In re Saler
| Decision Date | 24 February 1997 |
| Docket Number | Bankruptcy No. 96-15119F,Adversary No. 96-1039F. |
| Parties | In re Richard T. SALER, Debtor. Harold B. SALER and Stephen B. Saler Trust, Plaintiffs, v. Richard T. SALER, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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David A. Koss, Wynnewood, PA, for debtor.
Michael L. Temin, Wolf, Block, Schorr and Solis-Cohen, Philadelphia, PA.
Presently before me in this adversary proceeding is the motion of plaintiffs Harold B. Saler and Stephen B. Saler Trust for summary judgment and/or judgment on the pleadings. The plaintiffs seek a determination that certain prepetition debts owed to them by the debtor are nondischargeable in this chapter 7 case. As will be discussed below, the defendant does not oppose the relief sought by the Trust plaintiff, but does oppose the relief sought by Harold Saler.
For the following reasons, upon consideration of the memoranda and oral arguments of counsel, I conclude that the motion should be granted as to both plaintiffs.
The facts surrounding this 1996 adversary proceeding are not materially in dispute.
In 1988, Richard Saler filed a voluntary bankruptcy petition, docketed at Bankr. No. 88-13003F. On September 30, 1988, Harold Saler, on behalf of himself individually, and as trustee of the Stephen B. Saler Trust, commenced an adversary proceeding against the debtor. This complaint (Ex. A to the instant motion) alleged that Stephen and Richard Saler are the sons of Harold Saler. Stephen, however, died at some point prior to 1988, and a trust was established for the benefit of Stephen's children. Richard and Harold were both trustees of this trust. Among the assets of the trust were certain bearer and registered bonds located in a safe deposit box. Further, Harold Saler also held separate bearer and registered bonds which he kept in a different safe deposit box.
By conduct alleged to be fraudulent, willful and malicious, this 1988 bankruptcy complaint asserted that Richard Saler wrongfully converted certain bonds belonging to Harold Saler and to the Stephen B. Saler Trust, and improperly used the proceeds of some or all of those bonds for his sole benefit. The plaintiffs sought injunctive relief as to any bonds then still in Richard's possession or control, along with an accounting for those bonds which were sold or transferred. In addition, the plaintiffs in their 1988 action sought a determination that any claims then held by them against Richard were nondischargeable pursuant to 11 U.S.C. § 523(a)(2), (a)(4) or (a)(6).
Richard apparently filed an answer in opposition to the complaint. However, on July 10, 1989, the parties submitted a settlement stipulation (Ex. B to the instant motion) which was approved by Bankruptcy Judge Scholl on July 17, 1989.1 In material part, this stipulation provided that the aforementioned adversary proceeding would be dismissed without prejudice. Richard agreed that Harold could raise the same claims on or after September 1, 1989. Further:
the Debtor Richard hereby acknowledges and agrees that if, in any subsequent proceeding, Harold establishes any of the claims set forth in Counts I fraud and conversion and III nondischargeability of the Complaint any amounts or damages awarded as a result of those claims would constitute a non-dischargeable debt in the Bankruptcy Proceeding, pursuant to 11 U.S.C. § 523(a). As a result, any such amounts and damages are and are deemed to be a non-dischargeable debt pursuant to 11 U.S.C. § 523(a).
Motion, Ex. B (¶ 2).
On September 30, 1991, Richard Saler received his bankruptcy discharge. Thereafter, his chapter 7 bankruptcy case was closed.
Earlier, on July 13, 1990, Richard pled guilty to theft of property from the Stephen B. Saler Trust. As part of his sentence, he was ordered to pay $174,000.00 in restitution to the Trust. (Complaint, Ex. A.) Also in 1990, Harold Saler brought suit in New York state court against his son Richard. (Complaint, Ex. B.) In this state court complaint, Harold alleged that Richard improperly took personal and registered bonds from Harold's safe deposit box. Among the relief sought were damages for wrongful conversion, as well as equitable relief along with punitive damages.
For reasons not explained, Richard did not file any answer to this state court complaint and a default was entered. Thereafter, the state court held a hearing to assess damages, at which time Richard did not appear. By order dated January 4, 1994, judgment by default was entered against Richard Saler in the amount of $570,332.30, plus punitive damages in the amount of $2,000,000.00. (Complaint, Ex. C.)
On June 4, 1996, Richard Saler filed the instant chapter 7 bankruptcy petition. On September 4, 1996, the above-captioned plaintiffs filed a complaint requesting a determination that the prepetition debts owed to them be held nondischargeable pursuant to 11 U.S.C. §§ 523(a)(2), (a)(4) or (a)(6).2 The debtor filed an answer asserting that his father, Harold Saler, authorized Richard's use of the proceeds of the bonds belonging to Harold and so Richard did not improperly convert them. The debtor avers:
The Personal Bonds and the proceeds thereof which Debtor obtained from Harold Saler were obtained with the express permission and consent of Harold Saler and with full knowledge of the use of said Personal Bonds and proceeds thereof by Debtor Richard Saler.
Answer, ¶ 37. Thus, the debtor contends that his debt to his father is dischargeable in this 1996 bankruptcy case.
However, Richard does concede that he wrongfully converted bonds which were owned by the plaintiff Trust. Further, the "debtor does not seek a discharge of any debt due the Trust . . . and . . . is not seeking a discharge from the ordered restitution." Answer, ¶¶ 12-13. Therefore, the "Debtor admits that the claim of the Trust in the amount of $174,000., less those amount already paid by Debtor in restitution, is non dischargeable." Answer, Count V, Wherefore Clause.
The plaintiffs here seek the entry of judgment on the pleadings in favor of the Stephen B. Saler Trust and the entry of summary judgment in favor of Harold B. Saler individually. The defendant/debtor does not oppose entry of judgment against him in favor of the Trust. He acknowledges that his restitution obligation is nondischargeable in this chapter 7 case. See generally Kelly v. Robinson, 479 U.S. 36, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986). Accordingly, such judgment shall be entered.
However, the debtor opposes the entry of summary judgment in favor of plaintiff Harold Saler. He maintains that plaintiff Harold Saler has obtained only a prepetition judgment by default against him. Default judgments, the debtor argues, cannot serve as the basis for summary judgment in nondischargeability disputes. The debtor further argues that any agreements he entered into in his 1988 bankruptcy case are unenforceable in this 1996 case.
Federal Rule of Bankruptcy Procedure 7056 incorporates Fed.R.Civ.P. 56. In general, the standard for entry of summary judgment under Rule 56 is well established. As the Third Circuit Court of Appeals recently discussed:
Summary judgment is appropriate when the moving party is entitled to judgment as a matter of law and there is no genuine dispute of material fact. Gottshall v. Consolidated Rail Corp., 56 F.3d 530, 533 (3d Cir.1995) (citing Fed.R.Civ.P. 56(c)). In order to defeat "a properly supported summary judgment motion, the party opposing it must present sufficient evidence for a reasonable jury to find in its favor." Groman v. Township of Manalapan, 47 F.3d 628, 633 (3d Cir.1995) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-52, 106 S.Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986)). In essence, the non-moving party must demonstrate a dispute over facts that might affect the outcome of the suit. Id. Moreover, in reviewing the record, we must give the non-moving party the benefit of all reasonable inferences. Josey v. John R. Hollingsworth Corp., 996 F.2d 632, 637 (3d Cir.1993).
Hampton v. Borough of Tinton Falls Police Dept., 98 F.3d 107, 112 (3d Cir.1996).
As has been mentioned above, there is no dispute concerning that which occurred during the debtor's earlier bankruptcy filing, the substance of the debtor's two prior agreements with the plaintiff, or the entry of judgment against him in state court. Conversely, the parties do dispute whether Harold Saler authorized his son Richard to liquidate various bonds and use their proceeds for Richard's benefit.
Implicitly, the plaintiff contends that this factual dispute over the grant of authority is immaterial to this nondischargeability proceeding. Harold Saler argues that the debtor agreed in the 1988 bankruptcy case that any prepetition claim which Harold held was nondischargeable and the debtor is now bound by that agreement. The debtor counters with the two related arguments: first, that the entry of...
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