Maxfield v. Jennings (In re Jennings)
| Decision Date | 22 February 2012 |
| Docket Number | No. 11–11422.,11–11422. |
| Parties | In Re Janice K. JENNINGS, Debtor.Brandon James Maxfield, Plaintiff–Appellee, v. Janice K. Jennings, Defendant–Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
OPINION TEXT STARTS HERE
Richard R. Thames, Stutsman, Thames & Markey, PA, Jacksonville, FL, for Plaintiff–Appellee.
John F. MacLennan, Raymond R. Magley, Smith, Hulsey & Busey, Jacksonville, FL, for Defendant–Appellant.
Appeal from the United States District Court for the Middle District of Florida.
Before BARKETT, PRYOR and KRAVITCH, Circuit Judges.
Janice K. Jennings appeals from a district court order ruling that her debt from a fraudulent transfer judgment was nondischargeable in bankruptcy under 11 U.S.C. § 523(a)(6). That section excepts from discharge any debt “for willful and malicious injury by the debtor to another entity or to the property of another entity.” Id. We are asked to determine whether a fraudulent transfer of property by a co-conspirator constituted a willful and malicious injury under § 523(a)(6). After a review of the record, and with the benefit of oral argument, we affirm.
When Appellee Brandon James Maxfield was seven years old, he was rendered permanently quadriplegic after being shot by the accidental discharge of a handgun. The handgun was manufactured by Bryco Arms, Inc., and distributed by B.L. Jennings, Inc., companies controlled by Appellant Janice Jennings's former husband, Bruce Jennings. In May 2001, Maxfield sued Bruce Jennings and the two companies for personal injury in California state court.
In December 2001, Maxfield filed an amended complaint to add Janice (Bruce's second ex-wife), Anna Leah Jennings (his third ex-wife), and RKB Investments as defendants in the personal-injury action, seeking to hold them liable under joint venture/enterprise, partnership, and alter-ego theories. RKB is a partnership created by Bruce and Janice, who acted as co-trustees of three California trusts that were the three partners in RKB. RKB held title to a parcel of property, called Shoreview, which is relevant to the instant proceedings.
In February 2002, Bruce directed Janice to execute a deed on behalf of RKB transfering Shoreview to Anna Leah Jennings. When Janice completed the transfer, Bruce recorded the deed. Maxfield became aware of the transfer through Bruce's responses to interrogatories in the personal-injury action. In response, Maxfield filed a complaint in California state court against Janice, RKB, and the trusts forming RKB's partnership, alleging fraud, conspiracy, and fraudulent transfer.
On May 13, 2003, a jury found Bruce, Bryco Arms, Inc., and B.L. Jennings, Inc. liable for Maxfield's injury, and awarded Maxfield $24,774,146.53 in damages. At that time, there had been no determination as to Maxfield's joint venture/enterprise, partnership, and alter-ego claims against Janice, Anna Leah, and RKB. The next day, Janice, Bruce, Bryco Arms, Inc., B.L. Jennings, Inc., and RKB filed Chapter 11 bankruptcy petitions. Janice's petition was later converted to a Chapter 7 petition. Janice and RKB filed declaratory actions seeking to determine which of their assets creditors, including Maxfield, may reach.
Shortly thereafter, Maxfield's state cases were transferred to the bankruptcy court and joined with the declaratory actions. Then, in June 2007, the court concluded that Janice participated in a joint venture with Bruce, Bryco Arms, Inc., and B.L. Jennings, Inc., and was therefore jointly and severally liable with those parties for damages awarded to Maxfield in his personal injury suit. The court also found that Janice was a conspirator with Bruce and RKB in the fraudulent transfer of Shoreview and was therefore jointly and severally liable for the damages to Bruce's creditors in the amount of $3,900,000, the value of Shoreview.
In reaching these conclusions, the bankruptcy court made several findings. Although Janice testified that the deed she signed to Shoreview was a replacement deed for one executed in 1995 as part of Bruce's divorce settlement with Anna Leah, the court found this testimony incredible in light of earlier testimony in an unrelated case that Bruce had no outstanding obligation to Anna Leah resulting from their divorce. Instead, the court found that Janice “knew that RKB was a defendant in the Maxfield case, in which Maxfield was claiming millions of dollars in damages.” And she knew that Shoreview, a multi-million dollar property, was unencumbered. Thus, the bankruptcy court concluded that Janice was liable to Bruce's creditors for the value of Shoreview because she “knew that RKB, through Bruce Jennings, intended to transfer the Shoreview Property to Anna Leah Jennings to keep it out of the hands of creditors.”
Janice never challenged the bankruptcy court's ruling. And in December 2007, Maxfield filed an adversary complaint in bankruptcy court against Janice, seeking an exception under 11 U.S.C. § 523(a)(6) to Janice's Chapter 7 debt discharge, in the amount of Shoreview's value. Under § 523(a)(6), any debt “for willful and malicious injury by the debtor to another entity or to the property of another entity” is excepted from discharge in bankruptcy. 11 U.S.C. § 523(a)(6). Janice responded by filing a motion to dismiss. The bankruptcy court granted that motion, concluding that a conspiracy claim, such as the one here against Janice, was not the sort of intentional tort that § 523(a)(6) required for discharge. On appeal, the district court reversed and remanded, finding “that in certain circumstances willful and malicious injury may be inflicted by a co-conspirator.”
On remand, the bankruptcy court granted Janice's motion for summary judgment, finding that the debt owed—which the court said resulted from the personal injury suit—did not result from willful and malicious injury by the debtor. Furthermore, the bankruptcy court found that, even though Janice aided in the Shoreview transfer with knowledge of the Maxfield suit and of Bruce's desire to keep Shoreview out of his creditors' hands, her conduct and knowledge were “insufficient as a matter of law to establish the intent to harm or cause injury to [Maxfield] as required by § 523(a)(6).” And the court stated that, even if Janice acted with intent to harm Maxfield under that section, her participation in the conspiracy “was not substantially certain to cause injury to” Maxfield because the Shoreview transfer occurred over a year before Maxfield obtained a judgment in his personal injury action.
Maxfield again appealed to the district court, arguing that Janice's active participation in the fraudulent transfer satisfied the “willful and malicious” standard in § 523(a)(6), and that he possessed a cognizable interest in Shoreview at the time of its transfer sufficient to establish that Janice's actions were substantially certain to cause him injury. The district court agreed. The court emphasized that evidence in the record showed that Janice knew that: (1) the Shoreview deed was not a replacement deed that was part of the 1995 divorce between Bruce and Anna Leah; (2) Bruce had no outstanding obligations to Anna Leah from their 1995 divorce; (3) RKB, Janice, and Anna Leah were defendants in Maxfield's personal injury action, which involved millions of dollars in damages; (4) Bruce invested millions of dollars in Shoreview, which was unencumbered; and (5) RKB, through Bruce, intended to transfer Shoreview to keep it out of the hands of creditors. And the district court pointed out that the bankruptcy court had discredited Janice's self-serving testimony that she did not know the nature of the Shoreview transfer.
The district court concluded that this evidence, which was sufficient to establish a fraudulent transfer, also satisfied the requirements of § 523(a)(6). Specifically, the court found that Janice's “undisputed conduct constitute[d] a willful and malicious attempt to injure Maxfield's interests, as a matter of law on this record.” The court made clear that the fact that Maxfield's personal injury claim had not been reduced to a judgment before he initiated his fraudulent transfer claim did not affect the § 523(a)(6) analysis because, under California law, a tort claimant is a “creditor” who may attack a fraudulent transfer. The court therefore reversed the bankruptcy court's ruling, concluding that, as a matter of law, Janice's adjudicated debt of $3,900,000 was nondischargeable under § 523(a)(6). The district court directed the bankruptcy court to enter judgment in favor of Maxfield. This appeal followed.
“The bankruptcy court's findings of fact are reviewed ‘under the clearly erroneous standard.’ ” In re Builders Transp., Inc., 471 F.3d 1178, 1184 (11th Cir.2006) (quoting In re Fretz, 244 F.3d 1323, 1326 (11th Cir.2001)). “ ‘Conclusions of law, whether from the bankruptcy court or the district court, are reviewed de novo.’ ” Id. (quoting In re Fretz, 244 F.3d at 1326). Summary judgment is appropriate “if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Thus, we review de novo the bankruptcy and district courts' judgments as a matter of law. In re Builders Transp., 471 F.3d at 1184.
This appeal presents the issue of whether Janice Jennings willfully and maliciously injured Maxfield or his property under 11 U.S.C. § 523(a)(6). Janice Jennings argues that (1) neither Maxfield nor his property suffered an injury; and (2) even if an injury occurred, the injury was not inflicted willfully or maliciously. Each of these is addressed in turn.1
Section 523(a)(6) excepts from discharge in bankruptcy any debt that results from “willful and malicious injury by the debtor to another entity or to the property of another entity.” 11 U.S.C. § 523(a)(6). Janice contends that, because her obligation...
To continue reading
Request your trial
-
Dynomite Mktg., LLC v. Dowd (In re Dowd), Case No. 17-60610-WLH
...intentional or deliberate act, which is not done merely in reckless disregard of the rights of another." Maxfield v. Jennings (In re Jennings), 670 F.3d 1329, 1334 (11th Cir. 2012) (citations omitted). The purpose of the act must be to cause injury. Id. " ‘Malicious’ means ‘wrongful and wit......
-
Lenox Pines, LLC v. Smith (In re Smith)
...of personal hatred, spite or ill-will.'" In re Watson, 2019 WL 5388061, at *3 (Bankr. N.D. Ga. Oct. 18, 2019) (quoting In re Jennings, 670 F.3d 1329, 1334 (11th Cir. 2012)). In the Eleventh Circuit, "a party need not prove specific intent to harm another, as malice can be implied or constru......
-
Trenwick Am. Reinsurance Corp. v. Swasey (In re Swasey)
...id. at 61, 118 S.Ct. 974), even if the injury was the result of a reckless act. Id. at 61, 118 S.Ct. 974;Maxfield v. Jennings, 670 F.3d 1329, 1334 (11th Cir.2012) (per curiam). Indeed, not even all intentional torts are covered. Williams v. International Brotherhood of Electrical Workers Lo......
-
Smith v. Smith (In re Smith)
...But “[r]ecklessly or negligently inflicted injuries are not excepted from discharge under § 523(a)(6).” Maxfield v. Jennings (In re Jennings), 670 F.3d 1329, 1334 (11th Cir.2012) (citing Kawaauhau v. Geiger, 523 U.S. 57, 64, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998)). In the Eleventh Circuit, a ......
-
Attorney Fees in Bankruptcy
...To establish malice, ‘a showing of specific intent to harm another is not necessary.’” Maxfield v. Jennings ( In re Jennings ), 670 F.3d 1329, 1334 (11th Cir. 2012). Another bankruptcy case addressing attorney fees, analyzing a Supreme Court case under a different subsection of 523, determi......