In re Sunde, 031017 FED9, BAP NV-16-1073-JuKuL

Docket Nº:BAP NV-16-1073-JuKuL
Party Name:In re: JOSEPH MICHAEL SUNDE, DBA Nevada Quick Divorce, AKA J. Michael Sunde, AKA Joseph Sunde, AKA Mike Sunde and VIKTORIYA SOKOL SUNDE, AKA Viktoriya Sokol, Debtors. v. VICTORIA A. CROCKETT, individually and as Trustee of the ERKP Family Trust; ROBERT D. CROCKETT; NEVADA DIVORCE & DOCUMENT SERVICES, INC., a Nevada Corporation, Appellees. JOSEP...
Attorney:Appellant Joseph Michael Sunde argued pro se. Michael Lehners argued for appellees.
Judge Panel:Before: JURY, KURTZ, and LAFFERTY, Bankruptcy Judges.
Case Date:March 10, 2017
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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In re: JOSEPH MICHAEL SUNDE, DBA Nevada Quick Divorce, AKA J. Michael Sunde, AKA Joseph Sunde, AKA Mike Sunde and VIKTORIYA SOKOL SUNDE, AKA Viktoriya Sokol, Debtors.

JOSEPH MICHAEL SUNDE; VIKTORIYA SOKOL SUNDE, Appellants,

v.

VICTORIA A. CROCKETT, individually and as Trustee of the ERKP Family Trust; ROBERT D. CROCKETT; NEVADA DIVORCE & DOCUMENT SERVICES, INC., a Nevada Corporation, Appellees.

BAP No. NV-16-1073-JuKuL

Bk. No. 3:14-bk-50937-BTB

Adv. No. 3:14-ap-05044-BTB

United States Bankruptcy Appellate Panel of the Ninth Circuit

March 10, 2017

         NOT FOR PUBLICATION

          Argued and Submitted on February 24, 2017 at Las Vegas, Nevada

         Appeal from the United States Bankruptcy Court for the District of Nevada Honorable Bruce T. Beesley, Chief Bankruptcy Judge, Presiding

          Appellant Joseph Michael Sunde argued pro se.

          Michael Lehners argued for appellees.

          Before: JURY, KURTZ, and LAFFERTY, Bankruptcy Judges.

          MEMORANDUM 1

         Appellees, Victoria A. Crockett, Robert D. Crockett (collectively, the Crocketts), and Nevada Divorce and Document Services, Inc. (NDDSI), filed an adversary complaint against appellants, Joseph Michael Sunde and Victoriya Sunde (collectively, the Sundes), seeking to except a state court judgment debt from discharge under § 523(a)(6).2 The Crocketts alleged that the Sundes willfully and intentionally (1) destroyed real property located on Greenwich Way in Reno, Nevada (Greenwich Property) which the Crocketts owned and leased to the Sundes; (2) recorded numerous documents that clouded title on the Greenwich Property; and (3) transmitted false and defamatory statements of fact to Mr. Crockett's employer.

         After a twelve day trial, the bankruptcy court found that the Sundes' removal of improvements and landscaping from the Greenwich Property fell within the scope of § 523(a)(6). The court entered a nondischargeable judgment against the Sundes consisting of $30, 849.00 in damages awarded by a jury and $69, 580.31 for attorney's fees and costs awarded by the state court pursuant to an attorney's fee clause in the underlying lease between the parties. The Sundes appealed from this judgment.

         The Sundes filed a motion to alter or amend the judgment, arguing that the bankruptcy court was required to find the Sundes' conduct was tortious under state law to fall within § 523(a)(6). After a limited remand from this Panel, the bankruptcy court denied the motion by order entered July 22, 2016. The Sundes filed an amended notice of appeal to include the July 22, 2016 order.

         For the reasons set forth below, we VACATE the judgment in the Crocketts' favor and REMAND to the bankruptcy court to make further findings as discussed in this decision.

         I. FACTS3

         A. Prepetition Events

         On August 23, 1996, Mr. Sunde created NDDSI, a Nevada corporation. NDDSI issued 100 shares of stock which were owned by Mr. Sunde.

         Victoria Crockett is the daughter of Mr. Sunde and also the trustee of the ERKP Family Trust which was created in July 2002. Mr. Sunde is the sole beneficiary of the trust, and he contributed his 100 shares in NDDSI to the trust. Victoria, as trustee, was to make monthly payments to Mr. Sunde for his retirement, which were funded from NDDSI. Since January 20, 2011, Victoria has been the sole director and chief executive officer of NDDSI.

         1. The Greenwich Property

         In 2000, the Crocketts purchased the Greenwich Property for $230, 000. On March 1, 2008, the Crocketts and the Sundes entered into a twelve month lease agreement for the property (March 2008 Lease). Paragraph 9 of the March 2008 Lease states: Any and all leasehold improvements and fixtures done and paid for by Lessee shall revert to Lessor. Lessee shall have no ownership interest in such leasehold improvements or fixtures.

         The March 2008 Lease required the Sundes to maintain the property in good condition and contained an attorney's fee clause.

         Mr. Sunde provided another lease dated July 15, 2008 (July 2008 Lease) which he maintains is the controlling lease between the parties. Paragraph 8 of that lease provided that the lessor agreed that any improvements and fixtures done and paid for by the Sundes would be owned by the Sundes and that lessor agreed to compensate them for the improvements, repairs and fixtures should they vacate the home for any reason whatsoever. While living in the property, Mr. Sunde made various improvements to the property which he paid for.

         2. The Legal Proceedings

         a. J. Michael Sunde & Viktoriya Kokol Sunde v. Robert and Victoria Crockett (CV10-01187)

         By 2010 the relationship between the parties had soured. According to Mr. Sunde, this happened because he got remarried and Victoria did not want his new wife, Viktoriya, to get any of his assets.

         In April 2010, the Sundes filed a complaint against the Crocketts in the Nevada state court, Case No. CV10-01187. The Sundes alleged that Victoria breached her fiduciary duties as trustee of the ERKP Family Trust by stealing Mr. Sunde's retirement funds and refusing to pay him. They also asserted a claim of elder abuse, contending that Victoria was attempting to destroy NDDSI and force the Sundes to the streets. The Sundes sought to replace Victoria as trustee of the ERKP Family Trust. In essence, the Sundes sought to regain control of NDDSI and the family trust. This case was consolidated with Nevada Divorce & Document Services, Inc. v. Michael Sunde et. al., Case No. CV10-0218. Although the record is sketchy, apparently the Sundes lost and were not granted the relief requested.[4] During the lawsuit, Mr. Sunde filed a lis pendens against all properties owned by the Crocketts in the Washoe County Recorder's Office.

         b. The Eviction Proceedings

         The Sundes lived in the Greenwich Property until the Crocketts served them with a notice of eviction based on unpaid rent and a no-fault end of lease, letting the Sundes know that the Crocketts would not continue the lease after February 28, 2011.

         On December 20, 2010, the Justice Court of Reno Township issued an eviction decision and order in favor of the Crocketts. The Justice Court ordered the Sundes to pay rent of $2100 directly to the Crocketts rather than the mortgage company. The eviction proceeding was dropped after Mr. Sunde paid the rent.

         In late January 2011, the Sundes moved from the Greenwich property.5 Before they moved, they removed and destroyed improvements made to the property, including cabinets, doors, and landscaping.

         c. Robert and Victoria Crockett v. Michael Sunde et. al. (CV11-00307)

         On January 28, 2011, the Crocketts filed a lawsuit against the Sundes in the Nevada state court, Case No. CV11-00307. In the background facts common to all claims for relief, the Crocketts alleged that in January 2011, the Sundes began to destroy the Greenwich Property by removing or destroying front bushes and shrubs, back bushes and shrubs, the air conditioner unit, and numerous built-in cabinets and casings. The Crocketts further alleged that the Sundes returned to the home on January 27, 2011, and removed, among other things, various landscaping in the front of the home. According to the Crocketts, these actions violated the terms of the March 2008 Lease, as the items removed solely belonged to the Crocketts. Based on these facts, the Crocketts alleged claims for breach of contract, breach of the implied covenant of good faith and fair dealing, conversion, and unjust enrichment. They also requested a temporary restraining order and preliminary injunction. Attached to the complaint was the March 2008 Lease.

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