Matter of Graham
| Decision Date | 16 January 1996 |
| Docket Number | Bankruptcy No. A91-71114-WHD. Adv. No. 92-6311A. |
| Citation | 191 BR 489 |
| Parties | In the Matter of Eddie Lee GRAHAM, Debtor. Harry M. LEAGUE, Plaintiff, v. Eddie Lee GRAHAM, Defendant, v. U.S. POSTAMATIC, INC. and Herbert M. Schwartz, Third-Party Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
Eddie Lee Graham, Acworth, Georgia, pro se.
Stephen C. Steele, J. Brian O'Neil, Moore & Rogers, Marietta, Georgia, for Plaintiff, Harry M. League.
J. Timothy White, Varner, Stephens, White & Humphries, Atlanta, Georgia, Jerry B. Blackstock, C. Scott Greene, Christopher P. Galanek, Powell, Goldstein, Frazer & Murphy, Atlanta, Georgia, for Third-Party Defendants, Herbert M. Schwartz and U.S. Postamatic, Inc.
This matter comes before the Court on two related motions. First, Harry M. League (hereinafter "the Plaintiff") has presented the Court with a Motion for Summary Judgment on the dischargeability action which he has commenced against Eddie Lee Graham (hereinafter "the Defendant"). Also, U.S. Postamatic, Inc. and Herbert M. Schwartz (hereinafter collectively "the Third-Party Defendants" or "TPD's"), have filed a Motion for the Dismissal of the Claims of Defendant Eddie Lee Graham, seeking a release from certain third-party claims which the Defendant has filed against them in the course of defending the main action. Each of these motions constitutes a core proceeding within the Court's subject matter jurisdiction, see 28 U.S.C. § 157(b)(2)(A) & (O), and the Court will resolve the two collectively in accordance with the following reasoning.
This adversary proceeding arises from the Defendant's pre-bankruptcy involvement in the activities of U.S. Postamatic, Inc., a corporation whose primary business appears to have been selling coin-operated scales and related franchises to would be investors.1 After expending over $440,000.00 on purchases from the Postamatic product line, the Plaintiff filed a claim in the Superior Court of Cobb County, Georgia, U.S. Postamatic v. League, Civil Action File No. 110373-18, alleging inter alia that the Defendant had made fraudulent statements to induce his participation in the scale-peddling venture. Although the named defendants to that action included the Defendant, U.S. Postamatic, Inc., Herbert M. Schwartz and a variety of other individuals, each party settled out of court, save the Defendant.
Upon the Defendant's filing of a Chapter 11 petition, the Plaintiff commenced the instant adversary proceeding to determine the dischargeability of the contingent debt owed to it by the Defendant. The Debtor responded to the adversary case by filing complaints against the Third-Party Defendants, attempting to assert a right of indemnification from those parties. Given the pending nature of the state court action, however, this Court held all matters from the adversary proceeding in abeyance, lifting the automatic stay so as to allow the state court suit to proceed to judgment.
Although the Defendant initially appears to have actively participated in the state court action, he subsequently ceased to do so. Ultimately, he fired the attorney representing him and refused to offer any further opposition to the Plaintiff's case. Through an Order dated August 11, 1995, Judge Kreeger entered a default judgment against him in the amount of $1,517,566.32.
Their state court litigation concluded, the parties then returned their attention to the dischargeability proceeding initiated with this Court. In keeping with his course of conduct from that prior action, however, the Defendant again refused to participate. Although notified of his deposition by the Third Party Defendants, the Defendant did not appear. Notwithstanding the filing of the Plaintiff's present Motion for Summary Judgment, the Defendant did not file any responsive opposition. Furthermore, despite the repeated attempts of his counsel to contact him regarding the adversary case, the Defendant refused to respond.
In light of the Defendant's specific disregard of their deposition notices and his general obstructionism in this case, the Third Party Defendants have presented the Court with their Motion for the Dismissal of the Claims of Defendant Eddie Lee Graham. In substance, this motion relies upon the provisions of Federal Rule of Civil Procedure 37(d) for the proposition that the Defendant's third party complaint against them should be dismissed by the Court as a sanction for his non-compliant conduct.
The Defendant's non-participation also forms the crux of attention in the Plaintiff's Motion for Summary Judgment. Specifically, the Court must determine if, notwithstanding its entry by default, the judgment entered by the state court should collaterally estop further litigation of the dischargeability question under 11 U.S.C. § 523(a)(2)(A). According to the Plaintiff, the Eleventh Circuit's recent holding in Bush v. Balfour Beatty Bahamas, Ltd. (In re Bush), 62 F.3d 1319 (1995), resolved that question in his favor. As such, he contends that the Court should grant him Summary Judgment.
In accordance with Federal Rule of Bankruptcy Procedure 7056, which incorporates Federal Rule of Civil Procedure 56, this Court will grant a motion for summary judgment only in the absence of any material issue of fact so as to make the movant entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The movant has the burden of establishing that no such factual issue exists, Id. at 324, 106 S.Ct. at 2553, and the Court will read the opposing party's pleadings liberally. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). As a drastic remedy, summary judgment only will be granted when there is no room for controversy. United States v. Earhart (In re Earhart), 68 B.R. 14, 15 (Bankr.N.D.Iowa 1986); Sell v. Heath (In re Heath), 60 B.R. 338, 339 (Bankr.D.Colo.1986).
Additionally, the pertinent local rules for the Northern District of Georgia, also applicable to bankruptcy proceedings, act to give notice to the parties that a motion will be ready for determination on the merits twenty days from the date of service of the motion. LR 220-1(b)(1) (N.D.Ga.) (); see Dunlap v. Transamerica Occidental Life Ins. Co., 858 F.2d 629, 632 (11th Cir.1988); Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst v. Louisiana Hydrolec, 854 F.2d 1538 (9th Cir.1988). If no response or other opposition is filed, the Court will deem the facts as set forth in the movant's pleadings admitted. Kelly v. United States, 924 F.2d 355 (1st Cir.1991); Louisiana Hydrolec, 854 F.2d at 1545; Ellenberg v. Mercer (In re Home Co.), 108 B.R. 357 (Bankr.N.D.Ga.1989) (Cotton, B.J.). Finally, the Court will examine the record to determine whether the movant's motion and supporting pleadings provide a sufficient legal basis which would entitle the movant to judgment. Dunlap, 858 F.2d at 632; Kelly, 924 F.2d at 358. If the movant has set forth a sufficient legal basis, judgment is proper. Id.
As to those debts which a debtor may have incurred through some scheme of fraudulent activity, the Bankruptcy Code provides:
11 U.S.C. § 523(a)(2)(A). Through this provision, the Code offers a means of denying those individuals who do not qualify as "honest but unfortunate debtors" the benefits of a fresh start. Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 659, 112 L.Ed.2d 755 (1991). Like other exceptions to discharge, however, the provisions of section 523(a)(2)(A) warrant narrow construction. Gleason v. Thaw, 236 U.S. 558, 562, 35 S.Ct. 287, 289, 59 L.Ed. 717 (1915); Schweig v. Hunter (In re Hunter), 780 F.2d 1577, 1579 (11th Cir.1986).
In practice, the creditor bears the burden of establishing non-dischargeability under section 523(a)(2)(A). Hunter, 780 F.2d at 1579. Specifically, the creditor must establish by a preponderance of the evidence that:
See City Bank & Trust Co. v. Vann (In re Vann), 67 F.3d 277, 279-84 (11th Cir.1995); see also Grogan, 498 U.S. at 285-90, 111 S.Ct. at 658-61; Signet Bank v. Keyes, 959 F.2d 245, 1992 WL 66723 (10th Cir.1992); Mfr's. Hanover Trust Co. v. Ward (In re Ward), 857 F.2d 1082, 1082 (6th Cir.1988); Hunter, 780 F.2d at 1579.
Creditors may find their evidentiary burdens substantially lessened where a prior judgment serves to dispose of those issues material to a section 523(a)(2)(A) proceeding. Although the doctrine of claim preclusion does not apply to dischargeability proceedings in bankruptcy, Brown v. Felsen, 442 U.S. 127, 132-37, 99 S.Ct. 2205, 2209-12, 60 L.Ed.2d 767 (1979), the related doctrine of collateral estoppel, or issue preclusion, may step in to prevent re-litigation of those individual matters which actually and necessarily were decided as part of a prior court action. Grogan v. Garner, 498 U.S. 279, 284-85, 111 S.Ct. 654, 658-59, 112 L.Ed.2d 755 (1991). At the same time, however, courts have noted that judgments by default normally should not...
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