Gray v. Diane J. Tacason & Djaygee, Inc. (In re Tacason)

• Decision Date: 31 December 2014
• Docket Number: Adv. No. 12-1096-BAH,Bk. No. 12-11879-BAH
• Citation: 2014 BNH 017
• Court: U.S. Bankruptcy Court — District of New Hampshire
• Parties: In re: Diane J. Tacason, Debtor John Gray, Plaintiff v. Diane J. Tacason & Djaygee, Inc., Defendants

2014 BNH 017

In re: Diane J. Tacason, DebtorJohn Gray, Plaintiff v. Diane J. Tacason & Djaygee, Inc., Defendants

Bk. No. 12-11879-BAH

Adv. No. 12-1096-BAH

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE

December 31, 2014

Note: This is an unreported opinion. Refer to LBR 1050-1 regarding citation.

Patrick M. Groulx,

Donahue Grolman & Earle,

Boston, MA

Attorney for Plaintiff

Michael B. Feinman,

Feinman Law Offices,

Andover, MA

Attorney for Defendant,

Diane Tacason

Chapter 7

MEMORANDUM OPINION

I. INTRODUCTION

The Court has before it the cross-motions for summary judgment of the Plaintiff, John Gray and the Defendant, Diane Tacason. Tacason seeks summary judgment on all remaining counts of the complaint, while Gray only asks for summary judgment on Count X. For the reasons set forth below the Court shall grant Tacason summary judgment on Counts II, III, IV, and VIII, and shall grant Gray summary judgment on Count X. This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a) and Local Rule 77.4(a) of the United States District Court for the District of New Hampshire. This is a core proceeding in accordance with 28 U.S.C. § 157(b).

II. FACTS

The parties dispute many of the facts in this litigation, but not the facts that are relevant and material to the disposition of the cross-motions for summary judgment. Tacason and Gray had a personal and business relationship which began in 1989. The parties ran a business together, Djaygee Inc., which was operated under the name "Cutting Edge Sports." Its main business was selling sports jerseys. They each owned an equal share of the business entity. Tacason generally took care of the parties' books and records—both personal and business—while Gray designed the jerseys. Both aspects of the parties' relationship completely disintegrated and resulted in litigation in Massachusetts state court in 2007 (the "2007 Litigation"). This litigation included claims (among others) that Tacason had breached her fiduciary duties to Gray as a fellow shareholder of a close corporation, wasted corporate assets, and committed fraud. One of the key factual allegations in the 2007 Litigation was that "since at least 2003 Tacason has removed tens of thousands of dollars from the parties' bank accounts by way of Automatic Teller Machine bank withdrawals largely in $300, $400 and $500 denominations, and converted them to her own personal use to the exclusion of John Gray." Doc. No. 66, Ex. 1, Gray's Compl. in the 2007 Litigation.

The parties agreed to settle the 2007 Litigation six months after it began. They executed a settlement agreement in March of 2008 (the "2008 Settlement"). Most importantly, the 2008 Settlement provided that "the parties agree to a general release as to all claims except those reserved by the settlement agreement and ongoing in NH." Doc. No. 66, Ex. 3, ¶ 2. In exchangefor the release Tacason agreed to pay Gray $50,000 and "equally divide the sports + music memorabilia and old team overstock jerseys at the Business Premises." Id. at ¶ 6.5. The 2008 Settlement also provided for the dismissal of the 2007 Litigation with prejudice. Id. at ¶ 8.

In 2009, Gray filed another lawsuit alleging that Tacason had breached the 2008 Settlement (the "2009 Litigation"). The 2009 Litigation came to its conclusion when the superior court found Tacason in contempt of court for failing to abide by three of its orders. The court had issued these orders in furtherance of the division of property envisaged in the 2008 Settlement. Doc. No. 60, Superior Court Order of August 4, 2010 (the "Contempt Order"). As a sanction, the court awarded default judgment to Gray and dismissed all of Tacason's counterclaims. In finding contempt, the court stated that the contempt occurred

when Tacason: failed to divide all of the sports and music memorabilia, concealed some of it from the division process, asserted a bailment on behalf of numerous teams although she only had verification from a very small number of teams, destroyed or damaged property while subject to the jurisdiction of the [c]ourt, and failed to produce all of the non-bailment jerseys for division and failed to follow the process set forth by Judge Inge. In each instance, this [c]ourt finds that this was done intentionally, without justification and with the clear purpose of avoiding, circumventing and in fact defying the Orders of this [c]ourt.

Contempt Order, at 8 (footnote omitted). The effect of the default judgment was to find Tacason liable for breach of the 2008 Settlement.

After entering default judgment for Gray, the superior court conducted a separate hearing to determine the extent of Gray's damages for Tacason's breach of the 2008 Settlement. After the hearing, the court concluded that Tacason owed Gray $252,500, less Gray's share of certain storage costs. Doc. No. 60, Superior Court Order dated April 6, 2011, at 6 (the "Damages Order"). These damages were Gray's damages under the 2008 Settlement; the court found that "Gray is entitled to recover for losses that would not have occurred had the contract beenperformed." Damages Order, at 4. The court found that these damages flowed from the value of the property that Tacason still owed Gray under the 2008 Settlement. Id. at 1-4.

Tacason filed this bankruptcy petition on June 8, 2012. At the 341 meetings that occurred on July 26, 2012 and May 9, 2013, Tacason testified that she transferred the assets of Djaygee, Inc. to herself in March 2012 for no consideration and with no bill of sale. Doc. No. 81, Gray Supplemental Statement of Fact, at ¶¶ 17, 18.

This adversary proceeding was filed on September 20, 2012. The complaint was amended once. Doc. No. 43, First Amended Complaint (the "Amended Complaint"). After the hearing on the cross-motions for summary judgment, the Court issued an order dismissing all counts in the Amended Complaint, except Counts II, III, IV, VIII, and X, based on the agreement of the parties (Doc. No. 91) ("September 22, 2014 Order"). Of the remaining counts, Gray voluntarily dismissed all claims insofar as they were based on "ATM withdrawals" and "payroll checks." Id. Also in the September 22, 2014 Order, the Court indicated that it would consider the extent to which the remaining counts in the Amended Complaint were preempted by the pending chapter 7 bankruptcy case of Djaygee, Inc. in the District of Massachusetts, Bk. No. 13-11166-WCH.¹ It gave the parties an opportunity to submit legal memoranda responding to this issue, as the Court had raised it sua sponte.

Of the Amended Complaint, five separate counts remain. In Count II, Gray seeks to recover Tacason's alleged fraudulent conveyance of Djaygee's assets to herself on March 12, 2012, pursuant to state law—M.G.L. c. 109A. In Counts III and IV, Gray seeks to liquidate damage claims against the estate based on Tacason's breach of fiduciary duty and fraud. Specifically, Counts III and IV allege that Tacason wrote checks on Djaygee's corporate account to cash, prior to 2007, without Gray's knowledge. In Count VIII, Gray seeks to determine thedebt liquidated in Counts III and IV to be nondischargeable under 11 U.S.C. § 523(a)(4) as a defalcation of a fiduciary duty. In Count X, Gray asks the Court to determine the sanction awarded Gray by the Contempt Order to be nondischargeable pursuant to 11 U.S.C. § 523(a)(6) as damages Tacason inflicted in a willful and malicious injury.

III. DISCUSSION

A. Summary Judgment Standard

Summary judgment is appropriate when "the movant shows 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). "Genuine issues of fact are those that a factfinder could resolve in favor of the nonmovant, while material facts are those whose 'existence or nonexistence ha[ve] the potential to change the outcome of the suit.'" Green Mountain Realty Corp. v. Leonard, 750 F.3d 30, 38 (1st Cir. 2014) (quoting Tropigas de Puerto Rico, Inc. v. Certain Underwriters at Lloyd's of London, 637 F.3d 53, 56 (1st Cir. 2011)). In assessing the summary judgment record, a court must draw all reasonable inferences in favor of the non-moving party but is "not obliged to accept as true or to deem as a disputed material fact, each and every unsupported, subjective, conclusory, or imaginative statement made to the court by a party." Adamson v. Walgreens Co., 750 F.3d 73, 78 (1st Cir. 2014) (citations omitted). The non-moving party cannot simply rely on contestations of motive or intent, where those issues are contested merely by conclusory allegations, improbable inferences, and unsupported allegations. Meuser v. Fed. Express Corp., 564 F.3d 507, 515 (1st Cir. 2007); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 424, 249-50 ("If the evidence is merely colorable or is not significantly probative, summary judgment may be granted." (internal citations omitted)); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475U.S. 574, 586 (1986) (parties opposing summary judgment "must do more than simply show that there is some metaphysical doubt as to the material facts").

"[T]he inquiry involved in a ruling on a motion for summary judgment . . . necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits." Anderson, 477 U.S. at 252. Thus, Gray has the burden of proof to prove a debt's nondischargeability under section 523(a)(6) by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 283 (1991). Additionally, "exceptions to discharge are narrowly construed in furtherance of the Bankruptcy Code's 'fresh start' policy, and, for that reason, the claimant must show that his claim comes squarely within an exception enumerated in Bankruptcy Code § 523(a)." Palmacci v. Umpierrez, 121 F.3d 781, 786 (1st Cir. 1997) (citation omitted).

B. The Claims in Counts III, IV, and VIII are barred by the Settlement Agreement

Tacason seeks summary judgment on...