Heinrich v. Bagg (In re Bagg)

589 B.R. 650
CourtUnited States Bankruptcy Court, E.D. Wisconsin
DecidedAugust 10, 2018
DocketCase No. 17-24668-bhl-7; Adversary No. 17-02247-bhl
StatusPublished
Cited by7 cases

This text of 589 B.R. 650 (Heinrich v. Bagg (In re Bagg)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Heinrich v. Bagg (In re Bagg), 589 B.R. 650 (Wis. 2018).

Opinion

DECISION AND ORDER

Brett H. Ludwig, United States Bankruptcy Judge *652Alan and Maureen Bagg are Chapter 7 debtors. On August 18, 2017, one of their longtime neighbors, Robert Heinrich, filed a proof of claim and an adversary complaint in their bankruptcy case. Heinrich's $425,324.05 claim is based on a state court judgment that he obtained against the Baggs for: (1) tortious interference with contract and (2) unlawful harvesting of timber on Heinrich's land. In the adversary proceeding, Heinrich contends these debts should be excepted from discharge under 11 U.S.C. § 523(a)(6) because the debts are for the Baggs' "willful and malicious" injury to Heinrich or his property. The Baggs acknowledge Heinrich's claim, but deny the debts are nondischargeable.

Heinrich initially sought summary judgment in the adversary proceeding, arguing that the Baggs were collaterally estopped from disputing nondischargeability based on the state court judgment. Because the state court verdict did not necessarily answer whether the Baggs acted willfully and maliciously, the court denied summary judgment and set the proceeding for trial. On April 11 and 20, 2018, the parties presented evidence and argument and the court took the matter under advisement. Based on the evidence and matters of record, the court now issues this Decision and Order resolving the parties' dispute.1 The court concludes that the debts are dischargeable.

FINDINGS OF FACT

The basic facts giving rise to Heinrich's claim are largely undisputed. Heinrich and the Baggs are neighbors who own adjoining parcels of real estate in Elmwood Park, Wisconsin, a small village on the outskirts of Racine. The Baggs purchased their home and another ½-acre parcel from Heinrich in the 1980s. At that time, Heinrich retained land next to the Baggs and continued to live there.

The Baggs and Heinrich appear to have been on reasonably good terms as neighbors for the next 25 years. During this time, the Baggs made use of portions of Heinrich's property, cutting down trees and planting a garden on Heinrich's land, all apparently without any objection from Heinrich.

Neighborly relations fell apart in early 2012. During the preceding fall, Heinrich entered into an agreement to sell a 3.2-acre parcel of land directly adjoining the Baggs' property to Gatlin Development Company, Inc. Heinrich was to receive $900,000 for the parcel, which Gatlin planned to develop into a Walmart.

The Baggs were less than thrilled at the prospect of having a Walmart next door. Along with a group called the Friends of Elmwood Park, the Baggs opposed the development and took measures to try to stop it. They helped draft and send emails to municipal officials, urging them not to rezone the property, a prerequisite to the development going forward.

In addition to their opposition through the political process, the Baggs filed an adverse possession lawsuit against Heinrich on April 18, 2012. Alan Bagg and Maureen Bagg v. Robert Heinrich , Racine County Circuit Court, Case No. 12-CV-1408. In their complaint, the Baggs relied upon their historic use of a ½-acre portion *653of Heinrich's property to claim they had ownership rights to it. As required by Wisconsin law, the Baggs supported their adverse possession claim by filing a lis pendens on the property.

Because the ½-acre portion that the Baggs claimed to have adversely possessed was part of the property Heinrich had already contracted to sell to Gatlin, the lawsuit and lis pendens raised questions about Heinrich's ability to convey clean title to the entirety of the parcel he had agreed to sell. These questions led Gatlin to terminate the purchase agreement and walk from the deal.

Whether the Baggs realized it at the time or not, the death of the Walmart development was not the end of the saga between them and Heinrich. Unhappy that the lawsuit had cost him a substantial economic gain, Heinrich responded to the Baggs' complaint by denying the Baggs' adverse possession allegations and counterclaiming for unlawfully harvesting timber in violation of Wis. Stat. § 26.05 (a Wisconsin statutory tort), tortious interference with contract, and slander of title. (Second Amended Answer, Affirmative Defenses and Counterclaim, Case No. 12-CV-1408, filed July 15, 2015).

In August 2015, more than three years after the Baggs filed their initial complaint, the case was finally ready for trial. On the brink of trial, the state court made a series of rulings in favor of each party. The court ruled in the Baggs' favor on a portion of their claim, concluding that they had adversely possessed that part of Heinrich's land where they had planted a garden. Based on this ruling, the state court dismissed Heinrich's slander of title counterclaim. But the court also held that the Baggs had not adversely possessed the balance of the parcel. The court then allowed the parties to present evidence and argument on Heinrich's intentional interference with contract claim to a jury, which found in favor of Heinrich and awarded him $405,000. Finally, the court determined that the Baggs had harvested timber on Heinrich's property in violation of Wis. Stat. § 26.05 and awarded Heinrich $2,400 in damages on this statutory claim.

ANALYSIS

One of the fundamental purposes of bankruptcy is to provide debtors with a fresh start by discharging their pre-petition debts. In re Jahrling , 816 F.3d 921, 924 (7th Cir. 2016). While a debtor's right to a discharge under the Bankruptcy Code is broad, it is not absolute. In 11 U.S.C. § 523(a), Congress has identified several types of debts that a debtor cannot discharge. Among these nondischargeable debts are those "for willful and malicious injury by the debtor to another entity or to the property of another entity." 11 U.S.C. § 523(a)(6).

Heinrich argues that the Baggs' debts to him are nondischargeable under this provision. As the party seeking to establish an exception to discharge, Heinrich bears the burden of proof by a preponderance of the evidence. Grogan v. Garner ,

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Cite This Page — Counsel Stack

Bluebook (online)
589 B.R. 650, Counsel Stack Legal Research, https://law.counselstack.com/opinion/heinrich-v-bagg-in-re-bagg-wieb-2018.