FOR THE NORTHERN DISTRICT OF CALIFORNIA
GUITY DEYHIMY, No. 91-11031
WILLIAM G. PRIEST,
v. A.P. No. 93-1009
Memorandum of Decision
Plaintiff William Priest and defendant Guity Deyhimy are both attorneys. In this adversary
proceeding, Priest seeks to establish a nondischargeable claim against Deyhimy for malicious
prosecution arising out of a lawsuit she filed against Priest on behalf of her client in 1986.
Deyhimy's complaint against Priest was based on a theory which was somewhat novel at the
time. Her client was a guarantor on a loan made to Priest's client. She in essence alleged that
Priest had conducted the defense of his client negligently, resulting in damage to her client. She
also alleged that Priest and his client had conspired to stick her client with the ultimate loss on
the defaulted loan, and that Priest had destroyed evidence which would have aided her client.
Deyhimy had very little facts upon which to base her complaint against Priest. It was
primarily based on the answer which Priest had signed and verified on behalf oh his client in
the initial action against Priest's client. The answer alleged viable defenses. Deyhimy
concluded that since the evidence to support those defenses no longer existed when her client
was being sued, Priest must have destroyed it. Deyhimy also based her decision to sue on
Priest's uncooperative attitude, which convinced her that he was hiding something.
The state trial court sustained Priest's demurrer to the complaint. Deyhimy appealed, but
while the appeal was pending it was abandoned by Dehimy's client and dismissed. Thus, Priest
prevailed in the action.
Priest filed a complaint for malicious prosecution against Deyhimy in state court in 1988.
On September 6, 1990, the state court granted summary judgment in favor of Deyhimy. Priest
Deyhimy filed her Chapter 7 petition on May 13, 1991, while the appeal was pending. She
failed schedule Priest as a creditor or notify him of the bankruptcy until the appellate court
reversed the summary judgment in her favor. At that time, the bankruptcy had been closed as
a no-asset case.
On December 11, 1992, the Honorable Robert Eisen granted Deyhimy's motion to reopen
the case for the purpose of determining the dischargeability of Priest's claim. He reserved the
issue of any expenses to be awarded to Priest as a result of Deyhimy's failure to timley notify
him to be heard in conjunction with the dischargeability action.
II. Failure to Notify
It was gross negligence on Deyhimy's part to fail to list Priest as a creditor. Since the
judgment of the state court was not final, Priest should have been listed as a disputed creditor.
Since he never learned of the bankruptcy in time to file an action under section 523(a)(6) of the
Bankruptcy Code, his claim is nondischargeable under section 523(a)(3)(B) if the court finds
that he had a valid claim under section 523(a)(6). See In re Lochrie
, 78 B.R. 257 (9th Cir.BAP
Priest seeks reimbursement for $16,000.00 in attorneys' fees and litigation expenses incurred
in prosecuting his appeal without knowledge of Deyhimy's bankruptcy. However, the court is
almost certain that if Priest had been informed of the bankruptcy and filed a timely
dischargeability action, the court would have directed the appeal to go forward and delayed trial
until the appellate court ruled; the appeal was already pending, and affirmance would have
mooted the need for a trial. Thus, Priest would have incurred most or all of the $16,000.00 in
Nonetheless, Priest did suffer some inconvenience and expense as a result of Deyhimy's
negligent failure to schedule him. The court resolves any doubt on this issue in favor of Priest,
since he was entirely blameless and Deyhimy falsely represented that she had listed all her
creditors. To compensate Priest, as well as to sanction Deyhimy, the court will award Priest
III. Malicious Prosecution
At the trial, one fact was clear and undisputed: however poor her judgment may have been,
Deyhimy was motivated solely by a desire to do her best for her client. There was not the
slightest hint of an improper motive on her part. She had fully researched the law and
determined that her action was justified by either the law as it was then or a good faith
argument for the extension of the law.
Deyhimy has been a defendant in malicious prosecution proceedings for the past five years
because of poor judgment. At the time she sued Priest, her legal theories were somewhat novel.
Where the law is questionable, it is unwise to bring a suit unless the facts are clear. Factually,
Deyhimy had little to go on except suspicions and questionable conclusions drawn from the
answer Priest had verified. Thus, she filed a lawsuit which was very weak from both a legal
and a factual standpoint. Most lawyers would not have brought the suit under these
Nonetheless, debts arising out of negligence are dischargeable. Under both state law and
federal bankruptcy law, malice must be found before the intentional tort of malicious
prosecution is established. Sheldon Appel Co. v. Albert & Oliker
, 47 Cal.3d 863, 874 (1989);
In re Braen
, 94 B.R. 35, 41 (D.N.J.1988). While the finder of fact may
infer malice from lack
of probable cause, it is not bound to do so; malicious prosecution is more than filing a suit a
reasonable attorney would not have filed.
In this case, the court finds that Deyhimy used poor judgment in bringing the action against
Priest, in that a reasonable attorney would not have brought the action. However, there is
absolutely no evidence justifying a finding of actual malice. Deyhimy had only the best
motive, the zealous representation of her client. Deyhimy represented an elderly Chinese man
whom she believed had been manipulated into guaranteeing an obligation and had suffered
serious financial loss as a result. That Deyhimey was willing to represent him to the best of her
abilities is to her credit, as is the fact that she had the courage to urge a new or expanded
interpretation of the law. Lacking the wisdom to temper her zeal, she filed suit against Priest.
Because this action was in a just cause, it was not malicious and does not give rise to a
For the foregoing reasons, Priest shall have judgment against Deyhimy in the amount of
$2,000.00 due to her failure to promptly notify him of the filing of her bankruptcy and schedule
him as a creditor. Priest shall take nothing on his malicious prosecution claim because the court
finds no malice. Each side shall bear his or her own costs.
This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a)
and FRBP 7052.
Dated: May 23, 1993 _______________________