Opinion
NOT FOR PUBLICATION
Argued by Video Conference and Submitted: June 20, 2008
Appeal from the United States Bankruptcy Court for the District of Arizona. Bk. No. 04-18134, Adv. No. 04-01266. Honorable Redfield T. Baum, Sr., Bankruptcy Judge, Presiding.
Before: MONTALI, DUNN and CARROLL, [ Bankruptcy Judges.
Hon. Peter H. Carroll, U.S. Bankruptcy Judge for the Central District of California, sitting by designation.
MEMORANDUM
Debtor-Appellant, Thomas M. Cagney (" Cagney"), appeals from a summary judgment entered in favor of Appellee, Andrea J. Smith (" Smith"), former wife of Cagney and plaintiff in the underlying adversary proceeding. The judgment declared three state court judgments in favor of Smith non-dischargeable pursuant to 11 U.S.C. § § 523(a)(5), (a)(6), and (a)(7). Because the record does not support giving preclusive effect to one of the judgments, we AFFIRM in part, REVERSE in part, and REMAND for further proceedings.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037, as enacted and promulgated prior to the effective date of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23.
FACTS
Cagney filed a voluntary bankruptcy petition under Chapter 7 on October 15, 2004, in the District of Arizona. On December 21, 2004, Smith filed a non-dischargeability action against Cagney, seeking to except from discharge three state court judgments issued by the Maricopa County Superior Court (" State Court"): 1) a judgment in favor of Smith for child support (" Child Support Judgment"); 2) a criminal restitution order in favor of Smith arising out of an aggravated assault by Cagney against Smith (" Restitution Award"); and 3) a civil judgment (" Civil Judgment") in favor of Smith and Katy A. Cagney (" Katy"), Smith and Cagney's then-minor child. Smith's complaint alleged that each of the three judgments was non-dischargeable pursuant to either section 523(a)(5) or (a)(6).
Katy was initially a co-plaintiff in the state civil action against Cagney but on April 10, 2007, she assigned all of her right, title and interest in the subsequent judgment to Smith.
A. Facts Underlying the State Court Judgments.
On August 20, 2002, the State Court entered an order dissolving the marriage of Cagney and Smith. In that dissolution proceeding, the court awarded the Child Support Judgment to Smith, which she sought to except from discharge under section 523(a)(5).
The record does not reflect the total amount of the Child Support Judgment, however, since Cagney does not contest its non-dischargeability, the actual amount is not important in this appeal.
On September 16, 2001 (" the September 16 incident"), Cagney assaulted Smith and Katy with a shotgun. Despite the lack of records before us to know exactly what charges were brought against Cagney, he did plead guilty to aggravated assault and disorderly conduct, a class 3 and class 6 felony, respectively. As a result of that criminal incident, on June 7, 2002, the State Court granted Smith the Restitution Award of $4,260.38 for her economic loss, which she sought to except from discharge under section 523(a)(6).
Since neither Cagney nor Smith included any criminal indictment or court transcript relating thereto, leaving the facts of the criminal matter unclear, any information regarding the assault incident was derived from Smith's civil complaint and the criminal judgment entered on April 25, 2002.
Also on April 25, 2002, Smith, for herself and on behalf of Katy, filed a civil complaint against Cagney alleging, inter alia, that on September 16, 2001, he assaulted them with a shotgun, thereby inflicting emotional distress. Smith further alleged several other non-assault-related claims asserting that Cagney: 1) purchased a handgun with the intent to kill Smith; 2) engaged in a course of conduct consisting of stalking Smith; 3) intentionally destroyed, concealed or otherwise deprived Smith of her property; 4) conspired with others, including his parents, to assert false charges against Smith; 5) intentionally changed accounts, made unauthorized charges to accounts, cancelled insurance coverage, designed to harm or destroy Smith's credit rating and/or expose her to potential liabilities that were not hers; 6) attempted to interfere with the relationship between Smith and her attorney through false statements, threats, and a course of harassment; and 7) threatened and intimidated relatives of Smith. In addition to compensatory damages of no less than $50,000, Smith prayed for punitive damages and related costs. We do not know whether Cagney responded to the complaint, but since there appears to be no default, we presume he did.
Furthermore, at some point, Smith must have filed a motion, or motions, for partial summary judgment on the state civil complaint because on September 2, 2002, the State Court entered a Minute Entry in her favor as to Cagney's liability. Unfortunately, none of those documents nor related transcripts are before us, so we have no way to determine on which of Smith's several claims Cagney was found liable. Moreover, the record does not disclose whether such documents were presented to the bankruptcy court. All that either party provided is the two-sentence Minute Entry stating that " Plaintiff's Motions for Partial Summary Judgment are granted, " leaving open the issue of whether plaintiff sustained any damages.
We glean from page 6 of Smith's " Appellee's Answering Brief" that the State Court held a trial on damages. However, she provided no court transcripts on that matter to review. Nevertheless, on November 3, 2004, the State Court entered the Civil Judgment, awarding $25,000 to Smith, $15,000 to Katy, both with interest thereon, and $395.00 for costs. Although the Civil Judgment did not state specifically which claim(s) supported the awards to Smith and Katy, Smith sought to except the entire award from discharge under section 523(a)(6) as conduct consisting of " willful and malicious injury by the debtor to another entity or to the property of another entity."
B. Adversary Proceeding Facts.
After Smith filed her non-dischargeability action, on various dates in January, 2007, Cagney filed three motions - a " Motion to Dismiss the Adversary Proceeding, " a " Motion to Dismiss Katy Cagney from the Complaint and Clarification Thereto, " and a " Motion for Information from Plaintiff Regarding Medical Issues." A hearing on his three motions was held on March 15, 2007. Cagney did not appear. All three of his motions were denied. However, since Katy was not a party to the non-dischargeability action, the bankruptcy court noted that Smith had to convince it as to how any non-dischargeability judgment could be entered in Katy's favor. It appears Smith did include evidence of Katy's assignment as an exhibit in her later-filed Motion for Summary Judgment.
On April 30, 2007, the bankruptcy court entered a Minute Entry/Order to respond to a letter drafted by Cagney entitled " Motions Before the Court" in which he stated there were " two unanswered motions" still pending and requiring resolution. In the first motion, Cagney sought Smith's medical records because he believed she alleged a claim for " mental trauma" in her non-dischargeability action. In response, the bankruptcy court stated that Smith's complaint was based on orders and judgments entered in State Court and did not include a claim for mental trauma. Presumably, and both Cagney and Smith assert as much in this appeal, Cagney was attempting to " retry" the merits of Smith's civil complaint as to her emotional distress, which prompted the medical record request. The request for medical records was denied. The second motion requested that the court " separate" the two plaintiffs in the non-dischargeability action. Since Smith was the only plaintiff to the action, no relief could be granted.
Although Cagney filed no formal motions but rather sent a letter to the bankruptcy court, the court treated them as motions nonetheless. Furthermore, even though the requests in the letter/motions had already been resolved in the hearing on March 15, 2007, the court still entered a separate Minute Entry/Order, apparently in an attempt to further clarify the issues for Cagney, who was, and has been throughout this adversary proceeding, appearing pro se.
On June 20, 2007, Smith filed a Motion for Summary Judgment seeking to except the three State Court judgments from discharge under sections 523(a)(5) and (a)(6) because she believed there were no material facts in dispute as to their dischargeability. Smith alleged that the Child Support Judgment was a non-dischargeable domestic support obligation under section 523(a)(5). She alleged the Restitution Award was non-dischargeable under section 523(a)(6) as a " willful and malicious injury caused by the debtor." Finally, for the Civil Judgment, Smith alleged that Cagney had used a shotgun to assault, harass and inflict emotional distress on Smith and Katy, and since Cagney had pled guilty to two crimes arising from the same acts, the State Court entered judgment in favor of Smith and Katy. For non-dischargeability of that judgment, Smith alleged that " assault with a shotgun" falls within the " willful and malicious" provision of section 523(a)(6) and argued that Cagney's guilty plea to aggravated assault and disturbing the peace with a shotgun should estop him from denying that the Civil Judgment arose out of a willful and malicious injury.
This is incorrect. Cagney pled guilty to " Disorderly Conduct." We refer to it as disorderly conduct throughout the memorandum.
Cagney responded to Smith's Motion for Summary Judgment on June 28, 2007, with a 2-page document entitled " Motion for Summary Judgment." He argued that Smith's Motion for Summary Judgment was asking " the court to rush to judgement [sic] in this case and preclude the defendant from offering a defense." It is clear by these remarks and others, including that he was entitled to a " fair hearing as guaranteed by the U.S. Constitution, " Cagney does not understand the function of a summary judgment. Nonetheless, in his response he argued that Katy's assignment to Smith should be disallowed, and contended that Smith's motion was improperly stripping the bankruptcy court's authority to determine whether his " actions were either wilful or malicious." Cagney then went on to discuss the merits of the assault and stated that " witnesses will attest to the nature of [Smith's] claims." Finally, Cagney asserted he will never have any money to pay the judgments, so this procedure was a waste of " everyone's time and the taxpayer's money."
Since Katy assigned her interest in the award to Smith, her portion of the award legally belonged to Smith to pursue in her motion.
On July 16, 2007, Smith, treating Cagney's response as his own Motion for Summary Judgment, filed a " Combined Reply in Support of Motion for Summary Judgment and Response to Cross-Motion for Summary Judgment." Smith noted that Cagney's response was merely an attempt to relitigate the merits of the underlying judgments or the debts at issue because Cagney has no assets.
A hearing on Smith's Motion for Summary Judgment was held on September 11, 2007. The bankruptcy court determined that because Cagney failed to meet his burden of providing evidence that any genuine issues of material fact were in dispute, summary judgment was entered in Smith's favor in a Minute Entry/Order on September 24, 2007, with a final judgment declaring the three State Court judgments non-dischargeable pursuant to section 523 entered on November 13, 2007.
For the Child Support Judgment, the bankruptcy court determined it non-dischargeable as a " domestic support obligation" pursuant to section 523(a)(5). Cagney does not dispute or appeal that decision, and accepts the bankruptcy court's ruling. Whether or not disputed by Cagney, we AFFIRM the bankruptcy court's ruling that the Child Support Judgment is a non-dischargeable debt under section 523(a)(5).
As to the Restitution Award, the court deemed it to be a non-dischargeable " fine" pursuant to section 523(a)(7) (even though Smith incorrectly asked for relief under section 523(a)(6)), and cited Kelly v. Robinson, 479 U.S. 36, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986), which held that restitution debts are non-dischargeable even though payment is directed to the plaintiff rather than a governmental unit. On the scant record, we are unclear if Cagney ever disputed the non-dischargeability of the Restitution Award, as he did not dispute it at the summary judgment hearing and does not appear to be raising the issue on appeal. In any event, whether or not Cagney disputes the bankruptcy court's ruling as to the Restitution Award, we AFFIRM its decision that it is a non-dischargeable debt under section 523(a)(7) and Kelly.
Therefore, the crux of this appeal centers on the non-dischargeability of the Civil Judgment. With respect to that issue, the bankruptcy court applied the principles of issue preclusion and determined that all of the elements were met, thus precluding that judgment from relitigation by the bankruptcy court and rendering it as a non-dischargeable debt under section 523(a)(6).
Cagney filed a premature Notice of Appeal on October 10, 2007, that was deemed timely upon entry of the judgment, pursuant to Rule 8002(a).
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § § 157(b)(2)(I) and 1334. We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court err when, after applying the principles of issue preclusion, it determined that the Civil Judgment was non-dischargeable under section 523(a)(6)?
STANDARD OF REVIEW
We review summary judgment orders de novo. Tobin v. San Souci Ltd. P'ship (In re Tobin), 258 B.R. 199, 202 (9th Cir. BAP 2001). Viewing the evidence in the light most favorable to the non-moving party, we must determine " whether there are any genuine issues of material fact and whether the trial court correctly applied relevant substantive law." Id . See New Falls Corp v. Boyajian (In re Boyajian), 367 B.R. 138, 141 (9th Cir. BAP 2007).
We review de novo the preclusive effect of a judgment; whether collateral estoppel applies is a mixed question of law and fact in which the legal questions predominate. The Alary Corp. v. Sims (In re Associated Vintage Group, Inc.), 283 B.R. 549, 554 (9th Cir. BAP 2002); Molina v. Seror et. al. (In re Molina), 228 B.R. 248, 250 (9th Cir. BAP 1998).
DISCUSSION
A. Substantive Requirements for Summary Judgment.
Summary judgment may be granted if, when the evidence is viewed in a light most favorable to the non-moving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(e); Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 992 (9th Cir. 2001). An issue is " genuine" if there is sufficient evidence for a reasonable fact finder to find in favor of the non-moving party, and a fact is " material" if it might affect the outcome of the case. Id.
The initial burden of showing no genuine issue of material fact exists rests on the moving party. Id . A plaintiff seeking summary judgment who fails to produce sufficient evidence on one or more essential elements of a claim is no more entitled to summary judgment than one who fails to offer evidence at trial sufficient to support the elements of a claim as to which that plaintiff bears the burden of proof. Watts v. United States, 703 F.2d 346, 347 (9th Cir. 1983).
B. The Elements of a § 523(a)(6) Claim.
Plaintiff bears the burden of proving its claim against defendant is excepted from discharge under § 523(a)(6) by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 284, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). Section 523(a)(6) provides:
" (a) A discharge under 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."
Thus, by a preponderance, the creditor must prove that the debtor's conduct in causing the claimant's injuries was both willful and malicious. Carrillo v. Su (In re Su), 290 F.3d 1140, 1146-47 (9th Cir. 2002). " Wilfulness" requires proof that the debtor deliberately or intentionally injured the creditor, and that in doing so, the debtor intended the consequences of his act, not just the act itself. Kawaauhau v. Geiger, 523 U.S. 57, 60-61, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998). For there to be a " malicious injury, " the creditor must prove that the debtor: (1) committed a wrongful act; (2) done intentionally; (3) which necessarily causes injury; and (4) was done without just cause or excuse. Su, 290 F.3d at 1146-47.
C. Issue Preclusion.
Issue preclusion, often called collateral estoppel, applies in dischargeability actions. Grogan v. Garner, 498 U.S. 279, 284 n.11, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). The purpose of issue preclusion is to foreclose relitigation of issues that have already been decided. Paine v. Griffin (In re Paine), 283 B.R. 33, 39 (9th Cir. BAP 2002). Because the creditor is asserting that the state court judgment is preclusive in the underlying non-dischargeability action, he or she " must introduce a record sufficient to reveal the controlling facts and pinpoint exact issues litigated [in the state court action]." Kelly v. Okoye (In re Kelly), 182 B.R. 255, 258 (9th Cir. BAP 1995) (emphasis added).
In order to analyze whether issue preclusion applies, the federal court must look to the law of the state in which the judgment was entered. In re Molina, 228 B.R. at 250 (citing Gayden v. Nourbakhsh (In re Nourbakhsh), 67 F.3d 798 (9th Cir. 1995)). The elements necessary to invoke issue preclusion under Arizona law are:
(1) the issue was actually litigated in a previous proceeding;
(2) there was a full and fair opportunity to litigate the issue;
(3) resolution of the issue was essential to the judgment;
(4) a final decision was entered on the merits; and
(5) there is a common identity of the parties.
Hullett v. Cousin, 204 Ariz. 292, 63 P.3d 1029, 1035-36 (Ariz. 2003).
The bankruptcy court, in applying these five elements to the Civil Judgment, concluded that all were met:
In the state court the defendant, while represented by counsel, fully litigated the issue, the judgment is final, valid on the merits, the issue was essential to the judgment and the parties are the same. Thus, the November 2, 2004, judgment is non-dischargeable under Section 523(a)(6) given the preclusive effect of the state court ruling.
DISPOSITION OF THE ISSUE
Cagney appeals the bankruptcy court's grant of summary judgment in favor of Smith with respect to the non-dischargeability of the Civil Judgment that Smith asserts arose strictly out of the September 16, 2001, aggravated assault/disorderly conduct incident. In particular, he disputes the court's ruling that the Civil Judgment deserved preclusive effect as a non-dischargeable debt for a " willful and malicious injury by the debtor to another entity or to the property of another entity" pursuant to section 523(a)(6). He also argues that the court " denied him his right to a fair hearing" guaranteed under Tinker v. Colwell, 193 U.S. 473, 24 S.Ct. 505, 48 L.Ed. 754 (1904), which he believes requires the court to hear evidence in his defense as to his " willful and malicious intent."
Smith argues on appeal that the Civil Judgment must be given preclusive effect because it arose from Cagney's willful and malicious conduct on September 16, 2001, it caused her injury, and, combined with his guilty plea, establishes the proof necessary to render it non-dischargeable under section 523(a)(6). Smith further argues that since Cagney presented no genuine issues of material fact as to the non-dischargeability of the Civil Judgment, or the Restitution Award and the Child Support Judgment, the bankruptcy court did not err in granting her summary judgment.
Based upon the record before us, which is presumably the same one before the bankruptcy court, there is no doubt that elements (2), (4) and (5), as set forth in Hullet, have been met. However, the bankruptcy court incorrectly concluded elements (1) and (3) were satisfied, and we therefore REVERSE its determination of the Civil Judgment as non-dischargeable.
A. Element (1): The Issue Was Actually Litigated in a Previous Proceeding.
In a recent en banc decision of the Arizona Supreme Court, the Court noted that it had before it an issue of first impression as to whether a guilty plea has preclusive effect in a later civil proceeding. Picaso v. Tucson Unified School Dist., 217 Ariz. 178, 171 P.3d 1219, 1222-23 (Ariz. 2007). In particular, the question before it, but not decided, was whether a guilty plea is an issue that has actually been litigated:
As the court of appeals noted, this issue has divided commentators and the courts. A number of opinions and authorities have adopted the position of the Restatement (Second) of Judgments that guilty pleas have no issue preclusive effect in later civil litigation because no issues have actually been litigated. Other courts and commentators, however, have rejected the Restatement rule, generally taking the view that the safeguards surrounding the entry of a guilty plea, which are designed to make the conviction reliable enough to deprive a defendant of his freedom, make the conviction preclusive as to the elements of the offense in a civil context.
Although we granted review to address this interesting issue, our review of the record reveals that this is not the appropriate case in which to do so.
. . . .
. . . We therefore leave for another day the preclusive effect of guilty pleas on subsequent civil proceedings.
Id. at 1221-22 (internal citations omitted).
Thus, in Arizona, the issue of whether a guilty plea is considered an " issue that was actually litigated in a previous proceeding" has not been determined. On the other hand, the Picaso court did note that a guilty plea can be properly submitted as an evidentiary admission. Id . at n.5.
Here, it is unclear on what claims or why the State Court granted Smith's Motion for Partial Summary Judgment with respect to Cagney's liability. However, Smith asserted in her bankruptcy Motion for Summary Judgment that " because Cagney had previously pled guilty and been convicted of two criminal charges arising from the same acts, the Superior Court granted partial summary judgment as to liability." If that is true, in light of Picaso, which was not decided until December 3, 2007, the bankruptcy court erred if it determined that Cagney's guilty plea provided preclusive effect of the Civil Judgment under element (1) as an " issue [that] was actually litigated in a previous proceeding, " thus rendering it non-dischargeable under section 523(a)(6).
In its decision on the preclusive effect of the Civil Judgment, which Smith asserts arose strictly out of the September 16 incident, the bankruptcy court concluded that the issue was " fully litigated" but provided no explanation on why it reached that conclusion.
Without more detailed findings, we can only assume the court erroneously believed Cagney's guilty plea rendered the issue " actually litigated, " thus meeting element (1) for giving the Civil Judgment preclusive effect.
Consequently, since there was a genuine issue of material fact regarding element (1), the bankruptcy court erred in granting Smith summary judgment as to the Civil Judgment.
B. Element (3): Resolution of the Issue Was Essential to the Judgment.
We also disagree with the bankruptcy court's conclusion on element (3) that " resolution of the issue was essential to the judgment" based upon the record Smith provided.
An issue is essential to the judgment for purposes of issue preclusion if, in absence of a determination of the issue, the judgment could not have been validly rendered. 47 Am. Jur. 2d. Judgments § 496 (2008). In other words, could Smith have been awarded damages in the Civil Judgment for something other than her claims for injuries arising out of the September 16 incident, and, if so, do those injuries meet the " willful and malicious injury" element necessary for non-dischargeability under section 523(a)(6)?
Here, along with the September 16 incident claims, in her State Court complaint Smith also alleged other acts by Cagney on other dates, causing different and additional injuries to Smith. Yet, Smith claimed in her bankruptcy Motion for Summary Judgment that the Civil Judgment was based exclusively upon Cagney's two criminal acts of September 16, to which he pled guilty, thus rendering it non-dischargeable under section 523(a)(6). The record does not support her contention.
The Civil Judgment consists of one page, granting an award of $25,000 to Smith and $15,000 to Katy, plus interest and court costs. It does not address specifically whether the judgment was based upon the September 16 incident and the injuries arising therefrom, or for other alleged conduct by Cagney on other dates that she claims caused her further and different injury, which may or may not meet the requirements for a non-dischargeability claim under section 523(a)(6).
Although the bankruptcy court determined element (3) had been met, it provided no further explanation. However, if the bankruptcy court relied only on Smith's assertion that the Civil Judgment arose exclusively from the September 16 incident to conclude that " resolution of the issue was essential to the judgment, " since the Civil Judgment is non-specific and could have been for claims other than the September 16 incident and resulting injury, the court erred when it determined that the September 16 incident claims were essential to the judgment, thereby meeting element (3) for giving the Civil Judgment preclusive effect. 47 Am. Jur. 2d. Judgments § 496.
Because of the incomplete record before us, which lacks any written findings or a transcript of any oral proceedings from the State Court, it is impossible for the Panel to determine exactly what issues were essential to the judgment because we do not know what the judgment specifically was for. Without more, neither this Panel nor the bankruptcy court could reach the conclusion Smith suggests.
In sum, it is plaintiff who bears the burden of establishing the necessary elements for issue preclusion. In re Khaligh, 338 B.R. 817, 825 (9th Cir. BAP 2006), aff'd, 506 F.3d 956 (9th Cir. 2007). Smith has not met her burden on this record. Under the circumstances, without transcripts or some other form of findings by the State Court, the Panel and the bankruptcy court cannot conclude that the Civil Judgment should have been given preclusive effect, and thereby rendered non-dischargeable.
Consequently, since there was a genuine issue of material fact regarding element (3), the bankruptcy court erred in granting Smith summary judgment as to the Civil Judgment.
CONCLUSION
Based on the foregoing reasons, we AFFIRM the granting of Smith's Motion for Summary Judgment as to the Child Support Judgment and Restitution Award, but since there were genuine issues of material fact regarding the Civil Judgment, we REVERSE that portion of Smith's Motion for Summary Judgment and REMAND for further proceedings.
Given that Cagney questions the constitutionality of the process he received, we feel the Panel should respond. The Ninth Circuit in Sigma Micro Corp. v. Healthcentral.com (In re Healthcentral.com), 504 F.3d 775, 787 (9th Cir. 2007), held that since summary judgment motions merely involve legal issues as to whether any trial is necessary, granting one does not deprive a party of a right to a trial. See City Fire Equip. Co., Inc. v. Ansul Fire Prot. Wormald U.S., Inc., 125 B.R. 645, 649 (N.D. Ala. 1989).