Opinion
CASE NO. 17-40141 PROC. NO. 17-4004
05-23-2018
IN RE: DAVID MARK BURKHARDT JENNIFER ANN BURKHARDT Debtors STATE OF INDIANA on the relation of the INDIANA DEPARTMENT OF WORKFORCE DEVELOPMENT Plaintiff v. DAVID MARK BURKHARDT Defendant
NOT FOR PUBLICATION DECISION
On May 23, 2018
By this adversary proceeding, the plaintiff seeks a determination that the debt owed it is non-dischargeable pursuant to § 523(a)(2)(A) (fraud) and § 523(a)(7) (fine, penalty, forfeiture) as the result of its determination that the debtor falsely represented his eligibility for unemployment insurance benefits. The matter is before the court following trial of the issues raised.
Plaintiff claims the defendant falsely represented his employment status and/or income in connection with applying for emergency unemployment benefits during the benefit year ending on December 26, 2009 and regular unemployment benefits from January through June 2010. At trial, the debtor testified that he informed an employee at WorkOne (where he completed the application for benefits through their computer system) of his employment status, was told to continue to apply for benefits and that they would adjust things accordingly. The debtor's testimony throughout the trial could be summarized that, based, in part, to a lack of education, he did not fully understand the application and relied on the staff of WorkOne for assistance. Based upon that and his reliance upon what he was told, his applications for unemployment compensation did not accurately reflect his employment status and/or wages received for the weeks in question.
The Department's definition of the time period for each "benefit year" is specific to that agency and will often defy ordinary, commonplace ideas of what constitutes a year. In this instance, it constitutes the time period during which benefits can be received and ends 52 weeks after the application is first submitted. But, a benefit year can extend beyond those 52 weeks if the applicant also seeks emergency benefits, as the debtor did here. --------
At the conclusion of trial, the court ruled that, as to the portion of the debt attributable to the penalties and fines assessed by the plaintiff, that amount was non-dischargeable pursuant to § 523(a)(7) of the United States Bankruptcy Code. See, Kelly v. Robinson, 479 U.S. 36, 107 S.Ct. 353 (1986); Matter of Loy, ___ B.R. ___, 2018 WL 2283871 (Bankr. N.D. Ind. 2018); In re Burge, 2015 WL 9997209 (Bankr. S.D. Ind. 2015) (§ 523(a)(7) does not contain any intent requirement). As to the amounts the debtor received for unemployment compensation challenged as having been fraudulently obtained, and thus non-dischargeable as a "debt for money, property, [or] services . . . obtained by - false pretenses, a false representation, or actual fraud" pursuant to § 523(a)(2), the court requested briefs from the parties as to the debtor's intent to deceive. See e.g., In re Owens, 2018 WL 1616852 *7 (Bankr. S.D. Ind. 2018) ("confusion is not the equivalent of fraud"). Although the plaintiff filed such a brief, the debtor has not done so.
Exceptions to discharge are narrowly construed in favor of the debtor. Ojeda v. Goldberg, 599 F.3d 712, 718 (7th Cir. 2010); Matter of Scarlata, 979 F.2d 521, 524 (7th Cir. 1992); In re Kimzey, 761 F.2d 421, 424 (7th Cir. 1985). The plaintiff bears the burden of proving that the debt should be excepted from discharge by a preponderance of the evidence. See, Grogan v. Garner, 498 U.S. 279, 111 S. Ct. 654 (1991). Here, given the prior administrative determination, the issue is not one of liability, but dischargeability and that turns upon the debtor's intent. There is no dispute that the debtor misrepresented his employment status to the plaintiff or that based upon those misrepresentations he received benefits he was not entitled to. The issue is whether those misrepresentations were made with the intent to deceive, or have some less culpable explanation. See, In re Gard, 327 B.R. 372, 375-76 (Bankr. N.D. Ind. 2003) citing McClellan v. Cantrell, 217 F.3d 890, 893-94 (7th Cir. 2000); In re Jewell, 554 B.R. 169, 171 (Bankr. N.D. Ind. 2016) ("It is this actual intent that distinguishes the fraud condemned by § 523(a)(2)(A) from negligence, imprudence, stupidity, or some other innocent error."); Owens, 2018 WL 1616852 *7. That is a question of fact for the court to determine based upon the evidence presented and its evaluation of the credibility of the witnesses.
The court can accept the debtor's testimony that, when he asked how to fill out the computerized application he may have told a representative of the plaintiff that he was employed and was told to go ahead and complete the form and adjustments would be made. That inquiry and that response are not, however, a license to completely misrepresent the true state of affairs, by saying "no" and "$0" when he was asked on the application whether he was employed and how much he earned. He could have easily said yes and disclosed his true earnings and then let the necessary adjustments to his eligibility and amount of benefits be made based upon accurate information. In not doing so the court finds that the debtor acted with the intent to deceive.
Debtor/defendant's obligation to the plaintiff is non-dischargeable. Judgment will be entered accordingly.
/s/ Robert E . Grant
Chief Judge, United States Bankruptcy Court