In re Leist
| Decision Date | 16 December 2008 |
| Docket Number | Adversary No. 07-3254.,Bankruptcy No. 07-32617. |
| Citation | 398 B.R. 595 |
| Parties | In re Thomas M. LEIST, Debtor. Weidle Corporation et al., Plaintiffs, v. Thomas M. Leist, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Eric S. Thompson, Dayton, OH, for D. Scott Weidle and Weidle Corporation.
Lee A. Slone, Dayton, OH, for Debtor and Defendant.
John Paul Rieser, Dayton, OH, Chapter 7 Trustee.
Office of the United States Trustee, Columbus, OH.
Decision Granting in Part and Denying in Part Plaintiffs' Motion for Summary Judgment, Granting in Part and Denying in Part Defendant's Motion for Summary Judgment, and Finding Debt Owed to Weidle Corporation Nondischargeable Pursuant to 11 U.S.C. § 523(a)(6)
This adversary proceeding is before the court on the cross-motions for summary judgment filed by the Plaintiffs and Defendant. Plaintiffs assert that a Decision, Entry, and Order filed on December 2, 2003 (the "Decision")1 in the Montgomery County Ohio Court of Common Pleas (the "State Court") establishes that they are owed a debt by the Debtor, Thomas M. Leist ("Debtor" or "Defendant"), that is nondischargeable pursuant to § 523(a)(4) and (6)2. The Debtor opposes the Plaintiffs' motion for summary judgment and seeks summary judgment on the basis that the Decision does not establish grounds for finding the debt nondischargeable under § 523. For the reasons set forth below, the court finds that: a) Plaintiff Weidle Corporation is entitled to summary judgment against the Debtor under § 523(a)(6) based on a willful and malicious injury to the corporation and b) the Debtor is entitled to summary judgment as to all other claims, including any relief sought by Plaintiff D. Scott Weidle ("Scott Weidle").
The relevant facts are either stipulated to by the parties through their Stipulation of Facts (Doc. 20) or were determined by the State Court in its Decision. The Plaintiffs are Weidle Corporation, an Ohio corporation, doing business in Germantown, Ohio (Doc. 20, ¶ 1) and Scott Weidle, the principal of Weidle Corporation (Doc. 20, ¶ 2). The Debtor was a real estate broker who had a "long established business relationship" with the Plaintiffs (Doc. 20, ¶¶ 3 and 4). Weidle Corporation acquires real estate for residential development as part of its overall business (Decision, p. 2). The Debtor was the exclusive realtor for such development, although at some point in 1999, Weidle Corporation was using another realtor for a development known as Broadhill Estates. Id. The Debtor "was upset" and "felt betrayed" by this development and felt his role with Weidle Corporation "was anything but secure[.]" Id.
Against this background, a dispute ensued between the parties concerning a 10.5 acre parcel of real estate in Germantown, Ohio known as the "Doc Hamilton" property (the "Property") (Decision, p. 1). In August 2000, the Property was unimproved and owned by Doc Hamilton's children, James Hamilton and Susan Bobb. Id. In August 2000, Scott Weidle asked the Debtor to make an initial offer on behalf of Weidle Corporation to James Hamilton to purchase the Property for $8,000 an acre (Decision, p. 2-3). Although no realtor fee was discussed, the Defendant was not doing this service on a volunteer basis and expected to earn a fee if Weidle Corporation purchased the Property. (Decision, p. 3).
Rather than contact James Hamilton as the realtor for Weidle Corporation, the Defendant contacted James Hamilton concerning purchasing the Property for his own benefit. Id. Initially, he spoke to Hamilton's wife, who informed him the Property could be purchased for $80,000. Id. By early September, "probably" September 4th, a proposed option contract to purchase the Property was submitted, with the purchase price being $80,000. Id. Under this offer, the Debtor agreed to purchase the Property with John Evans, another realtor. Id. Evans had been incorrectly told by the Debtor that Weidle Corporation had discharged him from his duties with respect to the Property. Id.
James Hamilton informed the Debtor the asking price was $100,000 and he did not want an option contract. Id. On September 7, 2000, Scott Weidle contacted the Debtor about the Property and, after being informed by the Debtor that he was "still researching" the development, Scott Weidle "became upset" and told the Debtor he would hire another realtor. Id.
Scott Weidle hired other realtors who, on behalf of Weidle Corporation, on September 8, 2000, submitted to James Hamilton a purchase contract offering to purchase the Property for $85,520.00 or $8,000 an acre. (Decision, p. 3-4). James Hamilton informed the Debtor of this offer and the Debtor and James Hamilton ultimately entered into a contract on September 10, 2000 under which the Debtor and Evans would purchase the Property for $100,000 (Decision, p. 4). Weidle Corporation wanted the Property for development and would have purchased the Property for $100,000, but for the intervention of the Debtor. Id.
The Debtor and Evans purchased the Property for residential development, but ultimately sold it to Associate Construction. Id. The State Court determined that the evidence showed, with reasonable certainty, that Weidle Corporation's lost profits in not buying the Property were $461,325.00 (Decision, p. 5).
The Plaintiffs filed a complaint against the Debtor in the State Court on January 16, 2002, which was assigned Case No. 2002 CV 00308 (Doc. 20, ¶ 8). The Decision of the State Court found the Debtor breached his contractual and fiduciary obligations to Weidle Corporation and awarded damages of $461,325.00, plus post-judgment interest (Doc. 20, ¶ 8; Decision, p. 6-7)3. The Decision was affirmed by the Ohio Second District Court of Appeals and the Supreme Court of Ohio declined jurisdiction (Doc. 20, ¶ 10); Weidle v. Leist, 2004 WL 1949509 (Ohio Ct.App. Sept. 3, 2004), appeal not allowed 104 Ohio St.3d 1462, 821 N.E.2d 578 (Ohio 2005).
On October 5, 2007, the Plaintiffs, Weidle Corporation and Scott Weidle, filed a complaint alleging that, based on the Decision of the State Court, a debt was owed to them by the Debtor and it was nondischargeable pursuant to § 523(a)(4) based upon defalcation while acting in a fiduciary capacity (Doc. 1). The Debtor answered on October 24, 2007 (Doc. 4). Following the filing of pretrial statements, the court set dates for summary judgment in a January 14, 2008 order (Doc. 9). On February 5, 2008, the Plaintiffs moved to amend their complaint to include embezzlement under § 523(a)(4) and also willful and malicious injury under § 523(a)(6) (Doc. 11). The court granted the motion on March 26, 2008 (Doc. 15), an amended complaint was filed on March 27th (Doc. 16), and an amended answer was filed on March 28th (Doc. 17). The court re-set the summary judgment filing dates (Doc. 15) and, in a separate order, allowed the parties until July 23, 2008 to file the State Court record (Doc. 22)4.
On June 6, 2008, the Plaintiffs moved for summary judgment based upon embezzlement under § 523(a)(4) and willful and malicious injury under § 523(a)(6) (Doc. 21). The Plaintiffs abandoned their cause of action for breach of fiduciary duty under § 523(a)(4) (Doc. 21, p. 12, n. 2). The Debtor filed a response to the Plaintiffs' summary judgment motion (Doc. 24) and a cross-motion for summary judgment (Doc. 25) on July 3, 2008. The Plaintiffs filed a response to the Debtor's cross-motion for summary judgment on July 23, 2008 (Doc. 27). The Debtor filed a reply brief supporting his motion for summary judgment on July 30, 2008 (Doc. 29). The parties also filed Stipulations of Fact (Doc. 20). On September 5, 2008, the court issued an order allowing the parties to file optional supplemental legal memoranda (Doc. 30) and each set of parties filed a supplemental memorandum (Docs. 32 and 33).
This court has jurisdiction pursuant to 28 U.S.C. § 1334 and this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).
The standard to address the parties' filings is contained in Federal Rule of Civil Procedure 56(c) and is applicable to adversary proceedings through Bankruptcy Rule 7056 and states, in part, that a court must grant summary judgment to the moving party if:
the pleadings, the discovery and disclosure statements on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law.
Federal Rule of Civil Procedure 56(c).
In order to prevail, the moving party, if bearing the burden of persuasion at trial, must establish all elements of its claim. Celotex Corp. v. Catrett, 477 U.S. 317, 331, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the burden is on the non-moving party at trial, the movant must: 1) submit affirmative evidence that negates an essential element of the nonmoving party's claim or 2) demonstrate to the court that the nonmoving party's evidence is insufficient to establish an essential element of the nonmoving party's claim. Id. at 331-332, 106 S.Ct. 2548. Thereafter, the opposing party "must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citations omitted); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-51, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). All inferences drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Matsushita, 475 U.S. at 586-88, 106 S.Ct. 1348.
The Plaintiffs must establish the elements of their nondischargeability ...
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