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Debenedictis v. Dougherty

United States District Court, D. Massachusetts

July 22, 2015



GEORGE A. O'TOOLE, Jr., District Judge.

This is an appeal from a ruling of a United States Bankruptcy Judge for the District of Massachusetts. Following a three-day trial, the judge found that the debt owed to the appellant for legal fees was not to be excepted from discharge as a debt arising from a willful and malicious injury pursuant to 11 U.S.C. § 523(a)(6). The court ruled that the appellant, as plaintiff in the adversary proceeding, had not carried her burden of proof as to the applicability of that exception. The issue presented on appeal is whether the bankruptcy court erred in failing to find that the debtor had the requisite intent to injure and malice necessary for a determination of nondischargeability under § 523(a)(6).

Section 523(a)(6) provides:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt-
* * *
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;

The parties are in agreement about the applicable law. To show willful and malicious injury, a creditor has the burden of proving by a preponderance of the evidence that the debtor caused an intentional injury to the creditor for which there was no justification or excuse. Kawaauhau v. Geiger, 523 U.S. 57 (1998); Printy v. Dean Witter Reynolds, Inc., 110 F.3d 853 (1st Cir. 1997); Grogan v. Garner, 498 U.S. 279 (1991)).

The trial evidence included the following: Attorney Danielle deBenedictis represented the debtor William Dougherty in a post-divorce complaint for modification of his alimony obligation in the Suffolk County Probate Court. By the fall of 2007, Dougherty owed deBenedictis more than $80, 000 in legal fees. They tried to negotiate a resolution, but without success. Dougherty also was dissatisfied with some of deBenedictis's advice concerning the proceeding, and in November 2007 he engaged another lawyer, Justin Maiona, to take over the case. DeBenedictis later withdrew her appearance. In mid-December, the Probate Court rendered a judgment in the proceeding that ordered Dougherty to pay more than half a million dollars to his former wife. Dougherty was stunned by the order.

Dougherty's assets at the time included equity in his condominium of a little over $400, 000, an IRA with a balance of about $160, 000, a boat that he was trying to sell for a little over $100, 000, and an account at an investment firm, Moors & Cabot Investments, that was apparently worth (net of margin owed the firm) a little under $150, 000.

On Thursday, January 3, 2008, deBenedictis, through counsel, commenced an action against Dougherty in the Suffolk County Superior Court to recover the legal fees she was owed. She simultaneously moved for approval of a trustee process attachment on the Moors & Cabot account to the amount of $116, 665. The court issued an order of notice and set a hearing on the motion for Monday, January 7, at 2:00 p.m. The sheriff's return indicates that the complaint, summons, and motion were served by leaving them at Dougherty's "last and usual place of abode, " a condominium building in Boston, on January 3 at 5:20 p.m.

Dougherty did not appear at the hearing on January 7, and the Court granted the motion and issued a trustee summons addressed to Moors & Cabot in the requested amount. The sheriff's return indicates that the trustee summons was served on an officer of Moors & Cabot at 3:20 p.m. on Tuesday, January 8.

When the summons was received by Moors & Cabot, the value of Dougherty's account was $170.25. On Monday, Dougherty had instructed the firm to liquidate the stock held in his account because he intended to withdraw the funds. He was told he could pick up a check the next day, which he did. He withdrew $148, 315 on Tuesday, January 8. There was no evidence as to what time he received the check that day, but it would be a reasonable inference that it was before the service of the trustee summons on Moors & Cabot. At any rate, there is no evidence that specifically supports a conclusion that Moors & Cabot delivered the funds to Dougherty after service of the trustee process summons. The next day, Dougherty gave the check to his new lawyer, Maiona, who deposited it in his IOLTA account.

On January 18, Maiona filed a motion in the Probate Court on Dougherty's behalf, seeking to reopen that court's December judgment. It was supported by an affidavit signed by Dougherty that outlined some details of his financial condition. In the affidavit, Dougherty noted that "Attorney deBenedictis ha[d] already obtained a freeze of my investment account." He added, "As it happens, I had already withdrawn the proceeds of the sale of my stock." He expressed concern "that Attorney deBenedictis will take further steps which will make the proceeds in the amount of $148, 315 unavailable to pay the judgment in this case." (Aff. Supp. Rule 59 Mot., Bankr. R. Pt. 4 at 7 (dkt. no. 10).) The motion asked for the Probate Court's guidance as to the disposition of the funds.

In the present case, deBenedictis's theory is that Dougherty learned of the trustee process summons and emptied the Moors & Cabot account before the summons could be served to avoid the attachment. This, she contends, was a willful and malicious injury to her interests within the meaning of §523(a)(6), calling for ...

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