Opinion
NOT FOR PUBLICATION
Submitted Without Oral Argument, August 29, 2005
Appeal from the United States Bankruptcy Court for the Western District of Washington. Honorable Thomas T. Glover, Bankruptcy Judge, Presiding. Bk. No. 04-15567. Adv. No. 04-01374.
Before: SMITH, JURY[ AND MARLAR, Bankruptcy Judges.
Hon. Meredith A. Jury, United States Bankruptcy Judge for the Central District of California, sitting by designation.
MEMORANDUM
The court dismissed Luc Martini's adversary action against Sherry Wyman (" Debtor") following the presentation of his casein-chief at trial on the grounds that he failed to establish a nondischargeable claim or a basis for the denial of discharge. We AFFIRM.
FACTS
Debtor rented a mobile home from Martini from 1998 to 2003. At some point Debtor stopped paying rent and, in October 2001, Martini served on her a Notice to Pay Rent or Quit Premises. The following month, the parties met to work out a payment plan regarding Debtor's delinquent rent. At the meeting, Martini drafted a promissory note which indicated both the amount Debtor owed in back rent and the personal property that Debtor was to provide as collateral for the unpaid rent, to wit, a camper, a boat, and a truck. Debtor never signed the promissory note. Instead, she countered with her own document entitled " An Agreement of Contract, " which stated
I SHERRY WYMAN OWE IN THE AMOUNT OF $3900.00 TO LUC MARTINI IN BACK RENT AT THE SAID ADDRESS. THIS AMOUNT IS BEING REDUCED UPON DELIVERY OF AGREED COLLATERAL TO $2700.00.
REPAYMENT OF SAID AMOUNT WILL START ON 01-01-02 IN THE AMOUNT OF $112.50 PER MONTH, FOR 24 MONTHS WITH NO INTEREST OR PENALTY EXCEPTING DEFAULT.
The document was signed by Debtor and included a handwritten notation:
P.S. Luc, due to financial " hardship" I am unable to furnish Oct/Nov 2001 rent until I find work. Things are " very" tough out there right now and am working very hard to land a desent [sic] job to cover said expenses.
According to Martini, days later, Debtor gave him a list of collateral securing the back rent she owed. The document was dated October 23, 2001 and signed by Debtor. It stated
To: Luke Martini
This is a record of personal property I, Sherry Wyman am using for collateral for repayment of back rent owed for 2001 In agreement with paperwork received on 10-10-01.
1: Snof. 1965 Camper model 11 CBR plate # 38022F
2: 1995 Starcraft 12' aluminum boat & Caulkins trailer plate #6227MJ.
Notably, the collateral offered by Debtor did not include the truck, the item of property Martini considered the most valuable of Debtor's possessions.
According to Martini's own testimony, the parties never reached an agreement with respect to repayment of his debt. He testified that he met with Debtor to hash out an agreement for payment of rent and arrears but that Debtor " almost immediately altered [the agreement] - you, know, she never signed the agreement." When Debtor later presented him with " something else which was more-or-less an agreement on terms she had invented, " Martini did not accept it. Martini testified that he allowed Debtor to continue living in the rental property because he felt secure once Debtor gave him some collateral.
In August 2002, the Washington State Department of Transportation (the " State") notified Debtor that the property would be subject to a condemnation action in the spring of 2003. In early March 2003, the State, Martini, and Debtor executed a stipulated order providing for the payment of $66,000 by the State for the immediate possession and use of the property. Under applicable federal and state law, Debtor was entitled to receive approximately $23,000 in relocation benefits. In this regard, she received $11,207 in March 2003 (most of which was paid to her new landlord), and $12,145 in October, 2003 (which was paid directly to her).
Martini claims that at the time she moved out in March 2003, Debtor owed him $5,037 in rent arrearages. He also charges that, in the course of her tenancy, Debtor's failure to maintain the property caused its value to diminish by $5,000. Finally, Martini accuses Debtor of having damaged the property in the amount of $30,000 by driving her truck across an area covering a septic tank.
In April 2004, Debtor filed a chapter 7 voluntary petition and in August, Martini filed this adversary proceeding, claiming that his debt was nondischargeable under § § 523(a)(2) and 523(a)(6), and that Debtor should be denied a discharge pursuant to § § 727(a)(2) and 727(a)(4).
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036.
Trial was held in January 2005. At the conclusion of Martini's case, the court dismissed the action in its entirety, sua sponte, finding that Martini had not met his burden of proof on any of the requirements for a determination of nondischargeability or denial of discharge. Martini appealed.
At trial, Martini was represented by counsel; on appeal, Debtor appeared pro se.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § 1334 and § 157(b) (1) and (b) (2) (I). This Panel has jurisdiction under 28 U.S.C. § 158(c).
ISSUE
Whether the court erred in determining that Martini had failed to establish a basis for excepting his debt from discharge under § § 523(a)(2) and 523(a)(6) or for denying Debtor's discharge under § § 727(a)(2) and 727(a)(4).
STANDARDS OF REVIEW
We review de novo whether a particular type of debt is nondischargeable under § 523(a). In re Tsurukawa, 258 B.R. 192, 195 (9th Cir. BAP 2001). Whether a debtor transferred property with intent to defraud a creditor is a finding of fact which we review under the clearly erroneous standard. Losner v. Union Bank, 374 F.2d 111, 112 (9th Cir. 1967) (per curiam); Citibank (S.D.), N.A. v. Eashai (In re Eashai), 87 F.3d 1082 (9th Cir. 1996). Review under the clearly erroneous standard is significantly deferential and requires that an appellate court accept the court's findings of fact unless it is left with the definite and firm conviction that a mistake has been committed. Comm. for Idaho's High Desert, Inc. v. Yost, 92 F.3d 814, 819 (9th Cir. 1996). " If the district court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently." Phoenix Eng'g and Supply, Inc. v. Universal Electric Co., 104 F.3d 1137, 1141 (9th Cir. 1997), quoting Anderson v. Bessemer City, 470 U.S. 564, 573-74, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). Where there are two permissible views of the evidence, the fact finder's choice between them cannot be clearly erroneous. Duckett v. Godinez, 109 F.3d 533, 535 (9th Cir. 1997).
Denial of discharge under § 727 is reviewed de novo. In re Searles, 317 B.R. 368, 373 (9th Cir. BAP 2004)(citing In re Bammer, 131 F.3d 788, 792 (9th Cir. 1997).
DISCUSSION
Martini's complaint alleges exceptions to discharge under § § 523(a)(2) and 523(a)(6) and objects to Debtor's discharge under § § 727(a)(2) and 727(a)(4).
Under § 523(a)(2)(A), a debt is nondischargeable if it was for money or property obtained by " false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's . . . financial condition." McCrary v. Barrack (In re Barrack), 217 B.R. 598, 605 (9th Cir. BAP 1998). Section 523(a)(2)(B) excludes from discharge a debt for money or property obtained through the use of a false written statement regarding the debtor's financial condition. Where a debtor's statement does not purport to set forth the debtor's net worth or overall financial condition, the analysis must revolve around § 523(a)(2)(A) rather than § 523(a)(2)(B) . Kirsh, 973 F.2d at 1457.
The creditor must show that (1) the debtor made the misrepresentation; (2) the debtor knew the representation was false at the time made; (3) the debtor made the representation with the intention and purpose of deceiving the creditor; (4) the creditor relied on the representation; and, (5) the creditor sustained damages as a proximate result. In re Kirsh, 973 F.2d 1454, 1457 (9th Cir. 1992).
As Martini does not allege that Debtor obtained a financial benefit from him on the basis of a false written statement concerning her financial condition, § 523(a)(2)(B) is not implicated.
Section 523(a)(6) excepts from discharge any debt resulting from " willful and malicious injury" by a debtor to another entity or the property belonging to another entity. Carrillo v. Su (In Re Su), 290 F.3d 1140, 1142 (9th Cir. 2002). The willful injury requirement is met only when the debtor has a subjective motive to inflict injury or when the debtor believes that injury is substantially certain to result from her own conduct. Id. " [D]ebts arising from recklessly or negligently inflicted injuries do not fall within the compass of § 523 (a)(6)." Kawaauhau v. Geiger, 523 U.S. 57, 64, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998).
A. Martini's debt is not excepted from discharge under § 523(a)(2) or § 523(a)(6).
At trial, the court denied Martini's attempt to except his debt from discharge under § § 523(a)(2) and 523(a)(6), holding that Martini had not identified any actionable misrepresentations by Debtor and that Debtor's failure to maintain the rental property did not rise to the level of the willful and malicious conduct required under § 523(a)(6).
The precise misrepresentation Martini believes Debtor made to him is not entirely clear from record presented. In his brief, Martini states that " a contract between the parties existed, evidenced by Quid-Pro-Quo" but the existence of a contract is not supported by the record. It is unclear what contract he is referencing.
Though Martini raises a number of arguments regarding Debtor's alleged misconduct, his primary complaint seems to revolve around representations concerning the " collateral." The court did not find Martini's testimony credible, in part, because the purported " collateral" had little to no value. In this regard, the court stated
In his appeal, Martini makes a number of other charges against Debtor which are not supported by argument or legal authority. These charges include, that Debtor's removal of the collateral constituted grand larceny, that her failure to list these assets on her schedules constitutes a fraud upon the court, that she committed perjury by testifying that she was homeless because she gave an address in her schedules, and that she tampered with evidence. We do not address these charges because issues raised in a brief but not supported by argument are deemed abandoned absent manifest injustice. Humble v. Boeing Co., 305 F.3d 1004, 1012 (9th Cir. 2002).
As far as the collateral is concerned, by the plaintiff's own admission, there was never a deal because she refused to sign the agreement and submitted her own, which wasn't satisfactory. There is no deal with respect to the providing of collateral. And again, the collateral is insignificant.
There might be a little value in that - it looks like a river fishing boat, but the camper is what? A 1965? At least that's what she puts on the data. Or am I misreading it? I mean that's an old junker. Any kind of camper that has been left out in the weather out there isn't worth anything. It's not worth anything with a truck to put it on anyway. And she specifically wasn't going to give the truck. Well, how can that be a false representation if there was never a deal made?
Transcript of Proceeding, January 3, 2005, pp. 60-61.
We find no error with the court's findings. Martini has not shown that his debt should be excepted from discharge under § 523 (a)(2)(A) because he has not met even the first element required, i.e., that Debtor made a misrepresentation. Though he seems to argue that she misrepresented the value of the collateral she was offering, and that he relied on her representation that " the surety she offered was worth the debt owed, " Martini offered no evidence of his own to refute her valuation. Instead, Martini argues that " [t]he issue of their actual value is moot under the principle that 'But For' the removal and transfer, the greater portion of this debt . . . would not exist; and 'But For' her Unlawful Detainer' no claim would exist." We disagree. If Martini's claim is that Debtor misrepresented the value of the collateral to him, the issue is not " moot" and he cannot prevail on the claim without demonstrating the falsity of Debtor's alleged statement.
Next, Martini appears to argue that Debtor misrepresented that she delivered the collateral to him by virtue of the fact that she took the property with her when she moved out in March 2003. This argument is difficult to follow, but ultimately fails under the weight of one clear truth: there was no underlying agreement to which a security interest could attach. Stated otherwise, Debtor could not, as the court correctly noted, make a representation about something (the " collateral") intended to support a debt that never existed.
In sum, Martini has not shown that Debtor made a misrepresentation that she knew to be false, with the intention and purpose of deceiving him, upon which he relied and that he sustained damages as a proximate result thereof. Kirsh, 973 F.2d at 1457. In short, Martini has not satisfied any of the elements of a § 523(a)(2)(A) claim.
The thrust of Martini's § 523(a)(6) claim is that Debtor willfully and maliciously damaged his property by driving or parking her vehicle over a buried septic tank, for the purpose of stealing an appurtenance of the property (an aviary). Debtor claims that Martini's septic tank allegations are without merit because his proof (photos of tire tracks which he alleges were made by Debtor's truck) is inadequate and unauthenticated, and also because he no longer owned the property on the date he claims Debtor did the damage. Debtor also argues that what she removed was fencing that was her own personal property, and that all of these charges constitute proof that Martini has persistently violated the relief from stay order by harassing her in an attempt to enforce a non-existent contract he believes he has with her.
Section 523(a)(6) essentially precludes a debtor from obtaining a discharge of a debt based on " tortious conduct that gives rise to willful and malicious injury." In re Jercich, 238 F.3d 1202, 1206 (9th Cir. 2001). Here, the bankruptcy court found that while Debtor may not have been diligent in maintaining the rental property, Martini did not demonstrate that any of her actions were done willfully and maliciously, as required under the statute. We agree.
Though Martini's legal argument is difficult to follow, to the extent he is claiming that Debtor committed trespass or theft, or any other tortious conduct, he has failed to present evidence sufficient to support such claims. We find no error with the court's ruling in this regard.
We are likewise not convinced by any of Martini's arguments that the court erred in not admitting certain exhibits which, Martini claims, would tend to support his claim of Wyman's willful and malicious conduct. None of the evidence Martini sought to introduce appears to be relevant to or probative of Wyman's intent. At best, the exhibits referenced, so far as we can discern, would have indicated what degree of damage, if any, Wyman inflicted on Martini's property, not whether the alleged damage was done willfully and maliciously.
B. Martini's objection to discharge under § 727(a) was properly dismissed.
Martini objects to Debtor's discharge under § 727(a)(2), which denies a discharge to one who, with intent to hinder, delay or defraud a creditor transfers property of the estate, and, under § 727(a)(4), which denies a discharge to one who knowingly or fraudulently made a false oath or account. Baker v. Mereshian (In re Mereshian), 200 B.R. 342, 345-46 (9th Cir. BAP 1996).
Section 727 is construed liberally in favor of debtors and strictly against a creditor. In re Adeeb, 787 F.2d 1339, 1342 (9th Cir. 1986). " Two elements comprise an objection to discharge under § 727(a)(2)(A): 1) a disposition of property, such as transfer or concealment, and 2) a subjective intent on the debtor's part to hinder, delay or defraud a creditor. . ." In re Beauchamp, 236 B.R. 727, 732 (9th Cir. BAP 1999), quoting In re Lawson, 122 F.3d 1237, 1240 (9th Cir. 1997).
To deny Debtor a discharge under § 727(a)(4)(A), Martini must show that (1) Debtor knowingly and fraudulently made a false oath; and (2) the false oath related to a material fact. In re Aubrey, 111 B.R. 268, 274 (9th Cir. BAP 1990); In re Ford, 159 B.R. 590 (Bankr. D. Or. 1993). A false oath may involve a false statement or omission in Debtor's schedules. In re Beaubouef, 966 F.2d 174, 178 (5th Cir. 1992). The purpose of § 727(a)(4)(A) is to insure that a debtor provides accurate information so that trustees and creditors do not have to conduct costly investigations. Wills, 243 B.R. at 65, citing Aubrey, 111 B.R. at 274. " The entire thrust of an objection to discharge because of a false oath or account is to prevent knowing fraud or perjury in the bankruptcy case. As a result, the objection should not apply to minor errors or deviations in testimony under oath." 243 B.R. at 65, quoting William L. Norton, Jr., Norton Bankruptcy Law and Practice 2d § 74.11 (1997). Before Debtor can be denied a general discharge under either of these sections, Martini must show Debtor's actual intent to defraud. In re Mereshian, 200 B.R. at 345.
Martini claims that Debtor's intent is evidenced by her failure to produce documents and other information as required under § 727(a)(2) and (4). Specifically, Martini claims that Debtor misrepresented her income on her schedules, falsely stated that she was " homeless" when she was, in fact, staying with a relative, failed to explain what became of the assets she had allegedly pledged to him as collateral, and did not adequately account for what became of the relocation funds she received from the Washington State DOT. Debtor, on the other hand, testified that she gave the boat and camper away to family members and that the relocation funds were used for living expenses. Debtor also testified that the relocation benefits were spent more than 90 days before she filed her petition so, in her opinion, the issue of the funds was irrelevant. Debtor further stated that she was staying temporarily with relatives at the time she filed her petition.
The court determined that Debtor had not acted with the requisite intent and that any false statements and omissions contained in her petition were immaterial, stating
As far as her bankruptcy is concerned, at least in this case, the complaints are - well, concerning her address. Well, she doesn't have a place to live. She's living around with various people. You know, that is - that's the truth. Maybe she isn't supposed to live with her sister; but, you know, you've got to live someplace. . . .
Transcript of Proceedings, January 3, 2005, p. 61-62.
With respect to the relocation funds Debtor received, one half was paid directly to her new landlord, and the court found that it was not unreasonable for Debtor to spend the remainder, roughly $1,000 a month, for living expenses over the course of a year. The court also found that it would have been unreasonable to deny Debtor a discharge because she did not keep records or receipts accounting for funds spent on living expenses.
We agree with the court's conclusion that Martini has not shown that Debtor acted with the fraudulent intent required for denial of her discharge. In addition, in determining that Debtor had no fraudulent intent, the court appropriately looked at the low value of the assets Debtor transferred to her family members - the boat and camper - as one factor to be considered. Mereshian, 200 B.R. at 346, citing 4 Collier on Bankruptcy ¶ 727.02[3] at 727-16-17 (15th ed. 1986)(" The fact that valuable property has been gratuitously transferred raises a presumption that such transfer was accompanied by the actual fraudulent intent necessary to bar a discharge under section 727(a)(2). The fact that the property transferred or concealed is of small value, however, tends to negate fraudulent intent.")
CONCLUSION
Based on the foregoing, we AFFIRM.