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Vohariwatt v. Matson

United States District Court, S.D. California

September 9, 2019

JANET VOHARIWATT and PAUL VOHARIWATT, Appellants,
v.
KEITH MATSON and JOANNE MATSON, Appellees.

         Bankruptcy No. 16-00658-LA7

          ORDER

          HON. ROGER T. BENITEZ UNITED STATES DISTRICT JUDGE

         Appellants Janet and Paul Vohariwatt appeal the Bankruptcy Court's September 4, 2018 Judgment on Remand. The Judgment is AFFIRMED.

         I. BACKGROUND

         A. The Foreclosure

         In 2006, Appellants Janet and Paul Vohariwatt purchased real estate located at 31 Sandpiper Strand. In December 2008, the Vohariwatts contracted to rent the property to tenants. The tenants paid $60, 000 to rent the property for one year, as well as a $10, 000 "pet deposit" and a $5, 000 security deposit. The tenants began living at the property in May 2009. In January 2010, the Vohariwatts and the tenants agreed to extend the lease until June 20, 2011 for another $60, 000. The tenants made a $50, 000 rent payment in May 2010, and the parties agreed that the pet deposit would be used to cover the remaining $10, 000 of rent owed.

         Notices of Default for the Property were recorded in August 2009 and July 2010, and Notices of Trustee's Sale for the Property were recorded in November 2009 and October 2010. On February 3, 2011, Keith and Joanne Matson purchased the 31 Sandpiper Strand property at a foreclosure auction. The Vohariwatts did not learn of the foreclosure auction until February 4, 2011. Between February 4, 2011 and February 23, 2011, the Matsons requested that the Vohariwatts turn over the rent money prepaid by the tenants for the period of February 3, 2011 (the day the Matsons took ownership of the property) through June 20, 2011 (the end of the rental period). The Vohariwatts refused.

         B. State Court Proceedings

         On March 30, 2011, the Vohariwatts brought suit for wrongful foreclosure against the Matsons in the Superior Court, County of San Diego. On October 7, 2011, the Superior Court dismissed the Vohariwatts' wrongful foreclosure suit. On that day, the Matsons again requested that the Vohariwatts turn over the prepaid rent, and the Vohariwatts again refused.

         The Matsons then brought suit against the Vohariwatts in the Superior Court, County of San Diego for (1) wrongful institution of civil proceedings for their wrongful foreclosure suit against the Matsons and (2) for conversion of the prepaid rent. After a two-day trial in January 2013, the Superior Court found for the Matsons on both claims, entering judgment against the Vohariwatts for $23, 587.55 on the wrongful institution of civil proceedings claim and for $22, 520.55 on the conversion claim. In finding for the Matsons on the conversion claim, the Superior Court stated:

The Vohariwatts kept the rent money attributable to February 3, 2011 to June 20, 2011 despite no longer owning [the property]. The conversion occurred on February 3, 2011. Mr. Matson and Mrs. Vohariwatt both testified that Mr. Matson requested the prepaid rent money on October 7, 2011. The Vohariwatts refused to give them the money.
At the rental rate of $5, 000 per month multiplied by twelve months, and then divided by 365 days, the daily rental rate is $164.38. February 3, 2011 to June 20, 2011 was 137 days. Therefore, the amount of the Matsons' personal property that the Vohariwatts converted is $22, 520.55.

Doc. 6-9 at p. 29 (2/5/2013 Superior Court Judgment).

         C. First Bankruptcy Proceeding

         In February 2016, the Vohariwatts filed for Chapter 7 bankruptcy. On April 28, 2016, the Matsons filed a complaint in the Bankruptcy Court seeking a determination that the two debts owed under the Superior Court's judgment against the Vohariwatts were nondischargeable under 11 U.S.C. § 523(a)(6). On January 24, 2017, the Matsons moved for a summary judgment order declaring that the judgment debts were exempt from the Vohariwatts' discharge. The Bankruptcy Court granted the Matsons' motion as to the debt owed for wrongful institution of civil proceedings. However, the Bankruptcy Court denied the Matsons' motion as to the debt owed for the conversion judgment, finding that particular debt to be dischargeable because it did not satisfy § 523(a)(6). In so holding, the Bankruptcy Court reasoned that the Matsons were collaterally estopped from arguing § 523(a)(6)'s nondischargeability exception applied because of the Superior Court's judgment that the conversion occurred on February 3, 2011. Specifically, the Bankruptcy Court determined that because the Superior Court found the conversion occurred on February 3, 2011, and the Vohariwatts did not learn about the foreclosure sale until after February 3, 2011, their conversion on February 3, 2011 could not be "willful and malicious," as required by § 523(a)(6)'s nondischargeability exception.

         D. First Appeal of ...


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