First State Bank of Roscoe; John R. Beyers v. Brad Allen Stabler; Brenda Lee Stabler

First State Bank of Roscoe (the “Bank”) and John R. Beyers appeal the

judgment of the district court affirming a bankruptcy 1 court order holding them in

1The Honorable Roberto A. Lange, United States District Judge for the District

of South Dakota, affirming the order of the Honorable Charles L. Nail, Jr., United

States Bankruptcy Judge for the District of South Dakota.

contempt and sanctioning them for violating a final bankruptcy discharge injunction.

The Bank and Beyers argue on appeal that an earlier bankruptcy court order and

related state-court judgments have preclusive effect and bar the current contempt

order. They also argue that even if preclusion doctrines do not otherwise bar relief,

they held a good faith belief that prevailing law permitted their conduct such that

sanctions are inappropriate. We affirm.

I.

Brad and Brenda Stabler (the “Stablers”) borrowed from the Bank to fund an

agricultural services business. Beyers was a principal at the Bank. When the

Stablers’ business failed, the Stablers liquidated their business, and Beyers counseled

them to seek bankruptcy protection. In the bankruptcy, the Stablers’ attorney (whom

Beyers recommended to the Stablers and who previously served as attorney for the

Bank) failed to list all debt owed by the Stablers to the Bank. The Stablers owed the

Bank over $600,000, but the bankruptcy schedules listed the Bank as a secured

creditor claiming much less than that amount. In addition to personal loan guarantees

from the Stablers, the Bank held priority liens against the Stablers’ land and farm

machinery as well as a lien on land owned by Brad Stabler’s parents. It is undisputed

that the liens, in total, were insufficient to secure fully the Stablers’ pre-bankruptcy

indebtedness to the Bank.

After the Stablers received their bankruptcy discharge, the Bank continued to

hold security interests on the Stablers’ land and equipment and on Brad’s parents’

land. Rather than foreclosing on this collateral (and realizing a substantial loss), the

Bank and Beyers obtained from the Stablers and Brad’s parents a commitment to pay

a new $650,000 note, an amount substantially in excess of the security interests that

had survived bankruptcy. The Bank and Beyers obtained this commitment without

court approval and through a series of transactions and debt transfers involving third

parties. Specifically, the four Stablers became obligated on a $416,000 note to a

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partnership named Schurrs, a $213,000 note to Roger Ernst, and a $21,000 note to a

company named H&K Acres. These three other parties had relationships with Beyers

or the Bank and received from the Bank assignments of security interests.

Eventually, the Stablers paid off the $21,000 note, and Beyers received the other

notes and related security interests by assignment. Later, acting as a guarantor,

Beyers helped the Stablers obtain a $150,000 loan from Ipswich State Bank

(“Ipswich” and “Ipswich Note”) secured by the Stablers’ property. The Stablers used

this additional $150,000 to pay the Bank, but the parties dispute whether this payment

to the Bank was for discharged debt or post-discharge debt. Eventually, Beyers

obtained assignment of the Ipswich Note and related security interests from Ipswich.

Next, the Stablers fell behind on their payments, and the Bank and Beyers

commenced collection efforts. In response, the Stablers and Brad Stabler’s parents

initiated a state-court action seeking a determination of what they owed the various

lenders. In the state-court action, they alleged the post-bankruptcy commitments

were unenforceable improper reaffirmations of discharged debt. They also alleged

claims of fraud, breach of fiduciary duty, and conspiracy, asserting the Bank and

Beyers knew the debt refinanced with the $650,000 note had been discharged but

misrepresented that the discharged amounts were still owed.

The Bank and Beyers asserted four counterclaims. They argued that

forbearance from foreclosing on the security interests that had survived discharge

served as permissible consideration for new security interests and repayment

commitments. Based on these arguments, Beyers and the Bank asserted that the

reaffirmed debt was enforceable. Beyers and the Bank invited the state court to

determine what debt had and had not been discharged in bankruptcy, and they

characterized their enforcement efforts as relating only to debt that the state court

might determine not to have been discharged. In fact, in their state court

counterclaims, Beyers and the Bank indicated they were seeking to collect only on

non-discharged debt.

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Looking specifically at the Bank and Beyers’s counterclaims, Counterclaims

1 and 2 sought to collect on the Ipswich Note and foreclose on the collateral for that

loan. Counterclaims 3 and 4 involved the $650,000 note that was approximately

equal in amount to what the Stablers owed Beyers and the Bank prior to bankruptcy.

Beyers and the Bank moved for summary judgment on Counterclaims 1 and 2.

After Beyers and the Bank filed their motion for summary judgment in the state court,

but before the state court had ruled on the motion, the Stablers filed an adversary

complaint in the bankruptcy court (a complaint the parties later conceded could be

deemed a motion for sanctions) seeking contempt sanctions against Beyers and the

Bank and alleging violation of the discharge injunction. The state court then granted

summary judgment to the Bank and Beyers on Counterclaims 1 and 2, holding the

Stablers had entered into the Ipswich Note after bankruptcy and had used the

proceeds to pay off security interests that survived bankruptcy. The state court held

the Stablers were in default on the Ipswich Note such that Beyers could foreclose on

that loan’s collateral.

After the state court granted summary judgment on Counterclaims 1 and 2, the

Bank and Beyers moved to dismiss the adversary complaint. In ruling on the motion

to dismiss, the bankruptcy court entered an order with two seemingly inconsistent

holdings. Looking at the Bank and Beyers’s state-court pleadings in which those

parties limited their request for relief to debt that had not been discharged, the

bankruptcy court indicated that it appeared the Bank and Beyers were seeking relief

related solely to permissible loans and not related to impermissible reaffirmations of

discharged debts. The bankruptcy court also indicated that the state-court grant of

summary judgment regarding Counterclaims 1 and 2 (the counts concerning the

Ipswich Note) appeared to have preclusive effect. Based on these observations, the

bankruptcy court appeared to grant the motion to dismiss for failure to state a claim.

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The bankruptcy court also held, however, that the state court possessed

jurisdiction and authority to make discharge determinations. As such, the bankruptcy

court expressly abstained from ruling on the motion to dismiss and noted that the

Stablers could return to the bankruptcy court if the state court were to determine the

Bank or Beyers had impermissibly attempted to collect discharged debt. In reaching

this determination, the bankruptcy court expressed skepticism that the Stablers might

achieve any such result in state court. Nevertheless, the bankruptcy court abstained

and expressly left open the possibility of the Stablers later returning to the bankruptcy

court.

The Stablers appealed to the Bankruptcy Appellate Panel (“BAP”) as to both

issues, and the BAP affirmed. Stabler v. Beyers (In re Stabler), 418 B.R. 764, 766

n.2, 769–71 (B.A.P. 8th Cir. 2009). The BAP, however, addressed only the issue of

abstention. No party sought from the BAP further analysis or explanation as to the

bankruptcy court’s apparent granting of the motion to dismiss on the merits.

Meanwhile, the state-court action proceeded. The state court granted summary

judgment for the Stablers on Counterclaims 3 and 4 and reversed its own earlier grant

of summary judgment to Beyers and the Bank on Counterclaims 1 and 2. As to

Counterclaims 3 and 4, the state court determined the $650,000 note was an

unenforceable reaffirmation of discharged debt. The court found Beyers had

“concocted a transaction” involving third parties for the purposes of recreating

discharged debt. The court also found Beyers did so without good faith and in an

effort to overcome the bankruptcy discharge. These determinations also led the court

to conclude that a question of material fact existed as to whether Beyers could enforce

the Ipswich Note at issue in Counterclaims 1 and 2.

Prior to trial, the Stablers dropped their fraud claim and elected to seek

rescission of the $650,000 note. The Stablers’ attorney indicated at the state-court

pretrial hearing that they would seek attorney fees in bankruptcy court rather than in

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state court. Issues remaining for trial, therefore, included the Stablers’ claim for

rescission of the $650,000 note, the enforceability of the Ipswich Note, and a fraud

claim asserted by Brad’s parents. In their fraud claim, Brad’s parents alleged Beyers

obtained their signature on the $650,000 note by falsely misrepresenting to them that

Brad owed much of the debt underlying that note even though it had been discharged

in bankruptcy. Brad’s parents’ claim was tried to a jury. The Stablers’ rescission

claim and Counterclaims 1 and 2 were tried to a judge.

The jury returned a special verdict in Brad’s parents’ case, finding that

$439,100 of the $650,000 note was obtained by fraud.

In the bench trial, the court entered a written order describing in detail its

findings as to the events that led the Stablers to enter into the $650,000 postdischarge

note. After introducing the parties and the initial debts, the court stated:

Things did not go well with [the Stablers’ business]. [The

business] was being sued by various parties. John Beyers assessed the

situation and realized that [the business] was doomed. More

importantly, John Beyers realized that if the litigation was allowed to

proceed, those other parties were going to obtain judgments against [the

business]. Beyers realized that [the business] did not have sufficient

assets to cover all of its liabilities and was essentially bankrupt. Being

an astute and experienced businessman, Beyers saw the natural

progression. Unless he took action, [the business] eventually would be

forced into bankruptcy. He realized that [the Bank] was under-secured

on the loans to Brad and Brenda Stabler and [the business]. In order to

protect [the Bank’s] interests, Beyer[s] arranged for Brad and Brenda

Stabler to meet with Attorney Rob Ronayne about filing for bankruptcy.

The evidence establishes that this bankruptcy was not Brad or

Brenda’s idea. This idea was solely that of John Beyers. John Beyers

decided that Brad and Brenda Stabler should file bankruptcy. John

Beyers personally decided who Brad and Brenda Stabler should use as

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their bankruptcy attorney—Rob Ronayne. Rob Ronayne is an

experienced bankruptcy attorney. Rob Ronayne also regularly served

as an attorney for [the Bank]. John Beyers also knew this. John Beyers

convinced Brad and Brenda Stabler that he was acting in their best

interests. He was not and knew it. I find and conclude that John

Beyers’[s] intention was to protect the financial interests of [the Bank].

John Beyers owns [the Bank]. John Beyers knew that if the

lawsuits were allowed to proceed, [the business] and Brad and Brenda

Stabler would eventually end up filing for bankruptcy. By maintaining

their trust, encouraging them to file bankruptcy, and selecting their

bankruptcy attorney, Beyers believed that he could control the situation

so that the debts of other creditors could be discharged while the

obligations to [the Bank] could be maintained or reassumed. Over the

course of the next year, this is exactly what John Beyers and [the Bank]

accomplished.

Brad and Brenda Stabler filed for and received discharge from

bankruptcy court. The discharge eliminated Brad’s personal guarantee

of [the business] debt. [The Bank] still held security interests in Brad

and Brenda Stabler’s farm and machinery because such secured interests

are not discharged by bankruptcy. [The Bank] still held a security

interest worth approximately $110,000 over a quarter section parcel of

land owned by [Brad’s parents]. [The Bank] could have foreclosed on

that quarter of land to recover on that debt. [The Bank] could have

foreclosed on Brad and Brenda’s land and other secured property. This

course of action would have resulted in a significant shortfall for [the

Bank]. [The Bank] would have recovered some money but would have

taken a significant loss on the various loans of Brad and Brenda and [the

business]. More importantly, [the Bank] would have had no further

recourse against any of the Stablers. John Beyers understood this.

Instead of accepting such a loss, John Beyers devised a scheme

through which he would convince Brad and Brenda Stabler to continue

paying on their discharged debt. Alone, this would be practically

useless because Brad and Brenda clearly did not have the resources to

service the reaffirmed debt. It was only a matter of time before they

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would default. John Beyers’[s] scheme included a plan to improve [the

Bank’s] security interests by convincing [Brad’s parents] to sign

increasingly larger mortgages to their entire farm in order to secure the

debt of Brad and Brenda. This is exactly what transpired. As found by

the jury and by this Court, $43[9,1]00 of the value of those mortgages

was obtained by fraud on the part of John Beyers and [the Bank].

Stablers v. First State Bank of Roscoe, et al., Civ. No. 07-11 (S.D. Cir. July 8, 2013)

(Memorandum Decision following court trial).

The state trial court concluded that Beyers had coerced Brad and Brenda into

reaffirming their debt and that “[t]his type of behavior is exactly what the

‘reaffirmation process’ is intended to protect against.” Id. at n.2. The court granted

the Stablers’ rescission of the $650,000 note, awarding the Stablers $142,908.27.

Finally, the court described Beyers’s behavior surrounding the Ipswich Note as

dishonest and manipulative, but concluded Beyers could enforce that particular loan

against the Stablers. On appeal, the South Dakota Supreme Court affirmed. Stabler

v. First State Bank of Roscoe, 865 N.W.2d 466, 469 (S.D. 2015).

After the state appeal became final, the Stablers, as envisioned by the

bankruptcy court and consistent with the Stablers’ expressly declared intent in the

state court, returned to the bankruptcy court. The Stablers sought attorney fees and

a contempt sanction for violation of the discharge injunction. The Bank and Beyers

argued the bankruptcy court’s earlier order was res judicata and precluded any

bankruptcy court sanction. The Bank and Beyers also argued the Stablers’ failure to

secure fees or sanctions in state court precluded any sanction order from the

bankruptcy court. Finally, they argued sanctions were inappropriate because they had

relied in good faith upon cases appearing to permit reaffirmations outside of

bankruptcy in exchange for forbearance in foreclosing upon a security interest. The

bankruptcy court rejected the Bank and Beyers’s arguments and sanctioned each

$25,000. And, in an extensive and careful analysis rejecting many claimed fees but

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awarding others, the bankruptcy court imposed upon the Bank and Beyers joint and

several liability for $ 159,605.77 in attorney fees. The Bank and Beyers appealed to

the district court, which affirmed.

II.

As a second reviewing court, we apply the same standards as the district court

in our review of the bankruptcy court’s order. See Contractors, Laborers, Teamsters

& Eng’rs Health and Welfare Plan v. Killips (In re M & S Grading, Inc.), 526 F.3d

363, 367 (8th Cir. 2008). We generally review factual determinations for clear error

and interpretations of law de novo. Id. In the absence of errors at law or clearly

erroneous factual determinations, we review a sanctions award, including an award

of attorney fees, for an abuse of discretion. See Williams v. King (In re King), 744

F.3d 565, 570 (8th Cir. 2014) (“The bankruptcy court was perfectly within its

discretion to impose the sanction.”). Appellants do not challenge the actual amounts

of the sanction or fee award. Rather, they challenge the propriety of any award,

presenting somewhat overlapping legal arguments addressing preclusion and their

alleged good faith beliefs concerning the state of the law at the time they filed their

counterclaims. We address their arguments in turn.

A. Preclusive Effect of the Bankruptcy Court’s Abstention Ruling and of

the Stablers’ Failure to Seek Sanctions or Punitive Damages in State

Court.

Our court employs a flexible and pragmatic approach when assessing the

preclusive effect of a court’s order. See, e.g., John Morrell & Co. v. Local Union

304A, United Food & Commercial Workers, 913 F.2d 544, 563–64 (8th Cir.1990)

(noting that finality in the context of issue preclusion may be satisfied where the

litigation has reached such a stage that the “court sees no really good reason for

permitting it to be litigated again” (citation omitted)). And when assessing the

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preclusive effect of a state court judgment, we apply that state’s law governing

preclusion. See Finstad v. Beresford Bancorporation, Inc., 831 F.3d 1009, 1013 (8th

Cir. 2016). Like our court, South Dakota applies a practical analysis, looking at the

parties’ roles and actions in the underlying proceeding. See Am. Family Ins. Grp. v.

Robnik, 787 N.W.2d 768, 775–76 (S.D. 2010) (considering the practical dynamics

of an underlying action to determine whether there had been “a full and fair

opportunity to litigate the issues in the prior proceeding,” and taking into

consideration facts such as (1) the alignment of interests between an insured and an

insurer providing a defense under a reservation of rights and (2) the relevancy of

later-raised issues during the earlier proceeding). Consistent with this pragmatic

approach, we recognize that bankruptcy courts and state trial courts operate within

a framework governed not only by law and procedure, but also by the informed

choices that the parties make as expressed clearly to the court and to one another. As

such, and in general, we do not make preclusion determinations in the abstract or in

a vacuum. Rather, we look to see what the underlying court actually said and what

the parties communicated to one another and to the court about what they understood

to be at issue in the underlying proceeding.

Here, when the bankruptcy court ruled on Appellants’ abstention request, the

bankruptcy court expressly acknowledged that the state court possessed the authority

to make discharge determinations and to assess the true scope of what Appellants

were actually seeking through their counterclaims. The bankruptcy court was correct

in this regard, and no party in the present case actually challenges this ruling. See

Apex Oil Co. v. Sparks (In re Apex Oil Co.), 406 F.3d 538, 542 (8th Cir. 2005)

(discussing 28 U.S.C. § 1334(b), holding that a state court could rule on

dischargeability issues, and noting that “Congress granted state courts concurrent

jurisdiction to consider bankruptcy issues arising from Chapter 11 proceedings”).

The bankruptcy court expressed skepticism as to the merits of the Stablers’

arguments, but invited the Stablers to return if the state court were to resolve

discharge issues in their favor. Simply put, the bankruptcy court did not purport to

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abstain permanently. It is obvious to our Court that the bankruptcy court did not

believe itself to be issuing a ruling that would have preclusive effect.2

Then, in state court, counsel for the Stablers stated in a pretrial hearing that the

Stablers were dropping their fraud claim and their demand for attorney fees and

electing to pursue in the state-court trial the remedy of rescission of the $650,000

note.3 At that hearing, and in briefing that preceded the hearing, counsel

communicated clearly to the court and to Appellants that, as per the bankruptcy

court’s invitation, the Stablers still intended to return to bankruptcy court. There is

no indication that Appellants contested or objected to this clearly expressed intention

and proposed course of action. Now, by asserting that the earlier abstention ruling

or the failure to pursue sanctions and fees in state court precludes a return to

bankruptcy court, the Appellants essentially seek to treat the state-court election of

remedies as a “gotcha” moment. The time to object to the Stablers’ proposed course

of action, however, was at the hearing where the course of action was proposed.

Appellants’ failure to object, coupled with their later challenge to the Stablers’ return

to the bankruptcy court, amounts to an attempt to deprive the Stablers of “a full and

fair opportunity to litigate the issues.” Robnik, 787 N.W.2d at 775. We will not

apply our circuit’s or South Dakota’s pragmatic approach to preclusion analysis in a

2The bankruptcy court stated:

I believe it would be possible, even preferable, to sever debtors’ state

court claims, allow the state court to determine, as it already has with

respect to count one of Beyers’[s] state court counterclaim, whether any

of the debts Beyers is seeking to collect have been discharged. And if

the state court determines, albeit contrary to the express language of

counts three and four of Beyers’[s] state court counterclaim, any of those

debts have been discharged, allow debtors to renew their complaint.

3Brad’s parents did not drop their fraud claim, resulting in their trial of legal

issues to a jury rather than to the bench as with the Stablers’ rescission claim.

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manner that thwarts such clearly expressed intentions or rewards Appellants’ election

to remain silent in the face of the Stablers’ proposal.

Appellants, ignoring this nuance, argue in their brief that “the [b]ankruptcy

court did not qualify or limit the scope of its abstention in any way.” It is true that

the bankruptcy court dismissed the adversary complaint rather than staying the case.

Still, Appellants’ assertions flatly ignore the balance of the bankruptcy court record

in which the bankruptcy court: (1) expressly invited the Stablers to return to

bankruptcy court depending upon the outcome of the state-court proceedings; and (2)

later clarified its own order by accepting the case again. See, e.g., United States v.

Maull, 855 F.2d 514, 516–17 (8th Cir. 1988) (holding that a lower court’s later order

“effectively clarified the ambiguity in its earlier order and ‘rebutted the presumption

of finality created by Rule 41(b)’” (quoting Knox v. Lichtenstein, 654 F.2d 19, 22

(8th Cir. 1981))).

Appellants also argue strenuously that our opinion in Apex Oil Company, Inc.

v. Sparks, 406 F.3d 538, 542 (8th Cir. 2005), somehow precludes the Stabler’s from

returning to the bankruptcy court after the state court entered its judgment. In Apex,

we held that state courts hold concurrent jurisdiction to make discharge

determinations. Apex, however, did not address the question of a state court’s

authority to issue sanctions for violation of a bankruptcy discharge. In Apex,

homeowners sued a bankrupt debtor in state court alleging the debtor had allowed a

plume of gasoline and other petroleum products to form under their homes thus

decreasing their property values and risking their health. Id. at 540–41. The debtor,

who had already passed through bankruptcy, moved the bankruptcy court to reopen

the bankruptcy arguing the plume-related claim had arisen prior to bankruptcy and

was barred by the discharge injunction even though the homeowners had not filed a

claim in the bankruptcy. Id. at 541. The debtor sought enforcement of the discharge

injunction against the homeowners, an order holding the homeowners in contempt for

violating the discharge injunction, and an order directing the homeowners to dismiss

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their claims. Id. The bankruptcy court refused to reopen the case. Id. We affirmed,

holding 28 U.S.C. § 1334(b) granted state courts concurrent jurisdiction, Apex, 406

F.3d at 542, and finding the state court “fully competent to determine whether the

plan and the injunction apply to the [homeowners’ ] claims.” Id. at 543.

Even assuming that Apex could be extended to stand for the proposition that

the state court is empowered to order contempt sanctions and impose attorney fees

independent from a state law cause of action, it certainly cannot be extended to

preclude the bankruptcy court’s actions in this case. Apex held merely that a

bankruptcy court did not abuse its discretion in refusing to reopen a case. Apex did

not purport to disempower the bankruptcy court, which, of course, possesses

jurisdiction to enforce its own orders. See, e.g., Koehler v. Grant, 213 B.R. 567,

569–70 (B.A.P. 8th Cir. 1997).

B. Law of the Case/Preclusive Effect of the Bankruptcy Court’s Alternative

“Holding”

As noted, the bankruptcy court’s first post-discharge order contained seeming

inconsistencies. That court appeared to grant the Appellants’ motion to dismiss on

the merits and also expressly abstained from ruling on the motion. Appellants now

argue the bankruptcy court’s initial order appearing to grant their motion to dismiss

is the “law of the case” and should preclude the later sanction order. We reject their

argument for two reasons.

First, if a ruling contains a decision to abstain or a decision concerning the

court’s power to decide the case, any purported resolution of the merits generally

should be of no effect. See, e.g., Remus Joint Venture v. McAnally, 116 F.3d 180,

184 n.5 (6th Cir. 1997) (“[W]hen a . . . ruling rests on alternative grounds, at least one

of which is based on the inability of the court to reach the merits, the judgment should

not act as a bar in a future action.”); 18 Charles Alan Wright et al., Federal Practice

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and Procedure § 4421 (3d ed. 2018) (“If a first decision is supported both by findings

that deny the power of the court to decide the case on the merits and by findings that

go to the merits, preclusion is inappropriate as to the findings on the merits.”). The

purported resolution of issues on the merits is, for all intents and purposes, a nullity

in light of the court’s express election to abstain. See Disher v. Info. Res., Inc., 873

F.2d 136, 140 (7th Cir. 1989) (“A dismissal based on the district court’s relinquishing

its pendent jurisdiction deprives any ruling that he may have made on the merits of

a relinquished claim of preclusive effect.”).

Second, the BAP in this matter affirmed the bankruptcy court on abstention

grounds and did not address the motion to dismiss on the merits. When an appeals

court decides the case before it on only one of multiple grounds presented for review,

those grounds decided below and not addressed by the appeals court generally do not

carry preclusive effect in future proceedings. See Fairbrook Leasing, Inc. v. Mesaba

Aviation, Inc., 519 F.3d 421, 425 (8th Cir. 2008) (“As the district court’s decision

was based on alternative grounds, the preclusive effect of the summary judgment we

affirmed in Fairbrook I must be determined by examining our opinion, not the district

court’s Order.”); Mandich v. Watters, 970 F.2d 462, 465 (8th Cir. 1992) (“The

general rule is that, ‘if a judgment is appealed, collateral estoppel only works as to

those issues specifically passed upon by the appellate court.’” (quoting Hicks v.

Quaker Oats Co., 662 F.2d 1158, 1168 (5th Cir. 1981))).

Consistent with our pragmatic approach to analyzing preclusion, these two

“rules,” while seemingly clear, should by no means be considered absolute. Still, we

conclude the bankruptcy court’s initial statement as to the merits is best understood

as a statement of skepticism concerning the Stablers’ position coupled with an

election to let the state court entertain the merits. Those comments, in light of the

bankruptcy court’s express abstention, do not establish the law of the case or preclude

a later ruling on the merits.

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C. State of Law Regarding Reaffirmation as Material to the Question of the

Bank and Beyers’s Good Faith Argument.

“A reaffirmation agreement is one in which the debtor agrees to repay all or

part of a dischargeable debt after a bankruptcy petition has been filed.” Venture Bank

v. Lapides, 800 F.3d 442, 445 (8th Cir. 2015) (quoting In re Duke, 79 F.3d 43, 44

(7th Cir. 1996)). In general, reaffirmation agreements are unenforceable unless they

are (1) “made before the granting of the discharge”; (2) “made after the debtor

received disclosures as described in [§ 524(k)]”; and (3) “filed with the court.” 11

U.S.C. § 524(c). Congress imposed these requirements “to . . . safeguard[] debtors

against unsound or unduly pressured judgments about whether to attempt to repay

dischargeable debts.” Venture Bank, 800 F.3d at 446 (alteration in original) (quoting

In re Jamo, 283 F.3d 392, 398 (1st Cir. 2002)). Debtors, of course, are free to

voluntarily repay a creditor. See 11 U.S.C. § 524(f) (stating that discharge does not

“prevent[] a debtor from voluntarily repaying any debt”). But, when assessing the

voluntariness of the debtor’s actions, we consider the creditors’ use of pressure and

coercion and its impact on the debtor. And, when assessing the particular actions

alleged to be in violation of the discharge—in this case the filing of the

counterclaims—we cannot separate those actions and view them in isolation. Rather,

“[t]he ‘coerciveness’ involved in each case must be assessed on its particular facts.”

Venture Bank, 800 F.3d at 448 (quoting In re Pratt, 462 F.3d 14, 20 (1st Cir. 2006)).

Sanctions are available for a willful violation of a discharge injunction. See

Walton v. LeBarge (In re Clark), 223 F.3d 859, 864 (8th Cir. 2000) (“[11 U.S.C. §]

105[(a)] gives to bankruptcy courts the broad power to implement the provisions of

the bankruptcy code and to prevent an abuse of the bankruptcy process, which

includes the power to sanction counsel.”). Sanctions generally should be unavailable

where a creditor acts without knowledge of the injunction or in good faith reliance

on the belief that their actions are permissible. See, e.g., Everly v. 4745 Second

Ave., Ltd. (In re Everly), 346 B.R. 791, 797–98 (B.A.P. 8th Cir. 2006) (“[A]s long

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as a creditor has a good faith basis for believing that its debt was excepted from

discharge or, as in this case, had no knowledge of any such discharge, the creditor is

not subject to sanctions for violating the discharge injunction when it proceeds in

state court.”); but see Taggart v. Lorenzen, 888 F.3d 438 (9th Cir. 2018), cert.

granted, 2019 WL 98543 (U.S. Jan. 4, 2019) (granting certiorari regarding whether

a creditor’s good-faith beliefs may preclude a finding of civil contempt for discharge

injunction violation). Here, Appellants argue they acted in good faith when seeking

a determination from the state court as to what portion of the debt had not been

discharged. In particular, they argue that, at the time they filed their counterclaims

in state court, they acted in good faith because the law was unclear regarding the

permissibility of obtaining a new commitment from a bankrupt debtor after discharge

based upon a secured lender’s forbearance in foreclosing on a security interest.4

To support their good-faith argument, Appellants cite several lower court cases

they characterize as permitting a lienholder and a bankrupt debtor to treat forbearance

surrounding a surviving lien as new and sufficient consideration for new debt. See

Watson v. Shandell (In re Watson), 192 B.R. 739, 748 (B.A.P. 9th Cir. 1996); Shields

v. Stangler (In re Stangler), 186 B.R. 460, 463–64 (Bankr. D. Minn. 1995); Minster

State Bank v. Heirholzer (In re Heirholzer), 170 B.R. 938, 941 (Bankr. N.D. Ohio

1994); In re Petersen, 110 B.R. 946, 950 (Bankr. D. Colo. 1990); Button v. Sheridan

Oil Co. (In re Button), 18 B.R. 171, 172 (Bankr. W.D.N.Y. 1982). They also argue

that the bankruptcy court’s initial statements in this case voicing skepticism at the

Stablers’ position further demonstrate the reasonableness of their own view regarding

the permissibility and enforceability of the new loan. Neither argument can succeed.

4The law in our circuit is now clear that “a secured creditor’s post-discharge

forbearance is not sufficient to take a reaffirmation agreement outside the purview of

§ 524(c).” Venture Bank, 800 F.3d at 447. The events in this case, however,

predated Venture Bank.

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The authority Appellants purport to have relied upon at the time they filed their

counterclaims establishes, at most, that, in limited circumstances, post-discharge

forbearance may serve as consideration for a new commitment to repay the present

value of the lien—an amount a bankruptcy court might have found permissible if

presented to the court prior to discharge. See, e.g., In re Stangler, 186 B.R. at 463

(indicating reaffirmation based upon lienholder’s forbearance was permissible as

related to the present value of the surviving lien). None of Appellants’ cases suggest

a lienholder could leverage a security interest to obtain a larger repayment

commitment, much less a larger commitment representing a discharged personal debt.

The absence of authority to support Appellants’ position is unsurprising given the

clarity of § 524(c)’s purposes and its express requirements. Moreover, the South

Dakota Supreme Court in its review of the state court trial in this matter agreed

emphatically and noted the absence of any evidence suggesting Appellants had

attempted to place a current value on the surviving lien. See Stabler, 865 N.W.2d at

478. That court stated:

We do not think the law is so unclear as to render Defendants unaware

of its application to Defendants’ conduct. . . . Any claim by Beyers that

the consideration to forego foreclosure on liens that passed through

bankruptcy is new consideration to which [§ 524(c)] does not apply is

unconvincing in the context of this case. There is no indication that any

sort of valuation was done on the liens that survived bankruptcy.

Instead, Defendants sought out Stablers to renew all obligations that

they owed prior to the bankruptcy, in the same form and amount that

Brad and Brenda personally owed pre-bankruptcy. We see no attempt by

Defendants to enter into an entirely new arrangement based on the value

of the surviving liens. Nor is the mere continuing of a banking

relationship sufficient to fulfill the statutory provisions regarding

reaffirmation, and Defendants cite no authority for such a proposition.

Id. (emphasis added).

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Finally, although Appellants nominally purported to seek in state court only

debt that had not been discharged, the state court viewed this articulation of their

counterclaim as disingenuous in that Appellants clearly knew no unsecured debt had

survived bankruptcy. Notwithstanding Appellants’ naked assertion as to

Counterclaims 3 and 4 that they were seeking only non-discharged debt, the state trial

court repeatedly emphasized Beyers’s knowledge as to the consequences of the

bankruptcy discharge and the clarity of his knowledge regarding the insufficiency of

the surviving liens.

Subsequently, in ruling on the motion for sanctions, the bankruptcy court

similarly rejected any reliance on the naked language of the counterclaims. The

bankruptcy court, referencing its initial skepticism as to the Stablers’ challenge to

Appellants’ collection efforts, stated the landscape had changed. The bankruptcy

court was no longer looking only at the demand for relief in Counterclaims 3 and 4,

but was reviewing the entirety of the matter. Importantly, it had become clear the

complicated structuring of the post-discharge transactions, coupled with Beyers’s

participation in the bankruptcy and its planning, demonstrated a lack of good faith

and an effort to defeat the bankruptcy discharge that culminated in the filing of the

counterclaims.

We agree. In summary, Appellants enjoyed neither a factual nor a legal basis

to assert that they filed Counterclaims 3 and 4 in good faith. The bankruptcy court

did not abuse its discretion in imposing sanctions and attorney fees.

We affirm the judgment of the district court affirming the judgment of the

bankruptcy court.