that Jackson had filed for bankruptcy. Jackson had, in fact, filed for bankruptcy a few months prior to Crow's motion, but never filed a notice with the district court. The matter was stayed for three-and-a-half months after which Jackson joined Crow's motion to continue the trial. The trial court entered an order on June 10, 2013, vacating the trial date. Crow's motion would be the last filing in the case for a period of nearly three years.

         Before Jackson received a bankruptcy discharge on June 4, 2013, the bankruptcy trustee, with the bankruptcy court's approval, hired Jackson's counsel in this case to pursue the negligence claim on behalf of the bankruptcy estate. However, Jackson's counsel did not pursue the claim during the bankruptcy and the bankruptcy trustee eventually abandoned the claim which reverted back to Jackson.

         Six months after Jackson's bankruptcy discharge, Crow also filed for bankruptcy. Like Jackson, Crow did not file a notice of bankruptcy filing with the district court. Crow's bankruptcy filing listed Jackson as a potential unsecured creditor with a claim of unknown value. Jackson filed a proof of claim in Crow's bankruptcy, valuing the claim at $120, 000, but, after a request from the bankruptcy trustee for a more definite valuation, Jackson filed an amended proof of claim valuing the claim at $61, 018.56. The trustee accepted the amended valuation. Crow received her bankruptcy discharge in April of 2014 and the trustee's final report was filed in September 2015. The discharge included Crow's personal liability relating to the August 5, 2008, automobile collision with Jackson. In 2016, Jackson received his pro rata distribution of the bankruptcy estate's assets in the amount of $1, 932.45.

         In May 2016, Jackson requested a status conference with the trial court. Objecting, Crow argued that Jackson's claim against her had been discharged in bankruptcy. Despite the objection, the district court set a jury trial for January 2017. Crow then filed an amended answer and demand for jury trial. The trial was reset for June 5, 2017.

         On September 30, 2016, Crow filed a motion for summary judgment in which she argued that: (1) allowing Jackson's case to go forward against her would violate the permanent discharge injunction of 11 U.S.C. §§ 524 and 727; (2) even if this procedure would not violate the Bankruptcy Code's permanent injunction, naming her as a nominal defendant was (a) not permitted by Idaho case law, the Idaho Rules of Civil Procedure, and Idaho's no-direct-action rule, and (b) would violate the Bankruptcy Code's policy of providing her a financial "fresh start"; (3) judicial estoppel barred Jackson's lawsuit; and (4) the doctrine of laches barred Jackson's lawsuit.

         Jackson filed his own motion for summary judgment on February 1, 2017, arguing that he was entitled to summary judgment on the following issues: (1) causation, because Crow's negligence was the sole cause of the collision; (2) negligence per se, because its elements were satisfied and no valid excuse existed; (3) liability, because there was no genuine issue of material fact regarding the proximate cause of the collision; and (4) the issues raised in Crow's motion for summary judgment.

         After a hearing on the summary judgment motions, the district court issued a memorandum decision and order granting Crow's motion for summary judgment on April 13, 2017, holding that: (1) the Bankruptcy Code's permanent injunction barred Jackson's lawsuit; (2) the Bankruptcy Code's goal of providing a financial fresh start to debtor would be violated by allowing the claim to proceed; (3) allowing the suit against Crow's insurer would violate Idaho's no-direct-action rule; and (4) no case law or rule permitted Jackson to proceed against Crow nominally. Concluding that granting Crow's motion for summary judgment was dispositive of the case, the district court did not reach the issues of judicial estoppel and laches, and deemed Jackson's motion for summary judgment moot.

         In its memorandum decision, the district court acknowledged that many federal courts allow suits such as Jackson's to proceed, but distinguished it by stating that many of these jurisdictions have "mechanisms for recovery against an insurer after a judgment has been obtained against the insured." In contrast, the district court was "aware of no mechanism under Idaho law for suing a defendant 'nominally' and then enforcing the judgment against the defendant's insurer . . . to collect on the judgment." The district court concluded that the case Jackson relied on as providing authority for the use of nominal defendants, Pigg v. Brockman, 79 Idaho 233, 314 P.2d 609 (1957), was factually distinguishable because the Pigg decision was based on a contractual provision in the insurance contract that allowed for suit after obtaining a judgment against the insured. Because neither party represented that Crow's policy included such a provision, the district court could not rule on the issue. Lastly, the district court reasoned that allowing the case to proceed against Crow nominally would result in negative economic consequences affecting her financial "fresh start" under the Bankruptcy Code. These consequences were: (1) Crow would have to pay a deductible; (2) a judgment could have a negative impact on Crow for purposes of explanation to future employers or creditors; and (3) a judgment could also affect Crow's credit rating.

         In his motion for reconsideration and motion to strike filed the following day, Jackson argued: (1) there was no evidence that any deductible would apply to Crow, and (2) he had requested the insurance policy from Crow twice but never received it. Jackson also filed a stipulation that if Crow should have to pay any deductible, she may have a credit for it against any future judgment entered against her. Basing his motion to strike on the district court's ruling that the judgment may harm Crow's credit score and affect her employment prospects, Jackson argued these findings were based upon a letter sent from Jackson's counsel to Crow's counsel. Jackson argued that this letter, which Crow had included as an exhibit in her motion for summary judgment, was protected by Idaho Rule of Evidence 408 as a statement made in the context of settlement negotiations. Crow argued that Jackson had missed his opportunity to object on this matter.

         The district court issued an order directing Crow to file a copy of her complete insurance policy. The district court also ordered the parties to file supplemental briefing as to how the policy affected the district court's analysis under Pigg. Crow filed the insurance policy and both parties filed supplemental memoranda on the issue.

         On August 31, 2017, the district court issued an order denying Jackson's motion to reconsider and motion to strike. In doing so, the district court incorporated its previous memorandum decision, but also found: (1) Crow's policy did not create any rights for Jackson to join the insurance company as a party in order to sue the insurer directly; (2) Pigg was not applicable or binding; (3) the district court had no legal authority to enter a judgment against Crow nominally under the Idaho Rules of Civil Procedure; and (4) it would be "unfair and prejudicial for a judgment to be entered against Crow in any capacity because Jackson failed to pursue the action during the pendency of Crow's bankruptcy."

         Jackson timely appealed.

         II. ISSUES ON APPEAL

         1. Did the district court err in determining that Jackson could not proceed by naming Crow as a nominal defendant in order to recover from her insurer?

         2. Can Crow's insurer or Crow's insurance policy be joined as a defendant?

         3. Is Jackson is entitled to summary judgment on the record?

         III. STANDARD OF REVIEW

         In this case, Jackson appeals both (A) the district court's grant of Crow's motion for summary judgment and (B) the district court's denial of the Jackson's motion for reconsideration.

          A. Summary Judgment

         "In an appeal from an order of summary judgment, this Court's standard of review is the same as the standard used by the trial court in ruling on a motion for summary judgment." Lockheed Martin Corp. v. Idaho State Tax Comm'n, 142 Idaho 790, 793, 134 P.3d 641, 644 (2006). "Summary judgment is proper when there is no genuine issue of material fact and the only remaining questions are questions of law." Chandler v. Hayden, 147 Idaho 765, 768, 215 P.3d 485, 488 (2009). "This Court liberally construes all disputed facts in favor of the nonmoving party and draws all reasonable inferences and conclusions supported by the record in favor of the party opposing the motion." Id. (citing Lockheed Martin Corp., 142 Idaho at 793, 134 P.3d at 644).

         B. Motion for Reconsideration.

         On a motion for reconsideration, the district court "must consider any new admissible evidence or authority bearing on the correctness of an interlocutory order . . . . [But the motion] need not be supported by any new evidence or authority." Fragnella v. Petrovich, 153 Idaho 266, 276, 281 P.3d 103, 113 (2012) (citing PHH Mortg. Servs. Corp. v. Perreira, 146 Idaho 631, 635, 200 P.3d 1180, 1184 (2009)).

When deciding the motion for reconsideration, the district court must apply the same standard of review that the court applied when deciding the original order that is being reconsidered. . . . Likewise, when reviewing a trial court's decision to grant or deny a motion for reconsideration, this Court utilizes the same standard of review used by the lower court in deciding the motion for reconsideration.

Id. Here, the trial court was asked to reconsider the granting of a motion for summary judgment, so the summary judgment standard applied to the trial court deciding the motion for reconsideration and now applies to our review of that decision on appeal. Id.

         "[W]hen the district court grants summary judgment and then denies a motion for reconsideration, this Court must determine whether the evidence presented a genuine issue of material fact to defeat summary judgment." Idaho First Bank v. Bridges, 164 Idaho 178, 186, 426 P.3d 1278, 1286 (2018) (quoting Massey v. Conagra Foods, Inc., 156 Idaho 476, 480, 328 P.3d 456, 460 (2014)).

         For both motions, "[i]f the evidence reveals no disputed issues of material fact, then only a question of law remains, over which this Court exercises free review." Brooks v. Wal-Mart Stores, Inc., 164 Idaho 22, 27, 423 P.3d 443, 448 (2018) (quoting Lockheed Martin Corp., 142 Idaho at 793, 134 P.3d at 644).

         IV. ANALYSIS

         A. The district court erred in granting Crow's motion for summary judgment.

         The parties disagree about the scope of Jackson's suit. As a debtor whose personal liability has been discharged by a bankruptcy court, Crow argues that any legal action attempting to recover from her violates the Bankruptcy Code's permanent injunction under 11 U.S.C. § 524(a)(2).[1] Maintaining that his lawsuit's purpose is not to recover from Crow personally, Jackson argues that federal courts read the Bankruptcy Code to permit state-court actions naming discharged debtors as nominal defendants when doing so is a prerequisite to recovery from a third party liable for the debt. The district court ruled that such an action is permitted under federal law, but is nevertheless blocked by Idaho's no-direct-action rule. Each part of this ruling will be discussed in turn.

         1. The district court correctly ruled that maintaining a case against a discharged debtor nominally is permitted under ...


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