Bankr. EDNC: John Deere Construction v. Keeter- Conversion of Collateral as "Willful and Malicious Injury"

Summary: The Debtor was a personal guarantor of 10 contracts between John Deere and his corporation, PEP, for the purchase of construction equipment.   Prior to filing bankruptcy, the Debtor sold 5 of the pieces of equipment to third parties, without the consent of John Deere. John Deere then instituted an action pursuant to 11 U.S.C. § 523(a)(6) to except from discharge this debt, asserting that it arose from a "willful and malicious injury by the debtor to another entity or to the property of another entity."  Following In re Buck, 406 B.R. 703 (Bankr. E.D.N.C. 2009), John Deere  contended that the conversion of collateral constituted such a "willful and malicious injury." The Court, however, found that the contracts for only 3 of the 5 pieces of converted equipment expressly prohibited sale of the property, with the remaining 2 contracts instead defining sale of such equipment only as an "event of default."  Accordingly, the Court granted Summary Judgment as to the 3 contracts that forbade sale of the collateral, but denied it for the other two. John Deere Construction v. Keeter- Conversion of Collateral as “Willful and Malicious Injury”.PDF