Carmona v. Morrison
| Decision Date | 08 February 2010 |
| Docket Number | Adversary Proceeding No. 08-02075.,No. 09-11739-BC, 09-11815-BC.,Bankruptcy Case No. 08-20783.,09-11739-BC, 09-11815-BC. |
| Citation | 424 B.R. 227 |
| Parties | In re Conrad CARMONA Sr., Debtor. v. Linda MORRISON, and Vanessa Gomez, Appellants/Cross-Appellees, Conrad Carmona Sr., Appellee/Cross-Appellant. |
| Court | U.S. District Court — Eastern District of Michigan |
William W. Allsopp, Allsopp Wackerly, P.C., Bay City, MI, for Debtor.
ORDER AFFIRMING BANKRUPTCY COURT DECISION
Appellants Linda Morrison and Vanessa Gomez ("Morrison" and "Gomez") and cross-appellant Conrad Carmona Sr. ("Carmona") appeal the bankruptcy court's denials of their cross-motions for summary judgment in an order dated April 23, 2009. Both sides contend that principles of collateral estoppel or res judicata operate to decide the question of whether a debt owed by Carmona to Morrison and Gomez, pursuant to state-court judgments for $10,000 each, entered pursuant to Michigan's case evaluation procedures, are non-dischargeable under 11 U.S.C. § 523(a)(6) (). For the reasons stated below, the decision of the bankruptcy court will be affirmed.
On or about March 1, 2007, Morrison and Gomez filed a civil lawsuit in Bay County Circuit Court against Carmona, alleging that he, as their former employer, sexually harassed them in violation of the Michigan Elliott-Larsen Civil Rights Act ("ELCRA"), Mich. Comp. Laws § 37.2101 et seq. Pursuant to Michigan Court Rule 2.403, the case was submitted to case evaluation. On January 7, 2008, the case evaluation panel determined that Carmona should pay $10,000 to Morrison and Gomez each "in full, final and complete settlement of any and all claims herein." The panel's evaluation did not include any specific statements concerning the underlying facts of the case. Carmona Br. Ex. A; [09-11815, Dkt. # 10-2] (case evaluation report).
Shortly thereafter, the parties accepted the case evaluation. Carmona Br. Ex. B; [09-11815, Dkt. # 10-3] (case evaluation acceptance). When the agreed upon amount was not paid within twenty-eight days, Morrison and Gomez were each awarded a judgment against Carmona for $10,000.00. Carmona Br. Ex. C; [09-11815, Dkt. # 10-4] (judgments). See Mich. Ct. R. 2.403(M)(1) (). Morrison's judgment, entered March 6, 2008, provides in full:
Case Evaluation having been accepted by the parties; now, therefore, pursuant to MCR 2.403(M)(1),
JUDGMENT is entered in favor Linda J. Morrison and against Defendants Conrad Carmona and Touch of Mexico, Inc., jointly and severally, in the amount of $10,000 inclusive of all fees, costs and interest to date of entry.
This Judgment resolves the last pending claim and closes the case.
Gomez's judgment, entered on March 10, 2008, is identical, except that her name replaces that of Morrison.
On March 17, 2008, Carmona filed a Chapter 7 bankruptcy petition seeking to discharge, inter alia, the debt owed to Morrison and Gomez. In re Carmona, No. 08-20786 (Bankr.E.D.Mich. Mar. 17, 2008). On June 20, 2008, Morrison and Gomez filed a complaint in an adversary proceeding alleging that the debt was "for willful and malicious injury by the debtor to another entity or to the property of another entity" and not dischargeable pursuant to § 523(a)(6). Morrison v. Carmona, No. 08-02075 (Bankr.E.D. Mich. June 20, 2008). On March 6 and 16, 2009, Morrison and Gomez filed a motion and corrected motion for summary judgment, respectively. On March 17, 2009, Carmona filed a cross-motion for summary judgment.
In their cross-motions, both sides argued that the state court judgments barred litigation of Gomez and Morrison's claims. However, the parties disputed the impact of the state-court judgments if collateral estoppel or res judicata applied. Gomez and Morrison argued that the issues raised in their state court complaint were necessarily resolved in their favor and thereby established non-dischargeable debt obligations pursuant to § 523(a) (6). On the other hand, Carmona argued that Gomez's and Morrison's acceptance of a case evaluation award without any specific factual findings makes it impossible for them to establish the facts necessary for a finding that the debts are nondischargeable pursuant to § 523(a)(6). Thus, Carmona contended that the debt must be considered dischargeable.
At a hearing on April 17, 2009, the bankruptcy court denied the parties' cross-motions for summary judgment, concluding that neither res judicata nor collateral estoppel precluded the parties from litigating whether Morrison and Gomez' claims were "for willful and malicious injury by the debtor to another entity or to the property of another entity" pursuant to § 523(a)(6). On April 23, 2009, the court memorialized the denial of the motions by entering an order stating that the motions were denied "for the reasons stated on the record."
At the hearing, Judge Opperman began his oral opinion by noting that principles of collateral estoppel generally apply to dischargeability proceedings, Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991), and that a bankruptcy court must determine whether applicable state law would give collateral effect to the state court judgment, In re Calvert, 105 F.3d 315 (6th Cir.1997). Judge Opperman explained that "[c]ollateral estoppel precludes relitigation of an issue in a subsequent, different cause of action between the same parties where the prior proceeding culminated in a valid, final judgment and the issue was (1) actually litigated, and (2) necessarily determined." People v. Gates, 434 Mich. 146, 452 N.W.2d 627, 630 (1990). Judge Opperman emphasized that a trial is not required for an issue to be "actually litigated," Latimer v. William Mueller & Son, Inc., 149 Mich.App. 620, 386 N.W.2d 618, 627 (1986), and that "[a]n issue is necessarily determined only if it is `essential' to the judgment." Gates, 452 N.W.2d at 631.
More specifically, Judge Opperman highlighted that Michigan courts generally do not give collateral estoppel effect to consent judgments, citing Goldman v. Wexler, 122 Mich.App. 744, 333 N.W.2d 121 (1983) (citing Am. Mutual Liability Ins. Co. v. Mich. Mutual Liability Co., 64 Mich.App. 315, 235 N.W.2d 769 (1975)); Berar Enterprises, Inc. v. Harmon, 101 Mich.App. 216, 300 N.W.2d 519 (1980); Peterson v. Lapeer, 106 Mich.App. 148, 307 N.W.2d 744 (1981); Fifth Third Bank of NW Ohio N.A. v. Baumhaft, 271 B.R. 523, 526 (Bankr.E.D.Mich.2001); Day v. Manuel, 76 B.R. 105, 106 (Bankr.E.D.Mich.1987). Judge Opperman emphasized the following reasoning by the court of appeals in American Mutual:
A consent judgment reflects primarily the agreement of the parties. The action of the trial judge in signing a judgment based thereon is ministerial only. The parties have not litigated the matters put in issue, they have settled. The trial judge has not determined the matters put in issue, he has merely put his stamp of approval on the parties' agreement disposing of those matters. But a judgment can be given collateral estoppel effect only as to those issues which were actually and necessarily adjudicated. It follows that because the issues involved in the settled case were not actually adjudicated, one of the prerequisites to giving a judgment collateral estoppel effect is not satisfied. Thus, the answer to the question posed above is: Nothing is adjudicated between two parties to a consent judgment.
235 N.W.2d at 776 (internal citations and footnote omitted). The American Mutual court also emphasized certain policy reasons:
The social interest in reducing instances of costly litigation is undermined by a rule which provides drastic consequences for settlements. One will tend to avoid a settlement rather than be later bound in potentially far-reaching, and often unintended, ways by facts imbedded in an otherwise innocuous settlement agreement. Because the application of the doctrine of collateral estoppel to consent judgments will in many cases be unforeseeable, consent judgments may become less desirable, thus impeding and embarrassing the settlement process. . . .
Moreover, refusing to construe consent judgments as adjudicating the issues joined therein will not threaten any legitimate expectations of repose, since none of the parties to the consent judgment ever bargained for such protection. Nor will a rule giving collateral estoppel effect to consent judgments promote judicial consistency, since the judges are not deciding anything.
Id. at 776-77 (internal citations and footnote omitted). Judge Opperman noted that an exception to the rule exists when "the parties have entered an agreement manifesting an intention that the judgment be conclusive with respect to one or more of the issues." Baumhaft, 271 B.R. at 526 (quoting Mustaine v. Kennedy (In re Kennedy), 243 B.R. 1, 12 (Bankr.W.D.Ky. 1997)).
Judge Opperman concluded that the judgments entered pursuant to the case evaluation in this case were "in essence," consent judgments. CAM Constr. v. Lake Edgewood Condo. Ass'n, 465 Mich. 549, 640 N.W.2d 256, 260 (2002) () (internal citations omitted). Thus, he concluded that collateral estoppel did not operate to bar litigation of the pertinent issues.
Judge Opperman also concluded that res judicata did not apply to the judgments in this case. While res judicata may be applied to consent judgments, it may only do so when "the same evidence necessary to sustain the second cause of action...
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