In re Camacho, Bankruptcy No. 08-40960.

• Citation: 411 B.R. 496
• Decision Date: 14 May 2009
• Docket Number: Bankruptcy No. 08-40960.,Adversary No. 08-4054.
• Parties: In the matter of Miguel C. CAMACHO, Debtor Pearl Hebbard, Plaintiff v. Miguel C. Camacho, Defendant.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Georgia

411 B.R. 496

In the matter of Miguel C. CAMACHO, Debtor

Pearl Hebbard, Plaintiff v. Miguel C. Camacho, Defendant.

Bankruptcy No. 08-40960.

Adversary No. 08-4054.

United States Bankruptcy Court, S.D. Georgia, Savannah Division.

May 14, 2009.

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Jeffrey M. Harvey, Law Office of Jeffrey Morton Harvey, LLC, Louisville, GA, Ramsey Austin Knowles, Taylor English Duma, LLP, Toronda M. Silas, Taylor, Busch, Slipakoff & Duma LLP, Atlanta, GA, for Plaintiff.

Barbara B. Braziel, Savannah, GA, Richard C.E. Jennings, Law Offices of Skip Jennings, PC, Savannah, GA, for Defendant.

MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

LAMAR W. DAVIS, JR., Bankruptcy Judge.

Defendant, Miguel G. Camacho ("Debtor"), filed Chapter 7 on May 30, 2008. On September 2, 2008, Plaintiff filed an Adversary Proceedings pursuant to 11 U.S.C. § 523(a)(2) and (6) for the purpose of determining whether the indebtedness owed by Debtor to the Plaintiff is nondischargable. After Debtor filed his answer, a pretrial conference was held, and discovery was conducted, Plaintiff filed a Motion for Summary Judgment on February 6, 2009. Debtor filed his Response on March 13, 2009. On March 24, 2008, Plaintiff replied to Debtor's response.

Plaintiff argues that a judgment entered by the Superior Court of Gwinnett County, Georgia in favor of Plaintiff and against Debtor for fraud and wrongful eviction "precludes dischargeability under the doctrine of collateral estoppel based on 11 U.S.C. § 523(a)(2), (6)-`false pretenses, a false representation, or actual fraud' and `willful and malicious injury by the debtor.'" Motion for Summary Judgment, Dckt.No. 14, pg. 1-2. For the following reasons, Plaintiff Pearl Hebbard's Motion for Summary Judgment is GRANTED.

On or about August 23, 2001, Plaintiff entered into a sales agreement to sell property located at 9013 Hightower Trail, Snellville, Gwinnett County, Georgia to Glass-Cam Commercial Developers, Inc. ("Glass-Cam") for $475,000.00 (the "Sale Agreement"). At the time Plaintiff and Glass-Cam entered into the Sale Agreement, Debtor was an officer and/or agent of Glass-Cam. Complaint, Dckt.No. 1, ¶ 6; Answer, Dckt.No. 4, ¶ 6. Following the execution, of the Sale Agreement, a dispute arose among Plaintiff, Glass-Cam and other related parties, and on March 26, 2003, Plaintiff instituted an action against Debtor and others to recover damages for fraud, breach of contract, wrongful eviction and other causes of action in the Superior Court of Gwinnett County, Case No. 03-A-03433-1. Complaint and Answer, ¶ 7.

Debtor filed an answer and participated for part of the Gwinnett litigation but did not appear at trial. Brief, Dckt.No. 18, pg. 1-2; Complaint and Answer, ¶ 8. Because Debtor failed to appear at trial, the Gwinnett Court struck Debtor's answer and entered judgment against Debtor for fraud, wrongful eviction and punitive damages on a default jury verdict. Complaint, ¶ 9; Response, Dckt.No. 18, pg. 1. Specifically, the Judgment on Verdict as to Plaintiffs fraud claim stated that judgment was entered "in favor of Plaintiff and against Defendant Miguel Camacho in the sum of $187,833.00 compensatory damages and $0.00 punitive damages." As to Plaintiffs wrongful eviction claim, judgment was entered "in favor of Plaintiff and against Defendant Miguel G. Camacho in the sum of $25,000.00 compensatory damages and $10,000.00 punitive damages. The jury found that Defendant did act with specific intent to cause harm." Complaint, Dckt. No. 1, Exhibit A.

STANDARD OF REVIEW

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.Proc. 5(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Rule 56 of the Federal Rules of Civil Procedure applies to motions for summary judgment in bankruptcy adversary proceedings. See Fed.R.Bankr. Proc. 7056. The party moving for summary judgment has the burden of demonstrating that no dispute exists as to any material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 156, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Once this burden is met, the nonmoving party must present specific facts that demonstrate that there is a genuine dispute over material facts. Finally a court reviewing a motion for summary judgment must examine the evidence in light most favorable to the nonmoving party, and all reasonable doubts and inferences should be resolved in the favor of the non-moving party. In re Davis, 374 B.R. 362, 364 (Bankr.S.D.Ga. 2006).

DISCUSSION

The issue here is whether collateral estoppel as a matter of law precludes the discharge of Debtor's judgment against him. In the present case, Plaintiff brought the instant adversary proceeding claiming that the judgment of the State Court is excepted from discharge pursuant to 11 U.S.C. § 523(a)(2) and (6). Section 523 provides in pertinent part as follows:

(a) A discharge under section 717, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained, by—

(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition;

(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;

. . .

11 U.S.C. § 523(a)(2)and(6).

In Section 523(a) dischargeability actions, this Court recognizes the applicability of collateral estoppel. Chisholm v. Stevens (In re Stevens), 1996 WL 33401190 at *3 (Bankr.S.D.Ga. May 21, 1996) (Davis, J.); see Grogan v. Garner, 498 U.S. 279, 284, 111 S.Ct. 654, 112 L.Ed.2d 755 n. ll (1991) ("collateral estoppel principles do indeed apply in discharge exception proceedings pursuant to § 523(a)."); In re Bilzerian, 100 F.3d 886, 892 (11th Cir. 1996); Bush v. Balfour Beatty Bahamas. Ltd. (In re Bush), 62 F.3d 1319, 1322 (11th Cir.1995): Hoskins v. Yanks (In re Yanks), 931 F.2d 42, 43 (11th Cir.1991); In re Latch, 820 F.2d 1163, 1164-65 (11th Cir.1987).

"Moreover, federal courts must give the same preclusive effect to prior judgments of state courts as those judgments have by `law or usage' in the courts of that state." In re Griffin, 1999 WL 33591982, at *2 (Bankr.S.D.Ga.1999)(Davis, J.)(citing 28 U.S.C. § 1738 (1994)). "Therefore, this Court must apply the law of the state of Georgia in order to determine the preclusive effect of the state court judgments against the Debtor." Id. (citing In re St. Laurent, 991 F.2d 672, 675 (11th Cir.1993)); see In re Bush, 62 F.3d at 1323 n. 6 (applying federal law to determine whether federal court default judgment had collateral estoppel effect and noting that state court judgment would be reviewed under law of that state). "While collateral estoppel may foreclose relitigation of issues decided in prior judicial proceedings, the ultimate issue of dischargeability is a legal question over which the bankruptcy court has exclusive jurisdiction." Id. (citing In re Halpern, 810 F.2d 1061 (11th Cir.1987)).

1. Collateral Estoppel under Georgia Law

Under Georgia law, a party may only assert the doctrine of collateral estoppel if the issue was (1) raised in a prior proceeding, (2) actually litigated and decided, and (3) necessary to final judgment. Boozer v. Higdon, 252 Ga. 276, 278, 313 S.E.2d 100, 102 (Ga.1984)("In order to successfully plead collateral estoppel, ... one must prove that the contested issues, even though arising out of a different claim, were actually litigated and decided and were necessary to the prior decision."); see also Kent v. Kent, 265 Ga. 211-12, 452 S.E.2d 764 (Ga.1995)("collateral estoppel applies where an issue of fact or law is actually litigated and determined by a valid by a valid-judgment, and the determination is essential to the judgment.").

Plaintiff has easily proven factors 1 and 3: the default judgment issued by the Gwinnett Court was raised in a prior civil litigation and was necessary to the court and jury's final judgment which ultimately assigned liability for fraud and wrongful eviction to Debtor and his other co-defendants.

Debtor, however, asserts that the second factor above was not satisfied because his liability was not actually litigated and decided. Specifically, Debtor argues that he "participated in the litigation of the Gwinnett County case in the early stages. He paid an attorney to represent him in that case. During the years of litigation, Mr. Camacho found that he could no longer afford to pay his attorney to defend him against Plaintiffs lawsuit." Brief, Dckt. No. 18, pg. 3. Debtor also argued that he "could not afford to travel back and forth from Savannah to Gwinnett County to defend himself." Response, Dckt.No. 18, pg. 2. As a result, Defendant did not appear at the trial, thus his answer was stricken and a default judgment was entered against him.¹

In the underlying state court case, Plaintiff specifically raised allegations of fraud as to Debtor. Debtor actively participated in the adversary process for "years." See Brief, Dckt.No. 18, pg. 3. He was represented by counsel. He answered the complaint. Yet, he elected not to appear at trial or defend the lawsuit. After the trial on the merits, the jury found Debtor liable for fraud. See Complaint, Dckt. No. 1, Exhibit A. This evidence undeniably establishes that the matters pertaining to fraud were actually litigated and decided in the state court.

In light of the foregoing, this Court concludes that all the necessary requirements for the application of collateral estoppel under Georgia law are present in this proceeding, thus the doctrine of collateral estoppel will prevent...