Gary F. Abel v. Denise D. Queen

United States Bankruptcy Appellate Panel
For the Eighth Circuit
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No. 18-6023
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In re: Michael G. Queen, also known as Mike Queen, also known as Bi-State
Acoustics, LLC; Denise D. Queen
lllllllllllllllllllllDebtors
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Gary Francis Abel; Metro Acoustics, LLC
lllllllllllllllllllllPlaintiffs - Appellants
v.
Denise D. Queen; Michael G. Queen
lllllllllllllllllllllDefendants - Appellees
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Appeal from United States Bankruptcy Court
for the Eastern District of Missouri - St. Louis
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Submitted: June 18, 2019
Filed: July 19, 2019
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Before SALADINO, Chief Judge, NAIL and SANBERG, Bankruptcy Judges.
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NAIL, Bankruptcy Judge.
Gary Francis Abel and Metro Acoustics, LLC appeal the August 22, 2018 order
of the bankruptcy court1 directing the entry of summary judgment in favor of
Michael G. Queen and Denise D. Queen on Abel and Metro's complaint to determine
the dischargeability of their claims against the Queens. We have jurisdiction over this
appeal pursuant to 28 U.S.C. § 158(b). We affirm.
BACKGROUND
Abel and Denise Queen formed Metro, which installed and replaced acoustic
ceiling tiles and wall panels. Michael Queen was an employee of the company.
The business ultimately failed, and Abel and Metro filed suit against the
Queens in Missouri state court, alleging fraudulent misrepresentation, breach of
contract, breach of fiduciary duty, and conversion. The Queens answered, and the
case bumped along for several years.
When the Queens failed to comply with their discovery requests, Abel and
Metro filed several motions for sanctions. The third such motion led to the entry of
a self-described judgment in which the state court granted Abel and Metro's motion,
struck the Queens' pleadings, entered a default judgment for Abel and Metro on all
counts of their complaint, and scheduled a hearing to determine damages.
Before that hearing could be held, however, the Queens filed a petition for
relief under chapter 7 of the bankruptcy code, staying further proceedings in state
court. Abel and Metro timely filed an adversary complaint to determine the
1
The Honorable Charles E. Rendlen, III, United States Bankruptcy Judge for
the Eastern District of Missouri.
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dischargeability of their claims against the Queens under 11 U.S.C. § 523(a)(2), (4),
and (6).
In the course of the adversary proceeding, Abel and Metro filed a motion for
partial summary judgment on the issue of liability, arguing the state court default
judgment precluded the Queens from re-litigating the issue of liability or the issue of
the dischargeability of Abel and Metro's claims against them. The Queens objected.
Following a hearing,2 the bankruptcy court stamped a copy of Abel and Metro's
motion "DENIED" and "WITHDRAWN" and entered it as an order.
A trial was scheduled, but shortly before the appointed date, the parties
communicated to the bankruptcy court their belief that the dischargeability of Abel
and Metro's claims against the Queens could be determined by summary judgment,
with the issue of damages reserved for later determination, if necessary. The
bankruptcy court concurred and entered an order to that effect.
The parties agreed the lone issue to be decided by the bankruptcy court was
whether Abel and Metro's claims against the Queens were dischargeable under
§ 523(a)(4).3 The matter was submitted on stipulated exhibits, stipulated facts, and
the parties' respective briefs, and the bankruptcy court entered an order for summary
judgment in favor of the Queens. In a section headed "PRELIMINARY MATTERS,"
the bankruptcy court stated:
2
While this hearing is not reflected on the bankruptcy docket, the parties agree
it was held.
3
That section excepts from a debtor's discharge any debt "for fraud or
defalcation while acting in a fiduciary capacity, embezzlement, or larceny[.]"
11 U.S.C. § 523(a)(4).
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The state court entered a prepetition default judgment
against Defendants on claims based on facts similar to
those asserted here. However, that judgment was only a
default judgment and, to any degree, did not become final.
The state court default judgment does not establish any fact
for purposes of determining whether summary judgment is
proper on the § 523(a)(4) claims raised in this matter.
Abel and Metro appealed.4
STANDARD OF REVIEW
On appeal, Abel and Metro raise two issues: (1) whether the Queens were
collaterally estopped by the state court default judgment from asserting they did not
breach a fiduciary duty to Abel and Metro; and (2) whether a fiduciary relationship
existed between either or both Michael Queen and Denise Queen on the one hand and
either or both Abel and Metro on the other. Were we to reach these issues, we would
review the former de novo and the latter for clear error. See Islamov v. Ungar (In re
Ungar), 633 F.3d 675, 679 (8th Cir. 2011) ("We review the bankruptcy court's factual
determinations for clear error, and its legal determinations de novo.").
DISCUSSION
Abel and Metro's appeal is premised on the bankruptcy court's perceived error
in not giving preclusive effect to the state court default judgment.5 However, for the
4
While the bankruptcy docket indicates judgment was entered for the Queens,
the judgment was not set out in a separate document. See Fed.R.Bankr.P. 7058 and
Fed.R.Civ.P. 58(a). However, this does not affect the validity of Abel and Metro's
appeal. Fed.R.Bankr.P. 8002(a)(5)(B).
5
Abel and Metro briefly argue the Queens owed them a fiduciary duty under
Missouri law, but they do not clearly identify how the bankruptcy court erred in its
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reasons discussed below, that issue was no longer before the bankruptcy court,
despite the bankruptcy court's passing reference to the state court default judgment.6
Consequently, we do not reach either of the issues raised by Abel and Metro. Rucker
v. Belew (In re Belew), 588 B.R. 875, 876 (B.A.P. 8th Cir. 2018) (issue not raised
before the bankruptcy court cannot be considered on appeal). Cf. Superpumper, Inc.
v. Nerland Oil, Inc. (In re Nerland Oil, Inc.), 303 F.3d 911, 920 n.8 (8th Cir. 2002)
(any argument on appeal requiring additional factual findings is considered waived);
Twin City Fed. Sav. and Loan Ass'n v. Transamerica Ins. Co., 491 F.2d 1122, 1126-
27 (8th Cir. 1974) (trial court erred when it decided a question of law the parties had
not submitted to it on a motion for summary judgment). See Christian Legal Soc.
Chapter of the University of California, Hastings College of the Law v. Martinez,
561 U.S. 661, 676-78 (2010) (the court will not consider a party's argument that
contradicts a stipulation entered at the outset of the litigation).
The record demonstrates Abel and Metro abandoned their claim that the state
court default judgment should be given preclusive effect, long before the bankruptcy
court entered its order for summary judgment in favor of the Queens. As noted
above, Abel and Metro raised the issue in their motion for partial summary judgment.
However, the order entered by the bankruptcy court following the hearing on that
motion indicates their motion was both "DENIED" and "WITHDRAWN." No one
has offered a satisfactory explanation for this seeming incongruity or provided a
transcript of the hearing from which such an explanation might be gleaned. Under
analysis of the requirement of a fiduciary relationship under § 523(a)(4). In any
event, to prevail under that code section, Abel and Metro also needed to establish
fraud or defalcation. In arguing they did so, they again rely solely on the state court
default judgment.
6
We express no opinion regarding the bankruptcy court's assessment of the
state court default judgment.
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the circumstances, we can only take the bankruptcy court's order at face value and
conclude Abel and Metro withdrew their motion for partial summary judgment.
The parties then submitted the issue of the dischargeability of Abel and Metro's
claims against the Queens to the bankruptcy court on stipulated exhibits and
stipulated facts. Abel and Metro relied on that record–not the state court default
judgment–in the brief they submitted to the bankruptcy court. They did not renew
their claim that the state court default judgment should be given preclusive effect.
In fact, they made no mention whatsoever of the state court default judgment in that
brief.
Abel and Metro did not address–much less explain away–the withdrawal of
their motion for partial summary judgment in their opening brief herein. The Queens
raised the issue in their opening brief, but Abel and Metro did not file a reply brief,
eschewing a second opportunity to offer such an explanation. And they glossed over
the problem at oral argument.7
CONCLUSION
By withdrawing their motion for partial summary judgment and submitting the
matter to the bankruptcy court on an agreed record–without renewing their claim that
the state court default judgment should be given preclusive effect–Abel and Metro
abandoned that claim. The issue was thus not before the bankruptcy court and affords
no basis for the instant appeal. Consequently, we affirm the bankruptcy court's order
for summary judgment in favor of the Queens.
7
In fairness to Abel and Metro's appellate counsel, we note she did not
represent them before the bankruptcy court.
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