Bankruptcy is available for honest debtors who have found themselves in unfortunate circumstances. Not every debtor is honest, nor is every debtor in unfortunate circumstances is entitled to bankruptcy. Take the case of William Berrien: I presume he was in unfortunate circumstances because he found himself in need of money. I presume that is why he decided he needed bankruptcy…but that decision came only after the scheme to stage and collect from a bogus car accident claim did not go as he had originally hoped and planned. In a case with twists and turns, this debtor learned that dishonest debtors really do get that they deserve.
An Accident at the Safeway
Berrien and his wife were shopping at the local Safeway near Evergreen Colordao. Liz, an 18 year-old high school student, was operating her parents’ car which – for unexplained reasons was uninsured. According to Berrien, he saw Liz race up and down rows of cars and then eventually hit his wife in the leg, causing her to twist and fall. According to the facts of the case, while he was running to aid his injured wife, he had the wherewithal to write down the plate number of the vehicle.
No one witnessed the incident accept for someone named Shawn. Mr. Shawn claimed never to have met the Berrien’s previously. He also claimed that in his lifetime he had personally witnessed some 400 accidents… although he never once called for help or offered assistance in any of them (of course, it could be because some of those 400 accidents were on the TV, but I digress).
Despite seeing Berrien’s wife fall to the ground, despite claiming to have seen her get injured, and witnessing what was described as a terrible car accident, Shawn did nothing. He didn’t call 911. He didn’t run over to help. He apparently just got into his car and left. The Berriens claimed they were not even aware that there were any witnesses until they just happen to run into Shawn the following week at the Safeway.
As for medical treatment, despite there being a doctor’s office a mere 200-300 feet away, Mrs. Berrien did not check to see she was hurt. Instead, she waited until either later that day or the next day.
The Criminal Charges and Civil Law Suits
A misdemeanor and felony charge was levied against Liz. While both were ultimately dismissed, Liz’s parents spent approximately $96,000 in defending her. Complicating things a bit further: Liz was not a US citizen. She faced deportation to her native South Africa if convicted.
Liz and her family had to defend themselves against two lawsuits: the first, was filed by Mrs. Berrien where she sought damages for the bogus accident. The second, was a subrogation claim brought by Mrs. Berrien’s insurance company. The company paid Mrs. Berrien for underinsured/uninsured motorist benefits under her policy, and the company was now seeking reimbursement from Liz and her family.
The insurance company conducted an investigation concerning the accident, and opted to dismiss the case once the results were determined (curiously, nothing is mentioned as to why the insurance company paid benefits before an investigation was concluded). The case brought by the Berriens was dismissed by agreement.
After resolving the lawsuits, Liz and her family filed one of their own against the Berriens. They alleged abuse of process, conspiracy to defraud, extreme and outrageous misconduct as well as other charged. They sought the money expended for defending the bogus claims, as well as other damages. At some point in this process, the Berriens separated. Just before the civil case was to go to trial, Mr. Berrien filed for chapter 7 bankruptcy protection.
The Bankruptcy, the Adversary Proceeding and the Appeals
Liz and her family filed an adversary proceeding against Mr. Berrien seeking a nondischargeability determination of the damages incurred caused by the reporting of the false accusations. After a trial, the bankruptcy court ruled that “the plaintiffs win by a reasonably wide and deep margin.” Berrien appealed to the Bankruptcy Appellate, which affirmed the decision. A determined Berrien then took his grievances to the 10th Circuit Court of Appeals (Tenth Circuit jurisdiction includes the six states of Oklahoma, Kansas, New Mexico, Colorado, Wyoming, and Utah, plus those portions of the Yellowstone National Park extending into Montana and Idaho).
Berrien’s did not challenge the determination that conduct caused a willful and malicious injury. Rather, he claimed that Liz’s parents could not recover the costs of defending the criminal charges because Liz was 18 years old, and thus, they had no legal obligation to. In other words, they were volunteers and not entitled to recovery for their volunteerism.
The court found that Berrien’s arguments ignored that the car was uninsured and that under state law, Liz’s parents faced significant civil exposure if Liz were convicted of the criminal charges. Remember, that for civil liability to be established, proof by a preponderance of the evidence is required. However, the proof required for criminal charges is higher: beyond a reasonable doubt. A conviction would have only helped Berrien’s claims. In light of their own exposure to liability, Liz’s parents could not be considered mere volunteers.
As to the heart of the dischargeability complaint, the court determined that Berrien intended the consequences of his actions, not merely the action itself. The Court found that:
The BAP correctly concluded, “Debtor’s statements to Safeway, the police, and investigators were clearly intended to support a claim for damages, in which Debtor believed he would share.” Seeking “to fraudulently obtain money from whatever source he could find,” Mr. Berrien caused [Liz and her family] to incur the expense of defending Liz against his false allegation.
Berrien v. Tyler, et al., 10th Circuit Court of Appeals, No. 07-1294 (June 4, 2008)
Related posts:
- Unauthorized Post Petition Transfer Leads to Denial of Discharge
- Destroyed Documents leads to Denial of Discharge
- Debtor Can’t Reopen Case to Enforce Discharge. Yet.
- The Consequences of Non-Disclosure
- Failure to Turnover Tax Refund Leads to Discharge Revocation
Tags: 523(a)(2): Fraud, 523(a)(6): Willful & Malicious Injuries