Jones v. Holland (In re Holland)

• Decision Date: 12 September 2014
• Docket Number: Adversary Proceeding No. 12-10040,Case No. 12-00496
• Parties: In re LESLIE A. HOLLAND, Debtor. JOHN JONES, Plaintiff, v. LESLIE A. HOLLAND, et al., Defendants.
• Court: United States Bankruptcy Courts – District of Columbia Circuit

In re LESLIE A. HOLLAND, Debtor.

JOHN JONES, Plaintiff, v. LESLIE A. HOLLAND, et al., Defendants.

Case No. 12-00496

Adversary Proceeding No. 12-10040

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLUMBIA

September 12, 2014

(Chapter 7)

Not for Publication in West's Bankruptcy Reporter

MEMORANDUM DECISION RE DEFENDANT'S AMENDED MOTION FOR SUMMARY JUDGMENT

The debtor-defendant, Leslie A. Holland, has filed an amended motion for summary judgment (Dkt. No. 91) as to the second amended complaint filed by the plaintiff, John Jones. In that motion, Holland asks for summary judgment as to:

• the entirety of the second amended complaint, on the grounds of res judicata and collateral estoppel;

• Jones's § 523(a)(4) nondischargeability claim, on the grounds that Jones cannot show that a fiduciaryrelationship existed; and

• Jones's § 523(a)(15) nondischargeability claim on the grounds that Jones is no longer pursuing that claim and that there is no evidence supporting Jones's claim.

For reasons explained in more detail below, the court will grant partial summary judgment in favor of Holland as to some of Jones's claims on the grounds of res judicata, but will otherwise deny the motion.

IJones's Claims

The parties owned, as joint tenants, real property located at 404 21^st Street NE, Washington, D.C. (the "Property"). Jones's second amended complaint alleges the following.

It alleges that in 2006, Holland committed a fraud upon Jones in that Holland represented to Jones that she would sell the Property, when in fact she had no intention of doing so. Furthermore, in describing the alleged fraud, Jones contends that Holland had Jones sign a power of attorney under the pretense that it would be used to facilitate a sale of the Property, but which Holland had instead obtained for the purpose of transferring the Property solely to herself. Jones also alleges that additional language was added to the power of attorney after he signed it, thereby allowing Holland to transfer the Property solely to herself absent a sale, and that after transferring theproperty to herself, Holland proceeded to suck equity out of the Property by taking out one or more mortgages against the Property.

Thereafter, the parties entered into a 2008 Settlement Agreement and Mutual Release (the "Settlement Agreement"), settling a lawsuit filed by Jones in the Superior Court of the District of Columbia in 2007 regarding Jones's claims arising from Holland's alleged misconduct in 2006. That Settlement Agreement provided in relevant part:

2. The parties hereby agree that they shall undertake all actions necessary to cause the real property known as 404 21^st Street, NE, Washington, DC 20002 ("Premises") to be sold for its full market value. Defendant will list the property with a real estate agent within two weeks of this Agreement and shall provide written proof of said listing. The parties shall divide the net sales proceeds from the sale of the Premises as follows: Plaintiff shall receive the initial $90,000 of the sales proceeds or an amount of money equal to the amount of any mortgages previously taken out by Defendant against the Premises to which Plaintiff is not a mortgagee ("Defendant's Prior Mortgages"), whichever is greater. Defendant shall provide copies of all documents evidencing the amount of Defendant's Prior Mortgages to confirm the validity of said amount. The remaining net sales proceeds shall be equally divided by the parties, provided however, that Plaintiff shall be entitled to receive an additional credit representing ½ of the rents Defendant has received in connection with the Premises ("Rent Income") and Defendant shall be entitled to a credit representing ½ of the reasonable and necessary expenses and costs associated with the upkeep and maintenance of the property. Within 20 days of the execution of this Agreement, Defendant shall disclose all documents that evidence her net rental income from the Property.

3. In the event that the net sales proceeds are insufficient to reimburse Plaintiff for the amount ofDefendant's Prior Mortgages and Rent Income, Defendant shall be personally liable to Plaintiff for said amounts and shall pay such to Plaintiff in equal monthly installments over five (5) years with simple interest of eight percent (8%) per annum.

. . . .

7. Defendant acknowledges that, in accordance with and subject to the terms of this Agreement, Plaintiff is a co-owner of the Property.

The second amended complaint alleges not only that Holland failed to perform under the Settlement Agreement, but that Holland entered into the Settlement Agreement without ever having intended to perform. As such, Jones contends that Holland procured the Settlement Agreement through fraudulent representations regarding her intent to perform. Jones claims that he suffered damages as a result of Jones's fraudulent procurement of the Settlement Agreement because (a) it caused Jones to release his claims against Holland in exchange for his rights under the Settlement Agreement, and (b) it led to a delay in the selling of the Property after execution of the Settlement Agreement.

The second amended complaint alleges that Jones has a one-half interest in the Property, and requests in Count One an order compelling Holland to execute a deed to him reflecting that one-half interest. Holland has already conceded in this adversary proceeding that Jones has a one-half interest in the Property. The request for an order directing Holland to execute and deliver to Jones a deed reflecting that 50% interest will be academic ifthe trustee sells the Property, but not otherwise.¹

Additionally, Jones seeks compensatory damages, costs, and attorney's fees for the debts owed Jones under the Settlement Agreement itself² and for the harm to Jones arising from delay in selling the Property after execution of the Settlement Agreement and from his having released claims in the settled lawsuit in exchange for the Settlement Agreement.

By his complaint, Jones also seeks a declaration that those debts are nondischargeable:

• under 11 U.S.C. § 523(a)(2) as debts for property obtained by fraud (Count Two);³

• under 11 U.S.C. § 523(a)(6) as debts for willful and malicious injury inflicted by Holland upon Jones (CountThree);

• under 11 U.S.C. § 523(a)(4) as arising from a breach by Holland of a fiduciary duty owed to Jones (Count Four); and

• under 11 U.S.C. § 523(a)(15) as having been incurred incident to a divorce proceeding (Count Five).

IIMaterial Facts Not in Genuine Dispute

Holland's motion establishes that the following facts are not in genuine dispute.⁴ In June 1992, Jones and Holland wed. On or about March 6, 2006, after a period of separation, the parties were divorced. At the time of their divorce, the parties owned the Property as joint tenants. On or about January 7,2008, in conjunction with a civil action then pending in the Superior Court of the District of Columbia, the parties entered into the Settlement Agreement, which provided for the sale of the Property, and for the payment of a portion of the sale proceeds to Jones. Although Holland contends that she listed the Property on at least two occasions, no contract was ever accepted and the Property was never sold.

On December 19, 2011, Jones filed in the D.C. Superior Court a Complaint to Enforce Settlement Agreement, Partition Real Property and for Equitable Relief (the "2011 Complaint"), Case Number 2011 CA 9947.⁵ The 2011 Complaint, relying upon the Settlement Agreement, alleged in relevant part:

2. Paragraph 7 of the agreement specifically provides that Plaintiff is deemed a co-owner of the property. However, defendant has failed and refused to execute a deed evidencing Plaintiff's ownership. As a co-owner of the Property Plaintiff desires to partition the Property and/ or to effectuate its sell [sic].

3. Additionally, Defendant has breached the terms of that agreement, by among other things, failing or refusing to make a good faith effort to sell the property as contemplated by the Agreement.

4. Upon information and belief, defendant is receiving rent from certain unknown tenants and improperly retaining the proceeds.

5. In consideration of the foregoing, Plaintiff requests the following relief:

a. That the Defendant be compelled to execute a deed conveying Plaintiff his 50% interest in the Property;

b. That the Plaintiff be awarded such monetary damages as may be consistent with the evidence;

c. That the Property be partitioned;

d. Issue a restraining order requiring the unknown tenants to pay rent into the court registry pending resolution of this case.

e. That Plaintiff be awarded such other relief as deemed appropriate by the Court.

The Superior Court entered a default in that civil action, but Holland successfully vacated that default and filed a motion to dismiss the 2011 Complaint. That motion sought dismissal of the complaint for failure to state a claim upon which relief could be granted, contending, among other things, that the Settlement Agreement contemplated a sale of the Property, not a conveyance to Jones; that the allegations of a failure to make a good faith effort to sell the Property were conclusory allegations not supported by sufficient allegations of fact to state a claim upon which relief could be granted; that the Settlement Agreement failed to specify the percentage of Jones's acknowledged co-ownership interest; that the request for partition was unwarranted because the Property was fully encumbered; and that the complaint failed to take into account the credits to which Holland was entitled for maintaining the Property as a setoff against the share of rents owed Jones from the Property. OnApril 6, 2012, the Superior Court conducted a scheduling conference. Although the motion to dismiss was ripe to act on, the Superior Court provided Jones with an additional ten days to respond to the pending motion. Jones failed to file a response by the extended deadline. On May 8, 2012, the Superior Court entered an order...