Hoffman et al v. Anstead

OCR transcription for search; preserved printed pages are authoritative

AUTHENTICATED

UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

In Re:
JUDGE RICHARD L. SPEER

Kevin Wayne Anstead
Case No. 10-3094

Debtor(s)
(Related Case: 09-38587)

Lyle Hoffman and Mark Hoffman,
as Co-Administrators of the Estate
of Robert Hoffman

Plaintiff(s)

Vv.

Kevin Wayne Anstead

New Nee ee eee ee ee ee ee ee ee we oe ae oe as

Defendant(s)

DECISION AND ORDER

This cause comes before the Court after a Trial on the Plaintiffs’ Complaint to Determine
Dischargeability. For their complaint, the Plaintiffs rely on 11 U.S.C. § 523(a)(6) which excepts from
discharge any debt arising as the result of a “willful and malicious” injury caused by the debtor. At
the conclusion of the Trial, the Court took the matter under advisement so as to afford the
opportunity to thoroughly consider the evidence submitted to the Court. The Court has now had this
opportunity and, for the reasons set forth in this decision, finds that the debts in controversy are

Nondischargeable.

U.S. GOVERNMENT

GPO

7
iP sooane Doc 27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 1 of 10

Lyle Hoffman, et al. v. Kevin Wayne Anstead
Case No. 10-3094

FACTS

The Plaintiffs in this matter, Lyle and Mark Hoffman, are the Co-Administrators of the Estate
of Robert Hoffman who died intestate on October 12, 2008. The Plaintiffs are close family members
of the Decedent, Robert Hoffman (hereinafter the “Decedent”).

For a period of time prior to his death, the Decedent and the Defendant, Kevin Anstead,
shared living accommodations. This living arrangement terminated approximately six months prior
to the time of the Decedent’s passing. Up until the time of his death, however, both the Decedent and

the Defendant remained in close contact.

Immediately after the death of the Decedent, the relationship between the Plaintiffs and the
Defendant became acrimonious. This condition arose because shortly after his death, the Defendant,
claiming an ownership interest, began to remove various personal effects from the Decedent’s
property. Believing, however, that he did not have any legal interest in the Decedent’s personal
property, the Plaintiffs told the Defendant to cease removing any of the Decedent’s property and to
return any property already removed.

During their initial contacts, the Parties’ interactions became heated. On one occasion, just
days after his death, a law enforcement officer was called to the Decedent’s residence to handle a
dispute between the Parties. At this juncture, the law enforcement officer related to the Parties that
their dispute was purely a civil matter and, that until their dispute was resolved, nobody should
remove any property from the Decedent’s residence. Shortly after the incident with the law

enforcement officer, the Plaintiffs changed the entry locks on the Decedent’s residence.

On October 29, 2008, the Decedent’s estate was probated, with the Plaintiffs being appointed

as administrators of the Decedent’s estate. On November 4, 2008, the Plaintiffs also filed and were

Page 2

10-03094-rls Doc27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 2 of 10

Lyle Hoffman, et al. v. Kevin Wayne Anstead
Case No. 10-3094

granted by the probate court a Motion for a temporary restraining order. The probate court’s order
provided that the Defendant was prohibited from entering the Decedent’s property and from
removing any personal property therefrom. On November 7, 2008, the temporary restraining order

was converted by the court into a preliminary injunction.

In the probate action, the Plaintiffs also commenced a suit against the Defendant, asserting
claims for conversion, unjust enrichment and concealment and embezzlement of estate assets. After
a bench trial, judgment was entered in favor of the Plaintiffs on these claims. This judgment is for
the sum of $7,499.00 and represents the value of the property the probate court found the Defendant
to have converted from the Decedent’s estate. A second judgment in favor of the Plaintiffs was
thereafter entered by the probate court in the amount of $4,346.50. This second judgment was

entered as a sanction against the Defendant for his frivolous conduct in the probate action.

PROCEDURAL BACKGROUND

On December 15, 2009, the Defendant filed a petition in this Court for relief under Chapter
7 of the United States Bankruptcy Code. The Plaintiffs then commenced the action now before the
Court, seeking a determination that the two judgments entered in their favor against the Defendant
constituted nondischargeable debts. For their action, the Plaintiffs relied primarily on § 523(a)(6) of
the Bankruptcy Code which excepts from discharge any debt arising as the result of a “willful and

malicious” injury caused by the debtor.

On their complaint to determine dischargeability, the Plaintiffs then filed a Motion for
Summary Judgment. For their Motion for Summary Judgment, the Plaintiffs relied upon the doctrine
of collateral estoppel, also known as issue preclusion, as the basis for a finding that the judgments
entered against the Defendant were nondischargeable for purposes of § 523(a)(6). In a decision and

order entered on this matter, the Court denied the Plaintiffs’ Motion for Summary Judgment, finding

Page 3

10-03094-rls Doc27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 3 of 10

Lyle Hoffman, et al. v. Kevin Wayne Anstead
Case No. 10-3094

that a genuine issue of fact existed with respect to one issue: Whether the Defendant acted with the
specific intent to cause harm as is necessary to sustain an action under § 523(a)(6)? The Trial held

on the Plaintiffs’ complaint was limited to a determination of just this issue.
DISCUSSION

Before this Court is the Plaintiffs’ Complaint to Determine Dischargeability of Debt.
Proceedings brought to determine the dischargeability of particular debts are deemed to be core
proceedings pursuant to 28 U.S.C. § 157(b)(2)(I). Accordingly, this Court has the jurisdictional
authority to enter final orders and judgments in this matter. 28 U.S.C. § 157(b)(1).

The Plaintiffs’ Complaint to determine dischargeability is brought pursuant to § 523(a)(6)
of the Bankruptcy Code. In full, this provision provides:

(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[.]
As with other exceptions to dischargeability, it is a plaintiff's burden to establish, by at least a
preponderance of the evidence, the applicability of § 523(a)(6). Grange Mut. Cas. Co. v. Chapman
(In re Chapman), 228 B.R. 899, 906 (Bankr. N.D.Ohio 1998). In an action brought under
§ 523(a)(6), this means demonstrating that the plaintiff's injury was caused by conduct on the part
of the debtor that was both “willful” and “malicious.” Graffice v. Grim (In re Grim), 293 B.R. 156,
167 (Bankr. N.D.Ohio 2003).

On the Plaintiffs’ § 523(a)(6) action to determine dischargeability, the Court’s role is not to

retry those issues already adjudicated between the Parties in the probate action. The doctrine of res

Page 4

10-03094-rls Doc27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 4 of 10

Lyle Hoffman, et al. v. Kevin Wayne Anstead
Case No. 10-3094

judicata — under which a determination made in a prior proceeding by a court of competent
jurisdiction cannot be challenged in a subsequent proceeding — is a basic facet of American
jurisprudence. 47 AM. JUR 2D Judgments § 463-465. As such, the judgments entered by the probate
court are res judicata on the court’s determination that the Defendant converted the Decedent’s
property. Resultantly, the judgments, including the award of damages set forth therein, are res
judicata concerning a necessary element of § 523(a)(6): that the Plaintiffs show that they suffered
an injury caused by the Defendant. New Century Bank, N.A. v. Carmell, 424 B.R. 401, 416 (Bankr.
N.D.Ill. 2010).

On the issue of whether the Defendant caused injury to the Plaintiffs in a willful and
malicious manner, however, this Court found the doctrine of res judicata to be inapplicable — hence
the denial of the Plaintiffs’ Motion for Summary Judgment — because, in rendering the two
judgments against the Defendant in the probate action, the court did not “make any specific finding
regarding the Debtor’s state of mind.” In re Anstead, 436 B.R. 497, 502 (Bankr. N.D.Ohio 2010).
In more detail, this Court remarked:

... the Plaintiffs’ position falters on what is missing from the judgment.
Particularly, at no point in its decision did the probate court make any
specific finding regarding the Debtor’s state of mind.

Rather, the probate court only went so far as to find that the Debtor removed
and then failed to return items belonging to the Hoffman estate. These
findings, while relevant and possibly tending to show that the Debtor acted
with an intent to cause harm, could also be indicative of simple forgetfulness
or ignorance — clearly nonculpable states of mind. Accordingly, the findings
of the probate court are not conclusive as to the specific intent requirement
of... § 523(a)(6).

Id. In sum, this Court denied the Plaintiffs’ Motion for Summary Judgment so as to afford the
Defendant the opportunity to offer evidence — particularly, testimonial evidence — supporting a lack

of any willful and malicious conduct on his part in converting the Plaintiffs’ property.

Page 5

10-03094-rls Doc27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 5 of 10

Lyle Hoffman, et al. v. Kevin Wayne Anstead
Case No. 10-3094

Neither the term “willful” nor “malicious” is defined by the Bankruptcy Code. But in the case
of Kawaauhau vy. Geiger, the Supreme Court of the United States addressed their scope. 523 U.S.
57, 118 S.Ct. 974, 975, 977, 140 L.Ed.2d 90, 92 (1998). The issue before the Court in Kawaauhau
v. Geiger was whether “§ 523(a)(6)’s compass cover acts, done intentionally, that cause injury, or
only acts done with the actual intent to cause injury?” /d. at 61, 118 S.Ct. 974. (internal
parentheticals omitted). Put differently, the Court in Kawaauhau v. Geiger was asked to decide
whether the mens rea requirement of § 523(a)(6) looked only to the general intent of the debtor, or

instead required a specific intent to cause harm.

In coming to a decision, the Court in Kawaauhau v. Geiger linked the mental state of
§ 523(a)(6) with that required of intentional torts, finding that § 523(a)(6) required a specific intent
to cause injury. In the Court’s words: “the (a)(6) formulation triggers in the lawyer’s mind the
category ‘intentional torts,’ as distinguished from negligent or reckless torts. Intentional torts
generally require that the actor intend ‘the consequences of an act,’ not simply ‘the act itself’” Jd.

at 61-62, 118 S.Ct. 974.

At the Trial, the thrust of the Defendant’s position, regarding a lack of any specific intent to
harm the Plaintiffs, centered on his belief that he was the rightful owner of that property which the
probate court found that he had converted. This belief, the Defendant explained, existed because
during the time he lived with the Decedent, they shared and/or purchased property together. Thus,
according to the Defendant, he was simply taking his property or property that the Decedent wanted

him to have.

After listening to the Defendant’s testimony at the Trial, the Court does not question the
Defendant’s subjective beliefs regarding the property he converted from the Plaintiffs. The
Defendant, although emotional at the Trial, appeared sincere. However, the Defendant’s subjective

belief regarding ownership does not change a basic facet of this case: The evidence overwhelmingly

Page 6

10-03094-rls Doc27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 6 of 10

Lyle Hoffman, et al. v. Kevin Wayne Anstead
Case No. 10-3094

shows that, from the onset, it was made clearly known to the Defendant that the Plaintiffs would

contest his claim of ownership in any of the Decedent’s property.

First, immediately after his death, a law enforcement officer was called to Decedent’s
residence to intercede in a dispute between the Parties concerning the disposition of the Decedent’s
property. At this time, the Defendant was plainly told to allow the judicial process to make a
determination regarding the Parties’ respective rights in the Decedent’s property. Around this same
time, the Plaintiffs also changed the entry locks on the Decedent’s residence so as to prevent the
Defendant’s ingress. The gravity of the situation was finally reinforced when, less than one month
after the Decedent’s passing, the Plaintiffs obtained a restraining order prohibiting the Defendant

from entering the Decedent’s property and from removing any personal property therefrom.

It can, therefore, be unequivocally stated that the Defendant knew, at the time he was
converting the Decedent’s property, that there was a dispute as to the ownership of the property.
Moreover, the Defendant could not have been under any illusions that, from the beginning, the
Plaintiffs’ claim of an interest in the Decedent’s property was cognizable, with both of the Plaintiffs
being close family members of the Decedent. In this way, the Court found the Defendant to be an

astute person, with a basic understanding of the law.

Notwithstanding, the Defendant went forward with his actions and converted the Decedent’s
property. The Defendant also failed, thereafter, to account for the property he converted. It is this
deliberate undertaking by the Defendant in converting the Plaintiffs’ property which gives rise to the
specific intent necessary to sustain a finding of a willful and malicious injury for purposes of

§ 523(a)(6).

In Kawaauhau v. Geiger, the Supreme Court held that not every tort judgment for conversion

is exempt from discharge. 523 U.S. at 64, 118 S.Ct. at 978. Thus, it has been recognized that, since

Page 7

10-03094-rls Doc27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 7 of 10

Lyle Hoffman, et al. v. Kevin Wayne Anstead
Case No. 10-3094

the Supreme Court’s ruling in Geiger, a debt arising from conversion may be found to be
dischargeable if it was incurred in the honest and good faith belief that authority to sell or use the
property existed. United States v. Dorman (Inre Dorman), 98 B.R. 560, 569 (Bankr. D.Kan.1987).
This has been labeled a technical conversion. See, e.g., Auto Mart, Inc. v. Wendt (In re Wendt), 355
B.R. 769, 775 (Bankr. W.D.Mo.2006).

However, once a debtor has knowledge that their interest in property is subject to a legitimate
dispute, any subsequent disposition of that interest, before the parties’ rights in the property are
determined, would not constitute an act of good faith. To hold otherwise, would stand to encourage
the use of extrajudicial measures by debtors to handle disputes, a situation at odds with the goal of
§ 523(a)(6) which serves to encourage lawful behavior by excepting from a bankruptcy discharge
any debt incurred by a debtor’s morally reprehensible conduct. O’Brien v. Sintobin (In re Sintobin),

253 B.R. 826, 831 (Bankr.N.D.Ohio 2000).

In this case, therefore, since the Defendant at all times had full knowledge that his actions
with respect to the Decedent’s property could impinge on the Plaintiffs’ rights, the Courtis not faced
with a technical conversion or the like. Nor, for this same reason, can the Court conclude that the
Defendant acted in good faith. As such, the Defendant’s conversion of the Plaintiff's property rises
to the level so as to constitute a willful and malicious injury within the meaning of § 523(a)(6). As
such, the two judgments entered against the Defendant are nondischargeable debts for purposes of

bankruptcy law.

In reaching these conclusions, the Court has considered all of the evidence, exhibits and

arguments of counsel, regardless of whether or not they are specifically referred to in this Decision.

Page 8

10-03094-rls Doc27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 8 of 10

Lyle Hoffman, et al. v. Kevin Wayne Anstead
Case No. 10-3094

Accordingly, it is

ORDERED that the two judgments entered by the Seneca County Court of Common Pleas,
Probate Division, against the Defendant, Kevin Wayne Anstead, in favor of the Plaintiffs, Lyle
Hoffman and Mark Hoffman, as Co-Administrators of the Estate of Robert Hoffman, be, and are
hereby, determined to be NONDISCHARGEABLE DEBTS for purposes of 11 U.S.C. § 523(a)(6).

Dated: January 12, 2011

BA wihard L. Speer
United States

Bankruptcy Judge

Page 9

10-03094-rls Doc27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 9 of 10

CERTIFICATE OF SERVICE

Copies were mailed this 12" day of January, 2011 to:

Timothy B. Pettorini
225 N. Market St.
P.O. Box 599
Wooster, OH 44691

Kevin Wayne Anstead
740 County Road 212
Lot 144

Fremont, OH 43420

Gregory E. Pawlowski
500 Madison Ave, #525
Toledo, OH 43604

/s/Diana Hernandez
Deputy Clerk, U.S. Bankruptcy Court

10-03094-rls Doc27 FILED 01/12/11 ENTERED 01/12/11 15:15:52 Page 10 of 10