Case Type:
Case Status:
MB 16-044 (1st Circuit, Sep 06,2017) Published
In a sad tale of family discord and proof of the adage that "no good deed goes unpunished," the BAP affirmed the bankruptcy court's judgment that the debtor's obligations to her daughter and son-in-law were nondishargeable under § 523(a)(2)(A). The bankruptcy court's finding that the debtor's actions were fraudulent was not clearly erroneous.
Procedural context:
The bankruptcy court conducted a trial on the Whitcomb's § 523(a)(6) complaint against the Ms. Whitcomb's mother, the debtor. At the conclusion of the trial, the bankruptcy court found that the debtor's testimony was inconsistent and that she was not credible. The court thus granted the Whitcomb's judgment under § 523(a)(6). In addition, the bankruptcy court concluded that the evidence adduced at trial was sufficient to enter a nondischargability judgment against the debtor under § 523(a)(2)(A). The debtor appealed.
Mary Smith and late husband asked their daughter, Kathleen Smith Whitcomb, and her husband, to move into the Smiths' house. The Whitcombs built an addition to the house, which they paid for themselves. In consideration, the Smiths agreed to convey title to the house to the Whitcombs. The Smiths never transferred title to the Whitcombs, and Ms. Smith incurred $270,000 additional mortgage debt without informing the Whitcombs. The Whitcombs moved out of the house due to a family dispute. The Whitcombs sued Ms. Smith in Massachusetts state court in 2009 regarding Ms, Smith's failure to transfer title to her house to her daughter and son-in-law. A judgment was entered in favor of the Whitcombs in 2014. The Whitcombs asked that the court amend the judgment because Ms. Smith had loaded the house with debt, thus making specific performance of little value. The state court amended the judgment in 2015. One option under the amended judgment was that the Whitcombs could have money judgment against Ms. Smith if they vacated the house. Three months later Ms. Smith filed a Chapter 7 petition. She continued to reside in the house and to hold title to the house. The Whitcombs obtained relief from stay to file the amended judgment, and then filed a complaint against Ms. Smith. The only issue at trial was whether the money judgment was nondischargeable under § 523(a)(6) as an obligation resulting from a willful and malicious injury. At trial the Whitcombs appeared pro se. Ms. Smith was represented by counsel. Another of her daughters was called as a witness on Ms. Smith's behalf. In a sad moment for that family, Kathleen Whitcomb cross-examined her 81 year old mother. The bankruptcy court, echoing the Massachusetts state court, found that Ms. Smith's testimony was inconsistent and not credible. The bankruptcy court found that Ms. Smith's actions in further encumbering the house without telling the Whitcombs evidenced malice. The bankruptcy court thus ruled that Ms. Smith's obligations to the Whitcombs was nondischargeable under § 523(a)(6) and § 523(a)(2)(A), even though the Whitcombs' complaint did not include a § 523(a)(2)(A) claim for relief.
DEASY, CARY, FAGONE, United States Bankruptcy Appellate Panel Judges

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