Opinion
Adversary No. 10-90372-PB
08-24-2012
In re TANYA SHUKIN, Debtor. BRONIA GENIN, Plaintiff, v. TANYA SHUKIN, aka TANYA SHUKINA, aka TANTIANTA CHOUKINA, Defendants.
WRITTEN DECISION - NOT FOR PUBLICATION
ORDER
This adversary proceeding took an unusual path in that debtor's bankruptcy case was filed in the Western District of New York, after debtor moved there from the San Diego area. Plaintiff Genin had commenced suit in the California Superior Court prior to the bankruptcy filing, and brought this adversary proceeding seeking a determination of nondischargeability in the Western District of New York, as well. Thereafter, plaintiff moved for a change of venue to San Diego in the adversary-proceeding, which was granted.
Pretrial proceedings were conducted with debtor appearing by-phone, and trial was set for dates when debtor represented she could appear, in person, in San Diego. As in other cases, the Court set dates for the parties to exchange witness lists and copies of all exhibits each side intended to introduce in their respective cases in chief. In addition, the Court set a deadline for filing and serving any trial brief. Plaintiff, through her attorneys, timely complied with each of the Court's requirements. Debtor complied with none.
This adversary then came on regularly for trial on August 23, 2012. Plaintiff and her counsel were present, with witnesses, and were prepared to proceed. There was no appearance by or on behalf of the debtor, nor were any communications received from the debtor regarding her non-appearance. The Court thereafter asked counsel for plaintiff for an offer of proof as to the elements of nondischargeability under 11 U.S.C. § 523(a)(2)(A), and as to plaintiff's damages. After that was provided in open court, the matter was taken under submission.
As stated in In re Britton, 950 F.2d 602, 604 (9th Cir. 1991):
The Ninth Circuit has employed a five-part test for determining when a debt is nondischargeable under section 523(a)(2)(A). The creditor must show that:
(1) the debtor made the representations;
(2) that at the time he knew they were false;
(3) that he made them with the intention and purpose of deceiving the creditor;
(4) that the creditor relied on such representations;
(5) that the creditor sustained the alleged loss and damage as the proximate result of the representations having been made.
Subsequent to the Britton decision, the Ninth Circuit held that the level of reliance required under § 523(a)(2)(A) is "justifiable", not "reasonable". In re Kirsh, 973 F.2d 1454 (1992). The Supreme Court subsequently so held, as well, in
Field v. Mans, 516 U.S. 59 (1995). As reiterated by the Ninth Circuit in In re Apte, 96 F.3d 1319, 1322 (1996):
"[A] person is justified in relying on a representation of fact 'although he might have ascertained the falsity of the representation had he made an investigation.'" [Citation omitted]. Although one cannot close his eyes and blindly rely, mere negligence in failing to discover an intentional misrepresentation is no defense to fraud,
The uncontroverted evidence is that debtor befriended Mr. And Mrs. Genin, an elderly couple of Russian origins. Mr. Genin was frail and in a wheelchair. Debtor is also of Russian origin. Debtor approached the Genins in the Fall of 2004 about a loan to improve real estate at 2341-2345 Manchester Ave. She said she needed the money to prepare the property for sale, and that their money would be protected by a trust deed on the property, thus representing there was value in the property to which their deed of trust would attach. In fact, the property was under water, with no value left for the Genins after senior debt was satisfied.
Aside from that representation of value, debtor also represented what the loaned funds would be used for. However, they were not so used. The initial loan by the Genins was made on November 2, 2004, in the principal amount of $120,000, at 10% interest, for a one year term. Debtor was obligated to pay $500 per month toward interest over that period, and she did make some payments on this and the other loans. Debtor did provide a promissory note and deed of trust on the first loan.
Shortly thereafter, debtor told the Genins she needed more money to fix some problems on the property. On January 21, 2005 she borrowed another $75,000, for a 13 month term, at 10% interest, with interim payments to be made of $3 50 per month. She gave the Genins another promissory note and trust deed on the Manchester property, although the trust deed was not recorded for over three months.
Just over two months later, debtor borrowed another $130,000 from the Genins. Debtor provided a promissory note and deed of trust dated March 30, 2005. That trust deed was not recorded until May 8, 2006. In the meantime, debtor granted a security interest in the same property to Kristina Zinovieva. The deed of trust was dated November 15, 2005 and was not recorded until May 2, 2006. Still, the latter was recorded before the March 30, 2005 trust deed given the Genins.
Still more curious is a trust deed from debtor to Kristina Zinovieva, purportedly dated August 9, 2005, but not notarized until June 8, 2006 and recorded the same date, to secure an interest in the same real property. Plaintiff asserts without controversion by debtor that Kristina Zinovieva is debtor's daughter.
The final "borrowing" is more complex. After persuading the Genins to borrow money to purchase a lot, the debtor arranged for her daughter to purchase it from a putative partnership between debtor and the Genins. The net proceeds exceeded $102,000, and the Genins' share was $51,112. Instead of paying those funds to the Genins, debtor gave them yet another promissory note and another trust deed on the Manchester property. The trust deed was dated March 14, 2006, and recorded April 10, 2006. The note was due and payable August 15, 2007.
As a threshold matter, debtor's failure to comply with this Court's stated requirements of exchanging a witness list and a copy of all exhibits to be offered in her case-in-chief permits the Court to enter judgment in plaintiff's favor pursuant to Bankruptcy Local Rule 7016-11, for abandonment of her position.
Further, plaintiff's offer of proof established that Mrs. Genin would testify to the representations debtor made about the use to which the loan proceeds would be put (improving the property securing the loans) and about debtor's representations concerning the safety and protection of the loaned funds as represented by the deeds of trust.
Plaintiff's trial exhibits, received without opposition, show that debtor had granted trust deeds on the 2341 Manchester property to KST Associates on February 6, 2004 and March 15, 2004, for a total of $75,000. On May 11, 2004 she gave a note and trust deed to Univest Mortgage for $675,000. So the 2341 property was already encumbered by at least $750,000 before debtor asked the Genins for the first loan.
The property at 234 5 Manchester was encumbered by a loan of $560,000 from Pacific West Syndication, and a trust deed dated December 12, 2002, recorded December 31, 2002. That was followed by another $40,000 debt on December 9, 2003, recorded December 22, 2003. Then, on April 12, 2004 debtor borrowed $675,000 from Saxon Mortgage. The trust deed was recorded April 28, 2004. That loan presumably paid off the Pacific West loans. It appears 2345 was thus encumbered by at least $675,000 before debtor approached the Genins.
Based on all the foregoing, the Court finds and concludes that the debts owed by debtor Shukin to Mrs. Genin are nondischargeable. Further, the Court finds and concludes that the Court has authority to enter a money judgment incident to determination of nondischargeability. In re Sasson, 424 F.3d 864 (9th Cir. 2005); In re Kennedy. 108 F.3d 1015 (9th Cir. 1997).
Mrs. Genin has established that the Genins made loans to Ms. Shukin totalling $376,112. Each of the promissory notes provided for 10% interest per year. Mrs. Genin acknowledges debtor made some payments, and Mrs. Genin has agreed to accept debtor's representation, made pretrial, that debtor made a total of $31,970 in payments. Including interest on each of the notes, Mrs. Genin seeks a net award of $627,971.21, which reflects the loan principal plus 10% simple interest, minus the payments Mrs. Genin has agreed to credit debtor with having made.
Counsel for plaintiff shall prepare and submit a separate form of judgment consistent with the foregoing within twenty-one days of the date of entry of this Order, and providing for a judgment in the amount of $627,971.21, plus costs as assessed upon application to the Clerk of Court. From date of entry of said judgment, it shall accrue interest at the federal post-judgment rate as applicable, until paid in full. Said judgment shall be nondischargeable under 11 U.S.C. § 523(a)(2)(A).
IT IS SO ORDERED.
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PETER W. BOWIE, Chief Judge
United States Bankruptcy Court