Dr. Gil Ctr. For Back, Neck & Chronic Pain Relief v. Rigney (In re Rigney)

In re: Crystal Dawn Rigney Debtor

Dr. Gil Center for Back, Neck and Chronic Pain Relief Plaintiff v. Crystal Dawn Rigney Defendant

No. 4:20-bk-12437-NWW

Adv. No. 4:21-ap-01002-NWW

United States Bankruptcy Court, E.D. Tennessee, Winchester Division

August 27, 2021

Chapter 7

MEMORANDUM

NICHOLAS W. WHITTENBURG, UNITED STATES BANKRUPTCY JUDGE

This adversary proceeding was initiated by Dr. Gil Center for Back, Neck and Chronic Pain Relief to determine the dischargeability of a debt pursuant to 11 U.S.C. § 523(a)(2), (4), and (6). Jurisdiction is proper in this court. 28 U.S.C. § 1334(b). T his adversary proceeding is a core proceeding. 28 U.S.C. § 157(b)(2)(I).

On cross-motions for summary judgment, the court previously dismissed Count I of the complaint, which asserted that the defendant obtained money or property by fraud and sought a determination that the plaintiff's claim is nondischargeable under 11 U.S.C. § 523(a)(2). Having considered the evidence presented at trial on the remaining counts, together with the arguments and briefs of the parties, the court makes findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52, as made applicable in this adversary proceeding by Federal Rule of Bankruptcy Procedure 7052.

I. Background

In November 2015, the defendant was involved in an automobile collision. She suffered injuries and sought treatment from the plaintiff during the spring of 2016.

As a condition to receiving treatment, the defendant executed an Assignment of Insurance Benefits and Proceeds of Claim and an Assignment of Benefits and Payment Agreement (collectively the "Assignments") on March 23, 2016. Pursuant to the Assignments, the defendant assigned to the plaintiff her interest in any insurance benefits she became entitled to receive to the extent of charges for the plaintiff's services, whether the benefits were paid by her insurance carrier or the carrier of a third party that may be responsible for the defendant's injuries. Additionally, the defendant executed a Doctor's Lien whereby she granted the plaintiff a lien on proceeds of any settlement, judgment, or verdict resulting from the collision. Finally, the defendant provided the plaintiff with information concerning her personal heath insurance. Specifically, she presented her health insurance card issued by Tri-Care Health Insurance ("Tri-Care").

After executing documents and providing health insurance information, the defendant began receiving treatment from the plaintiff. The last treatment was received on May 19, 2016. On or about August 17, 2016, the defendant received $25, 000.00 from Progressive Insurance Company ("Progressive"), the insurance company insuring the interests of the other driver in the collision. She did not use any of the proceeds to pay the plaintiff's outstanding balance totaling $4, 835.00. The defendant filed a petition for relief under chapter 7 of the bankruptcy code on September 14, 2020. The plaintiff commenced this adversary proceeding with the filing of its complaint on January 18, 2021.

II. Legal Analysis

A. Willful and Malicious Injury.

Exceptions to discharge are construed strictly against creditors. Gleason v. Thaw, 236 U.S. 558, 562 (1915); Padzierz v. First Am. Title Ins. Co. (In re Padzierz), 718 F.3d 582, 586 (6th Cir. 2013) (citing Rembert v. AT&T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277, 281 (6th Cir. 1998)). A party seeking a determination that its claim be excepted from discharge must prove the required elements "by a preponderance of the evidence." Padzierz, 718 F.3d at 586 (citing Grogan v. Garner, 498 U.S. 279 (1991)).

In Count II of the complaint, the plaintiff seeks a declaration that its $4, 835.00 claim is nondischargeable under 11 U.S.C. §523(a)(6). For the plaintiff to prevail under that section, it must prove that the defendant caused injury that was both willful and malicious. MarketGraphics Research Grp., Inc. v. Berge (In re Berge), 953 F.3d 907, 914 (6th Cir. 2020). Taken together, those two terms-willful and malicious-create a two-prong inquiry for a creditor to satisfy. Courts analyze the terms individually. Id. at 916.

Willful conduct requires actual intent to injure "not merely a deliberate or intentional act that leads to injury." Kawaauhau v. Geiger, 523 U.S. 57, 118 (1998). A defendant acts willfully if she desires the consequences of her actions or believes with reasonable certainty that such consequences will occur. Markowitz v. Campbell (In re Markowitz), 190 F.3d 455, 464 (6th Cir. 1999). Malicious under Section 523(a)(6) means "in conscious disregard of one's duties or without just cause or excuse." Wheeler v. Laudani, 783 F.2d 610, 615 (6th Cir. 1986) (citations omitted).

The plaintiff largely relies on the terms of the Doctor's Lien and Assignments to support its case. It is undisputed that the Doctor's Lien and Assignments encumbered and assigned, respectively, the proceeds of the settlement check issued by Progressive to the extent of the charges for medical services provided by the plaintiff. It is also undisputed that the defendant used the settlement proceeds without paying the plaintiff for the medical services provided. The plaintiff maintains that these facts establish that the defendant willfully and maliciously converted the plaintiff's property and, therefore, its claim should be declared nondischargeable under 11 U.S.C. §523(a)(6).

To counter, the defendant testified that she did not read or understand the Assignments or Doctor's Lien. She argues that because she did not read those agreements, she did not in fact know that the plaintiff held an interest in the proceeds of the settlement. In turn, because she did not know that the plaintiff was the assignee of or held a lien encumbering the settlement proceeds, she maintains that she could not possess the culpable state of mind that is a predicate to declaring the plaintiff's debt nondischargeable. The defendant's contention is contrary to the law.

Absent proof of fraud, duress, or action by the plaintiff preventing the defendant from reading the documents, she is bound by and presumed to know and understand the terms of the agreements she signed. See, e.g., Steinberg v. Creswell & Co., Inc. (In re Halls Trading Post, Inc.), 15 B.R. 781, 783-84 (Bankr.E.D.Tenn. 1981) (citations omitted) (reviewing Tennessee's general rule that a party to a written contract is conclusively presumed to know and assent to its contents in the absence of fraud, misrepresentation, or other wrongful act by another contracting party); see also Brass Reminders Co. v. RT Eng'g Corp., 844 Fed.Appx. 813, 821 (6th Cir. 2021) ("Notice of a contract's terms is presumed when a person has the opportunity to read the contract and accepts the contract offer. A party cannot abrogate the terms it dislikes after the fact, unless terms are misleading . . . ."). Although she testified that she has no legal background and has only a limited education, the defendant does not maintain that she does not have the capacity to enter into a contract. Nor does she maintain that the plaintiff prohibited her from reading the agreements. She merely maintains that she did not read the agreements or understand their terms. If the law allowed a party to escape the consequences of a written contract because the party failed to read or understand the contract, particularly an agreement that affords the other party an interest in property, the ability to rely on written agreements would be impaired, if not destroyed.

Although bound by and presumed to know the terms of the documents she executed prior to receiving treatment from the plaintiff, those documents nevertheless do not conclusively establish that the defendant willfully misappropriated the plaintiff's property. In addition to assigning and granting a lien encumbering the settlement proceeds, the Assignments and Doctor's Lien each direct all persons responsible for the defendant's health care costs, including Tri-Care and Progressive, to make pay-ments for health care services directly to the plaintiff. Further, the Personal Injury / Automobile Accident Financial Policy also executed by the defendant prior to receiving medical services states that the plaintiff "will bill your insurance carrier on your behalf," but later, it states that the plaintiff "will not bill your personal health insurance for personal injury." The court finds these provisions ambiguous, if not inconsistent.

The defendant argues that when she received the settlement check from Progressive, she believed that any amounts owed to the plaintiff had been paid by Tri-Care or, perhaps, Progressive. The defendant did provide the plaintiff with proof that she maintained health insurance through Tri-Care prior to receiving treatment. This fact, coupled with the fact that the Assignments and Doctor's Lien directed insurance companies to pay the plaintiff directly and authorized the plaintiff to bill those compa-nies for the medical services lends credence to the defendant's belief. The plaintiff's proof at trial did not adequately rebut the defendant's argument.

The plaintiff presented Mariah Wolfe, a co-owner of BMW Case Management, LLC ("BMW"). BMW is the agent for the plaintiff charged with billing and collections of the plaintiff's accounts receivable. Ms. Wolfe maintained that the defendant was advised of all of her contractual obligations to the plaintiff, including that she owed the plaintiff for the medical services provided and that the settlement proceeds were to be used to satisfy that indebtedness.

However Ms. Wolfe's testimony was very vague and generalized. She acknowl-edged that she had no direct communications with the defendant. Instead, she testified that Bernadette Wolfe, a prior...