In re McConnehea

• Decision Date: 09 September 1988
• Docket Number: Bankruptcy No. C-1-88-319.
• Citation: 96 BR 121
• Parties: In re William C. McCONNEHEA, Debtor. STATE FARM INSURANCE COMPANY and Teresa Orr, Plaintiffs, v. William C. McCONNEHEA, Defendant.
• Court: U.S. District Court — Southern District of Ohio

96 B.R. 121 (1988)

In re William C. McCONNEHEA, Debtor STATE FARM INSURANCE COMPANY and Teresa Orr, Plaintiffs, v. William C. McCONNEHEA, Defendant.

Bankruptcy No. C-1-88-319.

United States District Court, S.D. Ohio, W.D.

September 9, 1988.

Stuart Tobin, Cincinnati, Ohio, for plaintiffs.

William C. McConnehea, Eric James Barr, Middletown, Ohio, for defendant.

ORDER

HERMAN J. WEBER, District Judge.

This matter is before the Court upon the appeal from the United States Bankruptcy Court, Southern District of Ohio. Appellant, the State Farm Insurance Company, appeals the decision of the bankruptcy judge finding appellant's claim to be dischargeable under 11 U.S.C. § 523(a)(6). Appellant argues that the debtor-appellee deliberately, willfully, intentionally, and maliciously drove his car without proper automobile insurance in violation of the Ohio Financial Responsibility Law.

Debtor-appellee is 25 years old, is married, and has two children. He is employed for nine months out of the year at a salary which ranges from approximately $175.00 to $200.00 a week; during the balance of the year he receives unemployment compensation. On June 13, 1986, debtor-appellee was involved in an automobile accident due to his negligent operation of his motor vehicle, resulting in damages in the amount of $6,560.00. He was uninsured and has not paid any of the damages. Appellant was the subrogated insurer and is owed the $6,560.00 by debtor-appellee unless the debt is discharged as ordered herein.

Ohio law prohibits the operation of a motor vehicle without proof of financial responsibility and also prohibits the making of a false statement on a driver's license application. Debtor-appellee was not financially responsible at the time of his automobile accident. Debtor-appellee is functionally illiterate; he stated that he never read the driver's license application and did not understand the application which contained the statement that he would not operate an automobile without financial responsibility. Most of his driving is done in the course of his employment in his employer's vehicle which is covered by insurance.

Debtor-appellee filed a Chapter VII bankruptcy and listed the debt to appellant State Farm Insurance Co. on his schedules. Appellant filed its Complaint in the Bankruptcy Court to determine that the debt was non-dischargeable pursuant to 11 U.S.C. § 523(a)(6). A trial was held on December 21, 1987 in the Bankruptcy Court, and in February, 1988, the bankruptcy judge rendered his decision that the debt was dischargeable, which determination appellant appeals to this Court.

I.

The standard of review which the district court must apply in reviewing a judgment of the bankruptcy court's determination of the issues of fact is the clearly erroneous standard. Appellant, while accepting this rule of law, however, characterizes the issue it presents in this appeal as a legal issue, a matter of law, for which de novo review is the proper standard.

Appellant acknowledges that while the debt of $6,560.00 arose as a result of the negligent act of the debtor-appellee in operating his motor vehicle, the non-payment resulted because debtor-appellee willfully, intentionally and maliciously drove in violation of Ohio law, specifically Ohio Rev.Code §§ 4507.06, 4507.212 and 4509.101.

Appellant frames its "legal issue" as whether the debt is non-dischargeable under 11 U.S.C. § 523(a)(6). In other words, appellant contends that Ohio law has created a non-dischargeable debt under 11 U.S.C. § 523(a)(6) as a matter of law.

We hold that state law is powerless to create a non-dischargeable debt under the bankruptcy laws of the United States of America as a matter of law. Whether a debt is non-dischargeable depends, as a matter of law, solely on federal law which provides that if, as a matter of fact, the debt was incurred willfully, intentionally and maliciously, it is non-dischargeable. Thus, the determination by the bankruptcy court as to the dischargeability of the debt is a determination of fact under federal law. As such, that determination must be reviewed by this Court under the clearly erroneous standard; therefore, absent clear error, this Court must defer to the findings made by the bankruptcy judge.

The United States Supreme Court, in United States v. Yellow Cab Co., 338 U.S. 338, 70 S.Ct. 177, 94 L.Ed. 150 (1949), emphasized the reasoning and importance of deferring to the trial court's findings in such situations:

For triers of fact totally to reject an opposed view impeaches neither their impartiality nor the propriety of their conclusions . . . Findings as to the design, motive and intent with which men act depend peculiarly upon the credit given to witnesses by those who see and hear them.

Id. at 341, 70 S.Ct., at 179; see also Wedding v. Wingo, 483 F.2d 1131, 1136 (6th Cir.1973).

Rule 8013 of the Rules of Bankruptcy Procedure and Rule 52 of the Federal Rules of Civil Procedure provide the controlling standard for this Court's review in this matter.

Bankruptcy Rule 8013 imposes the clearly erroneous standard of review on findings of fact made by the bankruptcy court:

On an appeal, the district court or bankruptcy appellate panel may affirm, modify, or reverse a bankruptcy judge\'s judgment, order or decree or remand with instructions for further proceedings. Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.

The United States Court of Appeals for the Sixth Circuit has reaffirmed this standard most recently in Johnson & Associates, Inc. v. Johnson, 845 F.2d 1395 (6th Cir.1988):

Findings of fact by a bankruptcy court shall not be set aside unless clearly erroneous . . . This circuit has clearly enunciated that findings of fact of a bankruptcy court should not be disturbed by the district court judge unless there is `most cogent evidence of mistake or miscarriage of justice.\' Citing, Slodov v. United States, 552 F.2d 159, 162 (6th Cir.1977), reversed on other grounds, 436 U.S. 238, 98 S.Ct. 1778, 56 L.Ed.2d 251 (1978).

As an appellate court in this bankruptcy appeal proceeding, the district court may not make its own independent factual findings.

See also In Re Rosinski, 759 F.2d 539 (6th Cir.1985).

Rule 52(a) of the Federal Rules of Civil Procedure provides the standard governing appellate review in general: "Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of sic the credibility of the witnesses."

The Supreme Court has instructed that "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." United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746 (1948). The Supreme Court has further explained this concept:

This standard plainly does not entitle a reviewing court to reverse the finding of the trier of fact simply because it is convinced that it would have decided the case differently. The reviewing court oversteps the bounds of its duty under Rule 52(a) if it undertakes to duplicate the role of the lower court.

Anderson v. City of Bessemer City, 470 U.S. 564 at 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985). It is clear that the reviewing court may not reverse a trial court's account of the evidence if that account is plausible in light of the record viewed in its entirety, even though the reviewing court is convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently; the reviewing court's function is not to decide the factual issues de novo. Id. at 574, 105 S.Ct. at 1512; see also Yellow Cab, 338 U.S. at 342, 70 S.Ct. at 179; see also Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982).

The Supreme Court in Anderson has emphasized the importance of the rule:

When findings are based on determinations regarding the credibility of witnesses, Rule 52(a) demands even greater deference to the trial court\'s findings; for only the trial judge can be aware of the variations in demeanor and tone of voice that bear so heavily on the listener\'s understanding of and belief in what is said. See Wainwright v. Witt, 469 U.S. 412, 105 S.Ct. 844, 83 L.Ed.2d 841 (1985). This is not to suggest that the trial judge may insulate his findings from review by denominating them credibility determinations, for factors other than demeanor and inflection go into the decision whether or not to believe a witness.

The rationale for deference to the original finder of fact is not limited to the superiority of the trial judge\'s position to make determinations of credibility. The trial judge\'s major role is the determination of fact, and with experience in fulfilling that role comes expertise. Duplication of the trial judge\'s efforts in the court of appeals would very likely contribute only negligibly to the accuracy of fact determination at a huge cost in diversion of judicial resources. In addition, the parties to a case on appeal have already been forced to concentrate their energies and resources on persuading the trial judge that their account of the facts is the correct one; requiring them to persuade judges at the appellate level is requiring too much. As the Court has stated in a different context, the trial on the merits should be `the main event\' . . . rather than a `tryout on the road.\' Wainwright v. Sykes, 433 U.S. 72, 90, 97 S.Ct. 2497, 2508, 53 L.Ed.2d 594 (1977). For these reasons, review of factual findings under the clearly-erroneous standard —with its deference to the trier of fact—is the rule, not the exception.

Anderson...