J & V Developers, Inc. v. Malloy (In re Malloy)

• Decision Date: 10 August 2015
• Docket Number: Bky. No. 14–17727 ELF,Adv. No. 14–687
• Citation: 535 B.R. 81
• Parties: In re: Deborah R. Malloy, Debtor. J & V Developers, Inc., Plaintiff, v. Deborah R. Malloy, Defendant
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

535 B.R. 81

In re: Deborah R. Malloy, Debtor.J & V Developers, Inc., Plaintiff

v.Deborah R. Malloy, Defendant

Bky. No. 14–17727 ELF

Adv. No. 14–687

United States Bankruptcy Court, E.D. Pennsylvania.

Signed August 10, 2015

Kenneth E. West, Douglass, West and Associates, Drexel Hill, PA, for Plaintiff.

Edward C. Malloy, Generations Law, P.C., Boothwyn, PA, for Defendant.

MEMORANDUM

ERIC L. FRANK, CHIEF U.S. BANKRUPTCY JUDGE

I. INTRODUCTION

On July 13, 2013, prior to the commencement of this chapter 7 bankruptcy case, Plaintiff J & V Developers Inc. (“J & V”) obtained a pre-petition state court judgment in the Court of Common Pleas, Delaware County (“the C.P. Court”) against Debtor Deborah R. Malloy (“the Debtor”), for attorney's fees and costs, in the amount of $63,486.05 (“the Fee Award”). The C.P. Court entered the Fee Award pursuant to 42 Pa.C.S.A. § 2503(7) as a sanction against the Debtor and her counsel, jointly and severally, for their conduct during the pendency of the state court litigation between the parties. The C.P. Court supported the Fee Award in a lengthy opinion (“the C.P. Opinion”) that set forth the court's factual findings and legal conclusions.

The Debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code in this court on September 25, 2014. On December 19, 2014, J & V filed a complaint, initiating this adversary proceeding, seeking a determination that the Fee Award is nondischargeable under 11 U.S.C. § 523(a)(6). The Debtor filed an answer to the complaint on January 21, 2015.

Before me are the parties' cross motions for summary judgment.¹

Pursuant to the doctrine of collateral estoppel (also known as “issue preclusion”),² I conclude that the Debtor is precluded from relitigating the state court's factual findings and legal conclusions. Based on those findings and conclusions, J & V has satisfied its burden of proof on summary judgment.

Accordingly, J & V's motion for summary judgment will be granted, the Debtor's motion for summary judgment will be denied and an order will be entered determining that the Fee Award debt is nondischargeable under 11 U.S.C. § 523(a)(6).³

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Underlying Transaction

J & V is the developer of a planned community known as Spring Valley Estates located in Aston, Pennsylvania. (See J & V Developers v. Hargy, 87 A.3d 890 (Pa.Super.Ct. Oct. 24, 2013) (Table) (“Pa.Super.Ct.I”)).⁴ On March 22, 2007, the Debtor entered into an Agreement of Sale (“the AOS”) with J & V for the purchase of a home, at which time the Debtor tendered a deposit check in the amount of $10,000.00 to be placed in an escrow account. (See J & V Developers, Inc. v. Hargy, 99 Del. Cty. Rep. 347, 354 (C.P.Dela.2012) ( “C.P.Opinion”) (attached as Ex. 1 to Compl.)).⁵ (Id. at 354). The AOS provided that the purchase price of the property was $289,900.00 and was to be paid in full at settlement, to occur on or before June 30, 2007. (Id.; Pa.Super. Ct. I at 5–6).

The settlement date was extended by one (1) month to August 1, 2007 because the construction of the home was not complete on June 30, 2007. (See C.P. Opinion at 354). During this time, “Extras” and carpeting were installed. (Id. ). Notice of settlement was sent to the Debtor several days before August 1, 2007, although not exactly ten (10) days as contemplated by the AOS.⁶ (Id. ). A pre-inspection of the property took place on July 27, 2007, at which time, the Debtor's counsel, Edward Charles Malloy III (whom she subsequently married) (“Mr.Malloy”) appeared and entered the dwelling, while she stood outside. (Id. at 358).

The Debtor did not appear at the August 1, 2007 closing.⁷ (Id. at 354). By letter faxed to the Debtor on September 6, 2007, J & V offered to return the Debtor's $10,000.00 deposit in exchange for a release. ( Id. at 357). On September 7, 2007, the Debtor “counter offered” with a demand for legal interest on the escrowed deposit money, plus reimbursement of the $1,414.00 she spent on carpeting. J & V did not accept this “counter offer.” and, on September 12, 2007, responded to the counter offer by sending the Debtor a notice that she was in breach of the AOS for failing to close on the sale. (Id. at 357–78). J & V asserted that the AOS mortgage contingency clause was inapplicable and that the Debtor had no right to cancel the AOS because she failed to timely submit a proof of mortgage application. (Id. ).⁸

B. The Initial C.P. Litigation and the First Appeal

On May 8, 2008, J & V filed a complaint against the Debtor in the Court of Common Pleas of Delaware County in Pennsylvania. (“the C.P. Litigation”).⁹ In the complaint, J & V sought to retain the $10,000.00 in escrowed deposit money. (Id. at 352). The Debtor filed a counterclaim, asserting that Mr. Malloy was entitled to an “under the table” commission of $7,200.00 (to be awarded to him directly) for “bringing the ‘deal’ together.” (Id. ).

A six (6) day trial took place over the course of an eight (8) month period from July 19, 2010 through March 8, 2011.¹⁰ On March 15, 2011, the court entered its decision in favor of J & V. The court found that the Debtor breached the AOS and ordered that her $10,000.00 escrowed deposit on the purchase price of the property be turned over to J & V with 6% legal interest from the time of the breach (August 2, 2007). (Id. at 350 n.1). The court also determined that J & V was entitled to retain the nearly $10,000.00 worth of improvements added to the subject premises at the Debtor's request, as well as the $1,414.00 worth of carpeting (i.e., the “extras” mentioned earlier). (Id. ).

The Debtor failed to timely submit a post-trial motion pursuant to Pa. R. Civ.P. 227.1(c)(2).¹¹ (Id. at 350 & n.1). The court entered judgment in favor of J & V on April 13, 2011. (See Pa.Super. Ct. I at 14).

The Debtor filed an appeal to the Superior Court of Pennsylvania on April 14, 2011. (Id. ). The Superior Court dismissed the appeal on May 23, 2011 on J & V's motion to dismiss for the Debtor's failure to comply with Pa. R. C.P. 227(c)(2). (Id. ).

C. J & V's Petition for Assessment of Attorney's Fees

After the Debtor failed to file post-trial motions in the C.P. Court, J & V filed a “Petition for Assessment of Attorney Fees” (“the Fee Petition”) pursuant to 42 Pa.C.S.A. § 2503(7) for the dilatory, obdurate, vexatious and bad faith conduct on the part of both the Debtor and Mr. Malloy during the pendency of the C.P. Litigation. (See C.P. Opinion at 350). The C.P. Court held a hearing on the Fee Petition on March 26, 2012.

On July 13, 2013, the C.P. Court¹² issued the C.P. Opinion and granted the Fee Petition, awarding J & V $63,486.05 (i.e., the Fee Award that is the subject of this adversary proceeding). (Id. ).

III. LEGAL STANDARDS

A. Summary Judgment Under Rule 56

A moving party is entitled to summary judgment by demonstrating that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a) (incorporated in this adversary proceeding by Fed. R. Bankr.P. 7056 ); see, e.g., Liberty Lincoln–Mercury, Inc. v. Ford Motor Co., 676 F.3d 318, 323 (3d Cir.2012).

Under Rule 56, the moving party is entitled to judgment as a matter of law if the court finds that the motion alleges (and supports with evidence) facts which, if proven at trial, would require a directed verdict in the movant's favor. Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir.1993). “[I]t is inappropriate to grant summary judgment in favor of a moving party who bears the burden of proof at trial unless a reasonable juror would be compelled to find its way on the facts needed to rule in its favor on the law.” United States v. Donovan, 661 F.3d 174, 185 (3d Cir.2011) (quoting El v. Se. Pa. Transp. Auth., 479 F.3d 232, 238 (3d Cir.2007) ). If the moving party meets its initial burden, the responding party may not rest on the pleadings, but must designate specific factual averments through the use of affidavits or other permissible evidentiary material which demonstrate a genuine issue of material fact to be resolved at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The court's role is not to weigh the evidence, but to determine whether there is a disputed, material fact for resolution at trial. Anderson, 477 U.S. at 249, 106 S.Ct. 2505. A genuine issue of material fact is one in which the evidence is such that a reasonable fact finder could return a verdict for the non-moving party. Id. at 248, 106 S.Ct. 2505. The court must view the underlying facts and make all reasonable inferences therefrom in the light most favorable to the party opposing the motion. Pennsylvania Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir.1995) ; United States v. 717 South Woodward St., 2 F.3d 529, 533 (3d Cir.1993). Thus, if it appears that the evidence “is so one-sided that one party must prevail as a matter of law,” the court shall enter judgment accordingly in that party's favor. Anderson, 477 U.S. at 252, 106 S.Ct. 2505.

A party's burden of proof plays an essential role in determining the merits of a summary judgment motion.

Where the movant is the plaintiff who has the burden of proof at trial, the movant must show that no reasonable jury could find for the non-moving party. Fitzpatrick, 2 F.3d at 1115. The movant “must produce enough evidence to justify a directed verdict in its favor in order to meet its initial burden.” Nat'l State Bank v. Fed. Reserve Bank of New York, 979 F.2d 1579, 1582 n. 2 (3d Cir.1992) ; see also In re Newman, 304 B.R. 188, 193 (Bankr.E.D.Pa.2002).

Thus, in order to prevail on its motion, J & V must demonstrate that each element of its claim under § 523(a) has been proven and that the Debtor has not come forward with rebuttal evidence to create a triable factual dispute as to at least one (1) element of the plaintiff's claim. Conversely, as the moving par...