Perry v. Judge (In re Judge)

630 B.R. 338

IN RE Stephen Charles JUDGE, Debtor.

James W. Perry, Plaintiff - Appellee,

v.Stephen Charles Judge, Defendant - Appellant.

BAP No. CO-20-050

Bankr. No. 19-11653

Adv. No. 19-01140

United States Bankruptcy Appellate Panel of the Tenth Circuit.

Filed July 20, 2021

Phillip Jones of Williams, Turner & Holmes, P.C., Grand Junction, Colorado for Stephen Charles Judge - Appellant.

J. Michael Considine, Jr. of J. Michael Considine, Jr., P.C., Philadelphia, Pennsylvania for James W. Perry - Appellee.

Before CORNISH, MICHAEL, and HALL, Bankruptcy Judges.

OPINION

HALL, Bankruptcy Judge.

In a scene straight out of a western movie, a bar fight on the Western Slope of Colorado provides the backdrop for this appeal. Appellant Stephen Judge ("Judge") appeals the Order and Judgment of the United States Bankruptcy Court for the District of Colorado (the "Bankruptcy Court") excepting from his discharge a state court personal injury judgment arising from a bar fight under 11 U.S.C. § 523(a)(6). Finding no error in the Bankruptcy Court's fact finding or legal analysis, we AFFIRM.

I. Factual and Procedural History

James Perry ("Perry") and Judge were both at the crowded Derailed Pour House bar in Grand Junction, Colorado (the "Derailed Pour House") on the evening of January 31, 2015.¹ The two men were sitting at bar stools, back to back and turned away from each other seemingly absorbed in their own conversations.² Suddenly, Judge aggressively elbowed Perry in the back. Perry turned and appeared to say something to Judge and turned back away from Judge.³ In response, and only after Perry had his back to Judge again, Judge struck Perry on the head with a glass coffee mug.⁴ Perry reacted by hitting Judge with his drink, breaking the glass in Judge's face.⁵ The broken glass injured Perry's hand in the process.⁶ Bystanders, including Thomas Baca ("Baca"),⁷ intervened in the fray and stopped the fight from escalating further.⁸

Perry received treatment at a hospital for the injuries to his face, neck, and hand.⁹ Judge also received medical treatment for his injuries. Judge later pled guilty to third-degree assault.¹⁰ Perry, however, was not criminally charged for his involvement in the bar fight.¹¹ Perry and Baca sued Judge in the La Plata County, Colorado District Court (the "State Court"). Judge defaulted, and the State Court awarded Perry a $150,000 judgment and Baca a $75,000 judgment on June 22, 2018 (the "State Court Judgment"), after a damages hearing.¹²

Judge subsequently filed a chapter 7 petition on March 8, 2019. Perry and Baca then filed an adversary proceeding to have the State Court Judgment declared nondischargeable pursuant to 11 U.S.C. § 523(a)(6).¹³ The Bankruptcy Court conducted a trial in the adversary proceeding on July 9, 2020. Perry, Judge, and their counsel appeared via video conference. Baca did not appear for reasons not relevant to this appeal. In addition to the State Court Judgment and the testimony of both Perry and Judge, the key piece of evidence at trial was the video recording of the bar fight from the Derailed Pour House's security camera.¹⁴

Following trial, the Bankruptcy Court entered the Order and Judgment in favor of Perry excepting the State Court Judgment from Judge's discharge pursuant to § 523(a)(6).¹⁵ The Bankruptcy Court found Judge's self-serving, uncorroborated testimony lacking in credibility.¹⁶ The Bankruptcy Court concluded Perry's injuries proximately resulted from Judge's actions, which were intended, or at least were substantially certain, to cause injury to Perry. Judge timely filed a notice of appeal on November 16, 2020.¹⁷

II. Jurisdiction

This Court has jurisdiction to hear timely-filed appeals from ‘final judgments, orders, and decrees’ of bankruptcy courts within the Tenth Circuit with the parties' consent.¹⁸ An order resolving all claims asserted in an adversary proceeding is a final order for purposes of 28 U.S.C. § 158(a).¹⁹ And, neither Perry nor Judge elected for this appeal to be heard by the United States District Court for Colorado under 28 U.S.C. § 158(c).²⁰ Thus, this Court has jurisdiction over this appeal.

III. Issues & Standard of Review

Judge asserts two issues on appeal:

1. Whether the Bankruptcy Court erred in finding all of the injuries suffered by Perry were a result of a willful and malicious act by Judge; and

2. Whether, if all of Perry's injuries were not the result of a willful and malicious act, the Bankruptcy Court erred in finding the total judgment amount nondischargeable.

A bankruptcy court's determination of whether a debt is nondischargeable under § 523 is a legal question reviewed de novo .²¹ Whether a party acted "willfully and maliciously necessarily involves inquiry into and finding of intent, which is a question of fact" reviewed for clear error.²² "The amount of damages is a finding of fact and is clearly erroneous only ‘if it is without factual support in the record or if, after reviewing all the evidence, we are left with the definite and firm conviction that a mistake has been made.’ "²³

IV. Discussion

a. Liability for all injuries under § 523(a)(6)

By design, the Bankruptcy Code "limits the opportunity for a completely unencumbered new beginning to the ‘honest but unfortunate debtor.’ "²⁴ Section 523(a) reflects Congress' decision to protect honest debtors by excluding certain categories of debts from a debtor's discharge based on a debtor's unacceptable conduct, such as dishonesty, fraud, or intentional injury.²⁵ Section 523(a)(6), thus, prevents the damages arising from a debtor's brutal attack on a creditor from being discharged.²⁶ To do otherwise would allow a debtor to escape liability by discharging his judgment debt and undermine the deterrent efficacy of tort law without serving any policy of the Bankruptcy Code.²⁷

Consequently, § 523(a)(6) excepts from discharge debts for willful and malicious injury. To prevail under § 523(a)(6), a creditor must prove both a willful act and a malicious injury.²⁸

b. Willful Injury under § 523(a)(6)

"For an injury to be ‘willful,’ there must be a deliberate or intentional injury, not merely ‘a deliberate or intentional act that leads to injury.’ "²⁹ This is a subjective standard³⁰ and generally encompasses intentional torts: debts resulting from recklessness or negligence are not within the scope of § 523(a)(6).³¹

c. Malicious Injury under § 523(a)(6)

Malicious intent is established by evidence that the debtor had knowledge of another's rights and, notwithstanding such knowledge, proceeded to take action in violation of those rights.³² In determining if an injury was malicious, "evidence of the debtor's motives, including any claimed justification or excuse, must be examined to determine whether the requisite ‘malice’ in addition to ‘willfulness’ is present."³³

All the surrounding circumstances, including any justification or excuse offered by the debtor, are relevant to determine whether the debtor acted with a culpable state of mind vis-a-vis the actual injury caused the creditor. A willful and malicious injury requires more than negligence or recklessness. ... For an injury to be "malicious," therefore, the debtor's actions must be wrongful. ...

In summary, the totality of the circumstances must be examined to determine if a wrongful state of mind was present in [Debtor] when he caused injury to [Plaintiff].³⁴

In short, to be malicious, "the debtor's actions must be wrongful."³⁵

d. Judge willfully and maliciously injured Perry

On appeal, Judge does not argue Perry's injury stemming from breaking the mug over Perry's head fails to satisfy the willful and malicious standard under § 523(a)(6). In fact, at oral argument, Judge's counsel conceded Judge's actions in striking Perry were willful and malicious. However, Judge argues Perry's injuries to his hand arose when Perry hit Judge in the face with his own glass and not as a result of any of Judge's actions. Consequently, per Judge, Perry's hand injuries could not be intentionally caused by Judge. Judge further asserts the majority of Perry's damages resulted from the injury to Perry's hand rather than to his face, having been caused by Perry's defensive strike on Judge. Accordingly, Judge argues the amount excepted from his discharge should be apportioned between the damages from the injury to Perry's head versus the injury to Perry's hand.

1. Willful Injury

Section 523(a)(6) applies to acts done with "the actual intent to cause injury."³⁶ "A willful injury may be established by direct evidence that the debtor acted with the specific intent to harm a creditor or the creditor's property, or by indirect evidence that the debtor desired to cause the injury or believed the injury was substantially certain to occur."³⁷ The Bankruptcy Court satisfied the willfulness standard by explaining "Judge acted intentionally, and at the very least his actions were ‘substantially certain to cause ... injury.’ "³⁸ The video clearly establishes Judge's actions were neither negligent nor reckless - Judge was the initial aggressor provoking, and then attacking, Perry. Judge struck an unsuspecting Perry on the head with a glass mug with such force it broke. Given the sheer brutality with which Judge struck Perry suddenly and without warning, "no other conclusion could possibly be reached other than [Judge] intended to hit [Perry], therefore the act was willful."³⁹ "[H]aymakers, like most garden-variety punches to the face, are objectively very likely to cause harm."⁴⁰

Contrary to Judge's argument, the crucial question is not whether Judge intended to specifically cause harm to Perry's hand but whether Judge intended to cause harm to Perry.⁴¹ "[T]o constitute a willful act under § 523(a)(6), the debtor must desire to cause the consequences of his act or believe that the consequences are substantially certain to result from it."⁴² It is clear Judge intended to start a bar fight, and Judge "intended, or expected, to cause [ ] damage" to Perry.⁴³ And, the damage...