ARTHUR B. FEDERMAN, Chief Judge.
Plaintiffs Kenneth J. Pugh and Linda B. Pugh filed this adversary proceeding against Debtor-Defendants Robert J. Ennis and Elizabeth A. Ennis seeking a determination that the Debtors' debt to them for damage to a rental property and for defamation are nondischargeable under 11 U.S.C. §§ 523(a)(2)(A) and (a)(6). For the reasons announced at the conclusion of the trial, as supplemented by those that follow, judgment will be entered in favor of the Plaintiffs.
At the outset, I would mention that the Debtors' version of events is dramatically different than that of the Pughs. The Debtors wish to cast the Pughs as dishonest slumlords, and Mr. Pugh as a pervert. However, the Debtors' testimony was entirely contradicted by the evidence presented at trial and, simply put, I found them to be lacking in credibility on nearly every relevant point. Contrary to the Debtors' characterization, I find that the Pughs take pride in the quality and cleanliness of their rental properties and that Elizabeth Ennis' allegations of sexual misconduct by Kenneth Pugh are false.
With that framework in mind, the evidence at trial showed that the Pughs own four rental houses in and around Willow Springs and Cabool, Missouri. They have been in the rental house business for over thirty years.
The Pughs often hire an independent contractor, Kathy Delp, to clean and repair the rental houses between tenants. Ms. Delp testified that, in early 2011, she did rather extensive work on the house located at 502 N. Harris in Willow Springs, the property at issue here.
In early March 2011, after seeing a sign in the window of the house at 502 N. Harris, the Debtors submitted Leasing Applications to rent it. At the time the Debtors submitted their Applications, the Debtors advised the Pughs, both verbally and in their written Applications, that they had one small Chihuahua dog.
Contrary to the Debtors' testimony, I find that the Pughs and the Debtors did a walkthrough of the entire house prior to entering into the lease. Further, directly contrary to Elizabeth Ennis' testimony that the house was a "dump" when they
The Debtors stayed in the property for the full one-year lease term, and timely paid the monthly rent. The lease terminated on March 31, 2012.
On April 2, 2012, having not received keys from the Debtors or heard from them regarding whether they wished to stay in the property, the Pughs went to the property and found that the Debtors had gone. They also discovered that the Debtors had left the house with significant damage. Linda Pugh and Kathy Delp both testified as to the condition of the house when the Debtors moved out.
Both women described the condition of the house at that time as "disgusting." There was a significant amount of trash and animal waste all about the house. The wood floors were destroyed by scratches and urine stains; tiles on the floor in the kitchen were broken; the bathtub (which was brand new when the Debtors moved in) was severely damaged and stained; several doors were extremely dirty and damaged; holes had been punched into ceiling tiles; the mini blinds were missing or damaged; and light bulbs were missing.
Contrary to Elizabeth Ennis' testimony that she never had any dog in the house except for her one small dog, Mrs. Pugh and Ms. Delp both testified it was clear to them that many aspects of the damage were caused by one or more large dogs in the house. Indeed, the post-lease photographic evidence admitted at trial clearly shows there had been large dogs in the house and the Pughs offered into evidence a remarkably-damaged heavy metal doorknob which one can only conclude was chewed up by a large dog.
Further, Linda Pugh testified that, in hindsight, it was clear that the Debtors conducted themselves in a manner to prevent the Pughs from discovering the animals inside the house. In particular, the Debtors paid their rent in cash each month. Linda Pugh testified that, typically, when a renter pays cash, the Pughs go to the rental house to collect the rent in person. However, in the Debtors' case, she testified, the Debtors made an effort each month to meet the Pughs somewhere else to pay the rent. Although the Pughs drove by the house on occasion and viewed the exterior of the house, they never saw the interior, in part because of this manner of paying the rent.
The Pughs assert that the damage to the house caused by the misrepresented animals should be nondischargeable under § 523(a)(2)(A) of the Bankruptcy Code. That section provides, as relevant here, that a discharge under § 727 does not discharge an individual debtor from any debt "for money, property, [or] services... to the extent obtained by ... false, pretenses, a false representation, or actual fraud."
I find, based on the evidence, that both of the Debtors represented to the Pughs that they had one small Chihuahua; that that representation was false; that the Debtors knew it was false when they made the representation; that they subjectively intended to deceive the Pughs at the time they made the representation; that the Pughs justifiably relied on the statement; and that the Pughs were damaged as a result of the misrepresentation. As a result, the debt for damage caused by the dogs is nondischargeable as to both of the Debtors pursuant to § 523(a)(2)(A) for actual fraud.
However, as I stated at the trial, the Pughs' damages caused by the fraud are limited to the damage caused by the animals which were misrepresented. Other items, such as repair to the water heater, plumbing, replacing door locks, removal of trash, and loss of rent due to no notice of move, were not caused by the misrepresentation concerning the animals. The damages which are related to the animals, and are thus nondischargeable, include flooring for bedrooms and hall ($520.00); bathtub damage repair ($100.00); painting, repair, cleanup ($567.00); door repair, sanding and repainting ($200.00); tile, supplies, and installation ($578.98); and cost to enforce the lease ($1,000.00). In addition, the Pughs are entitled to some compensation for the time they spent at the house repairing it. Therefore, I find that the Pughs are entitled to judgment for fraud against both Debtors in the amount of $4,500, and that such judgment shall be nondischargeable under § 523(a)(2)(A) of the Bankruptcy Code.
The Pughs also assert that Debtor Elizabeth Ennis made defamatory statements about them and that damages from the defamation should be nondischargeable under § 523(a)(6). That section provides that a discharge under § 727 of the Bankruptcy Code does not discharge an individual debtor from any debt "for willful and malicious injury by the debtor to another entity or to the property of another entity." Willful and malicious are two distinct requirements that the Pughs, as the parties seeking to avoid the discharge of the debt, must prove by a preponderance of the evidence.
With regard to defamation under Missouri law:
Further, "[i]n a defamation claim where the plaintiff is not a public figure, the requisite degree of fault is negligence."
Because expressions of opinion are privileged under the First Amendment's guarantee of freedom of speech, a plaintiff alleging defamation must establish that the defendant misinformed the recipient of the statement concerning facts, rather than merely expressing opinions.
The Pughs point to two defamatory statements, both of which were made by Elizabeth Ennis. First, after the Pughs sued the Debtors in state court for the damage caused to the house, the following statement was posted on Craigslist on January 10, 2013, and remained there until January 21, 2013:
Although Elizabeth Ennis testified she did not post this statement and had nothing to do with it, the evidence was, and she essentially admitted, that this posting
Further, I find the following statements from the posting are purported statements of fact, not opinion: that the Pughs are slumlords and thieves; that they are scam artists, liars and thieves; they rent dumps that are falling apart and dangerous; they lock honest people out of their houses, steal all their belongings and then file illegitimate lawsuits to get money; they don't work and sue people to try to get free rides; and they prey on young people with good jobs. I find, based on the evidence, that none of these statements is true, and that Elizabeth Ennis posted these false statements with the intent of harming the Pughs' reputation in the community.
The second instance of defamation is that, also after the Pughs sued the Debtors, Elizabeth Pugh told Christine Kossakowski, who rented the house after the Debtors vacated it, that Kenneth Pugh made sexual advances to her. She also made this statement to the attorney who was representing her in the litigation, and perhaps other people.
Specifically, Elizabeth Ennis testified at trial that, in January or February of 2012, Kenneth Pugh came to the house, ostensibly to fix something. She testified it was winter, and that it was dark at the time of the visit. She further testified that he had driven a green car or van to the property. Although her testimony was vague on many of the other details, she said he refused to leave and, ultimately, propositioned her (and her sister, who was not present) for sex. She testified that she did not make a police report or tell anyone, including her husband, about the event at the time it purportedly occurred. She only first reported it to people after the Pughs sued them. Christine Kossakowski testified that Elizabeth Ennis told her about the alleged sexual advance during a conversation in which Elizabeth Ennis was trying to convince Ms. Kossakowski to move out of the house.
Again, I found Elizabeth Ennis' testimony about these events to be entirely lacking in credibility. They are statements of fact, not opinions, and I find her statements concerning the purported sexual advance were false. Among other things, the evidence at trial was that Kenneth Pugh was legally blind at the time of the alleged event and rarely drives — and never drives at night. Further, the consistent, and credible, testimony of the Pughs, Ms. Kossakowski, and Ms. Delp was that Kenneth Pugh never went to his rental properties without his wife accompanying him.
I find, based on the evidence, that Elizabeth Ennis was responsible for both the Craigslist statement and the sexual allegation, that both statements were false, and that she made them with the intent of harming the Pughs' reputations and to lower them in the estimation of the community. Such statements were also made with the intent of dissuading people from associating or dealing with the Pughs. Further, as discussed more fully below, the defamatory statements had the intended effect and, therefore, caused the Pughs significant damage.
As it relates to § 523(a)(6), I further find that the Pughs have proven, by a preponderance of the evidence that Elizabeth Ennis made the statements willfully, and that the statements were targeted at the Pughs in the sense that the conduct
As to damages, Willow Springs and Cabool, Missouri, where the Pughs' rental properties are located, are small towns. The uncontroverted evidence was that, prior to the statements, the Pughs' rental properties were consistently occupied by renters. By all accounts, Willow Springs and Cabool are a "landlord's market." However, being small towns, everyone knows everyone's business there and, after the statements were made, the Pughs have not been able to rent their three properties in Willow Springs and Cabool, except for the few months to Ms. Kossakowski who moved into the Willow Springs property after the Debtors left. This is despite the fact that the Pughs have now hired a real estate agent to help them find tenants. According to Linda Pugh, ever since the defamatory statements were made, potential tenants back out upon learning the Pughs' last name.
The uncontroverted evidence at trial was that the Pughs have lost a total of $22,575 in rents on three rental properties in Willow Springs and Cabool, Missouri, as a result of Elizabeth Ennis' defamatory statements.
In addition, Sharol McGehee, a psychologist who began treating the Pughs after the defamatory statements were made and continues to treat them now, testified extensively to the psychological and emotional damage the statements have caused, particularly to Kenneth Pugh.
The Pughs also seek attorneys' fees and punitive damages. On the question of attorney fees, "Missouri courts have consistently followed the `American Rule' that, with certain exceptions, litigants bear the expense of their own attorney fees."
The Lease at issue here provided that, "[i]n the event of default of this lease, Lessee agrees to pay all expenses including Lessor's attorney's fees necessary to rectify this matter plus $1,000."
As to the attorney fees incurred by bankruptcy counsel after the Debtors filed their bankruptcy case, I find that those were not provided for in the lease, nor did the Pughs cite any statute authorizing such attorney fees. Nor were the Pughs damaged in "collateral litigation." As to the fourth exception to the American Rule, the "equitable balance" rule:
This is not an unusual type of case, nor was the litigation unusually complicated. Nor did the Debtors' legal actions differ significantly from other dischargeability actions. In sum, I find that the Pughs are entitled to attorney fees in the amount of $8,565.
Finally, as to the request for punitive damages, "[i]mposing punitive damages requires that a proper balance be struck. The award must be enough to ensure that the tortfeasor is adequately punished and deterred from future similar conduct; yet the award must not be grossly excessive."
Here, the defamatory statements no doubt caused the Pughs both physical and economic damages. Further, Elizabeth Ennis was indifferent to the Pughs' well-being and published the statements with intentional malice toward them. However, there was no evidence to suggest that the Pughs are financially vulnerable and the statements were, in essence, two or three isolated incidents.
While I find Dr. McGehee's testimony about the psychological and physical harm to Mr. Pugh to be compelling, and that the statements were reprehensible to a certain degree, I find that the actual damages awarded in this case — particularly since they are nondischargeable — are sufficient to punish Elizabeth Ennis for making the statements she made and to deter her from making any similar statements in the future. The request for punitive damages will, therefore, be denied.
ACCORDINGLY, by separate Order, the Clerk of the Court will be directed to enter Judgment in favor of Plaintiffs Kenneth and Linda Pugh, and against Debtor-Defendants Robert Ennis and Elizabeth Ennis, jointly and severally, in the amount of $4,500, with such Judgment being nondischargeable under 11 U.S.C. § 523(a)(2)(A); and in favor of Plaintiffs Kenneth and Linda Pugh, and against Debtor-Defendant Elizabeth Ennis only in the amount of $31,140, with such Judgment being nondischargeable under 11 U.S.C. § 523(a)(6).