Court Opinion

ID: 9363277
Source: CourtListenerOpinion
Date Created: 2023-01-13 18:58:32.975185+00
Date Added: 2024-06-11T17:15:30.397281
License: Public Domain

NOT FOR PUBLICATION                      FILED
                        UNITED STATES COURT OF APPEALS                       DEC 16 2022
                                                                      MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS
                                 FOR THE NINTH CIRCUIT

In re: JAMES MANUEL RODRIGUEZ,                      No.   21-60018

                   Debtor,                          BAP No. 17-1245

------------------------------
                                                    MEMORANDUM*
JAMES MANUEL RODRIGUEZ,

                   Appellant,

  v.

STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,

                   Appellee.

                              Appeal from the Ninth Circuit
                               Bankruptcy Appellate Panel
              Faris, Lafferty III, and Brand, Bankruptcy Judges, Presiding

                                 Submitted December 9, 2022**
                                     Pasadena, California

Before: BEA, IKUTA, and CHRISTEN, Circuit Judges.

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
       **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      James Manuel Rodriguez appeals pro se the Bankruptcy Appellant Panel’s

(“BAP”) decision affirming the bankruptcy court’s decisions, which held Appellee’s

subrogation claim against Appellant nondischargeable under 11 U.S.C. § 523(a)(6).

The parties are familiar with the facts and arguments, so we do not recount them

here. We review the BAP’s decision de novo. In re Boyajian, 564 F.3d 1088, 1090

(9th Cir. 2009). We review the bankruptcy court’s conclusions of law de novo and

review its factual findings for clear error. In re Su, 290 F.3d 1140, 1142 (9th Cir.

2002). Because we hold that the bankruptcy court did not commit clear error in

determining that the elements required for a finding of nondischargeability under §

523(a)(6) were met, and that the BAP decision is correct, we affirm.

      1. The bankruptcy court did not commit clear error in holding that Appellant’s

conduct was tortious under state law, as required by our caselaw interpreting

§ 523(a)(6). See 11 U.S.C. § 523(a)(6); Lockerby v. Sierra, 535 F.3d 1038, 1041 (9th

Cir. 2008). Appellant’s taking of the Ferrari was an illegal conversion under

California law. The elements of a conversion claim under California law are: “(1)

the plaintiff’s ownership or right to possession of the property; (2) the defendant’s

conversion by a wrongful act or disposition of property rights; and (3) damages.”

Sheley v. Harrop, 215 Cal. Rptr. 3d 606, 626 (Ct. App. 2017) (quoting Lee v. Hanley,

354 P.3d 334, 344 (Cal. 2015)). Appellant’s taking possession of the Ferrari was an

illegal conversion of Sun’s property under California law because Sun had the right

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to possession of the Ferrari as its title was in her name, Appellant wrongfully took

the Ferrari without Sun’s permission, and Sun necessarily suffered damages because

she was deprived of her property.

      2. The bankruptcy court did not commit clear error in holding that Appellant’s

conduct was willful within the meaning of § 523(a)(6). Conduct is willful within the

meaning of § 523(a)(6) if the debtor (1) had a subjective motive to inflict injury, or

(2) knew that injury was substantially certain to result from his conduct. In re Su,

290 F.3d at 1143–46. The bankruptcy court’s determination that Appellant intended

to inflict harm on Sun by taking possession of the Ferrari is supported by Appellant’s

expressions of ill-will toward Sun in his trial brief. For example, Appellant described

Sun as a “conniving entrepreneur, an Asian Cruella-De-Ville of sorts” and stated

that he was going to drop a “nuclear bomb” on Sun and Curtis and did not want to

be anywhere near “ground zero” when it hit. These statements support the

bankruptcy court’s finding that Appellant intended to inflict harm on Sun and belie

Appellant’s argument that his taking of the Ferrari was the result of only benign

motives.

      3. The bankruptcy court did not commit clear error in holding that Appellant’s

conduct was malicious within the meaning of § 523(a)(6). Malicious conduct

“involves ‘(1) a wrongful act, (2) done intentionally, (3) which necessarily causes

injury, and (4) is done without just cause or excuse.’” In re Jercich, 238 F.3d 1202,

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1209 (9th Cir. 2001) (quoting In re Bammer, 131 F.3d 788, 791 (9th Cir. 1997) (en

banc)). The first three elements of maliciousness are easily met because Appellant

intentionally committed the wrongful act of illegal conversion of the Ferrari, which

resulted in the deprivation of Sun’s property. We reject Appellant’s argument that

he had just cause for his conduct because he relied on the advice of an attorney. The

bankruptcy court found that, although Appellant’s lawyer advised him to keep the

Ferrari in a safe and neutral location, Appellant’s lawyer never advised him to take

the Ferrari in the first place, which is the relevant conduct here. Appellant does not

challenge this factual determination on appeal. Moreover, regardless of any legal

advice Appellant may have received, there is significant evidence that Defendant

had the specific intent to injure Sun, which is enough to negate any just cause or

excuse for Defendant’s behavior. See In re Armstrong, 2006 WL 2850527, at *11

(Bankr. D. Idaho Oct. 3, 2006). The bankruptcy court therefore did not commit clear

error in holding that Defendant’s conduct was malicious.

      4. Appellant’s argument that Sun had “unclean hands” in her dealings with

Appellee was raised for the first time before the BAP. Although as a general matter

we do not decide issues that the trial court did not decide, we may in our discretion

consider all issues raised on appeal by a pro se debtor when we determine that

“justice will be better served” if we do so. In re Jacksen, 105 B.R. 542, 543–544

(B.A.P. 9th Cir. 1989). The doctrine of unclean hands requires that a plaintiff seeking

                                          4
equitable relief “shall have acted fairly and without fraud or deceit as to the

controversy in issue.” Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1097 (9th Cir.

1985). “In applying the doctrine, ‘[w]hat is material is not that the plaintiff’s hands

are dirty, but that he dirtied them in acquiring the right he now asserts, or that the

manner of dirtying renders inequitable the assertion of such rights against the

defendants.’” Id. (quoting Republic Molding Corp. v. B. W. Photo Utils., 319 F.2d

347, 349 (9th Cir. 1963)). However, the doctrine does not require that courts “always

permit a defendant wrongdoer to retain the profits of his wrongdoing merely because

the plaintiff himself is possibly guilty of transgressing the law.” Johnson v. Yellow

Cab Transit Co., 321 U.S. 383, 387 (1944). The court must “balanc[e] the alleged

wrongdoing of the plaintiff against that of the defendant,” Northbay Wellness Grp.,

Inc. v. Beyries, 789 F.3d 956, 960 (9th Cir. 2015), and “weigh the substance of the

right asserted by plaintiff against the transgression which, it is contended, serves to

foreclose that right” to strike an “equitable balance.” Republic Molding Corp., 319

F.2d at 350. Here, Appellant argues that Sun was “disingenuous in her disclosures”

to Appellee and that Appellee “failed to exercise due diligence” in investigating

Sun’s claim. Even assuming the truth of these assertions, “had the bankruptcy court

weighed the parties’ respective wrongdoing, it necessarily would have concluded”

that Appellant’s willful and malicious conversion of the Ferrari far outweighed the

alleged wrongdoing by Sun and Appellee. See Beyries, 789 F.3d at 960. Regardless

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whether it was forfeited, Appellant’s unclean hands argument fails on its merits.

Moreover, because Rodriguez stipulated that “[t]he appropriateness of State Farm's

subrogation claim is undisputed in that there is no issue that Sun was insured by

State Farm, she made a covered claim, the claim was paid, the payment was

reasonable and State Farm, standing in her shoes as subrogee, now has the right to

pursue recovery of the balance of the claim which is $42,003.51 from the parties

legally responsible for causing the loss,” In re Rodriguez, No. AP 15-90095-CL,

2021 WL 345571, at *7 (B.A.P. 9th Cir. Feb. 1, 2021), Rodriguez has waived the

argument that any wrongdoing on the part of Sun could be imputed to Appellee so

as to make its subrogation claim inappropriate.

      5. Appellant waived his argument that damages were incorrectly calculated

because he stipulated to the amount of damages before trial. Stipulation to a fact

naturally implies the intentional relinquishment of any right to challenge that fact

and is a clear example of waiver. See United States v. Perez, 116 F.3d 840, 849,

851–52 (9th Cir.1997) (en banc) (Kleinfeld, J., concurring).

      For these reasons, we affirm.

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