578 B.R. 505
Bankr. S.D.N.Y.2017Background
- Borges, a Venezuelan national, was placed in removal proceedings in 1997; after marrying a U.S. citizen he sought adjustment of status but, on advice from Entra America employee Adela Ivan, missed a February 3, 1998 hearing and was ordered removed in absentia.
- Placeres was the attorney of record (though he never met Borges); Ivan acted as his employee/paralegal and told Borges he did not need to attend the hearing because filings were in order.
- Placeres filed a deficient initial motion to reopen; a later motion alleging ineffective assistance and fraud was denied by the Immigration Court and affirmed by the BIA; Borges spent 14 months detained before the Third Circuit remanded and the in absentia order was ultimately vacated.
- Borges sued Placeres for legal malpractice in state court and obtained a $1,250,206 judgment (including $900,000 for pain and suffering) based on failures including advice not to attend the hearing and inadequate post‑hearing motions; judgment was affirmed on appeal.
- Placeres filed Chapter 7 bankruptcy in 2015 but did not schedule the malpractice claim as an asset and testified at his §341 meeting that he had no malpractice claim; after the trustee abandoned the claim to him, he amended schedules to list it for $1.
- Borges brought this adversary proceeding seeking (inter alia) nondischargeability under §523(a)(6) for willful and malicious injury and denial of discharge under §727(a)(4)(A) for knowingly false statements/omissions; the court tried Counts III (§523(a)(6)) and IV (§727(a)(4)(A)).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether debt is nondischargeable under §523(a)(6) for willful and malicious injury based on Ivan’s instruction that Borges skip the hearing | Borges: Ivan’s instruction caused deportation and should be imputed to Placeres (or Placeres was personally involved), satisfying willful intent | Placeres: He neither told Ivan to give that instruction nor knew of it; willfulness cannot be imputed from an agent’s conduct under §523(a)(6) | Court: Dismissed — plaintiff failed to prove Placeres’ subjective willful intent; intent of agent cannot be imputed for §523(a)(6) |
| Whether filing the deficient First Motion to Reopen constituted willful and malicious injury under §523(a)(6) | Borges: The motion was knowingly deficient and intended to fail, causing harm | Placeres: The omission was negligent; he lacked intent to injure and did not know facts (e.g., Ivan’s role) at the time | Court: Dismissed — negligent conduct insufficient; no evidence of subjective intent to injure |
| Whether Placeres’ statements to the Disciplinary Committee were knowingly false and caused the denial of relief (relevant to §523(a)(6)) | Borges: Placeres lied to disciplinary authorities, those false statements led to denial of the reopen motion and injury | Placeres: He believed his statements to be true; he did not knowingly make false statements and his statements were not the cause of the denial | Held: Dismissed — plaintiff failed to show the specific disciplinary statements were knowingly false or that Placeres intended the consequential injury |
| Whether Placeres should be denied a general discharge under §727(a)(4)(A) for failing to disclose the malpractice claim and making false statements at the §341 meeting | Borges: Placeres knowingly omitted a material asset (the malpractice claim) and lied at the §341 meeting to protect trial counsel | Placeres: He genuinely believed (or claimed to believe) he had no malpractice claim at the time and only learned otherwise later | Court: Held for Borges — discharge denied under §727(a)(4)(A); debtor knowingly omitted material asset and his explanations were not credible |
Key Cases Cited
- Kawaauhau v. Geiger, 523 U.S. 57 (1998) (willful and malicious standard for nondischargeability requires deliberate intent to injure)
- Grogan v. Garner, 498 U.S. 279 (1991) (burden of proof in nondischargeability and discharge objections is preponderance of the evidence)
- Bullock v. BankChampaign, N.A., 569 U.S. 267 (2013) (construing exception to discharge narrowly)
- In re Furio (Bethpage Fed. Credit Union v. Furio), 77 F.3d 622 (2d Cir. 1996) (exceptions to discharge construed narrowly)
- Navistar Financial Corp. v. Stelluti (In re Stelluti), 94 F.3d 84 (2d Cir. 1996) (malice may be implied where act is contrary to duties and injurious)
- Cowin v. Countrywide Home Loans, Inc. (In re Cowin), 864 F.3d 344 (5th Cir. 2017) (§523(a)(6) requires action by the debtor personally)
- In re Chavin, 150 F.3d 726 (7th Cir. 1998) (reckless indifference to truth equals fraud for §727 purposes)