Scheu v. Edmiston

MEMORANDUM OF DECISION - 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF IDAHO
______________________________________________________
In Re:
Bankruptcy Case
KARL RICHARD EDMISTON, 	No. 04-40275
Debtor.
______________________________________________________
R.J. SCHEU,
Plaintiff, 	Adv. Proceeding No. 04-6126
vs.
KARL RICHARD EDMISTON,
Defendant.
_______________________________________________________
MEMORANDUM OF DECISION
_______________________________________________________
Appearances:
R.J. Scheu, Ketchum, Idaho, Pro Se Plaintiff.
Greg J. Fuller, Twin Falls, Idaho, Attorney for Defendant.
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1 Defendant did not file a response to Plaintiff’s closing argument.
² Unless otherwise indicated, all chapter and section references are to the pre-
amended Bankruptcy Code, 11 U.S.C. §§ 101-1330, and rule references are to the
Federal Rules of Bankruptcy Procedure (“Fed. R. Bankr. P.”), Rules 1001-9036.
MEMORANDUM OF DECISION - 2
In this adversary proceeding, Plaintiff R. J. Scheu contends that a
$561,197.42 judgment, plus accrued interest, entered in his favor against
Defendant Karl Richard Edmiston, a Chapter 7 debtor, should be excepted from
discharge in his bankruptcy case. On December 1, 2005, the Court conducted a
trial at which the parties appeared and presented the testimony of witnesses and
introduced several documentary exhibits. At the conclusion of the trial, the parties
were invited to submit written closing arguments and did so. Docket Nos. 32–34.1
Having reviewed and considered all the evidence and testimony, and the
arguments of the parties, the issues are now ripe for disposition.
The Court concludes the state court judgment must be given
preclusive effect in this action, and as a result, the judgment debt owed by
Defendant to Plaintiff is excepted from discharge under § 523(a)(6) of the
Bankruptcy Code.2 The following constitutes the Court’s findings of fact and
conclusions of law and decision. Fed. R. Bankr. P. 7052.
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MEMORANDUM OF DECISION - 3
Findings of Fact
On April 8, 2001, Defendant entered Plaintiff’s business premises in
Ketchum, Idaho, where Plaintiff sells hot dogs and other food items. 	Plaintiff
routinely stays open late to attract business from customers leaving the adjacent
bar. Defendant was one such customer.
Defendant does not dispute that he was intoxicated that night.
Plaintiff alleges that Defendant made derogatory comments to and concerning
certain female customers while he waited in line to order. Defendant contends he
was merely joking, trying to be funny. Defendant ordered Plaintiff to leave.
When Defendant did not, Plaintiff came from behind the counter and forcibly
removed him from the restaurant.
It is undisputed that Defendant held on to the door frame and
apparatus while Plaintiff was pushing him outside. Once Plaintiff got Defendant
outdoors, they continued to wrestle. During the struggle, Plaintiff’s thumb and
knee were badly injured.
Plaintiff sued Defendant in state court for damages for his injuries.
While Defendant initially actively defended this action, during the course of the
litigation, Defendant’s attorney withdrew. When Defendant did not retain another
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MEMORANDUM OF DECISION - 4
attorney or appear to represent himself in the action, the state court conducted a
bench trial, took evidence, and ruled in Plaintiff’s favor. See Exs. 2 and 3.
The state court written findings of fact and conclusions of law
entered after the trial included, in part, the following:
1. The Defendant’s [Edmiston’s] conduct was
inexcusable, willful, malicious and conscious. That
conduct constituted multiple assaults and batteries
upon the Plaintiff’s person. The Court concludes as a
matter of law that the Defendant wanted to hurt the
Plaintiff, that he did so and that he must now be
financially responsible for the injuries caused by him.
2. The Plaintiff was not contributory in any way to his
injuries and was, indeed, an innocent victim of
particularly egregious, malicious, intentional and ugly
behavior on the part of the Defendant.
3. The Plaintiff was damaged in the total amount of
$561,197.42.
Findings of Fact and Conclusions of Law Pursuant to Rule 52(a) I.R.C.P. at 4, Ex.
2. 	Defendant did not appeal the resulting state court judgment, entered on
October 3, 2002. However, Defendant did later file a motion to have the judgment
set aside, which motion the state court denied. Ex. 4. Defendant also did not
appeal that decision.
Defendant filed for chapter 7 bankruptcy relief on February 20,
2004. Plaintiff timely commenced this adversary proceeding on May 20, 2004. In
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MEMORANDUM OF DECISION - 5
this action, Plaintiff argues the state court judgment effectively adjudicated all the
critical issues implicated in this action, and that Defendant is precluded from
relitigating those issues. Defendant contends the state court judgment did not
actually litigate the issues before the Court so the state court judgment should not
be given preclusive effect.
Disposition
A. Legal Standards
1. Section 523(a)(6).
Section 523(a)(6) excepts from discharge a debt “for willful and
malicious injury by the debtor to another entity or to the property of another
entity.” “To be considered willful, the debtor must commit an act akin to an
intentional tort under state law, and the debtor must intend the consequences or
injury resulting from the act rather than just the act itself.” Farmers & Merchants
State Bank v. Cracchiolo (In re Cracchiolo), 00.2 I.B.C.R. 84, 87 (Bankr. D. Idaho
2000) (citing Kawaauhau v. Geiger, 523 U.S. 57, 61–62 (1998)); See also Spokane
Railway Credit Union v. Endicott (In re Endicott), 254 B.R. 471 (Bankr. D. Idaho
2000). The act must be more than reckless or negligent. Cracchiolo, 00.2 I.B.C.R.
at 87.
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MEMORANDUM OF DECISION - 6
In the context of a nondischargeability action, the “willful injury
requirement is met only when the debtor has a subjective motive to inflict injury or
when the debtor believes that injury is substantially certain to result from his own
conduct.” Carrillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th Cir. 2002); see also
Dominguez v. Elias (In re Elias), 03.4 I.B.C.R. 243, 245–46 (Bankr. D. Idaho
2003). “A ‘malicious’ injury involves ‘(1) a wrongful act, (2) done intentionally,
(3) which necessarily causes injury, and (4) is done without just cause or excuse.’”
In re Su, 290 F.3d at 1146–47 (quoting In re Jercich, 238 F.3d 1202, 1209 (9th
Cir. 2001)); Elias, 03.4 I.B.C.R. at 246.
2. Issue Preclusion.
“The doctrine of issue preclusion ‘protect[s] the finality of decisions
and prevent[s] the proliferation of litigation.” Elias, 03.4 I.B.C.R. at 246 (quoting
Littlejohn v. United States, 321 F.3d 915, 919 (9th Cir. 2003)). The Supreme
Court has held that issue preclusion applies in discharge contests. Id. (citing
Grogan v. Garner, 498 U.S. 279, 274–85 n. 11 (1991)). A bankruptcy court must
apply federal law to determine the preclusive effect of federal judgments and, as
state court judgments may bear the same preclusive effect as federal judgments,
apply state law to determine the preclusive effect of a state court judgment. Id.
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MEMORANDUM OF DECISION - 7
(citing Allen v. McCurry, 449 U.S. 90, 96 (1980); Berr v. Fed. Deposit Ins. Corp.
(In re Berr), 172 B.R. 299, 305–06 (9th Cir. BAP 1994); and 28 U.S.C. § 1738).
“The burden of proof is on the party seeking to assert [issue
preclusion] and in order to sustain this burden, ‘a party must introduce a record
sufficient to reveal the controlling facts and pinpoint the exact issues litigated in
the prior action.’” Baldwin v. Kilpatrick (In re Baldwin), 245 B.R. 131, 134 (9th
Cir. BAP 2000) (citing Kelly v. Okoye (In re Kelly), 182 B.R. 255, 258 (9th Cir.
BAP 1995)). Additionally, “[a]ny reasonable doubt as to what was decided by a
prior judgment should be resolved against allowing the collateral estoppel effect.”
Id. (quoting Kelly, 182 B.R. at 258).
To determine the preclusive effect of the Idaho State Court
judgment, this Court must apply Idaho state law. Elias, 03.4 I.B.C.R. at 247.
Idaho law requires five factors to be met in order for a judgment to have preclusive
effect. The factors are:
(1) the party against whom the earlier decision is
asserted had a full and fair opportunity to litigate the
issue decided in the earlier case; (2) the issue decided
in the prior litigation was identical to the issue
presented in the present action; (3) the issue sought to
be precluded was actually decided in the prior
litigation; (4) there was a final judgment on the merits
in the prior litigation; and (5) the party against whom
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MEMORANDUM OF DECISION - 8
the issue is asserted was a party or in privity with a
party to the litigation.
Id. (citing Rodriquez v. Dep’t of Correction, 29 P.3d 401, 404 (Idaho 2001)).
B. The State Court Judgment is Preclusive.
Factors (1), (4) and (5) from the Idaho case law are met here. The
state court made specific findings of fact and conclusions of law after taking
evidence in open court during a court trial. The findings and conclusions note that
Defendant was given notice of the trial date but failed to appear or participate,
something Defendant does not dispute. In other words, Defendant was given a full
and fair opportunity to litigate the issues in state court.
Additionally, there is no doubt the state court judgment is final.
Defendant did not appeal the judgment, but instead unsuccessfully attempted to
have it set aside. See Exs. 4 and 5.
There is also no doubt that the same parties were involved in the
state court action as are involved in this adversary proceeding.
Factors (2) and (3) require more careful consideration. However,
upon review of the state court’s findings of fact and conclusions of law, the
conclusion is inescapable that the state court actually decided the same critical
issues presented in this action.
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MEMORANDUM OF DECISION - 9
The state court both found and concluded that Defendant injured
Plaintiff, and through his actions, “intended to harm the Plaintiff.” Findings of
Fact and Conclusions of Law Pursuant to Rule 52(a) I.R.C.P. at 3 and 4, Ex. 2.
Such findings are identical to those required for this Court to conclude Defendant
acted willfully for purposes of § 523(a)(6).
The state court judgment is also founded upon facts and conclusions
that Defendant acted maliciously. Based upon the evidence offered at trial, the
state court decided that Plaintiff was the “innocent victim of particularly egregious,
malicious, intentional and ugly behavior on the part of the Defendant.” Findings
of Fact and Conclusions of Law Pursuant to Rule 52(c) I.R.C.P. at 4, Ex. 2. These
findings satisfy the malicious prong under § 523(a)(6) and show that Defendant
acted wrongfully in intending to cause the injury to Plaintiff and without just cause
or excuse.
Conclusion
The state court judgment preclusively establishes the elements
necessary to except the judgment debt from discharge pursuant to § 523(a)(6). The
state court found that Defendant committed assault and battery on Plaintiff; that in
doing so, Defendant intended to hurt Plaintiff; that Plaintiff in no way contributed
to his own injuries; and that Defendant’s conduct was particularly egregious,
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MEMORANDUM OF DECISION - 10
malicious, intentional and ugly. Defendant had a full and fair opportunity to
litigate the critical issues in state court, and it would be inappropriate to allow
Defendant to relitigate those issues here.
A separate judgment will be entered.
Dated: January 6, 2006
Honorable Jim D. Pappas
United States Bankruptcy Judge
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