Court Opinion

ID: 1003838
Source: CourtListenerOpinion
Date Created: 2013-07-04 18:32:24.292922+00
Date Added: 2024-06-11T09:09:27.656421
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

In Re: FERNANDO NESTORIO,             
                            Debtor.

FERNANDO NESTORIO,
               Plaintiff-Appellant,            No. 00-1829
                v.
ASSOCIATES COMMERCIAL
CORPORATION,
              Defendant-Appellee.
                                      
           Appeal from the United States District Court
            for the District of Maryland, at Greenbelt.
              Deborah K. Chasanow, District Judge.
                (CA-99-3842-DKC, BK-98-22987)

                     Argued: January 25, 2001

                     Decided: March 15, 2001

       Before MICHAEL and MOTZ, Circuit Judges, and
      Robert E. PAYNE, United States District Judge for the
        Eastern District of Virginia, sitting by designation.

Affirmed by unpublished per curiam opinion.

                            COUNSEL

ARGUED: David Casler Slade, Bowie, Maryland, for Appellant. Ste-
ven Neal Leitess, LEITESS, LEITESS & FRIEDBERG, P.C., Balti-
2                          IN RE: NESTORIO
more, Maryland, for Appellee. ON BRIEF: Aryeh E. Stein,
LEITESS, LEITESS & FRIEDBERG, P.C., Baltimore, Maryland, for
Appellee.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                              OPINION

PER CURIAM:

   In this case a debtor appeals from the district court’s affirmance of
a bankruptcy court order precluding him from relitigating whether he
willfully and maliciously injured secured property, thus preventing
him from discharging the debt secured by that property. We affirm.

                                   I.

   On October 8, 1997, Associates Commercial Corporation filed a
complaint in federal district court alleging that Fernando Nestorio
(and various corporate entities) wrongfully converted, concealed, and
destroyed construction equipment in which Associates had a security
interest. Nestorio failed to file a responsive pleading or otherwise
appear in the action. The court subsequently entered a default judg-
ment for Associates, thus prompting Nestorio to file a motion to set
aside the default judgment. The court granted Nestorio’s motion on
the condition that he post a $100,000 bond. Nestorio failed to do so.
Accordingly, the default judgment was re-entered and the case
referred to a magistrate judge for a determination of damages.

   Nestorio was present and represented by counsel on the first day
of the damages hearing, which was continued to allow supplemental
briefing. On October 2, 1998, before the hearing resumed, Nestorio
filed a voluntary petition for relief under Chapter 7 of the Bankruptcy
Code, 11 U.S.C. §§ 701-766 (1994). This petition operated as an auto-
                           IN RE: NESTORIO                            3
matic stay preventing Associates from continuing the damages phase
of the litigation. See 11 U.S.C. § 361(a) (1994).

   On December 2, Associates filed a motion for relief from the auto-
matic stay to determine the damages and complete the litigation.
Associates subsequently requested Nestorio’s consent to lift the stay
and proposed a consent order. Nestorio filed a response to Asso-
ciates’s motion, stating that he "d[id] not oppose the granting of the
relief requested," but adding that the language of the proposed con-
sent order needed revision.

   After further negotiation by counsel for both sides, the language of
the consent order was revised. On January 7, 1999, Nestorio’s bank-
ruptcy counsel sent Associates a signed facsimile of the consent order
and a letter authorizing Associates to file the order with the court and
explaining Nestorio’s "understanding" of the scope of the consent
order:

    It is our understanding that this Order will lift the automatic
    stay solely for the purpose of allowing Associates to pro-
    ceed . . . so that the amount of damages, if any, can be deter-
    mined and a final judgment may be entered and that the stay
    will remain in effect as to the enforcement of any such judg-
    ments and that no attempt to collect on such judgment may
    be made by Associates outside the Bankruptcy Court, with-
    out further relief from that stay.

    It is also our understanding that is [sic] has already been
    determined by the court . . . that the measure of damages is
    the difference in value, if any, between the value of the
    equipment at the time that the equipment was determined to
    have been wrongfully retained by Mr. Nestorio and the
    value of the equipment at the time that it was recovered by
    Associates.

    If our understanding on any of these matters is not the same
    as your understanding please contact us before filing the
    consent order as our consent may be misplaced.
4                           IN RE: NESTORIO
   On January 14, 1999, after receipt of this letter, the consent order
was entered in the bankruptcy court. The consent order provided that
the parties consented to terminating the automatic stay, allowing
Associates "to proceed against Debtor in the litigation now pending
. . . for the purpose of determining the amount of Debtor’s liability
to Associates and the entry of final judgment in that amount," but that
Associates "must receive additional relief from this court prior to any
execution or enforcement of said final judgment."

   Following entry of the consent order, on January 15, 1999, Asso-
ciates filed a complaint in bankruptcy court, claiming that because
Nestorio willfully and maliciously injured Associates’s secured prop-
erty, the amount of the judgment determined by the district court
should be exempt from discharge in bankruptcy. See 11 U.S.C.
§ 523(a)(6). The complaint alleged that, "the only issue remaining to
be addressed [by the magistrate judge] is the amount of damages to
be awarded Associates" and explained that "a final hearing" with
respect to the amount of damages to be awarded Associates "due to
Debtor’s willful and malicious conversion and destruction of Asso-
ciates’ property (the "Debt") will be scheduled [before the magistrate
judge] shortly after the filing of this complaint." Nestorio, represented
by bankruptcy counsel, filed an answer to this complaint in bank-
ruptcy court, in which he stated "it is our understanding that another
issue not resolved in that litigation is whether [Nestorio] committed
fraud, and thus whether punitive damages should be awarded."

   In February 1999, Nestorio’s district court counsel filed a motion
to withdraw, which the magistrate judge granted. On March 10, 1999,
the magistrate judge resumed the damages hearing, which lasted for
three days. Although Nestorio was given notice of the hearing, he
failed to attend. After taking evidence, hearing testimony, and ques-
tioning witnesses, the magistrate judge filed a detailed, sixteen-page
report, recommending that Associates be awarded both compensatory
and punitive damages. The magistrate judge explicitly found that
Nestorio acted with "malice and a deliberate intent to deprive [Asso-
ciates] of possession of the Equipment." Nestorio did not object to
this recommendation and the district judge adopted the magistrate’s
report and entered final judgment for Associates.

   With judgment in hand, Associates moved for partial summary
judgment in its dischargeability action in the bankruptcy court. Over
                             IN RE: NESTORIO                             5
the protest of Nestorio’s original bankruptcy counsel, the bankruptcy
court precluded Nestorio from relitigating whether he willfully and
maliciously injured the property, reasoning that this issue had been
previously litigated and decided in the district court proceeding. As
a result, the bankruptcy court granted Associates’s motion for sum-
mary judgment and excepted its judgment from discharge. Nestorio,
represented by new bankruptcy counsel, appealed to the district court,
which affirmed. This appeal followed.

                                    II.

   We have reviewed the record, briefs, and applicable law, and con-
sidered the oral arguments of the parties, and we are persuaded that
the district court properly affirmed the bankruptcy court.* We affirm

   *Before us, Nestorio contends that it was always his and his counsel’s
"understanding" that the only issue to be litigated before the magistrate
judge was the amount of Associates’s compensatory damages. But the
record — including the January 7, 1999 letter of Nestorio’s counsel and
the answer that counsel filed in the bankruptcy court — simply do not
bear this out. Counsel’s January 7 letter appears entirely directed to two
points: (1) cataloging how the amount of compensatory damages would
be determined and (2) limiting proceedings before the magistrate judge
to determination of damages and entry of a final judgment with the
understanding that "no attempt to collect on such judgment may be made
outside the Bankruptcy Court." The consent order accurately incorpo-
rated both of those points. Moreover, after entry of the consent order,
Associates filed its complaint in the bankruptcy court, which alleged that
"liability has been established [by the magistrate judge] and the only
issue to be addressed [by him] is the amount of damages." Nestorio
answered that it was his understanding "that an additional issue not
resolved in that litigation is whether or not [Nestorio] committed fraud,
and thus whether punitive damages, should be awarded." Because this
responds to Associates’s allegation that (1) liability "had been" estab-
lished and (2) the "only issue to be addressed" was damages, Nestorio’s
answer that punitive damages was "another issue not addressed" by the
magistrate is most reasonably read as his acknowledgment that this issue
had not yet been "addressed" but is "another issue" that will "be
addressed" by the magistrate judge. In any event, neither in the answer
nor in any other pleadings or paper did Nestorio ever state that it was his
position that this issue could not or would not be "addressed" and "re-
solved" by the magistrate judge.
6                           IN RE: NESTORIO
the district court’s holding that the plain language of the consent order
"did not preclude the [magistrate judge] from considering all issues
relevant to a determination of damages," and that Nestorio is, there-
fore, barred from relitigating the issue of willful and malicious injury.
See Nestorio v. Associates Commercial Corp., 250 B.R. 50 (D. Md.
2000).

                                                            AFFIRMED