In re Su, 01-55656.

• Citation: 290 F.3d 1140
• Decision Date: 20 May 2002
• Docket Number: No. 01-55656.,01-55656.
• Parties: In re Nancy Shao SU; In re Louis C. Su, a/k/a Chienlu Su, Debtors. Dora Carrillo, Appellant, v. Louis C. SU, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

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290 F.3d 1140 In re Nancy Shao SU; In re Louis C. Su, a/k/a Chienlu Su, Debtors.
Dora Carrillo, Appellant,
v.
Louis C. SU, Appellee. No. 01-55656. United States Court of Appeals, Ninth Circuit. Submitted February 15, 2002.^* Filed May 20, 2002.

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Jerome Marks, San Francisco, CA, for the appellant.

Stanley A. Zlotoff, San Jose, CA, for the appellee.

Norma L. Hammes, Gold & Hammes, San Jose, CA, and John Rao, National Consumer Law Center, Boston, MA, for amicus curiae National Association of Consumer Bankruptcy Attorneys, urging affirmance.

Appeal from the Ninth Circuit, Bankruptcy Appellate Panel; Greenwald, Russell, and Ryan, Bankruptcy Judges, Presiding.

Before BEEZER, TASHIMA, and GRABER, Circuit Judges.

OPINION

TASHIMA, Circuit Judge.

Dora Carrillo ("Carrillo") filed an adversary complaint in Louis Su's ("Su") Chapter 7 bankruptcy case to determine the dischargeability of debt owed to her by Su. The bankruptcy court held that Su's debt to Carrillo was nondischargeable. The Bankruptcy Appellate Panel ("BAP") reversed, holding that the bankruptcy court erred by applying the incorrect legal standard. Carrillo appeals, arguing that the bankruptcy court correctly applied the law and that Su's debt is nondischargeable. We have jurisdiction under 28 U.S.C. § 158(d), and we affirm the BAP.

I. FACTUAL BACKGROUND

On August 21, 1997, shortly before 8 a.m., Carrillo was lawfully crossing a major downtown San Francisco intersection while walking to work. Su, who was driving a 14-passenger van, sped into the intersection against a red light, traveling 37 miles per hour in a 25-mile-per-hour zone, nearly five seconds after the light had turned red. He crashed into a car that was lawfully in the intersection and then careened into Carrillo, severely injuring her.

Carrillo subsequently sued Su in state court for compensatory and punitive damages, alleging that "[h]is conduct ... was wanton, willful and malicious, and such acts were intentionally done with reckless disregard of the consequences, necessarily producing permanent injury and harm to plaintiff, without just cause or excuse." The jury found that Su was negligent, that his negligence resulted in Carrillo's injuries, and that he was guilty of malice by clear and convincing evidence. "Malice" was defined by the state court either as conduct intended to cause injury to the plaintiff or as despicable conduct carried on with a willful and conscious disregard for the safety and rights of others. The jury awarded Carrillo $130,000 in economic damages and $400,000 in non-economic

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damages; no punitive damages were awarded.

After this judgment was entered against him, Su filed a Chapter 7 bankruptcy petition. In her adversary proceeding, Carrillo alleged that her judgment against Su was not dischargeable because 11 U.S.C. § 523(a)(6) ("§ 523(a)(6)") excepts from discharge a debt "for willful and malicious injury by the debtor to another entity or to the property of another entity." Relying on Miller v. J.D. Abrams Inc. (In re Miller), 156 F.3d 598, 606 (5th Cir.1998), which held that injuries are considered willful and malicious under § 523(a)(6) when the debtor possesses "either an objective substantial certainty of harm or a subjective motive to cause harm," the bankruptcy court held that Su's debt to Carrillo was nondischargeable because there was "by [an] objective standard, a substantial certainty" of harm when Su drove his van through a red light at an intersection known to be heavily congested with traffic.

After the bankruptcy court's decision, and while the case was pending before the BAP, this court decided Petralia v. Jercich (In re Jercich), 238 F.3d 1202 (9th Cir.), cert. denied, 533 U.S. 930, 121 S.Ct. 2552, 150 L.Ed.2d 718 (2001). In re Jercich held that § 523(a)(6)'s willful injury requirement is met "when it is shown either that the debtor had a subjective motive to inflict the injury or that the debtor believed that injury was substantially certain to occur as a result of his conduct." Id. at 1208.

Based largely on In re Jercich, the BAP reversed the bankruptcy court. See Su v. Carrillo (In re Su), 259 B.R. 909, 914 (9th Cir. B.A.P. 2001). According to the BAP, the bankruptcy court's use of an objective substantial certainty standard was inconsistent with the subjective substantial certainty standard articulated in In re Jercich. Id.

II. STANDARD OF REVIEW

We review the bankruptcy court's conclusions of law de novo and its factual findings for clear error. Am. Law Ctr. v. Stanley (In re Jastrem), 253 F.3d 438, 441 (9th Cir.2001); Duckor Spradling & Metzger v. Baum Trust (In re P.R.T.C., Inc.), 177 F.3d 774, 782 (9th Cir.1999). Whether a claim is nondischargeable presents mixed issues of law and fact and is reviewed de novo. Murray v. Bammer (In re Bammer), 131 F.3d 788, 791-92 (9th Cir.1997) (en banc). The bankruptcy court's interpretation of the Bankruptcy Code is reviewed de novo. State Bar v. Taggart (In re Taggart), 249 F.3d 987, 990 (9th Cir.2001). Decisions of the BAP are reviewed de novo. Cool Fuel, Inc. v. Bd. of Equalization (In re Cool Fuel, Inc.), 210 F.3d 999, 1001 (9th Cir.2000). We independently review a bankruptcy court's ruling on appeal from the BAP. In re Taggart, 249 F.3d at 990; In re Cool Fuel, 210 F.3d at 1001-02.

III. DISCUSSION

Section 523(a)(6) of the Bankruptcy Code provides: "(a) A discharge under section 727, 1141, 1228(a), 1228(b), 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." The question presented on appeal is whether a finding of "willful and malicious injury" must be based on the debtor's subjective knowledge or intent or whether such a finding can be predicated upon an objective evaluation of the debtor's conduct. We hold that § 523(a)(6)'s willful injury requirement is met only when the debtor has a subjective motive to inflict injury or when the debtor believes that injury is substantially certain to result from his own conduct.

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A. Willfulness

In Kawaauhau v. Geiger, 523 U.S. 57, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998), the Supreme Court established that § 523(a)(6) does not apply to those debts arising from unintentionally inflicted injuries:

The word "willful" in (a)(6) modifies the word "injury," indicating that non-dischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury. Had Congress meant to exempt debts resulting from unintentionally inflicted injuries, it might have described instead "willful acts that cause injury." .... [T]he (a)(6) formulation triggers in the lawyer's mind the category "intentional torts," as distinguished from negligent or reckless torts. Intentional torts generally require that the actor intend "the consequences of an act", not simply "the act itself."

523 U.S. at 61-62, 118 S.Ct. 974 (citation omitted). Thus, Geiger held that debts arising out of a medical malpractice judgment were dischargeable, even though the plaintiff alleged that Dr. Geiger had intentionally rendered inadequate medical care, and that this necessarily led to her injury. Geiger concluded that "debts arising from recklessly or negligently inflicted injuries do not fall within the compass of § 523(a)(6)." Id. at 64, 118 S.Ct. 974.

Both parties agree that a "deliberate or intentional injury" is required for § 523(a)(6) to render a debt non-dischargeable. The question we must decide is the state of mind that is required to satisfy § 523(a)(6)'s willful injury requirement. According to the Restatement, an action is intentional if an actor subjectively "desires to cause consequences of his act, or ... believes that the consequences are substantially certain to result from it." RESTATEMENT (SECOND) OF TORTS § 8A (1964). The Geiger Court, however, did not expressly adopt this subjective Restatement formulation,¹ and the lower courts have differed over whether to adopt a strict subjective test when applying § 523(a)(6).

The Sixth Circuit's interpretation of § 523(a)(6) exemplifies the strict subjective approach, in which a debt is nondischargeable under § 523(a)(6) only if the debtor intended to cause harm or knew that harm was a substantially certain consequence of his or her behavior. In Markowitz v. Campbell (In re Markowitz), 190 F.3d 455 (6th Cir.1999), the debt arose from a legal malpractice action against the debtor. The creditor argued that the debt was nondischargeable under § 523(a)(6)'s "willful and malicious injury" provision. While In re Markowitz acknowledged that Geiger had not expressly adopted the Restatement's subjective "substantially certain" language, it nonetheless concluded that "from the Court's language and analysis in Geiger, we now hold that unless `the actor desires...