Kvassay v. Kvassay (In re Kvassay)

Ninth Circuit Bankruptcy Appellate Case No. CC-15-1420-KiTaKu (October 6, 2106) Not for Publication
The Bankruptcy Appellate Panel affirmed the bankruptcy court's ruling denying Peter E. Kvassay ("Debtor") motion for order to show cause why Robert V. Kvassay ("Creditor") should not be sanctioned for allegedly violating the discharge injunction.
Procedural context:
Debtor pursued an order to show cause against Creditor. Without response from the Creditor or a hearing, the bankruptcy court entered an order denying Debtor's motion. Debtor appealed the ruling asserting that the bankruptcy court did not provide sufficient findings of fact to deny his motion, and, the court abused its discretion in denying the Debtor's motion.
Sometime in 2007, the Debtor, Creditor, and their brother's parents passed away. A trust was created to hold real property in California referred to as the Hill Drive Property. The Debtor, Creditor, and their brother each held a 1/3 beneficial interest in the Hill Drive Property. The Debtor and brother have both lived in the Hill Drive Property since the 1980's. originally the Debtor was the trustee of the trust that held the Hill Drive Property, the Debtor would resign and Creditor stepped into the role as trustee. The three brothers agreed to enter into a "Work Plan" wherein the Hill Drive Property (that was in severe disrepair) would be repaired and then sold. Creditor extended hundreds of thousands of dollars in the repair. Unknown to Creditor, Debtor represented that he was the trustee and entered into a $1.5 millions loan encumbering the Hill Drive Property. Upon creditor discovering this, he requested an accounting - Debtor could not account for approximately $800,000 of the loan. Creditor commenced a suit against Debtor and their brother to remove them from the Hill Drive Property and for the value of the loan. Debtor commenced a Chapter 7 bankruptcy. Creditor sought and obtained relief from the automatic stay to continue with state court and related probate proceedings related to the claim(s) against Debtor. Creditor also timely commenced an adversary seeking to except the Creditor's and/or the trust's claims against Debtor from discharge pursuant to 11 U.S.C. Sec. 523. Prior to the state court entering the judgment in favor of creditor against Debtor, the Court entered the Debtor's discharge. However, the discharge order (on the back of the order) provides that the discharge does not include those set forth in Sec. 523. The Debtor asserted that because the bankruptcy court entered the discharge prior to the state court entering the judgment against the Debtor that the debts were discharged; therefore, Creditor was violating the discharge injunction as provided in 11 U.S.C. Sec. 524. The Bankruptcy Appellate Panel agreed with the Bankruptcy Court's analysis, taking into consideration, the transcript from the oral argument related to the Creditor's motion for summary judgment in the adversary seeking exception of the Debtor's discharge.

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