Piccicuto v. Rex

• Court: Court of Appeals for the First Circuit
• Decided: November 9, 1994
• Docket: 94-1726
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                 ____________________

        No. 94-1726

                       RICHARD PICCICUTO D/B/A SHEEHAN'S CAFE,

                                 Plaintiff-Appellant,

                                          v.

                                   RALPH E. DWYER,

                                 Defendant-Appellee.

                                 ____________________

        No. 94-1735

RICHARD PICCICUTO,

                                 Plaintiff-Appellant,

                                          v.

                                    LINDA L. REX,

                                 Defendant-Appellee.

                                 ___________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Nathaniel M. Gorton, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                                  Cyr, Circuit Judge,
                                       _____________
                            Bownes, Senior Circuit Judge,
                                    ____________________
                           and McAuliffe*, District Judge,
                                           ______________

                                 ____________________


Steven  Weiss, with whom Shatz, Schwartz and Fentin, P.C., Richard
            _____________            ________________________________  _______
        M. Howland, and  Law Offices of Richard M. Howland,  were on brief for
        __________       _________________________________
        appellant,  David J. Noonan, with whom Cohen, Rosenthal, Price, Mirkin
                    _______________            _______________________________
        & Wernick for trustee in bankruptcy.
        _________
            John A.  Burdick, Jr.,  with whom  Burdick &  DiLeo,  P.C. was  on
            _____________________              _______________________
        brief for appellees.

____________________

                                   November 9, 1994
                                 ____________________

        __________________

        *Of the District of New Hampshire sitting by designation.


BOWNES, Senior Circuit  Judge.   Creditor-appellant
                      BOWNES, Senior Circuit  Judge.
                              _____________________

            Richard  M. Piccicuto commenced  this adversary proceeding in

            the bankruptcy  court which  sought to  have a  judgment debt

            owed him by  debtors-appellees Ralph E.  Dwyer and Linda  Rex

            ("the landlords") declared nondischargeable under 11 U.S.C.  

            523(a)(6)  (1989).1   Subsequently,  he  filed  a motion  for

            summary judgment on his claim.  The bankruptcy court not only

            denied his motion, it sua sponte granted  summary judgment to
                                  ___ ______

            the landlords.  The district court affirmed.  Because we find

            that summary judgment should have been entered for Piccicuto,
                                                           ___

            and not against him, we reverse.

                                          I.
                                          I.
                                          __

                      Throughout  1984  and  1985,  the  landlords  owned

            commercial  rental property ("the  property") in Northampton,

            Massachusetts.  Ralph Dwyer's son, Jeffrey Dwyer, managed the

            property.   During that  same time period,  Richard Piccicuto

            owned and operated Sheehan's Cafe,  Inc., which was a  tenant

            of  several  units  (including  two basement  units)  of  the

            property.  Until  July 13,  1984, when  the parties  executed

            leases for these basement units, Sheehan's had been a tenant-

            at-will therein.

                      On July  20, 1984,  Jeffrey Dwyer met  with Timothy

            and Paul  Driscoll, who  had been negotiating  with Piccicuto

                                
            ____________________

            1.  Section  523(a)(6)  precludes   the  discharge  of  debts
            incurred "for willful  and malicious injury by the  debtor to
            another entity or to the property of another entity."

                                         -3-
                                          3


for  the  purchase  of  Sheehan's.    At  that  meeting,  the

            Driscolls  requested that the leases of the basement units be

            assigned  to them.    Jeffrey Dwyer  not  only declined  this

            request, he denied  the existence  of the leases.   When  the

            Driscolls reported this to  Piccicuto, he telephoned  Jeffrey

            Dwyer,  who informed him that the  contemplated deal with the

            Driscolls was too good, and that there would be no assignment

            unless he  and  the landlords  were  paid $50,000  up  front.

            Piccicuto did not accede to Dwyer's demand.

                      For the ensuing ten months, Piccicuto attempted  to

            rectify the situation with the Driscolls, and otherwise tried

            to  sell  the  business  by placing  listings  with  brokers.

            Jeffrey Dwyer  interfered with  these efforts  by telephoning

            the brokers and informing them  that the leases were invalid,

            void,  or in litigation.   As a result,  the brokers withdrew

            from listing and showing the property.  During this same time

            period, whenever Piccicuto's rent payments  were a day or  so

            late,  Jeffrey  Dwyer deluged  him  with  notices of  breach,

            notices  of  termination,  and  notices  to quit.    He  also

            commenced a barrage  of noise complaints to the  police, none

            of  which was substantiated to  the point of  police or court

            action.    In  addition,   in  January  1985,  the  landlords

            initiated what became series of eviction  proceedings against

            Piccicuto.   All  of  these proceedings  eventually concluded

            with judgments in Piccicuto's favor.

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                                          4


Piccicuto was not able to sell the property and, on

            July  8, 1985, filed for  protection under Chapter  11 of the

            Bankruptcy Code.   Subsequently, in September  1985, he filed

            an action  in Massachusetts  Superior  Court against  Jeffrey

            Dwyer and the landlords which sought damages for, inter alia,
                                                              _____ ____

            intentional  interference  with   an  advantageous   business

            relationship  and  unfair  trade practices  in  a  commercial

            context.   See Mass. Gen. L.  ch. 93A,   2 (1993).   The case
                       ___

            went to trial  in June  1989.  Although  all defendants  were

            represented at  trial, only defendant Jeffrey  Dwyer chose to

            appear  and testify.   At  the conclusion  of the  trial, the

            court  submitted  the  common  law  intentional  interference

            claims to the jury on special questions, reserving to  itself

            Piccicuto's  claims  under ch.  93A.    The jury  returned  a

            verdict in  favor  of  Piccicuto  for $371,000.    The  court

            accepted this verdict  and doubled it to $742,000 under Mass.

            Gen. L. ch. 93A,    11 (1993), which directs courts  to award

            no  less than  double  and no  more  than triple  the  actual

            damages resulting  from a  "willful or knowing"  violation of

            ch. 93A,   2.  In conjunction with its decision, the superior

            court  issued   a  comprehensive  memorandum   detailing  its

            findings  and rulings.   The  memorandum clearly  states that

            "the  defendants'   acts   [were]  willful,   malicious   and
                           __

            unjustified."   Appendix at 151-52 (emphasis  supplied).  The

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Massachusetts  Appeals  Court   affirmed  in  all   respects.

            Piccicuto v. Dwyer, 586 N.E.2d 38 (Mass. App. Ct. 1992).
            _________    _____

                      Meanwhile, in  September 1989, the  landlords filed

            Chapter 11 petitions with  the United States Bankruptcy Court

            for the District of  Massachusetts.  Subsequently,  Piccicuto

            brought this adversary proceeding, and in due time  moved for

            summary judgment.  As we have noted, Piccicuto argued that 11

            U.S.C.     523(a)(6)  precludes  discharge  of  the  $742,000

            judgment  debt.    He based  his  argument  on  two theories.

            First, Piccicuto  contended that the  doctrine of  collateral

            estoppel  precluded  the  landlords  from  attacking  in  the

            bankruptcy court  the superior court's ch.  93A findings that

            they had acted willfully, maliciously, and unjustifiably, and

            that these  findings were, by virtue  of collateral estoppel,

            binding on the bankruptcy  judge.  See Grogan v.  Garner, 498
                                               ___ ______     ______

            U.S. 279, 285 n.11 (1991) (principles of collateral estoppel,

            as set forth in  the Restatement (Second) of Judgments    27,

            apply  in   dischargeability  proceedings  brought   under   

            523(a)).  In the alternative, Piccicuto asserted that even if

            Jeffrey  Dwyer  was  the  only defendant  who  willfully  and

            maliciously caused  him injury,  Jeffrey's actions  should be

            imputed  to  the  landlords   under  a  theory  of  vicarious

            liability.

                      The bankruptcy court rejected these arguments.  For

            reasons that  are not  entirely clear, it  misapprehended the

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                                          6


thrust of Piccicuto's first  argument and looked only  to the

            special  verdict   questions   submitted  to   the  jury   on

            Piccicuto's common  law claims.  Relying  on these questions,

            which referred only  to actions taken  by Jeffrey Dwyer,  the

            bankruptcy  court  held that  "[i]t  is  undisputed that  the

            verdict  and subsequent  judgment  was  rendered against  the

            [landlords]  based  solely  upon  their  vicarious  liability

            flowing  from the actions of Jeffrey Dwyer."   In re Rex, 150
                                                           _________

            B.R. 505, 506 (Bankr.  D. Mass. 1993).  The  bankruptcy court

            then ruled that vicarious  liability cannot support a finding

            that a debtor acted willfully and maliciously for purposes of

            11 U.S.C.    523(a)(6).   Id. at 506-07.   Finding no genuine
                                      ___

            issue of  material fact  remaining for trial,  the bankruptcy

            court, acting sua sponte, entered judgment for the landlords.
                          ___ ______

            Id. at 507.  
            ___

                      The  district court  to  which  Piccicuto  appealed

            these  rulings  agreed  with  the  bankruptcy  court's  legal

            conclusion regarding  vicarious liability under    523(a)(6).

            It  also upheld  as  "not clearly  erroneous" the  bankruptcy

            court's  "finding" that  the landlords'  liability was  based

            solely  on  the  actions   of  their  agent,  Jeffrey  Dwyer.

            Accordingly, it affirmed the bankruptcy court's judgment.

                                         II.
                                         II.
                                         ___

                      On  appeal to  this  court, Piccicuto  makes  three

            arguments.   First, he renews  his argument that the findings

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                                          7


of  the superior court in  connection with his  ch. 93A claim

            conclusively  establish that the  landlords themselves caused

            him  willful  and  malicious   injury,  as  those  terms  are

            understood under 11 U.S.C.   523(a)(6).  Next, he  reiterates

            his alternative argument that vicarious liability can support

            a finding of willfulness and maliciousness under   523(a)(6).

            Finally,  he  contends that  the  district  court abused  its

            discretion in declining his request for oral argument in this

            matter.  We need  not reach the merits of  Piccicuto's second

            and third appellate arguments because we agree with his first

            one. 

            A.  Summary Judgment in Bankruptcy Proceedings
            A.  Summary Judgment in Bankruptcy Proceedings
            ______________________________________________

                      We very  recently elaborated upon the  operation of

            summary  judgment  in  bankruptcy  proceedings.   See  In  re
                                                              ___  ______

            Varrasso, No. 94-1583,  slip op.  at 4-6 (1st  Cir. Oct.  18,
            ________

            1994).   We need not,  therefore, rehearse the relevant legal

            principles  at  great length.   Suffice  it  to say  that our

            review of  an order initially made under Bankruptcy Rule 7056

            (governing summary judgment  in bankruptcy proceedings)  does

            not  differ in  any material  respect from  our review  of an

            order under Fed. R. Civ.  P. 56.  We review such an  order de
                                                                       __

            novo,  determining  whether the  lower courts  have correctly
            ____

            assessed  the  record  in  deciding that  genuine  issues  of

            material fact  do, or do  not, remain for  trial.  See  In re
                                                               ___  _____

            Varrasso,  slip  op.  at  5.    As  always,  in  making  this
            ________

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                                          8


determination,  we   will  read  the  record   and  draw  all

            reasonable  inferences in  the manner  most favorable  to the

            party opposing summary judgment.  Id.
                                              ___

            B.  Applying the Principles
            B.  Applying the Principles
            ___________________________

                      As  an initial  matter, we  note that  the district

            court applied  the wrong standard  of review  in ruling  upon

            Piccicuto's  first argument.   The  bankruptcy court  did not

            make any findings of fact entitled to  deference; instead, it

            merely stated  its reading of the superior court's opinion in

            the course of making a summary judgment ruling.  See id. at 6
                                                             ___ ___

            and n.2.   The district court therefore should  have reviewed

            de novo  the bankruptcy court's legal determination regarding
            __ ____

            the effect of the superior court's findings. 

                      Although we could remand  to the district court for

            reconsideration  under the  appropriate  standard of  review,

            doing so would serve no useful  purpose.  As we explained  in

            Varrasso:    "The  validity  vel non  of  a  summary judgment
            ________                     ___ ___

            entails a pure question  of law and, therefore, we  are fully

            equipped  to  resolve  the question  as  a  matter of  first-

            instance appellate  review."   Id.  at  6.   Accordingly,  we
                                           ___

            address on the merits Piccicuto's first appellate issue.

                      The easiest way to  frame this issue is to  note at

            the outset  that which is  not disputed.  First,  there is no

            dispute  that  those  issues  necessarily  determined  by the

            superior  court in  finding  that the  landlords and  Jeffrey

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                                          9


Dwyer  had violated  ch. 93A,     2 and  11, are  to be given

            effect in  this proceeding.  "When an issue of fact or law is

            actually  litigated  and  determined  by a  valid  and  final

            judgment, and the determination is essential to the judgment,

            the  determination  is  conclusive  in  a  subsequent  action

            between  the parties,  whether  on the  same  or a  different

            claim."  Restatement (Second) of Judgments   27 (1982).  

                      Nor  is there  any  dispute that  the findings  the

            superior  court necessarily made under ch. 93A,    2 and 11,2

            are  tantamount  to  findings  of  "willful  and   malicious"

            behavior  under     523(a)(6).    The  landlords  agree  with

            Piccicuto  that, for an act to be willful and malicious under

              523(a)(6),  it must be "deliberate,"  "wrongful," and "done

            without regard to its consequences,"   see Brief of Appellees
                                                   ___

            at 9-10, and that  the superior court's findings conclusively

            establish  that  Piccicuto  was  the victim  of  willful  and

            malicious  behavior  under  this  definition,  see  Brief  of
                                                           ___

____________________

            2.  Under ch. 93A,    2, the superior court necessarily found
            that  the landlords'  and  Jeffrey Dwyer's  actions (1)  were
            outside the penumbra of established concepts of fairness; (2)
            were unethical or unscrupulous;  and (3) caused Piccicuto and
            his   business   substantial  injury.     See   Wasserman  v.
                                                      ___   _________
            Agnastopoulos,  497  N.E.2d 19,  23  (Mass.  App. Ct.),  rev.
            _____________                                            ____
            denied,  499 N.E.2d 298  (Mass. 1986).  Under  ch. 93A,   11,
            ______
            the superior court necessarily  found that the landlords' and
            Jeffrey  Dwyer's  violation of  ch.  93A,     2 was  willful.
            Wasserman, 497 N.E.2d at 24.
            _________

                                         -10-
                                          10


Appellees at  4 (conceding  that Jeffrey Dwyer's  conduct was

            willful and malicious).3

                      Finally,  there is  no  real dispute  that, in  its

            findings of  fact on Piccicuto's ch. 93A  claim, the superior

            court  used  language indicating  that  it  was going  beyond

            theories  of vicarious  liability and  holding the  landlords

            liable for their own acts and conduct towards Piccicuto.  See
                             ___                                      ___

            Appendix at 151-52 ("[T]he damages awarded must be multiplied

            under  [ch.  93A,    11]  particularly  where,  as  here, the

            defendants' acts are  willful, malicious and  unjustified.");
                     __

            Appendix at 152 n.17 (describing the aforementioned "acts" as

            "[o]f active and relentless campaign against [Piccicuto], and

                                
            ____________________

            3.  We  are aware  that  some  federal  courts seem  to  have
            construed  11 U.S.C.    523(a)(6)'s  "willful and  malicious"
            provision more  strictly than the  Massachusetts courts  have
            interpreted ch.  93A,   11's "willful  or knowing" provision.
            While we have been unable to locate any authority which reads
            ch. 93A,   11, as requiring an actual intent to injure, a few
            federal courts have interpreted    523(a)(6) as imposing such
            a  requirement.   See In re  Conte, 33 F.3d  303, 306-07 (3rd
                              ___ ____________
            Cir. 1994) (noting that the circuits have variously defined a
            willful and malicious act under   523(a)(6) as a wrongful act
            done with intent to  injure, a wrongful act that  will almost
            certainly  produce harm, and a  wrongful act that  has a high
            probability of causing harm)  (collecting cases); see also In
                                                              ___ ____ __
            re Scarlata,  979 F.2d 521,  536-39 (7th Cir.  1992) (Coffey,
            ___________
            J.,  dissenting) (noting the  same split in  the circuits but
            arguing that most  courts have adopted a definition which, in
            essence, looks  to whether  the debtor  has acted  in knowing
            disregard  of the rights  of another  and whether  the debtor
            should have  foreseen that  injury  could occur)  (collecting
            cases).  
                 At  any rate, because this circuit has not yet passed on
            this  difficult  and  controversial  issue,  and because  the
            landlords  have  expressly   adopted  Piccicuto's   favorable
            construction of the statute,  we decline to delve into  it at
            this time.

                                         -11-
                                          11


of  reckless disregard of the conduct of the business of this

            property by the owners, who took no role in supervising, even
                     __ ___ ______

            though  they were the parties in at least five separate state

            court  proceedings  and one  bankruptcy  court proceeding  in

            which  they, in  the  final analysis  were not  successful");

            Appendix at  153 ("[T]he  conduct of all  defendants violated
                                      _______    ___

            the  generally  accepted   standards,  falling  outside   the

            penumbra of  established  concepts of  fairness.   It may  be

            fairly  characterized  as   unethical,  unscrupulous,   [and]

            causing substantial injury to [Piccicuto and his business].")

            (emphases supplied).   

                      There is, however,  vehement disagreement about the

            real meaning of the  superior court's findings on Piccicuto's

            ch. 93A  claim.  Piccicuto  contends that the  superior court

            meant exactly  what it said:   that the  landlords themselves
                                                               __________

            acted willfully  and  maliciously towards  Piccicuto and  his

            business.   The landlords,  for their  part, assert  that the

            court could not have meant what it said -- or more precisely,

            that the court used  regrettably loose language in describing

            their "acts" and  "conduct" -- because there was  no evidence

            that they acted against  Piccicuto in any way.   In so doing,
                 ____

            the  landlords  paint  themselves  as   absentee  owners  who

            recklessly failed to supervise their  out-of-control, on-site

            agent.

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                                          12


Leaving   aside   the  question   of   whether  the

            principles underlying the issue preclusion doctrine  allow us

            to  go beyond the unambiguous findings of a state court judge

            and  assess whether  there was a  factual foundation  for the

            findings, we find  the landlords' reading of  the state court

            record  to be  myopic.   While  the  landlords may  not  have

            personally led the charge  against Piccicuto, they themselves
                                                               __________

            brought at least two eviction proceedings against him when he

            was  trying to  save  his  deal  with  the  Driscolls  and/or

            otherwise  sell  his business.   The  superior court  made it

            clear   that  these  eviction  proceedings,  which  ended  in

            judgments  for  Piccicuto,  were  an  integral  part  of  the

            campaign   of  harassment  and  intimidation  underlying  its

            finding that  "all defendants," by their  "conduct," violated

            ch.  93A,    2 and 11.   See Appendix at 151.4   In our view,
                                     ___

            this ends  the matter;  the superior court's  unambiguous and

            factually  supported findings  must be  given effect  in this

            action.  Piccicuto therefore should have been awarded summary

            judgment  on his claim that the $742,000 judgment debt is not

            dischargeable in bankruptcy.

                                         III.
                                         III.
                                         ____

                                
            ____________________

            4.  We  note  that  the  superior court's  reference  to  the
            eviction  proceedings is  preceded  by a  statement that  the
            proceedings  were brought  by Jeffrey  as agent  for debtors.
            Piccicuto  has documented, however,  that this statement (and
                                                      ____ _________
            not  the court's  ultimate finding)  was a  slip of  the pen.
            Debtors themselves, as owners  of the property, initiated the
            eviction proceedings.  See Appendix at 96-97.
                                   ___

                                         -13-
                                          13


For the reasons stated above,  the bankruptcy court

            erred  in awarding summary  judgment to the  landlords and in

            not awarding summary judgment to  Piccicuto.  It follows that

            the district court erred  in affirming the bankruptcy court's

            mistaken order.  We therefore  reverse the judgment below and

            enter summary judgment for Piccicuto.

                      So ordered.      
                      So ordered.
                      __________

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