Roberto et al v. Lopez et al

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
YADER PADILLA and VICTORIA LOPEZ, 	No. 10-11000
Debtor(s).
______________________________________/
FRANCISCO GARCIA, et al.,
Plaintiff(s),
v. 	A.P. No. 10-1086
YADER PADILLA and VICTORIA LOPEZ,
Defendant(s).
_______________________________________/
Memorandum After Trial
_________________
Debtors Yader Padilla and Victoria Lopez unwittingly helped Lopez’ brother cheat plaintiffs
Francisco and Roberto Garcia out of several hundred thousand dollars. Neither defendant had any idea
that plaintiffs were being cheated. Nonetheless, plaintiffs argue based on state law that their claim
against Padilla and Lopez should be found nondischargeable. The court disagrees.
In order for a debt to be nondischargeable pursuant to § 523(a)(2) of the Bankruptcy Code,
there must be en express finding of actual fraud. Constructive fraud, implied fraud and other state law
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Entered on Docket
March 31, 2011
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 10-01086 Doc# 9 Filed: 03/31/11 Entered: 03/31/11 11:08:27 Page 1 of 2

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fictions will not do. In re Anastas, 94 F.3d 1280, 1286 (9th Cir. 1996). The court finds that defendants
had no intent to defraud plaintiffs, so there can be no nondischargeable debt pursuant to § 523(a)(2).
In order for a debt to be nondischargeable pursuant to § 523(a)(4) for defalcation in a fiduciary
capacity, there must be an actual trust existing before the alleged wrongdoing. Constructive, resulting
or implied trusts will not do. In re Lewis, 97 F.3d 1182, 1185 (9th Cir.1996). General state law
concepts of fiduciary duties are not relevant. In re Honkanen, – B.R. – (9th Cir. BAP 2011). There
was no actual trust in this case, so there can be no nondischargeable debt pursuant to § 523(a)(4).
In order for a debt to be nondischargeable pursuant to § 523(a)(6), the debtor must have
intended both the act and the harm. There can be no nondischargeable debt without a finding of actual
malice. Kawaauhau v. Geiger, 523 U.S. 57, 62, 118 S.Ct. 974 (1998). There was no actual malice on
the part of Padilla and Lopez, who did not realize that they were helping Lopez’ brother to cheat
plaintiffs. Accordingly, there can be no nondischargeable debt pursuant to § 523(a)(6).
Accordingly, plaintiffs shall take nothing by their complaint, which will be dismissed with
prejudice. Defendants shall recover their costs of suit.
This memorandum, together with the statements made by the court on the record at the
conclusion of the trial, constitute the court’s findings and conclusions pursuant to FRCP 52(a) and
FRBP 7052. Counsel for defendants shall submit an appropriate form of judgment forthwith.
Dated: March 31, 2011
SAlan Jaroslovsky
U.S. Bankruptcy Judge
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Case: 10-01086 Doc# 9 Filed: 03/31/11 Entered: 03/31/11 11:08:27 Page 2 of 2