593 B.R. 765
Bankr. S.D. Ohio2018Background
- Greer sued Debtor Gerald Bruce (and his father Earl) in Ohio state court for conversion after the Bruces removed and sold Greer’s machinery and scrap from land Greer used as a laydown yard; magistrate and judge awarded Greer $303,591.20 compensatory and $303,591.20 punitive damages; judgment affirmed on appeal.
- Greer filed an adversary complaint in Debtor’s bankruptcy seeking to except the state-court judgment ($607,182.40) from discharge under 11 U.S.C. §§ 523(a)(4) (larceny) and 523(a)(6) (willful and malicious injury).
- Greer moved for partial summary judgment asking the bankruptcy court to give the state-court judgment preclusive effect to establish nondischargeability as a matter of law.
- The state court found (1) an oral agreement permitting Greer to use the Stephens Road Property (so Greer was not a trespasser), (2) the Bruces unlawfully removed and sold Greer’s property, and (3) punitive damages were warranted based in part on conduct of their agent, Writesel.
- Debtor produced materials (interrogatory answers, hearing transcript showing an earlier oral magistrate remark, affidavits challenging valuation and witness expertise) but did not seek to relitigate the state judgment; bankruptcy court’s task was limited to whether the state judgment precludes relitigation of nondischargeability elements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the state-court conversion judgment establishes larceny under §523(a)(4) | Greer: state-court findings show wrongful taking; preclusion makes debt nondischargeable as larceny | Bruce: original possession was lawful (oral lease); larceny requires unlawful initial taking | Denied — state court found Greer had an oral lease and Debtor’s possession was lawful, so larceny not established |
| Whether the state-court findings establish willful injury under §523(a)(6) | Greer: conversion + punitive damages show willful intent to harm; preclusion applies | Bruce: judgment relies on imputed conduct (father/agent); Debtor lacked intent/knowledge that harm was substantially certain | Denied — Magistrate’s findings do not show Debtor desired to cause harm or knew harm was substantially certain |
| Whether punitive-damages award in state court establishes malice for §523(a)(6) | Greer: punitive award reflects actual malice supporting nondischargeability | Bruce: award conflates conduct of father/agent; cannot impute others’ willful/malicious acts to Debtor for §523(a)(6) | Denied — punitive damages based on agent/father conduct are insufficient to establish Debtor’s own malice |
| Whether the state judgment is entitled to issue-preclusive effect for §523 claims | Greer: full faith and credit/issue preclusion bars relitigation of elements | Bruce: factual findings do not match the stringent federal standards for larceny or willful/malicious injury; preclusion should not resolve dischargeability | Denied — judgment is final but does not establish the specific federal elements required for nondischargeability; claims proceed to trial |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (state-court issues preclusive in dischargeability context)
- Kawaauhau v. Geiger, 523 U.S. 57 (willful means deliberate intent to cause injury)
- Markowitz v. Campbell, 190 F.3d 455 (6th Cir.) (willful and malicious elements discussed)
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard; genuine dispute of material fact)
- Celotex Corp. v. Catrett, 477 U.S. 317 (movant’s burden on summary judgment)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (nonmoving party must show genuine issue for trial)
- In re Wentland, 410 B.R. 585 (definition of larceny for §523(a)(4) purposes)
- In re Sweeney, 276 B.R. 186 (issue-preclusion prerequisites under Ohio law)