Zeeb v. Farah (In re Zeeb)

Summarized by Joel Newell , Ballard Spahr, LLP
10 years 3 months ago

Citation:

Ninth Circuit Bankruptcy Appellate Case No. CC-15-1012-FKiKu (Not For Publication)

Tag(s):

Ruling:

The Bankruptcy Appellate Panel ("BAP") vacated the bankruptcy court's order holding that Samuel Farah's ("Appellee") debt owed by Kamal Zeeb ("Appellant") was nondischargeable. The pre-petition state court judgment entered pursuant to California law for conversion and breach of contract, alone, does not necessarily equate to willful and malicious injury under 11 U.S.C. Sec. 523(a)(6).

Procedural context:

Appellant (and Debtor in Chapter 7 bankruptcy case) appealed the bankruptcy court's summary judgment excepting from discharge the obligation due to Appellee pursuant to the pre-petition state court judgment.

Facts:

Appellant and Appellee worked together in two businesses. Appellee managed the sales and accounts of the businesses, while Appellant managed the facilities and employees. Appellant was one of the named defendants in a pre-petition state court law suit commenced by the Appellee. Among the thirteen causes of actions asserted by Appellee, four of the allegations related to the assertion that while Appellee was out of the country, Appellant misappropriated inventory, cash, and other assets of the businesses. The jury rendered a special verdict; however, before final judgment could be entered Appellant filed Chapter 7 bankruptcy. Appellee obtained stay relief for purposes of entering the final judgment, and commenced an adversary proceeding against Appellant seeking to except the obligations due to Appellee as non-dischargeable. Appellee filed a Motion for Summary Judgment asserting that the collateral estoppel / issues preclusion precluded relitigating the issues adjudicated in the state court.

Judge(s):

FARIS, KIRSCHER, and KURTZ, Bankruptcy Judges.

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