In re Moore
| Decision Date | 07 September 1995 |
| Docket Number | Bankruptcy No. 93-34121DTC. Adv. No. 93-3520DM. |
| Citation | 186 BR 962 |
| Parties | In re Bonnie MOORE, aka Bonnie Moore Brown, an Individual, Debtor. Brennan J. NEWSOM, Franza Giffen Newsom, and Brennan J. Newsom as Attorney in Fact for Rene Uraconiso, an Individual (deceased), Plaintiffs, v. Bonnie MOORE, an Individual, aka Bonnie Moore Brown, an Individual, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of California |
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David S. Levin, Murray & Murray, Palo Alto, CA, for defendant.
David J. Cook, Cook, Perkiss & Lew, San Francisco, CA, for plaintiffs.
Plaintiffs Brennan J. Newsom, Franza Giffen Newsom, and Brennan J. Newsom as Attorney In Fact for Rene Uraconiso, an Individual (deceased) (collectively "Plaintiffs") filed a complaint (the "Nondischargeability Complaint") seeking to have the sum of $214,295.91 in compensatory and punitive damages awarded under a state court default judgment against defendant Bonnie Moore ("Defendant" or "Moore") declared nondischargeable under 11 U.S.C. §§ 523(a)(4) and (6). Both sides have moved for summary judgment. For the reasons stated below, the court will deny Defendant's motion and grant partial summary judgment in favor of Plaintiffs and against Defendant in the amount of $159,394.55 plus interest because this court is obliged to follow California law concerning the collateral estoppel effect of a default judgment, rather than federal law that would require matters actually to be litigated before they could be binding in a subsequent adversary proceeding seeking to hold the underlying judgment nondischargeable.
Moore filed her voluntary Chapter 7 petition on September 15, 1993. Prior to that time she had been employed as an accountant at the law firm of Plaintiffs Brennan J. Newsom, individually, and Franza Giffen Newsom (the "law firm"). During the course of Moore's employment, Richard Brown, who was at that time Moore's husband, retained the law firm to represent Brown and his two children in a wrongful death action involving Brown's deceased former wife. Although the wrongful death action was ultimately settled for $750,000, Moore was dissatisfied with the law firm's handling of the matter for her then husband.
After the wrongful death action was settled, Moore was assigned to prepare certain tax records in connection with a trust estate being handled by the law firm. Subsequently disputes arose over Moore's claim for payment for services she had rendered and the claim by Plaintiffs that she had wrongfully removed certain binders (and financial documentation and data contained therein) belonging to Brennan J. Newsom.
On March 30, 1990, Plaintiffs filed a complaint against Moore in the San Francisco Superior Court (Case No. 917692) (the "Complaint"). The Complaint contained seven causes of action. Moore filed an answer on September 18, 1990 and she filed a first amended answer and cross complaint on October 18, 1990. An order striking the first amended answer and cross complaint was issued by the court on January 3, 1991, and Moore's default was thereafter entered. On December 30, 1992, following a default prove-up hearing conducted on November 9, 1992, the court issued its Default Judgment After Hearing (the "Default Judgment"). The Default Judgment awarded Plaintiffs compensatory damages of $64,295.91 and punitive damages of $150,000. The causes of action and damages awarded under each in the Default Judgment are summarized as follows:
First Cause of Action (Conversion) (the alleged taking of binders pertaining to the financial affairs of Rene Uraconiso).
Compensatory Damages: $6,894.55
Punitive Damages: $12,500.00
Second Cause of Action (Claim and Delivery) (referring to the same binders mentioned in the First Cause of Action).
Compensatory Damages: $6,011.251
Punitive Damages: $12,500.00
Third Cause of Action (Slander) (alleged statements made by Moore about Brennan J. Newsom's embezzlement of funds and his and Franza Giffen Newsom's incompetence as attorneys).
Compensatory Damages: $20,000.00
Punitive Damages: $50,000.00
Fourth Cause of Action (Libel) (an alleged letter written by Moore repeating the embezzlement accusations directed at Brennan J. Newsom).
Compensatory Damages: $20,000.00
Punitive Damages: $50,000.00
Fifth Cause of Action (Willful Infliction of Emotional Distress) (alleged attempts by Moore to become the beneficiary of an illegal trust fund involving assets of her stepchildren; the taking of books and documents; extortion by means of a letter threatening to bring to the attention of authorities Brennan J. Newsom's alleged embezzlement of Rene Uraconiso's funds).
Compensatory Damages: $101.20
Punitive Damages: $-0-
Sixth Cause of Action (Negligence) (failure of Moore to prepare information necessary to obtain extensions of time to file tax returns with the Internal Revenue Service).
Compensatory Damages: $11,288.91
Punitive damages: $25,000.002
Seventh Cause of Action (Temporary Protective Order and Injunction) (to prevent Moore from entering the law firm's offices).
No damages awarded.
On November 15, 1993, Plaintiffs filed in this court a Complaint To Exempt Debt From Discharge under Bankruptcy Code § 523(a)(4 & 6) (the "Nondischargeability Complaint"). They allege six separate claims for relief, as follows3:
Count One — Injury to Person and Property — 11 U.S.C. § 523(a)(6) (Conversion of Property of Another) — The Nondischargeability Complaint provides more detail than the First Cause of Action of the Complaint by describing the relationship among Plaintiffs and Defendant and alleging that the purported conversion injured the persons of Plaintiffs, constituting a shock to their nervous systems, loss of sleep, general sickness and deprivation and loss of privacy. Nevertheless, the thrust of the count is the same as the First Cause of Action in the Complaint, namely conversion.
Count Two — Breach of Fiduciary Duty — 11 U.S.C. § 523(a)(4) (Embezzlement and Taking by Fiduciary) — This count incorporates the allegations of Count One, but adds the charge that Defendant breached a fiduciary duty to Plaintiffs.
Count Three — Injury to Person and Property — 11 U.S.C. § 523(a)(6) (Libel and Slander) — This count appears to collapse the Third Cause of Action and the Fourth Cause of Action of the Complaint, charging Defendant with libel and slander in connection with oral and written statements made by her.
Count Four — Embezzlement and Breach of Fiduciary Duty — 11 U.S.C. § 523(a)(4) (Taking of Private and Confidential Information) — This count appears to be little more than a repleading of Count Two.
Count Six4 — Malicious Injury To Another — 11 U.S.C. § 523(a)(6) (Extortion) — This count replicates to some extent the allegations of the Fifth Cause of Action of the Complaint.
Count Four (sic) — Malicious Injury to Another — under § 523(a)(4) (Wrongful Prosecution of Administrative Charges) — There is no corresponding Cause of Action in the Complaint, although Plaintiffs argue in their Counter-Motion (as defined below) that the damages sought on this count are included within damages awarded in the Default Judgment on the First Cause of Action, namely $6,894.55 in attorneys' fees incurred in the defense of a State Bar investigation of wrongful conduct initiated by Defendant.
The Nondischargeability Complaint does not contain a count that replicates the Sixth Cause of Action of the Complaint (negligence). It does, however, seek to have the court declare as nondischargeable the entire Default Judgment. Since the Sixth Cause of Action included $11,288.91 in compensatory damages and $25,000 in punitive damages, that portion of the Default Judgment may not be held to be nondischargeable under any provision of 11 U.S.C. § 523(a).
On January 3, 1995, Moore filed a Motion for Summary Judgment or, in the Alternative, for Summary Adjudication of Issues (the "Motion") on the grounds that (a) Plaintiffs cannot establish the elements necessary to prevail on each of their underlying nondischargeability claims and (b) Moore's affirmative defenses bar Plaintiffs' claims as a matter of law.
Plaintiffs responded with a Counter-Motion for Summary Judgment or Adjudication of Issues (the "Counter-Motion") on February 24, 1995. Plaintiffs contend that each of the elements necessary to support nondischargeability was necessarily determined by virtue of the Default Judgment, that Moore is therefore collaterally estopped from raising any issues of fact or defenses to the underlying claims, and that the collateral estoppel effect of the Default Judgment entitles Plaintiffs to summary judgment that the damages awarded pursuant to the Default Judgment are nondischargeable.5
The United States Supreme Court has recognized that the doctrine of collateral estoppel6 applies in dischargeability proceedings. Grogan v. Garner, 498 U.S. 279, 284-85 n. 11, 111 S.Ct. 654, 658 n. 11, 112 L.Ed.2d 755 (1991); In re Bugna, 33 F.3d 1054, 1057 (9th Cir.1994). Collateral estoppel, or issue preclusion, bars relitigation of an issue previously decided in a prior judicial proceeding if the party against whom the prior decision is asserted had a "full and fair opportunity" to litigate that issue in the earlier case. Allen v. McCurry, 449 U.S. 90, 95, 101 S.Ct. 411, 415, 66 L.Ed.2d 308 (1980). Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5, 99 S.Ct. 645, 649 n. 5, 58 L.Ed.2d 552 (1979).
Federal courts, including bankruptcy courts, are required by statute to give full faith and credit to state court judicial proceedings. 28 U.S.C. § 1738 (1982).7 Matter of Lockard...
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Default Judgment and Voluntary Dismissal
...judgment does not prevent the defendant from raising those defenses in a subsequent suit on different causes of action. [ In re Moore , 186 BR 962, 971 (Bankr ND Cal 1995), quoting Burtnett v. King , 33 C2d 805, 810-11, 205 P2d 657 (1949).] FURTHER CAVEAT: No collateral estoppel effect of d......