Gray v. Tacason

Summarized by David Baker , Law Office of David G. Baker
10 years 5 months ago

Citation:

BAP No. 15-003

Tag(s):

Ruling:

Debtor Tacason's appeal of bankruptcy court order finding debt to Gray non-dischargeable pursuant to §523(a)(6) affirmed.

Procedural context:

Tacason filed a chapter 13 case after suffering a judgment against her in a state court for $225,000. At some point she converted the case to chapter 7, which the BAP suggested was a bad idea since §523(a)(6) is not applicable in chapter 13.

Facts:

Ms. Tacason and Mr. Gray had a personal and business relationship which began in 1989. They owned (50% each) all of the stock of a company, Djaygee, Inc., and under the trade name “Cutting Edge Sports” operated its business of selling sports jerseys. Ms. Tacason generally oversaw the books and records—both of the company and of the couple personally—while Mr. Gray designed the company’s jerseys. In 2007, after the couple’s personal and business relationship had disintegrated, Mr. Gray sued Ms. Tacason in Massachusetts state court (the “2007 Litigation”) alleging, among other things, that Ms. Tacason had breached her fiduciary duties to Mr. Gray as a fellow shareholder of a close corporation, wasted corporate assets, and committed fraud. Ms. Tacason denied all of Mr. Gray’s allegations. In March 2008, the parties executed a settlement agreement ending the 2007 Litigation (the “Settlement Agreement”). Under the Settlement Agreement, Ms. Tacason agreed to pay Mr. Gray $50,000.00 for his 50% ownership interest in Djaygee, Inc. and to assume the company’s ordinary course of business debt, and the parties agreed they would “equally divide the sports and music memorabilia and old team overstock jerseys at the business premises.” The Settlement Agreement also provided that “[t]he parties agree to a general release as to all claims except those reserved by the settlement agreement and ongoing in NH”, and to dismiss the 2007 Litigation with prejudice. In 2009, Mr. Gray commenced a Massachusetts state court action against Ms. Tacason and Djaygee, Inc. (the “2009 Litigation”), alleging that Ms. Tacason had breached the Settlement Agreement due to her failure to pay the full $50,000.00, assume the business debt, and divide the personal property. Ms. Tacason and Djaygee, Inc. denied the allegations and asserted counterclaims against Mr. Gray. During the 2009 Litigation, the state court issued several orders to facilitate the division of property contemplated by the Settlement Agreement.2 In June 2010, Mr. Gray sought to have Ms. Tacason and Djaygee, Inc. held in contempt for failing to comply with these orders. On July 7 and 8, 2010, the state court held an evidentiary hearing on Mr. Gray’s request for contempt. Both individuals were present at the hearing accompanied by counsel. On August 4, 2010, the state court entered an order finding Ms. Tacason and Djaygee, Inc. in contempt of court (the “Contempt Order”), finding that Ms. Tacason's conduct was willful and intentional, and designed to frustrate the state court's orders. In the dischargeability litigation, Gray asserted that the state court's judgments had preclusive effect on all of the elements of §523(a)(6). The bankruptcy court agreed, and the BAP affirmed.

Judge(s):

Hoffman (author), Feeney and FInkle.

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