In re: Patricia Marcello Anderson and Anthony Marcus Anderson
AZ-17-1071-FSKu
| 9th Cir. BAP | Nov 7, 2017Background
- Patricia and Anthony Anderson recorded two lis pendens against CWB’s Scottsdale property after a disputed alleged purchase; CWB later acquired the property and sued for wrongful recordation.
- State court consolidated actions, granted summary judgment against the Andersons on the specific performance claim, and ordered removal of the lis pendens; the Andersons delayed removal and were later found liable under Ariz. Rev. Stat. § 33-420, with treble damages awarded to CWB.
- The Arizona Court of Appeals affirmed the wrongful recordation judgment against the Andersons (though it vacated portions of the specific-performance judgment as to the Andersons personally at one point).
- The Andersons filed Chapter 7 bankruptcy; CWB sought a nondischargeability determination under 11 U.S.C. § 523(a)(6) (willful and malicious injury), arguing issue preclusion from the state judgment or, alternatively, that undisputed facts established nondischargeability.
- The bankruptcy court granted partial summary judgment for CWB on elements of § 523(a)(6) but reserved the scienter (mental state) issue for trial because the Andersons asserted reliance on advice of counsel.
- After trial the bankruptcy court found the Andersons lacked the requisite willful and malicious intent because they credibly relied in good faith on advice of counsel; the BAP affirmed.
Issues
| Issue | CWB's Argument | Andersons' Argument | Held |
|---|---|---|---|
| Whether issue preclusion foreclosed relitigation of scienter for § 523(a)(6) | State judgment under § 33-420 established willful and malicious conduct; preclusion applies | State judgment did not decide scienter (or special circumstances counsel against preclusion); reliance on counsel not decided by state court | BAP: No error — bankruptcy court permissibly declined to apply issue preclusion to scienter (Arizona law allows discretionary refusal in special circumstances) |
| Whether Andersons acted with "willful and malicious" intent under § 523(a)(6) | Andersons’ refusal to remove lis pendens after court order constituted willful and malicious injury; nondischargeable | Andersons relied in good faith on advice of counsel, negating requisite mental state | BAP: Affirmed — factfinder reasonably credited advice-of-counsel reliance and good faith, so scienter not established; dismissal of § 523(a)(6) claim affirmed |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (issue preclusion applies in nondischargeability litigation)
- Barboza v. New Form, Inc. (In re Barboza), 545 F.3d 702 (9th Cir.) (definition of willful under § 523(a)(6))
- Anderson v. City of Bessemer City, 470 U.S. 564 (standard for clear error review of factual findings)
- Petralia v. Jercich (In re Jercich), 238 F.3d 1202 (9th Cir.) (definition of malicious under § 523(a)(6))
- First Beverly Bank v. Adeeb (In re Adeeb), 787 F.2d 1339 (9th Cir.) (advice-of-counsel can negate fraudulent intent if reliance is in good faith)