Compton v. Moschell (In re Moschell), Bankruptcy No. 19-21819-JAD

IN RE: MEGHAN M. MOSCHELL, Debtor.

CULLEN W. COMPTON, Plaintiff, v. MEGHAN M. MOSCHELL, Defendant.

Bankruptcy No. 19-21819-JAD

Adversary No. 19-02104-JAD

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

October 9, 2020

Chapter 7

MEMORANDUM OPINION

This adversary proceeding is a nondischargability action filed by Cullen W. Compton ("Mr. Compton" or "Plaintiff"), pro se, against the debtor, Meghan M. Moschell ("Ms. Moschell" or "Debtor"). Civil actions concerning the dischargeability of a particular debt are core proceedings pursuant to 28 U.S.C. §§157(b)(2)(I) and (J). Further, this Court has the requisite subject-matter jurisdiction to hear and decide this matter pursuant to both 28 U.S.C. §1334(b) and the standing order of reference issued by the United States District Court for the Western District of Pennsylvania. See Order of Reference of Bankruptcy Cases and Proceedings Nunc Pro Tunc dated October 16, 1984.

Mr. Compton's Claims

Mr. Compton's complaint (ECF 1) seeks a determination that his claim against the Debtor is nondischargeable pursuant to 11 U.S.C. §§523(a)(2) and 523(a)(4). His complaint does not assert relief pursuant to 11 U.S.C. §523(a)(6). Nevertheless, we will address the applicability of this Section for the following reasons. The Debtor based a portion of her Motion to Dismiss the Complaint (ECF 8) arguing that Section 523(a)(6) does not apply to the facts alleged in this case. In ruling on the Debtor's Motion, this Court concluded that the complaint contained sufficient allegations to withstand the Debtor's Motion to Dismiss on all bases including a claim pursuant to Section 523(a)(6) (ECF 21); Compton v. Moschell (In re Moschell, 607 B.R. 487 (Bankr. W.D. Pa. 2019). Further, Debtor failed to object to evidence and argument at the evidentiary hearing on this matter regarding the applicability of Section 523(a)(6). In fact, Debtor presented argument addressing Mr. Compton's burden of proof concerning this claim.

Federal Rule of Bankruptcy Procedure 7015(b)(2) provides in relevant part, "When an issue not raised by the pleadings is tried by the parties' express or implied consent, it must be treated in all respects as if raised in the pleadings." Considering the Debtor's failure to object to the presentation of evidence relating to Section 523(a)(6) at the evidentiary hearing; the Debtor having herself addressed Section 523(a)(6) issues in her Motion to Dismiss and at the evidentiary hearing, the Court concludes that the Parties have expresslyconsented to the claim having been tried. Accordingly, pursuant to Federal Rule of Bankruptcy Procedure 7015(b)(2) all issues regarding the applicability of 11 U.S.C. §523(a)(6) will be treated as having been raised in the pleadings.

Procedural Posture and Facts of the Case

The Carmella Drive Property

In or around 2009 Mr. Compton and Ms. Moschell purchased a home on Carmella Drive in Pittsburgh, Pennsylvania ("Carmella Property"). The home was owned by the parties as tenants in common. Together, they obtained a mortgage as co-obligors from SunTrust Bank. The mortgage payments were made solely by Mr. Compton. Ms. Moschell contributed approximately $10,000.00 to the household expenses during the time that she lived at the Carmella Property. Debtor left the home in May of 2010 and moved to her parents' home.

While the Debtor was living at her parents' home she received numerous telephone calls from SunTrust regarding late and missing mortgage payments. SunTrust also inquired as to Ms. Moschell's then current mailing address which she confirmed as her parents' address on Cape May Drive in Pittsburgh, Pennsylvania ("Cape May address"). Contact from SunTrust to Ms. Moschell began in approximately 2011-2012 and continued through 2016.

In August of 2012 Mr. Compton requested and received a deed from Ms. Moschell for her interest in the Carmella Property. At that time, the property had a value of approximately $100,000.00. Mr. Compton paid the Debtor nominal consideration of $100.00 for the transfer of her interest in the property.At no time while he still had an ownership interest in the Carmella Property did Mr. Compton attempt to refinance the property in order to extinguish the Debtor's obligations under the mortgage held by SunTrust Bank.

In July of 2016 Mr. Compton sold the Carmella Property - Ms. Moschell was not involved in the sale. The obligations of both the Plaintiff and the Debtor under the SunTrust mortgage were satisfied upon the closing.

Herein lies Mr. Compton's dispute with the Debtor: upon the closing of the Carmella Property, SunTrust held $1,991.09 in escrow. In July of 2016 SunTrust sent a check refunding the escrow funds to the Cape May address made payable to "Cullen W. Compton Meghan M. Moschell." The Debtor made inquiry of SunTrust and was informed that she could cash the check and that a check would also be sent to Mr. Compton. Ms. Moschell also made efforts to contact Mr. Compton regarding the escrow check but received no return communication from him.

Having received assurance from SunTrust that she could cash the check and having received no communication from Mr. Compton, Ms. Moschell endorsed the check and cashed it. Mr. Compton took issue with Ms. Moschell's actions believing that the check represented escrow funds belonging exclusively to him and that the check was improperly presented without his endorsement or permission. Further, Mr. Compton believed that Ms. Moschell affirmatively changed her address with SunTrust in the spring of 2016 for the purpose of diverting the escrow check without his knowledge.

Mr. Compton's Pursuit of Common Law Remedies

On October 24, 2016 Mr. Compton filed a complaint in a Magistrate District Court seeking damages for the amount of the SunTrust check which had been cashed by Ms. Moschell. A judgment was entered against Ms. Moschell. She appealed to the Allegheny Court of Common Pleas where a panel of Arbitrators affirmed the judgment against her. The Debtor again appealed. Judge O'Brien of that Court entered a non-jury verdict in favor of Mr. Compton in the amount of $1,991.00. Following the filing of a Motion for Post-Trial Relief by Ms. Moschell the Trial Court issued an opinion and order denying the Motion for Post-Trial Relief. (ECF 46, Exhibit 7.)

Judge O'Brien concluded that Ms. Moschell impermissibly cashed the escrow check and retained the escrow funds to the detriment of the Plaintiff. He further found that Mr. Compton's claim sounded in conversion which he defined as "the deprivation of another's right of property in, or use of possession of, chattel, or other interference therewith, without the owner's consent and without lawful justification." (Opinion at 5) citing PTSI, Inc. v. Haley, 71 A.3d 304, 314 (Pa. Super. 2013). Judgment was entered in favor of Mr. Compton by order dated January 2, 2019. (ECF 46, Exhibit 7.)

The Bankruptcy Proceedings

On May 2, 2019, the Debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code (11 U.S.C. § 101 et seq.). See Voluntary Petition forIndividuals Filing for Bankruptcy, 19-21819-JAD (ECF 1). On June 3, 2019, the Plaintiff commenced this Adversary Proceeding, pro se. His Complaint seeks relief "due to Ms. Moschell's act of conversion, fraud and theft." See Complaint, p.4.

The Debtor filed a Motion to Dismiss the Complaint (ECF 8 ) arguing that the complaint did not state a claim under any of the exceptions to discharge sought by the Plaintiff under 11 U.S.C. §523. After briefing and oral argument this Court entered a Memorandum Opinion and Order denying the Motion to Dismiss concluding that the complaint did, in fact, state claims under each of the theories presented. (ECF No. 21.) Compton.

An evidentiary hearing was held via ZOOM on August 6, 2020 at which both parties presented testimony and evidence. Following the hearing it appeared to the Court that Ms. Moschell had not been sworn in prior to her testimony. No objection was made. On August 7, 2020 this Court issued an order directing the Debtor to "affirm and ratify her testimony by filing an affidavit or declaration, under penalty of perjury, certifying that her testimony was the truth, the whole truth, and nothing but the truth." (ECF 48.) Debtor complied with the Court's order and filed an affidavit on August 14, 2020. (ECF 50.) Without objection having been made, any objections are waived. See Wilcoxan v. United States, 231 F.2d 384, 386 (10^th Cir.), cert. denied, 351 U.S. 943 (1956); United States v. Odom, 736 F.2d 104, 114-116 (4^th Cir. 1984); cf. Dennison v. United States, 385 F.2d 905, 907 (5^th Cir. 1967).

This matter is now ready for a determination of whether the Plaintiff has met his burden of proof on his claims. After review of the pleadings and briefs, and hearing testimony this Court finds that Mr. Compton's burden has not been met and concludes that his claim is dischargeable insofar as none of the exceptions to discharge set forth in 11 U.S.C. §523 upon which he relies have been proven. To the extent there are contradictions in the testimony of the Plaintiff and the Debtor the Court finds the Debtor's testimony to be credible. This Memorandum Opinion and Order constitute this Court's findings of fact and conclusions of law.

Effect of the Judgment in the Court of Common Pleas

In ruling on the Debtor's Motion to Dismiss, this Court anticipated that the parties would address the question of whether Judge O'Brien's opinion and ultimate judgment that Mr. Compton had proven a common law conversion claim against Ms. Moschell had collateral estoppel effect in this matter. Compton, 607 B.R at 501 n. 7; (ECF 21, page 23.) This Court concludes that collateral estoppel does not apply in this instance.

Collateral estoppel is applicable in proceedings to determine the dischargeability of debts in bankruptcy. Grogan v. Garner, 498 U.S. 279, 284-285 n.11 (1991). The application of the collateral estoppel doctrine in a federal case is based on the federal full...