Taatjes v. Maggio (In re Maggio)

518 B.R. 179

In re Julia A. MAGGIO, Debtor.

Patricia Taatjes and Maureen Emery, Plaintiffs

v.Julia A. Maggio, Defendant.

Bankruptcy No. 13–16257–JNF.

Adversary No. 14–1025.

United States Bankruptcy Court, D. Massachusetts.

Signed Sept. 22, 2014.

Jon H. Kurland, Kurland & Grossman, P.C., Chelmsford, MA, for Plaintiffs.

Christopher W. Parker, The Law Offices of Christopher W. Parker, Beverly, MA, for Defendant.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge.

I. INTRODUCTION

The matters before the Court are Cross–Motions for Summary Judgment filed by the Plaintiffs, Patricia Taatjes (“Taatjes”) and Maureen Emery (“Emery”)(collectively, the “Plaintiffs”), and the Defendant, Julia A. Maggio (“Maggio” or the “Debtor”). The Court heard the Cross–Motions on August 19, 2014 and took them under advisement. The issues presented are whether this Court should apply collateral estoppel to preclude the Debtor from challenging a state court judgment obtained by the Plaintiffs, and whether the Debtor is entitled to summary judgment based upon the affidavit of an attorney who was not called to testify in the state court proceeding and whose testimony would contradict factual findings of the state court, as well as medical records submitted by the Plaintiffs.

II. PROCEDURAL BACKGROUND

The Debtor filed a voluntary Chapter 7 petition on October 25, 2013. On Schedule F–Creditors Holding Unsecured Nonpriority Claims, the Debtor listed Taatjes and Emery as the holders of claims in the sum of $125,000 arising out of a “2013 Court Judgment–Now on Appeal Essex Superior Court No. 2010–02466.” She also disclosed the litigation in response to Question 4 on her Statement of Financial Affairs.

The Chapter 7 Trustee filed a Report of No Distribution on January 16, 2014. Prior to the expiration of the deadline for filing complaints under 11 U.S.C. § 523, see Fed. R. Bankr.P. 4007(c), the Plaintiffs filed an adversary proceeding against the Debtor seeking to except the Debtor's obligations to them from discharge under 11 U.S.C. § 523(a)(4). In their Complaint, they stated:

The Debtor is not entitled to a discharge of her obligation to the Plaintiffs inasmuch as she has been adjudicated after full trial in the Essex County Superior Court, docket number 2010–02466–A, to have committed fraud or defalcation while acting in a fiduciary capacity which resulted in the losses sustained by Plaintiffs....

The Plaintiffs attached a copy of the “Findings of Fact, Rulings of Law and Order for Judgment” (the “Superior Court Judgment”), dated April 23, 2013, issued by Associate Justice James F. Lang of the Essex Superior Court, Department of the Trial Court.

The Plaintiffs, based upon the Superior Court Judgment, contend that there are no genuine issues of material fact and that they are entitled to judgment as a matter of law. The Debtor disagrees, asserting that the issue to be precluded (“breach of fiduciary duty through ‘defalcation’ ”) was not previously litigated. She stated: “ ‘defalcation’ was never litigated, never discussed, and never decided in the state court.” In addition to their inability to show the requisite identify of issues, the Debtor argues that the Plaintiffs also cannot establish another requirement for collateral estoppel, namely, that “ ‘defalcation’ was ‘essential’ to the state court judgment.”

The Debtor also asserts that she is entitled to summary judgment based upon the affidavit of Joseph V. Ananian, Esq. (“Attorney Ananian”) who provided estate planning services to Mary Rita Barrett (“Barrett”), who was both the Debtor's aunt, as well as the Plaintiffs' aunt and whose wishes with respect to Series E United States Savings Bond standing in her name and the names of her four nieces as alternative owners are at the heart of the instant dispute.

III. THE SUPERIOR COURT ACTION

On or around November 24, 2010, the Plaintiffs filed a Complaint against the Debtor in the Essex Superior Court. In their Complaint, they alleged that Barrett executed a Durable Power of Attorney pursuant to which she appointed the Debtor as her attorney-in-fact. They further alleged that at that time Barrett owned four bonds, each in the amount of $52,000.00.¹ The bonds were held jointly between Barrett and the Debtor, Barrett and Taatjes, Barrett and Emery, and Barrett and Linda DiBenedetto (“DiBenedetto”), the Debtor's sister. According to the Plaintiffs, the Debtor “owed a fiduciary duty to act fairly and in good faith;” was only authorized to act in the manner Barrett desired; and “breached her fiduciary duty by liquidating two of the four bonds and distributing the proceeds to herself and her sister ... while liquidating the other two bonds and distributing the proceeds for the benefit of Mary Rita Barrett.” According to the Plaintiffs, Barrett had expressed a desire to treat the Debtor, her sister and the Plaintiffs equally, yet the Debtor “for the sake of benefitting herself and her sister, handled the liquidation of the bonds disproportionally [sic].” The Plaintiffs added that the Debtor engaged in “prohibited self dealing,” that she “exceeded her authority to act,” and that they suffered harm as a result.

The Superior Court conducted a non-jury trial on March 20, 2013 and April 10, 2103 at which the Plaintiffs and the Debtor testified. It issued the Superior Court Judgment, together with detailed findings of fact and rulings of law, on April 23, 2013. The court initially focused on the physical and mental health of the parties' aunt, Barrett. She was 86 and unmarried at the time of her death from advanced dementia. She had lived her entire life in a two-family home, located in Medford, Massachusetts, that had been her family's homestead. Prior to her nursing home placement, she had difficulty caring for herself and her finances, requiring her relatives to turn off her gas stove and arrange for care-givers to assist her.

Barrett enjoyed a close relationship with her two sisters, Louise Cuddy, who had three children, including the Debtor and DiBenedetto; and Margaret McInnis, who had four children, including Taatjes and Emery. Barrett routinely bought United States Savings Bonds. The bonds bore her name as well as the names of one of her four nieces. According to the Superior Court, it was her “intention in purchasing all of the bonds to eventually gift them, at some point after their maturity, to her four nieces in accordance with the listed alternative owner on each.” The court determined that while she bought more bonds for Louise Cuddy's children, it was her intention to treat the four nieces “roughly equally.” She told Taatjes on three occasions that she wanted her nieces to receive their bonds upon her death.

Barrett entered the Life Care Center of Stoneham in Stoneham, Massachusetts in July of 2003 after suffering a stroke. Prior to that time, her sister Louise was assisting her as she was experiencing signs of dementia. Her sister Margaret previously had been diagnosed with Alzheimer's disease and was unable to contribute to her care. Barrett died in 2007. According to the Superior Court, before her placement at Life Care, Barrett was confused and forgetful; her condition steadily worsened and she was uncommunicative, although she enjoyed “the unwavering support of her family.”

Sometime before February 23, 2004, the Debtor, her mother Louise, Attorney Ananian and another individual visited Barrett at the nursing home. At that time, Barrett granted Louise and the Debtor powers of attorney. She also agreed to the creation of a realty trust into which her Medford home would be transferred. Barrett designated her sisters as the beneficiaries of the trust. According to the Superior Court, Barrett intended to divide her most significant asset equally between the families of her two sisters. Attorney Ananian, who the Superior Court found was hired by the Debtor, drafted the documents. Barrett executed a General Durable Power of Attorney on February 24, 2004, and a trust document establishing the Mary Rita Fellsway Trust on March 13, 2004.² The Debtor and her mother were named as trustees and 50 % beneficiaries. On March 13, 2004, Barrett executed a quitclaim deed conveying her home to the trust for a consideration of $1. Attorney Ananian notarized the deed.³

According to the Superior Court, the Debtor testified that, at the nursing home, Barrett stated that she wanted the Debtor and DiBenedetto to keep the savings bonds bearing their names and that she wanted the Debtor to cash the other bonds bearing the Plaintiffs' names and use them to fund her nursing home expenses. The Superior Court found that the Debtor's testimony was incredible for a number of reasons. Specifically, the court rejected the Debtor's testimony as contrary to the Plaintiffs' credible testimony and Barrett's medical records which established that Barrett's mental acuity was adversely affected by her stroke and dementia. In view of the absence of a writing directing the disposition of the bonds in the manner asserted by the Debtor, and the likelihood that the Plaintiffs would conclude that the Debtor was exerting undue influence over Barrett, the court stated: “[t]he potential appearance of self-dealing was so obvious that it could not have escaped Maggio's comprehension, and she would have sought the protection of clear documentation that she was acting at Mary Rita's direction.” The court added:

Not only did Maggio not seek to memorialize in some fashion Mary Rita['s] supposed decision about the bonds, but she affirmatively sought to keep it from her McInnis cousins, and, when confronted about it, she lied. After Taatjes learned from Louise that Maggio and DiBenedetto had taken their bonds and that she and Emery were supposed to receive theirs, Taatjes called Maggio and inquired. Maggio replied, “I don't know anything about bond money. I didn't get any bond money.” The false denial reflects consciousness of guilt on her part that is inconsistent with having merely followed the expressed wishes of Mary

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