In Re: Smith

• Court: Court of Appeals for the Fifth Circuit
• Decided: April 13, 2001
• Docket: 00-21090
• Status: Unpublished

Opinion

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 R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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--