The Scope of Intentional Injury Under Kawaauhau v. Geiger, 118 S. Ct. 974 (1998)

• Publication year: 2021
• Citation: Vol. 78

78 Nebraska L. Rev. 470. The Scope of Intentional Injury Under Kawaauhau v. Geiger, 118 S. Ct. 974 (1998)

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Note*

The Scope of Intentional Injury Under Kawaauhau v. Geiger, 118 S. Ct. 974 (1998)

TABLE OF CONTENTS

I. Introduction .......................................... 470
II. Background ........................................... 472
A. History of 11 U.S.C. §523 (a)(6).................... 472
B. Kawaauhau v. Geiger.............................. 475
III. Analysis .............................................. 478
A. The Proper Standard for "Willful" under 11 U.S.C. §523 (a)(6)........................................ 479
B. The Scope of Intentional Injury Under Kawaauhau
v. Geiger .......................................... 483
IV. Conclusion ............................................ 488

I. INTRODUCTION

United States Bankruptcy law is premised on the idea of providing debtors with a fresh start. As the Supreme Court stated in Local Loan Co. v. Hunt,1 one of the central policies of our bankruptcy law is to give "the honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt."2 Despite the strong adherence to policy supporting a fresh start, the general rule of dischargeability has long been limited by a number of exceptions prohibiting the discharge of certain types of debt, including debts arising from a willful and malicious injury.3 The discharge exception for willful and malicious injuries first appeared in the Bankruptcy Act of 1898. 4 Throughout

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its history, the scope of the willful and malicious injury discharge exception has been the source of confusion. In Kawaauhau v. Geiger,5 the Supreme Court addressed a circuit split regarding the proper interpretation of the term "willful" under the discharge exception.

In Kawaauhau, Justice Ginsburg authored the unanimous opinion of the Court, holding that the term "willful" in the discharge exception for willful and malicious injury is satisfied only by a deliberate or intentional injury.6 This holding correctly resolved the circuit split regarding the proper meaning to be given to the term "willful" by limiting the exception to debts arising from intentional injuries.

Although Kawaauhau correctly resolved the circuit split regarding the proper interpretation of willfulness under the exception, the decision did not clearly define the scope of the term "intent" as used by the Court to describe willful conduct. The Court's failure to clearly define "intent" under the definition of willful creates a risk that Kawaauhau will narrow the willful and malicious discharge exception to a point where the exception will no longer be able to separate the honest and unfortunate debtor from the culpable debtor whose debt should be rendered nondischargeable under the exception. To prevent this result, it is necessary to interpret the term "intent" under 11 U.S.C. §523 (a)(6) as including both intent to injure and subjective knowledge that injury is substantially certain to result. Under this interpretation of intent, the discharge exception will serve its function in rendering the debts of culpable debtors nondischargeable while at the same time allowing honest debtors an opportunity for a fresh start.

This Note will examine the Supreme Court's holding in Kawaauhau and the proper scope to be given to the term "intent" as used by the Court. First, this Note will present a history of the willful and malicious injury discharge exception in United States bankruptcy law including a summary of the Kawaauhau holding. Second, this Note will examine the Supreme Court's holding in Kawaauhau, which correctly interpreted willfulness under 11 U.S.C. §523 (a)(6) to require intent to injure. Finally, this Note will examine the proper interpretation to be given to the term "intent" as used by the Court in Kawaauhau to enable the discharge exception to serve its function of excepting the discharge of debts arising from willful and malicious injuries.

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II. BACKGROUND

A. History of 11 U.S.C. §523 (a)(6)

The Bankruptcy Code excepts from discharge debts arising from a "willful and malicious injury by the debtor to another entity or to the property of another entity."7 The willful and malicious injury discharge exception first appeared as section 17a(2) of the Bankruptcy Act of 1898. 8 Soon after its enactment, the exception was interpreted by the Supreme Court in Tinker v. Colwell.9 Nearly a century after the decision, an understanding of Tinker remains essential to the proper interpretation of the willful and malicious injury discharge exception as codified in 11 U.S.C. §523 (a)(6).10

In Tinker, the debtor, Charles Tinker, filed bankruptcy following a $50,000 judgment rendered against him for criminal conversation (adultery) with Frederick Colwell's wife. Mr. Colwell raised objection to discharge of the judgment, arguing that Mr. Tinker's actions constituted a willful and malicious injury rendering the judgment nondischargeable under § 17a(2). The Tinker Court held the judgment nondischargeable after finding that the judgment for criminal conversation was based upon a willful and malicious injury as defined in § 17a(2) of the Bankruptcy Act of 1898. 11

In its examination of the discharge exception, the Tinker Court addressed willfulness and malice as separate statutory requirements.12 Under § 17a(2), the Court defined "willfulness" to mean "intentional and voluntary."13 The Court defined "malice" in its legal sense as "a wrongful act, done intentionally, without just cause or excuse."14 In addition, the Court clearly indicated that malice could be implied from the circumstances of the case.15 The Court stated that "the act itself necessarily implies that degree of malice which is sufficient to bring the case within the exception stated in the statute" and "it is not necessary that the cause of action be based upon special malice."16

After separately defining willfulness and malice under the discharge exception, the Tinker Court announced a test incorporating both the willful and malicious elements of the exception:

[W]e think a willful disregard of what one knows to be his duty, an act which is against good morals, and wrongful in and of itself, and which necessarily

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causes injury and is done intentionally, may be said to be done willfully and maliciously, so as to come within the exception.17

This language led to decades of confusion regarding the proper interpretation of the willful and malicious injury discharge exception.18 In the early 20 th Century, many courts incorrectly interpreted this language as allowing a "reckless disregard" standard under which reckless conduct by the debtor could satisfy the requirements of the willful and malicious discharge exception.19

The Supreme Court next encountered the willful and malicious discharge exception in McIntyre v. Kavanaugh.20 In McIntyre, the discharge exception was raised after the creditor brought a successful suit for conversion against the debtor. Quoting the combined test for willful and malicious injury announced in Tinker, the McIntyre Court found circumstances sufficient to show that the conversion was both willful and malicious and consequently denied discharge of the conversion debt.21

In Davis v. Aetna Acceptance Co.,22 the Supreme Court again examined the willful and malicious injury exception arising from an action for conversion of a security interest. R.H. Davis, an automobile dealer, obtained a loan from Aetna Acceptance Company to purchase an automobile. Davis secured payment of the loan with a chattel mortgage covering the automobile. In violation of the agreement, Davis sold the automobile without Aetna's consent and only later gave notice of the transaction to an Aetna representative.23 Evidence suggests that on many other occasions, cars held by Davis on similar terms had been sold without Aetna's express consent and the proceeds accounted for thereafter. On this occasion, Davis did not remit the proceeds of the sale to Aetna and subsequently petitioned for bankruptcy. Aetna brought action against Davis for conversion.24

In holding the debt dischargeable in bankruptcy, the Davis Court stated that every act of conversion does not necessarily constitute a willful and malicious injury.25 The Court held that "[t]here may be a conversion which is innocent or technical, an unauthorized assumption of dominion without willfulness or malice."26 The Davis Court

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believed "[t]here may be an honest but mistaken belief, engendered by a course of dealing, that powers have been enlarged or incapacities removed" and under such circumstances "what is done is a tort, but not a willful and malicious one."27 Under the facts before it, the Court did not find the requisite willfulness or malice and discharged the debt "as against a showing of conversion without aggravating features."28

Lower courts following Tinker, McIntyre and Davis often misinterpreted these holdings to allow reckless conduct to satisfy the willful and malicious injury discharge exception.29 Many of these cases involved injury resulting from the reckless operation of an automobile.30 Cases allowing reckless conduct to satisfy § 523(a)(6) were directly overruled in the Judiciary Committee Reports accompanying the Bankruptcy Reform Act of 1978.

When the Bankruptcy Code was revised under the Bankruptcy Reform Act of 1978, the words of the willful and malicious discharge exception remained unchanged as codified in 11 U.S.C. §523 (a)(6).31 However, in enacting the modern exception, reports of the Senate and the House of Representatives Judiciary Committees accompanying the Bankruptcy Reform Act of 1978 expressly addressed Tinker and expressed their intent regarding the proper meaning to be given to the word...