588 B.R. 122
Bankr. D. Idaho2018Background
- Bryan and Kristina Herrera (creditors) obtained a state-court judgment against debtor James H. Scott for abuse of process ($150,000) and breach of quiet enjoyment; judgment later amended to include fees and costs.
- Scott filed Chapter 7 bankruptcy; Herreras brought an adversary to except the $150,000 abuse-of-process award from discharge under 11 U.S.C. § 523(a)(6).
- The Herreras moved for summary judgment on nondischargeability; Scott opposed and submitted affidavits and exhibits; Herreras moved to strike portions of those affidavits.
- The bankruptcy court struck limited portions of the affidavits (statements lacking personal knowledge and hearsay) but allowed other contested statements and documents.
- Key legal question: whether the state-court abuse-of-process judgment establishes, via issue preclusion, that Scott’s conduct was "willful and malicious" under § 523(a)(6), so the debt is nondischargeable.
- Court found issue preclusion applicable as to willfulness but not as to malice (specifically the element that the wrongful act necessarily caused injury); summary judgment for Herreras was denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of affidavit statements | Strike challenged paragraphs as hearsay, lacking personal knowledge, or legal conclusions | Affidavits contain opposing-party statements or supporting documents; some statements based on personal knowledge | Court struck portions lacking personal knowledge and hearsay (Pamela Scott ¶¶5–7; Debtor ¶¶9,12); denied/sustained as to others and treated one as moot because document provided |
| Whether § 523(a)(6) nondischargeability is established by state-court judgment (issue preclusion) | Herreras: state jury’s abuse-of-process verdict necessarily proves willful and malicious injury; preclusion should apply | Scott: state findings are not identical to federal § 523(a)(6) elements; issues remain for this court | Issue preclusion applies to willfulness but not to maliciousness; Plaintiffs failed to carry burden for summary judgment |
| Whether the state-court findings establish "willful" under § 523(a)(6) | Jury found debtor committed a "willful act" in abusing process; that suffices for willfulness | Debtor argues no subjective intent to injure shown; willfulness under § 523(a)(6) requires subjective intent or substantial certainty of injury | Court held the jury finding supports willfulness (inference that debtor knew injury was substantially certain) |
| Whether the state-court findings establish "malicious" under § 523(a)(6) (necessity of injury) | Herreras: improper ulterior purpose and damages show malice (wrongful, intentional, no cause) | Scott: record does not show the injury was necessarily caused or that financial harm was certain or almost certain | Court held malice not established because the record does not show the injury was necessarily caused (third malice element unmet); summary judgment denied |
| Unclean-hands defense | N/A (Plaintiffs) | Scott: Plaintiffs acted improperly in prior proceedings and in this adversary; that bars equitable relief | Court rejected unclean hands defense as insufficiently connected to this proceeding; Plaintiffs may proceed |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden and standard)
- Anderson v. Liberty Lobby, 477 U.S. 242 (genuine issue and materiality standards for summary judgment)
- Grogan v. Garner, 498 U.S. 279 (burden of proof in dischargeability actions)
- Ormsby v. First Am. Title Co. of Nevada (In re Ormsby), 591 F.3d 1199 (definition of willful and malicious under § 523(a)(6))
- Petralia v. Jercich (In re Jercich), 238 F.3d 1202 (malice elements under Ninth Circuit law)
- Transamerica Commercial Fin. Corp. v. Littleton (In re Littleton), 942 F.2d 551 (financial-harm "certain or almost certain" test for necessity of injury)
- Murray v. Bammer (In re Bammer), 131 F.3d 788 (malice defined as wrongful act intentionally committed)
- Black v. Bonnie Springs Family Ltd. P’ship (In re Black), 487 B.R. 202 (B.A.P.) (abuse-of-process willfulness may align with § 523(a)(6) willfulness)