Opinion
NOT FOR PUBLICATION
Argued and Submitted at San Diego, California: January 24, 2008
Appeal from the United States Bankruptcy Court for the Northern District of California. Bk. No. 05-32677. Adv. No. 05-03412. Honorable Thomas E. Carlson, Bankruptcy Judge, Presiding.
For KHANM KIM LUC, Appellant: David J. Cook, Esquire, Attorney, Cook Collection Attorneys, P.L.C., San Francisco, CA.
For KEVIN W. CHIEN, Appellee: Douglas A. Applegate, Attorney, SEILER EPSTEIN ZIEGLER & APPLEGATE LLP, San Francisco, CA; Matthew J. Shier, Attorney, Pinnacle Law Group, LLC, San Francisco, CA.
Before: JURY, MARKELL and KLEIN, Bankruptcy Judges.
MEMORANDUM
I. INTRODUCTION
Creditor-Appellant Khanm Kim Luc (" Luc") appeals the bankruptcy court's judgment in favor of Debtor-Appellee Kevin Chien (" Chien" or " Debtor"), finding that a debt owed by Chien to Luc based on a California judgment for $ 160, 000 was not excepted from discharge under § 523(a)(6).
In this appeal, Luc seeks to expand the parameters of what constitutes a willful injury as defined by the United States Supreme Court in Kawaauhau v Geiger, 523 U.S. 57, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998) and the Ninth Circuit in Carrillo v. Su (In re Su), 290 F.3d 1140 (9th Cir. 2002). Luc contends that it is enough for her to prove that Debtor knew his intentional act would result in harm to some group of persons or entities, even if she was not one of those harmed. Luc also argues that the willful conduct of another person should be imputed to Debtor because he was the surrogate or alter ego of the wrongdoer or the wrongdoer's partner.
We reject the expansion of § 523(a)(6) liability on either of these theories, conclude the trial court did not err in finding the debt at issue dischargeable, and AFFIRM.
II. FACTS
The complex factual and legal background which led to Chien and Luc's battle in the bankruptcy court has been well documented in two state court trials, a jury verdict, a judgment on the verdict, a trial judge's statement of decision and judgment, and two appellate decisions. We take the facts pertinent to our determination in this case largely from the second appellate decision, which followed the trial of Luc v. Chien in the San Francisco County Superior Court and upheld the $ 160, 000 judgment against Chien.
Chien became friends with Donald Chiu (" Chiu") in 1995 soon after he graduated from college. On a number of occasions, he helped Chiu obtain money by taking out loans in his name on property Chiu owned and temporarily deeded to Chien. For example, in 1997 Chien helped Chiu obtain refinancing for a condominium Chiu's mother purportedly owned (the " Condo"), although title was in Chiu's name. To take advantage of Chien's good credit, Chiu deeded title to the Condo to Chien, Chien signed the loan papers and, three days later, deeded the property back to Chiu's mother.
Meanwhile, lacking sufficient credit to obtain a construction loan for the development of the Rental Property, Chiu turned again to Chien. In meetings among Chiu, Chien, and a mortgage broker, Chiu represented in Cantonese that Chien was his partner and they jointly submitted loan applications. Chien did not deny the partnership assertions, although the record reflects he did not speak Cantonese. After submitting the loan applications, Chiu conveyed the Rental Property to Chien for no consideration. Chien secured a loan to pay off the existing financing and additional loans to complete the construction and renovation of the Rental Property.
The sale netted $ 160, 000 after all the costs of acquisition and construction were paid. The $ 160, 000 was paid from the sale escrow to a Chien bank account, but Chien only received $ 100 and the balance went to Chiu.
On April 28, 2000, Luc obtained a judgment against Chiu for approximately $ 635, 000 after a jury verdict setting aside the Stipulation as a " fraudulent inducement." The large judgment was based in part on treble damages awarded under the rent control law. The Chiu judgment was upheld on appeal.
This judgment against Chien was affirmed on appeal, the damages being upheld on the constructive trust theory. The appellate court commented on Chien's liability:
There is no direct evidence Chien intended to defraud Luc. When he acquired the property, Luc was not a judgment creditor and had not yet filed her wrongful eviction action. When he sold the property, he conveyed it to a good faith purchaser, without knowing about Luc's wrongful eviction action....Likewise, there is no direct evidence Chien wrongfully handled the $ 160, 000 profit....
The appellate court also quoted the trial court's comments about Chien's responsibility:
Moreover, the trial court concluded that Chien acted wrongfully, even if he did not act with a fraudulent intent. At the hearing on the statement of decision, the court explained: 'I don't think that Mr. Chien is without some responsibility. I said it before and I will say it again. Mr. Chien allowed himself to be used. I'm sorry, Mr. Chien. That's how I see it...I don't think that Mr. Chien is involved in any active fraud, in any active willful or malicious conduct. I wouldn't find that he is, you know, if there were an issue of punitive damages here, which there isn't, that he was subject to that....'
Chien filed his chapter 7 petition on August 19, 2005, and Luc timely filed her adversary compla