216 B.R. 34 (9th Cir.BAP (Cal.) 1997), 97-01284, In re Magno

Docket NºAdversary No. LA 97-01284-KM.
Citation216 B.R. 34
Party NameIn re Philip L. MAGNO, Debtor. Philip L. MAGNO, v. Dennis Ray RIGSBY, Jr., a minor; Crystal Cathleen Raine Rigsby, a minor; Brent William Rigsby, a minor; Trisha Rae Rigsby, by their Guardian ad Litem, George Moore; George Moore, as Special Administrator of the Estate of Dennis Ray Rigsby; Richard Halderman, Chapter 7 Trustee, Appellees. BAP No. CC
Case DateDecember 17, 1997
CourtUnited States Bankruptcy Courts, Ninth Circuit

Page 34

216 B.R. 34 (9th Cir.BAP (Cal.) 1997)

In re Philip L. MAGNO, Debtor.

Philip L. MAGNO,

v.

Dennis Ray RIGSBY, Jr., a minor; Crystal Cathleen Raine Rigsby, a minor; Brent William Rigsby, a minor; Trisha Rae Rigsby, by their Guardian ad Litem, George Moore; George Moore, as Special Administrator of the Estate of Dennis Ray Rigsby; Richard Halderman, Chapter 7 Trustee, Appellees.

BAP No. CC-97-1389-OMeH.

Bankruptcy No. LA 96-46967-KM.

Submitted Without Oral Argument 1

Adversary No. LA 97-01284-KM.

United States Bankruptcy Appellate Panel of the Ninth Circuit

December 17, 1997

on December 1, 1997.

Page 35

[Copyrighted Material Omitted]

Page 36

Mufthiha Sabaratnam, Sabaratnam & Associates, Los Angeles, CA, for Philip L. Mango, appellant.

Mark W. Waterman, Breidenbach, Buckley, Huchting, Halm & Hamblet, Los Angeles, CA, for Dennis Ray Rigsby, Jr., Crystal Cathleen Raine Rigsby, Brent William Rigsby, Trisha Rae Rigsby, and the estate of Dennis Ray Rigsby, appellee.

Before: OLLASON, MEYERS and HAGAN, Bankruptcy Judges.

OPINION

OLLASON, Bankruptcy Judge.

The debtor, Philip Magno ("Debtor"), has appealed the bankruptcy court's order allowing the plaintiffs/appellees, consisting of the minor Rigsby children by Guardian ad Litem, George Moore, and the Estate of Dennis Ray Rigsby by its Special Administrator, George Moore (together "Rigsby"), to file an amended complaint for nondischargeability. Debtor contends that the bankruptcy court erred by allowing the amended complaint, which added a count for nondischargeability of a debt pursuant to § 523(a)(6) 2, to relate back to the original complaint, which stated a cause of action for denial of Debtor's discharge pursuant to § 727(a). We REVERSE.

FACTS AND PROCEDURE

Debtor filed a voluntary Chapter 7 bankruptcy petition on November 6, 1996. In February, 1997, Rigsby filed a timely complaint for denial of Debtor's discharge pursuant to § 727(a)(2)(A) and (a)(4)(A). 3 The

Page 37

complaint alleged that Debtor fraudulently concealed particular assets by omitting them from his schedules and concealing their existence at the 341 meeting, and that he did so with intent to hinder, delay or defraud a creditor. The complaint stated that Rigsby had a $120,040 claim against Debtor's estate, but did not specify the facts underlying the claim.

The bar date for filing an action to determine the dischargeability of a debt under § 523 was February 11, 1997. Rigsby did not move for an extension of that deadline. On April 8, 1997, Rigsby filed a motion for leave to amend the § 727 complaint to add an alternate cause of action under § 523(a)(6), which excepts a debt from discharge if it is the result of the Debtor's "willful and malicious injury." 4

The amended complaint explained the basis for Rigsby's claim, as follows. In 1991, Rigsby obtained general verdicts in Los Angeles County Superior Court against Debtor for the shooting death of Dennis Rigsby consisting of $120,000 for wrongful death damages and $40,000 for property damages. The wrongful death verdict expressly found that under the clear and convincing standard Debtor had not acted with malice towards Dennis Rigsby. Copies of the general verdicts were attached. Rigsby's attorney filed an affidavit which explained why the § 523 count was not pleaded in the original complaint, as follows:

8. When I filed the operative Complaint against defendant, I did not believe that my clients had any viable recourse under 11 U.S.C. Section 523(a)(6). However, I have recently come to learn that a line of cases hold [sic] that an intentional tort judgment in state court may not be dischargeable under Bankruptcy law, even if malice was not found in the state court proceeding.

In addition, the affidavit alleged that Rigsby "had never been able to recover any proceeds from the defendant in satisfaction of the judgment" because Debtor had been "hiding various assets since 1991."

Debtor opposed the motion on the grounds that it was time barred under Fed.R.Bankr.P. 4007(c) and could not relate back to an action for discharge under § 727(a).

A hearing was held on the matter on April 30, 1997. Debtor argued to the court that a complaint pursuant to § 727 did not give him notice of issues involved in a § 523(a)(6) action. Therefore, he argued that the amended complaint should not relate back to the timely filed original complaint. Rigsby argued that both complaints involved the same debt.

The bankruptcy court ruled in favor of Rigsby, holding that a § 523 count was a "lesser-included" claim of a § 727 action because the former seeks to prevent discharge of a particular debt, whereas the latter seeks to prevent discharge of all debts. The court stated:

523 is kind of a lesser-included of 727 as far as the effect. That's why I think it relates back. I think the counsel for the Debtor has a point that ... the particular facts of the 523(a)(6), willful and malicious, there are some different factual elements.... But I think he was on notice.

On May 9, 1997, the bankruptcy court entered its order granting leave to amend. Debtor filed a timely notice of appeal on May 14, 1997.

ISSUE

The sole issue raised in this appeal is whether an amended complaint which adds a § 523(a)(6) claim for nondischargeability of a judgment debt resulting from prepetition conduct, which allegedly was willful and malicious, can relate back to a § 727(a) complaint which alleged only fraudulent concealment of assets, and false oath by Debtor in the bankruptcy case.

STANDARD OF REVIEW AND JURISDICTION

Leave to amend a complaint is generally within the discretion of the bankruptcy court and is reviewed under the abuse of

Page 38

discretion standard. In re Daisy Systems Corp., 97 F.3d 1171, 1175 (9th Cir.1996). Even under the abuse of discretion standard, the bankruptcy court's decision is reversible if it is based upon an incorrect legal conclusion. In re Dominguez, 51 F.3d 1502, 1508 n. 5 (9th Cir.1995). Whether an amendment relates back to the date of the original pleading under Fed.R.Civ.P. 15(c)(2) is a legal question which we review de novo. Id. at 1509; Martell v. Trilogy Ltd., 872 F.2d 322, 325 (9th Cir.1989).

The Panel agrees with Rigsby's contention on appeal that the order granting leave to amend was an unappealable, interlocutory order. See In re Travers, 202 B.R. 624, 625 (9th Cir. BAP 1996) (an order allowing an extension for filing a § 523 complaint was interlocutory). An interlocutory order is one "which does not finally determine a cause of action, but instead decides only an intervening matter." In re Kashani, 190 B.R. 875, 882 (9th Cir. BAP 1995). To become final, the order must end the litigation or dispose of a complete claim for relief, leaving nothing for the court to do but execute the judgment. Id. Here, the order granting leave to amend the...

To continue reading

Request your trial