In re Overmyer
| Decision Date | 25 October 1985 |
| Docket Number | Bankruptcy No. 82 B 20329,83 Adv. 6041. |
| Citation | 52 BR 111 |
| Parties | In re Daniel H. OVERMYER, Debtor. The FIRST NATIONAL BANK OF BOSTON and D.H. Overmyer Telecasting Co., Inc., Chapter 11 Debtor-in-Possession, Plaintiffs-Movants, v. Daniel H. OVERMYER, Defendant-Respondent. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
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Reich and Reich, White Plains, N.Y., for Daniel H. Overmyer.
Parks, Eisele, Bates & Wilsman, Cleveland, Ohio, for D.H. Overmyer Telecasting Co., Inc.
Weil, Gotshal & Manges, New York City, for First Nat. Bank of Boston.
Harvey S. Barr, Spring Valley, N.Y., Trustee.
DECISION ON COMPLAINT OBJECTING TO DISCHARGEABILITY OF DEBTS
The First National Bank of Boston ("FNBB") and D.H. Overmyer Telecasting Co., Inc. ("Telecasting") have moved for partial summary judgment with respect to six counts of their amended complaint objecting to the dischargeability of the debts of the Chapter 7 debtor, Daniel H. Overmyer, to FNBB and Telecasting pursuant to 11 U.S.C. § 523(a)(4) and (6). The movants assert that there is no genuine issue of fact to be litigated because the debtor has fully litigated the underlying facts as an intervenor-plaintiff in the adversary proceeding reported as Hadar Leasing International Co., Inc. v. D.H. Overmyer Telecasting Co., Inc. (In re D.H. Overmyer Telecasting Co., Inc.), 23 B.R. 823 (Bkrtcy. N.D.Ohio 1982), aff'd, 53 B.R. 963 (N.D. Ohio 1984) and as an officer, director and person in charge of The Overmyer Company, Inc. ("TOC") when it litigated the adversary proceeding reported as First National Bank of Boston v. Overmyer Company, Inc. (In re Overmyer Company, Inc.), 2 B.C.D. 992 (Bkrtcy.S.D.N.Y.1976), aff'd, 697 F.2d 295 (2d Cir.1982). Accordingly, the movants contend that the debtor is collaterally estopped from contesting the findings of fact in the foregoing two bankruptcy cases.
The debtor maintains that collateral estoppel is not applicable because the Bankruptcy Courts in the two cited cases did not determine the issue of dischargeability and because the Ohio Bankruptcy Court's finding of fraud did not mention that the standard used was one of clear and convincing proof rather than by a preponderance of the evidence. The debtor also argues that there was no determination that a fiduciary relationship existed prior to his misconduct or that there was a finding of defalcation, embezzlement, or willful and malicious injury as charged in the amended complaint in this case. Additionally, the debtor contends that his Ohio judgment liability to the movants in this case is based upon guarantees of loans and not because of any fraudulent conduct on his part, and that subsequent misconduct does not cause a preexisting liability to be nondischargeable.
1. On May 28, 1982, the debtor, Daniel H. Overmyer, filed with this court a petition for relief under Chapter 7 of the Bankruptcy Code.
2. FNBB filed a proof of claim in this case for $23,016,980.31 based upon the amounts awarded to it as a result of its counterclaims against the debtor in the Hadar Leasing case in the Bankruptcy Court for the Northern District of Ohio, reported at 23 B.R. 823, as affirmed by the District Court for the Northern District of Ohio on July 11, 1984.1
3. Telecasting is a Chapter 11 debtor in possession, operating under the aegis of the Ohio Bankruptcy Court since February 6, 1981. Its stock was pledged to FNBB by The Overmyer Company, Inc. ("TOC") to secure the indebtedness of TOC to the bank. FNBB is the record title holder of 249 shares of Telecasting stock as a result of a default in repayment. Telecasting filed with this court its proof of claim against the debtor in the sum of $3,557,008.14, which resulted from the award to it on Telecasting's counterclaim against the debtor in the Hadar Leasing case in the Ohio Bankruptcy Court.
4. In count 18 of the complaint, FNBB alleges that its claim is nondischargeable pursuant to 11 U.S.C. § 523(a)(4) due to the debtor's fraud or defalcation in connection with his fiduciary responsibilities to Telecasting.
5. In count 19 of the complaint, Telecasting also alleges that its claim is nondischargeable pursuant to 11 U.S.C. § 523(a)(4) due to the debtor's fraud or defalcation in connection with his fiduciary responsibilities to Telecasting.
6. In count 20 of the complaint, FNBB alleges nondischargeability of its claim pursuant to 11 U.S.C. § 523(a)(4) due to the debtor's embezzlement or larceny.
7. In count 21 of the complaint, Telecasting alleges the same embezzlement or larceny as proscribed under 11 U.S.C. § 523(a)(4) for nondischargeability of its claim.
8. In count 22 of the complaint, FNBB seeks a denial of the dischargeability of its claim pursuant to 11 U.S.C. § 523(a)(6) by reason of the debtor's willful and malicious injury.
9. In count 23 of the complaint, Telecasting also seeks a denial of the dischargeability of its claim pursuant to 11 U.S.C. § 523(a)(6) because of the debtor's willful and malicious injury.
Summary judgment under Fed.R.Civ.P. 56, as adopted by Bankruptcy Rule 7056, is an extraordinary remedy which should be granted with great caution and only where it appears that there is no genuine issue as to any material fact to be tried. Katz v. Goodyear Tire and Rubber Co., 737 F.2d 238, 244 (2d Cir.1984); Grand Union Co. v. Cord Meyer Development Corp., 735 F.2d 714, 717 (2d Cir.1984) (per curiam); Heyman v. Commerce and Industry Insurance Co., 524 F.2d 1317, 1320 (2d Cir.1975). The court must resolve all ambiguities and draw all reasonable inferences against the moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam). On a motion for summary judgment, the court may not try issues of fact and must only determine whether there are disputed issues to be tried. Heyman v. Commerce and Industry Insurance Co., 524 F.2d at 1319-20. In the instant case, the movants rely upon the estoppel effect of the findings and determinations made by the Ohio Bankruptcy Court and the Bankruptcy Court in the Southern District of New York in Hadar Leasing International Co. v. D.H. Overmyer Telecasting Co., Inc. (In re Overmyer Telecasting Co., Inc.), 23 B.R. 823 (Bkrtcy.N.D.Ohio 1982), aff'd, 53 B.R. 963 (N.D.Ohio 1984), referred to as "the Ohio case" and First National Bank of Boston v. Overmyer Company, Inc. (In re Overmyer Company, Inc.), 2 B.C.D. 992 (Bkrtcy.S.D.N.Y.1976), aff'd, 697 F.2d 295 (2d Cir.1982), referred to as "the Southern District Case." Accordingly, partial summary judgment is warranted only if the findings in the foregoing bankruptcy cases satisfy the proof required to arrive at a determination of nondischargeability under 11 U.S.C. § 523(a)(4) or (6) in the context of the doctrine of collateral estoppel.
As stated in Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979):
Collateral estoppel, like the related doctrine of res judicata, has the dual purpose of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation.
Id. at 326, 99 S.Ct. at 649 (footnote and citation omitted). The doctrine of res judicata, or claim preclusion, is distinguishable from the principle of collateral estoppel in that res judicata forecloses all that which might have been litigated previously by the parties, whereas collateral estoppel treats as final only those issues actually and necessarily decided in a prior suit. Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979); Parklane Hosiery Co. v. Shore, 439 U.S. at 326 n. 5, 99 S.Ct. at 649 n. 5. In Brown v. Felsen, 442 U.S. 127, 139, 99 S.Ct. 2205, 2213, 60 L.Ed.2d 767 (1979), in dealing with the principle of res judicata, the Supreme Court noted in footnote 10 that if a state court determined factual issues in a state-law question, using standards identical to those of § 17 of the former Bankruptcy Act (now appearing as § 523 of the Bankruptcy Code), then collateral estoppel, in the absence of countervailing policy, would bar relitigation of those issues in the bankruptcy court. Mr. Justice Blackmun observed in this footnote that the case concerned res judicata only, and not the narrower principle of collateral estoppel. Moreover, the Supreme Court decided the preclusive effect of a state court judgment entered following a stipulated settlement where the issue of fraud had not been litigated. It has since been held that the doctrine of collateral estoppel may be applicable to a dischargeability determination in the bankruptcy court if the following conditions are met:
(1) the issue sought to be precluded must be the same as that involved in the prior action; (2) that issue must have been actually litigated; (3) it must have been determined by a valid and final judgment; and (4) the determination must have been essential to the prior judgment.
In re Ross, 602 F.2d 604, 608 (3d Cir.1979) (quoting Haize v. Hanover Insurance Co., 536 F.2d 576, 579 (3d Cir.1976)). See, e.g., In re Esposito, 44 B.R. 817, 823 (Bkrtcy.S. D.N.Y.1984); Revelle Motors, Inc. v. Spector (In re Spector), 22 B.R. 226, 231 (Bkrtcy.N.D.N.Y.1982); M & M Incorporated v. Supple (In re Supple), 14 B.R. 898, 903 (Bkrtcy.D.Conn.1981); Manning v. Iannelli (In re Iannelli), 12 B.R. 561, 563 (Bkrtcy.S.D.N.Y.1981); Tickner v. Allen (In re Allen), 3 B.R. 355, 357-58 (Bkrtcy. W.D.N.Y.1980).
There is no question that certain of the issues concerning the debtor's fraudulent scheme and conduct, as involved in the prior actions in the Ohio case and the New York Southern District case, are the same issues that the movants rely on in the instant case. Moreover, these issues were actually and fully litigated by the parties and determined by valid and final...
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