Court Opinion

ID: 2652728
Source: CourtListenerOpinion
Date Created: 2014-02-08 06:19:40.260133+00
Date Added: 2024-06-11T09:10:55.423190
License: Public Domain

Case: 13-60251          Document: 00512525831              Page: 1   Date Filed: 02/07/2014

            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT

                                            No. 13-60251
                                                                                United States Court of Appeals
                                                                                         Fifth Circuit

                                                                                       FILED
                                                                                 February 7, 2014
In the Matter of: MICHAEL VERNON SHANKLE,
                                                                                  Lyle W. Cayce
                                                                                       Clerk
                                                          Debtor

------------------------------------------------------------------------

MICHAEL VERNON SHANKLE,

                                                          Appellant,

versus

DIANNE SHANKLE,

                                                          Appellee.

                      Appeal from the United States District Court
                        for the Northern District of Mississippi
                                    No. 1:12-CV-117

Before SMITH, DeMOSS, and HIGGINSON, Circuit Judges.
PER CURIAM:*

        *Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
    Case: 13-60251    Document: 00512525831     Page: 2   Date Filed: 02/07/2014

                                 No. 13-60251
      Michael Shankle appeals the district court’s judgment affirming the
bankruptcy court’s determination that the obligations stemming from a divorce
decree and subsequent state-court judgments constituted a nondischargeable
debt pursuant to 11 U.S.C. § 523(a)(6). We affirm.

                                       I.
      The Shankles divorced in 1999. The divorce court ordered Michael to
pay alimony and child support to Dianne and to divide certain marital prop-
erty. Paragraph eleven of the decree provided, in relevant part,
      The Court finds the following items of personal property are mar-
      ital property, and shall be equally divided by the parties: Idex
      Mutual Fund with an approximate balance of $80,000.00; Baker-
      Hughes Stock in the approximate amount of $4,000.00; Invesco
      Mutual Fund with an approximate balance of $100,000.00.
Based on that division, each spouse was entitled to approximately $92,000.
Instead of complying, however, Michael withdrew all funds in the Invesco
account—$114,222.83—and remitted the proceeds to a John Hancock account
in his name, later spending it all for his own benefit. He testified that he con-
sidered the withdrawal to be his one-half of the proceeds from the three
accounts but refused to tender the remaining two accounts, which were regis-
tered in his name, to Dianne.
      The next year, an Arkansas state court found Michael in contempt for
failing to divide the three accounts or pay other sums as ordered. Although
the proceeds from the Invesco account had been spent by that time, the Idex
account was worth about $99,000. Michael nevertheless continued his refusal
to tender Dianne the money to which she was entitled under the divorce decree.
      In 2002, the state court again found Michael in willful contempt of its
previous orders for refusing to divide the three accounts and ordered him to
pay Dianne—within ten days—her share of the accounts listed in paragraph

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                                   No. 13-60251
eleven plus interest. Additionally, the court directed him to execute the docu-
mentation necessary to transfer his interest in the Idex account and the Baker-
Hughes stock to Dianne.
      Michael testified that because of steep market declines, the Idex account
was worth only $50,456.13. Later that year, Dianne received that sum, slightly
less than what she would have gotten from the Idex account had Michael com-
plied with the divorce decree, taking into account the interest that had accrued.
      In 2006, the state court found Michael liable to Dianne for $149,934.40
and awarded a judgment in that amount plus interest from June 6, 2006. Of
that amount, $97,435.91 was for “Marital Property awarded by Decree of
Divorce to [Dianne] but never tendered by [Michael] (with interest).” This sum
represented Dianne’s share of the Invesco and Idex accounts (plus interest)
that she never had received. 1
      A few months earlier, in late 2005, Michael filed a request for relief under
Chapter 7 of the Bankruptcy Code. In a schedule filed with the bankruptcy
court, he listed a disputed debt owed to Dianne. Dianne in turn filed an adver-
sary proceeding to determine the dischargeability of that amount, which con-
sisted of unpaid alimony, maintenance, child support, and other obligations
Michael had been ordered to pay pursuant to the divorce decree and later state-
court proceedings.
      The bankruptcy court held a trial with respect to the adversary proceed-
ing in early 2012. Because the parties stipulated that the amounts owed for
alimony, child support, and attorneys’ fees were nondischargeable, the only
issue was whether a debt of $97,435.91 for marital property awarded to Dianne
but never tendered by Michael was nondischargeable. The bankruptcy court

      1  Dianne previously received the Baker-Hughes stock. The precise amount of the
transfer, however, is unknown.
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                                  No. 13-60251
concluded that Michael’s conduct constituted willful and malicious injury to
Dianne under § 523(a)(6) of the Bankruptcy Code and, therefore, was a nondis-
chargeable debt. Michael appealed to the district court, which affirmed.

                                       II.
      “We review the decision of the district court by applying the same stan-
dard to the bankruptcy court’s findings of fact and conclusions of law that the
district court applied.” Morrison v. W. Builders of Amarillo, Inc. (In re Morri-
son), 555 F.3d 473, 480 (5th Cir. 2009). Namely, the “bankruptcy court’s find-
ings of fact are subject to review for clear error, and its conclusions of law are
reviewed de novo.” Id. (citing Gen. Elec. Capital Corp. v. Acosta (In re Acosta),
406 F.3d 367, 372 (5th Cir. 2005)). “A finding of fact is clearly erroneous only
if on the entire evidence, the court is left with the definite and firm conviction
that a mistake has been committed.” Cadle Co. v. Duncan (In re Duncan), 562
F.3d 688, 694 (5th Cir. 2009) (per curiam) (citation and internal quotation
marks omitted).

                                       III.
      The sole issue is whether Michael’s obligation resulting from paragraph
eleven and subsequent state-court judgments is a nondischargeable debt under
11 U.S.C. § 523(a)(6), which states that a debt is nondischargeable “for willful
and malicious injury by the debtor to another entity or to the property of
another entity.” An injury is willful and malicious when there is either a sub-
jective motive to cause harm or an objective substantial certainty of harm.
Miller v. J.D. Abrams Inc. (In re Miller), 156 F.3d 598, 606 (5th Cir. 1998).
      The bankruptcy court, in concluding that Michael’s obligation to Dianne
was nondischargeable, noted that several bankruptcy courts have found that a
debtor’s failure to tender marital assets in contravention of a divorce decree
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                                        No. 13-60251
constitutes willful and malicious injury under § 523(a)(6). 2 It also noted that
the amount of Michael’s indebtedness was established by the state-court order
that had set the sum at $97,435.91 plus interest. Michael does not dispute
that amount but instead attempts to distinguish those rulings on the basis that
the debtors in those cases purportedly engaged in conduct more egregious than
his own. Nevertheless, he has failed to show that the bankruptcy court clearly
erred in concluding that his repeated failure to tender to Dianne her half of the
marital assents constituted a “willful and malicious injury” because there was
an objective substantial certainty of harm to Dianne in failing to do so.
       Taking each of Michael’s arguments in turn, first, he suggests that the
bankruptcy court’s decision effectively penalizes him for exercising his right to
appeal the judgment of the divorce court. The bankruptcy court commented
that Michael’s actions “[did not] excuse not doing what you should have done
back in 1999.” As the district court noted, the record does not contain any
evidence that Michael’s appeal concerned paragraph eleven or that his

       2 See Ker v. Ker (In re Ker), 365 B.R. 807, 814–15 (Bankr. S.D. Ohio 2007) (“[C]ourts
within the Sixth Circuit and elsewhere have held that the kind of behavior in which Erik
admittedly engaged—dissipating marital assets and violating court orders—warrants a find-
ing of willful and malicious injury and nondischargeability under § 523(a)(6).” (emphasis
added)); Heyne v. Heyne (In re Heyne), 277 B.R. 364, 368–69 (Bankr. N.D. Ohio 2002) (finding
a debtor’s disposal of marital assets in violation of a divorce decree that resulted in civil con-
tempt to be willful and malicious for the purposes of § 523(a)(6)); Lipira v. Kaczmarski (In re
Kaczmarski), 245 B.R. 555, 561–62 (Bankr. N.D. Ill. 2000) (“By violating the restraining order
that his wife had obtained for the purpose of preventing his dissipation of marital assets,
Debtor was aware that his actions were substantially certain to lead to injury of Lipira or her
property interest. Debtor’s actions were thus willful. . . . His actions were malicious because
they were without just cause or excuse and contrary to his clear legal duty as found by state
court orders. A convenient memory about state court orders in a divorce proceeding is not an
excuse to violate these orders.”); Shteysel v. Shteysel (In re Shteysel), 221 B.R. 486, 489–91
(Bankr. E.D. Wis. 1998) (finding that a debtor’s actions in dissipating marital assets before
a court order in divorce proceedings constituted willful and malicious conduct under
§ 523(a)(6)); see also Structured Invs. Co., LLC v. Smith (In re Smith), 302 B.R. 530, 534
(Bankr. N.D. Miss. 2003) (finding that deliberately diverting monthly pension plan payments
contractually transferred to another constituted a nondischargeable debt under § 523(a)(6)).
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                                      No. 13-60251
obligation to comply with that decree was stayed pending his appeal. 3
       Second, Michael contends that he “left” or “reserved” the Idex account for
Dianne. Although it appears that the Idex account, along with the Baker-
Hughes stock, would likely have satisfied Michael’s obligation under the
divorce decree had he turned over possession when first ordered to do so, the
bankruptcy court found that Michael took no action to transfer any part of the
marital assets until the 2002 contempt order despite knowledge that failure to
comply with the state court’s orders would cause Dianne economic injury.
Michael’s belief that the Idex account—which at one point was worth roughly
$99,000—would satisfy his obligation to Dianne, however, does not explain the
almost three-year delay in turning over the marital assets.
       Third, Michael suggests that Dianne caused the Idex account to be frozen
and that this, combined with market declines, excuses the dissipation in mari-
tal assets. He also claims that when he learned that the Idex account had
decreased in value, he tried to preserve the principal in the account. Although
the record evidence is inconclusive with respect to who or what caused the Idex
account to be frozen, the bankruptcy court correctly noted, “[h]ad the defendant
not defied the divorce decree, this would not even be an issue.” Both the
market-induced decline in value and the freeze occurred only after Michael had
failed to tender Dianne her half of the value of the account at the time of the
divorce decree.
       Finally, Michael underscores that, pre-divorce and of his own accord, he
paid support to Dianne. Such conduct, although laudatory, does not explain
his repeated failure to comply with his obligation to Dianne or his continued
defiance of the state-court orders.

       3In fact, Michael, in his brief before this court, describes his appeal as being “pri-
marily” with respect to paragraph fifteen of the divorce decree.
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                                 No. 13-60251
      Accordingly, we agree with the district court that the bankruptcy court
correctly exercised its discretion in finding that Michael’s repeated refusal to
transfer marital assets, despite multiple contempt orders, constituted an
objective substantial certainty of harm to Dianne and, as a result, a willful and
malicious injury under § 523(a)(6). Because the bankruptcy court did not
clearly err, we AFFIRM the judgment of the district court.

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