In Re Ronald R. Diamond and Elaine Diamond, Debtors. Ronald R. Diamond and Elaine Diamond v. Jeffrey R. Kolcum and Linda K. Villelli-Kolcum

In this nondischargeability proceeding under 11 U.S.C. § 523 (a)(2)(A) and (a)(6), the bankruptcy court granted summary judgment against Debtors Appellants Ronald and Elaine Diamond (“the Diamonds”) because it determined that a Washington state court judgment against them and in favor of Appellees Jeffrey and Linda Kol-cum (“the Kolcums”) was entitled to pre-clusive effect. The Bankruptcy Appellate Panel (“BAP”) affirmed the judgment. The Diamonds appeal, contending that the state court judgment should not have been given preclusive effect.

The Diamonds first argue that the judgment should not preclude the Kolcums’ nondischargeability claim under 11 U.S.C. § 523 (a)(2)(A) because the standard for justifiable reliance underlying the state court jury’s fraudulent misrepresentation verdict differs from the standard for a claim of nondischargeability based on falsity or fraud under § 523(a)(2)(A). Second, they contend that the judgment should not preclude the Kolcums’ claim under 11 U.S.C. § 523 (a)(6) because the state court action did not determine the issue of intentional injury, which was necessary to find nondischargeability based on a “willful or malicious injury” under §…