League v. Lowther

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
DONNA RAYE LOWTHER, 	CHAPTER 13
CASE NUMBER: 10-04155-8-JRL
DEBTOR.
DANA L. LEAGUE, 	ADVERSARY PROCEEDING
NO. 10-00212-8-JRL
Plaintiff,
v.
DONNA RAYE LOWTHER,
Defendant.
______________________________________________________________________________
ORDER
This matter came before the court on the defendant’s motion to dismiss complaint and the
plaintiff’s motion for judgment on the pleadings. A hearing was held on November 23, 2010, in
Raleigh, North Carolina.
BACKGROUND
In March 2005, the plaintiff and defendant were involved in a traffic accident in Omaha,
SO ORDERED.
SIGNED this 07 day of January, 2011.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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Nebraska. The defendant operated her vehicle without liability insurance, as required by
Nebraska law. As a result of the collision, the plaintiff suffered injury by aggravating a previous
chronic condition of degeneration of the lumbar L-5 Disc. Subsequently, the plaintiff filed a
civil action in Douglas County, Nebraska seeking damages under a theory of negligence. The
plaintiff contends that the defendant entered the intersection turning left against a red light.
Contrary to the plaintiff’s statement, the defendant argues that she entered the intersection on a
left green arrow but was unable to turn before the arrow faded, resulting in a citation for failure
to yield.
On July 15, 2009, the plaintiff received a judgment against the defendant in the amount
of $22,873.00 and court costs of $50.74 with interest in the amount of 2.427% per annum. The
plaintiff asserts that the judgment awarded is non-dischargeable under 11 U.S.C. § 1328(a)(4).
Conversely, the defendant argues that because the complaint in state court case alleged only
negligence, the right to assert that defendant’s actions were willful or malicious is lost and the
debt should be discharged.
ANALYSIS
A non-dischargeable debt under 11 U.S.C. § 1328(a)(4) differs in two, possibly three,
respects from a non-dischargeable debt under 11 U.S.C. § 523(a)(6). First, pursuant to §
1328(a)(4) a debt is non-dischargeable if awarded in a civil action as a result of willful or
malicious injury. (Emphasis added). This is a lesser standard than § 523(a)(6) which requires an
injury be both willful and malicious. 10 Collier on Bankruptcy ¶ 1328.02[3][k](Alan N. Resnick
& Henry J. Sommer eds., 15th ed. rev.), In re Buck, 406 B.R. 703 (Bankr. E.D.N.C. 2009).
Second, in a chapter 7 bankruptcy case, the injury at issue may be to either person or property.
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In chapter 13 the injury must be to person alone. In re Derryberry, 367 B.R. 616, 617 (Bankr.
E.D.T.N. 2007). The third difference depends on the interpretation of ambiguous statutory
language. Courts are split as to whether a judgment “awarded” is interpreted as a past tense verb
or a past participle modifying a noun. See, In re Byrd, 388 B.R. 875 (Bankr. C.D. Ill. 2007), In
re Taylor, 388 B.R. 115 (Bankr. M.D. Pa. 2008). That issue is not determinative here, as in the
present case, a civil judgment was awarded against the debtor on July 15, 2009; therefore, the
timing of the judgment and its effect on dischargeability are not at issue. What remains before
this court is: (1) whether the plaintiff is precluded by res judicata from arguing that the debtor’s
actions were willful or malicious; and (2) if the actions of the debtor were willful or malicious
within the meaning of § 1328(a)(4).
1. Res Judicata
The determination of dischargeability is brought before the court by adversary
proceeding. Fed. R. Bankr. 4007. A separate action from the main bankruptcy case, the creditor
seeking the determination of a particular debt by adversary proceeding sues on the instrument
which created the debt. Brown v. Felsen, 442 U.S. 127, 135, 99 S.Ct. 2205, 2211 (1979). As
the Supreme Court noted, a plaintiff seeking non-dischargeability “[is] not assert[ing] a new
ground for recovery, nor does he attack the validity of the prior judgement. Rather, what he is
attempting to meet . . . is the new defense of bankruptcy. . . .” Id., 442 U.S. 127 at 133.
Therefore, res judicata does not confine bankruptcy courts to the prior state court record and
additional evidence may be offered. Id. at 138-139. Moreover, a fair reading of the law in the
Fourth Circuit encourages bankruptcy courts to look at and beyond the evidence of record in
state court when determining dischargeability. See, In re Raynor, 922 F.2d 1146 (4th Cir.
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1991)(a default judgment in state court awarding damages for fraud could not be invoked as res
judicata as to whether the debt should be discharged where the issue of fraud was not actually
litigated); In re Duncan, 448 F. 3d 725 (4th Cir. 2006)(judgment debt from a wrongful death
action was decided on a different standard than the one controlling the resolution of whether the
injury was willful and malicious under § 526(a)(6)).
The formal Nebraska judgment has not been placed in the record before this court;
however, the parties acknowledge and agree that it is founded upon negligent driving which led
to personal injury. Negligent driving is judged by a different legal standard than whether the
resulting injury was wilfully or maliciously inflicted pursuant to the Code. Accordingly, res
judicata does not prevent this court from determining the dischargeability of the judgment debt.
Those issues presented under § 1328(a)(4) are ripe for review.
2. Willful or Malicious pursuant to § 1328(a)(4)
This court previously considered the statutory requirements of willful and malicious as
they applied under § 523(a)(6). In re Buck, 406 B.R. 703 (Bankr. E.D.N.C. 2009). As noted
above, differences exist between the discharge provisions of § 523 and § 1328; however, there is
no impact on the definitions of the terms willful and malicious. The key difference in the
analysis of the present case lies in the lesser burden on the plaintiff. Pursuant to § 1328(a)(4) the
plaintiff must only show that the defendant’s actions satisfy one of the statutory requirements,
not both.
A finding of willfulness mandates “a deliberate or intentional injury, not merely a
deliberate or intentional act that leads to injury.” Buck, 406 B.R. at 706 (citing, In re Geiger, 523
U.S. 57, 61, 118 S.Ct. 974, 140 L.Ed. 2d 90 (1998)). While driving without liability insurance is
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a wrongful act under the laws of Nebraska, it is not a deliberate injury. Nor, is “[t]he mere act of
driving without insurance or ability to compensate an injured party . . . certain to cause injury.”
Pechar v. Moore, 98 B.R. 488, 490 (D. Neb. 1988). It is uncontested that at the time of the
accident the defendant drove without insurance. While the defendant was wrong to do so, she
did not deliberately or willfully commit injury as required by § 1328(a)(4).
Were this an analysis under § 523, the debt would be dischargeable without further
consideration; however, the question of malice remains. For the purpose of determining
dischargeability, malice means that the defendant knew his actions were wrong. Buck, 406 B.R.
at 706. Pursuant to Fed. R. Civ. P. 12(b), as incorporated in Bankr. R. 7012, the court must
accept the complaint as true and accurate. The complaint alleges that the defendant knew or
should have known that she operated an automobile without liability insurance. In her answer,
the defendant denies knowledge that the insurance policy lapsed prior to the accident, stating that
she offered proof of the lapsed insurance to the police officer who arrived at the scene under the
belief the policy was current. Viewing the pleadings in a light most favorable to the non-moving
party, the issue of the defendant’s knowledge is unresolved.
The court cannot say with certainty that the facts of the case support a finding of malice.
Therefore, based on the foregoing, the motion for judgment on the pleadings and motion to
dismiss are DENIED.
END OF DOCUMENT
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