DANIEL P. COLLINS, Bankruptcy Judge.
Troy Allen Short ("Plaintiff" or "Short") seeks an order of this Court holding his claims against Debtor/Defendant Francis Diane Toth ("Debtor" or "Toth") nondischargeable under 11 U.S.C. § 523(a)(6).
Debtor filed her voluntary chapter 7 petition on the Petition Date. Plaintiff commenced this adversary proceeding when he filed his complaint on February 13, 2015 (DE1)
On July 2, 2015, Plaintiff filed his motion for summary judgment (DE 8), Debtor responded (DE 17-20) and Plaintiff replied (DE 21-22). Oral argument was held on September 9, 2015. The Court held that, under the principles of collateral estoppel, it was bound by the Colorado Court's findings in its judgment of May 29, 2014 ("Colorado Judgment"), but that judgment did not speak to the issue of Debtor's subjective intent to cause harm to Short. This Court, therefore, set a trial on the Debtor's subjective intent. The trial was held on January 13, 2016. The parties stipulated to the admission of all exhibits. The Court heard in-person testimony from Plaintiff, Debtor, Plaintiff's fiancé, Stacy Jordan, and Debtor's son Tyler Toth ("Tyler"). Telephonic testimony was heard from Dr. Jeffrey Mahler and Bruce Hogy, both of whom were called by Debtor. After closing arguments, the Court took this matter under advisement.
Debtor and Short were in a relationship for a number of years. When that relationship soured, ugly behavior ensued. Short began threatening and intimidating Toth. A restraining order was eventually issued against him by the Denver County Court on April 4, 2011 (See Exhibit 1, ¶ 30 and Exhibit B) and remains in place to this day. For her part, Debtor filed numerous suits against Short in Colorado and, according to Short, embarked on a campaign to destroy Plaintiff's reputation, familial relationships, and business ties.
Following their breakup, Toth filed a small claims action against Short in Colorado. That action was settled on April 11, 2011. See Exhibit 1, ¶ 41 and Exhibit D. Short contends this settlement barred further actions by Toth against him for events that occurred before that settlement and that all actions brought by Toth after that date violated that settlement agreement and evidenced Toth's intent to harm Plaintiff. After the 2011 settlement, Toth, together with her brother, Robert Lelito ("Lelito"), sued Short in four different suits brought in numerous Colorado courts. Those actions were either dismissed or consolidated into an action ultimately heard by the Chaffee County Court. After lengthy proceedings in the Chaffee County Court, on May 28, 2014, Toth wrote a hostile letter (Exhibit 23) to that court the day before trial indicating, among other things, that she would not attend the scheduled trial.
Plaintiff contends (and Debtor admits)
As with all actions under § 523, plaintiffs bear the burden of proof by a preponderance of the evidence on § 523(a)(6) claims. Grogan v. Garner, 498 U.S. 279, 287, 111 S.Ct. 654, 659 (1991). While an underlying policy of the Code is to grant a "fresh start" to individual debtors, that "opportunity for a completely unencumbered new beginning [is meant for] the `honest but unfortunate debtor'." Id. quoting Local Loan Co. v Hunt, 292 U.S. 234, 244, 54 S.Ct. 695,699 (1934).
11 U.S.C. § 523(a)(6) provides that a debt may be nondischargeable "for willful and malicious injury by the debtor to another entity or to the property of another entity." The Supreme Court has clarified that § 523(a)(6) encompasses "only acts done with the actual intent to cause injury," as opposed to acts, done intentionally, that cause injury. See Kawaauhau v. Geiger, 523 U.S. 57, 61-64, 118 S.Ct. 974, 976-978 (1998).
In the context of § 523(a)(6), willful means "deliberate or intentional." In re Britton, 950 F.2d 602, 605 (9th Cir. 1991) (citing H.R. Rep. No. 595, 95th Cong., 1st Sess. 365, reprinted in 1978 U.S. Code Cong. & Ad. News 5787, 5963, 6320-21). The debtor's knowledge is the focus of the willfulness inquiry. "[T]he subjective standard correctly focuses on the debtor's state of mind and precludes application of § 523(a)(6)'s nondischargeability provision short of the debtor's actual knowledge that harm to the creditor was substantially certain." In re Thiara, 285 B.R. 420, 432 (9th Cir. BAP 2002) (quoting In re Su, 259 B.R. 909, 914 (9th Cir. BAP 2001)). "[T]he willful injury requirement of § 523(a)(6) is met when it is shown either that the debtor had a subjective motive to inflict the injury or that the debtor believed that injury was substantially certain to occur as a result of his conduct." In re Jercich, 238 F.3d 1202, 1208 (9th Cir. 2001)
"Malicious," in the context of § 523(a)(6), requires a showing of four elements. First, the debtor's act must have been wrongful. Second, the act must have been done intentionally. Third, the act must necessarily cause injury. Finally, the act must have been done "without just cause or excuse." In re Jercich, 238 F.3d 1202, 1209 (9th Cir. 2001); In re Bammer, 131 F.3d 788, 791 (9th Cir. 1997).
To summarize, for the Debtor's debts to be declared nondischargeable in this case, under § 523(a)(6), Plaintiff must prove by a preponderance of the evidence that Debtor had the subjective intent that her actions would harm Plaintiff or that she believed injury was substantially certain to occur as a result of her actions. Plaintiff must also prove that the Debtor's actions were wrongful, done intentionally, caused injury to Plaintiff or his property, and that Debtor's actions were done without just cause or excuse.
In the parties' Joint Pretrial Statement (DE34), they agreed to the following "uncontested facts deemed material":
1. On May 29, 2014, the Chaffee County Court entered the Colorado Judgment against Debtor and in favor of Short for $184,077.30.
2. Debtor was found liable to Short for the torts of defamation, abuse of process, intentional interference with prospective business advantage, and civil conspiracy.
3. In June 2014, the Colorado Judgment was domesticated in Arizona based on service to a California address.
4. The Colorado Judgment is res judicata.
The Colorado Judgment noted that, on April 10 and May 2, 2014, it entered a default judgment against plaintiff/counter defendant Lelito and against plaintiff/counter defendant Toth on May 22, 2014. After receiving evidence of the damages suffered by Short, it then went on to enter final judgment against Toth for the amounts noted above. The Chaffee County Court also made extensive factual findings and held that Short satisfied all the elements on his claims against Toth (and Lelito) for abuse of process, interference with prospective business advantage, defamation, and civil conspiracy. Of course, those claims are not the same as the claim brought by Plaintiff in the nondischargeability action at bar. However, this Court is bound by the facts (i.e. issues) determined by Chaffee County Court's findings. Those factual findings include, but are not limited to, the following:
These findings by the Chaffee County Court are devastatingly damning and nearly lead this Court (but not entirely) to a ruling in favor of Short on his § 523(a)(6) claim against Toth. As noted in this Court's ruling on Plaintiff's motion for summary judgment, the Court needed further evidence on Toth's subjective intent to cause injury to Short.
This letter was signed by Toth and, in addition to the language quoted in footnote 5 above, indicated that she had pursued that case on her "own (with advise [sic]), for over three years now" and that ". . . Short will not take one more dime from me. In my lifetime I have had great credit, but I have no qualms about filing bankruptcy against any judgment that is in his favor."
This letter makes it clear to this Court that Toth pursued her claims against Short in Chaffee County Court for over three years with no intention of ever being held accountable for her actions, under the mistaken belief that she could simply file bankruptcy and fully discharge any judgment awarded in favor of Short. This Court finds Toth's actions in this regard were intended to, and actually did, harm Short.
This agreement settled litigation between Toth and Short in the small claims court of Denver County, Colorado at Case No. 11-300126. While Short would have this Court find this settlement resolved all issues between the parties through that date, the agreement does not support this contention. Rather, this Court finds that agreement settled only the small claims actually pending before that court. No evidence was submitted to this Court indicating exactly what claims were pending before that small claims court. Nor did Plaintiff identify any facts or law supporting a theory that all of Toth's claims against Short should have been joined in that action or by operation of law were mandatorily joined in that action. Accordingly, this Court declines to find all claims held by Toth against Short as of April 11, 2011, were settled by that Resolution Agreement.
This portion of Exhibit 10 is discussed more fully below in § II (F)(1).
Exhibit 11 is more fully discussed below in § II (F)(2).
Plaintiff testified that an unsigned letter marked as Exhibit A attached to Plaintiff's Exhibit 10 (the "Scandalous Letter"), was received by Short's father, his father's business office, Short's employer, Short's friends and business referral sources (Ken and Natalie Himmelright), Short's friends and business acquaintances (Keith and Dawn Lotan) and Short's friends and customers (Casey Black and Grant Blicker). The permanent restraining order (Exhibit B) against Short was attached to the Scandalous Letter. Short noted that the language in the Scandalous Letter is similar to Toth's court filings and that she alone would know the recipients of the Scandalous Letter as people being close to Short. Plaintiff believes Toth authored the Scandalous Letter, but concedes he did not know for a fact. Short also acknowledged the restraining order was issued against him and that the restraining order required him to stay away from Toth and others. He testified that he has never been convicted of a crime, except traffic tickets.
The Court finds Short's testimony credible but also finds he was often antagonistic towards Toth and caused Toth to be justifiably fearful of Short.
When examined by Plaintiff's counsel, Toth conceded she wrote her 40-page response (Exhibit 11) to Short's answer in the Chaffee County Court action. The Court finds that response is very similar in nature, tone and verbiage to the Scandalous Letter. Toth testified she did not draft the Scandalous Letter, had never seen it and did not send the Scandalous Letter to the people identified in Short's direct testimony. The Court does not find Toth's testimony credible on this issue. The Court closely watched Toth during her testimony and noted her twisting in the witness chair, continually clearing her throat, shifting her eyes around the courtroom and grimacing and scowling while on the witness stand, particularly when questioned about the Scandalous Letter she claimed not to have authored. The Court finds Toth was the author of the Scandalous Letter and Toth caused the Scandalous Letter and the restraining order against Short to be sent to the people identified in Short's direct testimony.
During Toth's case-in-chief, she testified again, largely to the effect that the April 11, 2011 Resolution Agreement did not bar other claims held by her which were not the subject of that settled small claims action in Colorado. The Court finds Toth is correct and that she had the legal right to bring unsettled claims against Short after the execution of the Resolution Agreement. However, having the legal right to bring unsettled claims is quite different than ". . . filing multiple baseless and vexatious small claims lawsuits against Short one after another, in multiple jurisdictions, with the intent of obtaining as many default judgments as possible and to damage, as much as possible, Short's reputation in his community." See ¶51 of the Colorado Judgment.
Tyler Toth ("Tyler") is Debtor's 25-year-old son. He testified that he briefly lived with Short, witnessed a fight at that house in February of 2011, and that he, together with his mother and uncle (Lelito), obtained a permanent restraining order against Short. He indicated he had claims against Short but settled those claims for $800 at the April 11, 2011 settlement conference. He noted that his mother was not happy with her April 11, 2011 settlement with Short and that she wanted to recover more from Short. Tyler knew his mother feared Short but said he felt she was not trying to punish Short with her post-April 2011 lawsuits. While the Court finds Tyler to have been a credible witness, the Court does not credit Tyler's perception of his mother's intent relative to her acts against Short.
Dr. Mahler was called by Debtor to testify telephonically, not as an expert witness but, rather, as a 20-year friend of Debtor who spoke to Toth on many occasions between 2011 and 2014, about her dealings with and feelings towards Short, especially after they separated. Dr. Mahler clearly understood Toth wanted to recover money from Short but did not hear anything suggesting Toth was being vindictive against Short. The Court finds Dr. Mahler's testimony credible but not dispositive or even particularly helpful on the issue of Toth's intentions relative to her acts against Short.
Debtor called Mr. Hogy to testify telephonically. He met Short just before he met Toth, back when the parties were still a couple. Short and Mr. Hogy enjoyed road motorsports together, but Mr. Hogy claims Short defaulted on a loan and stole his motorcycle in the spring of 2012. After breaking off his friendship with Short, Mr. Hogy remained in touch with Toth. Toth never expressed to Mr. Hogy her desire to do harm to Short but, rather, indicated she feared Short and desired to collect money from him. The Court finds Mr. Hogy has a strong bias against and disdain for Short. More importantly, the Court did not find Mr. Hogy's testimony particularly helpful on the issue of Toth's intentions relative to her acts against Short.
Ms. Jordan was called by Plaintiff as a rebuttal witness. She is Short's fiancé and has been involved with him as a couple since May 2011. She testified that between April 2011 and May 2014, her friend Taff McMurray was contacted but by whom and for what purpose was not made clear as her testimony was inadmissible hearsay. She also noted some friends and her ex-husband were contacted by a private investigator but for whom and as to what purpose was not clear as her testimony on this point was also inadmissible hearsay. Finally, while she was never contacted by a private investigator, she was three times contacted by a process server asking that she accept service for Short at a time that Short did not live with Ms. Jordan. The Court finds Ms. Jordan's testimony credible and further finds that she was approached by process servers in Toth-related lawsuits because such service would potentially embarrass Short and drive a wedge between Ms. Jordan and Short.
In addition to this court's findings and the findings of the Chaffee County Court noted above, the Court finds that, while Toth may have held unresolved claims against Short after the execution of the Resolution Agreement in the 2011 Colorado small claims court, Toth thereafter pursued her many lawsuits against Short with the actual intent of harming Short. The Court finds the Scandalous Letter was drafted by Toth, sent by Toth to the very people whom Toth knew Short would most likely not want to receive this communication and that she did this to humiliate, embarrass and damage Short in both his personal and business relationships. The Court finds Toth's actions were willful, that is both deliberate and intentional. The Court also finds Toth's actions were malicious. In this respect, the Court finds the Debtor's acts were wrongful, done intentionally, caused Short's injury, and without just cause or excuse. Toth's actions were conducted with the subjective intent to injure Short.
The damages sustained by Short and caused by Toth were in the amounts identified in the Colorado Judgment. The court finds Plaintiff has sustained his burden of proof and is entitled to a judgment of this Court holding nondischargeable, pursuant to 11 U.S.C. § 523(a)(6), the amounts which the Chaffee County Court found owed by Toth to Plaintiff. Plaintiff is directed to lodge a form of judgment consistent with this Order.
While the Court finds for Plaintiff in this Adversary Proceeding, the parties should not take this as an exoneration of Short's behavior. It is clear to the Court that Short has behaved badly towards Toth since their 2011 breakup. He has intimidated her and caused her to be rightfully concerned for her safety. Nevertheless, Short's bad acts do not justify Toth's wrongful conduct noted in this Order.
