Garcia v. Soden (In re Soden)

• Decision Date: 30 March 2019
• Docket Number: Adv. Proc. No. 17-01449-MAM,Case No.: 17-20013-MAM
• Parties: In re: OLIVIA DIANE SODEN, Debtor. CHRISTOPHER GARCIA and GINNY DAVIES, Plaintiffs, v. OLIVIA DIANE SODEN, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Florida

In re: OLIVIA DIANE SODEN, Debtor.

CHRISTOPHER GARCIA and GINNY DAVIES, Plaintiffs, v. OLIVIA DIANE SODEN, Defendant.

Case No.: 17-20013-MAM

Adv. Proc. No. 17-01449-MAM

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA WEST PALM BEACH DIVISION

March 30, 2019

Chapter 13

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT [ECF NO. 31]

THIS MATTER came before the Court for a hearing on November 7, 2018 at 10:00 a.m. (the "Hearing") upon Defendant's Motion to Dismiss With Prejudice First Amended Complaint Filed by Plaintiffs, Christopher Garcia and Ginny Davies (ECF No. 31) (the "Converted Motion"), the Supplement To Defendant's Motion to Dismiss With Prejudice First Amended Complaint Filed by Plaintiffs, Christopher Garcia and Ginny Davies and Request for Hearing (the "Supplement") (ECF No. 73), the response [ECF No. 103] (the "Response")¹ to the Converted Motion filed by the above-captioned plaintiffs ("Plaintiffs"), the Joint Stipulation of Undisputed Facts in Connection With Defendant's Motion to Dismiss With Prejudice First Amended Complaint Filed by Plaintiffs, Christopher Garcia and Ginny Davies [ECF No. 31] Converted to Motion for Summary Judgment [ECF No. 96] (ECF No. 107) (the "Joint Stipulation"), and Defendant's Reply to Response to Motion to Defendant's Motion to Dismiss with Prejudice First Amended Complaint Filed by Plaintiffs, Christopher Garcia and Ginny Davies [ECF No. 31] Converted to Motion for Summary Judgement [ECF No. 96] (ECF No. 111) (the "Reply"). Prior to the Hearing, the Court converted the Converted Motion from a motion to dismiss to a motion for summary judgment pursuant to Federal Rule of Civil Procedure 12(d), made applicable to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 7012. See ECF No. 96.

BACKGROUND

I. Initial Summary Judgment Hearing and Briefing Order

The issues raised in the above-captioned adversary proceeding, Garcia et al. v. Soden, Adv. Proc. No. 17-1449 (the "Soden Proceeding"), largely mirror those raisedin the companion case styled as Garcia et al. v. Batcheler, Adv. Proc. No. 17-1448 (the "Batcheler Proceeding", and collectively with the Soden Proceeding, the "Adversary Proceedings").² In the Converted Motion, each of the defendants in the two Adversary Proceedings, Sean Ryan Batcheler ("Batcheler") and Olivia Diane Soden ("Soden", and collectively with Batcheler, "Defendants"), sought summary judgment as to all four counts asserted in the amended complaint (ECF No. 26) (the "Amended Complaint").³

At the Hearing, the Court granted summary judgment in favor of Defendants as to Counts I, II, and III of the Amended Complaint. The Court reserved ruling as to Count IV and directed both parties to submit supplemental briefing on certain key aspects of Plaintiffs' claims under Count IV (ECF No. 119, at ¶ 4 (the "Briefing Order").⁴ The Court also ordered Plaintiffs (only) to submit additional briefing anddocumentation with detailed record references describing Defendants' specific individual actions resulting in "willful and malicious injury" to Plaintiffs or their property. Id.

II. Procedural History

The dispute giving rise to these Adversary Proceedings first came to light in the prepetition case captioned Garcia et al. v. Mader Law Group, et al., Case No. CIVRS1307958 (the "California Case") filed in the Superior Court of California, San Bernardino County (the "California Court"). The Amended Complaint alleges that Plaintiffs engaged Defendants to provide legal representation in a potential loan modification for property located at 1415 W. 16^th St., Upland, CA 91784 (the "Upland Property").⁵ The allegations in the Amended Complaint largely follow (with a few notable exceptions discussed herein) the allegations set forth in the second amended complaint (the "California Complaint") filed in the California Case.⁶

Because Plaintiffs sought legal assistance with the Upland Property immediately prior to a previously-scheduled trustee sale,⁷ the proposed loan modification would have required a very short timeline. In the Amended Complaint, Plaintiffs allege that Defendants personally (individually) accepted the legalengagement,⁸ but quickly terminated⁹ the representation prior to the anticipated sale, causing mental anguish and other financial harm to Plaintiffs. Plaintiffs sought stay relief in this Court to continue litigation of the California Case against both Defendants, which this Court granted (the "Stay Relief Orders").¹⁰

The Stay Relief Orders permitted Plaintiffs to prosecute the California Case through a final, non-appealable judgment, but did not permit Plaintiffs to execute upon any monetary amount awarded in a judgment, absent further order of this Court. Pursuant to 28 U.S.C. §§ 1334(c)(1), 1334(c)(2), and 1452(b), the Court also abstained from liquidating any claims that Plaintiffs (as creditors in Defendants' Bankruptcy Cases) might have against Defendants.

On January 22, 2018, the California Court entered judgment by default in the California Case in favor of Plaintiffs and against Defendants (the "Default Judgment"). Amended Complaint, Exhibit C. The California Court also entered an "Order for Factual Determinations", which contains many legal conclusions designated as "factual" findings. Amended Complaint, Exhibit B. These findings are of little import to this Court's present decision, however, because the California Court vacated the Default Judgment pursuant to a Statement of Decision entered on April12, 2018 (the "Statement of Decision").¹¹

The California Court's Statement of Decision vacated the Default Judgment, restricted the potential award of damages, and offered Plaintiffs two options:

1) File an amended complaint within 30 days of April 12, 2018, and plead the amount of damages claimed in the 1st-13th and 16th-19th causes of action in the California Case, or

2) Within 30 days, accept the judgment as modified by the Statement of Decision.

If Plaintiffs chose Option 1, the Statement of Decision required Plaintiffs to serve an amended complaint and damage demand on Defendants, who then would have had the statutory period to file a responsive pleading. If Plaintiffs accepted Option 2, the Statement of Decision clarified that the modification set forth therein was based solely on the 14th/IIED cause of action and the amounts, as supported by the submitted evidence, and damages listed in the Statement of Damages, which provided a grand total judgment of $3,458,410.00. Pursuant to the Statement of Decision, upon entry of a new (modified) judgment (the "Proposed Modified Judgment"), Defendants were authorized to move for a new trial pursuant to applicable state law, including Don v. Cruz, 131 Cal.App. 3d 695 (Cal. 1982).

Plaintiffs elected instead to take no action at all. As a result, as of the date of this Order, no final judgment has been entered liquidating any potential claim asserted by Plaintiffs in Defendants' Bankruptcy Cases. Both Plaintiffs andDefendants appealed the Statement of Decision to the Court of Appeal of California, 4th District.¹²

All these events call into question Plaintiffs' status as creditors in Defendants' Bankruptcy Cases and, ultimately, Plaintiffs' standing to bring the Adversary Proceedings. The question of creditor status has been further muddied in these Adversary Proceedings by Plaintiffs' insistence upon repeatedly pleading allegations against Defendants likely based upon the actions of Mader Law Group, LLC ("MLG"), Defendants' prior employer and co-defendant in the California Case.

Plaintiffs relied heavily upon facts alleged in the California Complaint as support for allegations in the Amended Complaint. Unfortunately, many key allegations in the Amended Complaint are inconsistent with allegations in the California Complaint. One of the most striking differences between the various iterations of Plaintiffs' allegations is the inclusion or omission of MLG as the alleged primary actor who caused Plaintiffs' injuries. This variance between the Amended Complaint and the California Complaint, when coupled with Plaintiffs' conflation of MLG (a corporate entity) with Defendants (as individual debtors), has created a morass of conflicting factual and legal allegations for the Court to sift through in determining whether summary judgment is appropriate.

To avoid further confusion and properly focus the Court's inquiry upon Defendants in an individual capacity, rather than as employees or alleged agents of MLG, the Briefing Order explicitly directed Plaintiffs to submit a succinct statement (the "Statement") identifying the specific individual actions or inactions by Defendant Batcheler and Defendant Soden purportedly giving rise to a willful and malicious injury to Plaintiffs or their property. In sum, the Briefing Order directed the parties to submit all pertinent factual evidence and legal argument regarding three interrelated aspects of Plaintiffs' allegations under 11 U.S.C. § 523(a)(6):

1) The present status of the California Case (including any appeals), and the preclusive impact (if any) of findings, orders, or judgments entered in that case;

2) Any additional rulings or findings from the Florida Bar Grievance Committee in connection with a bar complaint filed by Plaintiffs against Defendant Soden;¹³ and3) What specific actions or inactions Plaintiffs allege Defendant Batcheler and Defendant Soden performed individually resulting in a "willful and malicious injury" upon Plaintiffs or their property.¹⁴

The parties timely submitted memoranda and supporting documents (ECF No. 124, "Defendants' Memorandum" and ECF No. 125, "Plaintiffs' Memorandum") and the Court took the matter under advisement. After reviewing all relevant pleadings, including (but not limited to) the Amended Complaint, Converted Motion, Supplement, Response, Joint Stipulation, Reply, all supplemental briefing submitted pursuant to the Briefing Order, and all exhibits to each of these respective filings, the Court concludes that: (1) there is...