Duncan v. Duncan

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: JACQUELINE DUNCAN, 
Debtor.
JAMES DUNCAN, Administrator of the
Estate of Meigan Lin Duncan, a/k/a
Yang Chun Song,  No. 05-1159
Plaintiff-Appellant,
v.
JACQUELINE DUNCAN,
Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Gerald Bruce Lee, District Judge.
(CA-04-443-1; BK-03-12031; AP-03-01240)
Argued: February 2, 2006
Decided: May 24, 2006
Before MOTZ, TRAXLER, and DUNCAN, Circuit Judges.
Reversed in part and remanded by published opinion. Judge Duncan
wrote the opinion, in which Judge Motz and Judge Traxler joined.
COUNSEL
Richard George Hall, Annandale, Virginia, for Appellant. Gregory
Harold Counts, TYLER, BARTL, GORMAN & RAMSDELL,
P.L.C., Alexandria, Virginia, for Appellee.
2 IN RE DUNCAN
OPINION
DUNCAN, Circuit Judge:
James Duncan, acting as the administrator of the estate of Meigan
Lin Duncan a/k/a Yang Chun Song, ("the Estate") appeals an order
of the district court granting summary judgment to Jacqueline Duncan
in this adversary proceeding1 brought by the Estate to challenge the
dischargeability of a judgment debt owed by Mrs. Duncan arising out
of a state wrongful death action. The Estate contends that the district
court erred in granting summary judgment to Jacqueline Duncan
based on the collateral estoppel effect of the state court judgment.
Because the issues decided in the state court proceedings were not
identical to and, therefore, could not collaterally estop litigation of the
controlling issue in this adversary proceeding, we reverse the district
court order and remand for further proceedings.2
I.
On June 9, 1998, Meigan Duncan ("Meigan"), the adopted minor
child of James and Jacqueline Duncan, died as a result of drowning
in a bathtub while in Jacqueline Duncan’s care and custody. Subdural
hemorrhaging and cerebral edema were contributing causes of the
child’s death. The Virginia Medical Examiner performed an autopsy
and listed the drowning as a homicide on the death certificate.
On May 18, 2000, James Duncan, as representative of Meigan
Duncan’s estate, filed suit against Jacqueline Duncan for wrongful
death in Virginia state court seeking both compensatory and punitive
1
"Adversary proceeding" is a term of art used in bankruptcy practice
for a lawsuit brought within a bankruptcy proceeding for one or more of
the reasons specified in Bankruptcy Rule 7001. Here, the Estate brought
an adversary proceeding under Bankruptcy Rule 7001(6) to determine
the dischargeability of a debt.
2
Because we reverse on this ground, we need not reach the Estate’s
additional argument that the district court procedurally erred by entering
summary judgment in favor of Mrs. Duncan because she had not moved
for it and had not contended below that there was an absence of material
issue of fact that justified entry of judgment in her favor.
IN RE DUNCAN 3
damages. The lawsuit contended that Jacqueline Duncan caused Mei-
gan’s death either by assaulting her and then leaving her in the bath-
tub unattended to drown or intentionally drowning her to obscure
evidence of previous abuse. At the close of trial, the jury returned an
award in favor of Meigan’s estate. The jury awarded $15,000 in com-
pensatory damages and $500,000 in punitive damages, which was
later reduced, against Jacqueline Duncan.
On April 29, 2003, Jacqueline Duncan filed a petition for Chapter
7 bankruptcy in the Eastern District of Virginia and listed the wrong-
ful death award as a debt. The Estate brought this adversary proceed-
ing to contest the dischargeability of the award under 11 U.S.C.
§ 523(a)(6), which makes debts that arise from willful and malicious
injuries nondischargeable in bankruptcy. The Estate then moved for
offensive summary judgment, arguing that the state court judgment
collaterally estopped relitigation of the controlling issue of whether
Jacqueline Duncan intended to injure Meigan. Jacqueline Duncan
opposed the Estate’s motion, but did not cross-move for summary
judgment.
The bankruptcy court granted the Estate’s motion in part, finding
that Jacqueline Duncan struck Meigan, that the injury was the proxi-
mate cause of Meigan’s death, and that the blow was intentional.3
However, the bankruptcy court denied the Estate summary judgment
on the issue of whether the award to the Estate was nondischargeable
as arising from a willful and malicious injury under § 523(a)(6), find-
ing that issue not to be collaterally estopped by the state wrongful
death judgment.
The Estate then sought and was granted leave to appeal the order
of the bankruptcy court on an interlocutory basis to the district court.
After considering the parties’ arguments, the district court held that
Jacqueline Duncan’s debt to the Estate was dischargeable. The district
court reached this conclusion by initially finding that the Estate had
proved by a preponderance of the evidence that the elements of collat-
eral estoppel had been established. The district court nevertheless
went on to hold that the Estate had failed to meet the stringent
requirement for a finding of nondischargeability under Kawaauhau v.
3
These findings were not challenged in this appeal.
4 IN RE DUNCAN
Geiger, 523 U.S. 57, 61 (1998) as a matter of law. In Geiger, the
Supreme Court found that Congress intended a debt to be nondischar-
geable under § 523(a)(6) only if the underlying injury was a deliber-
ate or intentional one. According to the district court, the jury verdict
in state court precluded such a finding. The district court therefore
held that Jacqueline Duncan’s debt, stemming from that verdict, was
dischargeable as a part of her bankruptcy petition. The Estate then
appealed to this court.
II.
"We review the judgment of a district court sitting in review of a
bankruptcy court de novo, applying the same standards of review that
were applied in the district court." In re Bogdan, 414 F.3d 507, 510
(4th Cir. 2005). We review findings of fact for clear error and ques-
tions of law de novo. Id.III.
The Estate argues that the district court erred by concluding that
the state court judgment collaterally estopped it from showing that the
debt was nondischargeable as arising from a willful and malicious
injury. The Estate argues, to the contrary, that the state court judg-
ment collaterally estopped Jacqueline Duncan from showing that the
debt was dischargeable. We conclude, however, that the state court
judgment does not support an application of collateral estoppel to the
ultimate issue in the Estate’s adversary proceeding and, therefore, nei-
ther party is entitled to summary judgment.
State court judgments can collaterally estop the litigation of issues
in adversary proceedings in federal bankruptcy court. See In re
Ansari, 113 F.3d 17, 19 (4th Cir. 1997). When determining whether
a state court judgment has such a preclusive effect, we apply the rele-
vant state law of collateral estoppel. Id. Here, because the underlying
wrongful death action was litigated in Virginia, we will apply the law
of the Commonwealth.
Under Virginia law, a party invoking collateral estoppel must prove
the following five elements: (1) the parties to the two proceedings
IN RE DUNCAN 5
must be the same or in privity; (2) the prior proceeding must have
resulted in a valid and final judgment against the party against whom
preclusion is sought or his privy; (3) the factual issue to be precluded
must have been actually litigated in the prior proceeding; (4) the fac-
tual issue to be precluded must have been essential to the judgment
in the prior proceeding; and (5) there must be mutuality, "that is, a
party is generally prevented from invoking the preclusive force of a
judgment unless that party would have been bound had the prior liti-
gation of the issue reached the opposite result." TransDulles Center,
Inc. v. Sharma, 252 Va. 20, 22-23, 472 S.E.2d 274, 275 (1996). An
issue is subject to collateral estoppel only if it is identical to an issue
decided in a prior proceeding. See Angstadt v. Atlantic Mut. Ins. Co.,
249 Va. 444, 447, 457 S.E.2d 86, 87-88 (1995); Sevachko v. Com-
monwealth, 32 Va. App. 561, 564-65, 529 S.E.2d 803, 804 (2000).
The first two elements of this analytical framework present no dif-
ficulty here. Both the Estate and Jacqueline Duncan were parties to
the state court proceeding that resulted in a valid and final judgment
against Jacqueline Duncan. The fifth element, mutuality, likewise
presents no difficulty. The state court litigation necessarily bound
both the Estate and Jacqueline Duncan because they were the only
parties to that proceeding. See Angstadt, 249 Va. at 447, 457 S.E.2d
at 88. Therefore, the question of whether collateral estoppel applies
turns on resolution of the third and fourth elements of the analysis:
whether the issue to be precluded was actually litigated in and neces-
sary to the state court judgment.
The controlling issue in the adversary proceeding is whether Jac-
queline Duncan intended to injure her daughter. Under 11 U.S.C.
§ 523(a)(6), a debt is not dischargeable in a Chapter 7 bankruptcy if
it arises from a "willful and malicious injury by the debtor to
another." 11 U.S.C. § 523(a)(6). As the Supreme Court instructs in
Geiger, § 523(a)(6) applies only to "acts done with the actual intent
to cause injury." 523 U.S. at 61 (emphasis added). Section 523(a)(6)
is not satisfied by negligent, grossly negligent or reckless conduct. Id.
at 62-64; Zygulski v. Daugherty, 236 B.R. 646, 653 (Bankr. N.D. Ind.
1999); In re Scarlata, 127 B.R. 1004, 1013 (Bankr. N.D. Ill. 1991).
Moreover, the mere fact that a debtor engaged in an intentional act
does not necessarily mean that he acted willfully and maliciously for
purposes of § 523(a)(6). See In re Moore, 357 F.3d 1125, 1128 (10th
6 IN RE DUNCAN
Cir. 2004); In re Williams, 337 F.3d 504, 509 (5th Cir. 2003); In re
Miller, 156 F.3d 598, 604 (5th Cir. 1998). "[N]ondischargeability
takes a deliberate or intentional injury, not merely a deliberate or
intentional act that leads to injury." Geiger, 523 U.S. at 61 (emphasis
in original).
Therefore, in order for collateral estoppel to apply here, the issue
of whether Jacqueline Duncan intended to injure Meigan (as opposed
to engaging in an intentional act that injured the child) must have
been both litigated in and necessary to the state court proceeding.
Sharma, 252 Va. at 22-23, 472 S.E.2d at 275. It must also be identical
to an issue litigated in the state court. Angstadt, 249 Va. at 447, 457
S.E.2d at 87-88. The Estate grounds its argument for precluding the
litigation of this issue on two aspects of the state court judgment: (a)
the finding that Jacqueline Duncan was liable for wrongful death, and
(b) the jury’s award of punitive damages. We will consider each in
turn.
1. Wrongful Death
The finding that Jacqueline Duncan was liable for wrongful death
does not support the application of collateral estoppel because it was
judged by a different legal standard than the "willful and malicious
injury" inquiry under § 523(a)(6). The Estate filed suit against Jacque-
line Duncan under Va. Code Ann. § 8.01-50, which governs wrongful
death actions in the Commonwealth. That statute provides for a cause
of action "[w]henever the death of a person [is] caused by the wrong-
ful act, neglect, or default" of another party. Va. Code Ann. § 8.01-50.
At trial, the state court instructed the jury that, in order to find Jacque-
line Duncan liable for wrongful death, it had to find that "the Defen-
dant was willful and wanton in her conduct toward her daughter" and
that such conduct was the proximate cause of Meigan’s death. J.A.
285E. The judge defined the term "willful and wanton conduct" as
acting consciously in disregard of [Meigan] or acting with
a reckless indifference to the consequences to [Meigan]
when the Defendant is aware of her conduct and is also
aware, from her knowledge of existing circumstances and
conditions, that her conduct would probably result in injury
to [Meigan].
IN RE DUNCAN 7
J.A. 87.
This definition created two distinct categories of "willful and wan-
ton conduct: "(1) conduct that was in conscious disregard of Meigan,
and (2) conduct that exhibited reckless indifference to the conse-
quences to Meigan. Both of these categories set a lower bar for a find-
ing of "willful and wanton conduct" than § 523(a)(6) sets for a finding
of a "willful and malicious injury" because neither required the Estate
to prove that Jacqueline Duncan intended to injure Meigan. There-
fore, the wrongful death judgment did not involve an identical issue
to the controlling issue here and does not support entry of summary
judgment in favor of either party based on collateral estoppel. See
Angstadt, 249 Va. at 447, 457 S.E.2d at 88.
2. Punitive Damages
The state court judgment for punitive damages likewise does not
support application of collateral estoppel because the record does not
establish that it was based on a finding identical to the controlling
issue under § 523(a)(6). See id. The state court jury entered a punitive
damages award against Jacqueline Duncan based on the following
instruction:
If you find your verdict for the Plaintiff and if you believe
by the greater weight of the evidence that the Defendant’s
conduct was willful, one, or was so reckless as to evince a
conscious disregard for the safety of [Meigan] you may also
award punitive damages to the Plaintiff.
J.A. 285G. Under this instruction, the jury could have found that Jac-
queline Duncan was liable for either willful conduct or reckless con-
duct. The record contains no indication of which of these two
standards the jury employed.
It is this gap in the record that renders summary judgment based
on collateral estoppel inappropriate. One of the two standards in the
punitive damages instruction — recklessness — is satisfied by con-
duct that is inadequate for purposes of § 523(a)(6). Geiger, 523 U.S.
at 64 (1998) ("debts arising from recklessly . . . inflicted injuries do
8 IN RE DUNCAN
not fall within the compass of § 523(a)(6)"). Even if we were to
assume that the willful conduct portion of the punitive damages
instruction is synonymous with a "willful and malicious injury" under
§ 523(a)(6), nothing before us suggests that the jury made its determi-
nation on that basis. We cannot say that the punitive damages award
necessarily involved a finding identical to the § 523(a)(6) inquiry
since the jury could have based its award on a finding of recklessness.
Both because such a possibility exists and because Virginia law
requires an identity of issues for collateral estoppel to apply, we can-
not conclude that the question of whether Meigan’s death was a "will-
ful and malicious injury" was litigated in and necessary to the award
of punitive damages. Accordingly, application of collateral estoppel
based on the punitive damages award is inappropriate here.
At bottom, neither the wrongful death nor the punitive damages
award in the state court involved the issue of whether Jacqueline Dun-
can intended to injure Meigan that controls resolution of this adver-
sary proceeding. Because issues must be identical for collateral
estoppel to apply, and such identity is lacking here, the state court
judgment does not support application of collateral estoppel to the
Estate’s nondischargeability claim under 11 U.S.C. § 523(a)(6).
IV.
In light of the foregoing, we reverse the order of the district court
and remand for further proceedings consistent with this opinion.
REVERSED IN PART AND REMANDED