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Summarizing by Shane Ramsey


Summarizing by Bradley Pearce

In re Lisa Garcia

Case Type:
Case Status:
United States Bankruptcy Appellate Panel Case Nos. CC-19-1214-SGF and CC-19-1232-SGF (9th Circuit, Sep 01,2020) Not Published
The Bankruptcy Appellate Panel vacated the Bankruptcy Court's Ruling excepting from discharge creditor's claim pursuant to 11 U.S.C. 523(a)(6), and, remanded the matter to the Bankruptcy Court to clarify, in the absence of issue preclusion, if the admissible evidence established the Debtor acted willfully and maliciously within 11 U.S.C. 523(a)(6). The Bankruptcy Appellate Panel affirmed the Bankruptcy Court's ruling denying creditor's claim under 11 U.S.C. 523(a)(2)(A).
Procedural context:
Creditor timely commenced an adversary proceeding seeking to except from discharge a judgment obtained in state court prior to the Debtor commencing her Chapter 7 Bankruptcy. The Bankruptcy Court held an evidence hearing to consider the creditor's claims under 11 U.S.C. Sec. 523(a)(6) and 523(a)(2)(A). The parties stipulated to numerous admitted facts. The Bankruptcy Court admitted the state court trial transcript into evidence. The Bankruptcy Court entered its ruling determining that the obligations due to creditor were excepted from discharge under 11 U.S.C. 523(a)(6) based upon finding that the jury in the state court matter determined that the Debtor willfully injured the Creditor. However, the Bankruptcy Court denied Creditor's claim under 11 U.S.C. 523(a)(2)(A). The Bankruptcy Court determined that nothing in the state court trial transcript established that the jury found the Debtor acted with intent to deceive. Thus, the claim under 11 U.S.C. 523(a)(2)(A) was denied. The Debtor appeal; and Creditor cross-appealed the respective adverse rulings.
The Debtor and Creditor were previously engaged and lived in Tennessee. Debtor loaned Creditor approximately half of the funds Creditor needed to purchase a grocery store. Approximately four years later, Debtor moved to New York to attend school and Creditor enlisted in the United States Army. Prior to deployment Creditor executed a general power of attorney and left Creditor vehicle with Debtor for use. Vehicle had always been titled in the name of the creditor. Shortly after Creditor's return from deployment, Debtor withdrew $76,134.10 from the parties' joint bank account without creditor's knowledge. Additionally Debtor changed title to the vehicle, previously in creditor's name, into her own name. Thereafter Debtor relocated. Creditor commenced a lawsuit in Arizona seeking recovery of the funds and the vehicle. Debtor responded and alleged counter claims. The matter was presented to a jury wherein the jury found the Debtor converted $10,900 and the vehicle. The jury further determined that the debtor was liable for the $76,134.10 under the theory of constructive fraud; and, awarded punitive damages. The punitive damages was based on the jury determining that the Debtor acted with an evil mind and committed fraud against the creditor. The jury instruction was clear that the intent deceive was not required in order to establish constructive fraud. Creditor pursued the exception of Debtor's discharge under the theory of issue preclusion based on the state court trial.
Honorable Spraker, Gan, and Faris

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