In Re: Smith ( 2001 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 00-21090
Summary Calendar
_______________
In the Matter of: CLYDE W. SMITH, JR.,
Debtor.
**********
CLYDE W. SMITH, JR.,
Appellant,
v.
DONNA LEE WILLIAMS, INSURANCE COMMISSIONER
OF THE STATE OF DELAWARE, AS RECEIVER OF
NATIONAL HERITAGE LIFE INSURANCE COMPANY,
A COMPANY IN LIQUIDATION
Appellee.
---------------------------------
Appeal from the United States District Court
for the Southern District of Texas
April 12, 2001
Before SMITH, BENAVIDES, and DENNIS, Circuit Judges.
PER CURIAM:*
The facts of this case, as contained in the opinion of the
district court, are as follows:
In August 1995, Donna Lee Williams, Insurance Commissioner
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
--1--
of the State of Delaware (“the Commissioner”), as Receiver of
National Heritage Life Insurance Company, a company in
liquidation, filed suit in the United States District Court for
the Middle District of Florida asserting claims for civil theft,
fraud, conspiracy to defraud, conversion, conspiracy to convert,
breach of fiduciary duty, and conspiracy to breach fiduciary duty
against Clyde W. Smith and other defendants (“Florida case”).
Smith and others had plead guilty to participating in a
multimillion dollar fraud perpetrated against National Heritage
Life Insurance Company, resulting in its insolvency and
subsequent receivership. During the pendency of the Florida
case, Smith filed for bankruptcy in the Southern District of
Texas. The bankruptcy court lifted the automatic stay,
permitting the Florida case to go forward. The district court
granted the Commissioner’s motion for summary judgment in the
Florida case concluding that the Commissioner’s “evidence that
Smith knowingly and intentionally participated in the theft at
issue . . . stands unrebutted by competent summary judgment
evidence.” Upon that finding, the District Court in the Florida
case entered a judgment against Smith for over $56 million.
The Commissioner then brought an action in the bankruptcy
court arguing that Smith’s debt arising from the Florida case was
nondischargeable as a matter of law under § 523(a)(4), which
makes debts for larceny non-dischargeable. The Commissioner
--2--
relied on the Florida district court’s conclusion that Smith
committed knowing and intentional theft. The Commissioner argued
she was entitled to judgment as a matter of law based on
collateral estoppel or upon the same uncontroverted summary
judgment evidence that was presented to the Florida district
court. The bankruptcy court granted the Commissioner’s motion
for summary judgment. The district court affirmed, ruling that
principles of collateral estoppel prevented Smith from
relitigating the theft issue before the bankruptcy court. Smith
filed a timely notice of appeal with this Court.
The Supreme Court has held that collateral estoppel applies
to discharge exception proceedings under 11 U.S.C. § 523(a).
Grogan v. Garner, 498 U.S. 279, 285 n.11, 111 S.Ct. 654, 658
n.11, (1991). In the Fifth Circuit, collateral estoppel applies
when: (1) the issue at stake is identical to one actually
litigated in a prior action; (2) the issue was actually litigated
in the prior action; and (3) the determination of the issue in
the prior given action was a necessary part of the judgment in
the prior action. Next Level Communications L.P. v. DSC
Communications Corp., 179 F.3d 244, 250 (5th Cir. 1999). The
dispute in the present case relates to the first prong – that is,
whether civil theft under Florida law requires the same findings
as larceny under § 523(a)(4) of the Bankruptcy Code. Florida’s
civil theft statute provides:
--3--
(1) A person commits theft if he or she knowingly obtains or
uses, or endeavors to obtain or use, the property of another with
intent to, either temporarily or permanently:
(a) Deprive the other person of a right to the property or
a benefit of the property,
(b) Appropriate the property to his or her own use or to
the use of any person not entitled to the use of the
property.
Fla. Stat. Ann. § 812.014 (West 1992).
While “larceny” is not defined in the Bankruptcy Code, its use in
§ 523(a)(4) is governed by federal common law. In re Rose, 934
F.2d 901, 903 n.2 (7th Cir. 1991); In re Barrett, 156 B.R. 529,
533 n.3 (Bankr. N.D. Tex. 1993). The common law definition of
larceny is “a felonious taking of another’s personal property
with intent to convert it or deprive the owner of same.” In re
Barrett, 156 B.R. 529, 533 n.3 (Bankr. N.D. Tex. 1993).
Smith attempts to draw a distinction between the statute’s
language “obtain or use” and the common law definition’s
“taking.” We reject such a formalistic distinction. The term
“take” has many shades of meaning depending on the context. “In
the law of larceny,” it means “to obtain or assume possession of
a chattel unlawfully, and without the owner’s consent; to
appropriate things to one’s own use with felonious intent.”
BLACK’S LAW DICTIONARY 1453 (6th ed. 1990) (emphasis added). This
definition makes clear that the term “taking” includes when the
property is “obtained” or “used.” We also find unlikely that
Congress’ use of the common law term larceny in § 523(a)(4) was
intended to exclude those actions that constitute its statutory
--4--
counterpart, theft. Accordingly, we find a conviction under
Florida’s civil theft statute satisfies the requirements for
nondischargeability under § 523(a)(4). See In re Padgett, 235
B.R. 660, 663 (Bankr. M.D. Fla. 1999) (“[T]he state court
findings of liability under Florida Statutes § 812.014 and §
772.11 satisfy the requirements of § 523(a)(4).”). Thus, Smith
is collaterally estopped from relitigating the identical issue in
the bankruptcy court. The judgment of the district court is
AFFIRMED.
--5--