First Am. Title Ins. Co. v. Moses (In re Moses)

• Decision Date: 15 March 2016
• Docket Number: Case No. 10–51769–ess,Adv. Pro. No. 11–01286–ess
• Citation: 547 B.R. 21
• Parties: In re: Keith O. Moses, aka Keith O.D. Moses, aka Keith Moses, aka Dougy Mo, Debtor. First American Title Insurance Company, Plaintiff, v. Keith O. Moses, aka Keith O.D. Moses, aka Keith Moses, aka Dougy Mo, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of New York

547 B.R. 21

In re: Keith O. Moses, aka Keith O.D. Moses, aka Keith Moses, aka Dougy Mo, Debtor.First American Title Insurance Company, Plaintiff,

v.Keith O. Moses, aka Keith O.D. Moses, aka Keith Moses, aka Dougy Mo, Defendant.

Case No. 10–51769–ess

Adv. Pro. No. 11–01286–ess

United States Bankruptcy Court, E.D. New York.

Signed March 15, 2016

Entered March 16, 2016

Raymond R. Siberine, Esq., Herold Law, P.A., 25 Independence Boulevard, Warren, NJ 07059, Attorneys for First American Title Insurance Company

Keith O. Moses, Esq., PO Box 8264, Jersey City, NJ 07308, Pro Se

DECISION AFTER TRIAL ON FIRST AMERICAN TITLE INSURANCE COMPANY'S NONDISCHARGEABILITY CLAIMS PURSUANT TO BANKRUPTCY CODE SECTIONS 523(a)(2), 523(a)(4), AND 523(a)(6)

HONORABLE ELIZABETH S. STONG, UNITED STATES BANKRUPTCY JUDGE

Introduction

First American Title Insurance Company ("First American") commenced this adversary proceeding on March 25, 2011 by filing a complaint against attorney and Chapter 7 debtor Keith Moses. First American seeks a determination that a judgment debt that it obtained on default in a New Jersey state court action should not be discharged in Mr. Moses's bankruptcy case under Bankruptcy Code Section 523(a)(2) because it arose from a false statement or fraud, under Section 523(a)(4) because it was caused by a fiduciary's defalcation, and under Section 523(a)(6) because it was the result of a willful and malicious injury. First American's claims turn on whether Mr. Moses's errors in preparing a Last Will and Testament in 1998, and two deeds in 2001, were the product of Mr. Moses's negligence or, alternatively, his intentional and willful misconduct.

Jurisdiction and Authority To Enter a Final Judgment

First American's nondischargeability claims arise under Bankruptcy Code Sections 523(a)(2), 523(a)(4), and 523(a)(6), and are core matters. 28 U.S.C. § 157(b)(2)(I). And as core matters, this Court has constitutional authority to enter a final judgment, because First American's claims stem "from the bankruptcy itself." Stern v. Marshall, 564 U.S. 462, 131 S.Ct. 2594, 2618, 180 L.Ed.2d 475 (2011). For these reasons, this Court has jurisdiction to consider and enter judgement on these claims under 28 U.S.C. § 1334(b) and the Standing Order of Reference dated August 28, 1986, as amended by Order dated December 5, 2012, of the United States District Court for the Eastern District of New York.

Procedural History

The New Jersey State Court Action

Long before this bankruptcy case was commenced, First American brought an action in the Superior Court of New Jersey, Chancery Division (the "New Jersey Action"), in order to quiet title and/or partition real property located at 12 Ivy Place in Jersey City, New Jersey ("12 Ivy Place" or the "Property"). There, First American sought determinations with respect to the nature of the interests in 12 Ivy Place held by three individuals who are now deceased, Lucius Turner, Rose Turner, and Ella Turner, to whom interests were conveyed by deed almost sixty years ago, in 1958 (the "1958 Deed"). The question to be determined in the New Jersey Action was whether those individuals held title to 12 Ivy Place as joint tenants or tenants in common, and the resolution of that issue was necessary to resolve a discrepancy between the deeds to 12 Ivy Place prepared by Mr. Moses in July 2001 (the "July 2001 Deed") and September 2001 (the "September 2001 Deed"), on the one hand, and certain claims to 12 Ivy Place asserted by heirs of Ella Turner, on the other.

Mr. Moses did not appear or participate consistently in the New Jersey Action, and this led to the entry of at least three orders against him. These include a default judgment entered as a sanction on April 12, 2011, an order for final judgment dated August 22, 2011, and an amended order for final judgment dated September 15, 2011 (together, the "New Jersey Judgments"). The New Jersey Judgments include findings of fact to the effect that, among other things, Mr. Moses committed fraud upon the New Jersey court and engaged in a fraudulent conveyance of real property by failing to disclose certain interests in real property in connection with the preparation of probate and related documents, with the consequence that several heirs of Ella Turner were divested of their interests in the 12 Ivy Place property. The debt created by the September 15, 2011 judgment is $185,295.14 (the "Judgment Debt").

This Bankruptcy Case and Adversary Proceeding

These proceedings have followed a long and circuitous path in this Court, including dispositive motion practice, a failed settlement, the imposition of sanctions, and trial. Mr. Moses filed a Chapter 7 bankruptcy petition on December 17, 2010. Two months later, on February 18, 2011, the Court granted First American's motion for relief from the automatic stay to allow it to proceed with claims against Mr. Moses in the New Jersey Action up to the entry of judgment, with enforcement to be subject to further order of this Court. A month later, on March 25, 2011, First American commenced this adversary proceeding against Mr. Moses by filing a complaint asserting nondischargeability claims under Bankruptcy Code Sections 523(a)(2), 523(a)(4), and 523(a)(6).

Mr. Moses answered the complaint and asserted a "counterclaim" against First American on May 20, 2011. On that same day, the Court held a pre-trial conference at which First American and Mr. Moses appeared. On consent, the Court directed First American to file an amended complaint by June 17, 2011, and Mr. Moses to respond by July 15, 2011. First American responded to the "counterclaim" on May 24, 2011.

First American filed an amended complaint on June 17, 2011, to add a claim based on collateral estoppel. It also requested a pre-motion conference. Two months later, on August 16, 2011, Mr. Moses answered the Amended Complaint, the Court held pre-trial and pre-motion conferences at which First American and Mr. Moses appeared, and the Court set a discovery deadline of October 17, 2011. Later that month, First American made its initial Rule 26 disclosures, and on September 13, September 22, and October 3, 2011, First American advised the Court that Mr. Moses was in default of his Rule 26 disclosure and other discovery obligations.

The Court held additional pre-trial conferences on October 11, 2011, and January 3, 2012, at which First American appeared and Mr. Moses did not appear or explain his absence. At the request of First American, the Court extended the discovery period to November 29, 2011, and then to January 17, 2012, and set deadlines for dispositive motions of March 2, 2012 and then April 2, 2012.

On March 15, 2012, the Court held a pre-trial conference at which First American and Mr. Moses appeared. At the next pre-trial conference, on May 17, 2012, First American appeared and Mr. Moses did not, and the Court extended the deadline for submissions of dispositive motions, to July 16, 2012. That date was again extended to September 28, 2012, and October 22, 2012.

The Motion for Summary Judgment

On October 18, 2012, First American filed a motion for summary judgment on each of its nondischargeability claims. There, as here, First American challenged the dischargeability of the judgment debt it obtained on default against Mr. Moses in the New Jersey Action, under three subsections of Bankruptcy Code Section 523(a). First American asserted a claim under Section 523(a)(2)(A), that the Judgment Debt arose from Mr. Moses's use of "false pretenses, a false representation, or actual fraud." 11 U.S.C. § 523(a)(2)(A). First American also asserted a claim under Section 523(a)(4), that the Judgment Debt arose from Mr. Moses's "fraud or defalcation while acting in a fiduciary capacity." 11 U.S.C. § 523(a)(4). And First American asserted a claim under Section 523(a)(6), that the Judgment Debt arose from "willful and malicious injury" by Mr. Moses "to another entity" or its property. 11 U.S.C. § 523(a)(6).

On November 14, 2012, the Court held a pre-trial conference at which First American and Mr. Moses appeared. One month later, on December 12, 2012, Mr. Moses filed opposition to the Summary Judgment Motion styled as an "Answer." That same day, the Court held a pretrial conference and hearing on the Summary Judgment Motion, at which First American appeared and Mr. Moses did not appear. Then, on December 20, 2012, the Court held another pre-trial conference and hearing on the Summary Judgment Motion, at which First American and Mr. Moses appeared. Briefing on the Summary Judgment Motion was completed on January 17, 2013, when First American filed a reply brief.

On January 24, 2013, the Court heard argument on the Summary Judgment Motion from First American and Mr. Moses. On April 25, 2013, the Court held a pre-trial conference and further hearing on the Summary Judgment Motion, and reserved decision.

On July 19, 2013, the Court issued a Memorandum Decision and Order denying the Summary Judgment Motion. There, the Court declined to give collateral estoppel effect to the New Jersey default judgment with respect to the issues of Mr. Moses's knowledge and intent based on, among other things, the New Jersey law of collateral estoppel in the context of a default judgment, and denied summary judgment on First American's Section 523(a)(2)(A), 523(a)(4), and 523(a)(6) claims.

Specifically, with respect to whether collateral estoppel effect should be accorded to the New Jersey default judgment, this Court concluded that it should give the same collateral estoppel effect to the judgment as would a New Jersey state court. The Court concluded that First American had not demonstrated that the facts determined for purposes of the New Jersey default judgment were "actually litigated" in that forum, and that First American had not shown that those matters were determined "on the merits." And based on the entire record, the Court declined to apply collateral estoppel effect to the New Jersey default judgment with respect to...