Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00705/USCOURTS-caed-2_05-cv-00705-1/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

In re

GALINA ANDREYEV,

NO. CIV. S 05-0705 MCE 

Debtor,

FIRST NATIONAL BANK OF MEMORANDUM AND ORDER

OMAHA,

Plaintiff/Appellee,

v.

GALINA ANDREYEV,

Defendant/Appellant.

----oo0oo----

Defendant Galina Andreyev (“Andreyev”) appeals the

Bankruptcy Court’s judgment in favor of Plaintiff First National

Bank of Omaha. Pursuant to its Memorandum Decision filed

February 18, 2005, the Bankruptcy court entered judgment that

Andreyev’s credit card debt to the First National Bank of Omaha,

Case 2:05-cv-00705-MCE Document 15 Filed 12/06/05 Page 1 of 10
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in the amount of $4,656.61, was non-dischargeable under 11 U.S.C.

§§ 523(a)(2)(A) and 523 (a)(2)(C). For the reasons set forth

below, the bankruptcy court’s decision is affirmed.

BACKGROUND

Andreyev filed a petition for bankruptcy under 11 U.S.C.

Chapter 7 on September 18, 2002. Among the debts Andreyev sought

to discharge through bankruptcy was credit card debt incurred

through use of a credit card issued by the First National Bank of

Omaha. As of July 25, 2002, that credit card account was in good

standing and had a balance of $4,699.48. Between July 25, 2002

and September 9, 2002, Andreyev made purchases against the credit

card, and took a $1,200.00 cash advance, for total additional

charges of $4,463.70. Those charges, which were all incurred

less than two months before Andreyev filed for bankruptcy,

brought Andreyev’s credit card over its $9,000.00 limit.

On December 19, 2002, the First National Bank of Omaha filed

a complaint against Andreyev seeking an exception from discharge 

for the debt incurred by Andreyev within sixty days prior to her

bankruptcy. Trial was held before the bankruptcy court on

February 17, 2005. A Memorandum Decision, issued the following

day, set forth the court’s findings of fact and conclusions of

law following that trial.

While Plaintiff First National Bank of Omaha asserted in its

complaint that Andreyev’s charges just prior to bankruptcy were

non-dischargeable both by virtue of the provisions of 11 U.S.C.

§§ 523(a)(2)(A) and 523(a)(2)(C), in fact the court’s decision

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was premised on § 523(a)(2)(A), which precludes discharge of any

debt obtained by “false pretenses, a false representation, or

actual fraud.” The court found that Andreyev’s promise to repay

the charges in question, which it found to be implied each time a

credit card is used, “was either false or so reckless as to

constitute willful misrepresentation”. (Memorandum Decision,

attached as Exhibit “B” to Appellant’s Designation of Record,

4:15-17).

The bankruptcy court looked to a number of factors gleaned

from the both the written record and the testimony adduced at

trial in making that factual determination. First, the court

noted that Plaintiff’s use of her credit card just before

bankruptcy more than doubled, even though neither Andreyev or her

husband was employed. This “virtual spending spree”, as

described by the court, put Andreyev over her credit card limit

and was made under “bleak” financial conditions. Andreyev

herself was disabled, had not worked for many years, and received

an income consisting of disability assistance payments totaling

some $9,000.00 per year. Her husband’s unemployment benefits

expired in August 2002, concurrently with Andreyev’s increased

use of the credit card. In addition, at the time Andreyev’s

bankruptcy petition was filed, she and her husband owed

$48,000.00 in unsecured obligations, including nearly $16,000.00

in credit card debt.

Based on these circumstances, the Court inferred that

Andreyev “never intended to repay the charges incurred in the 60-

day period prior to her bankruptcy filing”, making her implied

promise to pay this obligation false and with the intent to

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deceive the First National Bank of Omaha. (Memorandum Decision,

6:20-24). The bankruptcy court consequently found the credit

card debt incurred by Andreyev between July and September of 2002

was excepted from discharge under 11 U.S.C. § 523(a)(2)(A). 

While the court noted in its decision that some of the charges

made were also non-dischargeable as constituting the purchase of

“luxury goods and services” within 60 days prior to bankruptcy in

contravention of § 523(a)(2)(C), it noted that it did not need to

specifically address that question since it determined that all

of the charges in question were non-dischargeable under §

523(a)(2)(A).

Andreyev now appeals the judgment rendered against her

pursuant to the bankruptcy court’s Memorandum Decision. 

STANDARD

An appellant may petition the district court for review of a

bankruptcy court’s decision. Fed. R. Bankr. P. 8013. The

applicable standard of review is identical to that employed by

circuit courts of appeal in reviewing district court decisions. 

See Heritage Ford v. Baroff (In re Baroff), 105 F.3d 439, 441

(9 Cir. 1997). Legal conclusions are renewed on a de novo th

basis, and factual determinations are assessed pursuant to a

“clearly erroneous” standard. Murray v. Bammer (In re Bammer),

131 F.3d 788, 792 (9 Cir. 1997) (en banc). th

Findings of fact are “clearly erroneous” only if the

reviewing fact is “left with the definite and firm conviction

that a mistake has been committed.” In re Marquam Inv. Corp.,

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The Court recognizes, however, that whether charges were 1

incurred for luxury goods and services is also a factor to be

considered in determining fraudulent intent for purposes of §

523(a)(2)(A), as will be discussed, infra.

5

942 F.2d 1462, 1466 (9 Cir. 1991) (quoting United States v. th

United States Gypsum Co., 333 U.S. 364, 395 (1948)). The

appellant has the burden of proof in convincing the reviewing

court that such error has been committed, and the reviewing court

should not reverse simply because another decision could have

been reached. In re Windsor Indus., Inc., 459 F. Supp. 270, 275

(N.D. Tex. 1978).

For bankruptcy discharge purposes, a debtor’s intent to

defraud is a factual determination reviewed for clear error. 

Robertson v. Dennis (In re Dennis), 330 F.3d 696, 701 (5 Cir. th

2003).

ANALYSIS

It is difficult to divine from Appellant’s Brief (which

Andreyev has submitted in pro se) the precise grounds upon which

she is appealing the bankruptcy court’s decision in this matter. 

Most of Andreyev’s argument is directed towards disputing any

contention that the credit card charges at issue were for “luxury

goods and services” so as to fall within the purview of §

523(a)(2)(C). In her nine page brief, Andreyev refers on some 1

fifteen occasions to either “luxury” goods or the converse, items

she deems to be “necessities”.

To the extent Andreyev’s appeal is premised on the

applicability of the exemption for luxury goods, this bankruptcy

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appeal can be summarily rejected. As stated above, the

bankruptcy court’s Memorandum Decision makes it clear that while

§ 523(a)(2)(C) does apply to some of the credit card charges at

issue, the decision rests not on that subpart of the statute but

instead on § 523(a)(2)(A), which operates to make the entire

amount of the credit charges incurred since July of 2002 nondischargeable. (See Memorandum Decision, 3:19-25). 

Consequently, the validity of the decision necessarily hinges on

whether application of § 523(a)(2)(A), and the conclusion that

Andreyev’s conduct was either false or constituted willful

misrepresentation, was proper.

Inasmuch as Appellant’s Brief also refers, at least

obliquely, to a determination of fraud by the bankruptcy court,

this Court will deem her appeal to also encompass § 523(a)(2)(A),

although this is by no means clear from Andreyev’s papers. That

section provides in pertinent part as follows: 

(A) A discharge under § 727, 1141, 1228(a), 1228(b), or

1328(b) of this title does not discharge an individual from

any debt-

...

(2) for money, property, services, or an extension,

renewal or refinancing of credit, to the extent

obtained by-

(A) false pretenses, a false representation, or

actual fraud, other than a statement respecting

the debtor’s or an insiders’s financial

condition;...

11 U.S.C. § 523(a)(2)(A).

In order to prevail under § 523(a)(2)(A), a party contesting

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the scope of a proposed bankruptcy discharge must prove that the

debtor knowingly made false representations with the intention

and purpose of deceiving the creditor, that the creditor relied

on such representations, and that it sustained loss and damage as

a result thereof. Britton v. Price (In re Britton), 950 F.2d

602, 604 (9 Cir. 1991). th

Turning first to whether a false representation was

knowingly made, the law is clear that every time a credit card is

used, the card holder makes a representation that he intends to

repay the debt. When a card is used without an intention to

repay, a fraudulent representation has been made to the card’s

issuer. Anastas v. American Savings Bank (In re Anastas), 94

F.3d 1280, 1285 (9 Cir. 1996); American Express v. Hashemi (In th

re Hashemi), 104 F.3d 1122, 1126 (9 Cir. 1997). Because it is th

difficult to directly establish fraudulent intent in credit card

cases like this one, circumstantial evidence inferring fraud from

the “totality of the circumstances” may be enlisted. Household

Credit Services, Inc. v. Ettell (In re Ettell), 188 F.3d 1141,

1145 (9 Cir. 1999). In determining the totality of the th

circumstances, the Ninth Circuit Bankruptcy Appeal Panel, in

Citibank South Dakota v. Dougherty (In re Dougherty), 84 B.R.

653, 657 (9 Cir. BAP 1988), enumerated twelve factors relevant th

to determining a debtor’s intent, none of which is dispositive. 

As long as, on balance, the evidence supports a finding a

fraudulent intent, a determination to that effect is appropriate. 

See Grogan v. Garner, 498 U.S. 279, 291 (1991).

The twelve so-called Dougherty factors are as follows:

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1) the length of time between the charges and the

bankruptcy filing;

2) whether or not an attorney had been consulted

concerning the filing of bankruptcy before the charges were

made;

3) the number of charges made;

4) the amount of the charges;

5) the financial condition of the debtor at the time

the charges were made;

6) whether the charges were above the credit limit of

the account;

7) whether the debtor made multiple charges on the same

day;

8) whether or not the debtor was employed;

9) the debtor’s prospects for employment;

10) the financial sophistication of the debtor;

11) whether there was a sudden change in the debtor’s

buying habits;

12) whether the purchases made were luxuries or

necessities.

Dougherty, 84 B.R. at 657.

In its Memorandum Decision at pages 4 through 6, the

bankruptcy court applied the facts of Andreyev’s case to each of

these factors before coming to the conclusion, on the basis of

this analysis, that Defendant never intended to repay the charges

incurred within the 60-day period prior to her bankruptcy filing,

and that her implied promise to pay those obligations was hence

false and made with the intent to deceive the First National Bank

of Omaha. (Memorandum Decision, 6:20-24). As enumerated above,

in making that determination the bankruptcy court pointed to,

inter alia, Andreyev’s doubled use of her credit card in the face

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of her “bleak” financial picture (with neither Andreyev or her

husband employed, and her husband’s unemployment benefits

expiring as the charges in question were made), the fact that

Andreyev went over her credit limit, and the fact that the

charges made just before her bankruptcy were more than twice the

total of any previously incurred monthly charges.

The bankruptcy court went on to find that the First National

Bank of Omaha reasonably relied on Andreyev’s implied promise to

pay for the charges she incurred, inasmuch as Andreyev had

maintained her credit card account in good order until the 60-day

period before her bankruptcy filing, the First National Bank of

Omaha had no notice of a potential problem with the account

before the charges in question were made. See Hashemi, 104 F.3d

at 1126. (Memorandum Decision, 6:22-28). Finally, the

bankruptcy court determined that the First National Bank of Omaha

was damaged by Andreyev’s non-payment of her obligations in this

regard. (Id. at 6:28-7:2). The bankruptcy court hence found

that Plaintiff had met its burden of proof in establishing nondischargeability under 11 U.S.C. § 523(a)(2)(A).

This Court cannot determine, as it must to warrant reversal

on appeal, that the bankruptcy court’s findings in this regard

constituted clear error. The record supports the bankruptcy

court’s conclusion that credit card debt, owed by Andreyev to the

First National Bank of Omaha, was non-dischargeable under 11

U.S.C. 523 (a)(2)(A). See Britton, 950 F.2d at 604.

//

//

//

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Because oral argument would not be of material assistance, 2

this matter was deemed suitable for decision without oral

argument. E.D. Local Rule 78-230(h).

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CONCLUSION

Based on all the foregoing, the decision of the bankruptcy

court is hereby affirmed.2

IT IS SO ORDERED.

DATED: December 5, 2005

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

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