Robinson, In re, 92-1199

• Citation: 987 F.2d 665
• Decision Date: 23 February 1993
• Docket Number: No. 92-1199,92-1199
• Parties: Bankr. L. Rep. P 75,171 In re Paul ROBINSON, Debtor. Paul ROBINSON, Appellant, v. Mary Elaine TENANTRY, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 665

987 F.2d 665

Bankr. L. Rep. P 75,171

In re Paul ROBINSON, Debtor.

Paul ROBINSON, Appellant, v. Mary Elaine TENANTRY, Appellee.

No. 92-1199.

United States Court of Appeals,

Tenth Circuit.

Feb. 23, 1993.

Stephen E. Berken, Berken and Associates, P.C., Denver, CO, for appellant.

Brian Holland, Holland, Seelen & Pagliuca, Denver, CO, for appellee.

Before LOGAN and MOORE, Circuit Judges, and LUNGSTRUM, ^* District Judge.

PER CURIAM.

Appellant Paul Robinson (debtor) appeals the district court's reversal of the bankruptcy court's finding that his Chapter 13 plan was proposed in good faith, which is a prerequisite to confirmation of a Chapter 13 plan. 11 U.S.C. § 1325(a)(3). On appeal, ¹ debtor argues that the district court (1) erred in considering whether debtor's debt arose from a willful and malicious injury because that issue was not raised in the bankruptcy court; (2) impermissibly made independent findings of fact, not supported by the record, in deciding the debt arose from a willful and malicious injury; and (3) erred in concluding that the bankruptcy court's finding of good faith was clearly erroneous, even assuming the debt arose from a willful and malicious injury. We exercise jurisdiction under 28 U.S.C. § 158(d) and reverse. We conclude the bankruptcy court was not clearly erroneous in finding debtor's plan was proposed in good faith.

I. Background

In February, 1990, Mary Tenantry, appellee, filed a civil suit against debtor, asserting claims of breach of fiduciary duty and outrageous conduct. Tenantry named Bishop William Frey and the Bishop and Diocese of Colorado as debtor's codefendants. Tenantry alleged that debtor took advantage of his position as pastoral counselor and engaged Tenantry in a sexual relationship. On August 15, 1991, four days before the trial was scheduled to begin, debtor filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code. The petition gave rise to an automatic stay which prevented the trial from proceeding against debtor. 11 U.S.C. § 362(a)(1).

The state court allowed the trial to proceed against all other defendants, however. A jury found in favor of Tenantry and awarded her 1.2 million dollars. Of this amount, $448,000 was based on the jury's findings that debtor breached a fiduciary duty to Tenantry, and that debtor's co-defendants were vicariously liable for the economic and noneconomic damages caused by the breach. Based on the jury verdict, Tenantry filed an amended "proof of claim" in bankruptcy court which estimated debtor's liability on the breach of fiduciary duty claim at $241,200--the amount the jury awarded in economic damages from debtor's breach. The form also stated that Tenantry would amend her proof of claim when she obtained judgment on her other claims against debtor. ²

Debtor, in his proposed Chapter 13 plan, sought to discharge any contingent liability which might arise as a result of Tenantry's suit against him. ³ Tenantry filed a written objection to confirmation of the plan, arguing, among other things, that the plan was not proposed in good faith. She argued that her claim against debtor could not be discharged had debtor filed bankruptcy under Chapter 7 instead of Chapter 13, "pursuant to 11 U.S.C. § 523(4) and (6)." ⁴ Objection to Confirmation of Plan and Request for Denial, Appellant's App. at 41. A debt is nondischargeable in Chapter 7 under § 523(a)(4) if it arose from debtor's fraud or defalcation while acting in a fiduciary capacity. Under § 523(a)(6) a debt arising from debtor's willful and malicious injury cannot be discharged in Chapter 7. Tenantry, in her written motion, offered no argument explaining how her claim against debtor would result in a nondischargeable debt under § 523(a)(4), (6).

At the confirmation hearing in bankruptcy court, Tenantry's counsel argued only that the debt arose through a breach of fiduciary duty; she did not specifically argue that the debt arose from a willful and malicious injury. Debtor's counsel, however, raised the willful and malicious injury issue in his opening and closing statements. Appellant's App. at 57-58, 153. He argued that the debt did not arise from an injury which would qualify as "willful and malicious" as that phrase has been defined by Farmers Insurance Group v. Compos (In re Compos), 768 F.2d 1155, 1158 (10th Cir.1985). The bankruptcy judge, ruling from the bench, did not discuss whether the debt arose from a willful and malicious injury. The judge considered the eleven factors set forth in Flygare v. Boulden, 709 F.2d 1344, 1347-48 (10th Cir.1983), and concluded that the plan was filed in good faith. Appellant's App. at 156-60.

Tenantry appealed to the district court, arguing, among other things, ⁵ that the bankruptcy court erred as a matter of law in refusing to consider whether Tenantry's claim arose from debtor's willful and malicious injury to Tenantry, under § 523(a)(6). The district court reversed the bankruptcy court's finding of good faith. The district court found that (1) Tenantry's claim would be nondischargeable under Chapter 7, because it arose from willful and malicious conduct; and (2) the timing of the bankruptcy petition was a special circumstance not adequately considered by the bankruptcy court. The district court found, further, that the timing of the petition on the eve of trial was a "bad faith effort to use Chapter 13 bankruptcy protection to avoid a court's potential judgment." Appellant's App. at 248. For all of these reasons the district court concluded the bankruptcy court was clearly erroneous in finding the plan was filed in good faith.

II. Analysis

Our review of the confirmation of debtor's Chapter 13 plan is governed by the same standards that governed the district court's review. Eastland Mortgage Co. v. Hart (In re Hart), 923 F.2d 1410, 1414 (10th Cir.1991) ("[T]his court has the same scope of review over bankruptcy court decisions as does the district court."). The bankruptcy court's legal determinations are reviewed de novo. First Bank v. Mullet (In re Mullet), 817 F.2d 677, 679 (10th Cir.1987). "[T]he district court as well as the court of appeals must accept the factual findings of the bankruptcy court unless they are clearly erroneous." Branding Iron Motel, Inc. v. Sandlian Equity, Inc. (In re Branding Iron Motel, Inc.), 798 F.2d 396, 399 (10th Cir.1986). " 'A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' " Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)).

Whether a Chapter 13 plan has been proposed in good faith is a question of fact subject to the clearly erroneous standard of review. Noreen v. Slattengren, 974 F.2d 75, 77 (8th Cir.1992); In re Love, 957 F.2d 1350, 1354 (7th Cir.1992); Society Nat'l Bank v. Barrett (In re Barrett), 964 F.2d 588, 591 (6th Cir.1992); Jim Walter Homes, Inc. v. Saylors (In re Saylors), 869 F.2d 1434, 1438 (11th Cir.1989); Downey Sav. & Loan Ass'n v. Metz (In re Metz), 820 F.2d 1495, 1497 (9th Cir.1987).

A determination of good faith must be made on a case by case basis, looking at the totality of the circumstances. Pioneer Bank v. Rasmussen (In re Rasmussen), 888 F.2d 703, 704 (10th Cir.1989). In evaluating whether a debtor has filed in good faith, courts should be guided by the eleven factors set forth in Flygare, 709 F.2d at 1347-48, ⁶ as well as any other relevant circumstances. ⁷ In re Rasmussen, 888 F.2d at 704. "[T]he weight given each factor will necessarily vary with the facts and circumstances of each case." Flygare, 709 F.2d at 1348.

Debtor argues that the bankruptcy court's failure to make findings on the issue of whether the debt arose from a willful and malicious injury cannot constitute clear error in this case because Tenantry failed to raise this issue to the bankruptcy court. We agree that Tenantry failed to raise this issue in the bankruptcy court.

Generally, a party who refers to an issue "in passing and fails to press it by supporting it with pertinent authority, or by showing why it is sound despite the lack of supporting authority, forfeits the point." Nunez-Pena v. INS, 956 F.2d 223, 225 n. 4 (10th Cir.1992). Here, Tenantry cited to the relevant subsection in her written motion, but she did so without any elaboration. ⁸ At the hearing, she never mentioned her theory that the debt arose from a willful and malicious injury, but argued at length that the debt was nondischargeable because it arose from a breach of fiduciary duty.

Tenantry maintains on appeal that she attempted to establish the nature of the debt that resulted from debtor's breach of fiduciary duty, but "[t]he bankruptcy court refused to hear such evidence, telling counsel for Appellee, 'I'm not going to try the state court suit here today.' " Appellee's Corrected Br. at 9. Indeed, the transcript reveals that the bankruptcy judge limited Tenantry's efforts to impeach debtor's account of his sexual contact with Tenantry. Debtor testified that Tenantry initiated the sexual contact and debtor tried to stop her. Tenantry cross-examined debtor, pointing out that at an earlier deposition debtor recollected the embraces were mutual. Such evidence, arguably, bears on whether debtor acted volitionally and deliberately, as required for a willful and malicious injury under § 523(a)(6). See C.I.T. Fin. Servs. Inc. v. Posta (In re Posta), 866 F.2d 364, 367 (10th Cir.1989).

When the bankruptcy judge allowed Tenantry to make an offer of proof, however, Tenantry did not argue that the evidence related to whether the injury was willful and malicious. Instead, she explained that

[o]bviously the Court's going to have to determine the credibility of this [debtor]. [Debtor's counsel]...