Summary
concluding debtor did not act maliciously when property left with a "a broken window"
Summary of this case from Hynard v. MerkmanOpinion
Case No. 05-52645-293, Adversary No. 05-4384-659.
February 12, 2007
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The matter before the Court is Plaintiff's Complaint To Determine Dischargeability of Debt and Defendant's Answer to Complaint to Determine Dischargeability. A hearing on this matter was held on March 7, 2006, where Plaintiff appeared by power of attorney and Defendant appeared in person. Both parties were represented by counsel. After consideration of the record as a whole, the Court issues the following FINDINGS OF FACT:
Mabel Sanders appointed her daughter, Frankie Bramstedt, power of attorney in October 1, 2002. Frankie Bramstedt represented her mother's interests during this proceeding.
Debtor/Defendant Darlene Banks ("Defendant") filed a petition for relief under Chapter 7 of the Bankruptcy Code on September 3, 2005. Plaintiff/Creditor Mabel Sanders ("Plaintiff") holds a default judgment against Defendant arising out of an action for statutory waste in St. Louis County, Missouri. Plaintiff entered into a Residential Lease Purchase agreement with Defendant on May 13, 1999, and a Sale Contract (collectively the "Agreements") on May 14, 1999, concerning a single family home located at 3440 Parc Chateau Lane, Florissant, Missouri (the "Property"). Defendant made earnest money deposits totaling $11,000.00 on the Agreements along with additional rent payments of $800.00 per month from July 1, 1999 through July 2001. Defendant and her family occupied the Property from 1999 until July 2001 following the execution of the Agreements.
On April 10, 2001, showers and thunderstorms moved through Florissant, Missouri, producing widespread hail (the "April Storm"). The roof at the Property was damaged by the April Storm. Plaintiff was the owner of a policy of insurance through American Family Insurance Group ("AFIG") which insured the Property against loss from damage caused by wind and hail. Defendant thereafter notified Plaintiff that the Property was damaged by the April Storm. On further occasions between the April 10, 2001 roof damage and July 2001, Defendant and her husband requested that Plaintiff repair the roof. Plaintiff informed Defendant that AFIG would be contacted and the roof would be repaired. In May 2001, Defendant informed Plaintiff that the roof remained in disrepair.
In June 2001, Defendant informed Plaintiff of continuing rains causing interior damage to the Property in the hallway bathroom, master bedroom, and family room due to the damaged roof. Defendant was informed that the problem would be fixed. In July 2001, Defendant informed Plaintiff that no work had commenced on the roof and various insects were present in the Property. From April 10, 2001 to July 2001, Defendant continued to make monthly payments of $800.00, which were less than the $1,100.00 per month provided in the Agreements. However, Plaintiff accepted the lower payments even though they were less than the agreed amount.
In July 2001, Defendant decided to move her family out of the Property, but Defendant failed to clean the property, make minor repairs, and remove all of her belongings when she moved. The Property was therefore left in disarray with hinges taken off several doors, several spots on the carpet, a broken window, some cabinets were off their hinges, paint splotches on the bathtub and in other areas, and trash left throughout the Property. However, Defendant understood that she was not allowed to return to the Property to clean and remove some of her property.
Defendant then requested a return of her earnest money after she vacated the Property. Plaintiff declined to return any earnest money and informed Defendant that Plaintiff had exhausted these funds. AFIG made two separate payments to Plaintiff totaling $3,714.00 for storm damage to the Property. Plaintiff repaired the roof of the Property after Defendant and her family vacated the Property.
On June 10, 2002, Plaintiff commenced an action in the Associate Circuit Court, St. Louis County, Missouri, to recover for the condition of the Property. Plaintiff obtained a judgment for statutory waste pursuant to MO. REV. STAT. § 537.420 against Defendant (the "Judgment"). The Judgment forfeited the earnest money deposits in the amount of $11,000.00. The Judgment also awarded Plaintiff actual damages in the amount of $6,457.23, back rent of $4,040.00, $7,651.10 in attorney's fees, $303.00 for conversion of a refrigerator, and $12,169.10 in treble damages for waste and court costs.
"If any tenant, for life or years, shall commit waste during his estate or term, of anything belonging to the tenement so held, without special license in writing so to do, he shall be subject to a civil action for such waste, and shall lose the thing wasted and pay treble the amount at which the waste shall be assessed." MO. REV. STAT. § 537.420 (2002).
Plaintiff argues that Defendant failed to completely disclose her financial condition to this Court by filing an inaccurate Statement of Financial Affairs and omitting items on Schedules B, I, and J. However, Plaintiff failed to plead this claim under an applicable provision of the Bankruptcy Code, so this claim is not properly before the Court. Plaintiff also argues that Defendant's acts and omissions surrounding her departure from the Property constituted willful and malicious damage under Section 523(a)(6). Plaintiff further argues that Defendant's conversion of a refrigerator constitutes a violation of Section 523(a)(4). For these reasons, the Judgment should be deemed nondischargeable to the extent of $15,859.33 under Sections 523(a)(6) and (a)(4).
Defendant argues that she honestly disclosed her financial situation on her bankruptcy schedules and forms and corrected inadvertent errors (two by counsel) by amendment. Defendant further argues that any injury to the Property caused by Defendant was neither willful nor malicious. Furthermore, Defendant's disposal of a refrigerator was neither willful nor malicious and was due to the malfunction and uselessness of this property. Therefore, Defendant contends that the Judgment is dischargeable under Chapter 7. The Court weighs the merits of each argument and reaches a decision below.
JURISDICTION
The Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 151, 157, and 1334 (2005) and Local Rule 81-9.01(B) of the United States District Court for the Eastern District of Missouri. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I) (2005). Venue is proper in this District under 28 U.S.C. § 1409(a) (2005).
CONCLUSIONS OF LAW
The primary issue is whether Defendant's acts or omissions with regard to maintaining the Property rises to the level of willful and malicious injury under Section 523(a)(6). Section 523(a)(6) provides, "a discharge under Section 727 . . . 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." 11 U.S.C. § 523(a)(6) (2005).
A creditor must prove the elements of "willful" and "malice" to trigger a finding of nondischargeability under Section 523(a)(6). Adams v. Zentz (In re Zentz), 157 B.R. 145, 148 (Bankr. W.D. Mo. 1993). A plaintiff must prove each element by a preponderance of the evidence to support a finding of nondischargeability under Section 523(a)(6). Grogan v. Garner, 498 U.S. 279, 291, 111 S. Ct. 654, 661, 112 L. Ed. 2d 755, 767 (1991). The term "`[w]illful' is interpreted to mean a deliberate or intentional act." Zentz, 157 B.R. at 148 (citing Barclays American/Business Credit, Inc. v. Long (In re Long), 774 F.3d 875, 880 (8th Cir. 1985)). "[A] person acts intentionally if `he knows that the consequences are certain or substantially certain to result from his act.'" Johnson v. Meira (In re Meira), 926 F.2d 741, 744 (8th Cir. 1991).
Under the facts of this case, Defendants actions were at least deliberate in that Defendant failed to clean, clear out her personal property, and reattach a few doors upon vacating the Property. The Property was therefore left in sordid condition due to Defendant's acts and omissions. However, the damage to the Property attributable to the leaking roof was caused to a significant extent by Plaintiff's delay in retaining a roofer to secure and repair the roof of the Property. Therefore, Defendant's actions satisfy the willful element with regard to the condition of the Property at the time of her departure absent those injuries attributable to the roof.
Plaintiff must also prove that Defendant acted with malice. "The `malice' element requires that the act be targeted at the creditor such that the debtor either intended to cause the harm complained of or such harm was certain or almost certain to result from the debtor's act." Zentz, 157 B.R. at 148. "A finding of malice requires finding intent to do the claimed harm; a finding that the harm was caused through negligence or recklessness does not meet that high standard." Id. (citations omitted). However, "proof of malice `does not require spite, ill will, or a personal animosity.'" Suggitt v. Foushee (In re Foushee), 283 B.R. 278, 285 (Bankr. N.D. Iowa 2002).
Under the facts of this case, Defendant's conduct was not directly targeted at Plaintiff and failed to constitute malice. Plaintiff produced no evidence that Defendant intended to either damage or act in a way to damage the Property. There was testimony that Plaintiff would not allow Defendant to re-enter the Property to remove her items or clean. As discussed above, it was Plaintiff's failure to timely repair the roof of the Property that caused the bulk of the damage. The evidence merely indicates that Defendant left the home in sordid condition and neglected to make minor repairs, and this conduct was reckless but not malicious. Therefore, Plaintiff failed to prove nondischargeability under Section 523(a)(6).
The remaining issue is whether Defendant is entitled to discharge the portion of the Judgment regarding the conversion of the refrigerator. A debt may be excepted from discharge under Section 523(a)(4) for embezzlement. Under Section 523(a)(4), "[a] discharge under section 727 . . . does not discharge . . . any debt — (4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny." "Embezzlement . . . is the fraudulent appropriation of property of another by a person to whom such property has been entrusted or into whose hands it has lawfully come." In re Phillips, 882 F.2d 302, 304 (8th Cir. 1989). A plaintiff must prove nondischargeability under Section 523(a)(4) by a preponderance of the evidence. Garner, 498 U.S. at 291, 111 S. Ct. at 661, 112 L. Ed. 2d at 767.
Under the facts of this case, the refrigerator was in lawful possession of Defendant on the date Defendant took possession of the Property. However, the parties presented conflicting evidence regarding the fraudulent appropriation of the refrigerator. Plaintiff claims that the refrigerator was custom installed and Defendant failed to obtain authorization to remove the refrigerator. Defendant claims that Plaintiff gave her permission to remove the refrigerator given that the refrigerator was severely damaged due to its age and was removed to make room for a new refrigerator later purchased by Defendant.
The Court notes that the parties were contractually bound to sale and transfer the Property at the time the refrigerator was replaced, so the disposition and replacement of a faulty refrigerator by Defendant was not outside the scope of the overall transaction. Furthermore, Plaintiff introduced no additional facts to indicate that Defendant engaged in other fraudulent conduct surrounding the refrigerator. Therefore, the record indicates that Defendant did not embezzle the refrigerator. Consequently, Plaintiff failed to prove nondischargeability under Section 523(a)(4).
By separate order, judgment will be entered in favor of Defendant