Michael v. Savinell (In re Savinell)

661 B.R. 829

IN RE: Sean D. SAVINELL, Gina A. Savinell, Debtors.

Edward Michael, Plaintiff v. Sean D. Savinell, Defendant.

Case No. 23-50786 Adv. Pro No. 23-02036

United States Bankruptcy Court, S.D. Ohio, Eastern Division

Signed August 13, 2024

Laura Nesbitt, counsel for Plaintiff.

Nathaniel Sinn, Cleveland, OH, counsel for Defendant.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT SEAN D. SAVINELL'S AMENDED MOTION FOR SUMMARY JUDGMENT

Mina Nami Khorrami, United States Bankruptcy Judge.

I. Introduction

Before the Court is Defendant Sean D. Savinell's Amended Motion for Summary Judgment (Doc. 34) (the "Motion"), Plaintiff's Response In Opposition To Defendant's Motion For Summary Judgment (Doc. 35) (the "Response"), Plaintiff'sAmendedResponse in Opposition to Defendant's Motion for Summary Judgment (Doc. 38) (the "Amended Response"), and Defendant Sean D. Savinell's Reply To Plaintiff's Amended Response In Opposition To Defendant's Motion For Summary Judgment (Doc. 39) (the "Reply"). The Court held a hearing on June 14, 2024, (the "Hearing") where counsel presented oral arguments and responded to the Court's questions. Nathaniel Sinn appeared on behalf of the Defendant, Sean D. Savinell ("Defendant"), and Laura Nesbitt appeared on behalf of the Plaintiff, Edward Michael ("Plaintiff"). At the conclusion of the Hearing, the Court took the Motion under advisement pending the receipt of certain additional submissions from the parties to be filed by June 21, 2024, some, but not all, of which were filed.¹

For the reasons that follow, the Court grants the Motion with respect to Count I of the Complaint, and otherwise denies the Motion.

II. Jurisdiction and Venue

The Court has jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334 and Amended General Order 05-02 entered by the United States District Court for the Southern District of Ohio, referring all bankruptcy matters to this Court. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I). Venue properly lies in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

III. Factual and Procedural Background

The record before the Court consists of the pleadings of the Parties, the transcript of Defendant's deposition together with its 10 exhibits, which was Exhibit A to the Motion,² and the Affidavit of Edward Michael.³

This adversary proceeding arises out of the events that occurred in New Jersey over 17 years ago when the Parties lived in New Jersey. Defendant, who was originally from Ohio, was familiar with a small pizza restaurant in Steubenville, Ohio, known as DiCarlo's, and he believed that a restaurant of that nature would succeed in New Jersey. Defendant contemplated opening a similar restaurant in New Jersey (the "Pizza Shop").⁴ After identifying a potential location for the Pizza Shop, Defendant contacted Plaintiff and then met him in December 2007 at the location where the Pizza Shop would be built. Plaintiff owned two limited liability companies, known as Precision Mechanical and Precision Home Builders.

At the December 2007 meeting, Defendant wrote a $5,000 check payable to Precision Home Builders (the "Check"), which was subsequently presented to and honored by Defendant's bank.⁵ The Check bears the notation "deposit — construction" in the memo line. Also at this meeting, the Parties signed a document titled "Invoice," issued by Precision Home Builders, (the "Invoice"). The Invoice sets forth certain terms of agreement. It reflects Precision Home Builders would perform the following scope of work for the Pizza Shop: "Prepare construction drawings, including building specifications and reflective ceiling plans for new restaurant located at the above-mentioned address."⁶ The Invoice further reflects that the price for these services would be $5,000, and that Defendant had made the payment for these services. Notwithstanding that the Invoice and the Check reflect an agreement relating to the $5,000 payment, the Parties dispute the terms of their agreement and the purpose of the Check.

When Defendant received the cost estimates from Plaintiff, he decided that the project was more involved and expensive than he had anticipated, so he called Plaintiff on the telephone and advised that he had decided not to go forward with the Pizza Shop. Both Parties agree that the subject of a refund of the $5,000 was discussed during this call, but they dispute the specific details.

On or about April 4, 2008, Defendant went to the local police department in New Jersey and filed a police report⁷ (the "Police Report"). The Police Report provides as follows:

On Friday 4/4/08, Mr. Sean Savinell came to headquarters to report a theft of $5,000.00. I spoke to Mr. Savinell.

Mr. Savinell stated he wrote a check to Precision Home Builders for work in the amount of $5,000 00 for a deposit for construction located at 2511 Fire Road. He gave the check to Mr. Edward B Michael, the owner of company on 12/21/07 (see photocopy of canceled check). Mr. Savinell stated he spoke to Mr. Michael on several occasions and Mr. Michael had told him he would return the money to him but was having some financial problems.

Mr. Savinell gave him until 4/2/08 to return the money but Mr. Michael did not.

Complaints were signed by Mr. Savinell against Mr. Michael.

Nothing further at this time.

(Police Report., p. 2). At his deposition, Defendant acknowledged that the Police Report accurately reflected what he said to the police.⁸ From this point, the details in the record are quite spotty.

At some point after the Police Report was filed, Plaintiff was indicted in Atlantic County, New Jersey (Indictment 08-05-1121 D) (the "Indictment"). The Indictment itself is not in the record. In fact, there is no evidence in the record regarding anything that led to the Indictment, other than the Police Report. There is nothing in the record before this Court about any investigations that were conducted either by the police or the prosecutor or what role the Defendant played in those investigations. There is also nothing in the record about any specifics of the Indictment, such as when and how it was issued, or the specific charges alleged. Likewise, there is no evidence about the course of criminal proceedings that resulted from the Indictment. The Parties agree that the Indictment was subsequently dismissed, but there is nothing in the record which indicates how that dismissal came about.

On July 31, 2013, Plaintiff filed a civil complaint (the "New Jersey Complaint"), seeking a jury trial against Defendant in the Superior Court of New Jersey, Atlantic County, case no. ATL-L5140-13 (the "New Jersey Suit"). The New Jersey Suit was resolved by entry of a default judgment (the "New Jersey Default Judgment").⁹ The New Jersey Default Judgment granted judgment in favor of Plaintiff and against Defendant for a total of $164,302.26, which includes: compensatory damages of $100,000.00, punitive damages of $50,000.00, attorney's fees (criminal) of $10,000.00, and attorney's fees (civil) of $4,302.26. The New Jersey Default Judgment states that it is a "Default Judgment" that was entered following a "Proof Hearing." Other than the damages amount, it contains no findings, either on the merits of the dispute or regarding the reasons that Defendant was in default. There is no other evidence relating to the New Jersey Suit in the record.

IV. Positions of the Parties

A. Overview Of the Allegations of the Complaint

Plaintiff in Count I of the Complaint alleges that the New Jersey Default Judgment is nondischargeable under 11 U.S.C. § 523(a)(2)(A), because it arose out of a "fraudulent" Police Report to the local police. Because some of the false statements were allegedly made in writing, the Complaint also alleges that the New Jersey Default Judgment is also nondischargeable under 11 U.S.C. § 523(a)(2)(B). Plaintiff in Count II of the Complaint asserts that the New Jersey Default Judgment is nondischargeable under 11 U.S.C. § 523(a)(6), since it resulted from Defendant's willful and malicious actions of making false statements to the police for the purpose of harming Plaintiff and his reputation in the community.

B. Arguments of the Parties Regarding the Motion

Defendant asserts four arguments in the Motion. First, he argues that the New Jersey Default Judgment is not entitled to collateral estoppel effect here because it does not have that effect under New Jersey law. Second, he argues that 11 U.S.C. § 523(a)(2) is not applicable because there is no evidence that Defendant obtained any "money, property, services, .... or ... credit" from Plaintiff as a result of fraud or misrepresentation as required by the statute. He also argues that the attorney fees that Plaintiff paid to defend against the criminal charges are not something that the Defendant obtained. Based on these arguments, he asserts that Count I of the Complaint must be dismissed. Third, regarding Count II, Defendant argues that Plaintiff cannot prove that Defendant is liable for any harm Plaintiff suffered because of the Indictment since the power to prosecute in New Jersey is vested in the prosecutor and the grand jury. Consequently, Defendant could not have been the legal cause of any harm to Plaintiff. Finally, Defendant argues that he was acting with just cause or excuse, in that he was seeking the repayment of money owed to him by Plaintiff, and therefore was not acting willfully or with malice, as required under 11 U.S.C. § 523(a)(6).

Plaintiff in his Response and Amended Response only address Defendant's fourth argument, contending that Defendant's intent in making the Police Report is a disputed issue of fact that requires a trial to resolve. At the Hearing, with regard to Defendant's argument that Count I must be dismissed because Defendant did not obtain anything from Plaintiff by means of his alleged fraud, Plaintiff asserted that Defendant had "obtained" the attorney fees Plaintiff had to pay to defend against the criminal charges but did...