Jenkins v. Mitelhaus (In re Jenkins and Ramey)
- Citation:
- Jenkins v. Mitelhaus (In re Jenkins and Ramey), BAP Nos. CC-14-1185-PaTaD, CC-14-1258-PaTaD (Cross-Appeals) (B.A.P. 9th Cir. Feb. 20, 2015)
- Tag(s):
-
- Ruling:
- REVERSING, in part, the bankruptcy court's judgment determining that Debtors' debt to real estate salesperson was excepted from discharge under section 523(a)(4), AFFIRMING the bankruptcy court's judgment determining that such debt was excepted from discharge under section 523(a)(6), and AFFIRMING the bankruptcy court's judgment determining amount of non-dischargeable debt and that Debtor Ramey was not liable for such debt.
Jenkins's decision to withhold payment of the debt, while wrongful, was not a felonious taking for purposes of the federal standard for larceny under section 523(a)(4). The bankruptcy court's findings that Jenkins committed a willful and malicious injury to creditor by withholding commissions from him were not clearly erroneous, and thus, the bankruptcy court did not err in determining that the debt was excepted from discharge under section 523(a)(6). The bankruptcy court did not err when it exercised its independent judgment and determined that defense costs incurred by creditor were in the nature of a debt that were dischargeable. The bankruptcy court also did not err in deciding that Jenkins's subjective malicious intent could not be imputed to Ramey for purposes of establishing her liability under section 523(a)(6).
- Procedural context:
- The bankruptcy court entered judgment against Debtors determining that Debtor Jenkins's debt owed to creditor was excepted from discharge under section 523(a)(4) and (a)(6). Debtors appealed judgment, and creditor cross-appealed the bankruptcy court's determination of the amount of the non-dischargeable debt and whether Debtor Ramey was also liable for such non-dischargeable debt.
- Facts:
- Debtors owned a real estate brokerage. The brokerage entered into an independent contractor agreement with creditor, who performed work for brokerage in exchange for commissions generated from creditor's efforts to sell or lease real estate. After brokerage terminated its relationship with creditor, a third party sued brokerage and Debtors in connection with a lease transaction. Creditor was forced to defend himself and incurred substantial legal fees in doing so, as brokerage allowed its errors and omissions policy to lapse for failure to pay premiums. Creditor sued brokerage in state court for withheld commissions, costs of defense, and related claims. The dispute was submitted to arbitration, which yielded an award in creditor's favor that was confirmed in state court. Debtors filed a joint petition under chapter 7 and disclosed an unsecured debt owed to creditor arising from the state court judgment. Creditor initiated an adversary proceeding against Debtors seeking a judgment that the state court judgment was excepted from discharge under section 523(a)(4) and (a)(6).
- Judge(s):
- PAPPAS, TAYLOR, and DUNN
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