Rebecca B. Connelly, UNITED STATES BANKRUPTCY JUDGE.
The matter before the Court is Pat Hanson's motion for summary judgment on her complaint to except her debt from Steven Conway Cassidy's discharge. For the following reasons, the Court grants the motion for summary judgment.
On February 2, 2018, Mr. Cassidy filed his chapter 7 petition in this Court. Two months later, Ms. Hanson initiated this adversary complaint seeking to have the debt owed to her declared non-dischargeable under 11 U.S.C. § 523(a)(6). Mr. Cassidy answered the complaint denying that the debt meets the elements of section 523(a)(6) to except it from discharge.
The Court issued a scheduling order setting deadlines for discovery and dispositive motions. ECF Doc. No. 10. Ms. Hanson timely filed a motion for summary judgment. ECF Doc. No. 14. Mr. Cassidy filed a response contesting summary judgment. ECF Doc. No. 17. Counsel for the parties argued their respective positions before the Court at a pretrial conference on November 28, 2018. After hearing the arguments, the Court took the motion for summary judgment under advisement.
The Court has considered the pleadings, exhibits, and arguments voiced at the hearing. Pursuant to Federal Rule of Bankruptcy Procedure 7052, the Court
This Court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1334. The plaintiff is a creditor in this bankruptcy case and the defendant is the debtor.
The Court has jurisdiction to hear and determine core proceedings, including motions for summary judgment, pursuant to 28 U.S.C. § 157(b), Federal Rule of Bankruptcy Procedure 7056, and the Western District of Virginia District Court General Order of Reference dated December 6, 1994. This is a core proceeding because it is a determination of dischargeability of a particular debt. 28 U.S.C. § 157(b)(2)(I). Specifically, the matter is a request for summary judgment concerning the dischargeability of a state court judgment for assault and intentional infliction of emotional distress.
The facts are largely uncontested. Ms. Hanson and Mr. Cassidy were neighboring landowners in Madison County, Virginia. The neighbors quarreled over a period of many months. Ultimately, in June 2008, Ms. Hanson filed suit in the Madison County Circuit Court seeking $100,000.00 in damages from Mr. Cassidy. She pleaded three counts: Count I alleging assault, Count II alleging insulting and abusive words actionable under Virginia Code § 8.01-45, and Count III alleging intentional infliction of emotional distress.
The litigation lasted years. In 2016, Ms. Hanson filed a motion for summary judgment in the state court action. On September 28, 2016, the Madison County Circuit Court entered an agreed order ("the Circuit Court Consent Order") granting partial summary judgment against the defendant on Counts I and III.
The Circuit Court Consent Order provides that no material facts are genuinely in dispute as to Count I for assault and Count III for intentional infliction of emotional distress (IIED). Specifically, the Circuit Court Consent Order states:
ECF Doc. No 14, Ex. 1 at 1. The Circuit Court Consent Order also references and incorporates paragraphs from the complaint. After entry of the order establishing liability, the Circuit Court scheduled the matter for a jury trial to determine damages.
In November 2017, the damage issue was tried before a jury. The jury awarded $500,000 in damages to Ms. Hanson. Because the amount of the jury verdict exceeded the amount requested in the complaint, the Circuit Court judge remitted the award to either $100,000 or $200,000. Before the Circuit Court entered an order on the damage amount, Mr. Cassidy filed his chapter 7 bankruptcy petition.
Not long after Mr. Cassidy filed his chapter 7 bankruptcy petition, Ms. Hanson filed a complaint to determine the dischargeability of her debt. In that proceeding, Ms. Hanson now asks this Court to grant summary judgment asserting that
Ms. Hanson points to the Circuit Court Consent Order. She stresses that it was entered with the consent of Mr. Cassidy's counsel, who is also representing him in this proceeding, and that it unequivocally states that no material facts are genuinely in dispute as to assault and IIED. Next, Ms. Hanson points out that the grounds to except a debt from discharge under section 523(a)(6) match the elements of the cause of action for assault and IIED under the facts incorporated into the Circuit Court Consent Order. For these reasons, Ms. Hanson argues that no material facts are genuinely in dispute as to the liability of Mr. Cassidy for assault and IIED or that the liability is excepted from discharge under section 523(a)(6).
Mr. Cassidy disagrees. Mr. Cassidy argues that although the state court issued an order on partial summary judgment regarding Count I (assault) and Count III (IIED), the state court did not issue a final order regarding damages on these counts so the matter was not fully litigated, or did not result in a final order. For these reasons, Mr. Cassidy contends that the doctrine of collateral estoppel does not apply. Mr. Cassidy also argues that the state court order did not address whether the action was "malicious." Consequently, Mr. Cassidy asserts that the question of whether the debt resulted from "malicious conduct intended to cause injury" was not litigated. Hence, Mr. Cassidy maintains that this Court cannot grant judgment as a matter of law on the question of dischargeability of the debt.
In determining whether to grant the plaintiff's motion for summary judgment, the Court must apply the summary judgment standard of review articulated by the Fourth Circuit:
News & Observer Publ'g Co. v. Raleigh-Durham Airport Auth., 597 F.3d 570, 576 (4th Cir. 2010) (internal citations and quotations omitted) (summarizing Supreme Court precedent).
Ms. Hanson alleges that her debt is non-dischargeable because it arose from Mr. Cassidy's willful and malicious injury to her, and that he is estopped from arguing otherwise. Under Bankruptcy Code section
Ms. Hanson contends that the Circuit Court Consent Order should be given collateral estoppel effect as to the debtor's alleged willful and malicious conduct.
Hagan v. McNallen (In re McNallen), 62 F.3d 619, 624 (4th Cir. 1995) (quoting Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980)) (internal citations omitted).
In Virginia, five elements must be shown for collateral estoppel to apply: (1) the parties to the two proceedings must be the same; (2) the prior proceeding must have resulted in a valid final judgment against the party against whom preclusion is sought; (3) the factual issue to be precluded must have been actually litigated in the prior action; (4) the factual issue to be precluded must have been essential to the prior judgment; and (5) the party invoking estoppel would have been bound had the prior litigation reached the opposite result (stated differently, mutuality is present). See Duncan v. Duncan (In re Duncan), 448 F.3d 725, 728 (4th Cir. 2006) (quoting TransDulles Ctr., Inc. v. Sharma, 252 Va. 20, 472 S.E.2d 274, 275 (1996)).
Mr. Cassidy concedes that the first element of the doctrine of collateral estoppel
Next, the prior proceeding must have resulted in a valid final judgment against Mr. Cassidy. Because the state court judge had not yet entered an order setting the amount of damages, Mr. Cassidy contends that the state court proceeding did not result in a valid final judgment against him. What Mr. Cassidy overlooks is the order in which the state court judge granted judgment as a matter of law against Mr. Cassidy on the issues of assault and IIED. The Circuit Court Consent Order settled the question of whether Ms. Hanson was granted judgment against Mr. Cassidy for assault and IIED, and it was not appealed. This Circuit Court Consent Order is a final order. The only unresolved question was the amount of monetary damages, not whether Mr. Cassidy committed intentional acts that met the elements of assault and IIED under Virginia law.
Mr. Cassidy suggests that the failure to obtain an order setting the amount of damages renders the Circuit Court Consent Order a non-final judgment. Yet Mr. Cassidy has not articulated how the state court proceeding to set damages renders the prior state court order establishing liability non-final. Stated differently, Mr. Cassidy has not shown how he could have challenged the Circuit Court Consent Order establishing liability merely because the state court judge had not yet set an amount of money damages.
The third essential element of the doctrine of collateral estoppel requires the issue to be precluded from trial in the current action to have been "actually litigated" in the previous action. As to this element, Mr. Cassidy contends that a critical issue to dischargeability was not "actually litigated" in the prior action. Specifically, Mr. Cassidy denies that the state court litigation addressed whether his conduct was "malicious." For this reason, Mr. Cassidy insists that he is not estopped from challenging the dischargeability of the debt to Ms. Hanson.
Mr. Cassidy suggests that in the state court proceeding, the issue of whether his conduct was willful and malicious was not litigated because the complaint and the Circuit Court Consent Order did not state that his conduct was "extremely outrageous" or "shocks the conscience." Mr. Cassidy contends, without authority, that in order for his acts to be malicious for purposes of section 523(a)(6), the acts must be extremely outrageous or shock the conscience. See Resp. ¶ 1, ECF Doc. No. 17; Mem. in Opp'n ¶ 5, ECF Doc. No. 17-1. This Court disagrees.
Twenty years ago, the United States Supreme Court addressed the question of whether tortious conduct was "willful and malicious" for purposes of the exception to discharge. In Kawaauhau v. Geiger, 523 U.S. 57, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998), the Supreme Court held that for purposes of the exception to discharge in bankruptcy for debts based on willful and malicious acts, a court must find that the debtor intended to cause injury (not simply intended an act which happened to result in injury). The court must inquire "whether the debtor acted with `substantial certainty [that] harm
Willful and malicious conduct, for purposes of the bankruptcy exception to discharge, refers to acts causing injury without just cause or excuse. Johnson v. Davis (In re Davis), 262 B.R. 663 (Bankr. E.D. Va. 2001). These malicious acts, as one bankruptcy court recently described, are "wrongful, intentional, and taken without justification or excuse." WLC Enters., Inc. v. Rylant (In re Rylant), Adv. No 17-01090-T, 594 B.R. 783, 789, 2018 WL 6443989, at *4 (Bankr. D.N.M. Dec. 7, 2018). This means simply that as long as the debtor acted voluntarily and intended to cause injury or intended an act that was reasonably certain to cause injury, then the act meets the definition of willful and malicious for purposes of Bankruptcy Code section 523(a)(6). The definition does not limit the acts to those which are extremely outrageous or which shock the conscience, nor does it require the actor to hold subjective ill will toward the victim. See Davis, 262 B.R. at 670. Therefore, for this third element to be met, the state court action must have addressed liability for either conduct that was intended to cause injury or intended conduct reasonably certain to cause injury.
The Circuit Court Consent Order granted judgment as a matter of law against Mr. Cassidy for assault and IIED. Under Virginia law, the tort of assault requires an overt act committed "with the `inten[t] to place the victim in fear or apprehension of bodily harm' where the act `creates such reasonable fear or apprehension in the victim.'" Clark v. Virginia, 54 Va.App. 120, 676 S.E.2d 332, 337 (2009), aff'd, 279 Va. 636, 691 S.E.2d 786 (2010) (quoting Carter v. Virginia, 269 Va. 44, 606 S.E.2d 839, 841 (2005)). The Circuit Court Consent Order granted judgment as a matter of law acknowledging no material fact genuinely in dispute that Mr. Cassidy assaulted Ms. Hanson, or, in other words, that Mr. Cassidy "intended to place [Ms. Hanson] in fear or apprehension of bodily harm," or created in her "reasonable fear or apprehension." These terms could hardly be more consistent with the case law definition of "willful and malicious" conduct for purposes of section 523(a)(6) ("intend to place the person in fear of bodily harm" compared with "intent to injure or intend an act reasonably certain to injure"). For these reasons, this Court concludes that the factual issue of "maliciousness" was addressed in the state court litigation.
The fourth factor necessary for collateral estoppel requires that the factual issue to be precluded must have been essential to the judgment in the prior action. The state court judgment is for assault. As described above, the Virginia tort law of assault requires a finding of intent to cause fear of bodily harm. As such, without this requisite intent, a Virginia court would not enter a judgment for assault. Logically, the issue of Mr. Cassidy's intent to place Ms. Hanson in fear of bodily harm was essential to the state court judgment order for assault. This Court finds that the factual issue of Mr. Cassidy's intent to cause fear of bodily injury is so closely connected with the factual issue of Mr. Cassidy's intent to cause injury or intent to perform an act which could reasonably have caused injury that the latter issue is precluded from litigation in this proceeding. Thus, the factual issue of Mr. Cassidy's intent to cause injury is precluded by the Circuit Court Consent Order.
The final consideration for permitting collateral estoppel of an issue requires that the party invoking estoppel would have been bound had the prior litigation reached the opposite result (that is, mutuality is present). In this case, the defendant concedes that mutuality is present.
Putting it all together, in this proceeding, the Circuit Court Consent Order is final as to liability (not the monetary amount, but the existence of the debt). It is undisputed that the basis for the debt is assault and IIED. The Virginia law elements for assault line up with the elements of the bankruptcy exception to discharge under section 523(a)(6). Considering the requirements for collateral estoppel, and applying the factors to this case, this Court concludes the defendant is estopped from
This means that there is nothing for the bankruptcy court to find or decide: the elements of section 523(a)(6) are present in the state court order. The defendant is precluded from contesting these facts in this bankruptcy proceeding. As such, there is no genuine issue as to any material fact. Accordingly, it is appropriate to grant judgment as a matter of law to the plaintiff.
The Court therefore grants Ms. Hanson's motion for summary judgment. The Court will issue a separate order based on the conclusions in this opinion.
A copy of this Memorandum Opinion shall be provided to counsel for Pat Hanson and counsel for Steven Cassidy.