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holding that "[r]epeated misrepresentations of employment status when applying for benefits are sufficient to prove fraudulent intent"
Summary of this case from New Jersey v. Gifford (In re Gifford)Opinion
Case No. 12-31619 Adv. No. 12-3236
06-12-2013
In re: CRYSTAL G. THOKEY YUPPA, Debtor OHIO DEPARTMENT OF JOB & FAMILY SERVICES, Plaintiff v. CRYSTAL G. THOKEY YUPPA, Defendant
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.
______________________
Guy R. Humphrey
United States Bankruptcy Judge
Judge Humphrey
Chapter 7
Decision Granting Plaintiff's Motion for Summary Judgment
and Determining Debt to be Nondischargeable
I. Introduction
This matter is before the court on the Motion of State of Ohio, Department of Job and Family Services, for Summary Judgment against Crystal G. Thokey Yuppa (doc. 37) (the "Motion"). The Defendant-Debtor Crystal G. Thokey Yuppa ("Ms. Yuppa") did not respond to the Motion filed by Plaintiff Ohio Department of Job & Family Services ("ODJFS").
II. Procedural Background
On April 2, 2012 Ms. Yuppa filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code seeking a discharge of all her prepetition debts. ODJFS commenced this adversary proceeding on July 30, 2012 by filing a complaint to determine the dischargeability of certain debts arising from Ms. Yuppa's receipt of certain unemployment benefits to which she was allegedly not entitled, as well as her retention of those benefits. Count one of the complaint states that Ms. Yuppa improperly obtained benefits through false pretenses, false representations, or actual fraud and that, as a result, the debt owed in the amount of $2,202 plus interest is nondischargeable under 11 U.S.C. § 523(a)(2)(A). Count two alleges the same basic facts, but asserts that Ms. Yuppa's unlawful retention of the $2,202 constitutes a willful and malicious conversion of ODJFS's funds and is therefore nondischargeable under § 523(a)(6).
Ms. Yuppa answered the complaint and affirmatively stated that she did not intentionally mislead or defraud ODJFS and that her failure to repay the benefits was due to her dire financial straits. On April 15, 2013 ODJFS filed a motion for summary judgment on its § 523(a)(2)(A) claim. Because it appears that the defendant may no longer be represented by legal counsel, the court entered an order establishing the date by which Ms. Yuppa could file a response to the summary judgment and pointing out the formal requirements for any such response under Federal Rule of Civil Procedure 56. The court informed Ms. Yuppa that if she were unable, prior to the deadline, to obtain an affidavit or other appropriate evidentiary materials to support her factual basis for opposing summary judgment, she needed to specify the reasons why she could not. The deadline has passed and Ms. Yuppa has neither responded to the summary judgment motion nor sought additional time to do so.
III. Legal Analysis
A. Standard for Summary Judgment - No Response Filed by the Nonmoving Party
The appropriate standard to be used by the court to address the ODJFS's motion for summary judgment is contained in Fed. R. Civ. P. 56(a) and incorporated in bankruptcy adversary proceedings by reference in Fed. R. Bankr. P. 7056. Rule 56(a) states in part that "[t]he court shall grant summary judgment if the moving party shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In order to prevail, the movant, if bearing the burden of persuasion at trial, must establish all elements of its claim. Celotex Corp. v. Catrett, 477 U.S. 317, 331 (1986). Thereafter, "the nonmoving party must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (citations omitted); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-51 (1986).
In the instant case, the nonmoving party, Ms. Yuppa did not respond to the Motion. "Where the nonmoving party fails to respond to the motion for summary judgment, the trial court is under no obligation to 'search the entire record to establish that it is bereft of a genuine issue of material fact.'" Rabin v. DeLaCruz (In re St. Clair Clinic, Inc.), 1996 WL 6531, at *2 (6th Cir. Jan. 8, 1996) (unpublished opinion) (further citations omitted). Rather, "the trial court may rely upon the facts presented and designated by the moving party" to determine whether the moving party is entitled to summary judgment under the standard provided in Rule 56. Id. The nonmovant's failure to respond, however, does not automatically entitle the movant to summary judgment. A party moving for summary judgment always bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Carver v. Bunch, 946 F.2d 451, 454 (6th Cir. 1991). "The court is [therefore] required, at a minimum, to examine the movant's motion for summary judgment to ensure that he has discharged that burden." Id. at 455.
B. Determining Whether the Motion Can Be Granted
Before the court can grant the unopposed Motion, ODJFS must establish that there is no genuine issue of material fact as to each of the elements of § 523(a)(2)(A) and that it is entitled to judgment on count one as a matter of law. The court will first briefly outline what those elements are and then determine whether ODJFS has met its burden of demonstrating the absence of any genuine issue of material fact.
Section 523(a)(2)(A) provides, in relevant part, that: "A discharge under section 727 . . . of this title does not discharge an individual debtor from any debt . . . for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition[.]" 11 U.S.C. § 523(a)(2)(A).
The elements of a fraudulent misrepresentation claim under § 523(a)(2)(A) are "(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 justifiability relied on the false representation; and (4) its reliance was the proximate cause of loss." Rembert v. AT & T Univ. Card Svcs., Inc. (In re Rembert), 141 F.3d 277, 280-81 (6th Cir. 1998).
The justifiable reliance standard assesses reliance on a subjective basis rather than an objective one. Thus, the creditor's reliance need not necessarily be reasonable from an objective standpoint. Field v. Mans, 516 U.S. 59, 74-75 (1995). Under the justifiable reliance standard a party is "required to use his senses, and cannot recover if he blindly relies upon a misrepresentation the falsity of which would be patent to him if he had utilized his opportunity to make a cursory examination or investigation." Id. at 71. However, a party generally is under no duty to do an investigation for justifiable reliance to be found even if such an investigation might have revealed the fraud. Willens v. Bones (In re Bones), 395 B.R. 407, 432 (Bankr. E.D. Mich. 2008); Haney v. Copeland (In re Copeland), 291 B.R. 740, 767 (Bankr. E.D. Tenn. 2003).
In support of its motion for summary judgment, ODJFS tenders the affidavit of Diana Mingus. Ms. Mingus is employed by ODJFS as its Manager of Revenue Recovery. Due to her service in that position, Ms. Mingus is familiar with Ohio Job Insurance, the unemployment compensation database. This database contains information regarding unemployment benefit overpayments, as well as penalties and interest related to such overpayments. The database shows that Ms. Yuppa received unemployment benefits in the total amount of $2,500 for the weeks ending June 27, 2009 through August 29, 2009.
In her affidavit, Ms. Mingus authenticated the weekly claim certifications submitted by Ms. Yuppa for the weeks ending June 27, 2009 through August 29, 2009 which make up ODJFS Exhibit 3. In each of the ten weekly claim certifications Ms. Yuppa represented, inter alia, that she neither worked nor was self-employed during the week claimed. Ms. Mingus also averred that ODJFS Exhibit 5 is a true and accurate copy of the Determination of Unemployment Compensation Benefits dated October 14, 2009. This determination found that Ms. Yuppa had unreported earnings with Laboratory Corporation of America Holdings for the period April 5, 2009 through August 29, 2009 and had withheld this information with the intent of obtaining benefits to which she was not entitled. The total amount of unemployment compensation overpaid to Ms. Yuppa during this period was $2,500, and she was ordered to repay the overpaid benefits immediately.
Ms. Mingus states that, according to the unemployment compensation database, Ms. Yuppa did not appeal the Determination of Unemployment Compensation Benefits dated October 14, 2009 and did not repay the $2,500 within 30 days of the determination becoming final. The database shows that Ms. Yuppa subsequently made payments to ODJFS, and that the principal balance remaining due is $2,202.
Ms. Mingus states that ODJFS relies upon applications for benefits and weekly certifications to determine whether an applicant qualifies for unemployment benefits for specific periods of time and that ODJFS specifically relied on Ms. Yuppa's applications for benefits and her weekly certifications for the weeks ending June 27, 2009 through August 29, 2009 to determine that Ms. Yuppa was not employed during this period and hence qualified for unemployment benefits for the weeks in question. Ms. Mingus further states that ODJFS would not have paid Ms. Yuppa benefits totaling $2,500 had it not relied on Ms. Yuppa's applications for benefits and her weekly certifications for the weeks ending June 27, 2009 through August 27, 2009 or had Ms. Yuppa informed it that she was employed by Laboratory Corporation of America Holdings during those weeks.
Based on the evidence adduced by ODJFS, Ms. Yuppa obtained money in the form of unemployment compensation benefits through material misrepresentations that she knew were false. These misrepresentations consisted of ten weekly certifications by Ms. Yuppa that she did not work during the week claimed. Ms. Yuppa knew these representations to be false because she had, in fact, worked for Laboratory Corporation of America Holdings during each of these ten weeks. The misrepresentations were material because absent those certifications, ODJFS would not have paid unemployment benefits to her in the amount of $250 for each week she filed a claim.
The undisputed evidence further establishes that Ms. Yuppa intended to deceive ODJFS. "Whether a debtor possessed an intent to defraud a creditor within the scope of § 523(a)(2)(A) is measured by a subjective standard[.]" Rembert, 141 F.3d at 281. Because debtors will rarely admit an intent to deceive, "a debtor's intention -or lack thereof- must be determined by the totality of the circumstances." Id. at 282. It is Ms. Yuppa's course of conduct that provides the totality of circumstances through which an intent to deceive may be inferred. She filed, not one, but ten false certifications during the weeks ending June 27, 2009 through August 29, 2009. Repeated misrepresentations of employment status when applying for unemployment benefits are sufficient to prove fraudulent intent. See State ex rel. Central Collection Service v. O'Brien (In re O'Brien), 110 B.R. 27, 31-32 (Bankr. D. Colorado 1990) and Arizona Department of Economic Security v. Kaliff (In re Kaliff), 2 B.R. 465, 468 (Bankr. D. Ariz. 1979). See also Lucas County Department of Job & Family Services v. Perrin (In re Perrin), 2013 WL 509130 (Bankr. N.D. Ohio Feb. 11, 2013) (food assistance payments).
In Perrin, Judge Whipple found that the agency's prior determinations that the defendant had falsely misrepresented that his wife was living at home in order to deceive the agency into providing food assistance payments collaterally estopped the defendant from contesting the second and third elements of the plaintiff's § 523(a)(2)(A) claim. Because ODJFS has not asserted that the Determination of Unemployment Compensation Benefits dated October 14, 2009 would preclude Ms. Yuppa from re-litigating the issues of material falsity and intent to deceive, the court need not delve into whether collateral estoppel might apply.
Lastly, the court finds that ODJFS justifiably relied on Ms. Yuppa's false representations that she did work during the weeks in question and that ODJFS's reliance on these false representations was the proximate cause of its overpayment of $2,500 in unemployment compensation benefits to Ms. Yuppa. In order to carry out the statutory purposes of Ohio's unemployment compensation program in an efficient manner, ODJFS must be able rely on applications for benefits and weekly certifications to determine an applicant's eligibility for benefits over specific periods of time. Cf. O'Brien, 110 B.R. at 32-33. Further, ODJFS was under no duty to investigate whether Ms. Yuppa's applications for benefits and weekly certifications were true. The undisputed evidence also shows ODJFS would not have paid benefits to Ms. Yuppa for the weeks ending June 27, 2009 through August 29, 2009 had it not relied on her repeated misrepresentations that she was not employed during this time.
The court determines that ODJFS has demonstrated the absence of a genuine issue of material fact as to each element of a § 523(a)(2)(A) false representation claim. Ms. Yuppa did not respond with any evidence showing that a genuine issue of material fact does exist, and there are no inferences apparent in the context of ODJFS's evidence which are favorable to Ms. Yuppa. See St. Clair Clinic, 1996 WL 6531, at *2. "The failure to present any evidence to counter a well-supported motion for summary judgment alone is grounds for granting the motion." Everson v. Leis, 556 F.3d 484, 496 (6th Cir. 2009).
IV. Conclusion
For all of the reasons stated herein, the court grants ODJFS's motion for summary judgment. Accordingly, the debt owed by Ms. Yuppa to ODJFS is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). A separate order shall issue contemporaneously with this decision entering judgment on count one of the complaint in favor of ODJFS for the amount of $2,202.00 plus interest at an annual rate of 14% compounded monthly from November 4, 2009 and determining such debt to be nondischargeable. Count two of the complaint shall be dismissed without prejudice.
Copies to:
Raymond J. Pikna, Jr, 600 Vine Street, Suite 2500, Cincinnati, OH 45202-2491
(Counsel for the Plaintiff)
Crystal G. Thokey Yuppa, 5558 Mayville Drive, Dayton, Ohio 45432-1715
(Defendant)
John Paul Rieser, 7925 Graceland Street, Dayton, Ohio 45459
(Chapter 7 Trustee)