In re McGuffey

• Decision Date: 30 September 1992
• Docket Number: 91 A 00834.,Bankruptcy No. 91 B 08924
• Citation: 145 BR 582
• Parties: In re Malcolm McGUFFEY a/k/a Wally Mack, Debtor. Susanne LITTLEFIELD, Plaintiff, v. Malcolm McGUFFEY, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

145 B.R. 582 (1992)

In re Malcolm McGUFFEY a/k/a Wally Mack, Debtor Susanne LITTLEFIELD, Plaintiff, v. Malcolm McGUFFEY, Defendant.

Bankruptcy Nos. 91 B 08924, 91 A 00834.

United States Bankruptcy Court, N.D. Illinois, E.D.

September 30, 1992.

Leonard Groupe, Bruce Katz, Chicago, Ill., for plaintiff.

Joel Schechter, Grossman Mitzenmacher & Schechter, Chicago, Ill., for debtor, defendant.

MEMORANDUM OPINION

DAVID H. COAR, Bankruptcy Judge.

This matter comes before the Court on Plaintiff's Motion for Summary Judgment on a Complaint to Determine the Dischargeability of Debt. The Court, having reviewed the record, the memoranda of law submitted by the parties, and the applicable law, now rules as follows.

PROCEDURAL BACKGROUND AND FINDINGS OF FACT

Susanne Littlefield Littlefield, the Plaintiff in this adversary proceeding, is a judgment creditor of the Debtor/defendant Malcolm McGuffey, a/k/a Wally Mack McGuffey. McGuffey's debt to Littlefield arises from a judgment entered in Littlefield's favor on July 26, 1990, in the District Court for the Northern District of Illinois district court judgment, where Littlefield had sued McGuffey for violations of civil rights law, violations of fair housing law, and intentional infliction of emotional distress. Littlefield seeks to have her judgment debt determined nondischargeable pursuant to § 523(a)(6) of the Bankruptcy Code. Section 523(a)(6) excepts from discharge debts "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).

The facts underlying Littlefield's district court lawsuit against McGuffey are set forth in the opinion of District Judge Ann C. Williams, denying McGuffey's motions for judgment notwithstanding the verdict and a new trial. Littlefield v. Mack, 750 F.Supp. 1395 (N.D.Ill.1990). These facts are briefly summarized as follows. In September, 1988, McGuffey, who is white and owns several apartment buildings, agreed to lease an apartment to Littlefield, who is also white. Littlefield was to occupy this apartment with her daughter Shaunte and her sister Sandra. Littlefield paid a security deposit and received a key to the apartment. She cleaned and painted the apartment and moved various personal belongings into it.

Approximately two weeks after agreeing to rent the apartment to Littlefield, McGuffey learned that Littlefield's boyfriend, who is also the father of Littlefield's child, is black. McGuffey then informed Littlefield that she could not rent the apartment. McGuffey removed Littlefield's belongings from the apartment and changed the locks. In addition, according to the testimony of Littlefield and at least seven other witnesses, McGuffey began a campaign of harassment and intimidation against Littlefield. He reportedly telephoned Littlefield at home and spewed racial invectives at her. He made similarly harassing and racially abusive telephone calls to Littlefield's sister, Kathleen Gutierrez, and even visited Gutierrez's home on one occasion. Finally, McGuffey discovered the location of Littlefield's new apartment and pinned a note containing a death threat against her boyfriend to her door.

Littlefield's lawsuit in federal district court alleged that McGuffey's conduct violated 42 U.S.C. §§ 1982, 3604, 3613, and 3617, as well as constituting intentional infliction of emotional distress under Illinois common law. Section 1982, which was enacted as part of the Civil Rights Act of 1866, provides that "all citizens of the United States shall have the same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold, and convey real and personal property." 42 U.S.C.A. § 1982 (West 1981). Sections 3604, 3613, and 3617 are part of the Fair Housing Act, which was enacted as Title VIII of the Civil Rights Act of 1968. Section 3604 prohibits various forms of discrimination in the sale or lease of residential property, while § 3617 prohibits coercion or intimidation of any person attempting to exercise or enjoy fair housing rights. Section 3613 provides a private right of action for Fair Housing Act violations. 42 U.S.C.A. §§ 3640, 3613, 3617 (West Supp.1991).

The jury found in favor of Littlefield and awarded her compensatory damages in the amount of $50,000 and punitive or exemplary damages in the amount of $100,000. In addition, after denying McGuffey's motions for judgment notwithstanding the verdict and a new trial, Judge Williams awarded attorneys' fees and costs in the amount of $174,002.36 to Littlefield as the prevailing party on her federal claims.

Littlefield filed a Complaint to Determine the Dischargeability of Debt, requesting this Court to find the entire judgment debt of $324,002.36 nondischargeable under § 523(a)(6). Littlefield asserts that the jury verdict and district court judgment collaterally estop McGuffey from disputing that the judgment debt is a debt for a "willful and malicious injury" within the meaning of § 523(a)(6). Littlefield therefore moves for the entry of summary judgment on her Complaint. McGuffey denies that the district court judgment has collateral estoppel effect in this proceeding and opposes the summary judgment motion. In addition, McGuffey argues that even if the judgment debt is a debt for "willful and malicious injury" under § 523(a)(6), the portions of the judgment representing punitive damages and attorneys' fees are nevertheless dischargeable.

CONCLUSIONS OF LAW

I. Nondischargeability Under § 523(a)(6)

Rule 56(c) of the Federal Rules of Civil Procedure, which applies to bankruptcy adversary proceedings pursuant to Bankruptcy Rule 7056, states that a motion for summary judgment should be granted "if 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." The primary purpose of summary judgment is to avoid unnecessary trials in cases where no material factual issues are in dispute. Wainwright Bank & Trust Co. v. Railroadmens Fed. Saving and Loan Ass'n, 806 F.2d 146, 149 (7th Cir.1986).

Littlefield argues that summary judgment is appropriate in this case because the district court judgment conclusively resolved all of the factual issues necessary to establish that the judgment debt is nondischargeable under § 523(a)(6). She asserts that McGuffey is collaterally estopped from denying that the judgment debt is a debt for a "willful and malicious injury" to Littlefield. She therefore concludes that no material factual issues are in dispute, and that she is entitled to judgment as a matter of law.

In order to evaluate Littlefield's arguments, the Court must first examine the elements of a nondischargeability claim under § 523(a)(6), as well as the applicability of collateral estoppel doctrine to bankruptcy dischargeability proceedings. The Court may then apply the law to the facts of this case.

A. Section 523(a)(6)

Section 523(a)(6) of the Bankruptcy Code provides that a general discharge of debts in bankruptcy does not discharge a debtor from any debt "for willful and malicious injury by the debtor to another entity or the property of another entity." 11 U.S.C. § 523(a)(6). The policy behind § 523(a)(6) is to preserve the benefits of bankruptcy's "fresh start" for the honest debtor, not the malicious wrongdoer. United Bank of Southgate v. Nelson, 35 B.R. 766, 776 (N.D.Ill.1983). In order to establish that a debt is nondischargeable under § 523(a)(6), a creditor must prove that the act giving rise to the debt was both willful and malicious. In re Kimzey, 761 F.2d 421, 424 (7th Cir.1985); Southgate, 35 B.R. at 768.

The legislative history of § 523(a)(6) defines the term "willful" as "deliberate or intentional." H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 365 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6320 (cited in In re Scotella, 18 B.R. 975, 977 (Bankr. N.D.Ill.1982)). Courts have consistently used this definition of "willful" in determining whether a debt is nondischargeable under § 523(a)(6). See, e.g., In re Scarlata, 127 B.R. 1004, 1013 (N.D.Ill.1991); In re Condict, 71 B.R. 485, 487 (N.D.Ill.1987); Southgate, 35 B.R. at 768; In re Grier, 124 B.R. 229, 231 (Bankr.W.D.Tex.1991); In re Iaquinta, 98 B.R. 919, 924 (Bankr. N.D.Ill.1989).

Courts have been less consistent, however, in defining the term "malicious" for § 523(a)(6) purposes. Some courts have held that a debtor acts maliciously within the meaning of § 523(a)(6) only when he or she acts with actual malice, or with the specific intent to harm a creditor or a creditor's property. See, e.g., Ohio Grain Co. v. Gentis, 10 B.R. 209 (Bankr. S.D.Ohio 1981); In re Meyer, 7 B.R. 932 (Bankr.N.D.Ill.1981); In re Hodges, 4 B.R. 513 (Bankr.W.D.Va.1980). Other courts have held that implied or constructive malice is sufficient to support a finding of nondischargeability under § 523(a)(6). Chrysler Credit Corp. v. Rebhan, 842 F.2d 1257 (11th Cir.1988); Southgate, 35 B.R. 766. A "constructively malicious" act has been alternatively defined as an act which necessarily and predictably results in harm to a creditor and is without just cause or excuse, In re Cecchini, 780 F.2d 1440 (9th Cir.1986); In re Condict, 71 B.R. 485 (N.D.Ill.1987); Scarlata, 127 B.R. 1004, or as an act committed in the face of knowledge (which may be inferred from surrounding circumstances) that harm to a creditor will result. Southgate, 35 B.R. 766; In re Miceli, 1991 WL 242981, 1991 Bankr. LEXIS 1655 (Bankr.N.D.Ill. Feb. 11, 1991); In re Ries, 22 B.R. 343 (Bankr. W.D.Wis.1982).

The Seventh Circuit has not yet defined the term "malicious" for § 523(a)(6) purposes. This Court is persuaded, however, that the more liberal definition of "malicious," which includes implied or constructive malice as well as actual malice, is the better definition. As ...