Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-canb-4_10-ap-04009/USCOURTS-canb-4_10-ap-04009-0/pdf.json

Parties Involved:
First Republic Bank
Plaintiff
Christian Peter Mirner
Defendant
Tamara Lynne Cullen-Mirner
Defendant

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UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

In re No. 09-49872 TT 

Chapter 7

CHRISTIAN PETER MIRNER, 

TAMARA LYNNE CULLEN-MIRNER,

Debtors.

___________________________/

FIRST REPUBLIC BANK, A.P. No. 10-4009 AT

Plaintiff,

vs.

CHRISTIAN PETER MIRNER,

TAMARA LYNNE CULLEN-MIRNER,

Defendants.

___________________________/

MEMORANDUM OF DECISION

The above-captioned adversary proceeding was tried to the Court

on June 21, 2010. Appearances were stated on the record. At the

conclusion of the trial, the Court took the proceeding under

submission. After due consideration, the Court now concludes that

judgment should be entered for the plaintiff. The reasons for the

Court’s decision are set forth below.

Signed: July 01, 2010

________________________________________

LESLIE TCHAIKOVSKY

U.S. Bankruptcy Judge

________________________________________

Entered on Docket 

July 02, 2010

GLORIA L. FRANKLIN, CLERK 

U.S BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA

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SUMMARY OF FACTS

In September 2007, the defendants (the “Mirners”) obtained a

loan from the plaintiff (the “Bank”) for an amount in excess of $2

million and secured the obligation with a first deed of trust on

their residence, a mini-mansion located in Lafayette, California (the

“Residence”). In October 2007, the Mirners obtained a loan from the

Bank for an amount in excess of $600,000 and secured the obligation

with a first deed of trust on a lavishly appointed vacation home

located in Truckee, California (the “Vacation Home”). Both

obligations went into default in May 2009, and in June 2009 the Bank

began foreclosure proceedings. The Bank obtained appraisals of both

properties in July 2009. The Residence was appraised as having a

value of $1.9 million at that time. The Vacation Home was appraised

as having a value of $550,000.

On October 20, 2009, shortly before the scheduled foreclosure

sales on two properties, the Mirners filed a chapter 7 petition,

commencing this bankruptcy case. The Bank filed motions for relief

from the automatic stay and obtained orders terminating the stay as

to both properties. Foreclosure sales were conducted on the Vacation

Home on December 9, 2009 and on the Residence on January 7, 2010.

The Bank obtained title to each property at the foreclosure sales

based on credit bids of less than the full amount of their debt. 

After the sales were conducted, the Bank gained access to the

properties and discovered that numerous fixtures had been removed,

causing significant damage to each of the properties. The Bank has

resold the Vacation Home for $525,000 and asserts a damage claim for

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The Mirners challenged these amounts as unreasonable and

unsupported by the evidence. However, they presented no

conflicting evidence. Based on the photographs taken of the damage

done, the Court finds the amounts asserted by the Bank to be

reasonable.

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$25,000 with respect to that property: i.e., the difference between

the sale price and the appraised value of $550,000. It has not

resold the Residence. It asserts a $77,000 claim with respect to the

Residence based on an estimate obtained for repairing the damage done

to that property by the removal of the fixtures. The Bank asserts a

nondischargeable monetary claim against the Mirners totaling $102,000

based on 11 U.S.C. § 523(a)(6) (willful and malicious injury).1

At trial, Christian Mirner (“Mr. Mirner”) admitted personally

removing most of these items. He testified that he still had the

items that he had removed and hoped to use them in some future

residence. As for the damage done to the premises, Mr. Mirner

testified that he did not believe that the Bank, as a secured

creditor, could obtain a monetary judgment for damages against him.

He believed that the Bank’s only remedy upon his default was to

foreclose on the real property. He also expressed the belief that

the resale value of foreclosed-upon real property would not be

affected by the removal of the fixtures. He did not explain the

basis for this conclusion.

DISCUSSION

This adversary proceeding presents two distinct issues. First,

does the Bank have a claim for damages against the Mirners under

state law? Second, if so, is the claim excepted from the Mirners’

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The Bank asserted other legal theories in its complaint. 

However, it failed to advance or support these legal theories at

trial, and the Court concluded that they were abandoned. 

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bankruptcy discharge under 11 U.S.C. § 523(a)(6). The Court will

address each issue in turn.

A. DOES THE BANK HAVE A CLAIM FOR DAMAGES AGAINST THE MIRNERS UNDER

STATE LAW?

The Bank asserts a claim for “bad faith waste” against the

Mirners based on Mr. Mirner’s removal of various fixtures from the

Residence and the Vacation Home and the resulting damage.2

 Section

2929 of the California Civil Code provides that:

No person whose interest is subject to the lien

of a mortgage may do any act which will

substantially impair the mortgagee’s security.

Cal. Civ. Code § 2929. A violation of this statutory provision gives

rise to a claim of “waste.” This claim becomes part of the debt

secured by the deed of trust. See Cornelison v. Kornbluth, 15 Cal.

3d 590 (1975). 

California law provides that a secured creditor has no right to

a deficiency judgment if a deed of trust is foreclosed nonjudicially.

See Cal. Civ. Proc. Code § 580b. In addition, it provides that, if

the secured debt was incurred to purchase a single family dwelling,

there is no right to a deficiency judgment in any event. See Cal.

Civ. Proc. Code § 580d. There is no dispute that the Bank provided

purchase money loans on both properties, that both properties were

single family dwellings, and that both deeds of trust were foreclosed

nonjudicially. 

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California case law has a well established exception to the

prohibition on deficiency judgments under these circumstances. The

leading case on this issue is Cornelison v. Kornbluth, 15 Cal. 3d 590

(1975) which is still good law. The Cornelison court noted that the

same economic forces that cause a borrower to default on its secured

debt may sometimes result in a borrower’s failure to maintain the

collateral as well, resulting in waste. It concluded that this type

of “waste” was properly barred by California’s anti-deficiency

legislation referred to above. 

However, the Cornelison court concluded that the anti-deficiency

legislation did not intend to bar a claim for “bad faith waste”:

i.e., damage to the real property done recklessly, intentionally, or

maliciously by the borrower. See Cornelison, 15 Cal.3d at 603-04.

Mr. Mirner admitted intentionally removing the fixtures and was

clearly aware that he was doing damage to the properties in the

process. Based on the foregoing, the Court concludes that the Bank

has a claim for “bad faith waste” against the Mirners under

California law. The Court finds and concludes that the principal

amount of that claim is $102,000. 

B. IS THE BANK’S CLAIM FOR DAMAGES NONDISCHARGEABLE?

The Bank seeks to except its damage claim against the Mirners

from their chapter 7 discharge based on 11 U.S.C. § 523(a)(6).

Section 523(a)(6) provides that a chapter 7 discharge does not

discharge a debtor from a debt “for willful and malicious injury by

the debtor to another entity or to the property of another

entity....” 11 U.S.C. § 523(a)(6). Determining whether the Bank’s

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claim for “bad faith waste” should be excepted from the Mirners’

bankruptcy discharge under this provision requires the consideration

of two distinct issues: (1) whether Mr. Mirner acted willfully and

(2) whether Mr. Mirner acted maliciously. The Court will address the

latter issue first.

In the Ninth Circuit, for purposes of 11 U.S.C. § 523(a)(6),

malice requires: “(1) a wrongful act, (2) done intentionally, (3)

which necessarily causes injury, and (4) is done without just cause

or excuse.” In re Ormsby, 591 F.3d 1199, 1207 (9th Cir. 2010)

(quoting In re Jercich, 238 F.3d 1202, 1209 (9th Cir. 2001)). Based

on the evidence presented, the Court finds that Mr. Mirner acted

maliciously in removing the various fixtures from the two properties.

The action was clearly intentional. It was wrongful because it

violated Cal. Civ. Code § 2929. 

The Court finds and concludes that the damage necessarily

affected the value of the properties and thus caused injury to the

Bank, which is clearly undersecured. Finally, the Court finds that

there was no just cause or excuse for the Mirners’ conduct. Mr.

Mirner’s testimony that he believed that the Bank had no remedy

against him for the damage to the property does not provide a just

cause or excuse for the action.

The more difficult issue is whether Mr. Mirner acted willfully.

To be willful for purposes of 11 U.S.C. § 523(a)(6), the injury as

well as the action must be intended. Kawaauhau v. Geiger, 523 U.S.

57, 61-62(1998). In Geiger, the debtor, a doctor, negligently

prescribed ineffective medication, resulting in the amputation of the

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plaintiff’s right leg below the knee. Id. at 69. The bankruptcy

court found that the debtor’s conduct was intentional and necessarily

led to the injury suffered. As a result, the debt was excepted from

the debtor’s discharge under 11 U.S.C. § 523(a)(6). 

The Supreme Court held otherwise. It noted that such an

approach: 

...could place within the excepted category a

wide range of situations in which an act is

intentional, but injury is unintended, i.e.,

neither desired nor in fact anticipated by the

debtor. Every traffic accident stemming from an

initial intentional act-for-example,

intentionally rotating the wheel of an

automobile to make a left-hand turn without

first checking oncoming traffic-could fit the

description.

Geiger, 523 U.S. at 62. The Ninth Circuit has held that the debtor’s

intent to injure, for purposes of 11 U.S.C. § 523(a)(6) must be

determined based on a subjective test. In re Su, 290 F.3d 1140,

1145-46 (9th Cir. 2002). In Su, the plaintiff, a pedestrian, was

severely injured when struck by a vehicle driven by the debtor. The

debtor was speeding and drove through a red light. The bankruptcy

court held that the plaintiff had a claim for willful and malicious

injury. It used an objective test in making its determination of

whether the debtor acted willfully. Id., 290 F.3d at 1141-42. 

The Ninth Circuit Court of Appeals reversed and remanded,

directing the bankruptcy court to make the determination using a

subjective test. It noted that the Restatement (Second) of Torts

dictated the use of a subjective test to determine whether an action

is intentional. Id., 290 F.3d at 1143. It noted that the Sixth

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Circuit had adopted a subjective test while the Fifth Circuit had

adopted an objective one. In re Su, 290 F.3d at 1143-44. It

acknowledged that prior case law had not made a clear choice between

these two tests. See In re Su, 238 F.3d at 1142 (citing In re

Jercich, 238 F.3d 1202 (9th Cir. 2001), cert. denied 533 U.S. 930

(2001)). 

Following the rationale of Geiger, the Su court concluded that

a subjective test should be applied to prevent the category of

nondischargeable debts from being unduly expanded. Thus, the

debtor’s particular state of mind must be judged and determined. The

debt will only be excepted from the discharge under 11 U.S.C. §

523(a)(6) if the debtor had “actual knowledge that harm to the

creditor was substantially certain.” In re Su, 290 F.3d at 1145-46.

Applying this test to the facts presented here, the Court

concludes that Mr. Mirner’s conduct was willful within the meaning of

11 U.S.C. § 523(a)(6). Mr. Mirner testified convincingly that he had

no desire to cause harm to the Bank, that he was merely acting in his

own financial interest. Thus, the Court finds that he did not desire

the Bank’s injury. However, Mr. Mirner clearly could see that he was

doing substantial damage to the properties in the process of removing

the fixtures. Thus, he had “actual knowledge” that damage to the

Bank was “substantially certain” to occur. His unexplained testimony

that he did not believe that the damage would have any effect on the

Bank’s resale price was not convincing. 

CONCLUSION

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The Bank is entitled to a nondischargeable judgment against the

Mirners pursuant to 11 U.S.C. § 523(a)(6) in the principal amount of

$102,000, plus pre-judgment interest at the statutory rate under

California law from January 7, 2010, and reasonable costs of suit.

Counsel for the Bank is directed to submit a proposed form of

judgment in accordance with this decision. 

END OF DOCUMENT

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COURT SERVICE LIST

Edward Tredinnick

Greene, Radovsky, Maloney and Share

4 Embarcadero Center #4000

San Francisco, CA 94111 

Christian Peter Mirner

Tamara Lynne Cullen-Mirner

1331 Martino Rd

Lafayette, CA 94549

Tevis Thompson

P.O. Box 1110

Martinez, CA 94553 

Lynette C. Kelly

U.S. Office of the U.S. Trustee

1301 Clay St.

Oakland, CA 94612 

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