In June 2007, the bankruptcy court ruled that the debtor participated in a joint venture with the original defendants. Therefore, she was jointly and severally liable with those parties for Maxfield’s damages. The court also found that the debtor was a conspirator with Bruce and RKB in the fraudulent transfer of Shoreview. Therefore, she was jointly and severally liable for the damages to Bruce’s creditors in the amount of $3.9 million. The debtor did not challenge this ruling.

In December 2007, Maxfield filed an adversary proceeding against the debtor alleging that his claim for Shoreview’s value was excepted from discharge pursuant to Section 523(a)(6) which is the intent to cause injury to another. The bankruptcy court granted the debtor’s motion to dismiss, finding that a conspiracy claim was not the type of intentional tort that gave rise to a non-dischargeable claim under Section 523(a)(6).

The district court reversed and remanded, finding that “in certain circumstances willful and malicious injury may be inflicted by a co-conspirator.”

On remand, the bankruptcy court granted the debtor’s motion for summary judgment. The court characterized the debt owed as the one resulting from the personal injury suit. Because Maxfield’s injury was not caused by the debtor, the court ruled that Maxfield’s claim against the debtor was not the result of her willful and malicious conduct. The court found that even though the debtor aided in transferring Shoreview with knowledge of the Maxfiled suit, her conduct and knowledge were “insufficient as a matter of law to establish intent to harm or cause injury to Maxfield as required by Section 523(a)(6).”

The district court REVERSED AGAIN, concluding that the evidence establishing a fraudulent transfer, also established that the debtor acted willfully and maliciously. The 11th Circuit Court of Appeals agreed. Thus, a fraudulent transfer of property by a co-conspirator constituted willful and malicious injury.

Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally.  Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.

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