502 B.R. 458
Bankr. W.D. Va.2012Background
- Knight obtained a judgment against Eppard for $14,890 and sought tax-refund turnover under court orders.
- Rockingham General District Court ordered turnover of 2010 and 2011 tax refunds citing Virginia Code § 8.01-507; debtor was advised to turn funds over to plaintiff’s counsel.
- Debtor received 2010 and 2011 refunds but did not turn them over; a second similar order was entered in January 2012.
- Knight argued the orders created a lien on future tax refunds and converted funds if not turned over.
- Debtor argued the levy orders were advisory and the refunds were not in her possession, so no conversion occurred.
- Court sua sponte determined Knight lacked a property interest in future refunds and that, even if conversion occurred, there was insufficient evidence of willful and malicious injury.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Knight had a property interest in future tax refunds. | Knight asserts the orders created a lien on refunds. | Debtor argues there was no possession or control, so no property interest. | Knight had no property interest; no conversion. |
| Whether debtor's failure to turn over refunds constitutes willful and malicious injury under 523(a)(6). | Knight contends debtor intended to injure by not paying refunds. | Debtor contends lack of proven intent; orders violated but not malicious. | Insufficient evidence of willful and malicious injury; no exception to discharge. |
| Whether the state court orders created a lien or conveyed property rights in refunds. | Orders created a lien on refunds. | Orders were advisory when funds were not in debtor’s possession. | No lien on future refunds; orders did not convey property interest. |
Key Cases Cited
- Davis v. Aetna Acceptance Co., 293 U.S. 328 (1934) (willful and malicious injury requires purposeful conversion or injury with intent)
- Geiger v. Kawaauhau, 523 U.S. 57 (1998) (requires willful injury; strict intent to harm not required but substantial certainty or motive is considered)
- In re Parks, 91 Fed.Appx. 817 (4th Cir.2003) (debtor's state of mind shown circumstantially in 523(a)(6) cases)
- In re Wilkinson, 196 B.R. 311 (Bankr.E.D.Va.1996) (seizure of property via writ when property not in debtor's hands may require garnishment)
- In re Dunlap, 458 B.R. 301 (Bankr.E.D.Va.2011) (property interest requirement for 523(a)(6) applicability)
- United States f/u/o Global Bldg. Supply, Inc. v. Harkins Builders, Inc., 45 F.3d 830 (4th Cir.1995) (writ of fieri facias creates lien only to debtor’s possessory interests)
- Davis v. Aetna Acceptance Co., 293 U.S. 328 (1934) (superseding reference for conversion concept)