Opinion
Case No. 96-10161-SSM, Adversary Proceeding No. 96-1104
January 8, 1997
Brian M. O'Connor, Esquire, Reston, VA Counsel for the plaintiff
Karen M. Lang, Esquire, Nichols, Bergere Zauzig, P.C., Lake Ridge, VA Counsel for the debtor/defendant
MEMORANDUM OPINION
In this action, the debtor's former husband seeks a determination that the debtor's liability arising from a telephonic eavesdropping is nondischargeable under § 523(a)(6), Bankruptcy Code. After learning of the eavesdropping, the former husband sued the debtor and obtained a default judgment against her in a California court in the amount of $77,100. A trial of the nondischargeability action was held in this court on December 16, 1996, following which the court took the matter under advisement to consider whether collateral estoppel barred relitigation of the underlying facts (including the amount of damages) determined by the default judgment and whether the debtor's conduct, as shown by the evidence presented in this court, warranted a finding of nondischargeability and an award of damages. For the reasons stated in this opinion, the court determines that collateral estoppel does not apply but that statutory damages in the amount of $3,000 under the California Invasion of Privacy Act are nondischargeable.
Section 523(a)(6), Bankruptcy Code states:
(a) A discharge under section 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;
Findings of Fact
The facts, although sharply disputed in several crucial respects, may be simply stated. The plaintiff, Richard M. Ribas ("Ribas" or "the plaintiff"), and the debtor, Alice M. Brown ("Brown" or "the debtor"), had been married for approximately twelve years when they separated in late 1976. Shortly after the separation, Ribas, who had engaged an attorney, David Melmick, for that purpose, presented the debtor with a property settlement agreement which she signed in November 1976. The property settlement agreement was incorporated into a final decree of divorce entered in June 1977 by the Superior Court of the State of California in and for Santa Clara County. Following the divorce, the debtor sought tax advice from an accountant, Claudia Hill, who by coincidence had also prepared Ribas's return for the previous year. She told the debtor that the property settlement agreement was very unfair and that she ought to see a lawyer. The debtor thereupon consulted Robert L. Mezzetti, an attorney at law.
There were apparently two meetings at Melmick's office. At the first meeting, the terms of the agreement were discussed but nothing was signed. The debtor then consulted with an attorney, James Watterson, but subsequently advised him she did not need his services. The debtor testified that she did so only because Ribas had telephoned her, assured her he would be fair with her, and threatened that if she continued to see an attorney, she would be left penniless. The property settlement agreement was signed during the second meeting at Melmick's office.
The debtor, after consulting with Mezzetti, telephoned her husband and told him that she had been to see a lawyer and wished to renegotiate the property settlement agreement. The debtor's testimony is that Ribas reacted angrily, and demanded to know who the lawyer was. Ribas's testimony is that the debtor simply requested that he telephone Mezzetti. In any event, Ribas telephoned Mezzetti that same afternoon. The only evidence as to that conversation comes from Ribas, who testified that Mezzetti threatened him and used abusive language. Ribas then called the debtor back at an interior decorating business called "The Total Look" where the debtor worked part-time with the owner Joan Clark ("clark").
It is undisputed that Clark used an extension phone to listen in on the call between the debtor and Ribas. What is disputed is whether the debtor requested Clark to do so, or whether Clark picked up the phone independently without encouragement from the debtor. The debtor testified that not only did she not ask Clark to listen in, but that she was unaware Clark had done so until after the call was over. Ribas testified that at a later arbitration hearing Clark "called by the debtor as a witness" acknowledged that the debtor had requested her to listen in. This court, having observed both Ribas and the debtor testify, did not find either witness entirely convincing. Nevertheless, having considered carefully the testimony of the parties in the light of the surrounding circumstances, the court finds it more likely than not that the debtor knew that Clark was listening on the extension and in fact had asked her to do so.
Unfortunately, a transcript of the arbitration hearing was not presented to this court nor does one appear available.
Ribas, although testifying that he was extremely angry during the conversation, was notably vague as to what he actually said. The debtor testified that during the conversation she said to Ribas, "If you hadn't threatened me out of getting an attorney, this would not have happened," and that Ribas had replied, "You're probably right."
In his testimony before this court, Ribas testified that he had not made such a statement and that dark's later testimony concerning the conversation was untrue.
In December 1977, Brown brought an action to set aside the property settlement agreement, asserting, among other grounds, that the agreement had been procured by fraud. The parties agreed to binding arbitration, and a hearing was held before an arbitrator in 1980. At that hearing Clark testified on the debtor's behalf concerning the contents of the telephone conversation. This was the first time Ribas learned that Clark had listened in on the conversation. Notwithstanding dark's testimony, the arbitrator found for Ribas and characterized the action as frivolous.
Shortly thereafter (late 1980), Ribas sued Clark, the debtor, and the debtor's attorneys in the Superior Court of the State of California in and for Santa Clara County for invasion of privacy and "outrage." The debtor was personally served on July 22, 1981. No answer or other pleading was ever filed on her behalf. Since her attorneys were also defendants in the suit, she apparently felt that she did not need to take any independent action. It seems clear, however, that the attorneys were never formally retained to represent her. In any event, Ribas's attorney, John Hartford, informally agreed to an indefinite extension of the time for the debtor to file an answer pending a ruling on issues raised by the other defendants. and the suit proceeded without her for several years.
This agreement was confirmed by a letter dated August 12, 1981, from Hartford to the debtor stating, "This letter will confirm the open extension of time given to you in which to responsively plead to the Complaint in the above matter. . . . [T]he reason for this is to await a decision of the Court of Appeal in order that the uncertain legal issues may be resolved with some definition prior to actually litigating this case." Exh. B to Pltf. Ex. 4.
Clark filed demurrers to the original and an amended complaint. The trial court sustained the demurrer to the amended complaint without leave to amend. Ribas's appeal eventually reached the California Supreme Court after an intermediate court affirmed the dismissal of the action against Clark. Ribas v. Clark, 696 P.2d 637 (Cal. 1985), rev'g Ribas v. Clark, 201 Cal.Rptr. 721 (Ct.App. 1984). The California Supreme Court held that the pleaded causes of action, to the extent based on dark's testimony at the arbitration hearing, could not proceed as Clark's testimony was absolutely privileged under CAL. ClV. CODE § 47 (West 1996) as testimony given at a judicial or other official proceeding. Ribas, 696 P.2d at 643. The court did, however, allow Ribas to go forward with a cause of action based on the eavesdropping itself, based on CAL. PENAL CODE § 637.2, part of the California Invasion of Privacy Act. The cited statute, among other provisions, allows the recovery of general damages in the amount of $3,000 for each violation of the Invasion of Privacy Act even in the absence of actual damages. Ribas, 696 P.2d at 643-44.
Upon remand to the trial court, Ribas dropped the debtor's attorneys as defendants and settled with Clark for an undisclosed "cash amount." Ribas's attorney then wrote to the debtor on March 31, 1985, and advised her that the open extension of time previously given to her to respond to the complaint was terminated, and that a responsive pleading was due within 35 days. The debtor, however, no longer resided at the address to which the letter was sent, and she testified that she never received it.
Exh. C. to Pltf. Ex. 4.
She had moved to Virginia in August 1984.
On July 30, 1985, Ribas's attorney filed with the California court a request for entry of default, which was duly entered by the clerk "on the original complaint only." An ex parte hearing on damages was held on April 29, 1988. The debtor was not present, and the only witness who testified was Ribas. By a terse memorandum of decision dated May 18, 1988, the court found that "[t]he essence of plaintiffs claim is the procurement and use of false testimony," and awarded special damages in the amount of $17,100, general damages in the amount of $10,000, and punitive damages in the amount of $50,000, for a total of $77,100. A formal judgment against the debtor in those amounts is file-stamped May 27, 1987.
To say that the exhibits are inconsistent as to the actual year involved is an understatement. The memorandum of decision recites that the default hearing was held on April 29, 1988, and the signature line contains a handwritten date of "5-18-88." Def. Ex. H. The certificate of mailing, as well as the postmark on the undelivered envelope addressed to the debtor, likewise reflect the year as 1988. Def. Ex. H and I. The clerk's "filed" stamp on both the memorandum of decision and the judgment, however, show the year as 1987. Pltf. Ex. 1 and Def. Ex. H. There does not appear to be any ready explanation for the discrepancy. Under the circumstances, it seems most likely that the default hearing was held, and the judgment entered, in 1988. Fortunately, the exact year of either the default hearing or the judgment has no bearing on the issues to be resolved by this court.
Unfortunately, no transcript exists of this hearing, and the clerk's minutes are unilluminating, to say the least. Def. Ex. F.
A copy of the memorandum of decision was mailed to the debtor at her former Sunnyvale, California, address, but was returned by the postal service with the notation, "Forwarding Order Expired."
For the reasons discussed above, it would appear that the judgment was actually signed in May 1988. not 1987.
The debtor learned of the default judgment in "1987 or 1988" when she asked a friend to check the court file, but she took no other action at that time. Ribas subsequently docketed the judgment in Virginia under the Uniform Enforcement of Foreign Judgments Act, Va. Code Ann. 8.01-465.1 et seq. When the debtor learned in late 1995 that the judgment had been docketed in Virginia, she consulted with counsel, who advised her to file bankruptcy. She filed a voluntary chapter 7 petition in this court on January 16, 1996. On March 25, 1996, Ribas filed a timely complaint to determine the dischargeability of the judgment. The debtor received her discharge on April 20, 1996. Additionally, on motion of the debtor, an order was entered by this court on May 8, 1996, under § 522(f), Bankruptcy Code, setting aside Ribas's judgment lien against the debtor's house.
Conclusions of Law and Discussion I.
This court has jurisdiction of this controversy under 28 U.S.C. § 1334 and 157(a) and the general order of reference entered by the United States District Court for the Eastern District of Virginia on August 15, 1984. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I). Venue is proper in this district under 28 U.S.C. § 1409(a). The burden of proof is on the plaintiff, and the standard of proof is preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
II.
As an initial matter, the court must address Ribas's contention that collateral estoppel bars the debtor from litigating in this dischargeability action any of the issues determined by the California default judgment, including willfulness, malice, and the amount of damages. See, e.g., Newsome v. Moore (In re Moore), 186 B.R. 962 (Bankr. N.D. Calif. 1995) (California default judgment entered after defendant's answer was struck had collateral estoppel effect in nondischargeability action); Grain v. Limbaugh (In re Limbaugh), 155 B.R. 952 (Bankr. N.D. Tex. 1993) (Texas post-answer default judgment for wire-tapping was conclusive in subsequent nondischargeability proceeding).
Neither Moore nor Limbaugh represent true "default" situations in the classic sense of a judgment entered after a failure by the defendant to answer or appear after being served. In Moore, as discussed below, default was entered after the defendant's answer and counter-claim were struck, apparently for legal insufficiency, and the defendant did not further plead. Similarly, in Limbaugh the defendant had filed an answer and counterclaim, but her pleadings were subsequently struck as a sanction for failure to obey a discovery order. 155 B.R. at 955. The defendant, however, was allowed to participate in the subsequent hearing on damages and to cross-examine witnesses.
Collateral estoppel, commonly referred to as issue preclusion, bars relitigation of issues actually litigated and necessarily decided between the same parties in a different cause of action. Brown v. Felsen, 442 U.S. 127, 139 n. 10, 99 S.Ct. 2205, 2213, n. 10, 60 L.Ed.2d 767 (1979). It differs in that respect from res judicata, or claim preclusion, which bars litigation of all grounds for, or defenses to, recovery that were previously available to the parties, regardless of whether they were asserted or determined in the prior action. Id. at 131, 99 S.Ct. at 2209. The Supreme Court has held, essentially on policy grounds, that res judicata does not apply in the specific context of bankruptcy dischargeability litigation. Id. at 138-139, 99 S.Ct. at 2213. Collateral estoppel, however, does. Grogan v. Garner, 498 U.S. at 284, n. 11, 111 S.Ct. at 658, n. 11; see also Combs v. Richardson, 838 F.2d 112 (4th Cir. 1988) (jury verdict in assault action against debtor precluded debtor from relitigating willful and malicious nature of actions in subsequent bankruptcy dischargeability proceeding).
To evaluate the preclusive effect of a state court judgment, a federal court must generally apply the preclusion law of the state in which the judgment was rendered. See, 28 U.S.C. § 1738; In re Wizard Software, Inc., 185 B.R. 512 (Bankr. E.D.Va. 1995) (Virginia default judgment was res judicata and had preclusive effect in context of objection to proof of claim). Under California law, the elements of collateral estoppel are as follows:
"The records and judicial proceedings of any court of any . . . State, Territory or Possession . . . shall be proved or admitted in other courts within the United States and its Territories and Possessions by the attestation of the clerk and seal of the court annexed, if a seal exists, together with a certificate of a judge of the court that the said attestation is in proper form. Such . . . records and judicial proceedings . . ., so authenticated, shall have the same full faith and credit in every court within the United States and its Territories and Possession as they have by law or usage in the courts of such State, Territory or Possession from which they are taken." (emphasis added).
1. "[T]he issue sought to be precluded from relitigation must be identical to that decided in a former proceeding."
2. "[T]his issue must have been actually litigated in the former proceeding."
3. "[The issue] must have been necessarily decided in the former proceeding."
4. "[T]he decision in the former proceeding must be final and on the merits."
5."[T]he party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding."
Lucido v. Superior Court, 795 P.2d 1223, 1225 (Cal. 1990), cert. denied. 500 U.S. 920, 111 S.Ct. 2021, 114 L.Ed. 107 (1991). Under California law, it appears that a default judgment will satisfy the "actually litigated" test, with the result that a party to the action is collaterally estopped from relitigating any allegations well-pled in the prior proceeding. For example, the California Supreme Court has stated:
A judgment by default is as conclusive as to the issues tendered by the complaint as if it had been rendered after answer filed and trial had on allegations denied by the answer. Such a judgment is res judicata as to all issues aptly pleaded in the complaint and defendant is estopped from denying in a subsequent action any allegations contained in the former complaint.
Fitzgerald v. Herzer, 177 P.2d 364 (Cal. 1947) (citations omitted). In a later case, the Supreme Court of California stated:
The doctrine of conclusiveness of judgments applies to a judgment by default with the same validity and force as to a judgment rendered upon a trial of issues, provided such judgment is regular and valid, and shows distinctly on what count or cause of action it was rested.
Burnett v. King, 205 P.2d 657, 660 (Cal. 1949) (citations and internal quotations omitted). Consistent with this line of authority, a bankruptcy court sitting in California, while candidly acknowledging that "the question is a close one, and the California authorities are less than clear," has held that a California default judgment was entitled to preclusive effect in a subsequent nondischargeability determination. Newsome v. Moore, 186 B.R. at 972.
Although the state court judgment in that case was characterized as having been entered by "default," the defendant had in fact participated in the case to a significant extent by filing an answer, a first amended answer, and a cross complaint. The trial court issued an order striking the first amended answer and the cross complaint and thereafter entered a default against the debtor when she did not further plead. 186 B.R. at 966. The bankruptcy court specifically referred to "early participation in the case by Defendant and a subsequent prove-up hearing" as factors that would persuade a California court "to bind Defendant as to the matters necessarily decided that resulted in the Default Judgment."
However, an examination of California law does not end the inquiry. As the Supreme Court has explained, "The validity of a creditor's claim is determined by rules of state law. Since 1970, however, the issue of nondischargeability has been a matter of federal law governed by the terms of the Bankruptcy Code." Grogan v. Garner, supra, 498 U.S. at 284, 111 S.Ct. at 658 (citations omitted); see also Field v. Mans, — U.S. —, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995) (holding that the federal standard for nondischargeability under § 523(a)(2)(A), Bankruptcy Code, for debts grounded in fraud, is "justifiable reliance" while rejecting any state standards to the contrary).
The Fourth Circuit had held that in order for collateral estoppel to apply in a dischargeability proceeding, the issues sought to be precluded must have been "actually litigated," thus preventing a plaintiff from relying on a default judgment to bar the discharge of a debt. M M Transmissions, Inc. v. Raynor (In re Raynor), 922 F.2d 1146, 1148 (4th Cir. 1991) (North Carolina default judgment for fraud not conclusive in subsequent nondischargeability litigation). This standard has been consistently followed within this district. See, e.g., Commonwealth of Virginia v. Meyers (In re Meyers), 52 B.R. 901 (Bankr. E.D. Va. 1985) (Shelley, J.); Colwell v. Lucas (In re Lucas), 186 B.R. 67, 69 (Bankr. E.D. Va. 1995) (Tice, J.); In re Wizard Software, Inc., 185 B.R. 512 (Bankr. E.D. Va. 1995) (Mitchell, J.) (distinguishing between preclusive effect of default judgment in dischargeability litigation and claim allowance). These rulings, moreover, are entirely consistent with the language used by the Supreme Court in Grogan v. Garner, supra, that, where the standard of proof is the same, "a bankruptcy court could properly give collateral estoppel effect to those elements of the claim that are identical to the elements required for discharge and which were actually litigated and determined in the prior action." 498 U.S. at 284, 111 S.Ct. at 658 (emphasis added). As support for that proposition, the Supreme Court cited to Restatement (Second) of Judgments § 27 (1982), which was also relied upon by the Fourth Circuit in Raynor as authority for its holding that a default judgment would not support collateral estoppel.
The apparently clear holding of Raynor, however, has been clouded by the subsequent opinion of another Fourth Circuit panel in Hagan v. McNallen (In re McNallen), 62 F.3d 619 (4th Cir. 1995). McNallen did not involve a default judgment but rather a judgment (for compensatory and punitive damages for intentional infliction of emotional distress) entered by a Texas court after a seven-day jury trial. In determining that collateral estoppel precluded the debtor from contesting the elements of willfulness and malice, the court stated,
In determining the preclusive effect of a state-court judgment, the federal courts must, as a matter of full faith and credit, apply the forum state's law of collateral estoppel. . . . It is well recognized, therefore, that the forum state's law of collateral estoppel applies in determining the dischargeability of debt.
62 F.3d at 624 (citations omitted). Raynor is neither cited nor discussed. The court noted in McNallen, moreover, that the issue of whether Texas law or Federal law governed the application of collateral estoppel had no effect on the outcome, "because there is no material difference between the elements of federal collateral estoppel and Texas collateral estoppel." Id.
It is not possible to fully reconcile the language of Raynor and McNallen. Both are panel decisions, and since in the Fourth Circuit a panel may not overrule a published opinion of another panel, this court must assume that McNallen did not intend to abrogate the holding in Raynor. Since McNallen did not involve a default judgment, and since Raynor specifically addressed the issue of a default judgment, this court will follow Raynor as stating the appropriate rule of decision. Accordingly, this court concludes that the California default judgment does not have preclusive effect in the context of the present nondischargeability proceeding.
Parker v. Director, OWCP, 75 F.3d 929, 935 (4th Cir. 1996) ("A panel of three Fourth Circuit judges . . . may not overrule a prior published panel opinion.")
III.
This court now turns to the merits of the plaintiff's position "whether the plaintiff has proven by a preponderance of the evidence that the debtor's actions constitute a "Willful and malicious injury" within the meaning of § 523(a)(6), Bankruptcy Code.
A.
As a preliminary matter, this court must determine what causes of action under California law the plaintiff may assert in this present action. Ribas' complaint in this court alleges that the "judgment in the California action was the result of intentional, willful and malicious acts performed by Debtor, including invasion of privacy and outrage," and that "[t]he actions of Debtor alleged in the California action constituted violations of the California Penal Code "§§ 630, 631(a), and 637."
First, as discussed above, the default judgment has no collateral estoppel effect in the present dischargeability action; therefore, Ribas has the burden of proving that the debtor committed a tort under California law that constitutes a willful and malicious injury within the meaning of § 523(a)(6), Bankruptcy Code. Second, this court notes that California Penal Code § 630 is a mere recitation of legislative finding and intent, while §§ 631 and 637 concern criminal punishment and fines that may be levied for illegal wiretapping and disclosure of telegraphic or telephonic messages. These sections, by themselves, do not create any civil liability. However, the court also notes that California Penal Code § 637.2, although not directly cited in Ribas's complaint, provides a civil remedy for persons injured by violations of §§ 631 or 637. See Warden v. Kahn, 160 Cal.Rptr. 471, 474 (Ct.App. 1979).
The court further notes that the original complaint in the California action, Pltf. Exh. 2, alleged causes of action sounding only in invasion of privacy and "outrage." However, no damages may be recovered arising solely from the debtor's use of Clark's testimony at the arbitration hearing, as such testimony was absolutely privileged. Ribas v. Clark, 696 P.2d at 637. The California Supreme Court decision did hold, however, that Ribas could assert a cause of action based on the eavesdropping itself, independent of any later disclosure, and could recover under California Penal Code § 637.2 for three times actual damages, or, alternately, $3,000 for each violation of the Invasion of Privacy Act without any proof of actual damages. This court concludes that Ribas has fairly pleaded in this proceeding causes of action based on invasion of privacy, outrage, and California Penal Code § 637.2. Therefore, this court must determine whether Ribas has sustained his burden of proof with respect to those causes of action and, if so, whether the resulting damages constitute a willful and malicious injury.
During the trial in this court, there was extensive testimony concerning whether the debtor had a sufficient legal and factual basis for bringing the action to set aside the property settlement agreement. Indeed, Ribas testified in this case that his suit against the debtor in California was primarily grounded in malicious prosecution. Apparently, a malicious prosecution cause of action was pled by Ribas sometime during the California litigation. However, both the original complaint in the California action (Pltf. Exh. 2) and the complaint in this court allege causes of action only for invasion of privacy and the tort of "outrage." The default entered by the California court was expressly stated to be with respect to "the original complaint only." Pltf. Exh. 3. Therefore, any testimony as to whether the debtor had a good faith basis for bringing the action against Ribas is irrelevant, as malicious prosecution has never been fairly pleaded as a cause of action before this court.
1992 amendments to this section increased the amount of statutory damages from $3,000 to $5,000; however, because Ribas's cause of action accrued before 1992, the court will apply the $3,000 amount in this proceeding. See § 637.2 (legislative history).
This cause of action, as discussed below, is not an independent tort but is essentially a species of the tort of intentional infliction of emotional distress.
B. Invasion of Privacy
The common law of California recognizes four distinct kinds of invasion of privacy. These are:
"(1) Intrusion upon the plaintiff's seclusion or solitude or into his private affairs. (2) Public disclosure of embarrassing private facts about the plaintiff. (3) Publicity which places the plaintiff in a false light in the public eye. (4) Appropriation, for the defendant's advantage, of the plaintiff's name or likeness."
Lugosi v. Universal Pictures, 603 P.2d 425, 428 (Cal. 1979); see also RESTATEMENT (SECOND) OF TORTS § 652A (1977). In neither the California action nor the present one has the plaintiff specifically pleaded which type of invasion of privacy he contends was committed. Three of the kinds of invasion of privacy recognized by California law are clearly inapplicable to facts in this case. First, both public disclosure of embarrassing private facts about the plaintiff and publicity which places the plaintiff in a false light in the public eye require disclosure to the public in general, or to a large number of persons as opposed to one or several persons. See Fellows v. National Inquirer, Inc., 211 Cal.Rptr. 809, 821 (Ct.App. 1985); Kinsey v. Macur, 165 Cal.Rptr. 608, 611 (Ct.App. 1980); Porten v. University of San Francisco, 134 Cal.Rptr. 839, 841 (Ct.App. 1976). Here, it is uncontested that the only person who overheard the conversation was Clark, thus falling far short of the required "public disclosure." Second, appropriation, for the defendant's advantage, of the plaintiff's name or likeness is similarly inapplicable. This type of invasion of privacy involves the use of the likeness of a public, well-known figure for one's commercial advantage. See Lugosi, 603 P.2d at 428, 431 (holding that actor Bela Lugosi had a right, during his lifetime, to his name and likeness). Here, it has simply not been alleged or proven that Ribas was a "public figure" or that his name or likeness was used by the debtor for commercial advantage.
This leaves intrusion upon the plaintiff's seclusion or solitude or into his private affairs as the only potential common law action for invasion of privacy. This type of invasion of privacy is committed when a person "intentionally intrudes, physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns". Miller v. National Broadcasting Co., 232 Cal.Rptr. 668, 678 (Ct.App. 1986) (quoting RESTATEMENT (SECOND) OF TORTS § 652 B (1977)). Additionally, the intrusion must be highly offensive to a reasonable person. Id. In Miller, the court held that a plaintiff stated a cause of action when a television crew entered her home without consent during an emotional and insecure period when her husband was having a heart attack. Id. at 669. The court reasoned that the element that the conduct be "highly offensive" is essentially a moving target, where the fact finder must consider a multitude of factors to determine whether, under the circumstances, conduct is highly offensive. Id. at 679. These include: the "degree of intrusion, the context, conduct and circumstances surrounding the intrusion as well as the intruder's motives and objectives, the setting into which he intrudes, and the expectations of those whose privacy is invaded." Id. Finally, with respect to damages, special damages need not be proven, rather general damages are sufficient. Id. at 679-80. The fact finder would be entitled to award damages based on emotional distress suffered by the plaintiff which would include "anxiety, embarrassment, humiliation, shame, depression, feelings of powerlessness, and anguish". Id. at 680.
In the present case, it seems clear that the only actionable invasion of privacy is that inherent in the violation of the California Invasion of Privacy Act. Indeed, on his appeal in the California courts, Ribas's argument on invasions of privacy was based almost entirely on the provisions of that Act, with only incidental reference to an independent "common law" cause of action. Pltf. Ex. 6. In any event, even assuming that the debtor's act of having Clark listen in on the telephone call between her and Ribas would constitute a tortious invasion of privacy independent of the Invasion of Privacy Act, he has not established any damages beyond those recoverable under the Invasion of Privacy Act. Ribas, although clearly angered at learning of the eavesdropping, suffered no emotional or psychological injury. While unquestionably a reasonable person would find it "highly offensive" to have a third party listening in on what the person supposed to be a private conversation, the conversation was not about the most intimate details of one's life or business affairs but solely concerned a legal dispute between the debtor and Ribas. Put another way, Ribas could not have had any reasonable expectation that the debtor intended to keep the contents of the telephone call secret. Accordingly, the court concludes that the debtor has not established the elements of a common law invasion of privacy distinct from the civil remedy provided by statute for violation of the Invasion of Privacy Act.
C. "putrage"
Under California law, there does not appear to be a separate cause of action for "outrage." Rather, California recognizes a cause of action for the intentional infliction of emotional distress in which "outrageous conduct" is an element of the tort. Cf. Trunk v. Orr, 156 Cal.Rptr. 662, 666 (Ct.App. 1979) (analyzing the tort of "extreme outrageous conduct" under an intentional infliction of emotional distress standard). See also Daniel Givelber, The Right to Minimum Social Decency and the Limits of Evenhandedness: Intentional Infliction of Emotional Distress by Outrageous Conduct, 82 Colum. L. Rev. 42 (1982) (reasoning that the tort of intentional infliction of emotional distress many times boils down to one element "extreme and outrageous conduct" and that instead of distorting the elements of the tort of intentional infliction of emotional distress, courts should simply explicitly recognize a tort of "outrageous conduct" rather than de facto falling back towards it).
The elements of a prima facie case for intentional infliction of emotional distress as recognized in California are:
(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress;
(2) the plaintiff's suffering severe or extreme emotional distress;
(3) actual and proximate causation of the emotional distress by the defendant's outrageous conduct.
Davidson v. City of Westminster, 649 P.2d 894, 901 (Cal. 1982) (quoting Cervantez v. JCPenney Co., 595 P.2d 975, 983 (Cal. 1979). The conduct complained of must be so outrageous and extreme as to "exceed all bounds of that usually tolerated in a civilized community." Id. The Restatement (Second) of Torts, § 46, which California courts have adopted as their test for this tort, provides an excellent discussion of how extreme the conduct must be to be actionable:
It has not been enough that the defendant has acted with an intent which is tortious or even criminal, or that he has intended to inflict emotional distress, or even that his conduct has been characterized by "malice," or a degree of aggravation which would entitle the plaintiff to punitive damages for another tort. Liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.
RESTATEMENT (SECOND) OF TORTS § 46, Comment (d) (1977). In the present case, plaintiff has not sustained his burden of proof of any element of the prima facie case. While asking another to listen in surreptitiously on a telephone call may constitute an affront and an invasion of privacy, it is not so outrageous that it can fairly be said to exceed all bounds of decency in a civilized society. Moreover, plaintiff has not offered any evidence that he sustained severe or extreme emotional distress or psychological injury, or that the debtor, in asking Clark to listen in on the call, intended to cause the plaintiff severe emotional distress or had any intent other than to protect herself or gain an evidentiary advantage in civil litigation that she expected to ensue. In short, plaintiff has not sustained a cause of action for intentional infliction of emotional distress.
D. California Penal Code § 637.2
Ribas alleges finally that the debtor violated California Penal Code §§ 630, 631, and 637. Section 630 is merely a recitation of legislative intent in enacting the Invasion of Privacy Act. Section 631 prohibits wiretapping and states in relevant part:
§ 631. Wiretapping ". . .
(a) Prohibited acts; punishment; recidivists. Any person who, by means of any machine, instrument, or contrivance, or in any other manner, intentionally taps, or makes any unauthorized connection, whether physically, electrically, acoustically, inductively, or otherwise, with any telegraph or telephone wire, line, cable, or instrument, including the wire, line, cable, or instrument of any internal telephonic communication system, or who willfully and without the consent of all parties to the communication, or in any unauthorized manner, reads, or attempts to read, or to learn the contents or meaning of any message, report, or communication while the same is in transit or passing over any wire, line, or cable, or is being sent from, or received at any place within this state; or who uses, or attempts to use, in any manner, or for any purpose, or to communicate in any way, any information so obtained, or who aids, agrees with, employs, or conspires with any person or persons to unlawfully do, or permit, or cause to be done any of the acts or things mentioned above in this section, is [subject to specified punishments].
(emphasis added). Section 637 concerns disclosure of a telephone message by a person who was not a party to the telephone call or message. It states:
§ 637. Disclosure of telegraphic or telephonic message; punishment; exception
Every person not a party to a telegraphic or telephonic communication who willfully discloses the contents of a telegraphic or telephonic message, or any part thereof, addressed to another person, without the permission of such person, unless directed so to do by the lawful order of a court, is [subject to specified punishments].
While both of these sections define criminal conduct and prescribe punishment for violations thereof, § 673.2 provides a civil remedy for a violation of any of the provisions of the Invasion of Privacy Act. At the time of the events complained of, § 637.2 provided, in relevant part, as follows:
(a) Any person who has been injured by a violation of this chapter may bring an action against the person who committed the violation for the greater of the following amounts:
(1) Three thousand dollars ($3,000).
(2) Three times the amount of actual damages, if any, sustained by the plaintiff.
***
(c) It is not a necessary prerequisite to an action pursuant to this section that the plaintiff has suffered, or be threatened with, actual damages.
Section 637 prohibits only the willful disclosure of the contents of a telephone message by a person not a party to the communication which is addressed to another person. This section is clearly inapplicable to the issues before this court. Although Clark was not a party to the communication and unquestionably disclosed the contents of the communication without Ribas's consent during the arbitration hearing, the teaching of Ribas v. Clark is that such disclosure was absolutely privileged as testimony given at a judicial or other proceeding. Ribas, 696 P.2d at 643. Therefore, this court finds that the debtor, even if vicariously liable for Clark's disclosure, has not committed a violation of § 637.
Whether a violation of § 631 has occurred is a closer question. This court need not dwell on the issue of whether listening in, or "eavesdropping," on a telephone conversation by means of an extension telephone falls within the prohibition of § 631; the California Supreme Court has already ruled that it does. Ribas v. Clark, 696 P.2d 637, 641 (Cal. 1985); Montalti v. Catanzariti, 236 Cal.Rptr. 231, 233 (Ct.App. 1987) (citing Ribas v. Clark for this proposition). At first glance, it would appear that Ribas's civil action would lie only against Clark, as she was the person who actually "eavesdropped" on the conversation. However, § 631 also prohibits a person from aiding, agreeing with, employing, or conspiring with another person to violate that section.
This court has been unable to find any reported California case holding a person liable under § 637.2 for aiding, agreeing, employing, or conspiring with another person to violate § 631(a). However, looking to the plain language of the two sections, this court concludes that civil liability will attach under § 637.2 when a person "aids, agrees with, employs, or conspires with" another person to violate § 631(a). Section 631(a) expressly makes it a criminal violation for anyone to aid, agree with, employ, or conspire with another person to commit any of the acts in that subsection. Section 637.2 allows a person who has been injured by such a violation to bring an action against the person who committed the violation. Section 637.2 cannot be read as imposing civil liability only on the actual perpetrator; rather it imposes liability against any person who violates the Invasion of Privacy Act. Under § 631(a), that includes anyone who aids, agrees with, employs or conspires with another person to violate that section. Therefore, this court concludes that civil liability may attach under § 637.2 for a "vicarious" violation of § 631(a).
Turning to the case before the court, there is no dispute that Clark listened in on the telephone call without Ribas's consent and therefore no question that Clark violated § 631(a). As discussed above, the court finds it more probable than not that she did so because the debtor asked her to. By doing so, the debtor herself was guilty of a violation of § 631(a), and accordingly, she may be held civilly liable for such conduct under § 637.2.
With respect to damages, however, Ribas has not offered a scintilla of evidence that he suffered any actual loss. He candidly testified that the episode did not affect his employment or business prospects. There was no testimony that he suffered from any kind of emotional distress or required medical or psychiatric treatment as a result. Although he testified that he incurred "about" $20,000 in legal fees defending against the debtor's action to set aside the property settlement agreement, such expenses were not shown to have been the natural and proximate result of the eavesdropping itself. Therefore, this court cannot find that Ribas suffered any actual damages as a result of the debtor's violation of § 631(a).
This does not end the inquiry. Section 637.2, as it was written when Ribas's cause of action accrued, authorizes an award of general damages in the amount of $3,000 for each violation of the Invasion of Privacy Act without proof of actual damages. See Ion Equipment Corp. v. Nelson, 168 Cal.Rptr. 361, 368 (Ct.App. 1980). As only one violation has been shown, this court finds that Ribas is entitled to an award of $3,000 in general damages.
As noted above, § 637.2 was amended in 1992 to increase the amount that may be awarded without any proof of damages from $3,000 to $5,000.
IV.
The next issue before the court is whether this $3,000 debt is nondischargeable under § 523(a)(6), Bankruptcy Code, as a "willful and malicious injury by the debtor to another entity or to the property of another entity." The Fourth Circuit has recently spoken with respect to what is meant by "willful and malicious":
We noted in [St. Paul Fire Marine Ins. Co. v. Vaughn, 779 F.2d 1003 (4th Cir. 1985)] that "willful" means "deliberate or intentional." Thus, we ascribe to the word "willful," as it pertains to Section 523(a) of the Bankruptcy Code, a meaning similar to that derived from its use in other areas of the law.
"Malice," however does not mean the same thing in Section 523(a) that it often does in other contexts. A debtor may act with malice even though he bears no subjective ill will toward, and does not specifically intend to injure, his creditor. Hence, a debtor's injurious act done "deliberately and intentionally in knowing disregard of the rights of another," i.e., a creditor, is sufficiently willful and malicious and prevents discharge of the debtor.
Because the St. Paul test requires a deliberate act in "knowing" disregard of a creditor's rights, it is the debtor's subjective state of mind that is relevant; it does not matter that a "reasonable debtor" should have known that his act would adversely affect another's rights. However, a particular debtor's knowledge may be proved by circumstantial evidence: "Implied malice . . . may be shown by the acts and conduct of the debtor in the context of [the] surrounding circumstances."
First Nat'l Bank of Md. v. Stanley (In re Stanley), 66 F.3d 664, 667-668 (1995) (internal citations omitted).
In Stanley, the debtor had applied to a bank for a $10,000 line of credit, but the bank had approved only an $8,000 credit line, which the debtor immediately drew down.
Three months later, as a result of a bookkeeping error, the bank mailed the debtor a statement reflecting an $80,000.00 credit line. The debtor then drew down the "extra" $72,000 to purchase some real estate which he expected to appreciate in value. The market, however, plummeted, the property was sold at a loss, and the debtor filed a bankruptcy petition. The Fourth Circuit upheld the District Court in reversing a bankruptcy court determination that the debt was dischargeable and ruled that the debtor's subjective intention to repay the debt was irrelevant and that what mattered was that the debtor had knowingly exercised dominion and control over funds that he knew belonged to another. Such conduct, the court held, constituted a "willful and malicious" injury to the bank's property within the meaning of § 523(a)(6) and required that the debt be excepted from discharge.
This court has been able to find only two cases in which the underlying "Willful and malicious" injury in a § 523(a)(6) complaint concerned a wiretapping or eavesdropping scenario. In re Limbaugh, supra; Brzys v. Lubanski (In re Lubanski), 186 B.R. 160 (Bankr. D. Mass. 1995). In Limbaugh, the debtor had secretly tape recorded telephone calls between her former husband and their children. 155 B.R. at 960. Based on the unauthorized recording, one of the children was indefinitely committed to a mental hospital, and the father was denied access to the couple's three other children and was required to undergo psychological and social counseling. Id. The court found that the debtor acted deliberately and without just cause or excuse, and on that basis concluded that $142,174 in damages awarded by a state court for violation of a state wire-tap statute constituted a "willful and malicious" injury under § 523(a)(6).
In Lubanski, supra, the defendant debtor responded to insulting and harassing letters and telephone calls by electronically monitoring the plaintiffs to determine if they were the persons responsible for the harassing conduct. 106 B.R. at 162. This electronic monitoring took the form of planting a receiver in a wall where the plaintiff worked while the debtor listened to and recorded the plaintiff's conversations. Id. The plaintiff filed suit in state court, alleging a violation of Mass. Gen. Laws, Ch. 272, § 99, which provides a civil cause of action for a person whose oral or written communications were intercepted or disclosed. Id. The state court found that the debtor had indeed violated the statute, but that the plaintiff was unable to prove actual damages due to preexisting emotional distress she was suffering from. Id. However, the statute at issue authorized a liquidated damage award in the amount of the greater of $100 per day for each day of violation, or $1,000. Id. at 163. The plaintiff was able to secure a judgment in the amount of $10,240.49; the debtor filed for bankruptcy shortly thereafter. Id.
The bankruptcy court, applying collateral estoppel, held that the damage award for violation of the statute was nondischargeable under § 523(a)(6), Bankruptcy Code, as a "Willful and malicious" injury. Id. at 168. Reviewing the case law along with the legislative history and policy considerations, the court concluded that "Willful" means "deliberate and intentional," identical to the 4th Circuit's definition in St. Paul Fire Marine Ins. Co. v. Vaughn. Id. at 164. Additionally, it reasoned that "malicious" is defined as tin act done in conscious disregard of one's duties, "which is essentially the same as St. Paul's" knowing disregard of the rights of another." Id. at 165. The court found that the debtor in that case had acted willfully and maliciously by intentionally installing the monitoring device and recording and disclosing the information, and disregarding the plaintiff's clear right of privacy guaranteed by the Massachusetts statute. Id. at 166. Finally, the court noted that actual damages were not proven, but that liquidated damages were provided for in the statute. In response to the debtor's argument that actual damages must be established to satisfy the "injury" requirement under § 523(a)(6), Bankruptcy Code, and liquidated damages were not sufficient to do so, the court stated that there was "actual injury" because the Massachusetts legislature provided for liquidated damages in the statute as a minimum remedy without proof of harm for violation of the privacy interest protected. Id. at 166-67. The court held that the injury, and damages resulting therefrom, suffered by the plaintiff met the "willful and malicious" standard of § 523(a)(6), Bankruptcy Code, such that the judgment was nondischargeable.
Turning to the present case, this court finds the Lubanski decision instructive and holds that the $3,000 owed by the debtor to Ribas is nondischargeable as a "willful and malicious" injury. The debtor's actions here were willful "she deliberately and intentionally requested that Clark listen in on her conversation with Ribas. Her actions also satisfy the "malicious" requirement of § 523(a)(6), Bankruptcy Code as she knowingly committed an act that was in disregard of Ribas's rights as protected under § 631(a) of the California Penal Code. That she may not have been motivated by animus or ill-will but rather by a desire to redress what she believed was an injustice is beside the point. This court notes the striking similarity to Lubanski with respect to damages. As in Lubanski, no damages were proven, but the statute provided for an award of liquidated damages. In the present case, the $3,000 award of general damages authorized by the California Invasion of Privacy Act may be fairly viewed as liquidated damages provision. The California legislature has prohibited a certain type of conduct "wiretapping" and due to the difficulty in quantifying damages based on a violation of § 631(a), has provided for a minimum amount to be recovered without any further proof of damages. The debtor's violation of § 631(a) cannot be said to be an act without an injury; rather, the legislature has set a dollar value on the injury resulting from an invasion of privacy even where damages cannot be otherwise quantified. Therefore, this court concludes that the $3,000 owed by the debtor to Ribas for violation of California Penal Code § 631(a) is nondischargeable under § 523(a)(6) as a willful and malicious injury.
V.
As a final matter, this court must briefly address Ribas's suggestion, made both during opening argument at trial and in his trial memorandum, that one of the issues before this court "is whether the judicial lien obtained by the Plaintiff in Virginia will be enforceable." Plaintiffs Trial Memorandum at 1. The complaint itself, while seeking relief from the automatic stay to enforce the California judgment, does not specifically address the judgment lien against the debtor's real estate arising from the docketing of that judgment in Virginia. Subsequent to the commencement of this adversary proceeding, however, the debtor brought a motion in this court under § 522(f), Bankruptcy Code, to avoid Ribas's judgment lien against her real estate. Briefly, § 522(f) allows a debtor to avoid the fixing of a judicial lien "other than a judicial lien for spousal or child support" if the lien impairs an exemption to which the debtor would otherwise have been entitled. Ribas, although served with the motion, did not oppose it, and this court entered an order releasing the judgment lien from the debtor's real estate. That order was never appealed and is now final.
Ribas's trial memorandum confusingly states "as though the order avoiding the judgment lien had not already been entered and the time for appeal long past" "This Debtor seeks to avoid the judgment lien under [ 11 U.S.C. § 522(f)] as Plaintiff understands the Debtor's position." Id. at 6. It then adds, however, "In this case the lien was stayed and set aside" (emphasis added) but asserts, "[i]f the judgment is non-dischargeable, then the judicial lien would become enforceable or not under Virginia State law." Id. The order avoiding the judgment lien, however, did not merely "stay" the lien; it expressly set the lien aside and avoided it.
Although under F.R.Bankr.P. 7001, a proceeding to determine the validity or extent of a lien in property must ordinarily be brought as an adversary proceeding rather than by motion, a specific exception is provided for a debtor's lien avoidance action under § 522(f), which, under F.R.Bankr.P. 4003(d), may be brought by motion as a contested matter rather than as an adversary proceeding.
The debtor's case was filed after October 22, 1994, the effective date of the Bankruptcy Reform Act of 1994, Pub.L. No. 103-394, and is governed by the definition of "impairment" added by that Act. § 522(f)(2), Bankruptcy Code. Much of the prior case law concerning "impairment" was in effect legislatively overruled by the 1994 amendment. The debtor's motion in this case alleged that the value of the debtor's home was $152,000, that the home was subject to a mortgage in the amount of $151,403, and that she had fully exempted the equity on a properly-filed homestead deed. Accepting those figures as true, the debtor was plainly entitled under § 522(f), Bankruptcy Code, to the release of Ribas's judgment lien.
The order was entered on the docket on May 10, 1996. Under F.R.Bankr.P. 8002(a), any notice of appeal was required to be filed within 10 days. That period could have been extended, on proper motion made, but in no event beyond 30 days from the docketing of the order sought to be appealed. F.R.Bankr.P. 8003(a) and 9006(b)(3). At this point, therefore, the order is not subject to attack except under F.R.Bankr.P. 9024 ("Relief from Judgment or Order"), which incorporates, with some restrictions and modifications, the provisions of Fed.R.Civ.P. 60.
Simply because a debt has been determined to be nondischargeable does not permit the debt to be enforced against property that has been properly claimed exempt in a bankruptcy case. Under § 522(c), Bankruptcy Code, property exempted by the debtor during a bankruptcy case is not "liable during or after the case for any debt of the debtor that arose . . . before the commencement of the case" (emphasis added), with only three exceptions, none of which are applicable here. §§ 522(c)(1), (c)(2), and (c)(3). See, In re Scott, 199 B.R. 586 (Bankr. E.D. Va. 1996) (automobile and furniture properly claimed exempt by debtor could not be reached by creditor for debt that had been determined to be non-dischargeable under § 523(a)(6)). As a result, although Ribas is free to enforce his judgment (to the extent the court has determined to be nondischargeable) against the debtor's future earnings and against assets acquired by her subsequent to the bankruptcy petition, it cannot be enforced against the debtor's real estate, since the debtor's interest in the real estate has been fully exempted. In short, the determination of nondischargeability does not, contrary to Ribas's argument, revive his judgment lien against the debtor's real estate.
One of the exceptions is a debt of the kind specified in § 523(a)(6), but only where owed "by an institution-affiliated party of an insured depository institution to a Federal depository institutions regulatory agency acting in its capacity as conservator, receiver, or liquidating agent for such institution." § 522(c)(3), Bankruptcy Code.
VI.
A separate order will be entered consistent with this opinion.
Since Ribas's claim has already been reduced to a judgment, this court will not enter a redundant money judgment but will simply decree that the existing judgment is nondischargeable in the amount of $3,000.00, together with post-judgment interest at the rate of 10% per annum as allowed by California law. CAL. Civ. PROC. CODE § 685.010(a) ("Interest accrues at the rate of 10 percent per annum on the principal amount of a money judgment remaining unsatisfied.")