In re Dawson, Bankruptcy No. 05-13059.

• Decision Date: 04 January 2006
• Docket Number: Adversary No. 05-1339.,Bankruptcy No. 05-14078.,Adversary No. 05-1284.,Bankruptcy No. 05-13059.
• Citation: 338 B.R. 756
• Parties: In re Debra DAWSON, Michael Dawson, Debtors. David I. Jaffe, Plaintiff, v. Debra E. Dawson, Defendant. David I. Jaffe, Plaintiff, v. Michael Dawson, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Ohio

338 B.R. 756

In re Debra DAWSON, Michael Dawson, Debtors.

David I. Jaffe, Plaintiff, v. Debra E. Dawson, Defendant. David I. Jaffe, Plaintiff, v. Michael Dawson, Defendant.

Bankruptcy No. 05-13059.

Bankruptcy No. 05-14078.

Adversary No. 05-1284.

Adversary No. 05-1339.

United States Bankruptcy Court, N.D. Ohio, Eastern Division.

January 4, 2006.

COPYRIGHT MATERIAL OMITTED

Scott W. Gedeon, Cleveland, OH, for Debtors.

MEMORANDUM OF OPINION AND ORDER

RANDOLPH BAXTER, Chief Judge.

Before the Court is David I. Jaffe's ("Jaffe") motion for summary judgment on his complaint to determine a debt of Debtors Michael and Debra E. Dawson (collectively, the "Dawsons") to be nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).¹ The Court acquires core matter jurisdiction over this proceeding under 28 U.S.C. § 157(b)(2)(J) and General Order No. 84 of this District. Upon an examination of the parties' respective briefs and supporting documentation and conducting a hearing on the matter, the following findings of fact and conclusions of law are hereby rendered:

*

It is undisputed that Jaffe and Michael Dawson engaged in several loan transactions from May 1999 to October 2001. From May 14, 1999 to October 1, 2001, in connection with the operation of a towing business, Jaffe made loans to Michael Dawson in the amounts of $80,000, $79,000, and $9,500. Additionally, on October 25, 1999, Jaffe loaned Michael Dawson $40,000 for the purchase of certain commercial real estate (the "Property"). Michael Dawson failed to disclose that the owner of the Property, Debra Gwiazadowski, was at that time his girlfriend, who later became his wife and is now known as Debra Dawson. Michael and Debra Dawson sold the Property and used the sale proceeds, along with the October 1999 loan, to purchase a personal residence.

Prepetition, on May 14, 2002, Jaffe brought suit in the Court of Common Pleas in Cuyahoga County (the "state court") against Defendants Michael Dawson, Debra Dawson, and Mike's Lucky Seven, Inc., asserting that he was owed for the loans, and for his share of the profits from the sale of the Property. Jaffe alleged claims for breach of contract, unjust enrichment, and fraud.²

As reflected in the state court docket, the Dawsons failed to participate in the state court proceedings.³ On September 18, 2003, the Dawsons failed to appear at a duly noticed deposition.⁴ On December 19, 2003, the state court granted the motion of the Dawsons' attorney, Samuel Basta, to withdraw, based on the Defendants' refusal to respond to discovery requests or otherwise cooperate in the trial proceedings.⁵ The record does not reflect whether the Dawsons' sought leave to obtain substitute counsel. On December 24, 2003, after receiving no response from the Dawsons, the state court, pursuant to the Ohio Civil Rules and upon Jaffe's motion, granted Jaffe's Motion to Deem Admissions Propounded to Michael Dawson and Debra Dawson (Gwiazdowski) Admitted. On January 20, 2004, the Dawsons failed to appear at the duly noticed trial.⁶ The state court conducted a trial on the merits, and Jaffe was awarded a judgment on the merits against the Defendants, jointly and severally, in the amount of $396,782.35 (the "state court judgment"). The Dawsons received notice of the judgment, and failed to appeal the state court judgment.

Debra Dawson filed a petition for relief under Chapter 7 of the Bankruptcy Code on March 12, 2005. Michael Dawson filed a separate petition for relief on March 30, 2005. The state court judgment was scheduled by both Debtors. Jaffe commenced the subject adversary proceedings on the basis that the state court judgment is nondischargeable under § 523(a)(2)(A), since the amount due was incurred through fraud.

* *

Summary judgment is appropriate if a review of the record, in a light most favorable to the non-moving party, demonstrates that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c); see generally Celotex Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party moving for summary judgment has the initial burden of proving that there is no genuine issue as to any material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 161, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Leadbetter v. Gilley, 385 F.3d 683, 689-90 (6th Cir.2004). A fact is "material" only if its resolution will affect the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Determination of whether a factual issue is "genuine" requires consideration of the applicable evidentiary standards. Thus, in most civil cases the Court must decide "whether the [trier of fact] could find by a preponderance of the evidence that the [non-moving party] is entitled to a verdict." Id. at 252, 106 S.Ct. 2505.

Once the moving party has met this initial burden of proof, the non-moving party must present specific facts sufficient to raise a genuine issue for trial and may not rest on its pleadings or mere assertions of disputed facts to defeat the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (stating that the party opposing the motion "must do more than simply show that there is some metaphysical doubt as to the material facts"). Summary judgment is appropriate whenever the non-moving party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. The mere existence of a scintilla of evidence in support of the opposing party's position will not be sufficient to forestall summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmoving party is under an' affirmative duty to point out specific facts in the record as it has been established which create a genuine issue of material fact. Pavlovich v. National City Bank, 342 F.Supp.2d 718, 722-723 (N.D.Ohio 2004) (citing Fulson v. City of Columbus, 801 F.Supp. 1, 4 (S.D.Ohio 1992)). The non-movant must show more than a scintilla of evidence to overcome summary judgment; it is not enough for the non-moving party to show that there is some metaphysical doubt as to material facts. Id. Moreover, "the trial court no longer has a duty to search the entire record to establish that it is bereft of a genuine issue of material fact." Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir.1989) (citing Frito-Lay, Inc. v. Willoughby, 863 F.2d 1029, 1034 (D.C.Cir.1988)). In ruling on a motion for summary judgment, "the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson, 477 U.S. at 255, 106 S.Ct. 2505; White v. Turfway Park Racing Ass'n, Inc., 909 F.2d 941, 943-44 (6th Cir.1990).

Therefore, the Court must determine whether Jaffe has shown, by a preponderance of the evidence, that there is exists no genuine issue of material fact, and that he is entitled, as a matter of law, to a determination that the state court judgment against Michael and Debra Dawson is nondischargeable under § 523(a)(2)(A).

* * *

"The creditor has the burden of proving by a preponderance of the evidence that a debt is nondischargeable under § 523(a)(2)(A)." In re Shartz, 221 B.R. 397, 399 (6th Cir. BAP 1998) (citing Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991)); In re McLaren, 990 F.2d 850, 853 (6th Cir.1993).

Under § 523(a)(2)(A), a creditor seeking to except a debt from discharge must prove that:

(1) the debtor obtained money through a material misrepresentation that, at the time, the debtor knew was false or made with gross recklessness as to its truth;

(2) the debtor intended to deceive the creditor;

(3) the creditor justifiably relied on the false representation; and

(4) its reliance was the proximate cause of loss.

The creditor has the burden of establishing each of these elements by a preponderance of the evidence.

In re Catherman, 331 B.R. 333, 336 (Bankr.N.D.Ohio 2005) (citing In re Rembert, 141 F.3d 277, 280-81 (6th Cir.1998)).

* * * *

Jaffe argues that the state court's findings that a fraud had been committed upon him should be given preclusive effect in this case. As the party seeking to invoke collateral estoppel, Jaffe bears the burden of showing, by a preponderance of the evidence that all of the elements of the doctrine apply. Central Transport, Inc. v. Four Phase Systems, Inc., 936 F.2d 256, 260 (6th Cir.1991); In re Monas, 309 B.R. 302, 306 (Bankr.N.D.Ohio 2004); In re Robinson, 242 B.R. 380, 385 (Bankr. N.D.Ohio 1999).

"The Supreme Court has held that the doctrine of collateral estoppel is applicable in dischargeability proceedings." In re Sarff 242 B.R. 620, 623-24 (6th Cir. BAP 2000) (citing Grogan v. Garner, 498 U.S. 279, 284, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991)). "[T]he application of collateral estoppel in a nondischargeability action depends upon whether the applicable state law would give collateral estoppel effect to the judgment." Id. at 624. Under Ohio law, the doctrine of collateral estoppel applies when,

(1) the party against whom estoppel is sought was a party or in privity with a party to the prior action;

(2) there was a final judgment on the merits in the previous case after a full and fair opportunity to litigate the issue;

(3) the issue must have been admitted or actually tried and decided and must be necessary to the final judgment; and

(4) the issue must have been identical to the issue involved in the prior suit.

Id.; In re Monas, 309 B.R. 302, 306 (Bankr.N.D.Ohio 2004) (citing Thompson v. Wing, 70 Ohio St.3d 176, 637 N.E.2d 917, 923 (1994)) ("The doctrine of collateral estoppel applies in Ohio when a fact or issue (1) was actually and directly litigated in the prior action; (2) was...