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448 F.3d 725, 56 Collier Bankr.Cas.2d 326, Bankr. L. Rep. P 80,613

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                         United States Court of Appeals,
                                   Fourth Circuit.
                       In re Jacqueline DUNCAN, Debtor.
  James Duncan, Administrator of the Estate of Meigan Lin Duncan, a/k/a Yang Chun
                             Song, Plaintiff-Appellant,
                                         v.
                    Jacqueline Duncan, Defendant-Appellee.
                                    No. 05-1159.
                               Argued Feb. 2, 2006.
                              Decided May 24, 2006.

Background: Administrator of estate of deceased minor child, who had obtained state
court judgment against debtor in wrongful death action, filed adversary proceeding to
contest the dischargeability of the judgment in mother's Chapter 7 bankruptcy
proceeding. The United States Bankruptcy Court denied administrator's motion for
summary judgment on issue of nondischargeability. Administrator filed interlocutory
appeal. The United States District Court for the Eastern District of Virginia, Gerald Bruce
Lee, J., determined that the wrongful death judgment was dischargeable. Administrator
again appealed.

Holding: The Court of Appeals, Duncan, Circuit Judge, held that state court wrongful
death judgment did not collaterally estop litigation on issue of whether debtor caused the
child's death by willful and malicious injury, as would support nondischargeability
determination.

Reversed in part, and remanded.

                                     West Headnotes


[1] KeyCite Notes

  51 Bankruptcy
    51II Courts; Proceedings in General
     51II(B) Actions and Proceedings in General
      51k2156 k. Nature and Form; Adversary Proceedings. Most Cited Cases

“Adversary proceeding” is a term of art used in bankruptcy practice for a lawsuit brought
within a bankruptcy proceeding for the purpose of, among other things, challenging the
dischargeability of a debt. 11 U.S.C.A. § 523(a)(6).


[2] KeyCite Notes

  51 Bankruptcy
    51XIX Review
     51XIX(B) Review of Bankruptcy Court
      51k3782 k. Conclusions of Law; De Novo Review. Most Cited Cases

The Court of Appeals reviews the judgment of a district court sitting in review of a
bankruptcy court de novo, applying the same standards of review that were applied in the
district court.


[3] KeyCite Notes

  51 Bankruptcy
    51XIX Review
     51XIX(B) Review of Bankruptcy Court
      51k3782 k. Conclusions of Law; De Novo Review. Most Cited Cases


  51 Bankruptcy KeyCite Notes
    51XIX Review
     51XIX(B) Review of Bankruptcy Court
      51k3785 Findings of Fact
       51k3786 k. Clear Error. Most Cited Cases

The Court of Appeals reviews the bankruptcy court's findings of fact for clear error and
questions of law de novo.


[4] KeyCite Notes

  228 Judgment
    228XVII Foreign Judgments
     228k828 Effect of Judgments of State Courts in United States Courts
      228k828.21 Particular Federal Proceedings
       228k828.21(2) k. Bankruptcy. Most Cited Cases

State court wrongful death judgment against chapter 7 debtor, arising out of bathtub
drowning of debtor's minor child, did not collaterally estop, under Virginia law, the
litigation on issue of whether debtor caused the child's death by willful and malicious
injury, in adversary proceeding challenging the dischargeability of the state court
judgment in bankruptcy; the issue of whether debtor intended to injure the child was not
litigated in or necessary to the wrongful death lawsuit, as the wrongful death judgment
required determination that death was caused by conduct that was in conscious disregard
of child, and conduct exhibiting reckless indifference, and although state court judgment
included punitive damages, that award could have been supported by finding of either
willful or reckless conduct, and the judgment did not indicate which type of conduct the
jury found. 11 U.S.C.A. § 523(a)(6); West's V.C.A. § 8.01-50.


[5] KeyCite Notes

  228 Judgment
    228XVII Foreign Judgments
     228k828 Effect of Judgments of State Courts in United States Courts
      228k828.21 Particular Federal Proceedings
       228k828.21(2) k. Bankruptcy. Most Cited Cases

State court judgments can collaterally estop the litigation of issues in adversary
proceedings in federal bankruptcy court.


[6] KeyCite Notes

  51 Bankruptcy
    51I In General
     51I(A) In General
      51k2002 k. Application of State or Federal Law in General. Most Cited Cases

When determining whether a state court judgment has preclusive effect in an adversary
proceeding in bankruptcy court, a federal court applies the relevant state law of collateral
estoppel.


[7] KeyCite Notes

   228 Judgment
     228XIV Conclusiveness of Adjudication
      228XIV(A) Judgments Conclusive in General
       228k634 k. Nature and Requisites of Former Adjudication as Ground of Estoppel
in General. Most Cited Cases

Under Virginia law, a party invoking collateral estoppel must prove the following five
elements: (1) the parties to the two proceedings must be the same or in privity, (2) the
prior proceeding must have resulted in a valid and final judgment against the party
against whom preclusion is sought or his privy, (3) the factual issue to be precluded must
have been actually litigated in the prior proceeding, (4) the factual issue to be precluded
must have been essential to the judgment in the prior proceeding, and (5) there must be
mutuality, that is, a party invoking collateral estoppel would have been bound had the
prior litigation of the issue reached the opposite result.


[8] KeyCite Notes

  228 Judgment
    228XIV Conclusiveness of Adjudication
     228XIV(C) Matters Concluded
      228k715 Identity of Issues, in General
       228k715(1) k. In General. Most Cited Cases

Under Virginia law, an issue is subject to collateral estoppel only if it is identical to an
issue decided in a prior proceeding.


[9] KeyCite Notes

  51 Bankruptcy
    51X Discharge
     51X(C) Debts and Liabilities Discharged
      51X(C)5 Torts and Crimes
       51k3374 Willful or Malicious Injury
        51k3374(2) k. Willful, Deliberate, or Intentional Injury. Most Cited Cases

The provision of the bankruptcy code precluding dischargeability of debt arising from
willful and malicious injury caused by debtor applies only to acts done with the actual
intent to cause injury. 11 U.S.C.A. § 523(a)(6).


[10] KeyCite Notes

  51 Bankruptcy
    51X Discharge
     51X(C) Debts and Liabilities Discharged
      51X(C)5 Torts and Crimes
       51k3374 Willful or Malicious Injury
        51k3374(3) k. Recklessness or Negligence. Most Cited Cases

Provision of the bankruptcy code precluding discharge of debt arising from willful and
malicious injury caused by debtor is not satisfied by negligent, grossly negligent, or
reckless conduct. 11 U.S.C.A. § 523(a)(6).


[11] KeyCite Notes
  51 Bankruptcy
    51X Discharge
     51X(C) Debts and Liabilities Discharged
      51X(C)5 Torts and Crimes
       51k3374 Willful or Malicious Injury
        51k3374(2) k. Willful, Deliberate, or Intentional Injury. Most Cited Cases

The mere fact that a debtor engaged in an intentional act does not necessarily mean that
he acted willfully and maliciously for purposes provision of the bankruptcy code
precluding discharge of debt arising from willful and malicious injury caused by debtor.
11 U.S.C.A. § 523(a)(6).

*726 Richard George Hall, Annandale, Virginia, for Appellant. Gregory Harold Counts,
Tyler, Bartl, Gorman & Ramsdell, P.L.C., Alexandria, Virginia, for Appellee.

Before MOTZ, TRAXLER, and DUNCAN, Circuit Judges.


Reversed in part and remanded by published opinion. Judge DUNCAN wrote the
opinion, in which Judge MOTZ and Judge TRAXLER joined.



DUNCAN, Circuit Judge.

[1]     James Duncan, acting as the administrator of the estate of Meigan Lin Duncan
a/k/a Yang Chun Song, (“the Estate”) appeals an order of the district court granting
summary judgment to Jacqueline Duncan in this adversary proceeding FN1 brought by the
Estate to challenge the dischargeability of a judgment debt owed by Mrs. Duncan arising
out of a state wrongful death action. The Estate contends*727 that the district court erred
in granting summary judgment to Jacqueline Duncan based on the collateral estoppel
effect of the state court judgment. Because the issues decided in the state court
proceedings were not identical to and, therefore, could not collaterally estop litigation of
the controlling issue in this adversary proceeding, we reverse the district court order and
remand for further proceedings.FN2

FN1. “Adversary proceeding” is a term of art used in bankruptcy practice for a lawsuit
brought within a bankruptcy proceeding for one or more of the reasons specified in
Bankruptcy Rule 7001. Here, the Estate brought an adversary proceeding under
Bankruptcy Rule 7001(6) to determine the dischargeability of a debt.

FN2. Because we reverse on this ground, we need not reach the Estate's additional
argument that the district court procedurally erred by entering summary judgment in
favor of Mrs. Duncan because she had not moved for it and had not contended below that
there was an absence of material issue of fact that justified entry of judgment in her favor.
                                              I.

On June 9, 1998, Meigan Duncan (“Meigan”), the adopted minor child of James and
Jacqueline Duncan, died as a result of drowning in a bathtub while in Jacqueline
Duncan's care and custody. Subdural hemorrhaging and cerebral edema were contributing
causes of the child's death. The Virginia Medical Examiner performed an autopsy and
listed the drowning as a homicide on the death certificate.

On May 18, 2000, James Duncan, as representative of Meigan Duncan's estate, filed suit
against Jacqueline Duncan for wrongful death in Virginia state court seeking both
compensatory and punitive damages. The lawsuit contended that Jacqueline Duncan
caused Meigan's death either by assaulting her and then leaving her in the bathtub
unattended to drown or intentionally drowning her to obscure evidence of previous abuse.
At the close of trial, the jury returned an award in favor of Meigan's estate. The jury
awarded $15,000 in compensatory damages and $500,000 in punitive damages, which
was later reduced, against Jacqueline Duncan.

On April 29, 2003, Jacqueline Duncan filed a petition for Chapter 7 bankruptcy in the
Eastern District of Virginia and listed the wrongful death award as a debt. The Estate
brought this adversary proceeding to contest the dischargeability of the award under 11
U.S.C. § 523(a)(6), which makes debts that arise from willful and malicious injuries
nondischargeable in bankruptcy. The Estate then moved for offensive summary
judgment, arguing that the state court judgment collaterally estopped relitigation of the
controlling issue of whether Jacqueline Duncan intended to injure Meigan. Jacqueline
Duncan opposed the Estate's motion, but did not cross-move for summary judgment.

The bankruptcy court granted the Estate's motion in part, finding that Jacqueline Duncan
struck Meigan, that the injury was the proximate cause of Meigan's death, and that the
blow was intentional.FN3 However, the bankruptcy court denied the Estate summary
judgment on the issue of whether the award to the Estate was nondischargeable as arising
from a willful and malicious injury under § 523(a)(6), finding that issue not to be
collaterally estopped by the state wrongful death judgment.

FN3. These findings were not challenged in this appeal.

The Estate then sought and was granted leave to appeal the order of the bankruptcy court
on an interlocutory basis to the district court. After considering the parties' arguments, the
district court held that Jacqueline Duncan's debt to the Estate was dischargeable. The
district court reached this conclusion by initially finding that the Estate had proved by a
preponderance of the evidence that the elements of collateral estoppel had been
established. The district court nevertheless went on to hold that the Estate had failed to
meet the stringent requirement for a finding of nondischargeability*728 under
Kawaauhau v. Geiger, 523 U.S. 57, 61, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998) as a matter
of law. In Geiger, the Supreme Court found that Congress intended a debt to be
nondischargeable under § 523(a)(6) only if the underlying injury was a deliberate or
intentional one. According to the district court, the jury verdict in state court precluded
such a finding. The district court therefore held that Jacqueline Duncan's debt, stemming
from that verdict, was dischargeable as a part of her bankruptcy petition. The Estate then
appealed to this court.


                                            II.


[2]      [3]     “We review the judgment of a district court sitting in review of a
bankruptcy court de novo, applying the same standards of review that were applied in the
district court.” In re Bogdan, 414 F.3d 507, 510 (4th Cir.2005). We review findings of
fact for clear error and questions of law de novo. Id.


                                            III.


[4]     The Estate argues that the district court erred by concluding that the state court
judgment collaterally estopped it from showing that the debt was nondischargeable as
arising from a willful and malicious injury. The Estate argues, to the contrary, that the
state court judgment collaterally estopped Jacqueline Duncan from showing that the debt
was dischargeable. We conclude, however, that the state court judgment does not support
an application of collateral estoppel to the ultimate issue in the Estate's adversary
proceeding and, therefore, neither party is entitled to summary judgment.


[5]    [6]     State court judgments can collaterally estop the litigation of issues in
adversary proceedings in federal bankruptcy court. See In re Ansari, 113 F.3d 17, 19 (4th
Cir.1997). When determining whether a state court judgment has such a preclusive effect,
we apply the relevant state law of collateral estoppel. Id. Here, because the underlying
wrongful death action was litigated in Virginia, we will apply the law of the
Commonwealth.


[7]      [8]     Under Virginia law, a party invoking collateral estoppel must prove the
following five elements: (1) the parties to the two proceedings must be the same or in
privity; (2) the prior proceeding must have resulted in a valid and final judgment against
the party against whom preclusion is sought or his privy; (3) the factual issue to be
precluded must have been actually litigated in the prior proceeding; (4) the factual issue
to be precluded must have been essential to the judgment in the prior proceeding; and (5)
there must be mutuality, “that is, a party is generally prevented from invoking the
preclusive force of a judgment unless that party would have been bound had the prior
litigation of the issue reached the opposite result.” TransDulles Center, Inc. v. Sharma,
252 Va. 20, 22-23, 472 S.E.2d 274, 275 (1996). An issue is subject to collateral estoppel
only if it is identical to an issue decided in a prior proceeding. See Angstadt v. Atlantic
Mut. Ins. Co., 249 Va. 444, 447, 457 S.E.2d 86, 87-88 (1995); Sevachko v.
Commonwealth, 32 Va.App. 561, 564-65, 529 S.E.2d 803, 804 (2000).
The first two elements of this analytical framework present no difficulty here. Both the
Estate and Jacqueline Duncan were parties to the state court proceeding that resulted in a
valid and final judgment against Jacqueline Duncan. The fifth element, mutuality,
likewise presents no difficulty. The state court litigation necessarily bound both the
Estate and Jacqueline Duncan because they were the only parties to that proceeding. See
Angstadt, 249 Va. at 447, 457 S.E.2d at 88. Therefore, the question of whether collateral
estoppel applies*729 turns on resolution of the third and fourth elements of the analysis:
whether the issue to be precluded was actually litigated in and necessary to the state court
judgment.


[9]     [10]      [11]     The controlling issue in the adversary proceeding is whether
Jacqueline Duncan intended to injure her daughter. Under 11 U.S.C. § 523(a)(6), a debt is
not dischargeable in a Chapter 7 bankruptcy if it arises from a “willful and malicious
injury by the debtor to another.” 11 U.S.C. § 523(a)(6). As the Supreme Court instructs in
Geiger, § 523(a)(6) applies only to “acts done with the actual intent to cause injury.” 523
U.S. at 61, 118 S.Ct. 974 (emphasis added). Section 523(a)(6) is not satisfied by
negligent, grossly negligent or reckless conduct. Id. at 62-64, 118 S.Ct. 974; Zygulski v.
Daugherty, 236 B.R. 646, 653 (1999); In re Scarlata, 127 B.R. 1004, 1013 (1991).
Moreover, the mere fact that a debtor engaged in an intentional act does not necessarily
mean that he acted willfully and maliciously for purposes of § 523(a)(6). See In re
Moore, 357 F.3d 1125, 1128 (10th Cir.2004); In re Williams, 337 F.3d 504, 509 (5th
Cir.2003); In re Miller, 156 F.3d 598, 604 (5th Cir.1998). “[N]ondischargeability takes a
deliberate or intentional injury, not merely a deliberate or intentional act that leads to
injury.” Geiger, 523 U.S. at 61, 118 S.Ct. 974 (emphasis in original).

Therefore, in order for collateral estoppel to apply here, the issue of whether Jacqueline
Duncan intended to injure Meigan (as opposed to engaging in an intentional act that
injured the child) must have been both litigated in and necessary to the state court
proceeding. Sharma, 252 Va. at 22-23, 472 S.E.2d at 275. It must also be identical to an
issue litigated in the state court. Angstadt, 249 Va. at 447, 457 S.E.2d at 87-88. The
Estate grounds its argument for precluding the litigation of this issue on two aspects of
the state court judgment: (a) the finding that Jacqueline Duncan was liable for wrongful
death, and (b) the jury's award of punitive damages. We will consider each in turn.


                                     1. Wrongful Death

The finding that Jacqueline Duncan was liable for wrongful death does not support the
application of collateral estoppel because it was judged by a different legal standard than
the “willful and malicious injury” inquiry under § 523(a)(6). The Estate filed suit against
Jacqueline Duncan under Va.Code Ann. § 8.01-50, which governs wrongful death actions
in the Commonwealth. That statute provides for a cause of action “[w]henever the death
of a person [is] caused by the wrongful act, neglect, or default” of another party. Va.Code
Ann. § 8.01-50. At trial, the state court instructed the jury that, in order to find Jacqueline
Duncan liable for wrongful death, it had to find that “the Defendant was willful and
wanton in her conduct toward her daughter” and that such conduct was the proximate
cause of Meigan's death. J.A. 285E. The judge defined the term “willful and wanton
conduct” as

acting consciously in disregard of [Meigan] or acting with a reckless indifference to the
consequences to [Meigan] when the Defendant is aware of her conduct and is also aware,
from her knowledge of existing circumstances and conditions, that her conduct would
probably result in injury to [Meigan].

J.A. 87.

This definition created two distinct categories of “willful and wanton conduct”: (1)
conduct that was in conscious disregard of Meigan, and (2) conduct that exhibited
reckless indifference to the consequences to Meigan. Both of these categories set a lower
bar for a finding of “willful and wanton conduct” than § 523(a)(6) sets for a finding of a
“willful and malicious injury” *730 because neither required the Estate to prove that
Jacqueline Duncan intended to injure Meigan. Therefore, the wrongful death judgment
did not involve an identical issue to the controlling issue here and does not support entry
of summary judgment in favor of either party based on collateral estoppel. See Angstadt,
249 Va. at 447, 457 S.E.2d at 88.


                                    2. Punitive Damages

The state court judgment for punitive damages likewise does not support application of
collateral estoppel because the record does not establish that it was based on a finding
identical to the controlling issue under § 523(a)(6). See id. The state court jury entered a
punitive damages award against Jacqueline Duncan based on the following instruction:

If you find your verdict for the Plaintiff and if you believe by the greater weight of the
evidence that the Defendant's conduct was willful, one, or was so reckless as to evince a
conscious disregard for the safety of [Meigan] you may also award punitive damages to
the Plaintiff.

J.A. 285G. Under this instruction, the jury could have found that Jacqueline Duncan was
liable for either willful conduct or reckless conduct. The record contains no indication of
which of these two standards the jury employed.

It is this gap in the record that renders summary judgment based on collateral estoppel
inappropriate. One of the two standards in the punitive damages instruction-recklessness-
is satisfied by conduct that is inadequate for purposes of § 523(a)(6). Geiger, 523 U.S. at
64, 118 S.Ct. 974 (1998) ( “debts arising from recklessly ··· inflicted injuries do not fall
within the compass of § 523(a)(6)”). Even if we were to assume that the willful conduct
portion of the punitive damages instruction is synonymous with a “willful and malicious
injury” under § 523(a)(6), nothing before us suggests that the jury made its determination
on that basis. We cannot say that the punitive damages award necessarily involved a
finding identical to the § 523(a)(6) inquiry since the jury could have based its award on a
finding of recklessness. Both because such a possibility exists and because Virginia law
requires an identity of issues for collateral estoppel to apply, we cannot conclude that the
question of whether Meigan's death was a “willful and malicious injury” was litigated in
and necessary to the award of punitive damages. Accordingly, application of collateral
estoppel based on the punitive damages award is inappropriate here.

At bottom, neither the wrongful death nor the punitive damages award in the state court
involved the issue of whether Jacqueline Duncan intended to injure Meigan that controls
resolution of this adversary proceeding. Because issues must be identical for collateral
estoppel to apply, and such identity is lacking here, the state court judgment does not
support application of collateral estoppel to the Estate's nondischargeability claim under
11 U.S.C. § 523(a)(6).


                                             IV.

In light of the foregoing, we reverse the order of the district court and remand for further
proceedings consistent with this opinion.

REVERSED IN PART AND REMANDED

C.A.4 (Va.),2006.
In re Duncan
448 F.3d 725, 56 Collier Bankr.Cas.2d 326, Bankr. L. Rep. P 80,613


Briefs and Other Related Documents (Back to top)

• 2005 WL 1827726 (Appellate Brief) Reply Brief of Appellant (Jul. 5, 2005)
• 2005 WL 1656657 (Appellate Brief) Brief of Appellee (Jun. 23, 2005)
• 05-1159 (Docket) (Feb. 14, 2005)
END OF DOCUMENT

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