Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-canb-4_05-ap-04455/USCOURTS-canb-4_05-ap-04455-0/pdf.json

Parties Involved:
Carol Lam
Plaintiff
Richard Conrad Lam
Defendant

Document Text:

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

In re No. 05-44314 TT

Chapter 7

RICHARD CONRAD LAM,

Debtor.

___________________________/

CAROL LAM, A.P. No. 05-4455 AT

Plaintiff,

vs.

RICHARD CONRAD LAM,

Defendant.

___________________________/

MEMORANDUM OF DECISION RE MOTION FOR

PARTIAL SUMMARY JUDGMENT

In the above-captioned adversary proceeding, Carol Lam

(“Carol”), the former spouse of the above-captioned debtor, Richard

Conrad Lam (“Richard”), seeks an exception from Richard’s chapter 7

bankruptcy discharge with respect to certain claims arising from

their dissolution proceeding. In the complaint, she asserts two

bases for nondischargeability: i.e., 11 U.S.C. § 523(a)(4) and 11

U.S.C. § 523(a)(15). In this motion, Carol seeks partial summary

Signed: June 27, 2006

________________________________________

LESLIE TCHAIKOVSKY

U.S. Bankruptcy Judge

________________________________________

Entered on Docket 

June 27, 2006

GLORIA L. FRANKLIN, CLERK 

U.S BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA

Case: 05-04455 Doc# 26 Filed: 06/27/06 Entered: 06/27/06 12:34:36 Page 1 of 7 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26 1

A copy of the Libbey Decision is attached as Exhibit A to

Carol’s Request for Judicial Notice, filed on May 3, 2006. 

2

judgment with respect to her claim under 11 U.S.C. § 523(a)(4). For

the reasons stated below, her motion is denied.

SUMMARY OF FACTS

In 1999, a proceeding to dissolve the marriage of Richard and

Carol was commenced in state court. For various reasons not relevant

here, the proceeding progressed slowly. A trial was conducted on

February 23 to 25 and August 23 to 24, 2204 before a state court

judge, the Honorable James H. Libbey (“Judge Libbey”), with respect

to various issues. On November 2004, Judge Libbey issued his

decision with respect to those issues (the “Libbey Decision”).1 On

August 4, 2005, Richard filed a chapter 7 bankruptcy petition,

thereby commencing this chapter 7 bankruptcy case. Thereafter, Carol

filed this adversary proceeding, seeking nondischargeability of

certain claims established by the Libbey Decision. 

DISCUSSION

In her motion for partial summary judgment, Carol asserts that

she is entitled to a judgment as a matter of law with respect to her

first claim for relief, under 11 U.S.C. § 523(a)(4), as a matter of

collateral estoppel. As a factual matter, the claim has two distinct

parts. First, Judge Libbey found that, after the couple separated,

during the dissolution proceedings, Richard converted $368,285 in

community property funds contained in certain rollover accounts.

Second, during the couples’ marriage, Judge Libbey found that Richard

used $417,000 in community property funds to pay child support from

Case: 05-04455 Doc# 26 Filed: 06/27/06 Entered: 06/27/06 12:34:36 Page 2 of 7 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

2

Collateral estoppel prevents the relitigation of an issue

that was already decided in a prior proceeding between the same

parties. However, the issue in the prior proceeding must be

identical to the issue presented currently; it must have been

actually litigated and necessarily decided in the prior proceeding;

and a final judgment on the merits must have been entered. In re

Cantrell 329 F.3d 1119, 1122 (9th Cir. 2003).

3

a prior marriage at a time when he had separate property available to

him. Carol contends that Judge Libbey found that these acts were

breaches of fiduciary duty or that the Court should so find as a

matter of law based on Judge Libbey’s factual findings. As a result,

she contends that, pursuant to 11 U.S.C. § 523(a)(4), she is entitled

to a nondischargeable claim for $392,642--50 percent of these two

amounts–-based on principles of collateral estoppel.2

At the hearing on the motion, the Court held that the motion

should be denied with respect to the first factual claim. The Court

agreed that, in the Libbey Decision, Judge Libbey found that

Richard’s conversion of the Rollover Accounts was a “massive breach

of fiduciary duty.” However, as the Court read the Libbey Decision,

Judge Libbey concluded that no damage claim should be awarded for the

conversion. Instead, he treated the treated the converted funds as

a distribution of community property to Richard in deciding how the

community assets should be divided between the two. See Libbey

Decision, p. 3, ll. 14-25, p. 10, ll. 11-28. Thus, presumably,

Carol received an equivalent distribution of community property by

virtue of other provisions in the Libbey Decision. 

The Court took the second factual contention under submission.

At the hearing, the Court noted that, in the Libbey Decision, Judge

Case: 05-04455 Doc# 26 Filed: 06/27/06 Entered: 06/27/06 12:34:36 Page 3 of 7 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

3

The Libbey Decision does not make it clear whether Richard

paid the child support before or after the couple separated. 

However, since spouses have a fiduciary duty to each other during

marriage as well as after separation and during a dissolution

proceedng, this ambiguity does not affect the outcome of this

issue. See Cal. Fam. Code § 1100(e).

4

Libbey ordered Richard to reimburse the community for the $417,000 of

community property used to pay child support for his children from a

prior marriage: i.e., either one-half of the amount if using his

separate property to reimburse the community or the whole amount if

using community property. However, Judge Libbey did not expressly

hold that Richard’s use of community property to pay the child

support constituted a breach of fiduciary duty. See Libbey Decision,

p. 10, 34-37. Nevertheless, if spouses have a fiduciary duty to each

other with respect to community property during their marriage, prior

to separation, and if Richard’s use of community property to pay the

child support under these circumstances constituted a breach of that

duty, Carol would still be entitled to partial summary judgment on

this claim as a matter of collateral estoppel. 

Richard conceded that spouses have a fiduciary duty to each

other during marriage with respect to community property.3 However,

he contended that his use of community property to pay the child

support when he had separate property available was not a breach of

that duty. He contended that, in awarding Carol a claim based on

these payments, Judge Libbey applied the wrong standard. He

contended that the statutory prohibition was the use of community

property to pay support for children from a prior marriage when one

has separate income, not separate property available.

Case: 05-04455 Doc# 26 Filed: 06/27/06 Entered: 06/27/06 12:34:36 Page 4 of 7 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26 4

The Court presumes that, if Richard did have nonexempt

separate income available, his use of community property to make

the payments would constitute a breach of fiduciary duty. However,

5

Section 1100(e) of the California Family Code provides that

spouses have a fiduciary duty with respect to control of the

community assets during marriage. Cal. Fam. Code § 1100(e); see also

In re Reuling, 23 Cal. App. 4th 1428, 1437 (1994)(fiduciary duty

applies during marriage). A spouse has a claim for breach of

fiduciary duty against the other spouse based on any impairment in

the claiming spouse’s share of the community property. Cal. Fam.

Code § 1100(a). 

Section 915(b) of the California Family Code provides that:

If property in the community estate is applied

to the satisfaction of a child or spousal

support obligation of a married person that does

not arise out of the marriage, at a time when

nonexempt separate income of the person is

available but is not applied to the satisfaction

of the obligation, the community estate is

entitled to reimbursement from the person in the

amount of separate income, not exceeding the

property in the community estate so applied.

Cal. Fam. Code § 915(b). If no separate income was available, the

community is not entitled to any reimbursement for such expenditures.

See In re Williams, 213 Cal. App. 3rd 1239, 1244 (1989). As noted

above, the Libbey Decision did not make a finding that Richard had

nonexempt separate income available at the time he used community

property to pay support for his children from a prior marriage. No

evidence as to that factual issue has been presented in connection

with this motion. Therefore, Carol’s request for summary judgment on

this portion of the claim must also fail.4 

Case: 05-04455 Doc# 26 Filed: 06/27/06 Entered: 06/27/06 12:34:36 Page 5 of 7 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

it makes no decision on this issue at this time. 

6

CONCLUSION

Carol’s motion for partial summary judgment, granting judgment

in her favor on her claim for relief under 11 U.S.C. § 523(a)(4) is

hereby denied. Richard is directed to submit a proposed form of

order in accordance with this decision. 

END OF DOCUMENT

Case: 05-04455 Doc# 26 Filed: 06/27/06 Entered: 06/27/06 12:34:36 Page 6 of 7 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

7

COURT SERVICE LIST

Chris D. Kuhner

Kornfield, Paul & Nyberg, P.C.

1999 Harrison St., Ste. 2675

Oakland, CA 94612

Richard C. Lam

1470 Creekside Drive, Unit 6

Walnut Creek, CA94596

Case: 05-04455 Doc# 26 Filed: 06/27/06 Entered: 06/27/06 12:34:36 Page 7 of 7