Keith v. Exchange Bank (In re Keith)

Summarized by Richard Corbi , Otterbourg P.C.
12 years 5 months ago

Citation:

B.A.P. 9th Cir. Oct. 3, 2013 (Not for Publication)

Tag(s):

Ruling:

The Bankruptcy Appellate Panel of the Ninth Circuit held that the lender did not meet its burden of proof to establish that a portion of the debt owed by the debtor was nondischargeable under a theory that was not contemplated by the lender.

Procedural context:

The Bankruptcy Appellate Panel of the Ninth Circuit REVERSED the Bankruptcy Court for the Northern District of California.

Facts:

The Debtors had received a tax refund and did not disclose it to the their lenders during workout negotiations. The Debtor transferred some of the tax refund to another party to "hold" for the Debtor. The lender brought an adversary proceeding against the Debtor arguing that the debt was nondischargeable, but the lender did not reference a specific code section. The Debtor moved to dismiss the complaint because it did not know which section of the Bankruptcy Code the lender was relying on. The Bankruptcy Court entered a judgment in favor of the lender under section 523(a)(6), a claim for relief not asserted by the lender in its pleadings. The Bankruptcy Appellate Panel reversed the Bankruptcy Court decision on the grounds that it prejudiced the Debtor and the Debtor did not have the opportunity to put forth a defense to the 523(a)(6) ruling.

Judge(s):

Dunn, Pappas and Jury

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