Opinion
Case No. 10-14849, Case No. 10-15313, Adversary No. 10-1188.
October 24, 2011
DECISION ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
In this chapter 13 case creditor Rodney Rogers commenced the present adversary proceeding, the Complaint of which alleges that defendants have committed fraudulent acts barring dischargeability under § 523(a)(2) and willful and malicious acts barring dischargeability under § 523(a)(6). Plaintiff died after this adversary proceeding was begun, and the suit is being pressed by Gaylord Otterbacher, executor of the estate of Rodney Rogers. We note as well that defendant Lloyd Martin Bowers is the father of defendant Dale Michael Bowers. Hereafter, we will refer to defendants by their first names.
This Court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334(b) and the general order of reference entered in this district. This is a core proceeding arising under 28 U.S.C. § 157(b)(2)(I).
Now before the Court is a Motion for Summary Judgment brought by defendants. In support of their motion, defendants filed a Memorandum. Attached to their Memorandum is a copy of a Complaint filed by plaintiff in the Common Pleas Court of Highland County, Ohio on February 16, 2010, against the same parties that are defendants here. Also attached to defendants' memorandum is a copy of a Decision Granting Partial Summary Judgment in Favor of Defendants Dale, Amber and Lloyd Bowers filed by that Court on June 25, 2010. Each defendant has also filed an affidavit in support of the Motion for Summary Judgment. Plaintiff filed a Memorandum in Response to defendants' motion. Plaintiff also filed depositions of the now deceased plaintiff, as well as one for each of the defendants, all taken in connection with litigation conducted by these parties in the Court of Common Pleas, Highland County, Ohio.
In his Complaint here, plaintiff mistakenly cited § 523(a)(5) instead of § 523(a)(6). It was evident that this was a mistake, for § 523(a)(5) refers to domestic relations matters, which clearly has no relevance here. In addition, the parties and events giving rise to this adversary proceeding are identical, with the exception of Amber Bowers, to those in state court case no. 08CV553 in the Common Pleas Court of Highland County, Ohio. No domestic support obligation issue was presented there, nor could it have been under the allegations of the Complaint. The same is true here. The matter was correctly referred to as § 523(a)(6) in the docket entry for the filing. The Court will make no further reference to that mistake in the filing.
FACTS
There is no dispute by any of the parties hereto that on February 15, 2001, plaintiff agreed to buy five acres of land ("the property") from defendant Dale, and paid Dale $15,000.00 for it. Though Dale accepted the payment, he did not give plaintiff a deed to the property. After Dale took the payment, plaintiff repeatedly asked for a deed on many occasions, but never obtained it.
Dale was in the construction business. Dale agreed to erect a pole barn on the property. Plaintiff paid him for materials and labor in that project. Plaintiff then decided to live on the property, the address for which was 8918 Blazer Road in Highland County. Plaintiff himself provided materials and labor in part on the barn and house projects, and Dale also did work on them. Plaintiff moved into the house in 2002. At the time that plaintiff moved into the house, Dale believed that plaintiff was indebted to him for work and materials in the amount of $8,125.14. Dale states that he believed that he had a right to withhold the deed because of the amount allegedly owed him by plaintiff. Plaintiff had put a substantial amount of money into the building of the pole barn and the residence, which consequently was of considerable value. Dale conveyed the property to his father Lloyd on March 27, 2007, Lloyd giving no consideration for it. Lloyd, on the basis of the improvements on the property, secured a $100,000.00 loan on the property on April 28, 2007. Lloyd and Dale distributed this fund between themselves. No part was given to plaintiff.
DISCUSSION
On the undisputed facts, the Court has reached the following conclusion. The issue of fraud under § 523(a)(2) has been adequately dealt with by the Highland County Common Pleas Court, in favor of defendants.
The questions raised by § 523(a)(6), however, were not, and could not have been dealt with by the Highland County Common Pleas Court, for that claim arises under federal law. In re McConnehea, 96 B.R. 121, 123 (S.D. Ohio 1988). Defendants in their memoranda do not deal with the § 523(a)(6) claim, contending that:
As to Plaintiff's claim that Defendants debt is non-discharageable pursuant to § 523(a)(6), Plaintiff did not plead in his Complaint that this debt was non-discharageable under these grounds. Nowhere in Plaintiff's Complaint did Plaintiff allege that the debt arose out of willful or malicious injury.
Defendants' Lloyd Martin Bowers and Dale Michael Bowers Reply to Response to Motion for Summary Judgment. (pp. 2-3.)
The Court disagrees. In his Complaint, plaintiff says:
On or about March 26, 2007, Defendant Dale Michael Bowers conveyed the Premises to his father, Defendant Lloyd Martin Bowers for no consideration.
On or about April 28, 2007, Defendant Lloyd Martin Bowers encumbered the Premises with a mortgage in the amount of $100,000.00 in favor of Home Building and Loan in Greenfield, Ohio.
Defendant Lloyd Martin Bowers defaulted on the said mortgage and the Premises were sold at foreclosure sale.
Defendants knew or had reckless disregard that the statements that the Premises would be conveyed to Plaintiff and causing Plaintiff to incur a benefit upon Defendants to his detriment through their fraudulent and illegal conduct was fraud.
The Court holds that these allegations are a sufficient basis upon which to seek relief under § 523(a)(6).
Section 523(a)(6) provides:
§ 523 Exceptions to discharge.
(a) A discharge under section 727.1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt —
* * *
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;
For defendants to succeed in their motion for summary judgment, they must present evidence to contravene the following:
To block the discharge of a debt under § 523(a)(6), a claimant must show that 1) the debtor's conduct was willful and malicious, 2) the creditor suffered an injury to its legal rights, and 3) the creditor's loss was caused by the debtor's conduct. See, e.g., In re Best, 109 Fed. Appx. 1, 5-6 (6th Cir. 2004); In re Jones, 300 B.R. 133, 139 (1st Cir. BAP 2003). Although relevant state laws may be instructive, "what constitutes `willful and malicious injury' under § 523(a)(6) is a matter of federal law." In re Baldwin, 249 F.3d 912, 917 (9th Cir. 2001); In re Taylor, 322 B.R. 306, 309 (Bankr. N.D. Ohio 2004).
CMEA Title Agency, Inc. v. Sheldon Little (In re Little), 335 B.R. 376 (Bankr. N.D. Ohio 2005).
The Sixth Circuit has held the two prongs of the first element cited in Little, willful and malicious, are separate and distinct inquiries. Markowitz v. Campbell (In re Markowitz), 190 F.3d 455, 463 (6th Cir. 1999). A debtor's actions are willful if he or she intends both the conduct as well as the consequences of his or her conduct.Kawaahau v. Geiger, 523 U.S. 56, 61-63, 118 S.Ct. 974 (1988). A debtor's actions are malicious if they arise out of "conscious disregard of one's duties or without just cause or excuse." Kimco Leasing Co. v. Wilson (In re Wilson), 383 B.R. 678, 681-82 (Bankr. N.D. Ohio 2007) (quoting Wheeler v. Laudani, 783 F.2d 610, 615 (6th Cir. 1986)).
Rather than contravening the elements of a § 523(a)(6) claim, the Court finds that the undisputed facts in all respects satisfy those elements. Dale and his wife transferred title to the property to Lloyd, Dale's father, without consideration, followed by the obtaining of a mortgage loan of $100,000.00 which was divided between Lloyd and Dale without even informing plaintiff. Lloyd and Dale intended the conduct and consequences of their actions, misappropriation of plaintiff's equity. These were willful acts. See In re Martin, 321 B.R. 437, 441 (Bankr. N.D. Ohio 2004) (holding that a defendant, having knowingly received and used plaintiff's mistakenly distributed funds, was substantially certain that his acts would injure plaintiff and thus acted willfully for purposes of § 523(a)(6)).
Further, these actions were malicious. Defendants knew that plaintiff had caused the increase in the value of the property by erecting a barn and a home, to the extent that a mortgage in the amount of $100,000.00 could be obtained. Defendants did not keep the mortgage current and allowed it to fall into foreclosure, despite their knowledge that plaintiff paid $15,000 for, and invested labor and materials into, the property securing the mortgage. Defendants thus not only intended their actions and the consequences thereto, but clearly knew that there would be no benefit to plaintiff. See In re Martin, 321 B.R. at 442 (distinguishing malice as having a "heightened level of culpability transcending mere willfulness"). Lloyd's and Dale's actions were without just cause or excuse and thus malicious.
In obtaining the $100,000.00 by way of mortgage on the property, which they divided between themselves, defendants committed a conversion. They converted equity in the property, which belonged to plaintiff, to their own use. Conversion is defined:
Conversion is wrongful control or exercise of dominion over property belonging to another which is inconsistent with or in denial of the rights of the owner.
In re Little, 335 B.R. 376, 386 (Bankr. N.D. Ohio, 2005). Conversion is one of the intentional torts which the Sixth Circuit has said can give rise to liability under § 523(a)(6). Thus, in Steir v. Best (In re Best), 109 Fed. Appx. 1, 5 (6th Cir. 2009), for the Court said:
Debts arising out of these types of misconduct satisfy the willful and malicious injury standard: intentional infliction of emotional distress, malicious prosecution, conversion, assault, false arrest, intentional libel, and deliberately vandalizing the creditor's premises.
It is to be noted that not only did defendants convert plaintiff's property, but they gave no part of it to plaintiff, nor did plaintiff have knowledge of the transaction until later, and by accident. See In re Martin, 321 B.R. at 442-43 (debtor's efforts to keep a transaction secret supported a finding of malice). This loss of plaintiff's equity in the property is economic injury. Defendants' conversion as we have shown was a willful and malicious act which caused injury to plaintiff Cf. In re Little, 335 B.R. 376 (finding that a debtor's misconduct surrounding real estate transfers amounted to a willful and malicious conversion).
The contention of defendants that the deed was withheld from plaintiff because it was being held until plaintiff paid outstanding debt to defendants cannot avail defendants. Defendants had no lien on the property or other kind of legal security. That plaintiff knew that they were withholding the deed until the debt was paid cannot avail defendants, as defendants had no legal basis for their conduct.
Though only defendants have filed a motion for summary judgment, this Court grants summary judgment to plaintiff. It is well established that it may do so sua sponte where liability of the moving party is clear. In re Ward, 300 B.R. 692, 695 (Bankr. S.D. Ohio 2003); Ledford, Chapter 13 Trustee v. Tiedge (In re Sams), 106 B.R. 485, 491 (Bankr. S.D. Ohio 1989).
On the record in this case, defendants' actions give rise to nondischargeability of plaintiff's debt under § 523(a)(6). Having found the debt owed by defendants to plaintiff nondischargeable, plaintiff is entitled to damages. On the present record, the court holds that an award of $100,000.00 to plaintiff, from defendants, jointly and severally, will be granted by separate order.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.