Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_18-cv-02168/USCOURTS-casd-3_18-cv-02168-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (District or BAP)

---

I , 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

FILEJ) I 

I 

I SEP 10 2019 i . "" ........ I 

CLERK uS rns·1 RtC-1 couMT \ 

SOUTHERN TRICT OF CALIFORNIA I 

13Y DEPUIJj 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

JANET VOHARIWATT and 

PAUL VOHARIWATT, 

v. 

KEITH MATSON and 

JOANNE MATSON, 

Appellants, 

Appellees. 

Case No.: 3:18-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA7 

ORDER 

19 Appellants Janet and Paul Vohariwatt appeal the Bankruptcy Court's September 4, 

20 2018 Judgment on Remand. The Judgment is AFFIRMED. 

I. BACKGROUND 

A. The Foreclosure 

21 

22 

23 In 2006, Appellants Janet and Paul Vohariwatt purchased real estate located at 31 

24 Sandpiper Strand. In December 2008, the Vohariwatts contracted to rent the property to 

25 tenants. The tenants paid $60,000 to rent the property for one year, as well as a $10,000 

26 "pet deposit" and a $5,000 security deposit. The tenants began living at the property in 

27 May 2009. In January 2010, the Vohariwatts and the tenants agreed to extend the lease 

28 until June 20, 2011 for another $60,000. The tenants made a $50,000 rent payment in May 

3: l 8-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA? 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 1 of 12
1 2010, and the parties agreed that the pet deposit would be used to cover the remaining 

, ___ _...2--'. $10 000 of rent owed. 

3 Notices of Default for the Property were recorded in August 2009 and July 2010, 

4 and Notices of Trustee's Sale for the Property were recorded in November 2009 and 

5 October 2010. On February 3, 2011, Keith and Joanne Matson purchased the 31 Sandpiper 

6 Strand property at a foreclosure auction. The Vohariwatts did not learn of the foreclosure 

7 auction until February 4, 2011. Between February 4, 2011 and February 23, 2011, the 

8 Matsons requested that the Vohariwatts turn over the rent money prepaid by the tenants for 

9 the period of February 3, 2011 (the day the Matsons took ownership of the property) 

10 through June 20, 2011 (the end of the rental period). The Vohariwatts refused. 

11 B. State Court Proceedings 

12 On March 30, 2011, the Vohariwatts brought suit for wrongful foreclosure against 

13 the Matsons in the Superior Court, County of San Diego. On October 7, 2011, the Superior 

14 Court dismissed the Vohariwatts' wrongful foreclosure suit. On that day, the Matsons 

15 again requested that the Vohariwatts turn over the prepaid rent, and the Vohariwatts again 

16 refused. 

17 The Matsons then brought suit against the Vohariwatts in the Superior Court, County 

18 of San Diego for (1) wrongful institution of civil proceedings for their wrongful foreclosure 

19 suit against the Matsons and (2) for conversion of the prepaid rent. After a two-day trial 

20 in January 2013, the Superior Court found for the Matsons on both claims, entering 

21 judgment against the Vohariwatts for $23,587.55 on the wrongful institution of civil 

22 proceedings claim and for $22,520.55 on the conversion claim. In finding for the Matsons 

23 

24 

25 

26 

27 

28 

on the conversion claim, the Superior Court stated: 

The Vohariwatts kept the rent money attributable to February 3, 2011 to June 

20, 2011 despite no longer owning [the property]. The conversion occurred 

on February 3, 2011. Mr. Matson and Mrs. Vohariwatt both testified that Mr. 

Matson requested the prepaid rent money on October 7, 2011. The 

Vohariwatts refused to give them the money. 

2 

3: 18-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA? 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 2 of 12
1 

2 

3 

At the rental rate of$5,000 per month multiplied by twelve months, and then 

divided by 365 days, the daily rental rate is $164.38. February 3, 2011 to June 

L__ ___ =zo~20117V11S 1~7oays. Therefor~the amount of tne Matsons' personal 

property that the Vohariwatts converted is $22,520.55. 

4 Doc. 6-9 at p. 29 (2/5/2013 Superior Court Judgment). 

5 C. First Bankruptcy Proceeding 

6 In February 2016, the Vohariwatts filed for Chapter 7 bankruptcy. On April 28, 

7 2016, the Matsons filed a complaint in the Bankruptcy Court seeking a determination that 

8 the two debts owed under the Superior Court's judgment against the Vohariwatts were 

9 nondischargeable under 11 U.S.C. § 523(a)(6). On January 24, 2017, the Matsons moved 

10 for a summary judgment order declaring that the judgment debts were exempt from the 

11 Vohariwatts' discharge. The Bankruptcy Court granted the Matsons' motion as to the debt 

12 owed for wrongful institution of civil proceedings. However, the Bankruptcy Court denied 

13 the Matsons' motion as to the debt owed for the conversion judgment, finding that 

14 particular debt to be dischargeable because it did not satisfy§ 523(a)(6). In so holding, the 

15 Bankruptcy Court reasoned that the Matsons were collaterally estopped from arguing § 

16 523(a)(6)'s nondischargeability exception applied because of the Superior Court's 

17 judgment that the conversion occurred on February 3, 2011. Specifically, the Bankruptcy 

18 Court determined that because the Superior Court found the conversion occurred on 

19 February 3, 2011, and the Vohariwatts did not learn about the foreclosure sale until after 

20 February 3, 2011, their conversion on February 3, 2011 could not be "willful and 

21 malicious," as required by§ 523(a)(6)'s nondischargeability exception. 

22 D. First Appeal of Bankruptcy Judgment 

23 On June 19, 2017, the Matsons appealed to this Court the parts of the Bankruptcy 

24 Court's judgment declaring that the judgment debt attributable to conversion was 

25 discharged and ordering that the interest would accrue at the federal judgment rate. On 

26 appeal, this Court held that "the Bankruptcy Court erred when it applied the doctrine of 

27 collateral estoppel to conclude that the Conversion did not include acts that occurred after 

28 February 3, 2011" because "[t]he Superior Court had no reason to decide whether or not 

3 

3: l 8-cv-02 I 68-BEN-BGS 

Bankruptcy No.: 16-00658-LA? 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 3 of 12
1 the Conversion included events that occurred after that date." 12/18/17 Order at p. 6. As 

2 . relevant to the instant ap.peal, this Court fu-rt~h.~e~r~h~e"l,rl~: ______________ .__----11 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

In this case, principles of collateral estoppel require this Court to accept the 

Superior Court's conclusion that the Conversion had begun to occur by 

February 3, 2011 ... The Vohariwatts 1 have yet to transfer the Prepaid Rent 

to the Matsons. Consequently, the Conversion has continued from February 

3, 2011 until the present. The Conversion includes "any act[ s] of dominion" 

over the Prepaid Rent committed by the Vohariwatts during that period of . 

time. Igauye v. Howard, 249 P.2d 558, 561 (Cal. Ct. App. 1952). 

The Court remands this case to the Bankruptcy Court to determine whether 

the Vohariwatts committed acts of dominion over the Prepaid Rent after 

February 3, 2011. Having determined the acts that make up the Conversion, 

the Bankruptcy Court must determine whether the Conversion Debt is "for 

willful and malicious injury by the [Vohariwatts] to [the Matsons]" and 

therefore [non]dischargeable under 11 U.S.C. § 523(a)(6). 

12/18/17 Order at p. 7. 

E. Bankruptcy Proceedings Following Remand 

On remand, the Bankruptcy Court held a hearing during which it asked, "[W]ith 

16 respect to additional hearings to understand whether there's a commission of acts of 

17 dominion after February 3, 2011, and if there is a conversion, that conversion was willful 

18 and malicious, what are you anticipating you might have to do?" Doc. 149 at p. 4. Both 

19 parties stated their wish to brief the issues, and the Court set a briefing schedule. See id. 

20 The Court additionally requested a full transcript of the Superior Court trial, which the 

21 parties agreed to provide, and noted, "We will determine whether or not, after the 

22 conclusion of the briefing - that the Court is satisfied that no further evidence is required." 

23 Id. atp. 10. 

24 When the Vohariwatts filed their opposition brief on remand, they attached a 

25 declaration with more than 100 pages of new exhibits showing "improvements" they made 

26 

27 

1 The Court has modified the quoted language from the 12/18/17 Order to reflect 

28 the correct spelling of the Vohariwatts' name. 

4 

3: l 8-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA? 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 4 of 12
1 to the property prior to the February 3, 2011 foreclosure. At the August 23, 2018 hearing 

___ _,,.2'-'. on remand, the Bankrup_tcy_C_o_urLiss.u_ed_a-"tentati:s.re_ruling~-•-•_Sustain[jngJ_the_Matsons,_' ,____. 

3 evidence objection to strike the Vohariwatts' post-trial evidence as untimely and irrelevant 

4 and took under submission to explain in writing the basis for her decision on remand that 

5 (1) the Vohariwatts' conversion of the prepaid rent began on February 3, 2011 and has 

6 continued until the present; and (2) the resulting conversion debt is for a 'willful and 

7 malicious injury' that is nondischargeable under 11 U.S.C. § 523(a)(6)." Doc. 9-1 at p. 81; 

8 see also Doc. 9-1 at p. 78 ("Tentative Ruling"). The Bankruptcy Court later issued a five9 page written order reaffirming its tentative ruling. Doc. 9-1 at p. 81. This appeal followed. 

10 II. DISCUSSION 

11 The Vohariwatts raise two issues on appeal. First, they argue that the Bankruptcy 

12 Court erred by using the "substantial certainty" standard for "willful injury" adopted by In 

13 re Jercich, 238 F.3d 1202 (9th Cir. 2002). Second, they contend that even if the 

14 Bankruptcy Court applied the correct standard, it did not apply it correctly, including 

15 because it improperly struck the Vohariwatts' pre-foreclosure improvements evidence. For 

16 the reasons discussed below, the Court rejects both grounds for appeal and affirms the 

17 Bankruptcy Court's judgment. 

18 

19 

A. The Bankruptcy Court Properly Followed Jercich and Geiger 

Section 523(a)(6) prevents the discharge of any debt arising from "willful and 

20 malicious injury by the debtor to another entity or to the property of another entity[.]" § 

21 523(a)(6). The Vohariwatts contend that the Bankruptcy Court applied the wrong standard 

22 for § 523(a)(6)'s "willful" injury requirement because it relied upon the Ninth Circuit's 

23 decision in Jercich. 2 According to the Vohariwatts, Jercich "misconstrued (and then 

24 overlooked)" the Supreme Court's prior decision in Kawaauhau v. Geiger, 523 U.S. 57 

25 (1998), by applying a "substantial certainty" test for willfulness. Doc. 8 at p. 19. 

26 

27 

28 

2 The Vohariwatts do not appeal the Bankruptcy Court's "malicious" injury finding, 

and thus, the Court addresses only the "willful" injury prong of§ 523(a)(6). 

5 

3: 18-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA? 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 5 of 12
I . 

1 The Court reviews de nova the Bankruptcy Court's construction of§ 523(a)(6). See 

___ _..2'-'. In re Su 290 F.3d 1140 1142 (9th Cir. 2002) (stating that a conclusion oflaw is reviewed __ 

3 de nova). In its 2018 decision, the Bankruptcy Appellate Panel ("BAP") considered and 

4 rejected the same arguments raised by the Vohariwatts. See In re Hamilton, 584 B.R. 310 

5 (9th Cir. BAP 2019),pending appeal, 2019 WL 1259164 (9th Cir. Apr. 19, 2019). As the 

6 BAP recently explained, "[Geiger and Jerich] are not at odds" with one another.3 Id. at 

7 318 ( emphasis added). In Geiger, the Supreme Court considered whether a debtor-doctor's 

8 debt arising from a medical malpractice claim against him fell within the "willful and 

9 malicious injury" exception to discharge. The Supreme Court expressly declined to expand 

10 the definition of "willful" to include the debtor's negligent or reckless medical care, 

11 

12 

13 

14 

15 

explaining: 

The word "willful" in§ 523(a)(6) modifies the word "injury," indicating that 

nondischargeability takes a deliberate or intentional injury, not merely a 

deliberate or intentional act that leads to injury. Had Congress meant to 

exempt debts resulting from unintentionally inflicted injuries, it might have 

described instead "willful acts that cause injury." 

16 Id. at 61 (emphasis in original). 

17 Three years after Geiger, the Ninth Circuit decided Jercich and declined to find that, 

18 under Geiger, the willfulness prong necessarily requires a "specific intent" to cause injury. 

19 Jercich, 238 F.3d at 1207. In so holding, the Jercich court reasoned that Geiger "clarified 

20 that it is insufficient under§ 523(a)(6) to show that the debtor acted willfully and that the 

21 injury was negligently or recklessly inflicted; instead, it must be shown not only that the 

22 debtor acted willfully, but also that the debtor inflicted the injury willfully and maliciously 

23 rather than recklessly or negligently." Id. (emphasis in original). Jercich concluded that 

24 Geiger did not, however, "answer . . . the precise state of mind required to satisfy § 

25 523(a)(6)'s 'willful' standard." Id. The Ninth Circuit went on to follow the Fifth and Sixth 

26 

27 

28 320. 

3 This Court's reasoning follows the BAP's reasoning in Hamilton, 584 B.R. at 318-

6 

3: 18-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA 7 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 6 of 12
1 Circuits in holding that, "under Geiger, the willful injury requirement of§ 523(a)(6) is met 

2 . when it is shown either that the debtor had a subjective motive to inflkU:lie injury ouhaL __ 

3 the debtor believed that the injury was substantially certain to occur as a result of his 

4 conduct." Id. Thus, as the BAP confirmed, Jercich remains good law that this Court must 

5 follow. See Hamilton, 583 B.R. at 320 (rejecting arguments identical to those raised by 

6 the Vohariwatts). 

7 The Vohariwatts' reliance on Hawkins v. Franchise Tax Board of California, 769 

8 F.3d 662 (9th Cir. 2014), to show that willfulness requires "specific intent" fares no better. 

9 Hawkins is distinguishable because it concerned only tax debts under§ 523(a)(l )(A) within 

10 "the bankruptcy tax context," not a conversion judgment within the context ofa willful and 

11 malicious injury under§ 523(a)(6), as is the case here. See also Hamilton, 584 B.R. at 320 

12 (rejecting debtors' reliance upon Hawkins on same grounds). Thus, contrary to the 

13 Vohariwatts' argument, Hawkins did not "implicitly overrule Jercich." Id. 

14 Having rejected the Vohariwatts' arguments and construed the test for willfulness 

15 under § 523(a)(6), the Court considers next whether the Bankruptcy Court applied the 

16 correct standard for willfulness. It did. The Bankruptcy Court properly grounded its 

17 construction of the willfulness standard in Geiger, Jercich, and In re Su, 290 F.3d 1140 

18 (9th Cir. 2002), by using the "substantial certainty" standard adopted in Jercich. See Doc. 

19 9-1 at p. 82-83. Accordingly, the Bankruptcy Court did not err in its construction of§ 

20 523(a)(6). 

21 B. The Bankruptcy Court Correctly Applied the Willfulness Standard 

22 Next, the Vohariwatts contend that even if Jercich is good law, the Bankruptcy Court 

23 incorrectly applied its "substantial certainty" standard to the facts of this case by finding § 

24 523(a)(6)'s willful injury requirement was satisfied. To make that determination, the 

25 Bankruptcy Court necessarily made factual findings about the Vohariwatts' mental state. 

26 Thus, the Court reviews those factual findings for clear error. See Hamilton, 584 B.R. at 

27 318 ("The clear error standard applies to the bankruptcy court's factual findings about the 

28 

7 

3: l 8-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA 7 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 7 of 12
1 Debtors' mental state."). The Bankruptcy Court made the following findings on 

---=2---J. willfulness: 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

The Vohariwatts acted with a willful intent when they took the injuryproducing action of asking the tenants to remain in possession without paying 

any rent to the Matsons, while simultaneously retaining the prepaid rent 

instead of transferring it to the Matsons. The necessary consequence of this 

action is that the Matsons could not re-rent the property, or possess the 

property for themselves, or receive the rental income from the property to pay 

their mortgage and other debts. 

Additionally, the Vohariwatts' willful intent is evidenced by their retention of 

the prepaid rent after the state court dismissed their foreclosure action against 

the Matsons, and after the Matsons demanded payment of the rent in October 

2011. It is further evidenced by the Vohariwatts' continued retention of the 

prepaid rent after the Matsons filed the state court action against them for 

malicious prosecution and conversion of the prepaid rent, and after the 

Matsons had obtained a judgment against them on both claims. The natural 

consequence of the Vohariwatts' continued retention of prepaid rent is to 

deprive the Matsons of their use of these rental monies in violation of their 

clear ownership rights. 

16 Doc. 9-1 at p. 83. 

17 As previously discussed, the willful injury requirement is met when the debtor 

18 knows that the injury is substantially certain to occur as a result of his conduct. See 

19 Jercich, 238 F.3d at 1208. The court may infer intent "from the totality of the 

20 circumstances and the conduct of the person accused." In re Ormsby, 591 F.3d 1199, 

21 1206 (9th Cir. 2010). In addition, the "court may consider circumstantial evidence 

22 that tends to establish what the debtor must have actually known when taking the 

23 injury-producing action." Su, 290 F.3d at 1146, n. 6. "The [d]ebtor is charged with 

24 the knowledge of the natural consequences of his actions," Ormsby, 591 F.3d at 

25 1206, and the court is not required to "take the debtor's word for his state of mind," 

26 Su, 390 F.3d at 1146, n. 6. 

27 The Vohariwatts argue that the Bankruptcy Court improperly assumed the 

28 conversion judgment was nondischargeable without identifying and considering the 

8 

3: 18-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA 7 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 8 of 12
1 requisite "nexus" between their conduct and the end result. That argument lacks merit. 

___ _..2~,. The Bankrup_tc_y_C_o_urt_duLnoJ:_has_e__its_finding_of_intent_mer.ely_on_the_\lohariw_atts,_' .,.__----11 

3 retention of the prepaid rent, as the Vohariwatts contend. Rather, the Bankruptcy Court 

4 relied upon the Vohariwatts' undisputed acts of interference with the property's tenants. 

5 As the Bankruptcy Court found, the post-February 3, 2011 "injury-producing" conduct was 

6 the Vohariwatts' "asking the renters to remain in possession without paying any rent to the 

7 Matsons, while simultaneously retaining the prepaid rent instead of transferring it to the 

8 Matsons." Doc. 9-1 at p. 83. The Bankruptcy Court further found that the Vohariwatts 

9 knew their actions would cause substantial injury to the Matsons because "[t]he necessary 

10 consequence of this action is that the Matsons could not re-rent the property, or possess the 

11 property for themselves, or receive the rental income from the property to pay their 

12 mortgage and other debts." Id. Thus, in contrast to the Vohariwatts' characterization, the 

13 Bankruptcy Court's decision was not based on the existence of the conversion judgment, 

14 alone. Instead, the record reflects that the Bankruptcy Court properly considered the 

15 parties' arguments and the evidence offered at trial to come to its conclusions 'regarding 

16 the Vohariwatts' knowledge and intent-conclusions that are logical, plausible, and 

1 7 supported by the record. 

18 Next, the Vohariwatts contend that because they used the prepaid rent funds to pay 

19 for "improvements" to the property prior to the foreclosure sale on February 3, 2011, the 

20 Matsons "actually had ownership of all the funds received from the prepaid rents" that they 

21 were owed pursuant to the Superior Court's conversion judgment. Doc. 8 at p. 22; see also 

22 Doc. 9-3 (7/11/2018 Declaration and attached exhibits). Thus, the Vohariwatts theorize, 

23 the Bankruptcy Court erred by "conclud[ing] that the Vohariwatts knew the natural 

24 consequences of continued retention of prepaid rent [ wa]s to deprive the Matsons of their 

25 use"' because the Matsons were not, in fact, injured. Doc. 8 at p. 22 (citing Doc. 9-1 at p. 

26 83.). The Vohariwatts are incorrect. The Vohariwatts' late-filed evidence of pre27 foreclosure improvements to the property, accompanied by their new theory that the 

28 Matsons were somehow reimbursed for the prepaid rent by purchasing the property with 

9 

3: l 8-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA? 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 9 of 12
1 the pre-foreclosure improvements, is not only illogical, but it contradicts issues already 

---=2---J. resolved bj' the Superior Court, which in turn, th~_B_ankrupic.y_C_nJltUUld_thi.s_C_oJJli..ReLe __ _ 

3 required to accept. See 12/17/18 Order ("Under California law, collateral estoppel ... 

4 applies to issues that 'have been necessarily decided in the former proceeding."'). In the 

5 first appeal, this Court held that collateral estoppel applied to three issues necessarily 

6 resolved by the Superior Court: "(l) whether the Matsons had a right to the Prepaid Rent 

7 'at the time of the conversion,' (2) whether the Vohariwatts converted the Prepaid Rent 'by 

8 a wrongful act,' and (3) the amount of damages owed to the Matsons." 12/18/17 Order at 

9 p. 6. Accordingly, the Vohariwatts are collaterally estopped from using their late-filed 

10 evidence to challenge either the extent of the Matsons' financial damage or whether the 

11 Vohariwatts converted the prepaid rent on February 3, 2011. 

12 Nonetheless, the Vohariwatts contend that the Bankruptcy Court erred by striking 

13 their pre-foreclosure improvements evidence.4 That decision, however, was not an abuse 

14 of discretion. The Court has reviewed the Vohariwatts' declaration and exhibits and agrees 

15 with the Bankruptcy Court that the evidence was both untimely and not relevant to the 

16 willfulness finding, for the reasons discussed supra. 

17 

18 

19 

20 

21 

22 

23 

25 

26 

27 

28 

4 The Court is likewise not persuaded that the Bankruptcy Court's evidentiary ruling 

denied due process to the Vohariwatts. First, the Vohariwatts offer no evidence in the 

record showing that they did not have an opportunity to respond, particularly when the 

Bankruptcy Court held a hearing on August 23, 2018 to address the parties' briefing. The 

24 Court notes that the Vohariwatts neglected to file the transcript of that hearing as part of 

their appeal, and thus, the Court is unable to consider it. In light of the tentative ruling 

issued by the Bankruptcy Court during that hearing, the Court is skeptical that the 

evidentiary issue was not at least raised during the hearing. Moreover, there is no evidence 

in the record suggesting the Vohariwatts took any further steps to be heard on the matter, 

e.g., by filing a motion to reconsider or for leave to file a sur-reply to the Matsons' reply 

brief. 

10 

3: 18-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA? 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 10 of

 12
1 Further, even if the Bankruptcy Court had considered the pre-foreclosure 

---=2---1. imnrovements evidence-which it mav have5-the outcome would be the same. First the 

3 Vohariwatts' declaration does not assert their subjective belief that the Matsons were 

4 already reimbursed by virtue of purchasing the foreclosed property with the pre-foreclosure 

5 improvements. Indeed, there is no direct evidence of the Vohariwatts' beliefs on that point; 

6 rather, their alleged belief is evidenced only by implication. See Doc. 9-3 (7/11/2018 

7 Declaration). 

8 Second, even considering the Vohariwatts' new theory within the "totality of the 

9 circumstances," a court is not required to accept it as true, particularly in the face of 

10 evidence to the contrary. See, e.g., Ex. 29; App. 133 (2012 email from the Vohariwatts to 

11 third party stating, "I do not think they have the right [to the prepaid rent] ... 1. Because 

12 we have not dropped the wrongful foreclosure case. 2. These are money we used to pay the 

13 mortgage and reinstate the loan."); see also Su, 390 F.3d at 1146, n. 6 (noting that the court 

14 is not required to "take the debtor's word for his state of mind."). For example, during 

15 direct examination at trial, counsel asked, "What did you do with the rent and the security 

16 deposit you received," and the Vohariwatts responded, "We use[d] it to pay mortgage." 

17 Tr. P. 89:26-28; App. 460. Thus, even considering the pre-foreclosure improvements 

18 evidence, the Bankruptcy Court's finding that the Vohariwatts interfered with the Matsons' 

19 rental income, as well as refused to reimburse them, would still be logical, plausible, and 

20 supported by the record. See In re Retz, 606 F.3d 1189, 1196 (9th Cir. 2010) ("A court's 

21 factual determination is clearly erroneous if it is illogical, implausible, or without support 

22 in the record."). 

23 

24 

25 

26 

27 

28 

5 See Doc. 9-1 at p. 84 ("Even if the Vohariwatts had already spent these funds prior 

to February 3, 2011 as they claim, they still had sufficient funds at various times after 

February 3, 2011 to pay this debt but chose to direct their funds elsewhere."). 

11 

3: l 8-cv-02 I 68-BEN-BGS 

Bankruptcy No.: 16-00658-LA? 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 11 of

 12
1 For the previous reasons, the Bankruptcy Court properly construed "willfulness" 

___ _....2'_J. under§ 523(a)(6),~Jlroperly aJ).plied Jercich's substantial certaincy standard to the facts, and ~~~-

3 did not abuse its discretion by striking the pre-foreclosure improvements evidence. 

4 III. CONCLUSION 

5 The Bankruptcy Court's Judgment dated September 4, 2018 is AFFIRMED, and 

6 the appeal is dismissed. 

7 

8 

IT IS SO ORDERED. 

9 DATED: Septemberjl-, 2019 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

12 

TEZ 

3: l 8-cv-02168-BEN-BGS 

Bankruptcy No.: 16-00658-LA? 

Case 3:18-cv-02168-BEN-BGS Document 10 Filed 09/10/19 PageID.<pageID> Page 12 of

 12