Kansas Exemptions For Life Insurance Proceeds In Bankruptcy

Under what circumstances are life insurance policies exempt in bankruptcy? Can the exemption ever be forfeited? These were some of the questions considered by the 10th Circuit Bankruptcy Appellate Panel in the case of In Re Larry Erickson and Betty Moore, filed in August 2011 (KS-11-005). Life insurance proceeds are normally exempt in bankruptcy provided certain conditions are met, but this case had an unusual set of facts.

Husband and wife Larry J. Erickson and Betty L. Moore filed a petition for Chapter 7 relief on March 30, 2010. At the time the petition was filed, Erickson owned several insurance policies on his life with respect to which Moore was the designated beneficiary. Debtors neither scheduled the life insurance policies as assets, nor claimed them as exempt.

Erickson died on May 24, 2010, within 180 days of filing the petition, thereby implicating 11 U.S.C. § 541(a)(5)(C), which operates to include the life insurance proceeds into Moore’s bankruptcy estate. Moore did not notify the Chapter 7 trustee of Erickson’s death, or of her receipt of the life insurance proceeds as beneficiary.

The Trustee contacted the debtors’ attorney about the issue. The debtors amended their Schedules B and C to disclose and exempt out the life insurance proceeds. Moore claimed two of the policies exempt under Kansas Statute § 60-2313(a)(7),7 which exempts any interest in any policy of insurance upon a person’s life exempt from process pursuant to Kansas Statute § 40-414. Moore claimed the other policy exempt under Kansas Statute § 60-2308, which exempts pensions and benefits received from qualified retirement plans.

Trustee then objected to Moore’s claimed exemptions under Kansas Statute § 60-2313, and filed a motion for turnover with respect to the insurance proceeds.  The Trustee argued Moore did not have an exemptible interest in the life insurance policies as of the petition date, and that the insurance proceeds came into the bankruptcy estate pursuant to § 541(a)(5)(C) which (he alleged) supercedes any applicable state law.

The Trustee also argued Kansas Statute § 40-414 did not exempt the proceeds paid to Moore. The bankruptcy court ruled against the Trustee, and he appealed.  On one point, the BAP agreed with the Trustee. As of the petition date, Erickson, the insured, was still living. Therefore, Moore’s interest in the life insurance policies was limited to that of a designated beneficiary subject to divestment.

The court noted that the Kansas Supreme Court had ruled that “‘[a] beneficiary has only an inchoate right to the proceeds of a policy, subject to being divested at any time during the lifetime of the insured, by transfer, assignment, or change of beneficiary.’” Thus, Moore had only an expectancy and not a legal or equitable interest in the life insurance policies that she could exempt.

However, even though the debtor could not use that provision, it could still exempt out the insurance proceeds under Kansas state law. Bankruptcy exemptions in Kansas are determined by state law. The B.A.P noted that Kansas law exempts the proceeds of a life insurance policy, whether they be cash or surrender value in the hands of the insured or proceeds in the hands of the beneficiary. Kan. Stat. Ann. § 40–414(a)(4) expressly exempts the “beneficiary’s interest” from any claims of his creditors. Kansas courts have long held that proceeds of an insurance policy in the hands of a beneficiary or deposited in the beneficiary’s bank account retain their exempt character. Proceeds held by beneficiaries remain exempt, and this has been the rule for some time.

The Trustee’s argument that § 541(a)(5)(C) somehow “superseded” this Kansas exemption statute was found to be without merit. This argument is “completely contrary to § 522(b) which provides that debtors are entitled to certain exemptions notwithstanding § 541.” It was true that § 541(a)(5)(C) operated to bring the life insurance proceeds into Moore’s bankruptcy estate because she became entitled to them within 180 days of filing her petition. But she may still claim them as exempt pursuant to Kansas Statutes § 40- 414 and § 60-2313.

The B.A.P. emphasized, once again, the firm rule that exemptions should be “liberally construed” in favor of a debtor. In other words, if there is any doubt as to whether an exemption should be applied, courts should err on the side of applicability. This is in keeping with the intention of the Code of giving debtors a fresh start.

This case highlights two important points. One is the reminder of the exemptability of life insurance proceeds. The second point is the duties debtors have to be forthright with the bankruptcy court and the trustee. Attempts to conceal assets, or failures to disclose material assets, set the stage for bad things to happen. It was not clear if the debtor’s failure to disclose the receipt of the proceeds was deliberate or simply ignorance, but the point remains valid. The debtor could have saved herself a lot of trouble by simply disclosing the asset, and then exempting it out. Not doing so created a presumption (justified or not) that something amiss was happening.

Read More:  Myths And Misconceptions About Bankruptcy

“Jury Box” Or “Hot Box” Jury Selection In Kansas Felony Criminal Trials

Does it matter how a jury is selected in a criminal case?  Can the method used in seating a jury cause reversible error?  According to the Kansas Court of Appeals, the answer is yes.  A recent case discussed these issues and how they would be applied.  The case was State v. Crabb, decided in February of this year (KS Court of Appeals No. 110,673).

In the Crabb case, defendant Christopher Crabb appealed his conviction of one count of interference with law enforcement. Crabb claims the district court committed reversible error by using the so-called “hot-box” method of jury selection over Crabb’s objection instead of using the statutory method of jury selection set forth in K.S.A. 22-3411a.  He also argued that the district court erred in instructing the jury and that he was denied a fair trial based on prosecutorial misconduct and cumulative error.

Crabb had been charged with “running” from a law enforcement officer.  Crabb was arrested and taken into custody after allegedly running from law enforcement for an alleged parole violation.  On August 23, 2012, the State charged Crabb with one count of interference with law enforcement, a nonperson felony. The case proceeded to a jury trial in April 2013. The trial resulted in a deadlocked jury, so the district court declared a mistrial.  A second trial was conducted in 2013.  And this is where the problems began.

At the second trial, the trial judge announced that the court would be using the “hot box” method of jury selection.  What was this?  The judge elaborated:

“I decided that this morning we are going to have jury selection by what has commonly been referred to as hot box. That means we are going to call 12 people into the jury box who will be examined by the Court and by counsel. All other people will remain in the gallery and be able to listen to court proceedings. At the time that 12 people have been passed for cause, then each party will have the opportunity to exercise a peremptory challenge and the State will go first, if you wish to exercise one or you may pass. Then the defendant will have the opportunity to exercise a peremptory challenge or may pass, until such time as both parties have either passed, leaving 12 people in the jury box, or each party has exercised six peremptory challenges, then we will have our jury.”

Defense counsel objected to this method, and asked what was its statutory basis.  The Court replied that it was permitted.  The trial proceeded and Crabb was convicted of felony interference with law enforcement.  He appealed, claiming that the method of jury selection prejudiced him.  He argued that the jury selection procedure used by the district court violated K.S.A. 22-3411a, which provides that the court shall cause enough jurors to be called, examined, and passed for cause before any peremptory challenges are required.

Crabb cited State v. Mitchell, 234 Kan. 185, 192-96, 672 P.2d 1 (1983), to support his argument that the district court erred by failing to use the jury selection procedure set forth in K.S.A. 22-3411a. In Mitchell, the district court used a jury selection method identical to the hot-box method used by the district court at Crabb’s trial.

The Court found that the “hot-box” method was inferior, for two reasons.  First, as the Mitchell court noted, the hot-box method requires counsel to exercise their peremptory challenges piecemeal rather than in comparison to the entire panel. How, the Court asked, can a party properly exercise a peremptory challenge to strike a juror when the next juror seated by the court may be even worse, from that party’s perspective, than the juror who was initially challenged?

Second, under the hot-box jury selection method, after the parties have exercised all peremptory challenges and the final juror is seated in the jury box, that final juror may only be removed for cause. There is no remaining peremptory challenge for the final juror seated by the court. Thus, unless a party is successful in striking the final juror for cause, the final juror will remain on the jury.

Finally, the Court noted that the State could not prove that the error that Crabb suffered from the trial court was harmless.  The burden was on the State to prove that there had not been an error.  And this they could not do.  The Appellate Court noted that the “jury box” method was used in some federal courts, but this did not mean that it was authorized in the State of Kansas:

[T]he “jury-box” method, is permitted in some federal courts. See, e.g., United States v. Severino, 800 F.2d 42, 47 (2d Cir. 1986). The Second Circuit Court of Appeals has found that federal trial courts have broad discretion in determining how peremptory challenges will be exercised and that the hot-box method is not an abuse of that discretion so long as the defendant is not prevented from using all of his or her peremptory challenges. See United States v. Thompson, 76 F.3d 442, 451-52 (2d Cir. 1996). But the fact that some federal courts permit the use of the hot-box jury selection method does not mean that Kansas courts are free to ignore the mandate of K.S.A. 22-3411a for selecting juries in felony trials. Likewise, the fact that some federal courts allow the hot-box method of jury selection does not mean that a Kansas court’s failure to comply with K.S.A. 22-3411a is always harmless error.

Just because the jury box method was used in federal courts did not make it acceptable in Kansas.  In short, the Appellate Court ruled that there was one method—and one method only—for jury selection in felony trials in the State of Kansas.  And this was the method laid out in K.S.A. 22-3411a.  Because this method had not been used, reversible error had occurred and Crabb was entitled to a new trial.  This decision upholds the far-reaching jury selection rights that defendants have in felony criminal cases in Kansas.

Read More:  Violent Crimes

What Is A “Core Proceeding” In A Bankruptcy Case?

What is a “core proceeding” arising from a bankruptcy case?  What standard is used to evaluate this issue?  These were the questions asked by the Eighth Circuit case of In Re Schmidt, decided in 2011 (11-6028 to 11-6030).  In this case, Klein Bank appealed the bankruptcy court’s order  denying its motions to remand its replevin actions which had been removed from the state court to the bankruptcy court. In denying the motions, the bankruptcy court had originally concluded that the replevin actions were core proceedings. The Eighth Circuit B.A.P. disagreed, stating that  core proceedings are limited to those “arising under or arising in” a bankruptcy case.

In 2011, Klein Bank filed two lawsuits against David Schmidt, Douglas Schmidt, and Dale Schmidt, and several of their companies in the District Court of Wright County, Minnesota.  The lawsuits were replevin actions.  A replevin action is a civil action undertaken for the purpose of recovering some secured collateral, when there has been a default on the loan.  Then on February 28, 2011, Douglas Schmidt, David Schmidt, and Dale Schmidt, along with their respective spouses, all filed voluntary Chapter 11 petitions in the United States Bankruptcy Court for the District of Minnesota.  Neither F.H. Schmidt, Schmidt Electric, nor any of the other corporate defendants in the Replevin Actions filed for bankruptcy relief.

The Schmidts then filed Notices of Removal to United States Bankruptcy Court pursuant to 28 U.S.C. § 1452 in the replevin action.  The notice of removal asserted that (1) the respective Debtors have a legal interest in the property being replevined and, therefore, these are core proceedings which cannot be resolved without affecting the Debtors’ bankruptcy estates; (2) the Replevin Actions are related to the Debtors’ respective bankruptcy cases and, therefore, it would be more efficient and expeditious to have them heard in bankruptcy court; and (3) the United States District Court for the District of Minnesota has original jurisdiction under 28 U.S.C. § 1334.

The Bankruptcy Court determined that the replevin actions were core proceedings and, therefore, mandatory abstention under § 1334(c)(2) did not apply. The Court also declined to abstain under § 1334(c)(1)’s discretionary abstention provision, and denied the requests to remand based on equitable grounds under 28 U.S.C. § 1452(b). Klein Bank appealed.

The BAP reasoned as follows.  Section 1334(a) gives the federal district courts “original and exclusive jurisdiction over cases under title 11” – in other words, bankruptcy cases themselves. Section 1334(b) gives federal courts non-exclusive jurisdiction over “all civil proceedings arising under Title 11, or arising in or related to cases under Title 11.” Such civil proceedings are divided into two categories: core proceedings and noncore, related proceedings.  Core proceedings are those cases arising under Title 11, or arising in a case under Title 11.

The bankruptcy court originally hearing the case determined that the replevin actions were core, concluding that they may fall within as many as three of the sixteen different types of core proceedings enumerated in 28 U.S.C. § 157(b)(2). The bankruptcy court had found that the replevin actions fell within § 157(b)(2)(A) (matters concerning the administration of the estate), § 157(b)(2)(B) (the allowance or disallowance of claims against the estate), and § 157(b)(2)(O) (other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtorcreditor or the equity security holder relationship).

In essence, the Bankruptcy Court concluded that, since the Debtors showed that they would not likely be successful in their reorganization efforts if Klein Bank replevined the assets of their non-debtor corporations, that litigation falls within those three examples in § 157(b)(2). Thus, the Bankruptcy Court originally concluded, they are core, essentially regardless of whether they actually arose under or in the Debtors’ bankruptcy cases.  But the BAP did not agree with this reasoning.

According to the BAP, the replevin actions did not “arise under” Title 11 because they do not involve causes of action expressly created or determined by the Bankruptcy Code, nor do they involve a right created by federal bankruptcy law. In addition, they do not “arise in” the bankruptcy cases because they would, and indeed did, exist regardless of the bankruptcy filing.

Determinative in this case was the fact that a new Supreme Court decision had just come down that affected things.  In Stern v. Marshall, the United States Supreme Court rejected the notion that § 157 embodies a category of matters that are core, but do not arise under or arise in a bankruptcy case.  As the Court stated, “core proceedings are those that arise in a bankruptcy case or under title 11.”  That is so regardless of whether the matter can be fitted into one of the enumerated examples in § 157(b)(2).

Since the replevin actions did not arise under or arise in the Debtors’ bankruptcy cases, they are, simply, not core.  Basically the BAP also pointed out that the corporations should also have filed a bankruptcy case, not just the officers personally.  This was not done.  The lesson seems clear:  if there are issues going on both for a debtor personally and for his or her corporation, filing two cases should be considered highly.  Had the corporations also filed for Chapter 11, the outcome would have been different.

Read More:  Restaurant Bankruptcy And Food Supplier Bankruptcy 

Director Must Prove Elements Of Refusal Of Breath Test In DWI Cases

In a recent decision, the Missouri Court of Appeals upheld the standard required for the Director of Revenue to prove in DWI cases involving an alleged refusal to submit to a breath test.  The case was Ryan McPhail v. Director of Revenue (ED101307, from December 2014).  The Appellant, McPhail, argued that the Director had not proved he refused to submit to a breath test under RSMo. 577.041.1.  The Appellate Court agreed with him.

The facts were as follows.  The police officer conducted a traffic stop after observing a vehicle swerving and hitting parked cars.  The officer told the driver to get out and sit on the curb, and then told him to get his license and insurance.  The officer claimed he noticed signs of impairment, like slurred speech and stumbling; he asked McPhail to perform sobriety tests and take a breath test, and McPhail allegedly refused.  He was then arrested.

The officer informed him of Missour’s Implied  Consent Law and asked him to take a chemical breath test.  McPhail asked to speak to an attorney.  The officer told McPhail that he had twenty minutes to contact his attorney, and then he would again be asked to take the test.  McPhail was booked and processed for DWI.  The trial court found that he had “refused” to submit to a breath test, and that he would have his license revoked for one year.  He then appealed.

On appeal, McPhail argued that the Director of Revenue failed to establish a violation of the Missouri Implied Consent Law for two reasons:  (1) his refusal was equivocal in that it was conditioned on speaking to his attorney; and (2) there was no evidence that the officer asked McPhail to submit to a breath test after the 20 minute statutory period had expired.  Thus, he took the position that he never voluntarily and unequivocally “refused” to submit to a chemical test as required by RSMo. 577.041.1.  The appeals court agreed.

In Missouri, a license revocation for a refusal to submit to a chemical test will be upheld if: (1) the driver was stopped and arrested; (2) the arresting officer had reasonable grounds to believe that the driver was in an impaired condition; and (3) the driver refused to submit to a breath test.  Brown v. Dir. Of Revenue, 164 S.W.3d 121, 125 (Mo. App. E.D. 2005).  The Director is required to prove these elements.

What is a “refusal”?  It is a “declining on one’s own volition to take the test…when requested by an officer to do so.” Webb v. Dir. Of Revenue, 157 S.W.3d 769, 772 (Mo. App. E.D. 2005).  A conditional refusal is also a refusal, except when a driver qualifies a refusal on his or her having an opportunity to contact an attorney.  Id.  Section 577.041.1 states that when a driver requests to speak to an attorney, he or she must be given a 20-minute period of time in which to do so.  Once this period expires, if the driver continues to refuse to submit to any test, it will be deemed a refusal.  RSMo. 577.041.1.

Also, if the driver abandons his attempt to contact an attorney and makes a final decision before the 20 minute period expires, then it is a refusal.  Bacandreas v. Dir. Of Revenue, 99 S.W. 3d 497, 500 (Mo. App. E.D. 2003).

In McPhail’s case, it was clear that he never abandoned his attempt to speak to an attorney.  The alcohol influence report (AIR) that the officer filled out was silent about the time sequence of events, and this was something that troubled the appellate court.  The court stated that “it is entirely unclear from the AIR and its narrative whether Appellant continued to refuse to take the breath test after being given an opportunity to contact an attorney.”

Since the burden was on the Director to prove the required elements, the court had to look at what it was given in the record.  And the AIR here was simply flawed.  This was something that the court found significant:

This is a proceeding that carries with it immense repercussions for a petitioner.  There is no legal principle or presumption that allows a court to divine the officer’s meaning or to supply missing clarification where seeming errors and omissions in the AIR and its narrative create ambiguity.

All the court had in front of it was the AIR.  There was no live testimony. All it could do was base its decision on what it had in front of it, and this was deficient.  Since the officer was not called to testify, the court had to go with what it had.  And this fell short of what the director was required to prove under the statute.  Thus, the court found that the director failed to show that McPhail refused to submit to a chemical test.

Read More:  Expungement Of A DUI In Missouri

Charitable Contributions In Bankruptcy: What Is Reasonable?

How much charity should a person in bankruptcy be able to contribute?  At some point, can donations become excessive?  These issues often come up in bankruptcy cases.  Some debtors need to tithe as part of their religious obligations.  Some debtors have a need to contribute as part of their work obligations.  These were the questions under consideration in a recent 10th Circuit bankruptcy appellate case from 2012.  The case was In Re McGough (B.A.P. No. CO-11-038).

The McGoughs filed a Chapter 7 case in 2009. On November 18, 2010, the Trustee initiated an adversary proceeding by filing a complaint against the Word of Life Christian Center (or WLCC, the recipient of the debtors’ charitable contributions) seeking to avoid and recover all of the charitable contributions it had received from the Debtors during 2008 and 2009, which totaled $4,758. In its answer to the complaint, the Church admitted its receipt of donations in the specified amounts, but argued that they were excepted from avoidance as charitable contributions within the “safe harbor” provided by 11 U.S.C. §548(a)(2).

The Trustee looked back to the two years before the filing of the bankruptcy.  He argued that because the charity constituted more than 15% of the debtors’ gross income, all of the charitable contributions should be recoverable by him for the benefit of the estate.  WLCC argued that only the portion of the charity that exceeded 15% should be recoverable by the Trustee.

The issue on appeal was clear.  It was whether §548(a)(2)(A) protects charitable donations up to 15% of a debtor’s gross annual income, even when the total of the donations exceeds that threshold, or whether exceeding the threshold removes the entire donation from protection.  Some debtors like to contribute a large amount of money to charities.  The Trustee took the position that contributions over 15% were excessive, and that the other creditors should be able to recover some of this money.  The Court accepted that the Debtors made donations to a qualified charitable organization that exceeded 15% of their gross annual income in both 2008 and 2009.

Section 548 of the Bankruptcy Code allows bankruptcy trustees to avoid and recover certain transfers made by debtors prior to the filing of their bankruptcy petition on the ground that the transfers were either actually or constructively fraudulent.  This rule is not unlimited, of course.  However, a debtor’s constructively fraudulent charitable donation cannot be avoided by the trustee if the transferee establishes that: 1) it is a qualified religious or charitable entity; and 2) the amount of the donation is not more than 15 percent of the debtor’s gross annual income in the year of the transfer.

The Trustee asserted that § 548(a)(2)(A) is clear and unambiguous on its face, and its plain reading provided a safe harbor only if the contributions did not exceed a minimum threshold, but provides no safe harbor if the threshold (15%) is exceeded.  The BAP disagreed, saying that the statute was not clear on its face.  In fact, it was ambiguous.  So the Court had to look to other authority.  The Court said:

We consider the statement in the House Report that accompanied this statute’s revision in 1998 that “the safe harbor protects annual aggregate contributions up to 15 percent of the debtor’s annual income” to be particularly instructive. We read the statute’s provision of protection “up to” a threshold amount to mean that is the most that will be given. We do not read that to mean that, once the threshold is crossed, all protection disappears.

When computing their disposable income, Chapter 13 debtors thus may deduct their charitable donations “in an amount not to exceed” 15% of their gross income. This provision plainly reduces disposable income in Chapter 13 cases by an amount up to 15% of gross income. As such, Chapter 13 debtors’ post-filing charitable contributions are deductible up to the threshold amount, and would be considered to be not open to scrutiny by the bankruptcy court.

So, when all was said and done, the Trustee could only avoid a portion of the charitable contributions.  And this amount was the amount that exceeded 15% of the debtors’ income.  This decision makes sense, and should be a reassurance to the many debtors out there who perform tithing obligations, or other charitable obligations during the year.

Read More:  Damages For Violations Of The Automatic Stay In Bankruptcy

Aggravated Battery Conviction Does Not Require Intention Of Resulting Harm

In January of this year, the Kansas Supreme Court published an opinion that clarified its position on the type of proof needed to sustain a conviction for aggravated battery.  The case was State v. Hobbs  (Docket No. 107,667).  To sustain an aggravated battery conviction, is the prosecutor required to prove that the defendant intended the consequences of his act, or just the act itself?  It is a question that is constantly present in these cases.

The facts of the Hobbes case were relatively simple.  On the night of August 11, 2011, Hobbs went to an Emporia bar with some friends. Because he had recently lost his identification, he called ahead to ensure that he could get into the bar. He was informed by the bar’s owner that he would be able to enter but would not be served alcohol. When Hobbs arrived, Michael Watson, an employee of the bar, confirmed to Hobbs that he was welcome to enter but could not order or drink alcohol. Watson also warned Hobbs that he would have to leave if anyone saw Hobbs drinking. Despite the warnings, Watson eventually saw Hobbs drinking alcohol.

Watson approached Hobbs and told him that he would have to leave. Watson escorted Hobbs  toward the door until he saw Clint Crawford, the bar’s bouncer, and asked him to take Hobbs outside. Hobbs and Crawford eventually reached the door of the bar. Hobbs then punched Nienke.  Nienke had not touched Hobbs.

Nienke fell backwards and hit his head on the bumper of a car.  Thompson, a bystander, went to help Nienke, saw blood coming from his head and told Crawford to call 911. Hobbs would eventually testify to a different version of the events. Hobbs basically asserted that Nienke grabbed him and got involved in some sort of tussle with him.

When Nienke fell, Hobbs tried to leave the premises but was detained there. Hobbs was arrested. The doctor treating Nienke determined that he had suffered a basilar skull fracture, which would have required significant force to be inflicted. At trial, the doctor testified that “[t]his was a very serious injury. This gentleman faced lifetime debility and death.” Hobbs was promptly charged with aggravated battery under K.S.A. 2011 Supp. 21- 5413(b)(1)(A), which requires that he “[k]nowingly caus[e] great bodily harm to another person or disfigurement of another person.”

At his trial, the jury found Hobbs guilty of aggravated battery. The district judge sentenced Hobbs to a prison term of 43 months.  Hobbs appealed his case, and the Appellate Court ruled against him.  Hobbs argued that there was insufficient evidence to find him guilty of aggravated battery because, in his view, K.S.A. 2011 Supp. 21-5413(b)(1)(A) required that he “knowingly caused the great bodily harm that was suffered.”

The panel rejected his argument, relying on the characterization of aggravated battery as a general intent crime, as opposed to a specific intent crime. As such, the panel ruled, “only the underlying act that caused great bodily harm or disfigurement must be intentional,” and there was “sufficient evidence upon which a jury could find beyond a reasonable doubt that Hobbs intentionally hit Nienke with such force as to cause him great bodily harm.”

Hobbes appealed further, to the Kansas Supreme Court.  He basically argued that aggravated assault should be considered a specific intent crime, rather than a general intent crime.  That is, he argued that a person should intend the results of the assault, not just the act of the assault alone.  He believed that the statute’s reference to “knowingly” applied to both the defendant’s underlying act and its specific resulting harm.

The Supreme Court was not in agreement.  It noted that aggravated assault was a general intent crime, and that

Our adoption of Hobbs’ view would add to the elements the State traditionally has had to prove to convict a defendant for a general intent crime. See Gross v. State, 24 Kan. App. 2d 806, 808, 953 P.2d 689 (1998) (general intent crime requires only that the underlying act be intentional rather than accidental); see also K.S.A. 2011 Supp. 21-7 5202) (culpable mental state may be established by proof of intentional, knowing, reckless conduct); State v. Mitchell, 262 Kan. 434, Syl. ¶ 8, 939 P.2d 879 (1997) (specific intent more than general intent required by K.S.A. 21-3201).

From the trial evidence, believed it was reasonable for a jury to infer that Hobbs acted while knowing that some type of great bodily harm or disfigurement was reasonably certain to result from the punch, even if he did not anticipate Nienke’s precise injury. The evidence against Hobbs was sufficient, the Court found, to uphold his conviction of aggravated battery.  “Knowingly,” as used in K.S.A. 2011 Supp. 21-5413(b)(1)(A), means that the accused acted when he or she was aware that his or her conduct was reasonably certain to cause the result. This does not mean that the accused must forsee the specific harm that resulted. Instead, it is sufficient that he or she acted while knowing that any great bodily harm of the victim was reasonably certain to result from the action.

Using this logic, the Court found no trouble in sustaining Hobbs’s conviction.  The decision makes it clear just how dangerous physical altercations can be.  Serious harm can result from them, and a person can be held responsible for the harm, even if they did not intend the precise outcome of the physical confrontation.

Read More:  Domestic Battery Charges

Copyright Violations Can Be Willful And Malicious Injuries In Adversary Proceedings Under Section 523(a)(6)

Can a bankruptcy debtor’s copyright violation ever rise to the level of a willful and malicious injury, such that it would be excepted from a bankruptcy discharge under 11 U.S.C. §523(a)(6)?  The answer is yes, according to the Bankruptcy Appellate Panel for the 8th Circuit (which includes Missouri).  The case here is In Re Walker, decided in August 2014 by the 8th Circuit B.A.P. (No. 14-6012).

The facts of the case were these.  The debtor (Walker) was a managing member of an establishment called Twister’s Iron Horse Saloon.  Twister’s often played music and hosted musical performances. Some of the music played or performed was included in the repertoire of the American Society of Composers, Authors and Publishers. ASCAP is a professional membership organization of song writers, composers and music publishers.  In accordance with Federal copyright law, ASCAP licenses and promotes the music of its members. It also obtains compensation for the public performances of their works and distributes the royalties based upon on those performances. Several music companies granted ASCAP a nonexclusive right to license public performance rights of their works.

Twister’s did not hold a public performance license. ASCAP became aware of this and promptly contacted the debtor to offer him a license. The debtor did not respond to ASCAP’s offer. ASCAP unsuccessfully attempted to contact the debtor an incredible 44 times: twice in person, 14 times by mail and 28 times by telephone.  None of the mail was returned as undeliverable. The phone calls were made on various days and at various times.  The debtor was often on the Twister’s premises but refused to acknowledge the communications.  An investigator from ASCAP visited Twister’s and noted that unauthorized musical performances were taking place.

ASCAP in 2009 informed the debtor of the violations and offered to settle for a monetary amount. The letter was delivered to Twister’s return receipt requested. The receipt was signed by the debtor and confirmed that delivery was made on September 23, 2009.  The debtor signed for the letter but claimed not to have read it.

In June 2010, the music companies brought an action for copyright infringement against the debtor in the Eastern District of Missouri.  The debtor did not contest the case and lost by default.  A judgment of $41,231 was entered against him.  When the debtor filed a Chapter 7 bankruptcy, the music companies filed an adversary proceeding against him under §523(a)(6), which prevents the discharge of debts incurred through “willful or malicious” injury.  The trial court found that the debtor had willfully failed to obtain an ASCAP license and maliciously disregarded the rights of ASCAP’s members and Federal copyright law. The debtor appealed.

The case is an interesting one, since adversary proceedings under §523(a)(6) are rare.  Proving “malice” and a “willful injury” is not an easy matter.  An intentional tort must be inflicted on some opposing party.  The B.A.P.’s analysis focused on the meaning of the words “willful,” “malicious,” and “injury.”  Under case law in the Eighth Circuit, the terms must be separately analyzed.  Furthermore:

Malice requires more than just reckless behavior by the debtor. Scarborough, 171 F.3d at 641 (citing In re Miera, 926 F.2d at 743). The defendant must have acted with the intent to harm, rather than merely acting intentionally in a way that resulted in harm…

If the debtor was aware of the plaintiff-creditor’s right under law to be free of the invasive conduct of others (conduct of the sort redressed by the law on the underlying tort) and nonetheless proceeded to act to effect the invasion with particular reference to the plaintiff, willfulness is established. If in so doing the debtor intended to bring about a loss in fact that would be detrimental to the plaintiff, whether specific sort of loss the plaintiff actually suffered or not, malice is established. Sells v. Porter (In re Porter), 375 B.R. 822, 828 (B.A.P. 8th Cir. 2007) aff’d, 539 F.3d 889 (8th Cir. 2008) (quoting KYMN, Inc. v. Langeslag (In re Langeslag), 366 B.R. 51, 59 (Bankr. D. Minn 2007)).

The debtor made the rather unconvincing argument that he did not “intentionally” injure the music companies because he was not aware he needed an ASCAP license.  He claimed he was not aware of the violations until suit was filed against him in court.  The court was not persuaded, noting that he had been contacted 44 times, and never responded.  Furthermore, the court found that Walker (the debtor) failed to distinguish between the concepts of injury and harm:

The Supreme Court [has] analyzed willfulness in terms of injury. Injury is the “invasion of any legally protected interest of another.” Restatement (Second) of Torts § 7(1). Under § 523(a)(6), a judgment debt cannot be exempt from discharge unless it is based on an intentional tort, which requires the actor to intend “the consequences of the act rather than the act itself.” Restatement (Second) of Torts § 8A, comment a, at 15; Geiger, 523 U.S. at 61. In effect, Geiger requires that the debtor intend the injury.

The debtor had a duty, the court found, the obtain the required license.  He also signed for a settlement letter from the plaintiffs, but later claimed he had not read it. These types of arguments did little to win the debtor friends among the judges.  The court then turned its attention to the concept of harm:

The Eighth Circuit analyzed maliciousness in terms of harm…Harm is the “existence of loss or detriment in fact of any kind to a person resulting from any case.” Restatement (Second) of Torts § 7(2). In this case, the debtor’s actions were malicious because he intended to harm the appellees. The debtor did not obtain a public performance license yet he continued to play music covered by the license. The district court for the Eastern District of Missouri found the debtor to be in violation of Federal copyright law and entered judgment against him. The Eighth Circuit has held that the bankruptcy court may consider a violation of a statute as evidence of malicious intent. In re Fors, 259 B.R. at 139. And, one court has held that the debtor’s intentional violation of a Federal copyright law was an aggravating feature which evinces a voluntary willingness to inflict injury. Knight Kitchen Music v. Pineau (In re Pineau), 149 B.R. 239 (D. Me. 1993).

The debtor admitted he had a general knowledge of federal copyright law.  When all was said and done, the court plainly could see that the debtor knew he needed to obtain a license, and deliberately avoided doing so because then he would have to pay royalties.  Thus, he intended the financial harm which was the logical consequence of his actions.  Thus, the B.A.P. had no trouble in upholding the ruling of the lower bankruptcy court on making the debt nondischargeable. Presumably, what irked the court most was the repeated and deliberate evasions of the plaintiff creditor’s communications.  At some point, willfulness can be inferred from this sort of extrinsic evidence.

Read More:  Bankruptcy Adversary Proceedings Under Section 523

For A DUI Stop, Police Need “Reasonable Suspicion” Of Criminal Activity

Every now and then, a DUI decision comes along that sums up a very important point of law. One of these decisions came down in January 2015 from the Missouri Court of Appeals for the Western District.

If the police wish to stop a motorist for a suspected DUI, they must have a reasonable suspicion of criminal activity.  Stops based on mere curiosity, or based on pretexts, are not legally valid.  This was the rule that the Missouri Court of Appeals for the Western District recently (2014) reminded the legal community of.  The case was State v. Cardwell (WD76791), on appeal from Cole County, Missouri.  After a bench trial, Mr. Cardwell was convicted of driving while intoxicated under Section 577.010 of RSMo.  On appeal he argued that the trial court should have granted his motion to suppress evidence. The Court of Appeals agreed with Cardwell and reversed the conviction.

Cardwell had filed a motion to suppress evidence during the case.  He argued that, because the officer who stopped him did not have reasonable suspicion or probable cause to do so, all evidence obtained thereafter should be suppressed. His motion was denied, and he was convicted.  When the officer initiated the stop, Cardwell argued, he did not have reasonable suspicion or probable cause to believe that Cardwell’s behavior suggested that he may be involved in illegal activity.  Thus the officer’s stop and seizure of Cardwell was unreasonable, and evidence obtained thereafter should have been suppressed.

The officer testified that when he first stopped Cardwell, he observed Cardwell to have watery, bloodshot eyes, could smell the odor of alcohol from his car, and Cardwell admitted to the officer that he had been drinking.  But the real issue, the Court found, was whether Cardwell should have been stopped in the first place.

The testimony of the police officer was the heart of the case.  The officer testified that on September 16, 2011, he was on his way to assist another officer, at approximately 1:00 in the morning, when he observed a vehicle in front of him traveling “very slow.”  The road was  gravel and “not a very wide road.” He testified that he quickly caught up with the vehicle, which was traveling in front of him and going in the same direction. The officer testified that the vehicle then stopped in the right hand lane and the driver motioned for him to go around and left him room to do so.

The officer said he instead chose to “check on the driver, make sure everything was okay[,]” and so he turned his lights on “so that he would know that it was a deputy behind him and that it wasn’t someone that was possibly a threat to him and also as a warning beacon to anyone else that would come up behind us or a beacon for other deputies should I need help.” At that point, the officer testified that he contacted the driver and had him show his driver’s license. The officer said although Cardwell then told him he was fine, he could smell alcohol coming from inside the vehicle.

The officer said he had not observed the vehicle commit any traffic offense. The officer testified that most people do not drive fifty-five miles per hour on a gravel road, indicating his perspective that driving slower than that was not “unusual conduct which [would] lead[] him reasonably to conclude in light of his experience that criminal activity may be afoot, as required for the existence of reasonable suspicion.

Cardwell was detained when the officer activated his emergency lights. At that moment, the Court noted, a reasonable person would have believed he was not free to leave.  From looking at the entire circumstances, the Court found nothing to indicate that the detention of Cardwell was justified in the first place.  In other words, the officer had no reason to believe that criminal activity was in progress or had occurred. The detention and the arrest never should have occurred.

The Court summed up its position with this brief but succinct expression of the law in this area.  It is worth quoting here:

However, “whether an officer lacked reasonable suspicion ‘turns on an objective assessment of the officer’s actions in light of the facts and circumstances confronting him at the time and not on the officer’s actual state of mind at the time the challenged action was taken.’” Id. (quoting Maryland v. Macon, 472 U.S. 463, 470–71 (1985)) (emphasis added). An objective assessment of the events leading to Sergeant Huffman’s [the officer conducting the stop] stop of Cardwell fails to reveal any specific and articulable facts and rational inferences therefrom that would reasonably warrant the stop. Driving slowly on a rural gravel road in the early morning, coming to a stop when quickly approached from behind by another vehicle, and motioning the approaching vehicle to go around with adequate room to do so does not constitute “unusual conduct” leading reasonably to a conclusion that criminal activity is taking place. There was no indication Cardwell’s vehicle was in any way disabled or that Cardwell was in need of help. In fact, Cardwell waved the officer on.

Taking all of the circumstances into consideration, then, the Court was able to find that the officer never should have stopped Cardwell in the first place.  Why?  He had no reason to.  There was no indication that anything of a criminal nature had happened or would happen. The law is clear on this point, and it is good for law enforcement to be reminded of it.  For this reason, the Court reversed Caldwell’s conviction.

Read More:  The Field Sobriety Test In A DUI Or DWI Case

10th Circuit BAP: Means Test Includes All Income Received During Look-Back Period

A recent decision by the Bankruptcy Appellate Panel for the 10th Circuit (which covers the state of Kansas) dealt with an interesting issue of statutory interpretation.  The case was In Re Miller, (BAP No. WY-14-002), on appeal from a bankruptcy court in Wyoming, and decided in October 2014.  The question in the case involved the calculation of the income figures for the “means test.”  When a bankruptcy case is filed, there is normally a requirement to submit financial data (on Form B22A) showing the average monthly income and expenses in the six months preceding the month of the filing of the case.

The issue was whether a debtor’s wages need to be both earned and received during the applicable six-month “look-back” period in order to be included as part of his “current monthly income” (called “CMI”) under 11 U.S.C. § 101(10A).  In Miller’s case, the Wyoming bankruptcy court concluded that his CMI figures were high enough to disqualify him from proceeding under Chapter 7.  The Trustee felt he should convert his case to Chapter 13.  When this did not happen, the case was dismissed.  Miller then appealed.

The critical issue was the dispute on the interpretation of what should be considered “income.”  The United States Trustee (UST) contested Miller’s CMI calculations, which Miller based on his understanding of the term “current monthly income,” as defined in § 101(10A). That definition includes, “income from all sources that the debtor receives . . . without regard to whether such income is taxable income, derived during the 6-month period.” Miller argued that the “derived during” language means “earned during,” such that his CMI only need include income he both received and earned during the look-back period.  The UST read the definition to include all money received during the six month look-back period, regardless when it was earned.

The bankruptcy court agreed with the UST interpretation, holding that all income received by a debtor in the look-back period must be included in the calculation of CMI “without relation to when that income was earned.” The bankruptcy court dismissed Miller’s case pursuant to § 707(b)(2) when he declined to convert to a Chapter 13 proceeding.

The BAP first noted that the 10th Circuit had not previously ruled on this issue.  The court, applying principles of statutory construction, then proceeded to look at the plain language meanings of the words “derived from.”  While the interpretations of “received” and “derived” were a bit ambiguous, normal meanings should be applied.  After reviewing the accepted definitions for the term “derived,” in the context of the phrase “derived during,” the Court concluded that the phrase “income derived during the look-back period” had the plain meaning “income received during the look-back period.”  In other words, all income received during the look-back period should be included.

The Court found that this interpretation also was in accord with the original purpose of the statute (Sect. 101(10A)), which was to evaluate the debtor’s income level.  The court said “Finally, the doctrine that we should be guided by the underlying public policy of the statute reinforces our interpretation of CMI as requiring inclusion of all income received by a debtor during the look-back period….Although both parties present persuasive arguments on this difficult issue of statutory interpretation, we conclude that the plain meaning of § 101(10A) is that the term ‘current monthly income’ includes all income a debtor receives in the look-back period, regardless when it was earned.”

Readers should note that this ruling is not as harsh as it might appear.  There are times when a debtor receives an atypical amount of money during the means test period, that is not representative of his or her normal “income.” For example, sometimes people cash in retirement plans, receive personal gifts, or income from the sale of an asset.  In these situations, all a debtor has to do is to file a rebuttal of the presumption of abuse, and explain why this atypical amount should not be factored into the CMI calculation.  In the present case, the court might have been influenced by a perception that the debtor was artificially understating his normal salary figures.

Read More:  Confirmation Of A Chapter 13 Plan:  The Effects

Failure To Register As A Sex Offender In Missouri Not A Strict Liability Crime

In Missouri, failing to register as a sex offender is a class C felony, pursuant to RSMo. Sections 589.400 and 589.425.  The Missouri Court of Appeals for the Southern District recently had an opportunity to rule on some important aspects of this offense, and reached an interesting conclusion.  The case was State of Missouri v. William Wilder, No. SD33140, on appeal from Wright County, Missouri.  The decision was reached on January 16, 2015.

The background of the case was relatively simple.  On October 22, 2010, Wilder was charged by information with the class C felony of knowingly failing to register as a sex offender (Count I), in violation of sections 589.400 and 589.425; and the class C felony of sexual assault (Count II), in violation of section 566.040.  As the case proceeded to trial, a joint stipulation was entered between the State and the defense.  The stipulation contained the following information:

1.  Records from the State of California show that the defendant, William Wilder, was arrested by the Los Angeles Police Department on September 17, 1979.

2.  The defendant entered into a final plea on October 4, 1979 to counts 1 and 5 (forcible rape).

3.  The defendant was ultimately sentenced to eight (8) years in prison.

4.  The defendant thereafter was notified by the State of California that he must register as a sex offender.

5.  The Notification of Registration Requirement bears the defendant’s signature and right thumbprint and is dated September 17, 1984.

6.  The defendant’s criminal history record shows the defendant was convicted of “Rape with Force” and he was received at a California Penal Institution on March 2, 1982.

7.  On September 23, 2010, Wright County Missouri Deputy Tiffany Butts (Neill) received a report of sexual assault. The alleged victim, [B.R.], reported that the defendant was helping her move on September 3, 2010 and the defendant forced her to have sex with him. [Victim] reported that the defendant again forced her to have sex on September 11, 2010.

8.  The defendant was arrested in Missouri on the forcible rape charge on September 24, 2010 (21 days after the initial alleged rape within Wright County Missouri) and had never registered in Missouri as a sex offender.

9.  That defendant moved from the State of California to the State of Missouri in 1985, after being released from confinement.

10.  That at the time the defendant moved to the State of Missouri, the State of Missouri did not have any statutory requirement for anyone who was a sex offender to register as a sex offender.

11.  That the State of Missouri did not have any statutory requirement to register as a sex offender until 1997. (See Section 589.400 RSMo)

12.  That the defendant was notified upon his arrest to register as a sex offender in the State of Missouri by registering with the Wright County Sheriff’s Department and the defendant has complied with that request.

13.  That the notification that defendant received to register as a sex offender upon his arrest on September 24, 2010 was the first notification that he had received to register as a sex offender since he moved to Missouri in 1985.

Besides this joint stipulation, no other evidence was submitted to the trial court, and no witnesses testified.  In their briefing to the trial court, the parties admitted that when Wilder moved to Missouri in 1985, there was no federal requirement for registration by sex offenders.  After the submission of trial briefs, the court in 2013 entered its “Order,” with findings of fact and conclusions of law, finding Wilder “guilty of the Class C felony of Failing to Register as a Sex Offender, [pursuant] to RSMo. Section 589.425, beyond a reasonable doubt.”  The court sentenced Wilder to prison, but suspended the sentence and put him on probation.

Wilder appealed his case, claiming that the trial court erred in that there was insufficient evidence for the trial court to find that Wilder knowingly failed to register as a sex offender in Missouri under RSMo. Section 589.425.  The appellate court agreed, finding that the critical element that had not been proven was the “knowingly” element.

The court found that a critical element of the “failure to register” statute is the “knowingly” element.  In other words, the State should have proven that the defendant knowingly or deliberately failed to register, after being aware that he had to do so.  A person cannot violate the statute by being negligent, careless, or reckless.

Section 589.425 provides: “A person commits the crime of failing to register as a sex offender when the person is required to register under sections 589.400 to 589.425 and fails to comply with any requirement of sections 589.400 to 589.425.” The State had the burden to show that Wilder knowingly failed to comply with the registration requirement of section 589.400 to 589.425.  This is consistent with the findings of State v. Jacobs, 421 S.W.3d 507, 513 (Mo.App. S.D. 2013) (en banc) and State v. Younger, 386 S.W.3d 848, 853 (Mo.App. W.D. 2012).

The appellate court had to conclude that no evidence was presented that Wilder knowingly failed to register.  Instead, the State claimed that “failing to register” should be seen as a “strict liability” crime; that is, no mental state should need to be proven.  In the State’s view, if you fail to register, you are guilty, period.  The appellate court rejected this view.  It clearly and unequivocally held that the State must prove that a person “knowingly” failed to register.  This clearly shows that the State must first demonstrate that a person knew he had to register, and then deliberately failed to do so.  And this it could not do.  You can’t be guilty of “failing to register” if you didn’t know you were supposed to register.  

In today’s mobile society, this places the burden on the State of actually informing people of their duty to register before trying to prosecute them.  Seen in this light, the Wilder decision is consistent with due process and fundamental fairness.

Read More:  Computer Crimes And Cyber Crimes