Opinion
Case No.: 2:18-bk-17205-RK Adv. No. 2:18-ap-01296-RK
12-07-2020
In re: AVI COHEN, Debtor. SWIFT FINANCIAL, LLC, fka SWIFT CAPITAL CORPORATION, INC., Plaintiff, v. AVI COHEN, Defendant.
Daren M. Schlecter, Esq. (SBN 259537) Law Office of Daren M. Schlecter, A Prof. Corp. 1925 Century Park East, Suite 1180 Los Angeles, CA 90067 Telephone (310) 553-5747 Telecopier (310) 553-5487 Attorney for Plaintiff/Creditor Swift Financial, LLC fka Swift Capital Corporation, Inc
Daren M. Schlecter, Esq. (SBN 259537)
Law Office of Daren M. Schlecter, A Prof. Corp.
1925 Century Park East, Suite 1180
Los Angeles, CA 90067
Telephone (310) 553-5747
Telecopier (310) 553-5487 Attorney for Plaintiff/Creditor
Swift Financial, LLC fka Swift Capital Corporation, Inc NOT FOR PUBLICATION Chapter 7
SEPARATE STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW IN SUPPORT OF PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; ORDER THEREON
Pursuant to LBR 7056-1(b)(2) Date: October 7, 2020
Time: 2:30 p.m.
Location: SEE CONCURRENTLY FILED NOTICE, COURTCALL ONLY TO THE HONORABLE JUDGE ROBERT KWAN, UNITED STATES BANKRUPTCY JUDGE, TO DEFENDANT AVI COHEN AND ALL OTHER PARTIES IN INTEREST:
Plaintiff Swift Financial, LLC hereby submits its Separate Statement of Uncontroverted Facts and Conclusions of Law ("SUFCL"): A. Swift's 11 U.S.C §523(a)(2)(A) Claim
| UNDISPUTED MATERIAL FACTS | EVIDENCE SHOWING FACTS ARENOT SUBJECT TO DISPUTE |
|---|---|
| 1. On or about May 31, 2017, Avi Cohen("Debtor" or "Cohen") completed an onlineapplication for his business PerfumeDynasty with various contact and financialdetails in support of the application. | Declaration of Bonnie Carey at ¶8, Exhibit "A" |
| 2. On the Application, Cohen indicated heneeded the advance from Swift to "purchaseinventory" and represented his monthlygross sales as $83,333.33. | Declaration of Bonnie Carey at ¶9 |
| 3. Concurrently with the application,Debtor provided documentation to supportthe information contained in the Applicationconsisting of 4 months of bank statements,proof of active status in the Secretary ofState, Business EXP report (which confirmsthe borrowers business address, activestatus, ownership and then confirms theirtrade history), Driver's License and portionsof a TLO investigative report ("FinancialDocumentation"). | Declaration of Bonnie Carey at ¶10 |
| 4. On or about May 31, 2017, Swift andCohen entered into a Future ReceivablesSales Agreement for an advance of$75,000.00 to his business PerfumeDynasty, LLC (the "Agreement" or"FRSA"). | Declaration of Bonnie Carey at ¶11, Exhibit"B" |
| 5. In addition to agreeing that Cohenwould guarantee the debt, he agreed to giveSwift two business bank accounts to initiatea weekly ACH debt to repay the advance,and granted Swift a security interest inDebtor's collateral, including sales andinventory. | Declaration of Bonnie Carey at ¶11, Exhibit"B"; Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶12. |
| 6. Subsequently, and in reliance on theApplication and Financial Documentation,Swift wired $75,000.00 to Cohen on June2, 2017 in exchange for his agreement torepay $92,175.00 in weekly draws in theamount of $2,560.42 until paid in full (the"Advance"). | Declaration of Bonnie Carey at ¶12;Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶11. |
| 7. On or about June 2, 2017, Swift causeda UCC Financing Statement to be filed withthe California Department of State. | Declaration of Bonnie Carey at ¶13, Exhibit"C"; Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶12. |
| 8. The Agreement further requiredPerfume Dynasty through Debtor, toprovide and maintain an irrevocable ACHdebit to allow Plaintiff to take of futurereceivables to satisfy the amount ofreceivables purchased. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶12. |
| 9. Defendant's company Perfume Dynasty,LLC incurred at least $63,110.31 inbusiness debt at the time he sought moniesfor the advance from Swift, and whichremain unpaid. | Declaration of Daren M. Schlecter at ¶¶5-6,Exhibit "B" |
| 10. Just days later, in or about June, 2017,Perfume Dynasty by and through Debtor,defaulted on his first payment under theAgreement, failed to inform Plaintiff priorto debiting payments that there wereinsufficient funds in the bank accountidentified under the Agreement, and failedto maintain a bank account that could satisfythe Obligation. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶13. |
| 11. Debtor maintained multiple other bankaccounts into which he continued to depositand thus divert sales receipts withoutrepaying Swift. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶13. |
| 12. Debtor knew at the time he received theAdvance from Swift that he had closed orwas planning on closing Perfume Dynasty,LLC. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶20; see also ¶9, Exhibit "C"- Certified Copy of 341a Transcript at p. 12,Lines 1-12; see also ¶14, Exhibit "F" (Requestsfor Admission ("RFA") No. 9 & 13, ¶17,Exhibit "H" (late responses to Requests forAdmissions), which Plaintiff asserts are bothdeemed admitted by operation of law.RFA No. 9: Admit that YOUR first payment torepay Swift under the AGREEMENT bouncedin early June,13 2017.RFA No. 13: Admit that YOU knew YOUcould not repay the ADVANCE to Swift onMay 31, 2017 |
|---|
| 13. Defendant knew at the time he took theAdvance from Swift that he had insufficientmonies to repay Swift as of May 31, 2017. | Declaration of Daren M. Schlecter at ¶14,Exhibit "F" (Requests for Admission No. 9 &13, ¶17, Exhibit "H" (late responses toRequests for Admissions), which Plaintiffasserts are both deemed admitted by operationof law.RFA No. 11:Admit that there were sufficient monies fromMay 31, 2017 to November, 2017 to repay the18 ADVANCE under the AGREEMENT.RFA No. 13:Admit that Perfume Dynasty, LLC did not havetwo full time employees as represented in the28 attached Application YOU submitted toSwift on May 31, 2017 |
| 14. Defendant did not use the monies fromSwift to purchase inventory, but to pay offvendors. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 12, Lines 2-12. |
| 15. According to Swift's records, Swift's firstattempt to withdraw monies from Debtor'sbankruptcy account in the amount of$2,560.42 bounced on or about June 9,2017, resulting in an NSF fee. Thus,Debtor made no payments towards theLoan. | Declaration of Bonnie Carey at ¶14. |
| 16. Defendant admitted at his 341(a)meeting of creditors that at the time he closedhis business, he gave away all of his inventoryfor pennies on the dollar. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 7, Lines 14-25, p. 8, Lines 1-3 |
| 17. Defendant admitted at his 341(a)meeting of creditors that he closed PerfumeDynasty, LLC in or about June, 2017. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript, p. 7, Lines 14-18 [Closed thebusiness about a year and half before 341a,which was on September 6, 2018] |
| 18. After defaulting, Swift began phone andin writing collection efforts. On or about July10, 2017, Swift emailed a hold demand toPaypal pursuant to the UCC FinancingStatement and guarantee under the FRSA. | Declaration of Bonnie Carey at ¶15. |
| 19. Debtor used his Paypal account(s) tooperate Perfume Dynasty, LLC. | Declaration of Bonnie Carey at ¶15;Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p 15-17. |
| 20. Debtor/Defendant did not keep anydocuments showing the sales of PerfumeDynasty, LLC, including for July, 2017. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" Certified Copy of 341a Transcriptat p. 15, Lines 1-8 |
| 21. Debtor did not keep track of sales in theoperation of Perfume Dynasty, LLC. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" Certified Copy of 341a Transcriptat p. 5, Lines 19-24. |
| 22. Debtor's bankruptcy petition shows that his2017 and 2018 gross income fromoperating a business was $0.00. | Declaration of Daren M. Schlecter at ¶¶3-4,Exhibit "A" |
| 23. Based on the Debtor's bankruptcy petitionand testimony at his 341a meeting ofcreditors, Perfume Dynasty, LLC wasstruggling financially at the time theadvance was made to Debtor/Defendant. | Declaration of Daren M. Schlecter at ¶¶3-4,Exhibit "A" (page 32/33 of Debtor'sbankruptcy petition showing no gross incomefrom operation of his business);Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 7, Lines 14-25, p. 12, Lines 1-12;Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶¶ 13, 20 |
| 24. Swift was never provided notice of any ofDebtor Avi Cohen's bankruptcy filings.Swift discovered the current bankruptcyfiling only after the Debtor had filed forbankruptcy and Swift contacted him incontinuing collection efforts in or aboutJuly 9, 2018. | Declaration of Bonnie Carey at ¶16. |
| CONCLUSIONS OF LAW | LAW SUPPORTINGCONCLUSIONS OF LAW |
|---|---|
| 1. Defendant's representation that he wasusing monies from Swift to purchaseinventory was materially false if it includedinformation which is "substantiallyinaccurate" and is of the type that wouldaffect the creditor's decision makingprocess; to except a debt from discharge, thecreditor must show not only that thestatements are inaccurate, but also that theycontain important and substantial untruths. | In re Greene, 96 B.R. 279, 283 (9th Cir. BAP1989). |
| 2. Defendant's statement of monthly sales of$83,333.00 on his Application without anybasis or supporting documentationconstitute a materially fraudulentmisrepresentation as a reckless indifferenceto the actual facts, without examining theavailable source of knowledge which lay athand. | Advanta Nat'l Bank v. Kong (In re Kong), 239B.R. 815, 826 (BAP 9th Cir.1999) |
| 3. Debtor's Lack of sale records may berelevant in considering misrepresentationsmade under 11 U.S.C. §523(a)(2)(A). | In re Heckencamp, 110 B.R. 1, 2 (Bankr. C.D.1989)(Borrower had no records to show whathe did with the money) |
| 4. A debtor's promise while not intending topay or knowing that payment would beimpossible is actionable under 11 U.S.C.§523(a)(2)(A). | Citibank (South Dakota) N.A. v. Lee (In re Lee),186 B.R. 695, 699 (9th Cir. BAP 1995) |
| 5. Defendant's ability to repay may be a factorin determining the debtor's intent. | In re Cole, 226 B.R. 647, 656, fn 12 (9th Cir.1998) |
|---|---|
| 6. The Court may conclude "intent to deceive"based on circumstantial evidence, includingdrawing inferences from the Debtor's actionsand the surrounding circumstances. | In re Eashai, 87 F.3d 1082, 1090 (9th Cir.1996); In re Brody, 2017 WL 992408 at *7 (9thCir. BAP 2017). |
| 7. Swift reliance on Defendant was justifiablegiven the extent of Swift's investigation intothe continued operation of Perfume Dynasty,LLC | Field v. Mans, 516 U.S. 59, 73-76 (1995); In reEashai, 87 F.3d 1082, 1090 (9th Cir. 1996) |
| 8. Defendant's representations caused Swiftdamages, including the utter failure of Debtorto repay any of the advance. | 11 U.S.C. §523(a)(2)(A); Britton v. Price (In reBritton), 950 F.2d 602, 604 (9th Cir.1991) |
| UNDISPUTED MATERIAL FACTS | EVIDENCE SHOWING FACTS ARENOT SUBJECT TO DISPUTE |
|---|---|
| 1. On or about May 31, 2017, Avi Cohen("Debtor" or "Cohen") completed an onlineapplication for his business Perfume Dynastywith various contact and financial details insupport of the application. | Declaration of Bonnie Carey at ¶8, Exhibit "A" |
| 2. On the Application, Cohen indicated heneeded the advance from Swift to "purchaseinventory" and represented his monthly grosssales as $83,333.33. | Declaration of Bonnie Carey at ¶9 |
| 3. Concurrently with the application, Debtorprovided documentation to support theinformation contained in the Applicationconsisting of 4 months of bank statements,proof of active status in the Secretary ofState, Business EXP report (which confirmsthe borrowers business address, active status,ownership and then confirms their tradehistory), Driver's License and portions of aTLO investigative report ("FinancialDocumentation"). | Declaration of Bonnie Carey at ¶10 |
| 4. Subsequently, and in reliance on theApplication and Financial Documentation,Swift wired $75,000.00 to Cohen on June 2,2017 in exchange for his agreement to repay$92,175.00 in weekly draws in the amountof $2,560.42 until paid in full (the"Advance"). | Declaration of Bonnie Carey at ¶12;Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶11. |
| 5. Defendant knew at the time he took theAdvance from Swift that he had insufficientmonies to repay Swift as of May 31, 2017. | Declaration of Daren M. Schlecter at ¶14,Exhibit "F" (Requests for Admission No. 9 &13, ¶17, Exhibit "H" (late responses toRequests for Admissions), which Plaintiffasserts are both deemed admitted by operationof law.RFA No. 11:Admit that there were sufficient monies fromMay 31, 2017 to November, 2017 to repay the18 ADVANCE under the AGREEMENT.RFA No. 13:Admit that Perfume Dynasty, LLC did not havetwo full time employees as represented in the28 attached Application YOU submitted toSwift on May 31, 2017 |
| 6. Debtor/Defendant did not keep anydocuments showing the sales of PerfumeDynasty, LLC, including for July, 2017. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" Certified Copy of 341a Transcriptat p. 15, Lines 1-8 |
| 7. Debtor did not keep track of sales in theoperation of Perfume Dynasty, LLC. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" Certified Copy of 341a Transcriptat p. 5, Lines 19-24. |
| 8. Debtor's bankruptcy petition shows that his2017 and 2018 gross income from operating abusiness was $0.00. | Declaration of Daren M. Schlecter at ¶¶3-4,Exhibit "A" |
| 9. Based on the Debtor's bankruptcy petitionand testimony at his 341a meeting of creditors,Perfume Dynasty, LLC was strugglingfinancially at the time the advance was made toDebtor/Defendant. | Declaration of Daren M. Schlecter at ¶¶3-4,Exhibit "A" (page 32/33 of Debtor'sbankruptcy petition showing no gross incomefrom operation of his business);Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 7, Lines 14-25, p. 12, Lines 1-12;Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶¶ 13, 20 |
| CONCLUSIONS OF LAW | LAW SUPPORTINGCONCLUSIONS OF LAW |
|---|---|
| 1. Swift's Application qualifies as a statement"respecting the debtor's or an insider'sfinancial condition" | Lamar, Archer & Cofrin, LLP v. Appling, 138S.Ct. 1752, 1760-1761 (2018) |
| 2. Debtor's statement of gross monthly saleswas a statement that has a direct relation toor impact on the debtor's overall financialstatus. | Lamar, Archer & Cofrin, LLP v. Appling, 138S.Ct. 1752, 1760-1761 (2018) |
| 3. Given Defendant's general lack of salesrecord keeping, keeping documents, andrepresentation of zero gross income on hisbankruptcy petition, his statement of grossmonthly sales was a materially falsestatement which painted a substantiallyuntruthful picture of his financial conditionby misrepresenting information of the typewhich would normally affect the decision togrant credit. | First Interstate Bank of Nevada v. Greene (In reGreene), 96 B.R. 279, 283 (9th Cir. BAP 1989) |
|---|---|
| 4. Swift's reliance on Defendant was reasonablegiven the extent of Swift's financialreview/diligence into the sales and generalfinancial condition of Perfume Dynasty, LLC,including the lack of any indication that theApplication was inaccurate or otherwise false. | In re Gertsch, 237 BR 160, 170 (9 th Cir. BAP1999); In re Candland (9th Cir. 1996) 90 F3d1466, 1470 |
| 5. Defendant's representations caused Swiftdamages, including the utter failure ofDebtor to repay any of the advance. | 11 U.S.C. §523(a)(2)(B); Candland v.Insurance Co. of N. America (In re Candland),90 F.3d 1466, 1469 (9th Cir.1996). |
| UNDISPUTED MATERIAL FACTS | EVIDENCE SHOWING FACTS ARENOT SUBJECT TO DISPUTE |
|---|---|
| 1. On or about May 31, 2017, Avi Cohen("Debtor" or "Cohen") completed an onlineapplication for his business PerfumeDynasty with various contact and financialdetails in support of the application. | Declaration of Bonnie Carey at ¶8, Exhibit "A" |
| 2. Concurrently with the application, Debtorprovided documentation to support theinformation contained in the Applicationconsisting of 4 months of bank statements,proof of active status in the Secretary ofState, Business EXP report (which confirmsthe borrowers business address, activestatus, ownership and then confirms theirtrade history), Driver's License and portionsof a TLO investigative report ("FinancialDocumentation"). | Declaration of Bonnie Carey at ¶10 |
| 3. On or about May 31, 2017, Swift and Cohenentered into a Future Receivables SalesAgreement for an advance of $75,000.00 tohis business Perfume Dynasty, LLC (the"Agreement" or "FRSA") | Declaration of Bonnie Carey at ¶11, Exhibit"B" |
| 4. In addition to agreeing that Cohenwould guarantee the debt, he agreed togive Swift two business bank accountsto initiate a weekly ACH debt to repaythe advance, and granted Swift asecurity interest in Debtor's collateral,including sales and inventory. | Declaration of Bonnie Carey at ¶11, Exhibit"B"; Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶12. |
| 5. Subsequently, and in reliance on theApplication and FinancialDocumentation, Swift wired $75,000.00to Cohen on June 2, 2017 in exchangefor his agreement to repay $92,175.00 inweekly draws in the amount of$2,560.42 until paid in full (the"Advance"). | Declaration of Bonnie Carey at ¶12;Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶11. |
| 6. On or about June 2, 2017, Swift causeda UCC Financing Statement to be filedwith the California Department of State. | Declaration of Bonnie Carey at ¶13, Exhibit"C"; Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶12. |
| 7. The Agreement further requiredPerfume Dynasty through Debtor, toprovide and maintain an irrevocableACH debit to allow Plaintiff to take offuture receivables to satisfy the amountof receivables purchased. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶12. |
| 8. Just days later, in or about June, 2017,Perfume Dynasty by and through Debtor,defaulted on his first payment under theAgreement, failed to inform Plaintiff priorto debiting payments that there wereinsufficient funds in the bank accountidentified under the Agreement, and failedto maintain a bank account that could satisfythe Obligation. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶13. |
| 9. Debtor maintained multiple other bankaccounts into which he continued to depositand thus divert sales receipts withoutrepaying Swift. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶13. |
| 10. Debtor knew at the time he received theAdvance from Swift that he had closed orwas planning on closing Perfume Dynasty,LLC. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶20; see also ¶9, Exhibit "C"- Certified Copy of 341a Transcript at p. 12,Lines 1-12; see also ¶14, Exhibit "F" (Requestsfor Admission ("RFA") No. 9 & 13, ¶17,Exhibit "H" (late responses to Requests forAdmissions), which Plaintiff asserts are bothdeemed admitted by operation of law.RFA No. 9: Admit that YOUR first payment torepay Swift under the AGREEMENT bouncedin early June,13 2017.RFA No. 13: Admit that YOU knew YOUcould not repay the ADVANCE to Swift onMay 31, 2017 |
|---|
| 11. Defendant knew at the time he took theAdvance from Swift that He HadInsufficient Monies to Repay Swift as ofMay 31, 2017 | Declaration of Daren M. Schlecter at ¶14,Exhibit "F" (Requests for Admission No. 9 &13, ¶17, Exhibit "H" (late responses toRequests for Admissions), which Plaintiffasserts are both deemed admitted by operationof law.RFA No. 11:Admit that there were sufficient monies fromMay 31, 2017 to November, 2017 to repay the18 ADVANCE under the AGREEMENT.RFA No. 13:Admit that Perfume Dynasty, LLC did not havetwo full time employees as represented in the28 attached Application YOU submitted toSwift on May 31, 2017 |
| 12. Defendant did not use the monies fromSwift to purchase inventory, but to pay offvendors. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 12, Lines 2-12. |
| 13. According to Swift's records, Swift's firstattempt to withdraw monies from Debtor'sbankruptcy account in the amount of$2,560.42 bounced on or about June 9,2017, resulting in an NSF fee. Thus, Debtormade no payments towards the Loan. | Declaration of Bonnie Carey at ¶14. |
| 14. Defendant admitted at his 341(a) meeting ofcreditors that at the time he closed hisbusiness, he gave away all of his inventoryfor pennies on the dollar. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 7, Lines 14-25, p. 8, Lines 1-3 |
| 15. Defendant admitted at his 341(a) meeting ofcreditors that he closed Perfume Dynasty,LLC in or about June, 2017. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript, p. 7, Lines 14-18 [Closed thebusiness about a year and half before 341a,which was on September 6, 2018] |
| 16. After defaulting, Swift began phone and inwriting collection efforts. On or about July10, 2017, Swift emailed a hold demand toPaypal pursuant to the UCC FinancingStatement and guarantee under the FRSA. | Declaration of Bonnie Carey at ¶15. |
| 17. Debtor used his Paypal account(s) to operatePerfume Dynasty, LLC. | Declaration of Bonnie Carey at ¶15;Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p 15-17. |
| 18. Debtor/Defendant did not keep anydocuments showing the sales of PerfumeDynasty, LLC, including for July, 2017 | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" Certified Copy of 341a Transcriptat p. 15, Lines 1-8 |
| 19. Debtor did not keep track of sales in theoperation of Perfume Dynasty, LLC. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" Certified Copy of 341a Transcriptat p. 5, Lines 19-24. |
| 20. Debtor's bankruptcy petition shows that his2017 and 2018 gross income fromoperating a business was $0.00. | Declaration of Daren M. Schlecter at ¶¶3-4,Exhibit "A" |
| 21. Based on the Debtor's bankruptcy petitionand testimony at his 341a meeting ofcreditors, Perfume Dynasty, LLC wasstruggling financially at the time theadvance was made to Debtor/Defendant. | Declaration of Daren M. Schlecter at ¶¶3-4,Exhibit "A" (page 32/33 of Debtor'sbankruptcy petition showing no gross incomefrom operation of his business);Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 7, Lines 14-25, p. 12, Lines 1-12;Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶¶ 13, 20 |
| CONCLUSIONS OF LAW | LAW SUPPORTINGCONCLUSIONS OF LAW |
|---|---|
| 1. While Defendant entered into theAgreement with Swift, the assets of PerfumeDynasty by the granting of a securityinterest and subsequent UCC lien againstthe sales became Swift's property to satisfyrepayment of the Agreement. Defendant'sability to relinquish collateral consisting ofinventory of Perfume Dynasty, LLC but | Transamerica Commercial Fin. Corp. v.Littleton (In re Littleton), 942 F.2d 551, 555(9th Cir.1991). First Del. Life Ins. Co. v. Wada(In re Wada), 210 B.R. 572, 576-77 (9th Cir.BAP 1997); In re Montes, 177 B.R. 325, 331(Bankr. C.D. Cal. 1994) |
| failure to do so establishes Defendant'sconversion of the collateral whereDefendant's unilateral transfer of all of theinventory of the business for pennies on thedollar is evidence of intent to defraud withno reasonable expectation of continuation ofbusiness operations, which demonstratesembezzlement of Plaintiff's collateral. | |
| 2. Defendant's lack of sales records andtracking sales is evidence of Defendant'sintent to defraud. | Transamerica Commercial Fin. Corp. v.Littleton (In re Littleton), 942 F.2d 551, 555(9th Cir.1991); First Del. Life Ins. Co. v. Wada(In re Wada), 210 B.R. 572, 576-77 (9th Cir.BAP 1997) |
|---|---|
| 3. Defendant's closing of Perfume Dynasty,LLC at or about the time the Advance wasgiven is evidence of Defendant's intent todefraud. | Transamerica Commercial Fin. Corp. v.Littleton (In re Littleton), 942 F.2d 551, 555(9th Cir.1991); First Del. Life Ins. Co. v. Wada(In re Wada), 210 B.R. 572, 576-77 (9th Cir.BAP 1997) |
| 4. Defendant's default on his first paymentunder the Agreement is evidence ofDefendant's intent to defraud. | Transamerica Commercial Fin. Corp. v.Littleton (In re Littleton), 942 F.2d 551, 555(9th Cir.1991); First Del. Life Ins. Co. v. Wada(In re Wada), 210 B.R. 572, 576-77 (9th Cir.BAP 1997) |
| 5. Defendant's use of the Advance monies topay off other vendors is evidence ofDefendant's intent to defraud. | Transamerica Commercial Fin. Corp. v.Littleton (In re Littleton), 942 F.2d 551, 555(9th Cir.1991); First Del. Life Ins. Co. v. Wada(In re Wada), 210 B.R. 572, 576-77 (9th Cir.BAP 1997) |
| 6. Defendant's failure to pay any amount ofthe Advance is evidence Defendant's intentto defraud. | Transamerica Commercial Fin. Corp. v.Littleton (In re Littleton), 942 F.2d 551, 555(9th Cir.1991); First Del. Life Ins. Co. v. Wada(In re Wada), 210 B.R. 572, 576-77 (9th Cir.BAP 1997) |
| 7. Defendant's use of multiple unexplainedbank accounts, including a separate Paypal | Transamerica Commercial Fin. Corp. v.Littleton (In re Littleton), 942 F.2d 551, 555(9th Cir.1991); First Del. Life Ins. Co. v. Wada |
| account is evidence of Defendant's intent todefraud. | (In re Wada), 210 B.R. 572, 576-77 (9th Cir.BAP 1997) |
| UNDISPUTED MATERIAL FACTS | EVIDENCE SHOWING FACTS ARENOT SUBJECT TO DISPUTE |
|---|---|
| 1. On or about May 31, 2017, Avi Cohen("Debtor" or "Cohen") completed an onlineapplication for his business PerfumeDynasty with various contact and financialdetails in support of the application. | Declaration of Bonnie Carey at ¶8, Exhibit "A" |
| 2. Concurrently with the application, Debtorprovided documentation to support theinformation contained in the Applicationconsisting of 4 months of bank statements,proof of active status in the Secretary ofState, Business EXP report (which confirmsthe borrowers business address, activestatus, ownership and then confirms theirtrade history), Driver's License and portionsof a TLO investigative report ("FinancialDocumentation"). | Declaration of Bonnie Carey at ¶10 |
| 3. On or about May 31, 2017, Swift and Cohenentered into a Future Receivables Sales | Declaration of Bonnie Carey at ¶11, Exhibit"B" |
| Agreement ("FRSA") for an advance of$75,000.00 to his business PerfumeDynasty, LLC (the "Agreement"). | |
| 4. In addition to agreeing that Cohen wouldguarantee the debt, he agreed to give Swifttwo business bank accounts to initiate aweekly ACH debt to repay the advance,and granted Swift a security interest inDebtor's collateral, including sales andinventory. | Declaration of Bonnie Carey at ¶11, Exhibit"B"; Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶12. |
| 5. Subsequently, and in reliance on theApplication and Financial Documentation,Swift wired $75,000.00 to Cohen on June 2,2017 in exchange for his agreement to repay$92,175.00 in weekly draws in the amount of$2,560.42 until paid in full (the "Advance"). | Declaration of Bonnie Carey at ¶12;Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶11. |
| 6. On or about June 2, 2017, Swift caused aUCC Financing Statement to be filed withthe California Department of State. | Declaration of Bonnie Carey at ¶13, Exhibit"C"; Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶12. |
| 7. The Agreement further required PerfumeDynasty through Debtor, to provide andmaintain an irrevocable ACH debit to allow | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶12. |
| Plaintiff to take of future accountsreceivables to satisfy the amount ofreceivables purchased. | |
| 8. Just days later, in or about June, 2017,Perfume Dynasty by and through Debtor,defaulted on his first payment under theAgreement, failed to inform Plaintiff priorto debiting payments that there wereinsufficient funds in the bank accountidentified under the Agreement, and failedto maintain a bank account that could satisfythe Obligation. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶13. |
| 9. Debtor maintained multiple other bankaccounts into which he continued to depositand thus divert sales receipts withoutrepaying Swift. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶13. |
| 10. Debtor knew at the time he received theAdvance from Swift that he had closed orwas planning on closing Perfume Dynasty,LLC. | Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶20; see also ¶9, Exhibit "C"- Certified Copy of 341a Transcript at p. 12,Lines 1-12; see also ¶14, Exhibit "F" (Requests |
|---|
| for Admission ("RFA") No. 9 & 13, ¶17,Exhibit "H" (late responses to Requests forAdmissions), which Plaintiff asserts are bothdeemed admitted by operation of law.RFA No. 9: Admit that YOUR first payment torepay Swift under the AGREEMENT bouncedin early June,13 2017.RFA No. 13: Admit that YOU knew YOUcould not repay the ADVANCE to Swift onMay 31, 2017 | |
| 11. Defendant knew at the time he took theAdvance from Swift that he had insufficientmonies to repay Swift as of May 31, 2017. | Declaration of Daren M. Schlecter at ¶14,Exhibit "F" (Requests for Admission No. 9 &13, ¶17, Exhibit "H" (late responses toRequests for Admissions), which Plaintiffasserts are both deemed admitted by operationof law.RFA No. 11:Admit that there were sufficient monies fromMay 31, 2017 to November, 2017 to repay the18 ADVANCE under the AGREEMENT.RFA No. 13:Admit that Perfume Dynasty, LLC did not havetwo full time employees as represented in the28 attached Application YOU submitted toSwift on May 31, 2017 |
| 12. Defendant did not use the monies fromSwift to purchase inventory, but to pay offvendors. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 12, Lines 2-12. |
| 13. According to Swift's records, Swift's firstattempt to withdraw monies from Debtor'sbankruptcy account in the amount of$2,560.42 bounced on or about June 9,2017, resulting in an NSF fee. Thus, Debtormade no payments towards the Loan. | Declaration of Bonnie Carey at ¶14. |
| 14. Defendant admitted at his 341a meeting ofcreditors that at the time he closed hisbusiness, he gave away all of his inventoryfor pennies on the dollar. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 7, Lines 14-25, p. 8, Lines 1-3 |
| 15. Defendant admitted at his 341a meeting ofcreditors that he closed Perfume Dynasty,LLC in or about June, 2017. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript, p. 7, Lines 14-18 [Closed thebusiness about a year and half before 341a,which was on September 6, 2018] |
| 16. After defaulting, Swift began phone and inwriting collection efforts. On or about July10, 2017, Swift emailed a hold demand toPaypal pursuant to the UCC FinancingStatement and guarantee under the FRSA. | Declaration of Bonnie Carey at ¶15. |
| 17. Debtor used his Paypal account(s) to operatePerfume Dynasty, LLC. | Declaration of Bonnie Carey at ¶15;Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p 15-17. |
| 18. Debtor/Defendant did not keep anydocuments showing the sales of PerfumeDynasty, LLC, including for July, 2017. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" Certified Copy of 341a Transcriptat p. 15, Lines 1-8 |
| 19. Debtor did not keep track of sales in theoperation of Perfume Dynasty, LLC. | Declaration of Daren M. Schlecter at ¶9,Exhibit "C" Certified Copy of 341a Transcriptat p. 5, Lines 19-24. |
| 20. Debtor's bankruptcy petition shows that his2017 and 2018 gross income fromoperating a business was $0.00. | Declaration of Daren M. Schlecter at ¶¶3-4,Exhibit "A" |
| 21. Based on the Debtor's bankruptcy petitionand testimony at his 341a meeting ofcreditors, Perfume Dynasty, LLC wasstruggling financially at the time theadvance was made to Debtor/Defendant. | Declaration of Daren M. Schlecter at ¶¶3-4,Exhibit "A" (page 32/33 of Debtor'sbankruptcy petition showing no gross incomefrom operation of his business);Declaration of Daren M. Schlecter at ¶9,Exhibit "C" - Certified Copy of 341aTranscript at p. 7, Lines 14-25, p. 12, Lines 1-12;Declaration of Daren M. Schlecter at ¶12,Exhibit "E", Defendant's Answer to AdversaryComplaint, within ¶¶ 13, 20 |
| CONCLUSIONS OF LAW | LAW SUPPORTINGCONCLUSIONS OF LAW |
|---|---|
| 1. Defendant acted willfully because he couldonly have known that the transfer of | Carrillo v. Su (In re Su), 290 F.3d 1140, 1142(9th Cir.2002). |
| Perfume Dynasty LLC's inventory forpennies on the dollar would result in injuryto Swift based on the security interestgranted in Swift's favor. | |
| 2. Defendant acted willfully because he couldonly have known that the use of theAdvance to pay off vendors instead ofpurchasing inventory would result in injuryto Swift based on the security interestgranted in Swift's favor. | Carrillo v. Su (In re Su), 290 F.3d 1140, 1142(9th Cir.2002). |
|---|---|
| 3. Defendant acted willfully because he couldonly have known that his closing orplanning on closing Perfume Dynasty at orabout the time he accepted the Advancefrom Swift would result in injury to Swiftbased on the security interest granted inSwift's favor. | Carrillo v. Su (In re Su), 290 F.3d 1140, 1142(9th Cir.2002). |
| 4. Defendant's act of giving away PerfumeDynasty's inventory for pennies on thedollar showed malice because it was awrongful act which necessarily producedharm and was without just cause or excuse. | Petralia v. Jercich (In re Jercich), 238 F.3d1202, 1209 (9th Cir.2001); TransamericaCommercial Fin. Corp. v. Littleton (In reLittleton), 942 F.2d 551, 554(9th Cir.1991). |
| 5. Defendant's act paying off other vendorsinstead of purchasing inventory with the | Petralia v. Jercich (In re Jercich), 238 F.3d1202, 1209 (9th Cir.2001); TransamericaCommercial Fin. Corp. v. Littleton (In reLittleton), 942 F.2d 551, 554(9th Cir.1991) |
| Advance money from Swift showed malicebecause it was a wrongful act whichnecessarily produced harm and was withoutjust cause or excuse. | |
| 6. Defendant's act of accepting the SwiftAdvance at the time he was closing orplanning on closing Perfume Dynastyshowed malice because it was a wrongfulact which necessarily produced harm andwas without just cause or excuse. | Petralia v. Jercich (In re Jercich), 238 F.3d1202, 1209 (9th Cir.2001); TransamericaCommercial Fin. Corp. v. Littleton (In reLittleton), 942 F.2d 551, 554(9th Cir.1991) |
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| 7. Defendant's Statement of Genuine Issues ofMaterial Fact in Dispute in Support ofOpposition to Motion for SummaryJudgment Pursuant to Local Rule 56-2, filedon November 3, 2020, is insufficient tocreate a genuine issue of material factbecause the Statement is a conclusory, self-serving declaration, lacking detailed factsand any supporting evidence. | F.T.C. v. Publishing Clearing House, Inc., 104F.3d 1168, 1171 (9th Cir. 1997) |
Law Office of Daren M. Schlecter
By: /s/ Daren M. Schlecter
Daren M. Schlecter, Esq.
ORDER
The above Separate Statement of Uncontroverted Facts and Conclusions of Law as reviewed and modified by the court is hereby adopted and so ordered. By separate order being filed and entered concurrently herewith, the court grants Plaintiff's motion for summary judgment.
IT IS SO ORDERED.
###
Date: December 7, 2020
/s/_________
Robert Kwan
United States Bankruptcy Judge