Simmons v. Wiles (In re Wiles)

• Decision Date: 13 October 2021
• Docket Number: Adversary Proceeding 19-00147-5-SWH,19-02972-5-SWH
• Court: U.S. Bankruptcy Court — Eastern District of North Carolina
• Parties: IN RE: JOHN LEE WILES, DEBTOR v. JOHN LEE WILES, Defendant. TONY RAY SIMMONS, JR., Plaintiff,

IN RE: JOHN LEE WILES, DEBTOR

TONY RAY SIMMONS, JR., Plaintiff, v. JOHN LEE WILES, Defendant.

No. 19-02972-5-SWH

Adversary Proceeding No. 19-00147-5-SWH

United States Bankruptcy Court, E.D. North Carolina

October 13, 2021

ORDER REGARDING MOTION FOR SUMMARY JUDGMENT

Stephani W. Humrickhouse United States Bankruptcy Judge

The matter before the court in this adversary proceeding is the plaintiff's motion for summary judgment under Rule 56 of the Federal Rules of Civil Procedure (made applicable in bankruptcy proceedings by Rule 7056 of the Federal Rules of Bankruptcy Procedure) on grounds that the debt owed by the debtor/defendant John Lee Wiles to plaintiff Tony Ray Simmons, Jr. should be deemed nondischargeable as a matter of law. (Dkt. 22) The defendant filed a response in opposition to the motion (Dkt. 24), and a hearing was held on September 1, 2021, in Raleigh North Carolina. The court took the matter under advisement and invited the parties to submit additional authority in support of their positions, which both plaintiff and defendant elected to do. On October 7, 2021, the court entered a short order which allowed the motion in part and denied it in part for reasons to be set forth in a supplemental opinion. (Dkt 34) Those reasons are set forth below.

BACKGROUND AND PROCEDURAL HISTORY

There is no dispute that in September 2009, defendant John Lee Wiles shot plaintiff Tony Ray Simmons, Jr. in the parking lot of Northern Tool in Concord, North Carolina. In 2017, Simmons filed a complaint asserting a civil claim of common law battery against Wiles in the Cabarrus County Superior Court, and a jury trial was held in December 2018. Following the presentation of the evidence, plaintiff moved for a directed verdict on his claim for common law battery, which the state court granted. Judgment and Opinion of the Court Pursuant to N.C. G.S. § 1D-50 (Dkt. 23, Ex. A) at 1 ("the Judgment"). In the Judgment, which was entered by that court on January 23, 2019, the state court acknowledged that it ordinarily would not direct a verdict in favor of a party with the burden of proof, but that granting the motion was appropriate "'where the non-movant establishes proponent's case by admitting the truth of the basic facts on which the claim of proponent rests'" or "'where there are only latent doubts as to the credibility of oral testimony and the opposing party has failed to point to specific areas of impeachment and contradictions.'" Id. (internal citation omitted). Here, the court noted, there was "no genuine dispute at trial that Defendant shot the Plaintiff and that Plaintiff sustained some damage or injury as a result; and further the element of non-consent was established as a matter of law." Id. Accordingly, the state court granted plaintiff's motion for directed verdict on the affirmative claim of common law battery. Id. With respect to the four issues that were left to be put to the jury, its unanimous verdict established that 1) the defendant's commission of a battery upon plaintiff was not in self defense, or in the defense of another; 2) plaintiff was entitled to recovery for personal injury in the amount of $1 million dollars; 3) that the defendant was liable to plaintiff for punitive damages; and 4) that the jury in its discretion awarded $2 million dollars to plaintiff in punitive damages. Id. at 1-2.

Because the defendant made post-verdict motions for judgment notwithstanding the verdict on issues 3 and 4, those being whether, and if so to what extent, plaintiff was entitled to punitive damages, the court noted its statutory obligation to enter a written opinion stating its reasons for either upholding or disturbing the jury's findings on punitive damages. Id. at 2, citing N.C. G.S. § 1D-50. The standard of review applied by that court is essential to this court's disposition of the matter at hand, and is discussed infra, but it suffices to say for background purposes that the court upheld the jury's verdict and it remains undisturbed notwithstanding defendant's subsequent appeals.

Defendant filed a petition under chapter 11 of the Bankruptcy Code on June 28, 2019, and on October 14, 2019, plaintiff filed an amended proof of claim in the amount of $3, 253, 117.38. The motion for summary judgment was filed on August 7, 2021, and in it, plaintiff asserts that based upon application of the doctrine of collateral estoppel to the state court determinations by both the jury and the judge, the entire debt should be deemed nondischargeable under 11 U.S.C. § 523(a)(6) as being a debt "for willful and malicious injury by the debtor" to the plaintiff. Dkt. Nos. 22, 23. In response, defendant initially countered that plaintiff could not "satisfy the first prong of issue preclusion as neither 'willful' nor 'malicious' was actually litigated and a necessary element of either the Battery Debt or the Punitive Damages Debt." Dkt. 24 at 5. At the hearing, defendant focused^[1] primarily on the issue of whether the jury verdict established that the injury and related debt are from "malice." For the reasons set out below, the court concludes that the issue of willfulness was determined by the state court's entry of a directed verdict on the battery claim at the close of evidence, and that collateral estoppel does not apply with respect to the issue of malice.

DISCUSSION

Distilled to its essence, the issue before the court turns on whether the jury verdict awarding $1 million in compensatory damages for civil battery and $2 million for punitive damages (which under North Carolina state law, may be based upon actions that are willful or wanton or malicious) must be found, as a matter of law, to satisfy the nondischargeability standard of being debts for willful and malicious injury. Section 523(a)(6) excepts from judgment those debts that are "for willful and malicious injury by the debtor" to the person or property of another entity.

In plaintiff's motion for summary judgment, plaintiff bears the burden of proof and must establish an exception to discharge by the preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 291 (1991); Farouki v. Emirates Bank Int'l., Ltd., 14 F.3d 244, 249 (4th Cir. 1994). Non-dischargeability provisions are "to be interpreted narrowly." In re Theonnes, 536 B.R. 680, 697 (Bankr. D.S.C. 2015), citing Kawaauhau v. Geiger, 523 U.S. 57, 62 (1998) (noting the "'well-known' guide that exceptions to discharge 'should be confined to those plainly expressed'" (internal citation omitted)); see also Thomas v. Causey (In re Causey), 519 B.R. 144, 154 (Bankr. M.D. N.C. 2014) ("If this Court were to interpret Section 523(a) as allowing equitable exceptions to discharge under general common law principles, such a holding would impermissibly widen the scope of these provisions of the Code and, in effect, swallow-up or render superfluous those exceptions enumerated in Section 523(a).").

At issue is whether the doctrine of collateral estoppel, also known as issue preclusion, applies to the directed verdict, jury verdict, and the state court judgment and opinion^[2] issued in the underlying litigation to preclude further litigation of whether the resulting debt rests upon a previous determination that defendant inflicted an injury upon plaintiff that was both willful and malicious, as is necessary for the debt to be nondischargeable as a matter of law. In North Carolina, for collateral estoppel to apply in this matter, plaintiff must show that the issue in question is "'identical to an issue actually litigated and necessary to the judgment, that the prior action resulted in a final judgment on the merits, and that the present parties are the same as, or in privity with, the parties to the earlier action." Sartin v. Macik, 535 F.3d 284, 289 (4th Cir. 2008) (emphasis added). More comprehensively, the issues must be the same as those involved in the prior action, must have been "raised and actually litigated" in that action, and must have been "material and relevant to the disposition of the prior action." Id., quoting State v. Summers, 528 S.E.2d 17, 20 (N.C. 2000); see also Musselwhite v. Mid-Atlantic Rest. Corp., 809 Fed.Appx. 122, 127-28 (4th Cir. 2020); Sykes v. Blue Cross & Blue Shield of N.C. , 828 S.E.2d 489, 494 (N.C. 2019); Thomas M. McInnis & Assocs., Inc. v. Hall, 349 S.E.2d 552, 557 (N.C. 1986). Here, the question is whether the "willful" The court considers that question with reference to the state court's entry of directed verdict on the civil battery claim and with the tremendous benefit of having the state court's thorough review of the bases upon which the jury's verdict could have been supported. As to the jury issues of self-defense, compensatory damages, and punitive damages, this court is bound by the jury's verdict and necessarily underlying findings of fact, and not the state court judge's analysis or summary of the evidence, however detailed and thoughtful that summary may be. Accordingly, before turning to the specifics of whether the directed verdict and/or the jury's verdict established the willful and/or malicious nature of the injury to plaintiff such that the debt is nondischargeable, this court looks to the Judgment issued by the state court, in which it articulated the bases for its directed verdict and, as to the jury's punitive damages award, clarified precisely what that review was - and was not - intended to do. In announcing its standard of review, the state court explained:

At the outset, the Court notes that what follows is the opinion of the Court on the existence and sufficiency of evidence regarding the Jury's decision on Defendant's liability for punitive damages and the Jury's decision to award punitive damages and the amount thereof. See Scarborough v. Dillards, Inc.,

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