Margulies v. Hough (In re Margulies)
Decision Date | 20 March 2017 |
Docket Number | 16 Civ. 2643 (KPF),Bankr. No. 10–14012 (SMB) |
Citation | 566 B.R. 318 |
Parties | IN RE: Joshua Simon MARGULIES, Debtor. Joshua Simon Margulies, Appellant, v. Dennis Hough and USAA Casualty Insurance Company, Appellees. Dennis Hough, Cross–Appellant, v. Joshua Simon Margulies and USAA Casualty Insurance Company, Cross–Appellees. |
Court | U.S. District Court — Southern District of New York |
Joel Martin Shafferman, Shafferman & Feldman LLP, New York, NY, Joshua Margulies, Pro Hac Vice, Solo Practitioner, Lynbrook, NY, for Appellant.
Howard J. Smith, III, Peter Martin Sartorius, Olshan Frome Wolosky LLP, New York, NY, for Appellees.
For the second time, Appellant/Cross–Appellee Joshua Simon Margulies ("Margulies") comes before this Court to appeal from a judgment of the United States Bankruptcy Court for the Southern District of New York (Bernstein, J. ), and, more particularly, its finding that his debt to Appellee/Cross–Appellant Dennis Hough ("Hough") was not dischargeable pursuant to 11 U.S.C. § 523(a)(6) because it arose from Margulies's willful and malicious conduct. Hough cross-appeals from the Bankruptcy Court's determination that USAA Casualty Insurance Company ("USAA") was not liable for the judgment pursuant to New York Insurance Law § 3420, because Margulies's injurious conduct did not qualify as an "accident" under New York law. For the reasons set forth below, the judgment of the Bankruptcy Court is affirmed and both appeals are denied.
The Court assumes familiarity with the complex and lengthy history of this litigation, which has been set forth in (i) the Bankruptcy Court's previous decisions in Hough v. Margulies (In re Margulies) , 476 B.R. 393 (Bankr. S.D.N.Y. 2012) (" Margulies I "); Hough v. Margulies (In re Margulies) , Adv. No. 10-04050, 2012 WL 3782535 (Bankr. S.D.N.Y. Aug. 31, 2012) (" Margulies II "); Hough v. Margulies (In re Margulies) , Adv. No. 10-04050, 2013 WL 2149610 (" Margulies III "); and Hough v. Margulies (In re Margulies ) ("Margulies V "), 541 B.R. 156 (Bankr. S.D.N.Y. 2015) ; (ii) this Court's previous decision, In re Margulies ("Margulies IV "), 517 B.R. 441 (S.D.N.Y. 2014) ; and (iii) the filings contained in the dockets for In re Margulies , No. 10–14012 (SMB) (Bankr. S.D.N.Y.); Hough v. Margulies , Adv. No. 10–04050 (SMB) (Bankr. S.D.N.Y.); and In re Margulies , No. 13 Civ. 6009 (KPF) (S.D.N.Y.). Therefore, the Court will focus here on the procedural developments that followed this Court's September 9, 2014 Opinion and Order (the "2014 Opinion") and the facts found by the Bankruptcy Court on remand.
The Bankruptcy Court entered its first final judgment in the adversary proceeding on May 29, 2013. (No. 10–04050, Dkt. # 118). On June 11, 2013, Margulies filed a notice of appeal from the May 29, 2013 judgment, and Hough's cross-appeal followed on June 13, 2013. (No. 10–04050, Dkt. # 121). The parties' respective notices of appeal were docketed by this Court on August 27, 2013. (No. 13 Civ. 6009, Dkt. # 1, 2).
After considering at length the Bankruptcy Court's factual findings and legal analysis, this Court determined that further factual findings and the application of a different legal framework were required. See generally Margulies IV. The Court remanded to this end. Id. at 462. Specifically, the Court directed the Bankruptcy Court to determine on remand:
On December 22, 2014, USAA advised United States Bankruptcy Judge Stuart M. Bernstein that the Court had vacated the May 29, 2013 judgment and remanded the case for further proceedings consistent with the Court's decision. (No. 10–04050, Dkt. # 145). USAA offered its belief that "[b]ased on the substantial evidence adduced at the [Bankruptcy Court's one-day bench trial on December 19, 2012], ... the record [was] sufficient to allow the [Bankruptcy] Court to issue additional post-trial findings of fact which answer the questions posed" in this Court's Opinion. (Id. ).2 Margulies concurred, writing separately to express his agreement that the parties need not submit new proposed findings of fact given the sufficiency of the already-existing record. (No. 10–04050, Dkt. # 147).
Judge Bernstein directed the parties to appear at a conference on February 3, 2015. (See No. 10–04050, Dkt. # 148). At the conference, Hough took a different position from Margulies and USAA, agreeing that additional testimony was not required but arguing that he should be permitted to supplement the record to support his res judicata argument. (No. 10–04050, Dkt. # 148). Judge Bernstein decided that the parties should submit proposed findings of fact and conclusions of law, and set a schedule for same. (Id. ).
Hough filed his proposed findings of fact and conclusions of law on March 23, 2015 (No. 10–04050, Dkt. # 150–51), to which he appended three exhibits to supplement the record (No. 10–04050, Dkt. # 149). USAA objected to the length of Hough's filings, and argued that the Bankruptcy Court should strike the supplemental exhibits that, it contended, Hough had filed impermissibly. (No. 10–04050, Dkt. # 152). The Bankruptcy Court convened a second conference on April 7, 2015. (No. 10–04050, Dkt. # 154).
At the conference, Hough made two arguments. First, Hough argued that he needed to submit these additional exhibits so that the Bankruptcy Court could reconsider Hough's res judicata claim. (No. 10–04050, Dkt. # 154). Though the Bankruptcy Court believed this Court had precluded its reconsideration of that question on remand, it did not strike Hough's exhibits and reserved decision on the propriety of his renewed res judicata claim. (Id. ).
Second, Hough moved for extensions of time and page length with regard to his proposed findings of fact and conclusions of law. (No. 10–04050, Dkt. # 154). Hough claimed that he could not make his case within the confines previously set. (Id. ). Judge Bernstein retorted that Hough's difficulty derived from his decision to plead his claim in the alternative: (Id. ). Hough responded that he was unable to do so—to dismiss his claim against Margulies and proceed against USAA alone—because of USAA's contention that the underlying incident was intentional, not accidental. (Id. ). Hough reasoned that if the Court found for USAA on that claim, "then that would also require under these facts a finding that there was malice," such that Margulies's debt would be "not dischargeable." (Id. ).
The Bankruptcy Court scheduled a second round of briefing with revised page limits. (No. 10–04050, Dkt. # 158). Hough filed his proposed findings of facts and conclusions of law on April 28, 2015 (No. 10–04050, Dkt. # 156–57); USAA filed its proposed findings of fact and memorandum of law on May 29, 2015 (No. 10–04050, Dkt. # 160); and Margulies filed his brief on remand on May 30, 2015 (No. 10–04050, Dkt. # 161–62).
Margulies V , 541 B.R. 156. In sum, the Bankruptcy Court found that (i) "Margulies acted willfully and maliciously, and accordingly, [that] his debt to Hough is not dischargeable" and (ii) "the incident that gave rise to Hough's injury was not an accident within the meaning of New York's insurance law, and hence, is not covered by the USAA policies issued to Margulies." Id. at 159.
Regarding the circumstances of the Incident, the Bankruptcy Court found these facts:
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