In re Burress

• Decision Date: 07 March 2000
• Docket Number: Bankruptcy No. 99-14768 CEM. Adversary No. 99-1382 CEM.
• Citation: 245 BR 871
• Parties: In re Ronald W. BURRESS d/b/a ASR Solutions and ASR Systems & Peripherals, Inc., Debtor. Solar Systems And Peripherals, Inc., Plaintiff, v. Ronald W. Burress, Defendant.
• Court: U.S. Bankruptcy Court — District of Colorado

245 B.R. 871 (2000)

In re Ronald W. BURRESS d/b/a ASR Solutions and ASR Systems & Peripherals, Inc., Debtor.

Solar Systems And Peripherals, Inc., Plaintiff, v. Ronald W. Burress, Defendant.

Bankruptcy No. 99-14768 CEM. Adversary No. 99-1382 CEM.

United States Bankruptcy Court, D. Colorado.

March 7, 2000.

Stephen A. Hess, Sparks Willson Borges, Brandt & Johnson, P.C., Colorado Springs, CO, for Solar Systems & Peripherals, Inc., Plaintiff.

Robert J. Mason, Colorado Springs, CO, for Ronald W. Burress, Defendant.

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

CHARLES E. MATHESON, Chief Judge.

On November 30, 1999, the Plaintiff, Solar Systems and Peripherals, Inc., ("Plaintiff") filed Plaintiff's Motion for Summary Judgment ("Motion") seeking a determination that the judgment entered in its favor in state court is nondischargeable pursuant to 11 U.S.C. § 523(a)(4) and (6). The Plaintiff asserts that collateral estoppel applies to the facts which form the basis for the state court judgment and asks for summary judgment on that basis.

The Plaintiff's Motion is supported by a copy of a Settlement Agreement which was entered into in the state court action by the Plaintiff and the Debtor (Exhibit A to the Complaint and the Motion) ("Settlement" and "Exhibit A"); a copy of a Confession of Judgment and Stipulation (Exhibit B to the Complaint and the Motion) ("Confession" and "Exhibit B"); a correction of the state court judgment (Exhibit C to the Complaint and the Motion) ("Corrected Judgment" and "Exhibit C"); and the affidavit of Paul Cooke, the president of the Plaintiff ("Affidavit"). The Debtor filed Defendants (sic) Reply Brief Re: Motion for Summary Judgment ("Debtor's Brief"). In Debtor's Brief, and in his Answer, the Debtor acknowledges the authenticity of the documents and also relies on them but urges an interpretation different than that propounded by the Plaintiff. He does not attach any affidavits in support of his response. Essentially, there is no dispute about the underlying facts as they are established by Exhibits A, B and C and the Affidavit.

This dispute arises out of an employer-employee relationship. The Plaintiff bought and sold computer systems and their peripherals and it employed the Debtor as a sales representative. Plaintiff hired Debtor on April 16, 1993 and they entered into an employment contract on March 28, 1995. During the course of his employment, Debtor established relationships with Plaintiff's vendors and customers such that beginning in June of 1993, he engaged in a pattern of conduct whereby he personally received payments from some of the customers of the Plaintiff of $141,550 related to the sales of computer equipment and their peripherals. He received these payments between November of 1993 and May of 1995. The computer equipment was bought from a competitor of the Plaintiff and sold to a customer of the Plaintiff.

Shortly thereafter, Plaintiff fired Debtor and Debtor commenced a wrongful termination action against the Plaintiff in state court in the State of Washington ("State Court Action"). The Plaintiff counterclaimed alleging misappropriation of trade secrets, breach of fiduciary relationship, unlawful conversion and breach of a duty of loyalty.

Approximately one year and four months into the litigation, the parties entered into the Settlement. Exhibit A, and Confession, Exhibit B. The terms of the Confession were incorporated into the Settlement by reference. One of the terms of the Settlement provided that upon the default of the Debtor, Plaintiff could obtain entry of judgment in its favor in accordance with the terms of the Settlement and Confession. Plaintiff would not file the Confession unless and until Debtor defaulted in payment. The Debtor defaulted, the Plaintiff filed the Confession and on April 18, 1997, the state court entered judgment.

The Plaintiff argues that the terms of the Settlement and Confession bind the Debtor and bar him from relitigating the issues in the bankruptcy court. The Plaintiff relies on certain salient terms of the Settlement and Confession. The Debtor, on the other hand, defends on only two grounds. The Debtor argues that the Settlement on its face does not state that the judgment is for a breach of fiduciary duty and is simply a judgment for a dollar amount. The Debtor encourages the Court to read the Settlement and Judgment and determine that the debt has been discharged. Secondly, or alternatively, Debtor asserts that the judgment has been satisfied from various sources.

The provision of the Settlement upon which the Plaintiff primarily relies is one in which the Debtor admits that he intentionally injured Plaintiff and is as follows:

(Debtor) agrees that the payments to be made to Solar Systems pursuant to Section 4.1 of this Agreement constitute a debt arising from injuries intentionally inflicted on the entity or property of Solar Systems, as set forth in Section 5 below, and agree that said debt is excepted from discharge under the United States Bankruptcy Code. (Debtor) further agrees that said payments are compensation to Solar Systems for (his) "willful and malicious injury" (as that term is defined in 11 U.S.C. § 523(6) of the Bankruptcy Code) to Solar Systems as an entity and/or to its property, proximately caused by the breach of his duty of loyalty owed to Solar Systems, as further set forth in section 5 below, and more fully described in the Confession of Judgment and Stipulation and Judgment attached as Exhibit C hereto. (Debtor) further agrees that he will not seek a discharge under the United States Bankruptcy Code of his debt obligation to Solar Systems arising under this Settlement Agreement. . . . Settlement, Section 4.6.

Section 5 of the Settlement, captioned Limited Admission of Liability, (referenced in Section 4.6 above) provides:

It is understood and agreed by the undersigned that this Settlement Agreement is entered into by the parties for the purpose of avoiding further litigation, and that nothing in this Settlement Agreement is to be construed an admission of liability on the part of the (Debtor), except to the extent that (Debtor) admits he breached a duty of loyalty owed to his employer, defendant Solar Systems, as more fully set forth in the Confession of Judgment and Stipulation that is attached hereto as Exhibit C and incorporated herein by reference. Solar Systems withdraws its allegations of unlawful conversion against the (Debtor), except that Solar Systems expressly reserves the right to seek and obtain restitution under state and/or federal criminal laws for the value of any of its property found in a criminal proceeding to have been unlawfully converted by the (Debtor).

The Debtor's argument that the judgment is only for a specific amount and does not speak to breach of fiduciary duty is borne out by the exhibits only to a limited degree. The Confession contains at page 2 a section captioned "Confession of Judgment" and a Judgment Upon Confession and Stipulation at page 14 of Exhibit B which recites only that the Debtor confesses to judgment in favor of the Plaintiff in dollar amount. The section captioned "Confession of Judgment" is followed by a complete recitation of the facts which demonstrate Debtor's breach of his duty of loyalty to the Plaintiff as follows:

This Confession of Judgment is for the purpose of securing (Debtor) from tort liability arising from a counterclaim filed by Solar Systems & Peripherals, Inc., asserting that (Debtor) breached a duty of loyalty owed to his employer Solar Systems & Peripherals, Inc. Solar Systems withdraws its allegations of unlawful conversion against the (Debtor), except that Solar Systems expressly reserves the right to seek and obtain restitution under state and/or federal criminal laws for the value of any of its property found in a criminal proceeding to have been unlawfully converted by (Debtor). The assertions (sic) that (Debtor) breached a duty of loyalty owed to his employer Solar Systems and Peripherals, Inc. is shown by the following stipulated facts: . . .

5. (Debtor) was a resident of King County, Washington from April, 1993 until on or about August 1, 1996.(He) resided with his wife, Sondra Powell, throughout this period of time and the period of his employment by Solar Systems, and all acts described below on the part of the (Debtor) constituting a breach of his duty of loyalty owed to Solar Systems, upon which this confession of judgment is based, were done on his own behalf and for the benefit of his spouse and the marital community which they formed.

6. At all material times to this action, Solar Systems was in the business of buying and selling computer systems and their peripherals. Solar Systems had established business relationships with numerous buyers and sellers of computer equipment and their peripherals prior to and independent of its employment of the (Debtor). (Debtor) was employed by Solar Systems on April 16, 1993, as a sales representative, pursuant to an employment contract signed by the (Debtor) on March 28, 1995. In this capacity, he served as an agent on behalf of Solar Systems in dealing with entities wishing to acquire and/or sell new or used computer equipment and peripherals. Solar Systems had a reasonable expectancy of economic gain resulting from such transactions and (Debtor) fully knew and understood these expectations on the part of Solar Systems.

7. (Debtor) was a key employee of Solar Systems and as a sales representative had complete access to Solar Systems\' confidential information and trade secrets, including without limitation its customers and vendors and the prices at which it bought and sold computer systems and their peripherals. (Debtor) also became familiar with Solar Systems\' customers and suppliers, and confidential information peculiar to the needs and requirements of said customers and suppliers.

8. During the period of his employment by Solar Systems, (Debtor) engaged in a

...