Marjorie Aamodt v. Pasquale B. Narcisi, II

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 16-16688
Non-Argument Calendar
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D.C. Docket Nos. 2:15-cv-00765-JES; 9:14-bkc-08659-FMD
In re: PASQUALE B. NARCISI, II,
Debtor.
__________________________________________________________________
MARJORIE AAMODT, NORMAN AAMODT,
Plaintiffs - Appellants,
versus
PASQUALE B. NARCISI, II,
Defendant - Appellee.
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Appeal from the United States District Court
for the Middle District of Florida
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(July 26, 2017)
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Before TJOFLAT, WILLIAM PRYOR, and JORDAN, Circuit Judges.
PER CURIAM:
Marjorie and Norman Aamodt appeal the district court’s order affirming the
bankruptcy court’s grant of summary judgment in favor of debtor Pasquale Narcisi,
in which the bankruptcy court ruled that the debt Mr. Narcisi owed to the Aamodts
was not excepted from Chapter 7 discharge for fraud committed while acting in a
fiduciary capacity or larceny under 11 U.S.C. § 523(a)(4). Following a review of
the record and the arguments raised in the Aamodts’ brief, we affirm. 1
I
Over thirty years ago, the parties entered into a consignment agreement for
the sale of antiques which guaranteed the Aamodts $25,000.00 from the proceeds
of the auction. Because of certain irregularities in the way in which Mr. Narcisi
conducted the auction, the Aamodts ended up with only $14,795.83, so they sued
him in Pennsylvania state court for breach of contract. The state court entered a
damages judgment against Mr. Narcisi, concluding that he had breached the
agreement by “(i) selling items on days other than the scheduled date of the auction
without notice to the parties; (ii) commingling [the Aamodts’] property with other
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Also pending before this Court is the Aamodts’ amended motion to supplement the record. The
Aamodts seek to add an order that the bankruptcy court entered after it awarded Mr. Narcisi
summary judgment. That subsequent order by the bankruptcy court, which relates to
Mr. Narcisi’s core bankruptcy proceedings and not to this adversary proceeding, has no bearing
on this appeal. We therefore deny the motion to supplement the record.
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items for sale; and (iii) conducting the auction in ‘a less than vigorous manner.’”
Bankr. Ct. Mem. Op. and Order, D.E. 4-7, at 3 (Dec. 23, 2015).
Mr. Narcisi filed this Chapter 7 bankruptcy in 2014, and the Aamodts filed
an adversary complaint to determine the dischargeability of the debt under 11
U.S.C. § 523(a)(4). They later moved for summary judgment, but the bankruptcy
court denied their motion. Instead, it sua sponte entered summary judgment in
Mr. Narcisi’s favor. The district court affirmed, and this appeal followed.
II
“As the second court of review of a bankruptcy court’s judgment, this Court
examines independently the factual and legal determinations of the bankruptcy
court and employs the same standards of review as the district court.” In re Issac
Leaseco, Inc., 389 F.3d 1205, 1209 (11th Cir. 2004) (internal quotation marks
omitted). We review the bankruptcy court’s factual findings for clear error, and
exercise plenary review over its legal conclusions. See In re Fretz, 244 F.3d 1323,
1326 (11th Cir. 2001). We review “a bankruptcy court’s entry of summary
judgment de novo.” In re Optical Techs., Inc., 246 F.3d 1332, 1335 (11th Cir.
2001).
III
The Aamodts raise three arguments on appeal. First, they argue that the
bankruptcy court was collaterally estopped by findings made in the previous
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Pennsylvania state-court proceeding, and by a ruling in a different adversary
proceeding in Mr. Narcisi’s earlier Chapter 13 bankruptcy case. Second, they
contend that the bankruptcy court abused its discretion in denying them leave to
amend their adversary complaint to allege embezzlement as an additional
exception to discharge. Third, they argue that the district court erred in sua sponte
granting summary judgment in favor of Mr. Narcisi because there were material
issues of fact and because they were not on notice of the possibility that summary
judgment would be entered against them.
A
“[C]ollateral estoppel principles . . . apply in discharge exception
proceedings.” Grogan v. Garner, 498 U.S. 279, 285 n.11 (1991). “Collateral
estoppel, or issue preclusion, bars relitigation of an issue previously decided in
judicial or administrative proceedings if the party against whom the prior decision
is asserted had a ‘full and fair opportunity’ to litigate that issue in an earlier case.”
In re St. Laurent, 991 F.2d 672, 675–76 (11th Cir.), as corrected on reh’g (11th
Cir. 1993) (citing Allen v. McCurry, 449 U.S. 90, 95 (1980)). To determine the
preclusive effect of a prior judgment by a state court, we apply the collateral
estoppel law of that state. See In re St. Laurent, 991 F.2d at 675–76. Neither of
the two orders the Aamodts rely upon are preclusive.
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First, with respect to the dismissal order in Mr. Narcisi’s earlier Chapter 13
bankruptcy proceeding, the Aamodts failed to assert the alleged preclusive effect
of that order as a basis for summary judgment. See D.E. 4-7 at 5–12. See also
D.E. 3-11. This argument is therefore forfeited because it was not properly raised
before the bankruptcy court. See In re Worldwide Web Sys., Inc., 328 F.3d 1291,
1301 (11th Cir. 2003). In any event, had the Aamodts properly raised the
argument, they would still not prevail because, as the district court explained, the
bankruptcy court in Mr. Narcisi’s earlier Chapter 13 proceeding never decided
whether the debt he owed to the Aamodts was dischargeable. Rather, the dismissal
order in that case was based on Mr. Narcisi’s failure to file an amended Chapter 13
plan.
Second, like the district court, we conclude that the Pennsylvania state-court
order did not preclude the bankruptcy court from finding that Mr. Narcisi had not
acted as a fiduciary to the Aamodts and that he had not committed fraud. In
adjudicating the Aamodts’ state-law claim, the Pennsylvania state court determined
that the parties had entered into a consignment agreement, that Mr. Narcisi had
breached it in various ways, and that the Aamodts were entitled to a damages
award for their loss. The judgment stems from the state court’s determination that
Mr. Narcisi breached the express terms of a contract, not that he had acted as a
fiduciary and violated his duty. The state court’s judgment likewise does not mean
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that Mr. Narcisi committed fraud, because that ordinarily requires a finding of
intent.
In sum, the two orders relied upon by the Aamodts are not preclusive. They
either did not actually decide the issue before the bankruptcy court, or the issues
they did decide were not identical. See In re Bush, 62 F.3d 1319, 1322 (11th Cir.
1995) (collateral estoppel under federal law); Rue v. K-Mart Corp., 552 Pa. 13, 17,
713 A.2d 82, 84 (1998) (collateral estoppel under Pennsylvania law).
B
We review the denial of a motion for leave to amend for abuse of discretion.
See Bryant v. Dupree, 252 F.3d 1161, 1163 (11th Cir. 2001). A court need not
grant leave “where amendment would be futile.” Id. The bankruptcy court did not
abuse its discretion in denying the Aamodts’ motion for leave to amend their
adversary complaint (as construed from their amended motion for summary
judgment) to allege embezzlement as an additional exception to discharge under
§ 523(a)(4). The embezzlement claim was time-barred, so amendment would have
been futile.
Federal Rule of Bankruptcy Procedure 4007(c) requires a complaint to
determine the dischargeability of a debt to be filed no later than 60 days after the
first date set for the creditors’ meeting under 11 U.S.C. § 341(a). The Aamodts
timely filed their adversary complaint within the 60-day period, but that complaint
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did not assert embezzlement as an exception to discharge under § 523(a)(4). It was
not until their amended motion for summary judgment, filed nearly six months
after the deadline under Rule 4007(c), that the Aamodts asserted the embezzlement
exception by alleging that Mr. Narcisi had retained a number of the consigned
items instead of selling them.
The bankruptcy court construed the new argument as a motion for leave to
file an amended complaint, and then denied leave on the ground that amendment
would be futile because the new claim was time-barred. Underpinning this
conclusion was the bankruptcy court’s determination that the new embezzlement
claim did not relate back to the original complaint because it relied on facts that
had not been previously alleged by the Aamodts.
The Aamodts’ initial two-page adversary complaint only alleged that
Mr. Narcisi’s debt was excepted from discharge because “[t]he debt was incurred .
. . due to . . . fraud in acting in a fiduciary capacity.” D.E. 3-5 at 1. They
supported their complaint with affidavits alleging various deficiencies in
Mr. Narcisi’s auctioning of the consigned goods. See id. at 3–5. Neither the
complaint nor the affidavits, however, mentioned embezzlement or accused
Mr. Narcisi of retaining the consigned items. The embezzlement claim therefore
did not relate back and was time-barred. And so, because amendment would have
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been futile, we agree with the district court that the bankruptcy court did not abuse
its discretion in denying leave to amend.
C
Summary judgment is appropriate when the moving party shows that there is
no genuine dispute of any material fact and that it is entitled to judgment as a
matter of law. See Moton v. Cowart, 631 F.3d 1337, 1341 (11th Cir. 2011). If the
evidence supporting the nonmoving party is merely colorable or not significantly
probative, summary judgment may be granted. See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 249–50 (1986). As we explain, the bankruptcy court did not err
in entering summary judgment on the Aamodts’ claims that the debt was excepted
because Mr. Narcisi had committed fraud while acting as their fiduciary and
because he had committed larceny.
First, there is no evidence that the parties entered into a fiduciary
relationship. The Aamodts contend that their contract imposed fiduciary
obligations on Mr. Narcisi because it required a “segregated trust fund,” Br. of
Appellants at 11, but that is nowhere to be found in the one-page consignment
agreement. See D.E. 4-7 at 2 (citing Bankr. Ct. D.E. 30 at 46). And a consignment
agreement creating an agency relationship does not, by itself, establish a fiduciary
relationship for purposes of § 523(a)(4). See, e.g., In re Blaszak, 397 F.3d 386,
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391 (6th Cir. 2005) (“[A]n agent-principal relationship standing alone is
insufficient to establish the type of fiduciary duty contemplated by § 523.”).
The Aamodts also argue that Mr. Narcisi owed them a fiduciary duty under
Pennsylvania law. See Br. of Appellants at 10. We have previously held that
statutes that impose trust-like duties, such as those requiring an agent “to promptly
account for and remit payments of funds” and forbidding “commingling the funds
with [the agent’s] operating or personal accounts,” Quaif v. Johnson, 4 F.3d 950,
954 (11th Cir. 1993), may create a fiduciary relationship by operation of law. The
Aamodts say that Pennsylvania law at the time prohibited auctioneers from
commingling “moneys received from the sale of property,” Br. of Appellants at 10,
and therefore imposed a fiduciary duty on Mr. Narcisi.
Even if Pennsylvania law imposed certain fiduciary duties on Mr. Narcisi,
there is no evidence that he violated the specific duty to “promptly deposit moneys,
received from the sale of property, belonging to others in a separate custodial or
trust fund account maintained by the licensee or registrant until the transaction
involved is terminated.” Auctioneer Licensing and Trading Assistant Registration
Act, Act of Dec. 22, 1983, P.L. 327, No. 85 § 21. Neither the Aamodts’ affidavits,
nor the Pennsylvania state court’s factual findings, establish that Mr. Narcisi
commingled the proceeds from the sale of the Aamodts’ antiques. Rather,
Mr. Narcisi’s alleged contractual breach was that, among other things, he
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commingled the Aamodts’ antiques with other items at the time of sale. See Tr. of
Pennsylvania State Court Proceedings, D.E. 3-11, at 65 (finding that the auction
was supposed to take place on a specified date, with the Aamodts’ property to be
the only items up for auction on that day, and that Mr. Narcisi breached the
agreement by commingling the “assets for sale”). Accordingly, summary
judgment was properly granted on the Aamodts’ claim that Mr. Narcisi committed
fraud while acting as their fiduciary because there is insufficient evidence
demonstrating the existence of a fiduciary relationship.
Second, the Aamodts have presented no evidence that Mr. Narcisi
committed larceny. As the bankruptcy court explained, larceny requires the
unlawful taking of property. See D.E. 4-7 at 11–12. Here, the Aamodts willfully
turned their property over to Mr. Narcisi under the terms of the consignment
agreement. The bankruptcy court therefore correctly entered summary judgment
on the Aamodts’ claim that the debt was excepted under § 523(a)(4) because it was
the product of larceny. 2
Finally, the bankruptcy court did not abuse its discretion in sua sponte
entering summary judgment against the Aamodts. “A court may sua sponte grant
summary judgment so long as the losing party was on notice that it had to come
2
The Aamodts failed to allege larceny in their initial adversary complaint, but the bankruptcy
court considered their larceny claim after construing their amended motion for summary
judgment as a motion for leave to amend the complaint. Unlike the embezzlement claim, the
larceny claim, the bankruptcy court explained, was not time-barred because it related back to the
original facts alleged.
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forward with all of its evidence.” In re Fisher Island Investments, Inc., 778 F.3d
1172, 1195 (11th Cir. 2015) (internal quotation marks omitted) (quoting Celotex
Corp. v. Catrett, 477 U.S. 317, 326 (1986)).
The Aamodts were sufficiently on notice that they had to come forward with
all of their evidence. In fact, as part of a round of summary judgment that they
themselves initiated, the Aamodts had already presented their arguments and
evidence on the same issues covered by the bankruptcy court’s sua sponte order.
By the time the bankruptcy court capped off the round of summary judgment with
its sua sponte order, the Aamodts had submitted a 16-page amended motion for
summary judgment and over 50 pages of evidence in support. Mr. Narcisi
responded to the motion, but submitted no additional evidence of his own.
In entering summary judgment sua sponte, the bankruptcy court accepted all
of the Aamodts’ factual allegations as true and considered the evidence they had
submitted along with their amended motion for summary judgment. Because the
bankruptcy court did not rely on extraneous facts and instead completely credited
the Aamodts’ factual allegations, and because the Aamodts had already briefed and
submitted evidence on the same issues, there was no need to give them an
opportunity to present additional facts to contest summary judgment.
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IV
For these reasons, we affirm the district court’s order affirming the
bankruptcy court’s grant of summary judgment in favor of debtor Pasquale Narcisi.
AFFIRMED.
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