Jones v. Dyer (In re Dyer)
| Decision Date | 08 February 2018 |
| Docket Number | Adversary Proceeding No. 16-4038-CJP,Case No. 16-40063-CJP |
| Parties | In re: MICHAEL E. DYER, Debtor ROBERT JONES, Plaintiff v. MICHAEL E. DYER, Defendant |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Before the Court is the Motion for Summary Judgment or[,] in the Alternative, Judgment on the Pleadings (the "Motion") and the Memorandum of Law In Support [of the Motion] filed by the defendant Michael E. Dyer ("Defendant" or "Dyer"), seeking judgment in his favor with respect to all counts of the complaint (the "Complaint") filed by the plaintiff Robert Jones ("Plaintiff" or "Jones") in this adversary proceeding, and the Response to Defendant's Motion for Summary Judgment and Request for Summary Judgment (the "Cross-Motion," together with the Motion, the "Motions") and a Memorandum of Law [in support of the Cross-Motion] filed by Jones.
Through the Complaint, Jones, Dyer's former father-in-law, asserts that a separation agreement between his daughter and Dyer created an obligation for Dyer to pay Jones certain funds and that such obligation should be determined to be a non-dischargeable debt under 11 U.S.C. § 523(a)(4) and (6).1 In failing to pay him, Jones argues that Dyer defalcated as a fiduciary, embezzled funds, and willfully and maliciously injured Jones. After a hearing on the Motions, the Court took the matters under advisement. For the reasons discussed below, the Defendant's Motion is GRANTED, and the Plaintiff's Cross-Motion is DENIED.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a) and (b)(1) and 1334(b) and Local Rule 201 of the United States District Court for the District of Massachusetts. A determination of the dischargeability of a debt under § 523(a)(4) and (6) is a core proceeding. See 28 U.S.C. § 157(b)(2)(I).
The following facts are undisputed.2 While Dyer was married to Jones's daughter, Christine ("Ms. Dyer"), the Dyers borrowed funds from Jones. Compl. ¶ 43; Def.'s Mem. ¶ 2. On June 28, 2013, the Defendant and Ms. Dyer divorced pursuant to a Judgment of Divorce Nisi (the "Judgment") entered by the Essex Probate and Family Court (the "Probate Court"). Compl. ¶ 4.1; Def.'s Mem. ¶ 3. The Judgment approved and incorporated a separation agreement (the"Agreement"). See Compl. ¶ 4.1; Def.'s Mem. ¶ 3. Exhibit D to the Agreement, captioned "Liabilities," provided that: "[u]pon the transfer to the Husband of the Wife's interest in her Boston Medical Center 401(k), the Husband shall pay the following outstanding marital liabilities[.]" Compl. ¶ 4.1; Def.'s Mem. ¶ 4. Various creditors were listed and appear to have been numbered and modified by handwritten markings and comments, initialed by "CD" and "MD." See Compl. Ex. 1, Agreement Ex. D ¶ 3; Def.'s Mem. ¶ 4. The liabilities included: (1) approximately $13,000 owed to the Internal Revenue Service for 2011-2012 tax obligations, (2) $4,800 owed to the Town of North Andover for preschool, (3) an unknown amount owed to Sears for a furnace installation "consistent w/the contract dated 11/14/2012," (4) approximately $20,000 owed to Metro Credit Union, (5) approximately $6,800 owed to Capital One for credit card charges, (6) approximately $5,000 owed to Home Depot for credit card charges, (7) approximately $2,000 owed to Discover for credit card charges, and (8) $468.54 owed to Comcast. See Agreement Ex. D ¶ 3; Def.'s Mem. ¶ 4. Following the listing of liabilities was a provision stating that:
Any money remaining after payment of taxes and fees due upon the liquidation of the retirement account, and the above marital debts, shall be paid toward the unsecured loan from the Wife's father. In the event there are insufficient funds to pay off all of the above marital debt, the parties shall pay the remaining balances in equal shares.
Agreement Ex. D ¶ 3; Def.'s Mem. ¶ 4.
Exhibit H of the Agreement addressed the division of the Dyers' property. See Agreement Ex. H. A subpart to Exhibit H captioned "Retirement Accounts," provided in relevant part that:
The Wife has a 403(B) through Boston Medical Center as set forth on her financial statement. Within thirty (30) days of the entry of the Judgment of Divorce Nisi, the Wife shall transfer to the Husband 100% of the value of her 403(B), valued as of the date the account is divided.
Agreement Ex. H ¶ B. The parties confirmed on the record that the references to "401(k)" and "403(b)" accounts in the Agreement were used interchangeably and referenced the same retirement account of Ms. Dyer through Boston Medical Center (the "Retirement Account").
Of the $92,463.53 that was redeemed from the Retirement Account, $70,890.00 was distributed to the Defendant. Pl.'s Mem. ¶¶ 6-7; see Def.'s Resp. ¶ 1 (). Dyer "may have paid a portion of the marital debts listed in the [Agreement] totaling $29,102.50," Pl.'s Mem. ¶ 10; see Def.'s Resp. ¶1 (), but he did not satisfy the unsecured debt owed to Jones. According to the schedules filed in support of Dyer's chapter 7 bankruptcy petition, which was filed on January 21, 2016, Jones holds a general unsecured claim against Dyer in the amount of $55,219.96. See Compl. ¶¶ 1-2; Def.'s Mem. ¶¶ 1-2.
Ms. Dyer died before Jones commenced this adversary proceeding. See Compl. ¶ 4; Def.'s Mem. ¶ 13. Jones initially had filed the Complaint on his own behalf, as well as on behalf of the "Estate of Christine Dyer." The Court dismissed the Estate of Christine Dyer as co-plaintiff because there was no personal representative appointed for Ms. Dyer's probate estate at the time the Complaint was filed, and Jones conceded that Ms. Dyer's probate estate was not damaged financially by Dyer's failure to pay Jones and the marital creditors set forth in the Agreement4 as no creditor filed a claim against her estate in the year following her death.
Dyer moves for summary judgment on all counts of the Complaint.5 He emphasizes that Jones's claims are based on Dyer's failure to comply with the disbursement provisions under the Agreement, not the circumstances surrounding Jones loaning funds to the Dyers while they were married. Dyer contends that Jones does not have "standing" to bring the dischargeability claims because Jones was not a party to the Agreement, did not become Dyer's creditor as a result of the Agreement, and did not have any property interest in the Retirement Account proceeds that were turned over to Dyer for disbursement pursuant to the Agreement.
Jones, in turn, seeks summary judgment in his favor on all counts of the Complaint, arguing that his debt should not be discharged in Dyer's chapter 7 case since Dyer's "failure . . . to obey the Probate Court Order requiring the 401(k) transfer of marital property be paid to specific marital creditors[,]" Pl.'s Mem. ¶ 13, constituted both a defalcation while acting in a fiduciary capacity and embezzlement pursuant to § 523(a)(4). With respect to the defalcation allegations, Jones asserts that Dyer's failure to obey the Agreement is a "defalcation while acting in a fiduciary capacity" that harmed Jones because Dyer held the Retirement Account proceeds "pursuant to an express trust created by the Probate Court Order" which charged him with "a specific duty . . . for the benefit of both his ex-spouse and their marital creditors to pay over the 401(k) funds as ordered."6 Pl.'s Mem. ¶ 13, Argument § 1.
Jones also contends that Dyer's failure to distribute the Retirement Account proceeds tomarital creditors in accordance with the Agreement is "embezzlement with respect to [Jones]," Pl.'s Mem. ¶ 14, that renders Dyer's debt to Jones nondischargeable under § 523(a)(4) because Dyer "received the property of another" pursuant to the Agreement but "failed to account for the $70,890.00 received and/or converted at least $41,787.41 to his own use" in violation of the Agreement. Pl.'s Mem., Argument § 2.
Finally, Jones asserts that the debt Dyer owes him arises from "a willful and malicious injury by the [Defendant] upon [Jones]" that is nondischargeable under § 523(a)(6), Pl.'s Mem. ¶ 15, because Dyer "had to know that injury to [Jones] was substantially certain to occur as a result of" Dyer "convert[ing] at least $41,787.41 to his own use" instead of paying marital creditors, Pl.'s Mem., Argument § 3.7
As to Dyer's challenge to Jones's standing, Jones highlights the fact that Dyer has acknowledged that Jones is one of his creditors. Jones also asserts that he has standing to bring the nondischargeability claims because he "is a named beneficiary of the express [t]rust established by the Probate Court Order." Pl.'s Mem., Argument § 4.
Pursuant to Civil Rule 56, summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In determining cross-motions for summary judgment, the Court "must resolve all genuine factual disputes in favor of the party opposing each such motion and draw all reasonable inferences derived from the facts in that party's favor[,]" Atlantic FishSpotters Ass'n v. Evans, 321 F.3d 220, 224 (1st Cir. 2003), by evaluating "each motion separately, drawing inferences against each movant in turn" E.E.O.C. v. Steamship Clerks Union, Local 1066, 48 F.3d 594, 603 n.8 (1st Cir. 1995).
"A dispute is 'genuine' if the record permits a sensible factfinder to decide it in either party's favor." Eldridge v. Gordon Bros. Grp., LLC, 863 F.3d 66, 77 (1st Cir. 2017). "[A] fact is 'material' if its existence or nonexistence 'might affect the outcome of the suit under the governing law.'" Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The parties agree that there is no genuine dispute as to any material fact relevant to the matters at hand.
Section 523 sets forth various exceptions to...
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