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dismissing arguments that the bankruptcy court "omit[ed] relevant and material surrounding circumstances" because "such arguments d[id] little to overcome the evidence in the record that support[ed] the Bankruptcy Court's conclusion"
Summary of this case from Rubinov v. Harrison (In re A.N. Frieda Diamonds, Inc.)Opinion
02-CV-0921E(F), 02-CV-0922E(F)
December 18, 2003
MEMORANDUM and ORDER
This decision may be cited in whole or in any part.
Appellants Collins and Ridsdale ("debtors") appeal from United States Bankruptcy Judge Michael J. Kaplan's Decision of October 24, 2002 by which it was declared that $104,728.08 of their debt owed to Appellee Hi-Qual Roofing Siding Materials, Inc. ("Hi-Qual") was nondischargeable under 11 U.S.C. § 523(a)(6). In re Ridsdale, 286 B.R. 225 (Bankr. W.D.N.Y. 2002). For the following reasons, the judgment of the Bankruptcy Court will be affirmed.
Although Collins and Ridsdale filed separate appeals with this Court — Collins (02-CV-0921E(F)) and Ridsdale (02-CV-0922E(F)) — this Order will serve to dispose of both such appeals.
The debtors were tried together although their respective adversary proceedings were never formally consolidated. Likewise, the debtors have separately filed appeals with this Court. Inasmuch as their arguments on appeal are virtually identical, the debtors' appeals will be considered in tandem.
This Court reviews the Bankruptcy Court's legal conclusions de novo and its findings of fact for clear error. In re Manville Forest Products Corp., 896 F.2d 1384, 1388 (2d Cir. 1990); see also F.R.Bankr.P. 8013 (stating that "[f]indings of fact *** shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses").
The following pertinent factual findings were made by the Bankruptcy Court. Collins, Ridsdale, and Mark T. Fletcher ("Fletcher") were the directors of Coldale Enterprises ("Coldale"), a roofing corporation based in Rochester, N.Y. Hi-Qual, also located in Rochester, was a major supplier of materials to Coldale. Due to cash flow problems, Coldale sought a loan for $100,000 from M T Bank ("M T") in late 1997. M T initially refused to grant the loan because Collins had a previous personal bankruptcy. M T later granted the loan when Fletcher submitted his financials in place of those of Collins. Fletcher and Ridsdale were the signatories on the M T account. The Bankruptcy Court found that Collins had signed checks drawn from the M T account although he was not a designated signatory.
See Ridsdale, at 228-232 for a complete record of the Bankruptcy Court's findings of fact.
Collins and Ridsdale were originally designated as owners of Coldale. When M T denied Coldale's loan application, Fletcher substituted his financials in place of Collins'. As owners, Ridsdale and Fletcher, each received 50 shares of stock. However, an agreement was signed by Collins, Ridsdale and Fletcher, stating that Fletcher was acting in the capacity of "nominal owner" of said stock, and that "all beneficial rights, title and interest in the said stock issued to Fletcher is [ sic] that of Collins alone." Further, "[u]pon written request from Collins to Fletcher, which Collins shall have the right to provide at any time *** then Fletcher shall immediately transfer and convey all legal right, title and ownership in said stock to Collins." Agreement, Ex. 6.
Collins requested a loan of $10,000 from Hi-Qual, resulting in a series of meetings between Hi-Qual and Coldale in October 1997. At such time, Coldale owed Hi-Qual approximately $150,000. After reviewing cash flow projections and financial statements, Mark Druen, President of Hi-Qual, decided to advance money to Coldale for payment to vendors.
Beginning on October 27, 1997, Hi-Qual representatives met with Collins and Ridsdale weekly to examine Coldale's "payables" and make additional loan advances. Hi-Qual also received Coldale's revenue checks, payroll records, bank statements, vendor invoices and bids. Hi-Qual relied on representations by Ridsdale and Fletcher that Collins was not an owner and could not sign company checks. Hi-Qual's advances were conditioned on the premise that Coldale would turn its revenues over to Hi-Qual when Coldale received payment for the jobs that it was performing. Hi-Qual, however, did not seek payment directly from Coldale's customers or place liens on Coldale's jobs because it was concerned that such action would hurt Coldale's reputation, which in turn would impact Coldale's ability to continue operations.
Checks made out to Coldale itself, Collins, Ridsdale, or "Cash," were permitted only for Coldale-related trips, expenses and labor. Collins and Ridsdale were supported to provide receipts for such expenses. However, Collins frequently took checks without turning in receipts or otherwise accounting for his use of funds. Undocumented checks or checks that appeared to be for personal use were posted as "officer's loans," but no repayments were planned or made. Corporate funds were frequently used for personal expenses, including payments on a truck used by Collins' father, work on Collins' house, mortgage payments on Collins' house and payments on Ridsdale's race car trailer. While there is no evidence that Ridsdale had a practice of writing checks for personal use, he was aware of Collins' actions and assured Fletcher, Deborah Fitzgerald — Coldale's bookkeeper — and Greg DeLaus — Hi-Qual's Controller — that their concerns about Collins' diversions of Coldale's assets were unfounded.
The Bankruptcy Court noted that Ridsdale had "shrewdly assuaged — defused — the concerns of Fletcher, Fitzerald and DeLaus, to facilitate Collins' diversions of Coledale's assets and value." Ridsdale, at 230.
The Bankruptcy Court further found that Collins used company funds to pay for a family vacation to Florida and that Coldale's funds were used to pay Collins' and Ridsdale's personal expenses while working in Florida. Moreover, revenues from work in Florida were not turned over to Coldale, but kept by Collins and Ridsdale for their own benefit.
In July 1998, Hi-Qual decided to convert the unsecured debt into secured debt through execution of a Promissory Note and Security Agreement. Although Hi-Qual knew that it was undersecured, this change enabled Hi-Qual to begin receiving a fixed monthly payment from Coldale. Hi-Qual also obtained confessions of judgment from Coldale, Ridsdale, and Collins. Hi-Qual was further aware that M T Bank had first position on all of Coldale's assets. Hi-Qual received regular monthly payments from Coldale in September, October and November 1998. In November or December 1998, Hi-Qual decided not to make any further advances to Coldale, although it expected to receive future monthly payments. However, after November 1998, the monthly payments from Coldale stopped.
A September 1, 1999 Judgment By Confession for $369,099.03 was entered against Coldale in the New York State Supreme Court, County of Monroe; a December 2, 1999 Judgment By Confession for $358,288.58 was entered against Collins and Ridsdale.
In winter 1998, Collins and Ridsdale planned to go to Florida to look for work. Hi-Qual was aware of this, and was assured that any earnings in Florida would be for Coldale's benefit. Hi-Qual was aware that Collins and Ridsdale did not have a license to practice in Florida and would have to work in conjunction with other companies in Florida. Collins and Ridsdale transported a variety of equipment to Florida, including a Taurus Tanker, dump truck, Kenworth tractor, Freuhoff dump trailer, wheelbarrows, safety lines, brooms, spudding machines, a crane and one other truck. In Florida, Collins and Ridsdale formed Coldale Group, a separate corporation. The Bankruptcy Court found that Ridsdale's and Collins's formation of a new company in Florida was hidden from Hi-Qual.
While working in Florida, Collins and Ridsdale continued to draw paychecks from Coldale. Collins and Ridsdale alternated weeks in Florida over a period of four to six months, working first through Frank Casserino Construction and then through Florida Universal Roofing, both of which arrangements were hidden from Hi-Qual. Coldale was not reimbursed by either company for the use of Coldale's equipment. The Bankruptcy Court found that (1) Collins and Ridsdale personally received money as a result of these affiliations, (2) Coldale's funds were used to pay for Collins' and Ridsdale's personal expenses while working in Florida and (3) revenues derived from work performed by Coldale were never credited to Coldale's books but, rather, kept by Collins and Ridsdale for their own benefit.
In June 1999, Hi-Qual decided to seize Coldale's collateral. Hi-Qual coordinated with M T to recover Coldale's equipment and assets. Collins and Ridsdale cooperated with Hi-Qual's seizure of Coldale's office equipment, which Hi-Qual later purchased from M T. Hi-Qual was unable to locate most of the equipment taken to Florida, but was able to purchase a crane that M T recovered from Florida. Hi-Qual obtained and served a restraining order in September 1999 on Coldale's accounts receivable, but most of the accounts had already been paid. After realizing on Coldale Enterprises' collateral, M T's balance due was between $16,000 and $18,000. Fletcher settled with M T on his guarantee for $1,000. M T was reimbursed for 90% of its outstanding balance by the United States Small Business Administration.
Collins testified he last saw the equipment at Florida Universal Roofing's warehouse on August 27, 1999. He stated that he made no personal attempt to retrieve the equipment, but told Ridsdale about the equipment. Ridsdale informed DeLaus that a dump trailer was stolen in Florida, but that there had been no police report.
Collins filed Chapter 7 on March 24, 2000 (Case No. 00-11547) and Ridsdale filed Chapter 7 on April 26, 2000 (Case No. 00-21154). Coldale never filed for bankruptcy. Hi-Qual commenced a separate adversary proceeding in each case to determine whether the debt owed to it by Collins and Ridsdale was dischargeable. By court order dated April 25, 2001, the two matters were set for joint trial and were heard beginning July 30, 2001.
Hi-Qual originally proceeded pursuant to an 11 U.S.C. § 523(a)(4) claim alleging that the debtors had committed fraud and breached their fiduciary duty to their creditors. At the close of Hi-Qual's case-in-chief, the debtors moved to dismiss such claim arguing that Hi-Qual had not proven its claim. The court dismissed the section 523(a)(4) claim, but allowed Hi-Qual to amend its Complaint — over the debtors' objections — to include a section 523(a)(6) claim because it had made out a prima facie case of willful and malicious injury. See Judge Kaplan's November 29, 2001 Order, at 10-11 (holding that although not pled in the original complaint, the elements of willful and malicious injury had actually been litigated); Tr. at 347. Although Judge Kaplan provided the debtors with an opportunity to conduct additional discovery and time to gather evidence to present a defense — either collectively or separately — in light of the Amended Complaint, the debtors failed to take advantage of such opportunities. Instead, the debtors chose to rest on the proof submitted based on their belief that Hi-Qual had not presented sufficient evidence to sustain a section 523(a)(6) claim. In his subsequent October 24, 2002 decision, Judge Kaplan found that the debtors' intentional diversion of Coldale's assets and revenues for their own personal benefit constituted a willful and malicious injury under section 523(a)(6) and declared $104,728.08 of their debt to Hi-Qual to be nondischargeable. See Ridsdale, at 233-238.
Section 523(a)(4) pertinently provides that a debtor's debt shall be declared nondischargeable "for fraud or deflacation while acting in a fiduciary capacity, embezziement, or larceny."
Section 523(a)(6) declares nondischargeable an individual debtor's debt "for willful or malicious injury by the debtor to another entity or to the property of another entity."
Judge Kaplan held that "the very interactions that defeat the particular fiduciary relationship that was pled necessarily gave rise to questions of culpable conversion or other wilful and malicious injury once Hi-Qual began to interact with each Defendant individually." November 29, 2001 Order, at 11.
On appeal, the debtors argue, inter alia, that Judge Kaplan improperly allowed Hi-Qual to amend its pleading to add its section 523(a)(6) claim after its case-in-chief had concluded and that such amendment resulted in unfair prejudice against them. The debtors further contend that the Bankruptcy Court abused its discretion during trial and erred in determining damages based on the evidence presented at trial.
The Bankruptcy Court's decision to allow Hi-Qual to amend its complaint pursuant to Rule 15(b) of Federal Rules of Civil Procedure ("FRCvP") will be reviewed pursuant to an abuse of discretion standard. See Evans v. Syracuse City Sch. Dist., 704 F.2d 44, 47 (2d Cir. 1983) (holding that appellate review of a trial court's decision to allow an amended pleading pursuant to FRCvP 15 is limited to an abuse of discretion); see also FRCvP 15(a) (leave to amend "shall be freely given when justice so requires"). While such a decision is a matter of discretion for the Bankruptcy Court, in the absence of "undue delay, bad faith or dilatory motive on the part of the movant, *** undue prejudice to the opposing party ***, [or] futility of amendment, the leave sought should, as the rules require, be `freely given.'" Foman v. Davis, 371 U.S. 178, 182 (1962). Absent a showing of undue prejudice or bad faith, mere delay does not provide a basis to deny leave to amend the complaint. State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981). FRCvP 15(b) permits a court to amend pleadings after trial to conform to the evidence produced at trial. Gussack Realty Co. v. Xerox Corp., 224 F.3d 85, 94 (2d Cir. 2000). However, such a motion should only be granted if the party against whom the amendment is offered will not be prejudiced thereby. Ibid. "In opposing a FRCvP 15(b) amendment, a party cannot normally show that it suffered prejudice simply because of a change in its opponent's legal theory. Instead, a party's failure to plead an issue it later presented must have disadvantaged its opponent in presenting its case." Cruz v. Coach Stores, Inc., 202 F.3d 560, 569 (2d Cir. 2000).
FRCvP 15(a) is applicable pursuant to F.R.Bankr.P. 7015.
FRCvP 15(b) states, in pertinent part, "when issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment ***."
The debtors first claim that Judge Kaplan abused his discretion in allowing the creditor to amend its pleading. The debtors assert that Hi-Qual relinquished its section 523(a)(6) claim before trial and that they were prejudiced by the amendment of the pleading because (1) the debtors did not have an opportunity to distance themselves from each other before trial, (2) the debtors did not attempt to conduct discovery with regard to a section 523(a)(6) claim, (3) the debtors' trial strategy — i.e., cross-examination of Hi-Qual's witnesses and objections to Hi-Qual's offer of proof — had not been geared toward attacking Hi-Qual's proof of their willfulness or maliciousness and (4) the debtors' counsel could not, or should not, have represented both of them in a section 523(a)(6) adversary proceeding.
The debtors contend that they had no reason to inquire into either what each other had told Hi-Qual or what Hi-Qual's basis was for believing that they had willfully or maliciously caused it injury because Hi-Qual had asserted only a claim for fiduciary fraud under section 523(a)(4). See Debtors' Brief, at 18-19.
For instance, the debtors argue that Ridsdale was portrayed, in contrast to Collins, at trial as honest and reputable and who did not pillage Coldale for personal benefit. As such, the debtors argue that Ridsdale would have "distanced [himself] from Collins so [he] would not be tarred with the same broad brush strokes that had blackened Collins' character," Debtors' Br., at 22. Instead, the debtors chose to focus on Hi-Qual's acquiescence, or its "buying in," of their conduct in order to defend against the fiduciary fraud claim. Ibid.
The debtors have failed to show that they were prejudiced or that the Bankruptcy Court abused its discretion by allowing Hi-Qual to amend its Complaint to add a section 523(a)(6) claim. The Court gave the debtors the opportunity to conduct further discovery as between each other and to present separate defenses. Consequently, any prejudice to the debtors in allowing Hi-Qual to amend was remedied by the opportunity to proceed accordingly thereafter. Indeed, the specific inquiries that the debtors claim they would have made had they been faced with a section 523(a)(6) claim before trial — to wit, inquiries regarding what each had said to Hi-Qual — are inquiries that were not foreclosed by the Bankruptcy Court's ruling. In addition, the debtors' contention that they decided to proceed with the same attorney because of the nature of the fiduciary fraud claim that they were facing, but would have retained separate counsel if they had notice of a section 523(a)(6) proceeding is unavailing. The debtors were aware before trial of a potential conflict of interest and took no steps thereafter to ameliorate the situation even though they were given the opportunity to "defend separately or together" after Hi-Qual's case-in-chief. Thus, their assertion that they were prejudiced by a failure to retain separate counsel is without merit.
The debtors also assert that the Bankruptcy Court improperly decided issues not in contention or tried by the parties and failed to consider the totality of the circumstances by omitting relevant and material surrounding circumstances, including Hi-Qual's consent, ratification and acquiescence. For instance, the debtors assert that (1) the court did not discuss or consider the security interest, the contemporaneous guarantees and confessions of judgment "as they impact Debtors' intent to harm Hi-Qual," and (2) the court failed to discuss the benefit Hi-Qual received from "going along with Debtors or why Hi-Qual may have been motivated [to] still further acquiesce, condone Debtors' actions, or go along with Debtors." Debtors' Br., at 26. The debtors' arguments are without merit inasmuch as they can point to no evidence on the record to show that these factual findings are clearly erroneous. Furthermore, such arguments do little to overcome the evidence in the record that supports the Bankruptcy Court's conclusion that the debtors had intentionally exploited and diverted Coledale's assets and revenues for the benefit of themselves and to the detriment of Hi-Qual. Thus, the Court finds that the debtors have failed to show that any of the Bankruptcy Court's findings of fact were clearly erroneous.
"[A] finding is only clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. *** This standard precludes this Court from reversing the Bankruptcy Court's decision if its account of the evidence is plausible, even if this Court is convinced that it would have weighed the evidence differently." In re B. Cohen Sons Caterers, Inc., 108 B.R. 482, 484 (E.D. Pa. 1989) (internal quotations and citations omitted).
Pl.'s Exs. 16, 27, 28, 29 and 34 reveal that corporate funds were used for personal expenses. In addition, Fletcher's testimony supports such findings as well as the fact that Ridsdale acquiesced in such conduct. The record also supports the Bankruptcy Court's conclusion that no revenue generated by work done by Coldale in Florida "ever found its way on the books of Coldale or Hi-Qual." Ridsdale, at 230 n. 5.
The debtors also contend that the Bankruptcy Court made several erroneous legal conclusions. First, the debtors assert that it was an improper interpretation of section 523(a)(6) for the Bankruptcy Court to base its holding on an injury to Hi-Qual itself rather than an injury to Hi-Qual's property in which it had an interest. See Debtors' Br., at 22-25. The Bankruptcy Court found that the statute is not so limited, and held that section 523(a)(6) "exempts from discharge any debts for wilful and malicious injury `to another entity or' to the property of another entity." Ridsdale, at 233. This Court finds no error in such a conclusion and need not elaborate on the Bankruptcy Court's reasoning. See Ridsdale, at 233-235 (citing cases in support of such a proposition and discussing how the debtor's collective actions willfully and maliciously injured Hi-Qual).
Second, the debtors argue that the Bankruptcy Court erroneously failed to first apply New York State law in determining the existence of a "debt" before reaching issues of discharge under federal bankruptcy law. Debtors' Am. Reply Br., at 5-6; see also Debtors' Br., at 24-25 (citing Grogan v. Garner, 498 U.S. 279 (1991), for the proposition that an enforceable debt, determined according to state law, is an essential element of a creditor's claim that such debt is nondischargeable). Although not specifically addressed by the Bankruptcy Court, there is no doubt that a "debt" existed for purposes of section 523(a)(6). A "debt" is liability on a claim. 11 U.S.C. § 101(12). A "claim" is a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured ***." 11 U.S.C. § 101(5)(A). Thus, the term "debt" as used in section 523(a)(6) means liability or a right to payment. The debtors admitted such liability in their Answer and there is sufficient evidence in the record to establish the existence of a valid debt. See Hi-Qual's Am. Compl., Ex. B (December 2, 1999 Judgment By Confession against Collins and Ridsdale for $358,288.58). Although the debtors focus on the fact that the Bankruptcy Court failed to specifically address such an issue, they have failed to point this Court to any tangible evidence, nor do they make any serious arguments, disputing the existence of a debt.
Next, the debtors argue that the Bankruptcy Court misapplied the applicable standard for "willful and malicious injury" as explained in Kawaauhau v. Geiger, 523 U.S. 57 (1998). Kawaauhau clarified section 523(a)(6) in holding that, for a debt to be nondischargeable under such section, it must be shown that the debt was the result of intentional injury rather than reckless, negligent or intentional conduct which merely leads to injury. Kawaauhau, at 64 ("[D]ebts arising from recklessly or negligently inflicted injuries do not fall within the compass of § 523(a)(6)."). The debtors argue that there was no proof that they had willfully or maliciously injured Hi-Qual. As previously noted, there is an abundance of evidence in the record regarding the debtors' conduct which resulted in injury to Hi-Qual — injury that was not caused merely by reckless or negligent conduct but rather by conduct which the debtors knew would injure Hi-Qual. See, e.g., Ridsdale, at 235 (discussing the nature of relationship between the debtors and Hi-Qual and how that relationship supported the conclusion that the debtors knew that their actions in diverting Coldale assets and revenues for their personal benefit would injure Hi-Qual). Consequently, the debtors have failed to show any erroneous legal conclusions by the Bankruptcy Court.
Turning to the issue of damages, the debtors contend that the Bankruptcy Court erred in calculating Hi-Qual's damages because (1) the court failed to apply the lesser of the debt or actual injury to the value of the property, (2) the court failed to deduct the amount of prior Liens from the total damages, (3) the court's damage findings were too speculative and (4) the court erred by ignoring section 1411 of New York's Civil Practice Law and Rules ("CPLR"). Debtors' Br., at 40-46.
The Bankruptcy Court's findings with regard to damages are given deference and will be undisturbed unless such findings are clearly erroneous. In re Fugazy Exp. Inc., 124 B.R. 426, 430 (S.D.N.Y. 1991). The debtors have failed to show that any of the Bankruptcy Court's determinations of damages are clearly erroneous.
To begin, the debtors have failed to cite any controlling case law in support of their first argument that the Bankruptcy Court was required to determine damages in an amount equal to the lesser of the value of the debt or of the property right injured. Nevertheless, as pointed out by Hi-Qual, the debtors voluntarily chose not to present a case or put forth any evidence to rebut Hi-Qual's evidence pertaining to its damages. Second, the Bankruptcy Court's findings in this case with regard to damages were reasonable considering the fact that the debtors failed to present any evidence with regard to the value of the equipment at issue. Even though much of the equipment at issue had not been recovered or accounted for, Hi-Qual presented the best available evidence of value it could considering the debtors' inability to produce such assets. See In re Barney's Boats of Chicago, Inc., 616 F.2d 164, 166 (5th Cir. 1980) (affirming Bankruptcy Court's finding of damages based in part on the fact that the debtor did not present any evidence with respect to the value of converted property). To hold otherwise would provide an inequitable and unfair windfall to the debtors for their tortious conduct. Third, although the Bankruptcy Court declared the amount — as opposed to the fact — of Hi-Qual's damage to be somewhat speculative, it correctly applied the law and its determination of damages was not clearly erroneous upon the evidence in the record. There was sufficient documentary evidence in the record supporting the Bankruptcy Court's finding that Hi-Qual had met its burden of proof with regard to damages and which established the value of the items in question. Finally, the debtors' argument that the Bankruptcy Court failed to consider CPLR § 1411 is without merit. The Court did consider the debtors' argument in holding that "[t]his is a case of wilful and malicious injury; virtually by definition, one never `assumes the risk' of a wilful and malicious injury." Ridsdale, at 228. While this Court passes judgement on such a broad interpretation of the assumption of the risk doctrine, it is nonetheless a correct interpretation of New York law as applied to this case. The debtors cite to Abergast v. Bd. of Educ. of South New Berlin Central Sch., 65 N.Y.2d 161 (1985), in support of their argument that the Court should have reduced Hi-Qual's damages in accordance with section 1411. Although the Abergast decision lends some support for the position that a plaintiff's "culpable conduct" should be considered in a case of an intentional tort (and thus may be used as an affirmative defense by the defendant), it also supports the Bankruptcy Court's decision to find section 1411 inapplicable to the present situation. In its analysis of section 1411, the Abergast court also held that "comparative causation is *** the more accurate description of the process" and that "plaintiff's conduct must be a cause in fact of his or her injury" to trigger an apportionment of damages. Abergast, at 168-169. In this case, assuming arguendo that Hi-Qual somehow acted culpably or negligently, in (1) extending further credit or money to "a company that to [its] knowledge was losing huge amounts of money" and (2) "going along with a man reputed to be dishonest even after learning of ongoing dishonest acts" — Debtors' Br., at 45 —, such culpability was not the cause of its injuries. Hi-Qual's injuries were due solely to the debtors' intentional diversion of Coldale's revenues and assets for their personal benefit. See Ridsdale, at 235-236 (discussing how the debtors "manipulated and exploited Coldale's assets for Hi-Qual's reasonable expectations of good faith, for their personal benefit"). The debtors have failed to show that the Bankruptcy Court's factual finding with regard to the cause of Hi-Qual's injuries was clearly erroneous inasmuch as such finding is supported by the record.
Indeed, it would be unjust to hold that Hi-Qual's proof with regard to the value of the equipment at issue is insufficient when the failure to present anything more substantial was due to the debtors' tortious conduct in depriving Hi-Qual of the opportunity to obtain such equipment.
Section 1411 states: "In any action to recover damages for personal injury, injury to property, or wrongful death, the culpable conduct attributable to the claimant or to the decedent, including contributory negligence or assumption of risk, shall not bar recovery, but the amount of damages otherwise recoverable shall be diminished in the proportion which the culpable conduct attributable to the claimant or decedent bears to the culpable conduct which caused the damages."
See Haran v. New York Metropolitan Baseball Club, Inc., 500 N.Y.S.2d 485, 486-487 (N.Y.Sup.Ct. 1986) (denying plaintiffs' motion to strike defendant's defenses based on CPLR § 1411 and assumption of the risk in an intentional tort case).
See Abergast, at 167 (holding that (1) section 1411 is "applicable to not only negligence actions, but to all actions brought to recover damages for personal injury, *** whatever the legal theory upon which the suit is based" and (2) the "defendant's culpable conduct may include, but is not necessarily limited to, negligence, breach of warranty, *** and intentional misconduct").
In any event, it should also be noted that the debtors' argument is somewhat flawed inasmuch as whatever Hi-Qual purportedly acquiesced to, it did not assume the risk of being victimized by intentional wrongdoing. Cf. O'Neill v. Daniels, 135 A.D.2d 1076, 1077 (4th Dept. 1987) (citing New York cases for the proposition that a plaintiff does not assume the risk of reckless or intentional acts by defendant).
In sum, upon review of the entire Bankruptcy Court record, the undersigned finds no errors in the Bankruptcy Court's legal analyses and no clearly erroneous findings of fact or damages.
Accordingly, it is hereby ORDERED that the judgment of the Bankruptcy Court — with regard to both Ridsdale and Collins — is affirmed and that the Clerk of the Court shall close this case.