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Parties Involved:
Alexandr Alexandrov
Plaintiff
Volodymyr Semenyuk
Defendant

Document Text:

EF (Ai JF1rIA 

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF CALIFORNIA 

SACRAMENTO DIVISION 

In re Case No. 14-26460-A-7 

VOLODYMYR SEMENYUK, 

Debtor. 

ALEXANDR ALEXANDROV, Adv. No. 14-2239 

Plaintiff, 

vs. 

VOLODYMYR SEMENYUK, 

Defendant. 

FINDINGS OF FACT AND CONCLUSIONS OF LAW 

In this case, plaintiff Alexandr Alexandrov maintains that 

defendant Volodymyr Semenyuk falsely represented his intention to 

sell him two operational commercial vehicles, a truck and a 

trailer, for $20,000. The plaintiff asserts that he paid $20,000 

to the defendant but the vehicles were not operational and, 

whether or not operational, the defendant never transferred title 

to him. After failing to transfer the vehicles, the defendant 

Case 14-02239 Filed 09/02/15 Doc 53
1 agreed to repay the $20,000 to the plaintiff and he signed a 

2 series of short term notes to that effect. The defendant, 

3 however, failed to repay the $20,000 and then filed a chapter 7 

4 bankruptcy petition. 

5 Based on these findings of fact and conclusions of law, the 

6 court will enter a judgment in favor of the plaintiff, awarding 

7 him $20,035, interest, costs, and a declaration that the judgment 

8 is made nondischargeable by 11 U.S.C. § 523(a) (2) (A). 

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10 Findings of Fact 

11 1. In March 2012, the plaintiff offered to buy a 

12 commercial truck and trailer from the defendant for $20,000. 

13 When the offer was made, the defendant admits that he and his 

14 trucking business were in financial difficulty. There is no 

15 convincing evidence that the plaintiff knew of these financial 

16 difficulties. 

17 2. The defendant agreed to the deal, promising that the 

18 vehicles would be operational and free of material defects. The 

19 plaintiff gave the defendant $20,000 on or about March 22, 2012. 

20 The plaintiff, however, did not receive the vehicles. 

21 3. As to the title to the vehicles, at the time of the 

22 sale, the defendant gave to the plaintiff a certificate of title 

23 for each vehicle. However, the titles given to the plaintiff 

24 were insufficient to transfer title to him. The defendant had 

25 purchased each vehicle from a third party. He held endorsed 

26 certificates of title from these third parties but the defendant 

27 had never applied to the California Department of Motor Vehicles 

28 (DMV) to transfer the titles into his name. See Exhibits 1 and 

Case 14-02239 Filed 09/02/15 Doc 53
2. When he later sold the vehicles to the plaintiff, the 

defendant gave the plaintiff the endorsed certificates of title 

from the third parties. These, however, transferred title to the 

defendant, not to the plaintiff. 

With just this paperwork, DMV refused to transfer the 

titles to the plaintiff. In order to do so, the defendant first 

had to transfer title into his name and then transfer the titles 

to the plaintiff. The defendant never transferred clear titles 

to the plaintiff. 

As to the condition of the vehicles, the plaintiff 

discovered that they had numerous defects and were in need of 

repairs. The defendant promised to make the repairs and then 

deliver possession to the plaintiff. While waiting for the 

defendant to repair the vehicles, the defendant removed the 

vehicles from his business parking lot, leaving the plaintiff 

without the vehicles. 

The plaintiff made repeated attempts between the end of 

March 2012 and April 2013 to get the plaintiff to repair the 

vehicles, deliver them to him, and to obtain clear titles. 

However, the defendant hid from the plaintiff and failed to 

rectify the situation. In March 2013, the defendant sold the 

vehicles a second time to another person. See Statement of 

FinancialAffairs, Question 10(a), filed June 19, 2014, Docket 1, 

Case No. 14-26460.' The defendant sold the vehicles sold for a 

total $13,600. 

'The court takes judicial notice of the Statement of 

Financial Affairs which contains these admissions. Fed. R. Evid. 

201. 

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After persistent but unsuccessful efforts by the 

plaintiff to get the defendant either to honor their deal or to 

repay his $20,000, the defendant executed a promissory note on 

April 22, 2013 agreeing to repay plaintiff in 30 days. See 

Exhibit H. The defendant failed to pay the plaintiff in 30 days 

or ever. 

The first note was succeeded by a series of equally 

worthless notes. See Exhibits B through G. When the defendant 

failed to honor a note, and when the plaintiff was able to find 

the defendant, the defendant agreed to sign a new note. Starting 

in June 2013, the defendant also gave the plaintiff a series of 

checks. The first of these checks, in the sum of $1,600, was 

dishonored by the defendant's bank. The plaintiff's bank charged 

him $35 as a result. Thereafter, before depositing the 

defendant's four other checks, the plaintiff first contacted the 

defendant's bank to verify there were sufficient funds to cover 

the checks. Because he was told there were insufficient funds, 

he did not deposit the checks. 

Finally, in June 2014, the plaintiff filed suit in 

state court. Nine days later, the defendant filed his chapter 7 

petition. 

The defendant's response to this proceeding has been to 

deny that he sold the vehicles to the plaintiff. Instead, the 

defendant asserts that the $20,000 was an unsecured loan. The 

court finds that the defendant's testimony and other evidence 

offered in support of this defense lacks credibility. 

a. The defendant's theory of the case is contradicted by 

the fact that he gave the plaintiff certificates of title 

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Case 14-02239 Filed 09/02/15 Doc 53
for the vehicles at the inception of the deal, albeit 

certificates insufficient to transfer title. The defendant 

deals with this contradiction by asserting that the 

plaintiff's stole the title certificates from his office. 

However, there is no äorroboration for this, such as a 

police report that was placed into evidence. The court 

believes the plaintiff's testimony that he was given the 

certificates by the defendant in March 2012. 

b. The defendant also argues that the plaintiff should 

have known that the defendant could not sell him the 

vehicles because he did not own them. In fact, the 

defendant did own the vehicles. The former owners had 

signed and delivered certificates of title to the defendant. 

The defendant, however, had failed to file those endorsed 

certificates with DMV and have title registered in his name. 

All the defendant had to do was file certificates, obtain 

new title certificates, and then endorse them over to the 

plaintiff. The defendant did just this in March 2013 when 

he sold the vehicles a second time to someone else. He 

could have done the same for the plaintiff but did not. 

C. While the series of promissory notes might suggest a 

loan, these notes were not contemporaneous with the March 

2012 transaction. The first note was executed on April 22, 

2013, more than one year after the fact. This time gap is 

consistent with the plaintiff's version of the case - the 

notes were offered to the plaintiff only after the defendant 

failed to make good on the sale of the vehicles. 

d. Further, if the plaintiff was interested in loaning 

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Case 14-02239 Filed 09/02/15 Doc 53
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money to the defendant as an investment, one would expect 

the notes to include an interest rate. The notes make no 

mention of the return the plaintiff would receive on his 

investment. The court finds that the notes represented the 

plaintiff's effort to make the best of a bad situation and 

get his money back from the defendant. 

e. Finally, the court does not believe the defendant's 

testimony that he paid the plaintiff 3% a month on the 

$20,000 from March 2012 through February 2014. There is no 

documentary evidence of such payments and, even if the 

payments were in cash as claimed by the defendant, at a 

minimum he should have records showing the withdrawal of 

these sums from his bank accounts. Nothing was produced. 

And, given usury limits one would expect that a 36% annual 

interest rate would prompt the scheduling of the plaintiff's 

claim as disputed. Yet, Schedule F does not list the claim 

as disputed, contingent or unliquidated. 2 

11. Ultimately, the fact that the defendant admits he was 

in financial difficulty at the inception of the deal but denies 

he ever agreed to sell the vehicles to the plaintiff, convinces 

the court that the defendant set out to defraud the plaintiff. 

He intended to take the plaintiff's $20,000 and not to transfer 

the vehicles to him. 

Conclusions of Law 

2 The court takes judicial notice of Schedule F. Fed. R. 

IEvid. 201. 

Case 14-02239 Filed 09/02/15 Doc 53
1 1. To the extent any of the foregoing findings of fact are 

2 conclusions of law, they are incorporated by reference as 

3 conclusions of law. 

4 2. This court is the proper venue for this proceeding. 

5 See 28 U.S.C. § 1409. 

6 3. This matter was tried before the court sitting without 

7 a jury. The claim concerns the dischargeability of a debt 

8 pursuant to 11 U.S.C. § 523(a) (2) (A). This is a matter within 

9 the court's core jurisdiction. See 28 U.S.C. § 157(b) (2)(I). 

10 The court may enter a final order. Stern v. Marshal, 131 S. Ct. 

11 2594 (2011) and Exec. Benefits Ins. Agency v. Arkison (In re 

12 Bellingham Ins. Agency, Inc.), 134 S. Ct. 2165 (2014). 

13 4. In the Ninth Circuit, there is a five-part test for 

14 determining when a debt is nondischargeable under section 

15 523(a) (2) (A): 

16 A creditor must show that (1) the debtor made the 

representations; (2) that at the time he knew they were 

17 false; (3) that he made them with the intention and 

purpose of deceiving the creditor; (4) that the 

18 creditor relied on such representations; (5) that the 

creditor sustained the alleged loss and damage as the 

19 proximate result of the representations having been 

made. 

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21 Cowan v. Kennedy (In re Kennedy), 108 F.3d 1015, 1018 n.2 (9th 

22 Cir. 1997); Kirsh v. Kirsh (In re Kirsh), 973 F.2d 1454, 1457 

23 (9th Cir. 1992). 

24 5. In Field v. Mans, 516 U.S. 59, 116 S.Ct. 437 (1995), 

25 the Supreme Court determined that the term "actual fraud" in 

26 section 523(a) (2) (A) incorporated common law elements of fraud 

27 into nondischargeability cases. Citibank (South Dakota) v. 

28 Eashai (In re Eashai) , 87 F.3d 1082, 1087 (9th Cir. 1995) 

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1 Actual fraud includes circumstances where a debtor incurs debts 

2 "with no intention of paying for same." Karelin v. Bank of 

3 America Nat'l Trust and Say. Assn. (In re Karelin), 109 B.R. 943, 

4 947 (9th Cir. BAP 1990) 

A fraudulent misrepresentation may be express or 

implied. An implied misrepresentation arises from "conduct 

intended to create and foster a false impression." Smith v. 

Young (In re Young), 208 B.R. 189, 199 (Bankr. S.D. Cal. 1997). 

Failure to disclose a material fact can constitute a 

misrepresentation for nondischargeability purposes. Texas 

Venture Partners v. Christian (In re Christian), 111 B.R. 118, 

122 (Bankr. W.D. Tex. 1989) 

The court may infer the existence of the debtor's 

intent not to perform when the facts and circumstances of the 

case present a picture of deceptive conduct by the debtor. 

Eashai, 87 F.3d at 1087. This approach to determining if a 

debtor has engaged in actual fraud is known as the "totality of 

the circumstances" test. Id. at 1087; Barrack, 217 B.R. at 607. 

The totality of the circumstances, as summarized above 

and particularly as set out paragraphs 3 through 10(a)-(e) and 

11, convince the court that the defendant promised to deliver 

possession and title to two operational vehicles to the plaintiff 

but never intended fulfill that promise. The promise was made to 

induce the plaintiff to pay $20,000 to the defendant, which the 

plaintiff did to his detriment. 

3Young was overruled on other grounds. See Cote v. Smith I (In re Cote), 229 B.R. 15, 17 (9th Cir. BAP 1998). 

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Case 14-02239 Filed 09/02/15 Doc 53
1 9. The plaintiff's relied on the defendant's promise to 

2 sell him the vehicles and his reliance was justifiable. A 

3 plaintiff justifiably relies on a representation of intent to 

4 perform a contract as long as there are no apparent red flags 

5 suggesting that the defendant will not abide by his promise. 

6 Field v. Mans, 116 S.Ct. 437 (1995); In re Anastas, 94 F.3d 1280, 

7 1286 (9th Cir. 1996) . In this case, there were no red flags at 

8 the inception of the deal. To the extent it might be argued that 

9 the plaintiff should have been alerted to a problem by the 

10 certificates of title given to him by the defendant, the 

11 plaintiff is a Russian immigrant was ability to speak and read 

12 English is marginal at best, and the defendant was the expert - 

13 h operated a trucking business. And, the fact that both parties 

14 are Russian immigrants who were acquainted with one another prior 

15 to the transaction, reasonably prompted the plaintiff to trust 

16 the defendant. 

17 10. As a proximate result of the defendant's 

18 misrepresentation, the plaintiff has been damaged in the sum of 

19 $20,000, plus $35 in bank charges. 

20 A judgment shall be entered in accord with these findings of 

21 fact and conclusions of law. 

22 Dated: By the Court 

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Michael S. McManus, Judge 

25 United States Bankruptcy Court 

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Case 14-02239 Filed 09/02/15 Doc 53