Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-canb-3_04-ap-03160/USCOURTS-canb-3_04-ap-03160-0/pdf.json

Parties Involved:
Andy Saberi
Plaintiff
Shalini Poonam Bhutani
Defendant

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MEMORANDUM DECISION

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UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

In re

SHALINI POONAM BHUTANI, 

Debtor.

 

ANDY SABERI,

Plaintiff, 

vs.

SHALINI POONAM BHUTANI, 

Defendant.

 

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Case No: 04-30875

Chapter 7

Adv. Proc. No. 04-3160 TC

Date: October 4, 2005 

Time: 9:30 a.m.

Ctrm: Hon. Thomas E. Carlson

 235 Pine Street

 San Francisco, CA 

MEMORANDUM DECISION

This action was tried on October 4, 2005. Jeffrey J. Goodrich

appeared for Plaintiff. Alexander J. Berline appeared for

Defendant. Upon due consideration, and for the reasons set forth

below, I determine that Defendant should not be denied a discharge,

and that her debts to Plaintiff should not be excepted from

Signed and Filed: November 17, 2005

________________________________________

THOMAS E. CARLSON

U.S. Bankruptcy Judge

________________________________________

Entered on Docket 

November 18, 2005

GLORIA L. FRANKLIN, CLERK 

U.S BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA

Case: 04-03160 Doc# 17 Filed: 11/17/05 Entered: 11/18/05 15:42:38 Page 1 of 8 
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MEMORANDUM DECISION

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discharge. This memorandum decision shall constitute my findings

of fact and conclusions of law. 

FACTS

Defendant is an interior designer doing business as Lights ‘R’

Us. She performed work for Plaintiff during the construction of

his new home. Plaintiff first hired Defendant to select marble,

and to choose paint and stain colors. Defendant performed this

work pursuant to a written contract dated August 12, 2002, and was

paid in full ($4,000) for her work under that contract. 

Plaintiff later hired Defendant to perform additional work on

the house without a signed written contract. The additional work

included selection of lights, cabinets and furniture, and oversight

of subcontractors working on the house. Defendant contends that by

June 2003 she had performed $23,000 worth of additional services,

but had been paid only $3,000. Although she did not submit time

records establishing any specific amount owed, I find that

Defendant had performed a substantial amount of additional work,

and that she was entitled to at least a substantial part of the

amount she claimed. 

As of late June 2003, Defendant held the following property in

which Plaintiff had an interest: (1) a $6,000 cash deposit for

light fixtures Plaintiff had ordered from Defendant; and (2) new

furniture that Plaintiff had purchased from a Los Angeles dealer in

February 2003 at a cost of $16,474, and that Defendant stored for

him until his house was ready. 

In late June 2003, the relationship between Plaintiff and

Defendant quickly descended into crisis. Defendant, worried that

she would not be paid for the additional work she had performed

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MEMORANDUM DECISION

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without a written contract, refused to deliver the furniture until

Plaintiff paid her. In a June 29th letter, Plaintiff asked

Defendant to deliver his furniture before July 2nd. In a June 30th

letter, Defendant responded that she would deliver the furniture

when Defendant paid her the $20,000 she was due. At the same time,

Defendant stipulated that if Plaintiff wished to cancel the

purchase of light fixtures, Defendant would apply the $6,000 cash

deposit against that $20,000 balance.

Within the next few days, Plaintiff filed an action in the San

Mateo County Superior Court seeking to compel Defendant to deliver

the furniture. Defendant filed a counterclaim alleging that she

was owed $20,000. On July 8th, the Superior Court ordered

Defendant to turn over the furniture, but on the condition that

Plaintiff post a bond to secure payment to Defendant should

Defendant prevail on her counterclaim. Rather than posting the

required bond and thereby obtaining the furniture from Defendant,

Plaintiff purchased replacement furniture from a Los Angeles dealer

on July 9th. 

In early September 2003, Defendant received $6,447 from a

supplier, representing a credit payable to Plaintiff for materials

Plaintiff had returned. At some point, Defendant applied that cash

and the $6,000 deposit against the amount she claimed Plaintiff

owed her. Knowing that Plaintiff had purchased replacement

furniture, Defendant simply held Plaintiff’s furniture until

February 2004, when she sold some of it to a Mr. Singh for $5,635.

Defendant filed a chapter 7 petition on March 31, 2004. In

her schedules, she did not list among her personal property any

accounts receivable or any jewelry. 

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 This sum consists of the $6,000 deposit, the $6,447 returnof-merchandise credit, and the $5,635 proceeds of sale of

Plaintiff’s furniture.

MEMORANDUM DECISION

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DISCUSSION 

1. Denial of Discharge. Plaintiff urges that Defendant be

denied a discharge under 11 U.S.C. § 727(a)(4)(A), because she made

a false oath by failing to list any jewelry or accounts receivables

among the personal property disclosed in her bankruptcy schedules. 

Plaintiff argues that it is unlikely that Plaintiff would own no

jewelry. Plaintiff also argues that if he did owe Defendant

$20,000, Defendant should have listed that amount as a receivable. 

The evidence fails to support either allegation.

Defendant explained that she gave up all her jewelry in her

divorce. Plaintiff offered no evidence that Defendant in fact owns

any jewelry, other than to suggest that Defendant’s story was

improbable. The court will not deny Defendant’s discharge on such

a record.

Whether Defendant should have listed a receivable is a closer

question. In June 2003, Defendant claimed Plaintiff owed her

$20,000. By the March 31, 2004 petition date, Defendant had

applied against this debt $18,082 cash that would have otherwise

been payable to Plaintiff.1 In a strict mathematical sense,

Plaintiff would still have owed Defendant $1,918 on the petition

date. But this purely mathematical calculation fails to take

account of the fact that Defendant had detained Plaintiff’s

furniture, that Plaintiff had sued Defendant because of that act,

and that Defendant still held some of the furniture. To find that

Defendant made a false oath justifying denial of discharge, I must

find that Defendant acted fraudulently, which in this context means

Case: 04-03160 Doc# 17 Filed: 11/17/05 Entered: 11/18/05 15:42:38 Page 4 of 8 
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2

 Because Defendant did not assert any affirmative

counterclaim in this action, she should be barred from asserting

any such claim in the future outside of the present action. See

Fed. R. Civ. P. 13(a) and Fed. R. Bankr. P. 7013.

MEMORANDUM DECISION

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“with the intention and purpose of deceiving the creditors.” 

Roberts v. Erhard (In re Roberts), 331 B.R. 876, 884 (9th Cir. BAP

2005). The evidence does not suggest that Defendant acted with

such intent. Rather, the circumstances suggest that Defendant

wanted the dispute with Plaintiff over with, and that her failure

to list the receivable represented her willingness to consider

Plaintiff’s debt to her fully paid, if she could be free of any

further suits by Plaintiff.2

2. Exception from discharge. Plaintiff next argues that

Defendant converted his property by withholding his furniture, his

$6,000 purchase deposit, and his $6,447 return-of-merchandise

credit. Plaintiff contends further that Defendant’s resulting

liability should be excepted from discharge under 11 U.S.C.

§ 523(a)(6), because Defendant’s acts constitute willful and

malicious injury.

Conversion is the wrongful exercise of dominion over the

property of another. Peklar v. Ikerd (In re Peklar), 260 F.3d

1035, 1037 (9th Cir. 2001). Not every conversion, however,

constitutes a willful and malicious injury within the meaning of

section 523(a)(6). “But a willful and malicious injury does not

follow as of course from every act of conversion, without reference

to the circumstances. There may be a conversion which is innocent

or technical, an unauthorized assumption of dominion without

willfulness or malice.” Davis v. Aetna Acceptance Co., 293 U.S.

328, 332 (1934). Accord, Peklar, supra, 260 F.3d at 1037.

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MEMORANDUM DECISION

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For a conversion to be willful and malicious, the debtor must have

deliberately performed an act with the specific objective of

causing injury or with the subjective knowledge that injury was

substantially certain to result. Carrillo v. Su (In re Su), 

290 F.3d 1140, 1142 (9th Cir. 2002).

I find that there is no credible evidence that Defendant acted

with the specific objective of harming Plaintiff in withholding

either Plaintiff’s furniture or the two sums of cash.

I find that in withholding cash payable to Plaintiff,

Defendant did not act with the subjective knowledge that her

actions were substantially certain to cause Plaintiff harm. In so

finding, I rely upon the following factors. Cash is fungible. At

the time Defendant withheld the cash due Plaintiff, Defendant

believed in good faith that Plaintiff owed her $20,000, an amount

larger than the amount of cash she withheld from Plaintiff. The

offsetting obligations arose out of closely related transactions. 

Plaintiff in fact owed Defendant at least a substantial part of the

amount Defendant claimed she was owed. 

I find that in withholding Plaintiff’s furniture, Defendant

did not act with the subjective knowledge that her actions were

substantially certain to cause Plaintiff harm. In making this

finding, I rely upon the following factors. First, as noted above,

Defendant believed in good faith that Plaintiff owed her a

substantial sum, arising out of a closely related transaction, at

the time she withheld Plaintiff’s furniture. Second, Defendant

withheld the furniture for only a very short period of time before

Plaintiff’s own acts made the return of the furniture a useless

act. On June 29, 2003, Plaintiff demanded the furniture. The next

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MEMORANDUM DECISION

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day, Defendant stated her refusal to return it until she was paid. 

Within a week, Plaintiff brought an action in Superior Court to

compel Defendant to surrender the furniture. On July 8th, the

Superior Court held a hearing, and ruled orally that it would order 

turnover of the furniture, but only if Plaintiff posted a bond to

cover the amount Plaintiff might be found to owe Defendant. On

July 9th, Plaintiff, refusing to post the bond, purchased new

furniture. Only six months later did Defendant sell some of the

furniture she held. The amount received upon that sale, together

with the cash withheld, was still less than the amount Defendant in

good faith believed Plaintiff owed her. The most relevant period

is the ten days between Plaintiff’s demand for the furniture and

the date Plaintiff purchased new furniture. During that period,

Defendant withheld the furniture, but did not put it to her own use

or take any steps toward permanently depriving Plaintiff of its

use. See Borg-Warner Acceptance Corp. v. Littleton (In re

Littleton), 106 B.R. 632, 638-39 (9th Cir. BAP 1989).

Judgment will be entered for Defendant.

**END OF MEMORANDUM**

Case: 04-03160 Doc# 17 Filed: 11/17/05 Entered: 11/18/05 15:42:38 Page 7 of 8 
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Court Service List

Jeffrey J. Goodrich, Esq.

Law Offices of Goodrich and Assoc.

336 Bon Air Center, Suite 335

Greenbrae, CA 94904 

Alexander J. Berline, Esq.

Hanson, Bridgett, Marcus, Vlahos et al.

333 Market Street, Suite 2300

San Francisco, CA 94105-2173 

E. Lynn Schoenmann

800 Powell Street

San Francisco, CA 94108 

Office of the U.S. Trustee

235 Pine Street, Suite 700

San Francisco, CA 94104 

Case: 04-03160 Doc# 17 Filed: 11/17/05 Entered: 11/18/05 15:42:38 Page 8 of 8