Gray v. Tacason (In re Tacason)

537 B.R. 41

Diane J. Tacason, d/b/a Cutting Edge Sports, Debtor.

John Gray, Plaintiff–Appellee

v.Diane J. Tacason, Defendant–Appellant.

BAP No. NH 15–003

Bankruptcy Case No. 12–11879–BAH

Adversary Proceeding No. 12–01096–BAH

United States Bankruptcy Appellate Panel of the First Circuit.

September 25, 2015

Michael B. Feinman, Esq., and Stephen P. Shannon, Esq., on brief for Defendant–Appellant.

Carlo Cellai, Esq., on brief for Plaintiff–Appellee.

Before Feeney, Hoffman, and Finkle, United States Bankruptcy Appellate Panel Judges.

Opinion

Hoffman, U.S. Bankruptcy Appellate Panel Judge.

The debtor, Diane J. Tacason, appeals the bankruptcy court's judgment in favor of John Gray as to the nondischargeability pursuant to Bankruptcy Code § 523(a)(6)¹ of a certain debt owed by Ms. Tacason to Mr. Gray. The bankruptcy court entered judgment after a hearing on the parties' cross-motions for summary judgment. Summary judgment in favor of Mr. Gray was premised on the issue-preclusive effect of a pre-bankruptcy state court contempt judgment against Ms. Tacason. For the reasons set forth below, we AFFIRM.

BACKGROUND

I. Pre–Bankruptcy Events

Ms. Tacason and Mr. Gray had a personal and business relationship which began in 1989. They owned (50% each) all of the stock of a company, Djaygee, Inc., and under the trade name “Cutting Edge Sports” operated its business of selling sports jerseys. Ms. Tacason generally oversaw the books and records—both of the company and of the couple personally—while Mr. Gray designed the company's jerseys.

In 2007, after the couple's personal and business relationship had disintegrated, Mr. Gray sued Ms. Tacason in Massachusetts state court (the “2007 Litigation”) alleging, among other things, that Ms. Tacason had breached her fiduciary duties to Mr. Gray as a fellow shareholder of a close corporation, wasted corporate assets, and committed fraud. Ms. Tacason denied all of Mr. Gray's allegations.

In March 2008, the parties executed a settlement agreement ending the 2007 Litigation (the “Settlement Agreement”). Under the Settlement Agreement, Ms. Tacason agreed to pay Mr. Gray $50,000.00 for his 50% ownership interest in Djaygee, Inc. and to assume the company's ordinary course of business debt, and the parties agreed they would “equally divide the sports and music memorabilia and old team overstock jerseys at the business premises.” The Settlement Agreement also provided that “[t]he parties agree to a general release as to all claims except those reserved by the settlement agreement and ongoing in NH”, and to dismiss the 2007 Litigation with prejudice.

In 2009, Mr. Gray commenced a Massachusetts state court action against Ms. Tacason and Djaygee, Inc. (the “2009 Litigation”), alleging that Ms. Tacason had breached the Settlement Agreement due to her failure to pay the full $50,000.00, assume the business debt, and divide the personal property. Ms. Tacason and Djaygee, Inc. denied the allegations and asserted counterclaims against Mr. Gray.

During the 2009 Litigation, the state court issued several orders to facilitate the division of property contemplated by the Settlement Agreement.² In June 2010, Mr. Gray sought to have Ms. Tacason and Djaygee, Inc. held in contempt for failing to comply with these orders. On July 7 and 8, 2010, the state court held an evidentiary hearing on Mr. Gray's request for contempt. Both individuals were present at the hearing accompanied by counsel. On August 4, 2010, the state court entered an order finding Ms. Tacason and Djaygee, Inc. in contempt of court (the “Contempt Order”).³ In the Contempt Order, the state court made specific findings, including the following:

1. “Tacason did not comply with this Court's orders and in fact engaged in numerous tactics to stall, interfere with, prevent and ultimately thwart this Court's orders.”

2. “Tacason vandalized certain property prior to turning it over to Gray: broken frames, slashed shirts, Gray's face obliterated in keepsake photographs. This destruction of property which at the time was under the clear jurisdiction of this Court was intentional on Tacason's part, intended to interfere with and undermine this Court's orders.”

3. “With full knowledge that there were many other boxes of inventory remaining (approximately 30), Tacason nonetheless instructed her employees to divide only those jerseys included in Gardner's inventory. This withholding of property which at the time was under the clear jurisdiction of this Court was intentional on Tacason's part and intended to interfere with and undermine this Court's orders.”

4. “Since Tacason delegated the execution of the Court's orders to her employees and did not instruct them to check in the warehouse which as a matter of simple logic would likely have contained a host of items, the only reasonable inference to be drawn is that this was done to circumvent this Court's orders. Only Tacason kn[ew] what was in that warehouse at the time she was instructing her employees to divide up the property. This Court finds that this omission by Tacason was intentional and intended to interfere with and undermine this Court's orders.”

5. “[T]his Court finds that there were multiple instances where there was property which should and ought to have been divided which Tacason withheld.”

6. “[The division itself] was ... not done consistent with the manner in which [the state court] set forth. Instead, Tacason went ahead and boxed up those items which in her view were covered by [the state court]'s clear order. This was absolutely not what the order required and this Court draws the inference that Tacason knew it but implemented her own system to thwart the Court's order. By segregating, using her unilateral judgment, the items and then, putting Gray's emissary, Reading Fire Captain Marotta in an awkward position of having to take possession of these items, Tacason was again flouting this Court's orders.... This Court rejects the notion that Tacason was trying to comply with the letter or the spirit of the orders. To the contrary, this Court finds that this method of feigned compliance with the Court's orders was intentional and done to interfere with and undermine this Court's orders.”

Noting that a party engages in contempt when she engages in “undoubted disobedience of a clear and unequivocal order,” the state court found as follows:

For all of the reasons set forth in the findings of fact, this Court finds the defendants in contempt of the Court's orders dated October 9 as well as the two dated January 15, 2010. This contempt occurred when Tacason: failed to divide all of the sports and music memorabilia, concealed some of it from the division process, asserted a bailment on behalf of numerous teams although she only had verification from a very small number of teams, destroyed or damaged property while subject to the jurisdiction of the Court, and failed to produce all of the non-bailment jerseys for division and failed to follow the process set forth by [the state court]. In each instance, this Court finds that this was done intentionally, without justification and with the clear purpose of avoiding, circumventing and in fact defying the Orders of this Court.

The court then stated:

Tacason for her part, has attempted to explain her conduct and has suggested that the parties “try again” so to speak. Were this a minor misstep, or the first problem, the Court might agree. But it is not. Tacason has been given the benefit of the doubt on more than one occasion. But far from taking advantage of the opportunity to avoid a finding of contempt, Tacason has become emboldened and has totally ignored and in fact defied the repeated orders of this Court.

(footnote omitted).

The state court noted that although “many of Tacason's actions may have been borne of her mistrust of, frustration at and anger towards Mr. Gray,” she did not have “the luxury of repeatedly defying the orders of th[e] Court.” As a sanction for her contempt, the state court entered a default judgment against Ms. Tacason, and dismissed all of her counterclaims in the 2009 Litigation. It also scheduled an “assessment of damages hearing on plaintiff's claims....”

Thereafter, the state court conducted a separate evidentiary hearing to assess damages against Ms. Tacason. In an order dated April 6, 2011 (the “Damages Order”), the court determined that Mr. Gray was entitled to damages in the amount of $252,500.00, less Mr. Gray's share of certain storage costs.⁴ In assessing damages, the court noted that the purpose of awarding damages is “to place the plaintiff in the same position as if no wrong had been done to him,” and that it was “clear that had Tacason abided by the terms of the settlement agreement, Gray would have had a substantial collection of valuable sports and music memorabilia [ ] as well as overstock jerseys.” The state court's damage award in the amount of $252,500.00 was based on Mr. Gray's share of the value of the property and the remaining payment due under the terms of the Settlement Agreement.⁵ The state court also appointed a receiver, finding that Ms. Tacason had “consistently acted in direct contravention of this Court's orders with the result being that the Court's orders [were] repeatedly ignored and indeed thwarted” and that she had “concealed property while it was under the jurisdiction of th[e] Court.” The state court concluded that “without the appointment of a receiver, there [wa]s a very high likelihood of transfer or alienation of property which might otherwise be used to secure this judgment.”

On November 1, 2012, the state court entered an Amended Final Judgment (“Massachusetts Judgment”) as follows:

This action came on before the Court, Bruce R. Henry, Justice, presiding, and upon Plaintiff's Motion for entry of separate and final Judgment pursuant to Mass. R. Civ. P. 54(b), no opposition having been filed, and the Court having found and determined that there is no just reason for delay in the entry of final Judgment and

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