In Re Jenkins, Case No. 02-38913-BJH-7 (N.D.Tex. 11/5/2003)
| Decision Date | 05 November 2003 |
| Docket Number | Case No. 02-38913-BJH-7. |
| Parties | IN RE: LINDA FAY JENKINS, Debtor. DONALD ARMSTRONG, Plaintiff, v. LINDA FAY JENKINS, Defendant. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas |
On June 16, 2003, the Court held a hearing on the motion to dismiss amended complaint filed by Linda Fay Jenkins ("Jenkins") in the above adversary proceeding and a motion for partial summary judgment filed by Donald Armstrong ("Armstrong").1 By Order entered on September 4, 2003, the Court denied Armstrong's partial summary judgment motion on the ground that there are genuine issues of material fact with respect to the existence of an attorney-client relationship between the parties, without prejudice to renew after a separate trial of that issue. By that same Order, the Court took the motion to dismiss the amended complaint under advisement.
The prior proceedings in this case have been extensive, and will not be repeated here. Nevertheless, a brief procedural history is appropriate.
As originally filed on December 10, 2001, the complaint in the District Court Action alleged claims for legal malpractice, negligent misrepresentation, breach of fiduciary duty, negligence, gross negligence, violation of the Texas Deceptive Trade Practices Act and Consumer Protection Act, and fraud. Armstrong seeks to recover actual damages, as well as damages for mental anguish, loss of reputation, credit rating and business opportunities, a return of all attorneys' fees paid to Jenkins, all other attorneys' fees incurred by Armstrong, and punitive damages.
On October 7, 2002, Jenkins filed her voluntary Chapter 7 petition in this Court. On January 13, 2003, Armstrong filed the Adversary Proceeding in which he incorporated the allegations contained in the District Court Action and further alleged that the damages judgment he would obtain in the District Court Action was nondischargeable in Jenkins's bankruptcy case under 11 U.S.C. §§ 523(a)(2), (4) and/or (6). Between the District Court Action and the Adversary Proceeding, Armstrong's complaints have been amended several times, and Jenkins has filed several motions to dismiss those complaints.2
The present motion to dismiss, styled as one under Fed. R. Bankr. P. 7012, was filed on April 22, 2003. In support of the motion, Jenkins relies upon evidence outside the pleadings, as does Armstrong in opposing the motion. This most recent motion to dismiss is upon the grounds that Armstrong's claims, even if proven, are dischargeable in Jenkins's Chapter 7 bankruptcy case because Armstrong has failed to plead (or raise a genuine issue of material fact regarding each of the required elements of) a proper claim under 11 U.S.C. §§ 523(a)(2), (4), and/or (6). Jenkins asserts that Armstrong may not rely upon the allegations of the amended complaint in response to a motion for summary judgment, but instead must provide specific facts to indicate that there is a genuine issue for trial, and that "no such evidence exists with respect to the Plaintiff's allegations that the claims he has asserted against Defendant are not dischargeable in her bankruptcy case under 11 U.S.C. §§ 523(a)(2), (4) & (6)." Reply Brief Supporting Def's Mot. to Dismiss Amended Compl., p. 3. By agreement of the parties and/or for the reasons set forth in the Memorandum Decision and Order entered on October 9, 2003, the motion to dismiss shall be treated as one for summary judgment pursuant to Fed. R. Bankr. P. 7056.3
In 1989, Armstrong purchased an apartment building in Fort Worth. In 1994, he contracted to sell it to John and Rosalie Feece, who formed Steppes Apartments, Ltd. ("Steppes") for the purchase. Before closing, Armstrong severed title to the land and building from the personal property in the complex, and created two trusts, conveying the land to one and the personal property to the other. At closing, one trust conveyed the building and land to Steppes and the other conveyed the personal property. A dispute among the parties arose and eventually, Steppes filed a suit for declaratory judgment in Texas state court. The state court granted partial summary judgment in favor of Armstrong, finding Steppes in default. Armstrong then posted the property for foreclosure and Steppes sought to enjoin the foreclosure and for reconsideration of the partial summary judgment in Armstrong's favor.
The state court reversed the partial summary judgment after learning that Armstrong had apparently altered his summary judgment proof, ordered the parties to attempt to settle the litigation, and ordered Armstrong to provide calculations for his payoff demands. After several hearings, Armstrong provided a payoff summary and, shortly thereafter, Steppes amended its pleadings to include claims for usury and double usury.
After several procedural maneuvers, the suit went to trial in 1996 and the state court found in favor of Steppes on its usury claims, rendering judgment on September 23, 1996. Armstrong then objected to the entry of judgment because of Steppes' failure to give notice of the action to the trusts' beneficiaries pursuant to a Texas statute that required their participation. The state court vacated the judgment, but issued orders to the beneficiaries to show cause why a judgment should not be entered against them.
At this point in the litigation, March 1997, Armstrong hired Jenkins to represent the beneficiaries at the show cause hearing. The state court ruled against the beneficiaries at that hearing and entered a modified judgment in favor of Steppes. After entry of that modified judgment, Jenkins prepared and filed a motion for new trial, which was subsequently denied. Jenkins then appealed the adverse judgment on behalf of the beneficiaries, which was also unsuccessful.
Armstrong's complaint essentially alleges that Jenkins agreed to represent the beneficiaries in connection with the Steppes state court action in March of 1997, and that she represented to Armstrong (who hired her on behalf of the beneficiaries) that she was well qualified to represent the beneficiaries in that litigation. Armstrong further alleges that Jenkins's representations regarding her ability to represent the beneficiaries were false, that Jenkins did "not comply with or follow through with her representations," Compl. p. 2, and that as a result of her actions and inactions Armstrong has suffered "millions of dollars in damages." Id. Specifically, Armstrong alleges that he requested Jenkins to make certain arguments supported by specific case law and certain Texas statutes which he provided to her, but that she failed to put forth the arguments requested and did not cite to the appropriate authorities. He further alleges that Jenkins "had a fiduciary duty to the Beneficiaries of the Trusts and committed fraud and defalcation" and "willfully and intentionally caused damages to the Beneficiaries of the Trusts," including Armstrong. Id. at 3.
Jenkins's present motion asserts that even if Armstrong's underlying claims are proven, the resulting judgment would be dischargeable in her Chapter 7 bankruptcy case because Armstrong has failed to plead (or raise a genuine issue of material fact regarding each of the required elements of) a proper claim under 11 U.S.C. §§ 523(a)(2), (4), and/or (6).
Summary judgment is proper if the summary judgment record shows that there is "no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(b); Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Abbott v. Equity Group, Inc., 2 F.3d 613, 619 (5th Cir. 1993). The summary judgment movant:
[N]eed not support the motion with evidence negating the opponent's case; rather, once the movant establishes that there is an absence of evidence to support the non-movant's case, the burden is on the nonmovant to make a showing sufficient to establish an issue of fact for each element as to which that party will have the burden of proof at trial.
Epps v. NCNB Texas Nat'l Bank, 838 F. Supp. 296, 299 (N.D. Tex.), aff'd 7 F.3d 44 (5th Cir 1993) (citing Celotox Corp. v. Catrett, 477 U.S. 317, 322-25 (1986)). "[U]nsubstantiated assertions are not competent summary judgment evidence." Abbott, 2 F.3d at 619. The nonmoving party must "`come forward with specific facts showing there is a genuine issue for trial' . . . [and] must do more than simply show some `metaphysical doubt as to the material facts.'" Epps, 838 F. Supp. at 299 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).
Section 523 of the Bankruptcy Code excepts certain types of debts from a debtor's discharge. However, these exceptions to discharge are strictly construed in favor of dischargeability to facilitate a debtor's fresh start. See Texas Lottery Comm'n v. Tran (In re Tran), 151 F.3d 339, 342 (5th Cir. 1998); In re Hudson, 107 F.3d 355, 356 (5th Cir. 1997). The creditor filing the nondischargeability complaint bears the burden of proof at trial by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279 (1991); FDIC v. Smith (In re Smith), 160 B.R. 549, 552 (N.D. Tex. 1993), aff'd, 39 F.3d 320 (5th Cir. 1994); Hayden v. Hayden (In re Hayden), 248 B.R. 519 (Bankr. N.D. Tex. 2000).
Under § 523(a)(2)(A), a debtor is denied a discharge for "any debt — for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation, or actual fraud . . . ." 11 U.S.C. § 523(a)(2)(A). To prevail on a claim under § 523(a)(2)(A), the creditor must establish that (i) the debtor made false representations describing...
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