In re Menna, Bankruptcy No. 92-20543

• Decision Date: 09 March 1993
• Docket Number: Bankruptcy No. 92-20543,Adv. No. 92-2083.
• Citation: 152 BR 5
• Parties: In re Philip G. MENNA, Debtor. CENTURY 21 BALFOUR REAL ESTATE, Plaintiff, v. Philip G. MENNA, Defendant.
• Court: U.S. Bankruptcy Court — District of Maine

152 B.R. 5 (1993)

In re Philip G. MENNA, Debtor CENTURY 21 BALFOUR REAL ESTATE, Plaintiff, v. Philip G. MENNA, Defendant.

Bankruptcy No. 92-20543, Adv. No. 92-2083.

United States Bankruptcy Court, D. Maine.

March 9, 1993.

Daniel L. Cummings, Norman, Hanson & DeTroy, Portland, ME, for plaintiff.

John E. Geary, Portland, ME, for defendant.

MEMORANDUM OF DECISION

JAMES A. GOODMAN, Chief Judge.

This proceeding comes before the Court on cross-motions for summary judgment filed both by Plaintiff Century 21 Balfour Real Estate ("Balfour") and Defendant Philip G. Menna ("Menna"). The parties have presented stipulated facts, and each seeks a judgment as a matter of law, pursuant to F.R.Bky.P. 7056(c). This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).

FACTS

By this complaint, Balfour objects to the dischargeability of its claim against Menna, which is based on an indemnification judgment arising from the following facts. Years before the bankruptcy filing, Balfour represented Menna and his corporation in connection with the sale of his business and real estate to Robert E. Pawloski and Brenda G. Pawloski (the "Pawloskis"). After the Pawloskis instituted suit against both Menna and Balfour in connection with the sale, they obtained a judgment against Menna for fraud and were awarded $128,500.00 in compensatory damages, as well as $25,000.00 in punitive damages. Balfour was found liable to the Pawloskis for negligent misrepresentation, and held jointly and severally liable with Menna for the compensatory damages. Later, Balfour successfully cross-claimed against Menna for indemnification of all sums awarded to the Pawloskis against Balfour.

On May 12, 1992, Menna filed a petition pursuant to 11 U.S.C. Chapter 7. By complaint filed August 13, 1992, Balfour seeks to have this claim for indemnification deemed non-dischargeable, pursuant to 11 U.S.C. §§ 523(a)(2)(A) for fraud and (a)(6) for willful and malicious injury. Both parties have now moved for summary judgment.

DISCUSSION

Balfour does not contend that Menna defrauded or acted willfully and maliciously toward Balfour, but rather that the indemnification claim is based upon a debt obtained by Menna's fraud and his willful, malicious conduct toward the Pawloskis. Menna admits the Pawloskis' claim against him is non-dischargeable. However, to the extent that Balfour has already paid the compensatory damages, it urges this Court to prevent Menna from circumventing the provisions in § 523 by discharging the indemnification claim owed to Balfour. Otherwise, Balfour argues, Menna would effectively convert the non-dischargeable judgment debt owed to the Pawloskis into a dischargeable indemnification debt owed to Balfour.

Menna analyzes the situation differently by determining exactly what indemnification accomplishes. He reasons that the indemnification acted to transfer Balfour's judgment debt to him, citing Northeast Bank of Lewiston & Auburn v. Murphy, 512 A.2d 344 (Me.1986) for the proposition that "indemnity is a `total and complete transfer of liability . . .'" Id. at 351, quoting Gardner v. Murphy, 54 Cal.App.3d 164, 168, 126 Cal.Rptr. 302, 304 (1975). Because Balfour's obligation to the Pawloskis was for negligence, Menna correctly contends that as transferee of this liability, he cannot be held liable for fraud nor willful, malicious injury.

The docket in the underlying state court suit by the Pawloskis reflects the order granting Balfour's cross-claim, and simply enters judgment "in favor of Balfour and against Menna for indemnity of all sums awarded to the Plaintiff against Balfour and for Balfour's costs and attorneys fees arising out of this action." Docket No. CV89-550,...