Maxfield v. Jennings (In re Jennings)

Summarized by Kathleen DiSanto , Bush Ross, PA
14 years 1 week ago

Citation:

Case No. 11-11422 (11th Cir. Feb. 22, 2012)

Tag(s):

Ruling:

The Eleventh Circuit determined that because a creditor obtained a fraudulent transfer judgment containing a finding that a chapter 7 debtor intended to prevent the creditor from satisfying personal injury claim by transferring real property, the fraudulent transfer of the real property was a willful and malicious injury to the creditor or his property that was non-dischargeable under Section 523(a)(6) of the Bankruptcy Code.

Procedural context:

Appeal of the United States District Court for the Middle District of Florida's order directing the bankruptcy court to enter judgment in favor of creditor Brandon James Maxfield based on the district court's determination that the debtor's debt arising from a fraudulent transfer judgment was non-dischargeable pursuant to Section 523(a)(6) of the Bankruptcy Code. The Eleventh Circuit affirmed the district court's ruling.

Facts:

Creditor, Brandon James Maxfield ("Maxfield"), was paralyzed as a result of the accidental discharge of a handgun manufactured by Bryco Arms, Inc. (the "Manufacturer"), and distributed by B.L. Jennings, Inc. (the "Distributor"). Both the Manufacturer and the Distributor were controlled by Janice K. Jennings' (the "Debtor") former spouse, Bruce Jennings ("Jennings"). In May 2001, Maxfield initially commenced a personal injury action in California state court against the Manufacturer, Distributor, and Jennings, and in December 2001, Maxfield amended his complaint to add the Debtor, Anna Leah Jennings (Jennings' third ex-wife), and RKB Investments ("RKB") as defendants based on joint venture, partnership, and alter ego theories. RKB held title real property that shall be referred to as "Shoreview." In February 2002, as co-trustee of the three trusts that were partners of RKB (the "RKB Trusts"), Jennings instructed the Debtor (who was also a co-trustee of the RKB Trusts) to execute a deed on behalf of RKB transferring the Shoreview property to Anna Leah Jennings. Maxfield subsequently learned of the transfer and filed another complaint asserting fraud, conspiracy, and fraudulent transfer claims against the Debtor, RKB, and the RKB Trusts. On May 13, 2003, a California jury found the Manufacturer, the Distributor, and Jennings liable for Maxfield's injuries and awarded him $24,774,146.53 in damages. The joint venture, partnership, and alter ego claims remained unadjudicated. The Debtor, along with Jennings, the Manufacturer, the Distributor, and RKB sought relief under chapter 11 of the Bankruptcy Code the following day. The Debtor's case was subsequently converted to chapter 7. The Debtor commenced an adversary proceeding seeking a determination as to what assets were available for administration to creditors. Both of Maxfield's state court cases were transferred to the bankruptcy court. The bankruptcy court determined that the Debtor was jointly and severally liable for the damages awarded to Maxfield by the jury based on a joint venture theory. The court further ruled that the Debtor conspired with Jennings and RKB to fraudulently transfer Shoreview to Anna Leah Jennings, and was liable to Jennings' creditors for $3,900,000.00, the value of Shoreview, and found that she intended to transfer Shoreview to avoid creditors, including Maxfield. The Debtor failed to appeal this ruling, and Maxfield initiated an adversary proceeding against the Debtor to determine the non-dischargeability of the fraudulent transfer judgment under Section 523(a)(6). The Debtor sought to dismiss the complaint, and the bankruptcy court granted the motion. Maxfield appealed the bankruptcy court's ruling, and the district court reversed and remanded the proceeding to the bankruptcy court. The Debtor then filed a motion for summary judgment, which the bankruptcy court granted, and Maxfield again appealed. On appeal, in holding that the fraudulent transfer judgment against the Debtor was non-dischargeable, the district court found that the Debtor's active involvement in the fraudulent transfer satisfied the "willful and malicious" standard of Section 523(a)(6), and her actions were substantially certain to cause Maxfield injury.

Judge(s):

Barkett, Pryor, and Kravitch, Circuit Judges

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!