United States District Court, W.D. Michigan, Southern Division
David W. Charron, Appellant,
Glenn S. Morris, Appellee.
OPINION AND ORDER AFFIRMING BANKRUPTCY COURT
L. Maloney, United States District Judge.
Charron filed for bankruptcy. Among the debts he sought to
discharge, Charron identified the approximately $350, 000 he
owed Glenn Morris. The money represented the costs and fees
awarded to Morris in a contempt hearing against Charron.
Morris contested whether the debt was dischargeable and an
adversary proceeding was initiated. See Glenn S. Morris
and the Glenn S. Morris Trust v. David W. Charron (In re
David W. Charron), Adversary Proceeding No. 15-80086
(Bankr. W.D. Mich. 2015) ("AP"). The parties filed
cross motions for summary judgment. The bankruptcy court
applied collateral estoppel, finding that all of the facts
Morris needed to prove to establish that the debt was not
dischargeable had been litigated and resolved in the state
court proceedings. The bankruptcy court granted Morris's
motion and denied Charron's motion. Charron filed this
this appeal, the Court must resolve two questions. First, can
a civil contempt award be non-dischargeable in a Chapter 7
bankruptcy as a willful and malicious injury? Second, were
the facts establishing that the civil contempt award
constituted a willful and malicious injury, as defined the
bankruptcy code, actually litigated and necessarily
determined by the state court? Because this Court answers
both questions affirmatively, the bankruptcy court's
decision will be affirmed.
Court reviews the decision issued by the bankruptcy court
using the de novo standard. The decision to grant
summary judgment is a question of law, and questions of law
are reviewed without deference to the deciding court. In
re Morris, 260 F.3d 654, 663 (6th Cir. 2001); In re
Markowitz, 190 F.3d 455, 463 (6th Cir. 1999).
judgment is appropriate only if the pleadings, depositions,
answers to interrogatories and admissions, together with the
affidavits, show there is no genuine issue of material fact
and that the moving party is entitled to a judgment as a
matter of law. Fed.R.Civ.P. 56(a) and (c); Payne v.
Novartis Pharms. Corp., 767 F.3d 526, 530 (6th Cir.
2014). The facts, and the inferences drawn from them, must be
viewed in the light most favorable to the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986) (quoting Matsushita Elec. Indust. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986)). When resolving a
motion for summary judgment, the court does not weigh the
evidence and determine the truth of the matter; the court
determines only if there exists a genuine issue for trial.
Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014)
(quoting Anderson, 477 U.S. at 249).
this appeal, the parties cannot relitigate the factual
findings made the contempt hearing and later affirmed on
appeal. Either the state court made relevant findings of fact
for the purpose of collateral estoppel, or it did not. In
either case, there will be no genuine issues of material
fact. Neither can the parties relitigate the legal
conclusions reached by the state courts. In this appeal of
the bankruptcy court's decision, the Court considers only
what the state courts decided what the law was, and not
whether the state courts correctly interpreted Michigan law.
following discussion is provided for context. Glenn Morris
and Robert Schnoor were two owners of an insurance agency,
Morris, Schnoor and Gemel, Inc. (MSG). The two had a falling
out and, in 2007, Morris filed a lawsuit against Schnoor and
MSG, seeking to dissolve the agency. The lawsuit (2007
Lawsuit) was filed in the Kent County Circuit
Court.MSG was represented by the law firm of
Charron & Hanisch (C&H). Enforcing a shareholder
agreement, the court entered an order requiring Morris to
sell his shares of MSG stock to Schnoor. Schnoor made an
initial down payment, and Morris was given a secured interest
in the MSG stock. Schnoor made several monthly payments, but
soon missed payments because he had lost customers and did
not have the income. Morris initiated a contempt proceeding
against Schnoor in the lawsuit. During that contempt
proceeding on August 20, 2008, counsel for Morris asked the
court for an order that precluded Schnoor from
“engaging in any out of the ordinary business activity,
and no transfers of business interests, or activity, or
assets in the meantime.” (AP ECF No. 13-20 Hrg. Trans.
at 106.) When asked by the court, Schnoor's attorney,
David Charron, had no objection to maintaining the status quo
“for a week or two.” (Id.)
August 22, 2008, the court issued an order directing Schnoor
and MSG to produce certain financial documents. The order
also memorialized the discussion at the hearing. As part of
the order, the court prohibited Schnoor from transferring
"assets of Morris, Schnoor & Gremel, Inc., outside
of the ordinary course of business without authorization from
the Court." (ECF No. 2-7 August 2008 Order PageID.527.)
While the order was in place, Charron and C&H took
actions that facilitated the transfer of assets from MSG to
New York Private Insurance Agency (NYPIA).
February 2009, Morris sued Charron, C&H, MSG and
NYPIA. The lawsuit (2009 Lawsuit) was filed in
the Kent County Circuit Court. On October 22, 2009, the court
granted Charron's motion for summary disposition and
dismissed the claims brought against him personally. (ECF No.
19, 2011, in the 2007 Lawsuit, the court issued an order to
show cause why Schnoor, MSG, C&H, NYPIA and Charron
should not be held in civil contempt for violating the August
2008 order. (ECF No. 2-2 Contempt Opinion at 1 PageID.115.) A
trial on the contempt charge was held. On December 27, 2012,
the court issued an opinion finding MSG, C&H and Charron
in contempt and awarding damages to Morris. (ECF No. 2-2
Contempt Opinion PageID.115-35.) Against Charron, the court
awarded Morris “the attorney fees and costs [Morris]
incurred in the contempt trial that took place in
2011.” (Id. at 16 PageID.130.) The court
subsequently denied a motion for reconsideration and a motion
for a new trial. The court then held a five-day evidentiary
hearing to determine the fee award, and issued an opinion on
January 28, 2014, awarding Morris $349, 416 in fees and
another $14, 09.77 in costs. (ECF No. 2-2 Award Opinion
PageID.137-47.) On May 29, 2014, the Michigan Court of
Appeals upheld the decision finding Charron in contempt of
the 2008 order. (ECF No. 2-4 CoA Opinion PageID.310-68.)
filed for Chapter 7 bankruptcy on December 31, 2014, and
listed the award on his schedule of unsecured debts to be
discharged. In re Charron, No. 14-7970
(Bankr. W.D. Mich.) Morris filed his complaint objecting to
discharge on April 10, 2015, which was used to open the
Adversary Proceeding. Judge Boyd held a hearing on the cross
motions for summary judgment and, on September 30, 2015,
issued his opinion (ECF No. 2-2 MSJ Opinion PageID.59-84) and
order (ECF No. 2-2 PageID.57-58) granting Morris's motion
and denying Charron's motion. On November 28, 2016, Judge
Boyd issued an opinion (ECF No. 2-2 PageID.39-49) denying
Charron's Rule 52 Motion to Amend Findings, Rule 59
Motion to Amend Judgment, and Rule 60 Motion for
Reconsideration. Judge Boyd issued one order denying the Rule
52 and Rule 59 motions (ECF No. 2-2 PageID.37) and a separate
order denying the Rule 60 motion for reconsideration (ECF No.
2-2 PageID.38.) Charron appealed these five opinions and
civil contempt award be non-dischargeable in a Chapter 7
bankruptcy as a willful and malicious injury? Resolving this
question requires the Court to examine the § 523(a)(6)
of the bankruptcy code.
filing for bankruptcy, Charron sought the protection of the
bankruptcy court from his creditors. When a debtor files for
bankruptcy under Chapter 7, a trustee liquidates the
debtor's nonexempt assets and then distributes those
proceeds to creditors. See Marrama v. Citizens Bank of
Massachusetts, 549 U.S. 365, 367 (2007). Under the
bankruptcy code, 11 U.S.C. § 727(b), “discharge
under Chapter 7 relieves a debtor of all debts incurred prior
to the filing of a petition for bankruptcy, except those
nineteen categories of debts specifically enumerated in 11
U.S.C. § 523(a).” Rittenhouse v. Eisen,
404 F.3d 395, 396 (6th Cir. 2005).
bankruptcy proceeding, Morris had the burden to show that the
debt owed to him by Charron was not dischargeable. To avoid
discharge, creditors must file a complaint objecting to the
discharge of a debt, which initiates an adversary proceeding
in the bankruptcy court. See Fed. R. Bankr. P.
4004(c) and 7001(6); In re Storozhenko, 459 B.R.
693, 695-96 (E.D. Mich. 2011). The creditor who seeks to
avoid the discharge of a debt under § 523(a)(6) bears
the burden of proof. In re Brown, 489 F. App'x
890, 895 (6th Cir. 2012) (citing Grogan v. Garner,
489 U.S. 279, 286 (1991)); In re Chapman, 228 B.R.
899, 906 (N.D. Ohio 1998).
523(a)(6) provides that debts for “willful and
malicious injury by the debtor to another entity or to the
property of another entity” are not dischargeable.
Kawaauhau v. Geiger, 523 U.S. 57, 59 (1998) (quoting
11 U.S.C. § 523(a)(6)); In re Markowitz, 190
F.3d at 458. The Sixth Circuit has interpreted
Kawaauhau as requiring the creditor to show the
debtor willed or desired harm or the debtor believed that
injury was substantially certain to occur as the result of
his or her behavior. In re Mussi
li, 379 F. App'x 494, 498 (6th Cir.
2010) (quoting In re Markowitz, 190 F.3d at 465
n.10); Sanderson Farms, Inc. v. Gasbarro, 299 F.
App'x 499, 504 (6th Cir. 2008) (quoting In
reMarkowitz). The injury element means a legal injury, a
violation of the creditor's legal right, and not merely
harm to the person. In re Best, 109 F. App'x 1,