Matter of Musgrove
| Decision Date | 18 October 1995 |
| Docket Number | Bankruptcy No. N95-10489-WHD. Adv. No. 95-1023N. |
| Citation | 187 BR 808 |
| Parties | In the Matter of Vernon Thompson MUSGROVE, Debtor. Everett and Libby MORGAN, Plaintiffs, v. Vernon Thompson MUSGROVE, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
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T. Michael Flinn, Carrollton, Georgia, for Plaintiffs.
Jacquelyn L. Kneidel, Wood, Odom & Edge, P.A., Newnan, Georgia, for Debtor/Defendant.
Currently before the Court in this matter is a Motion to Dismiss or in the Alternative Motion for Summary Judgment, filed by Vernon Thompson Musgrove (hereinafter "the Debtor"). The Debtor's motion comes as defense to a Complaint to Determine Dischargeability and Objection to Discharge filed by Everett Morgan and Libby Morgan (hereinafter "the Morgans"). As such, these matters constitute a core proceeding. See 28 U.S.C. § 157(b)(2)(I) & (O). The Court bases it decision upon the Findings of Fact and Conclusions of Law which follow.
This controversy draws from a common association which the Debtor and Everett Morgan had with Eastern Utilities Construction Company (hereinafter "Eastern Utilities"), a now defunct Georgia corporation. The Debtor served as both an officer and an equity owner of that closely held corporation. At the same time, the Eastern Utilities organization employed Mr. Morgan. Ultimately, Mr. Morgan left Eastern Utilities on January 10, 1992, and he then elected to continue health insurance coverage for himself and his wife, pursuant to COBRA. As part of that extended insurance plan, the Morgans delivered $252.13 each month to the husband's ex-employer so that their health coverage would not lapse. Eastern Utilities accepted these remittances but, rather than applying the funds to their designated purpose, the company diverted them to its own use. Subsequently, a family illness caused the Morgan's to incur $18,415.00 in medical expenses, a cost for which they consequently were uninsured.
Faced with these out of pocket expenses, on February 9, 1993, the Morgans commenced a state court action alleging counts of breach of contract, breach of fiduciary duty, negligence, fraud and RICO violations. Out of an apparent uncertainty as to the individual malfeasors involved, the Morgans named Eastern Utilities Company as a defendant, as well as the individuals "John Doe I" and "John Doe II."1 Ultimately, the state court ruled in favor of the plaintiffs on all counts, entering a judgment for $31,500.00 against the named defendants.2 The Morgans, however, never filed an amendment so as to substitute actual parties for the two "John Doe" defendants.
Prior to satisfaction of the Morgans' judgment, Eastern Utilities closed its doors. In that same span of time, the Debtor began discussions with the Morgans and their attorney regarding the possibility of his assuming personal responsibility for the judgment entered against Eastern Utilities. Then, on March 2, 1995, the Debtor filed a petition commencing his present bankruptcy case. As part of that filing, the Debtor listed the Morgans in his schedule of creditors, describing their claim only as "fixed and liquidated."
The Morgans now have undertaken this adversary proceeding to determine the dischargeability of the debt owed to them by the Debtor and to object to the Debtor's discharge in bankruptcy. In short, the Morgans contend that, as a fiduciary who has committed fraud or defalcation, the Debtor owes them a non-dischargeable debt under 11 U.S.C. § 523(a)(4). In response to the Morgan's complaint, the Debtor first denies that he bears any personal obligation or debt in favor of these parties. In support of that fact, the Debtor points out that the state court action and resulting judgment nowhere referred to him personally. Alternatively, the Debtor reasons that, if in fact he owes any debt to the Morgans, that debt should not be declared non-dischargeable because he does not qualify as a "fiduciary" for the purposes of section 523(a)(4).
The debtor has chosen to support his present Motion to Dismiss with affidavits, thereby drawing the Court's attention to matters beyond the scope of pleadings themselves. To the extent that the Debtor presents such a "speaking motion," the Court deems it proper to consider the proffered evidence and apply traditional summary judgment standards to its analysis. See Fed. R.Civ.P. 12(b) (); see also Jones v. Automobile Ins. Co. of Hartford, Conn., 917 F.2d 1528, 1531-32 (11th Cir.1990) ().
In accordance with Federal Rule of Civil Procedure 56 (), this Court will grant summary judgment only if "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is material if it might affect the outcome of a proceeding under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A dispute of fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The moving party has the burden of establishing the right of summary judgment, Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991); Clark v. Union Mut. Life Ins. Co., 692 F.2d 1370, 1372 (11th Cir.1982), and the Court will read the opposing party's pleadings liberally. Anderson, 477 U.S. at 249, 106 S.Ct. at 2510-11.
In determining whether a genuine issue of material fact exists, the Court must view the evidence in the light most favorable to the party opposing the motion. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Rosen v. Biscayne Yacht & Country Club, Inc., 766 F.2d 482, 484 (11th Cir.1985). The moving party must identify those evidentiary materials listed in Rule 56(c) that establish the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); see also Fed.R.Civ.P. 56(e). Once the motion is supported by a prima facie showing that the moving party is entitled to judgment as a matter of law, the party opposing the motion must go beyond the pleadings and demonstrate that there is a material issue of fact which precludes summary judgment. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553; Martin v. Commercial Union Ins. Co., 935 F.2d 235, 238 (11th Cir.1991).
11 U.S.C. § 101(5). Thus, reading sections 101(12) and 101(5) coextensively, the term "debt" refers to any obligation capable of enforcement against the debtor. Penn. Dept. of Public Welfare v. Davenport, 495 U.S. 552, 557-58, 110 S.Ct. 2126, 2130, 109 L.Ed.2d 588 (1990) (citing H.R.Rep. No. 95-595, p. 309, U.S.Code Cong. & Admin.News 1978, p. 6266).
In apparent reliance upon the above-mentioned standard, the Debtor contends that he owes no debt to the Morgans because the state court judgment did not name him individually, and, as such a non-party, he may not be subjected to the enforcement of that judgment. Rather, argues the Debtor, the Morgans obtained a meaningless "John Doe" judgment and nothing more. The Court has serious doubts regarding that argument's ability to support a motion for summary judgment on the question of whether any "debt" exists.3
Moreover, the Court points out that, as part of his bankruptcy petition, the Debtor listed the Morgans as unsecured creditors of his estate by virtue of a "fixed and liquidated" claim. This entry in the Debtor's schedules, standing alone, constitutes a judicial admission that he does in fact owe a debt to the Morgans. See In re Standfield, 152 B.R. 528, 531 (Bankr.N.D.Ill. 1993) () (citations omitted); see also In re Gervich, 570 F.2d 247, 253 (8th Cir.1978) (); In re Leonard, 151 B.R. 639, 643 (Bankr.N.D.N.Y. 1992) (). Thus, by failing to qualify the schedule's description so as to include the term "disputed," the Debtor has waived the right to contest the debt's existence. See In re McMonagle, 30 B.R. 899, 903 (Bankr.D.S.D.1983) ().4
In the second leg of his argument, the Debtor reasons that, even if he in fact owes a debt to the Morgans, that obligation should not be declared non-dischargeable pursuant to section 523(a)(4). Code section 523(a)(4) provides in pertinent part, "A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual from any debt. . . . for fraud or defalcation while acting in a fiduciary capacity. . . ." 11 U.S.C. § 523(a)(4). Thus, to support a conclusion of 523(a)(4) non-dischargeability, the Court must...
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