Court Opinion

ID: 1013748
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:06:08.800462+00
Date Added: 2024-06-11T15:11:46.699590
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

In Re: GRACE C. RUTLEDGE,              
                            Debtor.

E. PRESTON RUTLEDGE,
                 Plaintiff-Appellee,
                 v.
                                              No. 03-1668
GRACE C. RUTLEDGE,
              Defendant-Appellant,
                and
UNITED STATES TRUSTEE; DAVID R.
RUBY,
                         Trustees.
                                       
           Appeal from the United States District Court
      for the Eastern District of Virginia, at Newport News.
             Henry Coke Morgan, Jr., District Judge.
            (CA-02-122-4; BK-01-52860; AP-02-5005)
                      Argued: June 3, 2004
                      Decided: July 15, 2004
  Before WILKINSON, TRAXLER, and SHEDD, Circuit Judges.

Affirmed by unpublished per curiam opinion.

                            COUNSEL
ARGUED: Jeannine Anne Provencher, RICHARD DUCOTE &
ASSOCIATES, P.L.C., New Orleans, Louisiana, for Appellant. Rob-
2                         IN RE: RUTLEDGE
ert Vincent Roussos, ROUSSOS, LANGHORNE & CARLSON,
P.L.C., Norfolk, Virginia, for Appellee. ON BRIEF: Richard L.
Ducote, RICHARD DUCOTE & ASSOCIATES, P.L.C., New Orle-
ans, Louisiana, for Appellant.

Unpublished opinions are not binding precedent in this circuit.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

                             OPINION

PER CURIAM:

  Grace Rutledge appeals the district court’s order reversing the
Bankruptcy Court and ruling that 11 U.S.C.A. § 523(a)(6) (West 1993
& Supp. 2004) precluded the discharge of an attorney’s fees award.
Finding no error, we affirm.

                                  I.

   Grace and Preston Rutledge are former spouses. As part of their
divorce proceedings, the Rutledges hotly litigated the question of who
would retain custody of their two children. Over the course of the
trial, Ms. Rutledge made numerous allegations that Mr. Rutledge had
sexually abused one or both of the children. Mr. Rutledge denied the
allegations and stated that Ms. Rutledge’s purpose in making the false
allegations was to punish Mr. Rutledge. During his opening statement
in the divorce proceedings, Mr. Rutledge’s attorney stated that Ms.
Rutledge had made the false allegations because she "hate[d] Preston
Rutledge," J.A. 19, and because she was "desperate to construct a case
to satisfy her desire to punish and convict her husband." J.A. 20. The
Arlington County Circuit Court judge indicated his agreement with
Mr. Rutledge’s theory of the case and adopted the opening statement
of Mr. Rutledge’s attorney, stating: "The mother has a highly
financed campaign invested in destroying the father," J.A. 20, and
that "[t]he opening statement by [Mr. Rutledge’s counsel] . . . almost
made you wince; it was so hard, so cruel; but then it was proven by
                             IN RE: RUTLEDGE                              3
the evidence." J.A. 20. The Circuit Court judge also noted that Ms.
Rutledge’s actions were "so malicious, so off the charts, so self-
serving . . . . I do not hold the mother innocent . . . . [Her] hatred . . .
[is] such that she cannot stop; she cannot say anything good about"
Mr. Rutledge]. J.A. 21.

   As a result of these proceedings, the judge awarded custody of one
child to Mr. Rutledge and custody of the other child to Ms. Rutledge.
Mr. Rutledge requested an award of attorney’s fees for constantly
having to defend himself from what he claimed were Ms. Rutledge’s
malicious charges regarding abuse of their children. The judge
awarded Mr. Rutledge $65,000 to cover part of his attorney’s fees in
the custody litigation. In awarding the fees to Mr. Rutledge, the judge
stated, "[I] believe that [Ms. Rutledge] should pay $65,000 in legal
fees and costs, because I don’t find that so much of what happened
in this case was to protect the children; it was to get the father." J.A.
22.

   On October 16, 2001, Ms. Rutledge filed for bankruptcy. On Janu-
ary 14, 2002, Mr. Rutledge filed a complaint in Bankruptcy Court
requesting a denial of discharge for attorney’s fees award. Specifi-
cally, Mr. Rutledge argued that discharge of Ms. Rutledge’s $65,000
debt should be denied under 11 U.S.C.A. § 523(a)(6), which provides,
in pertinent part, that "[a] discharge . . . does not discharge an individ-
ual debtor from any debt . . . for willful and malicious injury by the
debtor to another entity or to the property of another entity." Mr. Rut-
ledge contended that Ms. Rutledge willfully and maliciously injured
him with her baseless allegations of child sexual abuse during the cus-
tody dispute that gave rise to the legal fees. He argued that the state
court that heard the custody matter found this to be true and, there-
fore, Ms. Rutledge was collaterally estopped from contesting that
finding in Bankruptcy Court. In the alternative, Mr. Rutledge argued
that the evidence in the record warranted a finding that Ms. Rutledge
willfully and maliciously injured him during the child custody matter
that was litigated in state court.

   The Bankruptcy Court denied Mr. Rutledge’s request for denial of
discharge. On appeal, the District Court reversed the Bankruptcy
Court and ruled that the award was not subject to discharge under
4                           IN RE: RUTLEDGE
Section 523(a)(6). Ms. Rutledge now appeals and seeks reinstatement
of the Bankruptcy Court’s judgment discharging the attorney’s fees.

                                   II.

  For the fee award to be non-dischargeable, Mr. Rutledge must
prove willful and malicious injury by a preponderance of the evi-
dence. Grogan v. Garner, 498 U.S. 279, 288 (1991). Mr. Rutledge
contends that the state court finding establishes malice, and that Ms.
Rutledge is collaterally estopped from challenging that finding.

   In Grogan v. Garner, the Supreme Court concluded that principles
of collateral estoppel apply in dischargeability proceedings. Id. at 284
n.11 (stating that "collateral estoppel principles do indeed apply in
discharge exception proceedings pursuant to section 523(a)"). Apply-
ing Virginia’s law of collateral estoppel, Hagan v. McNallen (In re
McNallen), 62 F.3d 619, 624 (4th Cir. 1995) (explaining that "the
forum state’s law of collateral estoppel applies in determining the dis-
chargeability of debt"), the district court stated that in order to estab-
lish that Ms. Rutledge is collaterally estopped from challenging the
state court’s finding of malice, Mr. Rutledge must demonstrate that:
(1) the parties to the two proceedings, or their privies, were the same;
(2) the factual issues sought to be litigated actually were litigated in
the prior action and were essential to the prior judgment; and (3) the
prior action resulted in a valid final judgment against the party sought
to be precluded in the present action. TransDulles Center v. Sharma,
472 S.E.2d 274, 275 (Va. 1996). The district court noted that the first
and third elements of the test were clearly satisfied. The district court
went on to conclude that the second element was also satisfied: the
issue of willful and malicious injury was actually litigated and was an
essential part of the state court’s order awarding attorney’s fees. This
was more than evidenced by the court’s statements, including its com-
ment that Ms. Rutledge had engaged in a "highly financed campaign
invested in destroying the father." J.A. 20.

                                   III.

   We have carefully reviewed the record and considered the parties’
arguments, as set forth in their briefs and as made at oral argument.
                           IN RE: RUTLEDGE                           5
We conclude that the district court correctly decided the issues before
it. Accordingly, we affirm on the reasoning of the district court.

                                                          AFFIRMED