In re Warren

1

In re: Julie Warren, Debtor(s).

Richard Kevin Warren, Plaintiff, v. Julie Warren, Defendant.

No. 8:21-bk-01223-RCT

Adv. No. 8:21-ap-00229-RCT

United States Bankruptcy Court, M.D. Florida, Tampa Division

December 5, 2022

Chapter 13

MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

Roberta A. Colton, United States Bankruptcy Judge

Before the Court is Plaintiff Richard Kevin Warren's ("Plaintiff") Verified Motion for Summary Judgment and Motion for Determination that Collateral Estoppel Applies (Doc. 10) (the "Motion"), and Defendant-Debtor Julie Warren's ("Debtor") response in opposition to the Motion (Doc. 15) (the "Response"). Also part of the summary judgment record are (i) the affidavits of Liesl A. Weeks, Esq. and Stacey Gambel (Docs. 11 &12, respectively), (ii) a copy of a state court order dated March 29, 2022, determining Plaintiff's entitlement to attorney's fees in the parties' marriage dissolution action (Doc. 18) (the "Attorney's Fees Order") and (iii) a partial transcript of a March 10, 2022 hearing before the state court from which the Attorney's Fees Order issued (Doc. 19), all of which were filed by Plaintiff in support of his Motion. To the extent necessary, the Court has taken judicial notice of the parties' filings in the underlying Chapter 13 bankruptcy case.

Plaintiff seeks a determination that a debt arising from an Amended Final Judgment of Dissolution of Marriage dated June 9, 2020 (the "Divorce Judgment"),^[1] more specifically an award for equitable distribution in favor of Plaintiff based upon Debtor's dissipation of marital assets, is non-dischargeable under either 11 U.S.C. §§ 523(a)(2)(A) or (a)(4).^[2]Plaintiff's Motion is based solely on the application of the doctrine of collateral estoppel.

After a preliminary hearing at which the Court heard argument on the Motion, the Court took the matter under advisement. Upon review of the Motion and the Response, together with the summary judgment record, and for the reasons that follow, the Court finds that the Motion should be granted and the debt declared non-dischargeable.

Background

Plaintiff and Debtor were married in December 1996. They separated in early January 2015, and a few months later, Debtor filed for divorce claiming the marriage was irretrievably broken.^[3] Plaintiff cross-petitioned for divorce claiming the same and as relevant here, asked the state court in making its determination on equitable distribution to "tak[e] into account and carefully consider[] the manipulative actions and illegal conduct of the [Debtor] during the marriage and the pendency of this case."^[4] As noted by the state court, the dissolution proceeding was prolonged, lasting nearly five years due to the pendency of a criminal case against Debtor.^[5] The criminal case resulted in Debtor's adjudication of guilt for three felonies: grand theft, forgery, and uttering a forgery.^[6] As described by the state court, Debtor's convictions were based upon Debtor's "manipulating" the finances of Engineered Energy Equipment ("EEE"), Plaintiff's former business,^[7] and "failing to pay 941 taxes" during the period from 2012 until the parties' separation in January 2015.^[8]

The Divorce Judgment was entered following a two-day, non-jury trial and after the state court heard additional argument. Debtor was self-represented at the trial; however, that was the product of Debtor's own choosing. At the final pretrial conference at which her counsel was allowed to withdraw, Debtor informed the state court that she was prepared to proceed without counsel at the trial that was then only a week away.^[9]

In the Divorce Judgment, the state court ordered that as part of equitable distribution Debtor must pay Plaintiff the sum of $117,426, plus interest at the statutory rate, "as a result of her dissipation of marital assets" (the "Equitable Distribution Debt").^[10] The state court reserved ruling on Plaintiff's entitlement to attorney's fees and costs.

Approximately six months after the judgment's entry, Plaintiff filed his motion for attorney's fees and costs. Within a matter of weeks, Plaintiff also filed a motion for contempt and enforcement of the Divorce Judgment for Debtor's failure to make payments toward the Equitable Distribution Debt. Before the state court could adjudicate the Plaintiff's motions, Debtor commenced the Chapter 13 case underlying this proceeding.^[11]

After obtaining relief from the automatic stay,^[12] the parties returned to state court for that court to liquidate Plaintiff's claim for attorney's fees and costs, which are asserted as part of his claim in Debtor's bankruptcy. ^[13] Following a hearing at which Debtor was represented by her bankruptcy counsel, the state court entered the Attorney's Fee Order. The state court ordered Debtor to pay Plaintiff $23,172.15, one-half of the attorney's fees and cost Plaintiff had incurred during the lengthy dissolution proceeding. By agreed order on Debtor's objection to Plaintiff's claim, Plaintiff's claim was allowed in the amount of $145,009.99. This amount includes the Equitable Distribution Debt, prepetition interest on that debt, and the attorney's fees and costs ordered in the Attorney's Fee Order.^[14]

Due to the nature of Plaintiff's argument and for completeness, the Court sets forth the relevant portions of the Divorce Judgment and Attorney's Fee Order below.

Divorce Judgment

Regarding alimony and the relevant factors set forth in Fla. Stat § 61.08, the state court found, in part, as follows:

[5.](a) The Parties standard of living established during the marriage.

The Parties enjoyed a very pleasant standard lifestyle until October 31, 2014 when Wife's manipulation of EEE's finances was exposed....[T]here were months when Wife would max out the credit card limit of $5,000 leaving Husband stranded at hotels until monies could be transferred. The parties lived beyond their means. The court finds [that] Wife engaged in unfettered spending to the detriment of herself and her family. ...

(d) The financial resources of each party, including the nonmarital and the marital assets and liability distributed to each.

As far as the Court can determine, there are more liabilities than there are assets, as the Wife dissipated or otherwise disposed of the majority of the Parties' assets .... ...

(j) Any other factor necessary to do equity and justice between the parties.

Since 2012, the Wife has been involved in an extramarital affair with her paramour . . . [and] has lived in a supportive relationship with her paramour since the Parties' separation.

Additionally, Wife was adjudicated guilty of grand theft (F2); forgery (F3); and uttering a forgery (F3), for manipulating EEE's finances and failing to pay 941 taxes. This resulted in Husband in December 2014 prior to the parties' separation resigning his position of CEO of EEE, relinguish[ing] his shares in EEE and incurring a debt of $120,000 to EEE for Wife's criminal actions. Thus, there is competent, substantial evidence that Wife engaged in a systemic pattern of deceit and fraud which has harmed the husband.

Further, Wife went to elaborate lengths in her deceitful behavior going so far as to make a false police report in Alabama to hide her misappropriation of marital funds from the Husband ....

Stacey Gamb[el], MBA, CPA, CFF, CVA, testified that Wife expended from $173,520 to $234,851 of marital funds for non-marital purposes. Indeed, Wife and her paramour traveled extensively which accounted for a significant portion of those funds.

Taking these factors in the totality of the circumstances, the Court finds that Wife has engaged in misappropriat[ion] of the parties' assets causing the parties to incur significant debt which Wife has not contributed to paying such debts requiring Husband to pay those debts. Therefore, Husband does not have the ability to pay alimony. Alimony is terminated ....

After considering the relevant factors set forth in Fla. Stat. § 61.075, the state court concluded that as to equitable distribution, there was "justification" for an unequal distribution in favor of Plaintiff. The court found, in part, as follows:

[6. A.](e). The contribution of one spouse to the personal career or educational opportunity of the other spouse.

Both spouses worked together; however, from 2012 until the parties' separation . . ., Wife engaged in criminal behavior resulting in adjudication [of guilt] as to Grand Theft of [$20,000] or more . . .; Forgery . . .; and Uttering a Forgery. . . and restitution of $40,000 to EEE. Further Wife's behavior resulted in IRS debts for failure to pay 941 taxes and Husband's having to relinquish his shares in [EEE] such that "EEE" had no value.

...

(g). The contribution of each spouse to the acquisition, enhancement, and production of income or the improvement of, or the incurring of liabilities to, both the marital assets and the nonmarital assets of the parties.

There was competent substantial evidence that Wife's behavior resulted in the parties incurring significant debt and that she dissipated $173,520 to $234,851 in marital assets. The Court attributes $234,851 as to marital funds dissipated during the marriage. ...

(i). The intentional dissipation, waste, depletion, or destruction of marital assets after the filing of the petition or within 2 years prior to the filing of the petition.

There was competent substantial evidence that Wife engaged in depletion and destruction of marital assets prior to and after filing the petition for dissolution of marriage. Ms. Gamb[el], the Husband's forensic accountant expert testified that the Wife was responsible for the dissipation of $234,851 in marital assets.

This testimony was unrebutted.

(j). Any other factors necessary

...