Adams, In re

• Decision Date: 29 May 1985
• Docket Number: No. 84-5877,84-5877
• Citation: 761 F.2d 1422
• Parties: 12 Collier Bankr.Cas.2d 1220, 13 Bankr.Ct.Dec. 346, Bankr. L. Rep. P 70,576 In re Robert Stephen ADAMS, Debtor. Betty Hilda Ida Koepke MORAES, Plaintiff-Appellee, v. Robert Stephen ADAMS, et al., Defendants. Robert Stephen Adams, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1422

761 F.2d 1422

12 Collier Bankr.Cas.2d 1220, 13 Bankr.Ct.Dec. 346,

Bankr. L. Rep. P 70,576

In re Robert Stephen ADAMS, Debtor Betty Hilda Ida Koepke MORAES, Plaintiff-Appellee, v. Robert Stephen ADAMS, et al., Defendants Robert Stephen Adams, Defendant-Appellant.

No. 84-5877.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 8, 1985.

Decided May 29, 1985.

Janeen Kerper, San Diego, Cal., for plaintiff-appellee.

Chris J. Allied, El Cajon, Cal., for defendant-appellant.

Appeal from the United States District Court for the Southern District of California.

Before GOODWIN, WALLACE and REINHARDT, Circuit Judges.

REINHARDT, Circuit Judge:

Appellant Robert Adams appeals the district court's determination that his debt to appellee Betty Moraes is nondischargeable in bankruptcy. We affirm.

I. FACTUAL BACKGROUND

At approximately 1:25 a.m. on January 30, 1979, a pickup truck driven by Adams collided with a car driven by Moraes. At the time of the collision, Adams was traveling west on an eastbound lane of California Interstate 8, and Moraes was traveling east. Adams had been drinking for several hours prior to the collision. When the collision occurred, Adams' blood alcohol content was .15 per cent. Subsequent to the collision, Adams pleaded guilty to a state charge that he was driving while under the influence of alcohol.

On November 5, 1979, Moraes filed suit against Adams in California Superior Court, San Diego County, to recover damages for injuries she had sustained as a result of the collision. On or about November 12, 1982, prior to the termination of Moraes state court action, Adams filed for bankruptcy relief pursuant to Chapter 7 of the Bankruptcy Act, 11 U.S.C. Secs. 701-728 (1982). The state court proceedings were stayed pending resolution of Adams' bankruptcy petition. On February 2, 1983, Moraes filed an adversary complaint in United States Bankruptcy Court. Moraes alleged that Adams was liable for the injuries she had sustained in the collision and that Adams' resulting debt to Moraes was nondischargeable in bankruptcy. The district court withdrew the matter from the bankruptcy court and assumed original jurisdiction. ¹

The district court bifurcated the proceedings. It first conducted a jury trial on the issues of liability and damages, in which Adams was found liable for general damages in the amount of $258,000 and for punitive damages in the amount of $75,000. The district court then conducted a bench trial on the issue of dischargeability, concluding that Adams' debt was nondischargeable. Judgment was entered in May of 1984.

In this appeal, Adams challenges (1) the district court's jurisdiction to determine dischargeability; (2) the legal standard applied by the district court in reaching its determination of nondischargeability; and (3) the district court's conclusion that its finding of nondischargeability applied to both compensatory and punitive damages. ²

II. APPELLANT'S JURISDICTIONAL CHALLENGE

Appellant contends that jurisdiction to determine the issue of dischargeability rests exclusively with the bankruptcy court. Accordingly, appellant contends that the district court erred in assuming jurisdiction over the issue rather than allowing it to remain in the bankruptcy court. We review determinations of subject matter jurisdiction de novo. See Clayton v. Republic Airlines, Inc., 716 F.2d 729, 730 (9th Cir.1983).

An examination of the relevant jurisdictional statute demonstrates that Adams' contention is meritless. Enacted as part of the 1978 Bankruptcy Reform Act, 28 U.S.C. Sec. 1471 (1982), amended by 28 U.S.C. Sec. 1334 (Supp.1985), originally provided, in relevant part, as follows:

(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.

(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11 or arising in or related to cases under title 11.

(c) The bankruptcy court for the district in which a case under title 11 is commenced shall exercise all of the jurisdiction conferred by this section on the district courts.

In Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), the Supreme Court invalidated the trial court jurisdiction of bankruptcy judges provided by subsection (c). In re Burley, 738 F.2d 981, 984 (9th Cir.1984). Northern Pipeline did not, however, diminish the jurisdiction of the district courts. Thus, at the time the district court conducted the proceedings at issue in this case, subsections (a) and (b) were valid, and the district court had original jurisdiction in all cases under Title 11. See White Motor Corp. v. Citibank, N.A., 704 F.2d 254, 259-60 (6th Cir.1983).

Notwithstanding this clear statutory grant of original jurisdiction, Adams contends that a determination of dischargeability must be made in the first instance by the bankruptcy court. However, Adams' contention conflicts with an Emergency Rule which was issued by the Judicial Conference of the United States subsequent to Northern Pipeline and which was adopted, with minor variations, by all the district courts in the Ninth Circuit. See In re Burley, 738 F.2d at 984 n. 2. The Rule, which was adopted on January 10, 1983 and which has since been superseded by the 1984 Bankruptcy Amendments and Federal Judgeship Act, authorized direct reference to a bankruptcy judge of "[a]ll cases under Title 11 and all civil proceedings arising under Title 11 or arising in or related to cases under Title 11...." General Order No. 279-B(c)(1) (S.D.Cal.1983) (as amended). The Rule also prescribed the manner in which the district court might withdraw reference of a matter which had been referred, by virtue of the Rule, to a bankruptcy judge. The Rule provided that

The reference to a bankruptcy judge may be withdrawn by the district court at any time on its own motion or on timely motion by a party.... If a reference is withdrawn, the district court may retain the entire matter, may refer part of the matter back to the bankruptcy judge, or may refer the entire matter back to the bankruptcy judge with instructions specifying the powers and functions that the bankruptcy judge may exercise.

Id. 279-B(c)(2). Thus, pursuant to the Emergency Rule, the district court had explicit authority to revoke referral of any matter to the bankruptcy court on its own motion.

Here, it is apparent from the record that although Adams' petition and Moraes' adversary complaint had been filed in bankruptcy court, the district court, upon its own motion, properly withdrew reference of the dischargeability issue along with its mandatory withdrawal of the liability issue. ³ In the absence of any statutory duty to defer to the bankruptcy court on the issue of dischargeability, and in light of the clear direction provided by 28 U.S.C. Sec. 1471 (1982), we conclude that the issue of dischargeability was properly before the district court.

III. APPELLANT'S CHALLENGE TO THE DISTRICT COURT'S DETERMINATION OF NONDISCHARGEABILITY

11 U.S.C. Sec. 523(a)(6) (1982) provides as follows:

(a) A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt--... (6) for willful and malicious injury by the debtor to another entity or to the property of another entity.

In finding Adams' debt to Moraes nondischargeable, the district court concluded that the terms "willful" and "malicious" meant only "the intentional doing of a wrongful act with knowledge of its probable consequences." The court further concluded that Adams need not have specifically intended to injure Moraes in order for it to find his conduct willful and malicious. Relying on evidence that Adams had previously been involved in accidents as a result of drunk driving, the district court concluded that Adams had intentionally driven while drunk with knowledge that injury would probably result. Accordingly, the district court held that Adams' debt to Moraes was nondischargeable.

Appellant contends that in determining that his conduct was willful and malicious, the district court applied an erroneous legal standard. Appellant argues that the requirements of willfulness and malice may only be satisfied by a showing that he specifically intended to injure Moraes.

At the time of the district court's ruling, courts were in disagreement as to whether driving while intoxicated, without more, constituted conduct sufficiently willful and malicious to warrant a finding of nondischargeability. Compare In re Morgan, 22 B.R. 38, 39 (Bankr.D.Neb.1982) (liabilities incurred as a result of drunk driving held dischargeable in the absence of any evidence that judgment-debtor intended to injure anyone); In re Maney, 23 B.R. 61, 62 (Bankr.W.D.Ok.1982) ("driving while intoxicated does not as a matter of intent create a nondischargeable debt"); In re Naser, 7 B.R. 116, 118 (Bankr.W.D.Wis.1980) (section 523(a)(6) requires an intent to injure someone); In re Bryson, 3 B.R. 593, 596 (N.D.Ill.1980) (same) with In re Greenwell, 21 B.R. 419, 421 (Bankr.S.D.Ohio 1982) (liabilities incurred as a result of drunk driving held nondischargeable because "the voluntary drinking ... constituted an intentional act sufficient to support the conclusion that the injury caused by the defendant was willful and malicious"); In re Callaway, 41 B.R. 341, 346 (Bankr.E.D.Penn.1984) (same); In re Wooten, 30 B.R. 357, 358 (Bankr.N.D.Ala.1983) (same); In re Cloutier, 33 B.R. 18, 20 (Bankr.D.Me.1983) (debt resulting from driving while intoxicated held nondischargeable because substantial certainty of injury resulting from judgment-debtor's drinking gave rise to inference of intent to injure).

The legislative history...