In re Harris, Case No. 07-1587 (Bankr.N.D.W.Va. 9/15/2008), Case No. 07-1587.
| Decision Date | 15 September 2008 |
| Docket Number | Adv. Proc. No. 08-13.,Case No. 07-1587. |
| Court | U.S. Bankruptcy Court — Northern District of West Virginia |
| Parties | IN RE: SAMUEL DAVID LEE HARRIS, Chapter 7, Debtor. MICHELE D. JACKSON, Plaintiff, v. SAMUEL DAVID LEE HARRIS, Defendant. |
Michele Jackson seeks to except two money judgments from the Family Court of Marshall County West Virginia from the Chapter 7 discharge of Samuel David Lee Harris (the "Debtor"). She argues that the judgments are excepted from his discharge under 11 U.S.C. § 523(a)(15) on the grounds that the debts are owed to a former spouse and were incurred by the Debtor in connection with a separation agreement. One judgment was issued on December 28, 2006, in the amount of $12,828.90, and the other was issued on February 10, 2007 in the amount of $9,918.52.
The Debtor moves for summary judgment against Ms. Jackson. He raises three grounds as to why the two judgments are unenforceable against him: (A) Ms. Jackson waived her claims to recover the debts by contract; (B) she lacks "clean hands" to bring her claims; and (C) any amount the Debtor owes to Ms. Jackson is more than offset by the amount she owes to the Debtor. For purposes of summary judgment, the Debtor has not contested that Ms. Jackson otherwise holds debts of the kind described in 11 U.S.C. § 523(a)(15).
For the reasons stated herein, the court will deny the Debtor's motion for summary judgment.
Summary judgment is appropriate when the matters presented to the court "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Fed. R. Bankr. P. 7056; Celotex v. Catrett, 477 U.S. 317, 322 (1986). The party moving for summary judgment has the initial burden of proving that there is no genuine issue as to any material fact. Adickes v. S. H. Kress & Co., 398 U.S. 144, 161 (1970). Once the moving party has met this initial burden of proof, the non-moving party must set forth specific facts sufficient to raise a genuine issue for trial and may not rest on its pleadings or mere assertions of disputed facts to defeat the motion. Matsushita Electric Industrial Co., Ltd., v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (). The mere existence of a scintilla of evidence in support of the opposing party's position will not be sufficient to forestall summary judgment, but "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). In ruling on a motion for summary judgment, "the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255. A fact is not "genuinely disputed" unless the factual conflict between the parties requires a trial of the case for resolution. Finley v. Giacobbe, 79 F.3d 1285, 1291 (2d Cir. 1996) ().
The Debtor and Ms. Jackson married in 1988. During their marriage, Ms. Jackson became the stockholder of Town & Country Manufactured Housing Center, Inc. ("Town & Country"), which sold and delivered mobile homes in Ohio and West Virginia. On September 6, 1996, the Debtor and Ms. Jackson divorced. The terms of their separation agreement, which was adopted by their final order of divorce, provided that the Debtor would undertake the following obligations, among others: (1) assume and make payments on $889,000 in indebtedness owed by Town & Country; and (2) make the payments on a house purchased for $146,000 in Glen Dale, West Virginia in which Ms. Jackson would live. One of Ms. Jackson's obligations under the separation agreement was to turnover her stock ownership in Town & Country to the Debtor.
As alleged by the Debtor, Ms. Jackson refused to timely turnover the Town & Country stock. As a result, when the Debtor attempted to sell Town & Country, he was not able to execute the sale, which purportedly cost him an estimated $650,000 in lost profits and the satisfaction of the $889,000 indebtedness.
Contrary to the Debtor's assertions, while testifying under oath at a April 3, 2000 contempt hearing in Marshall County, Ms. Jackson stated that she turned the stock certificates over to the Debtor on the day of her final divorce — on September 6, 1996. Later, in contradiction to that earlier statement, Ms. Jackson purportedly acknowledged in a February 6, 2004 document titled "Amended Divorce Agreement," that she had retained the stock certificates, canceled the transfer of Town & Country Stock to the Debtor, and then reassigned that stock to herself. Among other things, the "Amended Divorce Agreement" also terminated the Debtor's obligation to pay the mortgage on the Debtor's home in Glen Dale, West Virginia.
In a deposition dated November 8, 2006, however, Ms. Jackson denied ever signing the "Amended Divorce Agreement." She also denied having any contact with the Debtor whatsoever since the time of their divorce in September 1996, and denied ever forging the Debtor's name to Town & Country's stock transfer certificates. According to Ray Fraley, a forensic document examiner hired by the Debtor, Ms. Jackson did indeed forge the Debtor's name to Town & Country's stock transfer certificates on April 11, 1997, and, according to a photocopy of the "Amended Divorce Agreement" of February 6, 2004, he stated that her photocopied signature was authentic.
The report of Ray Fraley and the validity of the "Amended Divorce Agreement" came before the Family Court of Marshall County on December 11, 2006, in connection with petition for contempt filed by the Debtor against Ms. Jackson. The Family Court determined that the "Amended Divorce Agreement" was not enforceable:
[T]he [Debtor] has not produced the original agreement, the agreement was not executed before a notary public, and therefore there exists no evidence or testimony to support the [Debtor's] position that [Ms. Jackson] signed such an agreement. A photocopy can too easily be altered to be found enforceable, particularly when there exists insufficient evidence of the consideration allegedly received by [Ms. Jackson] in exchange for the agreement, and the best evidence is not available that being the original agreement.
(Document No. 17, Ex. A, p. 6-7).
As a result of the December 11, 2006 hearing, the Family Court entered judgment on December 28, 2006, in favor of Ms. Jackson for $12,518.90, representing payments that Ms. Jackson made to Sky Bank on the deed of trust secured by the house in Glen Dale, West Virginia. The court also invited Ms. Jackson to provide a supplemental judgment order detailing additional sums paid by her that should have been paid by the Debtor under the parties' 1996 separation agreement. Consistent with that instruction, Ms. Jackson detailed tax payments and fire service fees that she had paid dating back to 1996, totaling $ 9,918.52. On February 10, 2007, the family court entered a supplemental judgment in that amount.
The Debtor appealed the orders of the Family Court, but the Supreme Court of Appeals of West Virginia refused his petition for appeal on February 22, 2008.
For purposes of summary judgment, the Debtor is not contesting that the amounts owed to Ms. Jackson under the December 28, 2006 and February 10, 2007 Family Court judgments fall within the 11 U.S.C. § 523(a)(15) exception to discharge for obligations owed to a former spouse under a separation agreement. Instead, the Debtor contends that no amount is owed Ms. Jackson based on: (A) Ms. Jackson's execution of the February 6, 2004 "Amended Divorce Agreement," which contractually waived the Debtor's obligations under the 1996 separation agreement; (B) Ms. Jackson's reported bad acts, which, under the equitable doctrine of "unclean hands," bars her from any recovery on the judgments; and (C) alleged offsets resulting from the claims the Debtor has against Ms. Jackson for her failure to timely turnover the stock certificates to Town & Country.
The basis for the Debtor's argument that Ms. Jackson contractually waived the Debtor's obligations under the 1996 separation agreement is that Ms. Jackson signed the "Amended Divorce Agreement" of February 6, 2004, which, inter alia, waived the Debtor's obligation to make payments on Ms. Jackson's house in Glen Dale, West Virginia.
At a hearing before the Family Court of Marshall County on December 11, 2006, however the validity of the February 6, 2004 "Amended Divorce Agreement" was put in issue by the parties. Ultimately, the Family Court determined that the document was not valid or enforceable. The decision of the Family Court is final, and the Debtor's petition for review to the Supreme Court of Appeals of West Virginia was denied on February 22, 2008.
The Full Faith and Credit Act, 28 U.S.C. § 1738, "requires federal courts to `give the same preclusive effect to a state-court judgment as another court of that State would give.'" Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 293 (2005) (citation omitted); see also Duncan v. Duncan (In re Duncan), 448 F.3d 725, 728 (4th Cir. 2006) (same). The preclusive effect of a State court judgment may either be to the particular claims that were asserted, or to the particular issues that were decided by the court. Before a West Virginia State court gives preclusive effect to claims adjudicated by another court, three elements must be satisfied:
First, there must have been a final adjudication on the merits in...
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