Court Opinion

ID: 4192622
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:01:55.835966+00
Date Added: 2024-06-11T14:40:19.618593
License: Public Domain

FILED
 1                         NOT FOR PUBLICATION               MAR 10 2017
                                                         SUSAN M. SPRAUL, CLERK
 2                                                         U.S. BKCY. APP. PANEL
                                                           OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )        BAP No. NV-16-1073-JuKuL
                                   )
 6   JOSEPH MICHAEL SUNDE, DBA     )        Bk. No. 3:14-bk-50937-BTB
     Nevada Quick Divorce, AKA     )
 7   J. Michael Sunde, AKA Joseph )         Adv. No. 3:14-ap-05044-BTB
     Sunde, AKA Mike Sunde and     )
 8   VIKTORIYA SOKOL SUNDE, AKA    )
     Viktoriya Sokol,              )
 9                                 )
                    Debtors.       )
10   ______________________________)
     JOSEPH MICHAEL SUNDE;         )
11   VIKTORIYA SOKOL SUNDE,        )
                                   )
12                  Appellants,    )
                                   )
13   v.                            )        M E M O R A N D U M1
                                   )
14   VICTORIA A. CROCKETT,         )
     individually and as Trustee of)
15   the ERKP Family Trust; ROBERT )
     D. CROCKETT; NEVADA DIVORCE & )
16   DOCUMENT SERVICES, INC., a    )
     Nevada Corporation,           )
17                                 )
                    Appellees.     )
18   ______________________________)
19                 Argued and Submitted on February 24, 2017
                              at Las Vegas, Nevada
20
                             Filed - March 10, 2017
21
             Appeal from the United States Bankruptcy Court for the
22                             District of Nevada
23    Honorable Bruce T. Beesley, Chief Bankruptcy Judge, Presiding
                         ________________________
24
     Appearances:     Appellant Joseph Michael Sunde argued pro se;
25
26       1
          This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
   have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8024-1.

                                      -1-
 1                     Michael Lehners argued for appellees.
                           ___________________________
 2
     Before: JURY, KURTZ, and LAFFERTY, Bankruptcy Judges.
 3
 4           Appellees, Victoria A. Crockett, Robert D. Crockett
 5   (collectively, the Crocketts), and Nevada Divorce and Document
 6   Services, Inc. (NDDSI), filed an adversary complaint against
 7   appellants, Joseph Michael Sunde and Victoriya Sunde
 8   (collectively, the Sundes), seeking to except a state court
 9   judgment debt from discharge under § 523(a)(6).2    The Crocketts
10   alleged that the Sundes willfully and intentionally
11   (1) destroyed real property located on Greenwich Way in Reno,
12   Nevada (Greenwich Property) which the Crocketts owned and leased
13   to the Sundes; (2) recorded numerous documents that clouded
14   title on the Greenwich Property; and (3) transmitted false and
15   defamatory statements of fact to Mr. Crockett’s employer.
16           After a twelve day trial, the bankruptcy court found that
17   the Sundes’ removal of improvements and landscaping from the
18   Greenwich Property fell within the scope of § 523(a)(6).       The
19   court entered a nondischargeable judgment against the Sundes
20   consisting of $30,849.00 in damages awarded by a jury and
21   $69,580.31 for attorney’s fees and costs awarded by the state
22   court pursuant to an attorney’s fee clause in the underlying
23   lease between the parties.     The Sundes appealed from this
24   judgment.
25
26       2
          Unless otherwise indicated, all chapter and section
27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
   “Rule” references are to the Federal Rules of Bankruptcy
28 Procedure.

                                      -2-
 1            The Sundes filed a motion to alter or amend the judgment,
 2   arguing that the bankruptcy court was required to find the
 3   Sundes’ conduct was tortious under state law to fall within
 4   § 523(a)(6).      After a limited remand from this Panel, the
 5   bankruptcy court denied the motion by order entered July 22,
 6   2016.      The Sundes filed an amended notice of appeal to include
 7   the July 22, 2016 order.
 8            For the reasons set forth below, we VACATE the judgment in
 9   the Crocketts’ favor and REMAND to the bankruptcy court to make
10   further findings as discussed in this decision.
11                                  I.   FACTS3
12   A.       Prepetition Events
13            On August 23, 1996, Mr. Sunde created NDDSI, a Nevada
14   corporation.      NDDSI issued 100 shares of stock which were owned
15   by Mr. Sunde.
16            Victoria Crockett is the daughter of Mr. Sunde and also the
17   trustee of the ERKP Family Trust which was created in July 2002.
18   Mr. Sunde is the sole beneficiary of the trust, and he
19   contributed his 100 shares in NDDSI to the trust.      Victoria, as
20   trustee, was to make monthly payments to Mr. Sunde for his
21   retirement, which were funded from NDDSI.      Since January 20,
22   2011, Victoria has been the sole director and chief executive
23   officer of NDDSI.
24
25
26        3
          To the extent necessary, we take judicial notice of
27 pleadings filed by both parties in the adversary proceeding and
   underlying bankruptcy case. Atwood v. Chase Manhattan Mortg. Co.
28 (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).

                                         -3-
 1        1.     The Greenwich Property
 2        In 2000, the Crocketts purchased the Greenwich Property for
 3   $230,000.    On March 1, 2008, the Crocketts and the Sundes
 4   entered into a twelve month lease agreement for the property
 5   (March 2008 Lease).    Paragraph 9 of the March 2008 Lease states:
 6        Any and all leasehold improvements and fixtures done
          and paid for by Lessee shall revert to Lessor. Lessee
 7        shall have no ownership interest in such leasehold
          improvements or fixtures.
 8
 9        The March 2008 Lease required the Sundes to maintain the
10   property in good condition and contained an attorney’s fee
11   clause.
12        Mr. Sunde provided another lease dated July 15, 2008 (July
13   2008 Lease) which he maintains is the controlling lease between
14   the parties.     Paragraph 8 of that lease provided that the lessor
15   agreed that any improvements and fixtures done and paid for by
16   the Sundes would be owned by the Sundes and that lessor agreed
17   to compensate them for the improvements, repairs and fixtures
18   should they vacate the home for any reason whatsoever.
19        While living in the property, Mr. Sunde made various
20   improvements to the property which he paid for.
21        2.     The Legal Proceedings
22               a.    J. Michael Sunde & Viktoriya Kokol Sunde v.
                       Robert and Victoria Crockett (CV10-01187)
23
24        By 2010 the relationship between the parties had soured.
25   According to Mr. Sunde, this happened because he got remarried
26   and Victoria did not want his new wife, Viktoriya, to get any of
27   his assets.
28        In April 2010, the Sundes filed a complaint against the

                                      -4-
 1   Crocketts in the Nevada state court, Case No. CV10-01187.      The
 2   Sundes alleged that Victoria breached her fiduciary duties as
 3   trustee of the ERKP Family Trust by stealing Mr. Sunde’s
 4   retirement funds and refusing to pay him.     They also asserted a
 5   claim of elder abuse, contending that Victoria was attempting to
 6   destroy NDDSI and force the Sundes to the streets.     The Sundes
 7   sought to replace Victoria as trustee of the ERKP Family Trust.
 8   In essence, the Sundes sought to regain control of NDDSI and the
 9   family trust.     This case was consolidated with Nevada Divorce &
10   Document Services, Inc. v. Michael Sunde et. al., Case No. CV10-
11   0218.     Although the record is sketchy, apparently the Sundes
12   lost and were not granted the relief requested.4    During the
13   lawsuit, Mr. Sunde filed a lis pendens against all properties
14   owned by the Crocketts in the Washoe County Recorder’s Office.
15                b.   The Eviction Proceedings
16           The Sundes lived in the Greenwich Property until the
17   Crocketts served them with a notice of eviction based on unpaid
18   rent and a no-fault end of lease, letting the Sundes know that
19   the Crocketts would not continue the lease after February 28,
20   2011.
21           On December 20, 2010, the Justice Court of Reno Township
22   issued an eviction decision and order in favor of the Crocketts.
23   The Justice Court ordered the Sundes to pay rent of $2100
24   directly to the Crocketts rather than the mortgage company.       The
25
26       4
          In closing argument of the bankruptcy court trial, counsel
27 for the Crocketts argued that it was reasonable to assume that
   the Sundes were motivated to destroy the Greenwich Property after
28 losing the lawsuit over the business and the trust.

                                      -5-
 1   eviction proceeding was dropped after Mr. Sunde paid the rent.
 2           In late January 2011, the Sundes moved from the Greenwich
 3   property.5    Before they moved, they removed and destroyed
 4   improvements made to the property, including cabinets, doors,
 5   and landscaping.
 6                c.   Robert and Victoria Crockett v. Michael Sunde et.
                       al. (CV11-00307)
 7
 8           On January 28, 2011, the Crocketts filed a lawsuit against
 9   the Sundes in the Nevada state court, Case No. CV11-00307.    In
10   the background facts common to all claims for relief, the
11   Crocketts alleged that in January 2011, the Sundes began to
12   destroy the Greenwich Property by removing or destroying front
13   bushes and shrubs, back bushes and shrubs, the air conditioner
14   unit, and numerous built-in cabinets and casings.     The Crocketts
15   further alleged that the Sundes returned to the home on
16   January 27, 2011, and removed, among other things, various
17   landscaping in the front of the home.     According to the
18   Crocketts, these actions violated the terms of the March 2008
19   Lease, as the items removed solely belonged to the Crocketts.
20   Based on these facts, the Crocketts alleged claims for breach of
21   contract, breach of the implied covenant of good faith and fair
22   dealing, conversion, and unjust enrichment.     They also requested
23   a temporary restraining order and preliminary injunction.
24   Attached to the complaint was the March 2008 Lease.
25
26       5
          In its findings of facts and conclusions of law, the
27 bankruptcy court noted that it was unclear whether the Sundes
   were evicted or whether they moved out during the eviction
28 process.

                                      -6-
 1        On February 4, 2011, the state court heard the Crocketts’
 2   request for a preliminary injunction.   The initial argument
 3   centered on whether the March 2008 Lease or the July 2008 Lease
 4   was the enforceable lease.   Later in the hearing, the judge
 5   asked Mr. Sunde where the cabinets were.   Mr. Sunde responded
 6   that he had hired some workers and they took them to the dump.
 7   Mr. Sunde stated on the record:
 8        I hired them. I said do you need a truck. They came.
          We loaded stuff up, and yeah, I tore things apart.
 9        They broke. I wasn’t sitting there playing with
          things. I tore them apart quickly because I wasn’t
10        going to spend careful time on stuff I was going to
          throw in the dump. They put it in the truck. I says,
11        ‘Go to the dump. Get a receipt from the dump. Dump
          it, come back get some more. . . .
12
13        At another point, he said:
14        Do you think I like throwing out what I put in? You
          think I didn’t cry every God damn day that I went --
15        excuse me, Your Honor -- that I tore that place apart?
          Think I didn’t cry at night when I went to sleep
16        because I was tearing my own house apart that I built?
          It wasn’t fun. But I wasn’t about to give it to her
17        after she already stole from me as much as she did. I
          was fighting for my life when she stole my retirement.
18        I was almost on the street. Now she wants me to turn
          over $205,000 to her? No. I won’t. She signed that
19        lease. The [July 15, 2008] lease is valid. I had a
          legal right to do what I did.
20
          The court:
21
          Well, is it fair to say, then, that you’re contending
22        that the cabinetry and other elements of the house
          including the landscaping are things you put into this
23        property that you didn’t want the Crocketts to get?
          Is that why you removed them?
24
          Mr. Sunde:   I didn’t want them to get them.
25
26        In the end, the state court found that the operative lease
27   was the March 2008 Lease and, therefore, Mr. Sunde had no right
28   to remove the fixtures to the house.

                                    -7-
 1           So there is a big problem, and it’s wrongful to remove
             the fixtures when you are the tenant. So I am going
 2           to grant the preliminary injunction. And I would also
             say that as part of that, that if you have any of
 3           these things that were removed from the house, you are
             required to return them.
 4
 5           On October 10, 2011, the Crocketts moved to amend their
 6   complaint.     The Crocketts maintained that after the original
 7   complaint was filed, the Sundes recorded a lis pendens against
 8   the Greenwich Property on April 20, 2011, and July 18, 2011.6
 9   They further alleged that in August 2011, the Sundes sought a
10   Writ Of Prohibition And Madamus to prevent the sale of the
11   Greenwich Property in the Nevada state court.      The Sundes
12   recorded other documents as well.      On August 30, 2011, they
13   recorded an Emergency Motion to Appoint a Receiver, Remove
14   Trustee, for Restraining Order and Injunctive Relief and for an
15   Accounting (Emergency Motion).     On September 9, 2011, the Sundes
16   recorded an application for a default judgment.      The Crocketts
17   alleged that the recording of these documents was not
18   authorized.
19           The Crocketts also alleged that in September 2011,
20   Mr. Sunde sent a document to Mr. Crockett’s supervisor at his
21   employment that contained false statements that the Crocketts
22   had stolen money and property from the Sundes in an attempt to
23   render them homeless.
24           Finally, the Crocketts alleged that in July 2011, they
25
26       6
           On July 26, 2011, the state court entered an order in Case
27 Nos.  CV10-01187 and CV11-00307 cancelling the lis pendens that
   Mr. Sunde had filed against the Greenwich Property on July 18,
28 2011.

                                      -8-
 1   entered into a purchase and sale agreement to sell the Greenwich
 2   Property for $239,000.     Due to the Sundes’ recorded documents,
 3   the sale was cancelled.     Afterwards, the Nevada state court
 4   denied Mr. Sunde’s Emergency Motion, but then he filed an
 5   improper application for default judgment with the court.
 6           The amended complaint continued to assert claims for breach
 7   of contract, breach of the covenant of good faith and fair
 8   dealing, conversion, unjust enrichment, and temporary
 9   restraining order and added claims for defamation, slander of
10   title, temporary and permanent injunction, intentional
11   interference with contractual relations, and intentional
12   interference with prospective economic advantage.
13           At a September 20, 2011 hearing, the state court authorized
14   the Crocketts to file their amended complaint and issued a
15   preliminary injunction which prohibited the Sundes from filing
16   or recording anything in the chain of title of property owned by
17   the Crocketts and prohibited Mr. Sunde from contacting
18   Mr. Crockett’s employer.     The state court found that the legal
19   documents Mr. Sunde filed were an “abuse of process” and “an
20   inappropriate use of the recording laws in the State of Nevada.”
21           Eventually, the matter was heard by a jury.   Jury
22   instructions were given for breach of contract, breach of the
23   covenant of good faith and fair dealing, and conversion.     After
24   a five-day trial, the jury returned a verdict in favor of the
25   Crocketts for $30,849.00 plus accrued interest.7      On
26
         7
27        The Sundes answered the amended complaint and asserted
   counterclaims alleging, among other things, that the Crocketts
28                                                    (continued...)

                                      -9-
 1   December 16, 2013, the state court entered a judgment against
 2   the Sundes for this amount.    There are no findings in the
 3   judgment as to which claim the Crocketts prevailed on nor did
 4   the jury answer special interrogatories pertaining to its
 5   verdict.
 6        The Crocketts then moved for attorney’s fees and costs,
 7   which were authorized by an attorney’s fee clause in the March
 8   2008 Lease.    They sought $64,350 in attorney’s fees, $120 in
 9   paralegal fees and $5,230.31 in costs, totaling $69,580.31.        The
10   Sundes opposed the motion on reasonableness and other grounds.
11   In its order granting the motion, the state court noted that the
12   case “arose from a contract dispute” involving a residential
13   lease.8    The state court noted that the March 2008 Lease
14   provided for reasonable attorney’s fees to the prevailing party
15   and found that the Crocketts were the prevailing party.      The
16   court also found the fees reasonable and awarded the attorney’s
17   fees and costs in full as requested.    On January 27, 2014, the
18   state court entered an order granting the Crocketts their fees
19   and costs.
20   B.   Bankruptcy Events
21        On May 29, 2014, the Sundes filed a chapter 7 case.
22        1.     The Adversary Complaint
23        On August 18, 2014, the Crocketts filed an adversary
24
25        7
          (...continued)
26 had converted their property. The Sundes did not prevail on any
   of their claims.
27
        8
          This language suggests that the jury awarded damages only
28 for breach of contract.

                                     -10-
 1   complaint against the Sundes alleging claims under §§ 523(a)(4)
 2   (breach of fiduciary duty)9 and (6) (willful and malicious),
 3   § 727(a)(4) (denial of discharge), and § 524(a)(3) (community
 4   discharge).     Only the § 523(a)(6) claim is at issue in this
 5   appeal.     The § 523(a)(6) claim was based on the Sundes’
 6   destruction of the Greenwich Property, their unlawful recording
 7   of numerous documents that clouded title to the property, and
 8   their false and defamatory statements to Mr. Crockett’s
 9   employer.     Based thereon, the Crocketts sought a declaration
10   that the state court judgment debt was nondischargeable based on
11   the Sundes’ willful and malicious conduct.
12           The bankruptcy court held a trial over twelve days.   The
13   Sundes appeared pro se.     On January 19, 2016, the bankruptcy
14   court issued an oral ruling setting forth its findings of fact
15   and conclusions of law.     The court found that the Sundes had
16   removed improvements and landscaping from the Greenwich Property
17   at the time they were being moved out of the home by the
18   Crocketts.     The court found that Mr. Sunde indicated he did that
19   was because he was angry, he was being moved out of the home,
20   which he thought would be his for life, and he didn’t want his
21   daughter to have the benefit of any of the improvements he had
22   made.     The court also found that the March 2008 Lease was the
23   operative lease.     Finally, the court found the Sundes were not
24   credible and the Crocketts were credible.     The bankruptcy court
25   concluded that all the damages awarded in the state court jury
26
27
         9
          The § 523(a)(4) claim was dismissed by order entered on
28 February 13, 2015.

                                      -11-
 1   trial case, including the attorney’s fees, were
 2   nondischargeable.
 3        On February 12, 2016, the bankruptcy court entered written
 4   findings of fact and conclusions of law consistent with its
 5   oral ruling.
 6        On March 9, 2016, the bankruptcy court entered a judgment
 7   in favor of the Crocketts, finding the state court judgment debt
 8   consisting of damages and attorney’s fees and costs
 9   nondischargeable under § 523(a)(6).    The Sundes timely appealed
10   from that judgment.    The Sundes filed an amended notice of
11   appeal on March 22, 2016.
12        2.     The Motion To Alter Or Amend The Judgment
13        On the same day that they filed the amended notice of
14   appeal, the Sundes filed a motion to alter or amend the judgment
15   or motion for new trial.    There, they argued, among other
16   things, that the Crocketts failed to mention a tort in their
17   adversary complaint.    They also complained that the bankruptcy
18   court failed to mention a tort in its findings of fact and
19   conclusions of law.    According to the Sundes, a finding of
20   tortious conduct under Nevada law is essential to a § 523(a)(6)
21   claim.    The Sundes maintained that the “‘gist’ of all claims,
22   testimony, and evidence prove without doubt that this is only a
23   contract claim.”
24        The bankruptcy court heard the motion on June 1, 2016.    On
25   the same day, the court also heard the Sundes’ motion for a stay
26   pending appeal.    The court first addressed the Sundes’ motion
27   for stay pending appeal and considered whether they were likely
28   to succeed on appeal.    In response to Mr. Sunde’s argument

                                     -12-
 1   regarding the requirement of a tort, the bankruptcy court
 2   stated:   “Well, destruction of property is a tort.   You don’t
 3   have to say, quote, ‘tort destruction of property.’”
 4        Mr. Sunde:   “Well, you do, Your Honor.   You have to
 5   specifically argue that there’s a tort, and we have the research
 6   to show that if you don’t specifically argue -- name the tort,
 7   specifically argue it, you don’t have a tort.”
 8        In support of his argument, Mr. Sunde relied on Spigot
 9   Resources, Inv. v. Radow (In re Radow), 2013 WL 1397342 (9th
10   Cir. BAP Apr. 2, 2013); Lockerby v. Sierra, 535 F.3d 1038, 1040
11   (9th Cir. 2008), and Buenaventura v. Vinh Chau (In re Vinh
12   Chau), 2014 WL 643726 (9th Cir. BAP Feb. 19, 2014).
13        Mr. Sunde further argued that there were no damages because
14   the Sundes provided evidence that they made $230,000 worth of
15   improvements and Victoria testified that she spent about $15,000
16   or $20,000 to remodel after the Sundes left.    According to
17   Mr. Sunde, the Crocketts still had benefitted by the sum of
18   about $210,000 from his efforts.   After oral argument, the
19   bankruptcy court denied the motion to amend the judgment.
20        On June 13, 2016, the Sundes filed a motion for
21   reconsideration of the court’s denial of their motion to amend
22   the judgment.
23        On June 24, 2016, the Panel entered an order granting a
24   limited remand so that the bankruptcy court could enter an order
25   on the Sundes’ motion for reconsideration and to enter any order
26   regarding the unresolved §§ 727(a)(4) and 524(a)(3) claims in
27   the adversary.
28        On July 19, 2016, the bankruptcy court entered an order

                                    -13-
 1   denying the Sundes’ request for a stay pending appeal.
 2        On July 22, 2016, the bankruptcy court entered an order
 3   denying the Sundes’ motion to alter or amend the judgment and
 4   denying their motion for reconsideration of that ruling.        There,
 5   the court found that it properly identified the tortious conduct
 6   even though it had not mentioned the word “tort” in its findings
 7   and conclusions.     The court dismissed the remaining claims,
 8   thereby rendering its judgment on the § 523(a)(6) claim final
 9   for purposes of this appeal.10
10        On August 1, 2016, the Sundes filed a third amended notice
11   of appeal to include the bankruptcy court’s July 22, 2016 order
12   denying their motion to amend the judgment and their motion for
13   reconsideration of that decision.
14                                II.   JURISDICTION
15        The bankruptcy court had jurisdiction over this proceeding
16   under 28 U.S.C. §§ 1334 and 157(b)(2)(I).         We have jurisdiction
17   under 28 U.S.C. § 158.
18                                  III.    ISSUES
19        Did the bankruptcy court err in determining that the state
20   court judgment was nondischargeable under § 523(a)(6)?
21        Did the bankruptcy court err in denying the Sundes’ motion
22   to alter or amend the judgment?
23                          IV.    STANDARDS OF REVIEW
24            “Because the bankruptcy court entered its judgment after
25   trial, we review the bankruptcy court’s findings of fact for
26
         10
27        On May 17, 2016, the § 727(a)(4) claim was dismissed. On
   July 22, 2016, the bankruptcy court dismissed the § 524(a)(3)
28 claim.

                                           -14-
 1   clear error, and its conclusions of law de novo.”      Thiara v.
 2   Spycher Brothers (In re Thiara), 285 B.R. 420, 426 (9th Cir. BAP
 3   2002) (citing Carrillo v. Su (In re Su), 290 F.3d 1140, 1142
 4   (9th Cir. 2002)).    A court’s factual determination is clearly
 5   erroneous if it is illogical, implausible, or without support in
 6   the record.   United States v. Hinkson, 585 F.3d 1247, 1261-62 &
 7   n.21 (9th Cir. 2009) (en banc).     “The bankruptcy court’s
 8   conclusions of law regarding nondischargeability, as well as its
 9   interpretation of state law, are reviewed de novo.”
10   In re Thiara, 285 at 426.    We also review de novo the bankruptcy
11   court’s application of the legal standard in determining whether
12   a debt resulting from a debtor’s wrongful conduct is
13   dischargeable as a willful and malicious injury.      Id.
14        We review the bankruptcy court’s denial of a motion to
15   alter or amend the judgment for abuse of discretion.        Ta Chong
16   Bank Ltd. v. Hitachi High Techs. Am., Inc., 610 F.3d 1063, 1066
17   (9th Cir. 2010).    Under the abuse of discretion standard, we
18   first “determine de novo whether the [bankruptcy] court
19   identified the correct legal rule to apply to the relief
20   requested.”   Hinkson, 585 F.3d at 1262.      If the bankruptcy court
21   identified the correct legal rule, we then determine under the
22   clearly erroneous standard whether its factual findings and its
23   application of the facts to the relevant law were:
24   “(1) illogical, (2) implausible, or (3) without support in
25   inferences that may be drawn from the facts in the record.”        Id.
26                               V.   DISCUSSION
27   A.   Section 523(a)(6):    Legal Standards
28        Section 523(a)(6) excepts from discharge any debt “for

                                       -15-
 1   willful and malicious injury by the debtor to another entity or
 2   to the property of another entity.”    The willful and malicious
 3   requirements are analyzed separately, and both elements must be
 4   met.    In re Su, 290 F.3d at 1146–47; Ormsby v. First Am. Title
 5   Co. of Nev. (In re Ormsby), 591 F.3d 1199, 1206 (9th Cir. 2010).
 6          Whether a debtor acted willfully is a subjective inquiry:
 7   the “willful injury requirement is met only when the debtor has
 8   a subjective motive to inflict injury or when the debtor
 9   believes that injury is substantially certain to result from his
10   own conduct.”    In re Ormsby, 591 F.3d at 1206.    Further, when
11   determining the debtor’s intent under § 523(a)(6), there is a
12   presumption that the debtor knows the natural consequences of
13   his actions.    Id.
14          “‘A malicious injury involves (1) a wrongful act, (2) done
15   intentionally, (3) which necessarily causes injury, and (4) is
16   done without just cause or excuse.’”    In re Su, 290 F.3d at
17   1146-47.    “Malice may be inferred based on the nature of the
18   wrongful act.”    In re Ormsby, 591 F.3d at 1206.
19          When the debt in question arises out of a contract, in
20   addition to willfulness and maliciousness, a plaintiff must also
21   show that the injury was caused by intentional tortious conduct.
22   Lockerby v. Sierra, 535 F.3d 1038, 1040–42 (9th Cir. 2008)
23   (citing Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1205
24   (9th Cir. 2001) (“[a]n intentional breach of contract is
25   excepted from discharge under § 523(a)(6) only when it is
26   accompanied by malicious and willful tortious conduct.”).
27   Conduct is tortious if it constitutes a tort under state law.
28   Lockerby, 535 F.3d at 1041.    A state court judgment debt based

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 1   solely on a simple breach of contract is dischargeable as a
 2   matter of law.    Snoke v. Riso (In re Riso), 978 F.2d 1151 (9th
 3   Cir. 1992).
 4   B.   Analysis
 5        Applying these standards, we conclude that the bankruptcy
 6   court’s findings of fact and conclusions of law are inadequate
 7   for our review.   The court summarily concluded that the willful
 8   and malicious elements were met without connecting the Sundes’
 9   conduct or the Crocketts’ damages to any tort recognized by
10   Nevada law.   In the absence of such findings, we cannot tell
11   whether the Sundes’ conduct fell within the scope of one or more
12   of the numerous torts mentioned throughout this proceeding or
13   whether the Crocketts’ damages arose out of that tort as opposed
14   to breach of contract.   Indeed, the link between a tort under
15   Nevada law and the Sundes’ conduct has been a moving target
16   throughout these proceedings.
17        In the adversary complaint, the Crocketts alleged
18   destruction of property, defamation, and wrongful recording of
19   documents (abuse of process) as the basis of their § 523(a)(6)
20   claim.   During closing argument, Crocketts’ counsel argued that
21   the tort of conversion applied to the Sundes’ conduct and cited
22   the definition for conversion under Nevada law:
23        [A] distinct act of dominion wrongfully exerted over
          another’s personal property in denial of, or
24        inconsistent with his title or rights therein or in
          derogation, exclusion, or defiance of such title or
25        rights. Additionally, conversion is an act of general
          intent, which does not require wrongful intent and is
26        not excused by care, good faith, or lack of knowledge.
27   Evans v. Dean Witter Reynolds, Inc., 5 P.3d 1043, 1048 (Nev.
28   2000).   This definition does not require the subjective intent

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 1   for willful conduct under § 523(a)(6).   Compare In re Jercich,
 2   283 F.3d at 1207 (“The conversion of another’s property without
 3   his knowledge or consent, done intentionally and without
 4   justification and excuse, to the other’s injury, constitutes a
 5   willful and malicious injury within the meaning of
 6   § 523(a)(6).”).   In any event, nowhere does the bankruptcy court
 7   mention whether the tort of conversion was the basis for its
 8   decision.
 9        Counsel next argued that in addition to damaging the
10   Greenwich Property, there was evidence that the Sundes slandered
11   the title11 and committed abuse of process.   Counsel explained
12   the elements for slander of title and abuse of process, but
13   nowhere does the bankruptcy court mention whether the Sundes’
14   recording of the lis pendens or other documents fell within the
15   scope of those torts under Nevada law or whether any of the
16   damages awarded by the state court were as a result of these
17   acts.
18        Later, at the hearing on the Sundes’ motion to alter or
19   amend the judgment and motion for a stay pending appeal, the
20   Sundes argued that the Crocketts failed to mention, much less
21   prove, that their conduct was tortious under Nevada law, a
22
23
         11
          Slander of title is a tort under Nevada law and involves
24 false and malicious communications that disparage a person’s
   title in land and causes special damages. See Summa Corp. v.
25 Greenspun, 655 P.2d 513, 514 (Nev. 1982) and Higgins v. Higgins,
26 744 P.2d 530, 531 (Nev. 1987). Slander of title has been found
   to be a basis for a § 523(a)(6) claim. See Gambino v. Koonce,
27 757 F.3d 604 (7th Cir. 2014) (Illinois judgment for slander of
   title for use of forged deeds and other fraudulent documents to
28 improperly gain title held non-dischargeable).

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 1   requirement under Ninth Circuit law.    The requirement of
 2   tortious conduct was therefore squarely before the bankruptcy
 3   court.   During that hearing, the bankruptcy court found that the
 4   tort was the destruction of property, thus implying that the
 5   tort requirement had been met.    However, nowhere did the
 6   Crocketts argue that Nevada recognized a tort for the
 7   destruction of property, and we cannot determine whether such a
 8   tort exists for the first time on appeal.12
 9        Finally, we cannot tell whether the state court awarded
10   damages or attorney’s fees based on the Sundes’ tortious conduct
11   or whether those awards were based solely on breach of contract.
12   Accordingly, the bankruptcy court erred by giving preclusive
13   effect to the amount of the damages and award of attorney’s fees
14
15       12
          The closest we could find to a tort for destruction of
16 property  in Nevada is embodied in a criminal statute. Nevada
   Revised Statutes 206.310, entitled “Injury to other property,”
17 provides:
18       1. Every person who shall willfully or maliciously
19       destroy or injure any real or personal property of
         another, for the destruction or injury of which no
20       special punishment is otherwise specially prescribed,
         shall be guilty of a public offense proportionate to
21       the value of the property affected or the loss
         resulting from such offense.
22
23       2. It is not a defense that the person engaging in the
         conduct prohibited by subsection 1 holds a leasehold
24       interest in the real property that was destroyed or
         injured.
25
26 The statute does not expressly recognize a civil cause of action,
   but we need not decide whether there is one for the first time on
27 appeal. The bankruptcy court should decide whether a civil cause
   of action exists for destruction of property in the first
28 instance if it allows the Crocketts to pursue this tort theory.

                                      -19-
 1   without connecting those awards to damages caused by the Sundes’
 2   tortious conduct.
 3        In sum, it is impossible for us to determine whether the
 4   bankruptcy court properly applied the law to the facts in this
 5   case.   Therefore, on remand, the bankruptcy court should address
 6   whether the Sundes’ conduct was tortious under Nevada law based
 7   on the evidence presented at trial and determine whether the
 8   damages awarded by the state court are recoverable based on that
 9   tort.   In light of our decision, it is unnecessary to address
10   the other issues raised by the Sundes on appeal.
11                            VI.   CONCLUSION
12        For the reasons stated, we VACATE the judgment in the
13   Crocketts’ favor and REMAND to the bankruptcy court to make
14   further findings as discussed in this decision.
15
16
17
18
19
20
21
22
23
24
25
26
27
28

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