482 B.R. 265
Bankr. E.D. Wis.2012Background
- Dispute over dischargeability of a state court judgment in Kevin and Margaret Gerard’s favor against Kevin’s brother Michael Gerard
- October 2007 Agreement: Kevin and Margaret would fund down payment and take title to Lot 3; Michael would pay mortgage, taxes, and construction loan, with eventual transfer to Michael
- Oral replacement agreement: Kevin and Margaret would purchase Lot 3 and hold for one year, then Michael would buy back
- Memorandum of Interest recorded by Michael in 2008 suggested Kevin and Margaret held Lot 3 for Michael’s benefit; Kevin learned of this in 2009
- Ozaukee County jury verdict (2010) found Michael recorded the Memorandum of Interest and breached an agreement, awarding Kevin and Margaret $280,000 with $1,000 punitive damages; damages deemed indivisible
- Bankruptcy proceeding (2012) seeking nondischargeability under § 523(a)(6); Court grants summary judgment finding willful and malicious injury per § 523(a)(6)
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Ozaukee judgment precludes the § 523(a)(6) dispute | Gerard argues collateral estoppel binds bankruptcy court | Michael contends issues differed and not identical | Yes; preclusion applies if elements align |
| Whether the Ozaukee findings satisfy willful and malicious standard | Findings show intentional act causing injury | Michael argues no explicit finding of willfulness or malice | Yes; jury findings and instructions support willfulness and malice under § 523(a)(6) |
| Whether recording the Memorandum of Interest was an unlawful act | Recording caused injury and was not privileged | Privilege defense could negate malice | No; privileges rejected by jury, recording was intentional and malicious |
| Whether the privilege defense negates malice or willfulness | Privilege rejected by jury | Privilege would exonerate conduct if valid | Privilege rejected; malice established |
| Whether damages were properly viewed as divisible or indivisible | Damages support slander of title amount | Damages indivisible between claims | Court accepted indivisible damages finding allowing judgment in full |
Key Cases Cited
- New Hampshire v. Maine, 532 U.S. 742 (2001) (issue preclusion applies to preclude re-litigation of resolved issues)
- Reeves v. Davis (In re Davis), 638 F.3d 549 (7th Cir. 2011) (collateral estoppel may bind bankruptcy court on certain factual determinations)
- Mikulsky (In re Mikulsky), 301 B.R. 726 (Bankr.E.D. Wis. 2003) (Wisconsin four elements of issue preclusion; burden on movant to prove identity of issues and facts)
- Ball v. A.O. Smith Corp., 451 F.3d 66 (2d Cir. 2006) (scope of willfulness and malice can be established by equivalent findings even if not labeled as such in judgment)
- Klingman v. Levinson, 831 F.2d 1292 (7th Cir. 1987) (consent agreement can resolve issues overlapping with bankruptcy proceedings; collateral estoppel may apply)
- Kawaauhau v. Geiger, 523 U.S. 57 (1998) (willful requires actual intent to cause injury; not mere recklessness or negligence)
- In re Mathews, 433 B.R. 732 (Bankr.E.D.Wis. 2010) (malice defined as conscious disregard of duties; self-defense can negate malice when valid)