G&S Investment Management, LLC v. Nacke

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Greenbelt
IN RE: 	:
:
GARY O. NACKE 	: 	Case No. 05-42035PM
: 	Chapter 7
Debtor 	:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :
G&S INVESTMENT 	:
MANAGEMENT, LLC 	:
Plaintiff 	:
vs. 	: 	Adversary No. 06-1112PM
GARY O. NACKE 	:
Defendant 	:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :
MEMORANDUM OF DECISION
This case came before the court for hearing on the Plaintiff’s Motion for Summary
Judgment and the opposition thereto. For the reasons stated, the court will deny the Plaintiff’s
motion.
The Complaint is founded upon §§ 523(a)(2)(A) and 523(a)(6) of the Bankruptcy Code.
These sections provide as follows:
§ 523. Exceptions to discharge
(a) A discharge under section 727 ... does not discharge an individual from
any debt –
. . .
(2) for money, property, services or an extension, renewal, or refinancing of
credit, to the extent obtained by –
(A) false pretenses, a false representation, or actual fraud, other than a
statement respecting the debtor’s or an insider’s financial condition[.]
. . .
Date signed April 24, 2006
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(6) for willful and malicious injury by the debtor to another entity or to the
property of another entity[.]
The court finds it unlikely that the Plaintiff can recover under 523(a)(6). In Kawaauhau
v. Geiger, 523 U.S. 57, 59 (1998), the Court held that § 523(a)(6) does not except from discharge
a debt that is negligently or recklessly inflicted. The Court found that willful means action that
is deliberate or intentional and that the debtor must have actually intended to cause injury, not
merely that an act of the debtor resulted in injury. It has been said that the test is whether the
debtor acted with “objective substantial certainty [that] harm [would result] or a subjective
motive to cause harm.” In re Miller, 156 F.3d 598, 606 (CA5 1998).
Here, the undisputed facts are that the Debtor entered into a contract to purchase a parcel
of properties in Baltimore, Maryland, with a cash down-payment of $100,000.00 that was to be
held in escrow. While there was a check given for the $100,000.00 down-payment, the funds
supporting the check were imaginary at best. The Debtor points to the real estate agent involved
as the source of all mischief in the case. That individual also signed the contract acknowledging
the receipt of $100,000.00. It is obvious to the court that the Debtor’s intention was to enter into
a contract that would give him a period of time to “flip” the contract to other purchasers. In
other words, this was a free option. To that end, the parties entered into an addendum that gave
the Debtor a study period during which time Debtor had the right to back out the contract for any
reason. The Debtor apparently was unable to do anything with the property and obtained an
extension until September 20, 2004, to settle under the contract.
That date came and went, and, on November 1, 2004, G&S Investment Management,
LLC (“G&S”), sued the Debtor in the Circuit Court for Montgomery County, Maryland. G&S’s
complaint was a one count pleading alleging breach of contract and demanding that Nacke
release or cause the escrow agent to release the deposit. A motion for summary judgment was
filed with the Complaint. No appearance was entered on behalf of the Defendant and, in due
course on January 21, 2006, at the recommendation of Master Susan Kalil, the Circuit Court
granted the motion for summary judgment. On the Plaintiff’s motion, that Order was modified,
and another judgment was entered on March 8, 2005.
Plaintiff relies in part on the Circuit Court judgment to establish that there was a contract.
This court finds that the doctrine of collateral estoppel is not applicable to this case. Generally,
under that doctrine, the proponent must establish the five elements that are set out in Sedlack v.
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Braswell Services Group, Inc., 134 F.3d 219 (CA4 1998):
(1) the issue sought to be precluded is identical to one previously litigated; (2) the issue
must have been actually determined in the prior proceeding; (3) determination of the
issue 	must have been a critical and necessary part of the decision in the prior
proceeding; (4) the prior judgment must be final and valid; and (5) the party against
whom estoppel is asserted must have had a full and fair opportunity to litigate the issue in
the previous forum.”
Id. at 224 (citing Ramsay v. INS, 14 F.3d 206, 210 (CA4 1994)). In looking at Maryland law
made applicable to this situation by the case of In re Ansari, 113 F.3d 17 (CA4 1997), namely
Berrett v. Standard Fire Ins. Co., 888 A.2d 1189, 1200 (Md. App. 2005); Brown & Sturm v.
Frederick Road Ltd. Partnership, 768 A.2d 62, 65 (Md. App. 2001); Richmond v. FWB, 712
A.2d 41, 59-60 (Md. App. 1998), it is clear that actual litigation with a final judgment on the
merits is required. 	The Circuit Court case was never litigated. Compare Combs v. Richardson,
838 F.2d 112, 115 (CA4 1998) (the issue sought to be precluded was actually litigated). The
court sees no difference between a judgment by default and what happened in this circumstance.
Many issues are left for trial. One is the Debtor’s recent contention that he did not sign,
nor did he authorize, the contract, although one may then ask why he issued a $100,000.00
check. Perhaps his defense is that he was merely an innocent party subject to the deceit of the
real estate agent, a Mr. Borlo. Debtor further contends that the Plaintiff cannot establish any loss
and damage as a result of the representations. And further, the Debtor contends that he made no
representations, inasmuch as all of his contact with G&S was made through Mr. Borlo.
In conclusion, the court must decide, after hearing the testimony and observing the
witnesses, whether the judgment entered in the Circuit Court for Montgomery County,
Maryland, will survive the Debtor’s discharge under the grounds pleaded in the Complaint. An
appropriate order will be entered.
End of Memorandum of Decision
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