In re Hamilton
| Decision Date | 27 November 1992 |
| Docket Number | Bankruptcy No. 92-10290-RJB,Adv. No. 92-1703-SBB. |
| Citation | 147 BR 779 |
| Parties | In re John Scott HAMILTON and Charlotte Belle Hamilton, Debtors. HARTWOOD AVIATION, INC.; Hartwood Paracenter, Inc.; Harry C. Schoelpple; and Robert T. Dorminey, Plaintiffs, v. John Scott HAMILTON a/k/a J. Scott Hamilton, Defendant. |
| Court | U.S. Bankruptcy Court — District of Colorado |
George T. Carlson, Englewood, Colo., for debtor/defendant.
Christine J. Jobin, Katch, Wasserman & Jobin, Denver, Colo., for plaintiffs.
THIS MATTER comes before the Court upon Plaintiffs' Motion for Summary Judgment and Memorandum Brief in Support thereof filed August 4, 1992 and Defendant's Response filed August 21, 1992 and Reply Brief filed September 16, 1992. The Court, having reviewed the file and being advised in the premises, makes the following findings of fact and conclusions of law.
In 1985 or 1986, Plaintiffs herein (collectively "Hartwood") employed J. Scott Hamilton and J. Scott Hamilton, P.C. as counsel to defend them in civil litigation in Virginia in connection with a parachuting accident which allegedly occurred in connection with the operation of its business (the "Civil Suit"). At the conclusion of the trial on the matter, a Virginia jury entered a verdict against Hartwood. Thereafter, Hartwood filed a legal malpractice action against Hamilton in Virginia seeking compensatory damages in the amount of $500,000.00 and punitive damages in the amount of $500,000.001 (the "Malpractice Suit").
The Malpractice Suit resulted in a jury award of $198,000.00 in compensatory damages and $160,000.00 in punitive damages, jointly and severally against J. Scott Hamilton and J. Scott Hamilton, P.C. (collectively "Hamilton"). Hartwood asserts that compensatory damages were awarded based upon express findings by the jury that Hamilton owed Hartwood a duty of care, that Hamilton breached that duty, and that Hamilton was negligent by reason of that breach.2 Similarly, Hartwood asserts that punitive damages were awarded based upon express findings by the jury that Hamilton's conduct was "willful and wanton."3
On January 10, 1992, John Scott Hamilton individually ("Debtor") filed a Voluntary Petition pursuant to Chapter 7 of the Bankruptcy Code. The within Complaint Objecting to Discharge Pursuant to 11 U.S.C. § 523(a)(4) and § 523(a)(6) was filed May 14, 1992. The Complaint asserts that the judgment entered against the Debtor in the Malpractice Suit is non-dischargeable.
On a motion for summary judgment, this Court must view the record, pleadings, and inferences in the light most favorable to the party opposing the motion. Lindley v. Amoco Production Co., 639 F.2d 671, 672 (10th Cir.1981); In re American Cable Publications, Inc., 62 B.R. 536, 537-538 (D.Colo.1986). Summary judgment may only be granted if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Carey v. U.S. Postal Service, 812 F.2d 621, 623 (10th Cir.1987); Grayson v. American Airlines, Inc., 803 F.2d 1097, 1101 (10th Cir.1986). Frito-Lay, Inc. v. Retail Clerks Union Local No. 7, 629 F.2d 653, 656 (10th Cir.1980). To determine if there is an issue of material fact in the instant case, this Court must determine the applicability and effect of the collateral estoppel doctrine.
Under the collateral estoppel doctrine, a final judgment on the merits in a prior action precludes relitigation of issues actually litigated and necessary to the outcome of the first action in a later suit between the same parties. Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). See, generally, Brown v. Felsen, 442 U.S. 127, 139 n. 10, 99 S.Ct. 2205, 2213 n. 10, 60 L.Ed.2d 767 (1979). "Collateral estoppel protects litigants from the burden of relitigating an identical issue with the same party and promotes judicial economy by preventing needless litigation." In re Mueller, 34 B.R. 869, 871 (Bankr.D.Colo.1983) (citing Parklane Hosiery, supra).
Although some courts have refused to apply collateral estoppel in dischargeability actions based upon a fear of interference with the exclusive jurisdiction of the Bankruptcy Court to determine the dischargeability of debts,4 the Tenth Circuit disagrees. In re Wallace, 840 F.2d 762 (10th Cir.1988). While the Bankruptcy Court ultimately decides if a debt is dischargeable under the various provisions of Section 523, collateral estoppel may be invoked to prevent a party from relitigating settled facts if the following three conditions are met: "1) the issue to be precluded is the same as that involved in the prior state action, 2) the issue was actually litigated by the parties in the prior action, and 3) the state court's determination of the issue was necessary to the resulting final and valid judgment." Id., at 765.
The parties do not appear to dispute that the issues were actually litigated and necessary to the jury's verdict in the previous Malpractice Suit. The only disputes appear to be whether there is identity of issues and whether the evidentiary standards used by the Virginia court were sufficient.
Hartwood relies upon the award of punitive damages to establish that there has been a finding that the Debtor's conduct was "willful and malicious" as those terms are used in 11 U.S.C. § 523(a)(6). This Court must, therefore, compare the standards under which the jury was instructed that it could award punitive damages with the standards by which the dischargeability of a debt is determined under Section 523(a)(6).
Section 523(a)(6) provides that the entry of a discharge does not discharge a debtor from a debt "for willful and malicious injury by the debtor to another entity or to the property of another entity." 11 U.S.C. § 523(a)(6) (emphasis added). The Tenth Circuit has addressed the meaning of these terms.
See, generally, In re Grey, 902 F.2d 1479, 1481 (10th Cir.1990) (); In re Tague, 137 B.R. 495, 502 (Bankr.D.Colo.1991) ().
The Debtor argues that, since the jury was instructed on and found that only "willful and wanton" conduct was present, the issues actually decided were not identical to the issues before this Court: Whether Defendant caused "willful and malicious" injury. This Court disagrees. The jury was instructed that "willful and wanton" conduct means either (1) a conscious act in disregard of another's rights or (2) an act in reckless indifference to the consequences to another when the defendant is (a) aware of his conduct and (b) aware, from his knowledge of existing circumstances and conditions, that his conduct would probably result in injury to another.5 This instruction clearly comports with the standards established in this Circuit for a finding of "willful and malicious." See, Posta, supra.
Identity of the issues in the context of collateral estoppel means "a substantive identity between the pertinent issues in the two proceedings, not in the precise terms in which the issues or the parties' claims are described." Tague, supra at 503. This Court finds that as to the Section 523(a)(6) claim there is an identity of the issues.
In addition, "collateral estoppel applies only if the evidentiary standard applied to the factual questions in the first action was equal to or greater than that applicable to a Section 523(a) claim." Id., at 503. In a unanimous decision, the United States Supreme Court has held in dicta that the preponderance of the evidence standard, rather than the clear and convincing evidence standard, applies to all exceptions from dischargeability of debts set forth in Section 523(a). Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 661, 112 L.Ed.2d 755 (1991).
The Debtor argues that this Court should follow Judge Clark's lead in this District that, despite Grogan and subsequent Tenth Circuit dicta,6 "the Tenth Circuit law binding on this Court remains unchanged until there is an actual decision on the issue." Tague, supra at 504. In her opinion, Judge Clark acknowledged that a number of courts had since applied a preponderance standard to claims under other portions of Section 523(a) including Section 523(a)(6) following the Grogan opinion. Tague, supra at 504 n. 12. Judge Clark, however, refused to follow the apparent trend.
Since Judge Clark's opinion in Tague, Judge Kane of the District Court has published at least two cases in which he applied the preponderance of evidence standard to various Section 523(a) claims in reliance on the dicta in Grogan and in one case the Tenth Circuit has affirmed. In re Hansen, 131 B.R. 167, 169 n. 1 (D.Colo. 1991), aff'd, 977 F.2d 595 (10th Cir.1992) (§ 523(a)(6)); In re Dunston, 146 B.R. 269 (D.Colo.1992) (affirming, in part, 117 B.R. 632 (Bankr.D.Colo.1990)) ...
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