Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caeb-2_17-ap-02083/USCOURTS-caeb-2_17-ap-02083-0/pdf.json

Parties Involved:
Afshin Kooshkebaghi
Plaintiff
Michael James Simons
Defendant
Stacey Michele Simons
Defendant

Document Text:

FILED 

SEP 1,0 2018 

UNITED STATES MNKRUPT'CY COURT 

EASTERN DISTRICT OF CALIFORNIA 

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF CALIFORNIA 

SACRAMENTO DIVISION 

In re Case No. 17-21035-A-13 

MICHAEL and STACEY SIMONS, 

Debtor. 

AFSHIN KOOSHKEBAGHI, Adv. No. 17-2083 

Plaintiff, Date: August 9, 2017 

Time: 9:00 a.m. 

I VS. Dept: A 

I MICHAEL and STACEY SIMONS, 

Defendants. 

FINDINGS OF FACT AND CONCLUSIONS OF LW 

This matter was tried by the court on August 9, 2018. 

Plaintiff Afshin Kooshkebaghi appeared with his attorney, Yasha 

Rahimzadeh, and defendants Michael and Stacey Simons appeared 

with their attorney, Richard Kwun. Having considered the 

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1 evidence presented at trial, the court now makes its findings of 

2 fact and conclusions of law. 

3 This is an action to determine the dischargeability of a 

4 debt as well as to deny the defendants' chapter 7 discharge. It 

5 is a core proceeding in which this court may enter a final 

6 judgment. 28 U.S.C. § 157 (b) (2) (I) & (J). 

7 For the reasons explained below, the court determines that 

8 the debt referred to in the complaint is nondischargeable as to 

9 defendant Michael Simons but there is no basis to deny the 

10 I defendants' discharge in its entirety. A separate judgment will 

11 be issued. 

12 

13 Findings of Fact 

14 1. The defendant, Michael Simons, purchased a used 2005 

15 Ford F350 truck in August 2015 from the plaintiff, Afshin 

16 Kooshkebaghi, for $21,000. The defendant paid $15,000 of the 

17 purchase price and agreed to pay an additional $6,000 within a 

18 reasonable time. 

19 2. contemporaneously with the exchange of the $15,000, the 

20 plaintiff and the defendant went to an office of the California 

21 Department of Motor Vehicles (the DMV) to report the sale and 

22 obtain a certificate of title in the name of defendant Michael 

23 Simons. They gave the DMV a bill of sale. However, that bill of 

24 sale incorrectly reported the sale price as $15,000, not $21,000. 

25 The certificate of title issued to Mr. Simons on September 2, 

26 2015, nonetheless reflected that the plaintiff held a lien on the 

27 truck. 

28 

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1 3. Mr. Simons received possession of, and title to, the 

2 truck. Soon thereafter, the plaintiff began sending text 

3 messages to Mr. Simons asking for the remaining $6,000. In 

4 response, Mr. Simons reiterated his promise to pay an additional 

5 $6,000 and did not dispute this obligation. For instance, in 

6 response to a September 18, 2015 text from the plaintiff asking 

7 when the $6,000 would be paid, Mr. Simons responded, "Like I 

8 said, I will contact you in acouple [sic] of weeks once I have an 

9 idea of how much I will be making." 

10 4. This was followed by a text message on October 13, 2015 

11 from Mr. Simons to the plaintiff: "I apologize for not getting 

12 back to you last night, family emergency. I do not feel 

13 comfertable [sic] giving you a post dated check as I have been 

14 screwed badly doing this in the past. I will be im [sic] touch 

15 with you by the 1Qth of November to get you money. Please do not 

16 call me as I am working and will not answer." Despite many 

17 promises, Mr. Simons never paid the $6,000. 

18 S. Unknown to the plaintiff, Mr. Simons had been in 

19 contact with the DMV soon after the issuance of the September 2, 

20 2015 certificate of title. Mr. Simons demanded that the DMV 

21 reissue the title without the plaintiff being identified as a 

22 lien holder. Mr. Simons informed the DMV that the purchase price 

23 for the truck had been $15,000 and he had paid the $15,000. This 

24 communication with the DMV was without the plaintiff's knowledge 

25 and during the period of time Mr. Simons was promising payment of 

26 the additional $6,000 in text messages. 

27 6. In August 2016, after tiring of Mr. Simons' empty 

28 promises of payment, the plaintiff filed a state court collection 

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action. On November 8, 2016, the state court entered a judgment 

after trial against Mr. Simons for $6,000 and $185 in court 

costs. •Hence, another court previously determined that the sale 

pice was $21,000, not $15,000, and that the additional $6,000 

was due to the plaintiff. 

In November 2016, the DMV cancelled the certificate of 

title identifying the plaintiff as the lien holder and issued a 

new title to Mr. Simons reflecting that the truck was not 

encumbered by any lien. 

Within a month of receiving clear title, in December 

2016, Mr. Simons sold the truck to Carmax for $8,000. At this 

point, Mr. Simons was in financial distress. The sale proceeds 

were used to pay back rent andother household expenses 

It is unclear from the record whether the state court 

judgment was entered before the DMV released the plaintiff's 

lien. It is clear, however, that the judgment was entered before 

Mr. Simons sold the truck and kept the proceeds without paying 

the plaintiff. 

There is nothing in the record convincing the court 

that the plaintiff was aware of Mr. Simons' efforts to have the 

DMV release his lien on the truck. While Mr. Simons testified 

that he sent a DMV form by certified mail to the plaintiff 

explaining his position that, because he had paid $15,000 for the 

truck, he was entitled to clear title, the court finds that no 

such form was sent to the plaintiff. 

First, there is no convincing evidence that such a 

form, or anything else, was mailed to the plaintiff. Neither a 

copy of the form nor proof of its mailing was introduced into 

El 

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1 evidence. 

2 12. Second, Mr. Simons was entitled to a release of the 

3 plaintiff's lien only if the purchase price was $15,000. But, 

4 the purchase price was $21,000 and he owed an additional $6,000. 

5 In his text messages to the plaintiff, which were contemporaneous 

6 with Mr. Simons' application to the DMV to release the lien, Mr. 

7 Simons admitted he owed the additional $6,000, promised payment 

8 at a later date, and finally admitted he was unable to pay that 

9 sum. 

10 13. Third, Mr. Simons did not claim in his text messages 

11 that he was entitled to clear title without payment of the 

12 I $6,000, nor did he alert the plaintiff that he was asking the DMV 

13 to release his lien. 

14 14. Fourth, Mr. Simons participated in the state court 

15 trial. While the record of that trial is slim, that court 

16 clearly did not believe the sale price was $15,000. It ordered 

17 payment of the additional $6,000 to the plaintiff. 

18 15. Fifth, even if Mr. Simons somehow honestly believed he 

191 was under no obligation to pay the $6,000 and therefore was 

20 entitled to clear title, he was disabused of that notion by the 

21 state court in November 2016. Despite this, he sold the vehicle 

22 in December 2016 without paying the plaintiff. 

23 16. The court finds that Mr. Simons realized in August 2015 

24 that the plaintiff had made a mistake on the bill of sale filed 

25 at the DMV. It mistakenly reported the sale price as $15,000 

26 rather than $21,000. Mr. Simons then sought to exploit that 

27 mistake. While making promises to the plaintiff that he would 

28 pay the $6,000, the plaintiff informed the DMV that the total 

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1 purchase price had been $15,000 and that he had paid this amount. 

PAI He therefore demanded that the DMV cancel the plaintiff's lien on 

3 the truck. This was done wIthout the plaintiff's knowledge. 

4 17. In December 2016, the plaintiff sought to enforce the 

5 judgment against Michael Simons' bank account at U.S. Bank but 

6 was unsuccessful because the account had been closed. 

7 18. Mr. and Mrs. Simons filed their underlying chapter 7 

8! case on February 20, 2017. The plaintiff is listed as an 

9 unsecured creditor on Schedule ElF. Despite this listing, the 

10 statement of financial affairs indicates the plaintiff satisfied 

11 his judgment from the levy on the bank account. 

12 19. The statement of financial affairs discloses that in 

13 I December 2016, the defendants sold the vehicle to Carmax for 

14 $8,000. Mr. Simons testified that he used the sale proceeds to 

15 catch up delinquent household bills. However, the statement of 

16 financial affairs does not list any payments to creditors larger 

17 than $600 during the 90-day period before bankruptcy. 

18 20. During the meeting of creditors in April 2017, the 

19 plaintiff's attorney questioned Mr. Simons to determine how he 

20 was able to sell the truck without first satisfying the 

21 plaintiff's lien. Mr. Simons testified that he had successfully 

22 asked the DMV to release the lien prior to the sale of the truck 

23 to Carmax. This was the plaintiff's first notice that his lien 

24 I had been released. 

25 21. The plaintiff filed this adversary proceeding on May 

26 22, the last day to file complaints pursuant to 11 U.S.C. §§ 523 

27 and 727. The first amended complaint was filed on August 6, 

28 2017. Dockets 20 & 23. 

Ell 

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To the extent any of the conclusions of law below are 

findings of fact, they are incorporated by reference as findings 

of fact. 

Conclusions of Law 

To the extent any of the foregoing findings of fact are 

conclusions of law, they are incorporated by reference as 

conclusions of law. 

To deny the defendants' discharge under 11 U.S.C. § 

727(a) (4) (A), the plaintiff must prove that "the debtor knowingly 

and fraudulently, in or in connection with the case - (A) made a 

false oath or account." 

The complaint alleges that certain representations in 

the schedules and statement of financial affairs, signed by the 

defendants under the penalty of perjury, were false and designed 

to defraud. 

First, the answer to question 10 of the statement of 

financial affairs is false inasmuch as the levy on the 

defendants' bank account netted nothing. That bank 

account had been closed prior to the levy. No money 

had been seized by the plaintiff's garnishment. 

Second, the defendants' answer to question 9 omitted 

disclosure of the plaintiff's state court lawsuit. 

C. Third, in response to question 6 of the statement of 

financial affairs, the defendants did not disclose 

payments to any creditors even though at the meeting of 

creditors the defendants testified that they had used 

the $8,000 received from the sale of the truck to pay 

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1 delinquent bills. 

2 26. Former counsel for the defendants explained that he had 

3 misunderstood. the defendants when they informed him that they 

4 received a notice that their bank acbount had been levied. He 

5 had understood this to mean that money from the account had 

6 actually been seized. In fact, it meant only that the plaintiff 

7 had attempted to satisfy his judgment. It did not mean the levy 

8 had been successful. Counsel had understood otherwise and the 

9 defendants relied upon him to complete the schedules. 

10 27. Further, Schedule ElF correctly listed the plaintiff's 

11 claim as due and owing. This is not a case where the debtor 

12 reported that a judgment had been paid and omitted the judgment 

13 creditor from the schedules. The defendants did not attempt to 

14 obtain a discharge without informing the plaintiff of their 

15 bankruptcy case. 

16 28. And, while the answer to question 9 omits reference to 

17 the plaintiff's • state court suit, the answer to question 10 

18 discloses the levy which presupposes the existence of a lawsuit 

19 and a judgment. Also, the listing of the claim on Schedule ElF 

20 again makes reference to the fact that it is based on a "levy," a 

21 term that presupposes a judgment. 

22 29. Finally, at trial, Mr. Simons testified that the bills 

23 he paid with the sale proceeds were all less than $600. 

24 Therefore, question 6 did not require disclosure of these 

25 payments. 

26 30. The court concludes that the misstatements and 

27 I omissions in the schedules and statement of financial affairs, 

28 I while false and inaccurate as described above, represent innocent 

191 

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1 mistakes, that were not meant to defraud and were not material. 

2 31. 11 U.S.C. § 523(a) (6) provides that an individual is 

3 not discharged "from any debt for willful and malicious injury by 

4 the debtor to another entity or to the property of another 

5 entity." 

6 32. To prevail on its 11 U.S.C. § 523(a) (6) claim, the 

7 plaintiff must show that the injury was both willful and 

8 malicious. Kawaauhau v. GeiQer, 523 U.S. 57, 61 (1998); Baldwin 

9 v. Kilpatrick (In re Baldwin), 249 F.3d 912, 917 (9th cir. 2001) 

10 33. The injury element of 11 U.S.C. § 523(a) (6) requires 

11 harm to the plaintiff's person or property. Ouarre v. Saylor (In 

12 re Saylor), 108 F.3d 219, 221 (9th Cir. 1997) (citing Snoke v. 

13 Riso (In re Riso) , 978 F.2d 1151, 1154 (9th Cir. 1992)) 

14 34. There has been an injury in this case. Mr. Simons 

15 caused the cancellation of the plaintiff's lien on the truck to 

16 the his detriment. Mr. Simons then sold the truck and kept the 

17 sale proceeds. Mr. Simons converted the plaintiff's collateral. 

18 35. The term willful means a deliberate or intentional 

19 injury. Kawaauhau, 523 U.S. at 61. This requires proof not only 

20 that the defendant intended to act, but that the injury was also 

21 intended by the defendant. jc 

22 36. The intent aspect of a willful injury focuses on the 

23 debtor's state of mind. It is a subjective inquiry. Carrillo v. 

24 Su (In re Su), 290 F.3d 1140, 1144-46 (9th Cir. 2002); Hughes v. 

25 Arnold, 393 B.R. 712, 718 (E.D. cal. 2008); Ormsby v. First 

26 American Title Co. of Nevada (In re Ormsby), 386 B.R. 243, 250 

27 (E.D. cal. 2008) . The debtor must have had the subjective intent 

28 to harm or the subjective belief/knowledge that harm was 

II 

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1 substantially certain to result from his conduct. Su at 1142-44. 

2 37. A willful injury is not necessarily malicious for 

3 purposes of 11 U.S.C. § 523(a) (6). A malicious injury involves 

4 (1) a wrongful act, (2) done intentionally, (3) which necessarily 

causes injury, and (4) is done without just cause or excuse. 

Carrillo v. Su (In re Su), 290 F.3d 1140, 1146-47 (9th Cir. 2002) 

7 (citing In re Jercich, 238 F.3d 1202, 1209 (9th Cir. 2001)); see 

8 also Jett v. Sicroff (In re Sicroff) , 401 F.3d 1101, 1106 (9th 

9 Cir. 2005) . "Within the plain meaning of this definition, it is 

10 the wrongful act that must be committed intentionally rather than 

11 the injury itself." Sicroff at 1106. 

12 38. As laid out in the findings of fact, the circumstances 

13 here permit the inference that Mr. Simons, despite knowing that 

14 he owed the plaintiff another $6,000, surreptitiously caused the 

15 DMV to release the lien securing that payment. While doing so, 

16 he never informed the plaintiff that he disputed the $6,000 

17 I obligation or the plaintiff's security interest in the truck. In 

18 fact, he strung the plaintiff along by indicating he would 

19 attempt to pay the $6,000 when he could. Then, after obtaining 

20 the release of the lien, he sold the truck and spent the sale 

21 proceeds despite having lost the state court lawsuit confirthing 

22 that he owed the $6,000 to the plaintiff. 

23 39. When doing this, Mr. Simons acted intentionally and 

24 with the purpose of depriving the plaintiff of his security 

25 interest in the truck which had a value in excess of his $6,000 

26 obligation. He acted wrongfully and without any just cause or 

27 excuse. The excuse offered was that the bill of sale reported 

28 I that the sale was for $15,000 and $15,000 was paid. However, Mr. 

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Simons understood that the bill of sale was not correct and he 

took advantage of the plaintiff's mistake. And, even if the 

court is wrong in this assessment, before Mr. Simons sold the 

truck, the state court determined that he still owed the 

plaintiff the $6,000. He nonetheless later sold the truck and 

pocketed the $8,000. 

40. Therefore, the court concludes that the state court 

judgment is nondischargeable pursuant to 11 U.S.C. § 523(a) (6). 

However, this exception to discharge pertains only to Mr. Simons. 

The plaintiff produced no evidence that Mrs. Simons participated 

in the purchase of the truck, the release of the lien, or the 

sale of the truck. Indeed, the state court judgment does not 

identify Mrs. Simons as a defendant. As to her, the debt is 

I dischargeable. 

counsel for the plaintiff shall lodge a conforming judgment. 

Dated: /0 BVt,-hn Court 

Michael S. McManus 

United States Bankruptcy Judge 

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United States Bankruptcy Court 

Eastern District of California 

Certificate of Mailing 

The undersigned deputy clerk in the office of the United States Bankruptcy 

Court for the Eastern District of California hereby certifies that a copy of the 

document to which this certificate is attached was mailed today to the following 

entities at the addresses shown below or on the attached list. 

Michael James Simons Stacey Michele Simons Richard Kwun 

114 Elkins Cir. 114 Elkins Cir. P0 Box 292 

Folsom CA 95630 Folsom CA 95630 Sacramento CA 95814 

Yasha Rahimzadeh 

980 9th St 16th Fl 

PMB 1021 

Sacramento CA 95814 

Dated: 9/10/2018 By:_ 

Dep ty lerk 

Sarah Head 

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