United States District Court, D. Massachusetts
OASIS, INC, JOHN C. FISHER, and JOHN L. SOUSA
NICHOLAS J. FIORILLO
MEMORANDUM OF DECISION
ZOBEL UNITED STATES SENIOR DISTRICT JUDGE
Oasis, Inc., John C. Fisher, and John L. Sousa (collectively,
“appellants”) appeal two orders of the United
States Bankruptcy Court for the District of Massachusetts.
The first order, dated October 31, 2014, denied their motion
for summary judgment against appellee Nicholas J. Fiorillo.
The second, dated April 20, 2015, entered judgment in favor
of Fiorillo. Appellants maintain that because a monetary
claim they have against Fiorillo falls under one or more
exceptions to bankruptcy discharge it should not be
discharged in Fiorillo's bankruptcy proceedings. Both
orders are affirmed.
appeal stems from a lawsuit that Fiorillo filed in the
Worcester County Superior Court in 1999. In this suit,
Fiorillo asserted an ownership interest in Oasis, Inc., and
claimed against Sousa, Fisher, and others. The parties agreed
to bifurcate the trial and first try the issue of whether
Fiorillo signed a release that precluded him from making his
claims. At the trial in November 2007, appellants offered a
letter (Exhibit 2) under which the release was unconditional,
while Fiorillo's counsel presented a letter (Exhibit 5)
saying the release should be held in escrow “until the
completion of the sale to Mr. Fiorillo and at the close my
client will formally surrender his ownership
interests.” R. at 62, 64, 102-03, 107-08. The jury
concluded that an unfulfilled condition precedent existed
that had to be met before the release could be
the trial, the trial judge granted a motion for a new trial
for reasons unrelated to the current appeal. Then, in May
2009, appellants moved to reopen discovery on the
authenticity of Exhibit 5. The motion was allowed, and the
trial judge held an evidentiary hearing. In an August 1,
2009, Memorandum of Decision and Order, the trial judge
concluded “that Exhibit 5 is a fabricated counterfeit
document” and that “Fiorillo did have access to
the legal files regarding this matter and, specifically, that
he had access to the documents eventually marked as exhibits
at the trial, or copies thereof.” Fiorillo v.
Oasis, Inc., No. 992455, 2009 WL 3086016, at *6 (Mass.
Super. Aug. 1, 2009). The judge stated that while he
“cannot make a finding that Fiorillo was the person who
fabricated Exhibit 5, [he] note[s] that the counterfeit
document was presented by his counsel at trial and was used
to bolster Fiorillo's contention that there was an
unfulfilled condition precedent to the release becoming
effective.” Id. at *7 (footnote
omitted). The judge dismissed Fiorillo's
complaint with prejudice and ordered Fiorillo to reimburse
appellants for costs and fees “for all matters relating
to the discovery of and proof of the fabrication of Exhibit
5.” Id. at *8. Appellants allege that the
Superior Court issued a $36, 728.27 execution against
Fiorillo in connection with these costs and fees on August
filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code on August 23, 2010, and his case was
converted to a Chapter 7 bankruptcy case on October 7, 2010.
On January 3, 2011, appellants filed an adversary proceeding
in the bankruptcy court in which they asserted that the
execution is nondischargeable under 11 U.S.C. §
523(a)(2). In 2014, they moved for summary judgment in the
bankruptcy court on the same ground, namely that “[t]he
execution issued against [Fiorillo] is non-dischargeable
under 11 U.S.C. § 523(a)(2)(A) because it arises
entirely from [Fiorillo]'s false pretenses, false
representations, and fraud, ” and “collateral
estoppel precludes [Fiorillo] from contesting the Worcester
Superior Court's findings with respect to the fraudulent
document that is the cause of [Fiorillo]'s debt to
[appellants].” R. at 20.
October 31, 2014, decision, the bankruptcy court denied
appellants' motion for summary judgment. The court
explained that the exceptions to discharge in 11 U.S.C.
§ 523(a)(2) apply to “money, property, services,
or an extension, renewal, or refinancing of credit, to the
extent obtained by, ” inter alia, fraud and false
representations. In re Fiorillo, 520 B.R. 355, 358
(Bankr. D. Mass. 2014) (quoting 11 U.S.C. § 523(a)(2)).
Here, the court said, “while [appellants] may have
advanced money, property or services in the form [of] legal
services, fees or costs in the Worcester Superior Court Suit,
those advances were not in any way obtained by Mr.
Fiorillo, fraudulently or otherwise.” Id. at
359. Accordingly, the court held that “[t]he mere fact
that plaintiffs were the beneficiaries of the state
court's monetary sanction and that the sanction arose as
a result of Mr. Fiorillo's fraud on the court, does not
make the monetary sanction non-dischargeable under §
denying appellants' motion for summary judgment, the
bankruptcy court issued an order requiring appellants show
cause why summary judgment should not enter for Fiorillo.
Appellants responded that “even if the debt is
dischargeable under § 523(a)(2)(A), it arises out of
[Fiorillo]'s willful and malicious injury to the
[appellants] and is a penalty payable for the benefit of a
government unit, and therefore is nondischargeable pursuant
to § 523(a)(6) and (7).” R. at 146. The bankruptcy
court rejected appellants' arguments that §
523(a)(2) applied and that genuine issues of material fact
existed with regard to this section. It then stated that
“[e]ven were I to consider [appellants'] belated
invocation of § 523(a)(6) and (7) as a deemed motion to
amend their complaint (which would be a stretch), I would
decline to grant such a motion at this point in the
proceeding.” R. at 168. The bankruptcy court then
issued a further order entering summary judgment for
Fiorillo. This appeal followed.
Standard of Review
district court reviews a bankruptcy court's factual
findings for clear error and its legal conclusions de novo.
See In re Watman, 301 F.3d 3, 7 (1st Cir. 2002).
“A motion for summary judgment in an adversary
proceeding under § 523(a)(2)(A) to have a debt declared
nondischargeable is governed by the same standards applicable
to motions under Fed.R.Civ.P. 56.” In re
Spigel, 260 F.3d 27, 31 (1st Cir. 2001) (citing
Fed.R.Bankr.P. 7056). Summary judgment is appropriate when
the moving party “shows that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a).
Accordingly, a district court reviews “the grant of
summary judgment de novo.” Spigel, 260 F.3d at
appeal, appellants make two main arguments: (1)
Fiorillo's debt satisfied the discharge exception under
11 U.S.C. § 523(a)(2)(A); and (2) even if the debt did
not satisfy the discharge exception under §
523(a)(2)(A), it did satisfy the exceptions under
§§ 523(a)(6) and 523(a)(7).
Section 523(a)(2)(A) of the Bankruptcy Code, a bankruptcy
discharge “does not discharge an individual debtor from
any debt . . . for money, property, services, or an
extension, renewal, or refinancing of credit, to the extent
obtained by . . . false pretenses, a false representation, or
actual fraud, other than a statement respecting the
debtor's or an insider's financial condition.”
See 11 U.S.C. § 523(a)(2)(A). These
“[e]xceptions to discharge are narrowly construed . . .
and the claimant must show that its claim comes squarely
within an exception enumerated in Bankruptcy Code §
523(a).” Spigel, 260 F.3d 32 (alterations in
original) (quoting In re Menna, 16 F.3d 7, 9 (1st
Cir. 1994)). The ...