Gerard v. Gerard

Summarized by Lars Fuller , BakerHostetler
10 years 11 months ago

Citation:

Gerard v. Gerard, No. 14-1496 (7th Cir. Mar. 12, 2015)

Tag(s):

Ruling:

The 7th Circuit reversed the U.S. District Court (E.D. Wis.), which had affirmed the bankruptcy court's entry of judgment of nondischargeability under 11 USC 523(a)(6)(willful and malicious injury) after giving preclusive effect to state court trial verdict in favor of creditors. Seventh Circuit ruled that jury verdict, which found debtor liable for slander of title because debtor "knew or should have known" that lien filing was sham did not satisfy requisite intent requirement for willful and malicious injury. Requisite intent required finding that debtor had "knowledge of its falsity or reckless disregard of whether it was false." State court jury did not factually determine if debtor had acted with knowledge or reckless disregard of lien falsity. Seventh Circuit remanded to bankruptcy court to decide if debtor knew of falsity of lien or had reckless disregard to whether lien filing was false, such that debtor's slander of title constituted "willful and malicious" within meaning of 11 USC 523(a)(6).

Procedural context:

Creditors filed suit to except debt from discharge in debtor's Chapter 7 bankruptcy, and bankruptcy court entered summary judgment in favor of creditors. Debtor appealed to U.S. District Court, which affirmed. Debtor appealed to Seventh Circuit.

Facts:

Family dispute began when debtor sought to buy vacant parcel of real property with loan from his brother and brother's wife ("Brother & Wife"). Brother & Wife purchased the lot in their name with oral agreement with debtor that debtor would pay expenses on the lot and make payments to acquire the lot. Debtor made payments totaling approximately $55,000 to Brother & Wife (approximately 5% of the purchase price), but disputes arose, and Brother & Wife sought to sell lot to third party. Debtor tampered with "For Sale" signs and recorded a "Memorandum of Interest" in the real property records asserting that he was the equitable owner of the lot. After Brother & Wife were unable to sell lot, they filed suit in state court to quiet title. Debtor testified that he recorded lien in order to impair Brother & Wife's ability to sell lot and to require any potential purchaser to pay him to obtain lien release. Jury was presented with special verdict forms seeking finding as to whether debtor "knew or should have known" that contents of his recording were "false, a sham, or frivolous." Jury responded "Yes." Jury was also presented with special verdict form seeking finding as to whether debtor had a "reasonable ground for believing the truth of all the contents" of his recording. Jury responded "No." State court entered judgment against debtor, awarding damages of $280,000, plus $1,000 in punitive damages. Debtor filed bankruptcy under chapter 11, seeking to discharge judgment. Brother & Wife commenced dischargeability action under 523(a)(6) seeking to except judgment from discharge.

Judge(s):

Manion, Rovner, and Hamilton

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!