In Crestar Bank v. Green, Judge Tice, for the United State Bankruptcy Court, Eastern District of Virginia, at Newport News, ruled that a debt to the debtor's cousin and his assignee was non-dischargeable pursuant to Bankruptcy Code §523(a)(6).
Originally the Creditor had complained that the debtor had falsely attested to a notary public and to a real estate lawyer that his note secured by the real estate had been paid in full. The Creditor argued that discharge was precluded as a false representation under Bankruptcy Code §523(a)(2)(A). The evidence was that the debtor had conceded that he voluntarily and intentionally signed the certificate releasing the deed of trust. The debtor also admitted that at the time he signed the certificate he knew that the document represented that the note was "paid in full". The debtor also admitted that he knew that he was transferring title of the property to the buyer even though the property was the security for repayment of the note to his cousin.
The Court, despite the Creditor's argument, held that the false representation was not made to either the note holder or to the successor bank, and neither creditor relied on the false representation. Therefore, Bankruptcy Code §523(a)(2)(A) did not preclude discharge. However, the Court held that the false representation was a willful and malicious injury to another person's property under Bankruptcy Code §523(a)(6). The Court found that the debtor effectively forged his cousin's signature and released the cousin's deed of trust. The debtor's intentional act of forging and recording the certificate of satisfaction constituted willful and malicious injury to the cousin's property rights. Therefore, the bank, as assignee, was entitled to the damages caused by the debtor's wrong. Accordingly, the Bankruptcy Court ruled that the debt to the cousin and his assignee was non-dischargeable pursuant to Bankruptcy Code §523(a)(6).
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