940 F. 2d 1534 - Karlin Fox v. V Karlin

MEMORANDUM*

Appellant Ted Fox appeals the Bankruptcy Appellate Panel's ("BAP") decision affirming the bankruptcy court's order that appellee-debtor Jan Karlin's debt to Fox is discharged. The bankruptcy court determined that Fox failed to demonstrate that Karlin possessed the requisite intent to harm Fox as required under 11 U.S.C. Sec. 523(a)(6) of the Bankruptcy Code. Accordingly, that court discharged Karlin's debt to Fox. The BAP affirmed that determination and also denied Fox's argument that the claim should be found nondischargeable under 11 U.S.C. Sec. 523(a)(4) because the BAP determined it lacked sufficient basis. Fox filed a timely appeal from the BAP's judgment. We have jurisdiction to decide this case under 28 U.S.C. Sec. 158(d) and we affirm.

On appeal, Fox argues that the BAP erred when it determined that his debt was not within the scope of "willful and malicious injury" as contemplated by section 523(a)(6), that Karlin's conduct did not amount to a violation of his fiduciary duty and, therefore, the debt was nondischargeable under section 523(a)(4). We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. In re Ashley, 903 F.2d 599, 602 (9th Cir.1990) (citations omitted). We address Fox's challenges on appeal in turn.

Under section 523(a)(6), a debt is nondischargeable if the debtor willfully and maliciously injures a creditor or his property. 11 U.S.C. Sec. 523(a)(6). This circuit relies on a three-part test to determine whether the debtor's conduct is willful and malicious. See In re Cecchini, 780 F.2d 1440, 1443 (9th Cir.1986). The three elements are: (1) the debtor intentionally engaged in a wrongful act; (2) the act produces harm; and (3) the debtor engaged in this act without just cause or excuse. Id. This standard does not require the creditor to prove the debtor had a specific intent to injure. Id. Nevertheless, the creditor must prove by clear and convincing evidence that the conduct was both willful and malicious. In re Littleton, 106 B.R. 632, 634 (BAP 9th Cir.1989), affirmed by, 931 F.2d 897 (9th Cir.1991).

After Fox refused to consent to the publication of the photos, Karlin contacted Hirsch and asked her to withdraw them. Apparently, Hirsch contacted Faces International, who agreed to either not publish the article or to use other pictures. Nevertheless, the photos of Fox still appeared in the publication. It is our view that Karlin's actions in this case did not constitute an intentional violation of Fox's rights. Similarly, Fox fails to point to specific facts that indicate Karlin acted wrongfully without just cause or excuse. Thus, there was no willful act that would justify an order that would prevent discharge of the potential debt that could result from a jury trial.

Fox also asserts that the debt is nondischargeable if the debtor engaged in fraud or defalcation while acting in a fiduciary capacity. See 11 U.S.C. Sec. 523(a)(4). Although Karlin concedes that he owed a fiduciary duty to Fox by way of their doctor-patient relationship, the BAP was correct when it determined that this fact alone was insufficient to establish the nondischargeability of a debt under section 523(a)(4). See, e.g., In re Short, 818 F.2d 693 (9th Cir.1987). For purposes of section 523(a)(4), statutorily created fiduciary trusts are permitted, but constructive or implied trusts are beyond its reach. Short, 818 F.2d at 695.

California statutory law provides that "[t]he willful, unauthorized violation of professional confidence constitutes unprofessional conduct." Cal.Bus. & Prof.Code Sec. 2263 (West 1990). In addition, California law provides that "[n]o provider of health care shall disclose medical information regarding a patient of the provider without first obtaining an authorization." Cal.Civ.Code Sec. 56.10 (West 1982). Finally, section 994 of California's Evidence Code provides patients a privilege to prevent the disclosure of "confidential communications." Cal.Evid.Code Sec. 994 (West Supp.1991).

Assuming that these statutes combine to create a fiduciary duty within the scope of section 523(a)(4), this panel agrees with the BAP that Karlin did not breach the duty because he obtained written authorization from Fox to use the photographs. The consent form stated generally that the pictures may be used for "any instructional or professional purposes." (Emphasis added). Moreover, Fox does not challenge the validity of the signed authorization form. Accordingly, we find that Fox's challenge to the bankruptcy court's finding of dischargeability of the potential debt under section 523(a)(4) must fail. We affirm the judgment of the BAP.

AFFIRMED.