In re Myers, Bankruptcy No. 97-10215-W. Adversary No. 98-80004-W.
| Decision Date | 27 August 1998 |
| Docket Number | Bankruptcy No. 97-10215-W. Adversary No. 98-80004-W. |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina |
| Parties | In re David L. MYERS, Debtor. Robert A. Thompson, Plaintiff, v. David L. Myers, Defendant. |
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Curtis L. Coltrane, Hilton Head Island, SC, for plaintiff.
Philip L. Fairbanks, Beaufort, SC, for defendant.
THIS MATTER comes before the Court upon the motion for summary judgment of the Plaintiff Robert A. Thompson ("Mr.Thompson") and the response of the Defendant/Debtor David L. Myers ("Mr. Myers") thereto. The Complaint filed in this adversary proceeding by Mr. Thompson, an unsecured creditor of Mr. Myers by virtue of a judgment rendered in a Massachusetts state court proceeding, sought the Court's determination that Mr. Myers' judgment debt to Mr. Thompson arose from a willful and malicious injury, and was thus excepted from discharge pursuant to 11 U.S.C. § 523(a)(6).1 Mr. Thompson's motion for summary judgment seeks to have the Court invoke the doctrine of collateral estoppel to preclude Mr. Myers from re-litigating the issue of whether the judgment arose from a willful and malicious injury. Based upon the evidence presented and arguments of counsel, the Court makes the following Findings of Fact and Conclusions of Law pursuant to Rule 52 of the Federal Rules of Civil Procedure, made applicable by Rule 7052 of the Federal Rules of Bankruptcy Procedure.2
In February of 1988, Mr. Myers, as trustee of a real estate development trust, brought an action in Massachusetts state court against Mr. Thompson, a builder, seeking an attachment against Mr. Thompson alleging damages in the amount of Ten Million ($10,000,000.00) Dollars. Mr. Myers alleged that Mr. Thompson had negligently bulldozed a significant archaeological site on land owned by the real estate development trust. That same month, a Massachusetts judge issued an attachment against Mr. Thompson in the amount of One Million ($1,000,000.00) Dollars. Mr. Thompson attempted to have the attachment, which had damaged his business, dissolved but was unsuccessful. Mr. Thompson ultimately was able to have the attachment reduced to One Hundred Thousand ($100,000.00) Dollars in May, 1988, and the attachment was discharged in June of 1988, after Mr. Thompson deposited that amount with the court.
In April of 1990, Mr. Thompson filed suit in Massachusetts state court asserting various causes of action against Mr. Myers as a result of the attachment. The state court complaint, which named Mr. Myers along with several other trustees of the real estate development trust as defendants, alleged causes of action for abuse of process, malicious prosecution, negligence and violation of the Massachusetts' "Unfair and Deceptive Acts" statute.
Following a lengthy trial, the jury returned a verdict against Mr. Myers on Mr. Thompson's abuse of process claim and awarded Mr. Thompson damages in the amount of One Million Four Hundred Thirty-One Thousand ($1,431,000.00) Dollars and judgment was entered against Mr. Myers in that amount. The jury's verdict finding was based upon the preponderance of the evidence. Following the jury verdict, the trial judge in ruling on the cause of action asserted for unfair and deceptive acts, appeared to criticize and disagree with the jury's view of the evidence but did not set aside the abuse of process verdict. Mr. Myers did not file an appeal of the jury verdict on the abuse of process cause of action and the jury verdict and judgment became final.
During the pendency of the Massachusetts state court litigation, Mr. Myers relocated to South Carolina and in December 1997, Mr. Myers filed a petition under Chapter 7 of the Bankruptcy Code.
In a motion for summary judgment, the movant bears the burden of coming forward with proof of the absence of any genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 321, 106 S.Ct. 2548, 91 L.Ed.2d 265, 273 (1986), Phipps v. Brown (In re Brown), 84-00163, C-84-0145 (Bkrtcy.D.S.C. 9/5/85); Wright & Miller, Federal Practice & Procedure, Civil, § 2727 at p. 124 (1969). The evidence must be viewed in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Rivanna Trawlers Unlimited v. Thompson Trawlers, Inc., 840 F.2d 236 (4th Cir. 1988) and Estate of Samson v. Ward (In re Ward), 194 B.R. 53 (Bkrtcy.D.S.C.1995).
In this motion for summary judgment, Mr. Thompson alleges that the Massachusetts state court jury verdict and judgment against Mr. Myers arising from the abuse of process cause of action includes a finding by the jury that the actions of Mr. Myers were willful and malicious and therefore, as provided for in § 523(a)(6), Mr. Myers cannot discharge Mr. Thompson's Massachusetts state court judgment. According to Mr. Thompson's position, he is entitled to a summary judgment finding in the within adversary proceeding upon grounds of collateral estoppel as a matter of law.
Section 523(a)(6) of the Bankruptcy Code provides as follows:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt— (6) 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). "Willful", for the purposes of § 523(a)(6), means deliberate or intentional. H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 365 (1977); In re Meyer, 100 B.R. 297 (Bkrtcy.D.S.C.1988), aff'd. on appeal, 100 B.R. 301 (D.S.C.1989) An act is "malicious" within the meaning of § 523(a)(6) if wrongful and without just cause or excuse. In re Meyer, supra; St. Paul Fire & Marine Insurance Co. v. Vaughn, 779 F.2d 1003 (4th Cir.1985). In order for the Court to grant Mr. Thompson's motion for summary judgment, the Court must find that the state court findings collaterally estop Mr. Myers from relitigating the willful and malicious elements contained in § 523(a)(6) and such a finding is predicated upon a determination by the state court that the actions of Mr. Myers were deliberate or intentional and wrongful and without just cause or excuse.
Collateral estoppel principles apply to dischargeability proceedings. Grogan v. Garner, 498 U.S. 279, 284 & n. 11, 111 S.Ct. 654, 657 & n. 11, 112 L.Ed.2d 755 (1991).
"The bankruptcy court\'s otherwise broad powers do not include the power to reject a party\'s invocation of collateral estoppel on an issue fully and fairly litigated in another court." Bugna v. McArthur (In re Bugna), 33 F.3d 1054, 1058 (9th Cir.1994); Gouveia v. Tazbir, 37 F.3d 295, 300-01 (7th Cir.1994); Johnson v. Laing (In re Laing), 945 F.2d 354, 357-59 (10th Cir.1991); First Jersey Nat\'l Bank v. Brown (In re Brown), 951 F.2d 564, 568-70 (3rd Cir. 1991); Kelleran v. Andrijevic, 825 F.2d 692, 694-95 (2nd Cir.1987), cert. denied, 484 U.S. 1007, 108 S.Ct. 701, 98 L.Ed.2d 652 (1988); Boyajian v. DeFusco (In re Giorgio), 862 F.2d 933, 936-37 (1st Cir. 1988).
In re Abbo, 192 B.R. 891 (Bkrtcy.N.D.Ohio (1996)) (). In Combs v. Richardson, 838 F.2d 112 (4th Cir.1988), the Fourth Circuit Court of Appeals set forth the test for applying collateral estoppel in dischargeability proceedings. The Court stated that collateral estoppel would apply:
if the bankruptcy court found that: (1) the issue sought to be precluded was the same as that involved in the prior action, (2) that the issue was actually litigated, (3) it was determined by a valid and final judgment, and (4) the determination was essential to the prior judgment.
Combs v. Richardson, Id. at 115. Additionally, the Court must apply Massachusetts' law of collateral estoppel.
Collateral estoppel precludes relitigation of an issue decided previously in judicial or administrative proceedings provided the party against whom the prior decision was asserted enjoyed a full and fair opportunity to litigate that issue in an earlier proceeding. See Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 415, 66 L.Ed.2d 308 (1980). In Grogan v. Garner, 498 U.S. 279, 284 & n. 11, 111 S.Ct. 654, 657 & n. 11, 112 L.Ed.2d 755 (1991), the Supreme Court concluded explicitly that principles of collateral estoppel apply in dischargeability proceedings in bankruptcy. In determining the preclusive effect of a state-court judgment, the federal courts must, as a matter of full faith and credit, apply the forum state\'s law of collateral estoppel. See Kremer v. Chemical Constr. Corp., 456 U.S. 461, 481-82, 102 S.Ct. 1883, 1897-98, 72 L.Ed.2d 262 (1982); 28 U.S.C.A. § 1738 (West 1994).
Hagan v. McNallen, 62 F.3d 619 (4th Cir. 1995). Massachusetts courts conduct a comparable analysis in applying the doctrine of collateral estoppel to determine the preclusive effect of prior litigation in subsequent proceedings.
Collateral estoppel, or issue preclusion, precludes the relitigation of issues that have previously been litigated. 50 C.J.S. Judgment § 779. "The premise of collateral estoppel is that once an issue has been resolved in a prior proceeding, there is no further fact finding function to be performed." Id. In deciding whether to apply collateral estoppel, a court must weigh the need to limit litigation against the right of a fair adversary proceeding in which a party may fully present his case. Id. The elements of issue preclusion are the "identity of cause of action and issues, the same parties, and judgment on the merits by a court of competent jurisdiction." Almeida v. Travelers Ins. Co., 383 Mass. 226, 229, 418 N.E.2d 602 (1981) (citing Franklin v. North Weymouth Coop. Bank, 283 Mass. 275, 280, 186 N.E. 641 (1933)).
Collateral estoppel does not apply to a...
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