Taylor v. Snyder (In re Snyder)

• Decision Date: 04 December 2015
• Docket Number: Bankruptcy No. 13–B–80541,Adversary No. 13–A–96053
• Citation: 542 B.R. 429
• Parties: In re: Marta Snyder, Debtor. Linda Taylor, Plaintiff v. Marta Snyder, Defendant
• Court: U.S. Bankruptcy Court — Northern District of Illinois

542 B.R. 429

In re: Marta Snyder, Debtor.Linda Taylor, Plaintiff

v.Marta Snyder, Defendant

Bankruptcy No. 13–B–80541

Adversary No. 13–A–96053

United States Bankruptcy Court, N.D. Illinois, Western Division.

Signed December 4, 2015

Entered December 7, 2015

MEMORANDUM OPINION

Thomas M. Lynch, United States Bankruptcy Judge

Creditor Linda Taylor asks this Court for judgment after trial to except from discharge the pre-petition judgment entered in her favor and against the Debtor in state court proceedings under 11 U.S.C. § 523(a)(6) as a debt for a willful and malicious injury. For the reasons discussed below, the Court finds a portion of the state court's judgment to be non-dischargeable. Accordingly judgment will be entered in favor of the Plaintiff in part and in favor of the Defendant in part.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b) and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. Matters concerning "determinations as to the dischargeability of particular debts" are "core proceedings" under 28 U.S.C. § 157(b)(2)(I). Because such matters "stem[ ] from the bankruptcy itself." this Court has constitutional and statutory authority to enter a final order in this proceeding. Stern v. Marshall, 546 U.S. 500, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011).

FINDINGS OF FACT

The following sets forth the Court's findings of fact as required by Fed. R. Bankr. P. 7052.¹

In 2007, Linda Taylor and her husband entered into a contract with the Debtor's business, Snyder's General Contractor,² to build an addition to their residence in Rockford, Illinois. The written agreement was signed by the Debtor on March 26, 2007. (Pl.'s Ex. 4.) The price for labor and materials was $33,281, and the contract provided for payment in four installments: "20% down, 20% set foundation, 40% framing up, ready to start drywall, 20% on completion of our work." (Id. ) Before commencing work the Debtor asked to see certified checks for each of the four proposed installment payments. On or about June 25, 2007, Ms. Taylor obtained four cashier's checks for the required sums payable to the order of Snyder's General Contractor. (Pl.'s Ex. 5.) On the same day the Taylors gave the Debtor a certified check for $6,656.20 as payment for the first installment. The Debtor and the subcontractors she hired began construction shortly afterward, and around July 20, 2007, the Taylors paid Snyder the second installment of $6,656.20 using another cashier's check. (Pl.'s Ex. 5.)

With framing only partially finished, the insulation was not installed and the project was not yet ready for the drywall on September 17, 2007, when Ms. Taylor's husband suddenly died at the house. The Debtor claims that in order to "give Ms. Taylor space" after his death, she started doing exterior work instead (including exterior siding, one of the third phase projects) rather than prepare the interior for the drywall and complete the second phase of the project.

After Ms. Taylor's husband died, the Debtor again expressed concern about Ms. Taylor's ability to pay for the complete project. Between September 17 and September 27, the Debtor made several demands for payment. On September 26, 2007, the Debtor called Ms. Taylor to demand the third installment payment. Ms. Taylor responded that the third payment was not yet due. During this conversation, Ms. Taylor informed the Debtor that she wanted to speak with her attorney. Ms. Taylor was unable to do so, however, until the next day. On September 27, 2007, the Debtor went to see Ms. Taylor at her house where she again demanded payment. An altercation ensued. The Debtor left, only to return to the residence later that day. Ms. Taylor then called her attorney, handing the phone to the Debtor who then spoke with him. Finally, Ms. Taylor agreed to pay the Debtor $10,000 and the Debtor promised to resume work upon receiving that sum and proof that Ms. Taylor held a cashier's check for the remainder of the full contract price.

Ms. Taylor gave the Debtor the $10,000 cashier's check on or about September 27. The Debtor testified without contravention that at the time she received the payment she intended to and had the ability to complete the project, but she did no further work because she never saw the requested proof of funds for the final payment. The Debtor testified that September 22, 2007 was the last day she performed work on the project. Ms. Taylor hired a different contractor on October 20, 2007 to complete the project for $9,600. (Pl.'s Ex. 6.)

The Debtor admits that she prepared and signed a document entitled "Statement of Claim for Mechanics Lien" in December, 2007. (Pl.'s Ex. 10.) The Debtor testified that she spoke with an attorney before preparing her "Statement of Claim." She claimed that while the attorney advised her informally, she prepared and filed the statement herself because she could not afford to retain him. At or about the same time, the Debtor sent Ms. Taylor a demand letter that stated: "I have filed a mechanics lien on your property ... for the balance due." (Id. ) The Debtor wrote further that a "balance of S6.680.40³ is past due" and that if "the payment is not received within 30 days I will be forced to file a suit to foreclose on the mechanics lien." (Id. )

The Debtor testified several times that she personally filed the Statement of Claim of Mechanics Lien with the Winnebago County Recorder's Office. A stamped copy of the document shows that it was notarized and recorded on December 27, 2007. (Pl.'s Ex. 11.) The Debtor further admits that she recorded the lien against Ms. Taylor's residence at this time even though the construction work had not been completed. In the document, "Marta Snyder / Snyder General Contractor" purports to claim a lien on Ms. Taylor's residence. The Statement of Claim further represents that the "job was completed on the 22 day of September, 2007." (Id. ) The Debtor's Statement of Claim also represents that of the $33,453 contract price, she had been paid $23,484.40, leaving a balance due of $9,968.60. The Debtor "further represent[ed] that there is now due [her] the said balance of $9,968.60 which respondents neglect and refuse to pay though requested, by reason whereof Claimant is entitled to a lien on said premises and the improvements thereon for said sum and interest from the maturity of the debt." (Id. )

In December 2008, Ms. Taylor commenced a state court action against the Debtor, Snyder's General Contractor, and the Debtor's sister-in-law.⁴ Her second amended complaint alleged breach of contract, intentional infliction of emotional distress and slander of title. The claims for breach of contract and slander of title, along with a counterclaim for foreclosure and breach of contract, were tried before a jury which returned a verdict in favor of Ms. Taylor.⁵ For the slander of title count, the jury instructions provided that Ms. Taylor had the burden of proving that:

1. Marta Snyder made a false and malicious publication, either oral or written;2. Such publication disparages Linda Taylor's title to the property; and

3. Damages due to such publication.

To demonstrate malice Linda Taylor must show that Marta Snyder knew that the disparaging statements were false or that the statements were made with reckless disregard of their truth or falsity. Marta Snyder acted with reckless disregard if she published the allegedly damaging matter despite a high degree of awareness of its probable falsity or if Marta Snyder had serious doubts as to its truth.

(Ex. 17.) Further, the instructions provided:

If you find that Marta Snyder acted with malice and proximately caused injury to Linda Taylor, and if you believe that justice and the public good require it, you may ... award an amount which will serve to punish Marta Snyder and to deter her and others from similar conduct.

(Id. ) The jury returned a plaintiff's verdict and on June 7, 2011, the state court entered judgment against the Debtor "d/b/a Snyder's General Contractor" and in favor of Ms. Taylor. The judgment awarded the Plaintiff $11,000 on the breach of contract claim,⁶ as well as $1,700 in compensatory damages and $1,000 in punitive damages on the slander of title claim.

Ms. Taylor then petitioned the trial court to award her attorneys' fees. At the direction of the state court judge the parties reached an agreement as to the fees solely attributable to the slander of title claim. In February 2012, the state court accepted and entered an agreed order awarding Ms. Taylor $13,000 for the attorney fees she incurred on her slander of title claim.

The Debtor filed her voluntary Chapter 7 petition on February 22, 2013. Her schedules filed several weeks later admit the judgment in the amount of $19,868.44 as an unsecured nonpriority claim. Shortly before the bankruptcy case closed, Ms. Taylor commenced this adversary proceeding seeking to except from discharge under 11 U.S.C. § 523(a)(6) the judgment on the grounds that it represents a debt for "willful and malicious injury." This Court conducted a trial on the adversary complaint over several weeks during which the Plaintiff and the Debtor testified, among others. At the close of the evidentiary proceedings, the parties were given leave to file post-trial briefs which, after some delay on the part of the Debtor, were filed.

DISCUSSION

Section 523(a)(6) of the Bankruptcy Code excepts from discharge a debt "for willful and malicious injury by the debtor to another entity or to the property of another entity." 11 U.S.C. § 523(a)(6). An "injury" for purposes of Section 523(a)(6) is a "violation of another's legal right, for which the law provides a remedy." First Weber Group, Inc. v. Horsfall, 738 F.3d 767, 774 (7th Cir.2013) (citation omitted). Willful and malicious injury "is one that the injurer inflicted knowing he had no legal justification and either desiring to inflict the injury or knowing it was highly likely...