Opinion
Case No. 13-15024 Adversary Case No. 14-1013
07-25-2014
In Re TIFFIANY M. WILSON Debtor ERIC D. BENDER, ADMINISTRATOR OF THE ESTATE OF AL-SHAKIEL FORD Plaintiff v. TIFFIANY M. WILSON Defendant
Chapter 7
ORDER PARTIALLY GRANTING MOTION TO DISMISS
This is an action to determine the dischargeability of a debt pursuant to 11 U.S.C. § 523(a)(2)(A) and (4). Presently before the Court is a motion to dismiss ("Motion")(Doc. 5) pursuant to Fed. R. Civ. P. 12(b)(6).
RULE 12(B)(6)
A claim must be plausible to avoid dismissal under Rule 12(b)(6). Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible if the complaint includes factual allegations that support a reasonable inference of liability. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint must contain direct or inferential allegations of all elements of the claim. D'Ambrosio v. Marino, 747 F.3d 378, 383 (6th Cir. 2014). If so, the claim is plausible "even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely." Twombly, 550 U.S. at 556.
When weighing plausibility, the complaint is construed in favor of the plaintiff, all well-plead allegations are accepted as true, and all reasonable inferences are drawn in favor of the plaintiff. Lutz v. Chesapeake Appalachia, L.L.C., 717 F.3d 459, 464 (6th Cir. 2013).
PLAINTIFF'S CLAIMS
The Plaintiff, Eric D. Bender, administrator of the estate of Al-Shakiel Ford ("Bender"), contests the dischargeability of a $17,682 judgment he obtained against the Defendant, Tiffiany M. Wilson ("Wilson"), in the Hamilton County probate court. The judgment found Wilson guilty of concealing assets of the probate estate.
Bender contends that the judgment is nondischargeable under § 523(a)(2)(A) and (4). Therefore, the Court must review the elements of these claims and determine whether Bender's complaint contains direct or inferential allegations of the same.
SECTION 523(A)(4)
A creditor may prevail under § 523(a)(4) by proof of any one of the following: (1) fraud or defalcation in a fiduciary capacity; (2) embezzlement; or (3) larceny. The elements of these claims are set forth below.
A. Fraud or Defalcation in a Fiduciary Capacity
The discharge exception for fraud or defalcation in a fiduciary capacity protects trust beneficiaries when their trustee files bankruptcy. In re Patel, 565 F.3d 963, 967 (6th Cir. 2009). However, the exception does not apply to constructive trusts. Id. at 968. It only applies to express or technical trusts. Id.
To establish the existence of an express trust, a creditor must demonstrate: (1) an intent to create a trust; (2) a trustee; (3) a trust res; and (4) a definite beneficiary. Id. A technical trust is a trust that arises by statute or common law. Jennings v. Bodrick (In re Bodrick), 509 B.R. 843, 858 (Bankr. S.D. Ohio 2014).
B. Embezzlement
"A creditor proves embezzlement by showing that he entrusted his property to the debtor, the debtor appropriated the property for a use other than that for which it was entrusted, and the circumstances indicate fraud." Brady v. McAllister (In re Brady), 101 F.3d 1165, 1173 (6th Cir. 1996); see also Cash America Fin. Servs., Inc. v. Fox (In re Fox), 370 B.R. 104, 116 (B.A.P. 6th Cir. 2007).
C. Larceny
Larceny is "the fraudulent and wrongful taking and carrying away of the property of another with intent to convert such property to the taker's use without the consent of the owner." Humility of Mary Health Partners v. Garritano (In re Garritano), 427 B.R. 602, 612 (Bankr. N.D. Ohio 2009).
The primary distinction between larceny and embezzlement is whether the original acquisition of the property was lawful. First Assembly of God v. Ping (In re Ping), 506 B.R. 486, 495 (Bankr. S.D. Ohio 2014).
BENDER'S COMPLAINT
Attached to Bender's complaint is a copy of a magistrate's decision from the probate action. The decision provides: (1) following a motorcycle accident, Al-Shakiel Ford ("Ford") was hospitalized in a medically induced coma for the final three weeks of his life; (2) Wilson was Ford's fiancee; (3) upon admission to the hospital, the hospital staff placed Ford's wallet and cash in the hospital safe; (4) Wilson claimed the cash from the hospital; (5) Ford's relatives observed Wilson remove some of Ford's jewelry from his hospital room; (6) three days after Ford's hospitalization, two vehicles controlled by Ford were gifted to Wilson by forged signature; and (7) the magistrate found Wilson guilty of concealing, conveying, and being in possession of jewelry, cash, and two vehicles belonging to Ford. Also attached to Bender's complaint is a judgment of the Hamilton County probate judge, adopting the magistrate's decision and entering judgment against Wilson in the amount of $17,682.
The vehicles were owned by a limited liability company, of which Ford was the sole member. The probate court treated the vehicles as the property of Ford's estate.
DOES THE COMPLAINT STATE A PLAUSIBLE CLAIM UNDER 523(A)(4)?
A. Fraud or Defalcation in a Fiduciary Capacity
The complaint does not allege the existence of an express trust. For example, it does not allege that Ford intended to create a trust. Nor does it suggest that a statute gave rise to a technical trust.
Bender argues that a technical trust arose by common law. Under Ohio law, an agreement to marry gives rise to a confidential relationship between the parties. Juhasz v. Juhasz, 16 N.E.2d 328, 331 (Ohio 1938). Because Wilson was Ford's fiancee, Bender argues that Juhasz created a technical trust between the parties. The Court disagrees. Juhasz addressed the validity of an antenuptial agreement. It makes no reference to the imposition of a trust, by common law or otherwise. Accordingly, the complaint does not state a claim for fraud or defalcation in a fiduciary capacity.
B. Embezzlement and Larceny
The magistrate's decision finds Wilson guilty of concealing and conveying property belonging to Ford. This alleged finding is sufficient to support a claim for embezzlement or larceny. If Wilson's original acquisition of the property was lawful, a claim for embezzlement is warranted, otherwise, a claim for larceny is supported. See Stentz v. Stentz (In re Stentz), 197 B.R. 966, 986 (Bankr. D. Neb. 1996)(Debtor's depletion of probate assets supported claim for either embezzlement or larceny, where debtor had no right to the assets and the only question was whether the debtor's original acquisition of the property was lawful).
According to Wilson, the complaint fails to state claims for embezzlement and larceny because it does not allege any intent to commit a fraud. The element of fraud required to support an embezzlement claim is satisfied by a showing of deceit. Ping, 506 B.R. at 495. Bender's complaint includes factual allegations that support a reasonable inference of deceit. It is not unreasonable to infer that a person who conceals and conveys the property of someone in the condition of Ford may have acted with deceit.
The Court is unaware of any controlling authority requiring proof of fraud to support a larceny claim under § 523(a)(4). In support of her position, Wilson cites an unpublished decision from the Northern District of Ohio. Contrary to LBR 9013-2(b), she did not attach a copy of the unpublished decision to her brief. Even if larceny requires the same showing of fraud as embezzlement, as argued by Wilson, the complaint contains a reasonable inference of deceit.
Wilson tries to draw a distinction between concealment and misappropriation, suggesting that the former does not give rise to liability under § 523(a)(4). Motion at 9. Wilson then claims that the probate court never made a finding of misappropriation, just concealment. Wilson is mistaken. The magistrate's decision references "the assets which have been misappropriated" by Wilson. See Doc. 1; Ex. 2 at 8.
--------
SECTION 523(A)(2)(A)
A creditor may prevail under § 523(a)(2)(A) by proof of any one of the following: (1) false representation; (2) false pretenses; or (3) actual fraud. The elements of these claims are set forth below.
A. False Representation
A false representation is established if: (1) the debtor obtained money through a material misrepresentation that, at the time, the debtor knew was false or made with gross recklessness as to its truth; (2) the debtor intended to deceive the creditor; (3) the creditor justifiably relied on the false representation; and (4) its reliance was the proximate cause of loss. In re Rembert, 141 F.3d 277, 280-81 (6th Cir. 1998).
B. False Pretenses and Actual Fraud
Like a false representation, both false pretenses and actual fraud require: (1) intent to deceive; (2) justifiable reliance; and (3) proximate causation. See CNA Fin. Corp. v. Flood (In re Flood), 498 B.R. 806, 811 (Bankr. S.D. Ohio 2013). The difference lies in the conduct upon which the creditor relied. Bodrick, 509 B.R. at 855. False pretenses involves an implied representation intended to create a false impression. Id. Actual fraud is broader. Id. It includes "any deceit, artifice, trick, or design involving direct and active operation of the mind, used to circumvent and cheat another." In re Vitanovich, 259 B.R. 873, 877 (B.A.P. 6th Cir. 2001).
DOES THE COMPLAINT CONTAIN A DIRECT
OR I NFERENTIAL A LLEGATION OF AN I NTENT TO D ECEIVE ?
Wilson's sole argument under § 523(a)(2)(A) is that the complaint fails to allege an intent to deceive. The Court disagrees.
Intent to deceive may be inferred from the totality of the circumstances. Liberty Savs. Bank v. McClintic (In re McClintic), 383 B.R. 689, 693 (Bankr. S.D. Ohio 2008). The question is whether the circumstances "present a picture of deceptive conduct." Id.
The complaint includes allegations that support a reasonable inference of deceptive conduct. The magistrate found that two vehicles controlled by Ford were gifted to Wilson by forged signature, three days after Ford's hospitalization, while Ford was comatose. Construing all inferences in favor of Bender, it is not unreasonable to infer that Wilson may have forged Ford's signature. This presents a picture of deceptive conduct. Consequently, the complaint sufficiently alleges an intent to deceive.
CONCLUSION
For the foregoing reasons: (1) the Motion is GRANTED to the extent that the claim for fraud or defalcation in a fiduciary capacity is DISMISSED; and (2) the Motion is DENIED with respect to all other claims.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: July 25, 2014
/s/_________
Jeffery P. Hopkins
United States Bankruptcy Judge
Copies to: Eric D. Bender
edb@fuse.net
Brian D. Flick
bflick@mmfllaw.com