Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-canb-1_07-ap-01032/USCOURTS-canb-1_07-ap-01032-0/pdf.json

Parties Involved:
Bay Area Diamond Wholesalers, Inc.
Plaintiff
Alexandru Polinski
Defendant

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1The complaint also seeks to determine dischargeability of plaintiff’s claim. The court determined it

would try the objection to discharge first pursuant to FRCP 42(b).

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UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

In re

ALEXANDRU POLINSKI, No. 07-10102

Debtor(s).

______________________________________/

BAY AREA DIAMOND WHOLESALERS, INC.,

 Plaintiff(s),

v. A.P. No. 07-1032

ALEXANDRU POLINSKI,

 

 Defendant(s).

_______________________________________/

 Memorandum After Trial

_________________

Plaintiff Bay Area Diamond Wholesalers, Inc., is a jewelry wholesaler. Debtor and defendant

Alexandru Polinski has been a jeweler for over forty years. Polinski filed his Chapter 7 bankruptcy petition

on January 31, 2007. By this adversary proceeding, plaintiff seeks denial of Polinski’s discharge.1

Plaintiff argues that there are three grounds for denying the discharge: that Polinski transferred title of

his home to his wife with the intent to hinder, delay or defraud a creditor; that he failed to keep or preserve

adequate business records, and that he has failed to satisfactorily explain what happened to several hundred

Entered on Docket 

January 15, 2008

GLORIA L. FRANKLIN, CLERK 

U.S BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA

Case: 07-01032 Doc# 18 Filed: 01/15/08 Entered: 01/15/08 13:31:14 Page 1 of 3 
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2Plaintiff and Polinski had no direct business relationship. Plaintiff gave its diamonds to one Andy

Finn, who in turn gave its diamonds to Polinski. Polinski did not pay Finn or return the diamonds which Finn

had obtained from plaintiff. Finn has assigned his rights to plaintiff.

3The diamond business is usually conducted under a very informal sale/consignment custom, whereby

stones are freely transferred from person to person under an arrangement whereby the recipient will eventually

pay for them or return them. See In re Gannon, 173 B.R. 313, 315 (Bkrtcy. S.D.N.Y. 1994); In re

Creative Goldsmiths of Washington, D.C., 178 B.R. 87 (Bkrtcy.D.Md. 1995); In re Monohan & Co.,

Ltd., 29 B.R. 579 (Bkrtcy. D.Mass. 1983).

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thousand dollars worth of jewelry given to him by plaintiff and other jewelry wholesalers.2,

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The first ground is easily dismissed. Polinski’s transfer of the home to his wife was more than a year

before his bankruptcy filing, and there is no evidence of concealment. Moreover, the undisputed evidence is

that as part of the transfer the property was-refinanced and the proceeds used to pay creditors. There is

nothing upon which the court could base a finding that the transfer was made with the intent to hinder, delay

or defraud any creditor.

The remaining two grounds point out the difficulties inherent in a jeweler obtaining a discharge in

bankruptcy. The jewelry business at Polinski’s level is based on personal relationships, trust and cash. 

According to plaintiff’s own witness, the terms of what little documentation there is between the parties is by

custom totally ignored. What few records exist are often just scribbled on small pieces of paper. While these

practices may work well for jewelers and their suppliers when all is going smoothly, they present grave

problems for jewelers seeking a discharge in bankruptcy.

Section 727(a)(3) of the Bankruptcy Code denies a discharge to any debtor who has failed to keep

or preserve any business records from which the debtor’s financial condition or business transactions might be

ascertained, unless such failure was justified under all of the circumstance of the case. Section 727(a)(5)

denies a discharge to any debtor who has failed to explain satisfactorily the loss of assets or deficiency of

assets to meet the debtor’s liabilities. Most significantly, neither of these sections require a showing of intent

to defraud any creditor. In re Suttles, 819 F.2d 764, 766 (7th Circ. 1987). A debtor may be denied a

discharge solely because of inadequate records. That is why Polinski cannot be granted a discharge in this

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case.

Once a jewelry wholesaler has established a jeweler took possession of its gems and presently has

neither the gems nor the proceeds of their sale, a prima facie case for denial of the jeweler’s discharge has

been made out. The burden then shifts to the debtor to show both business like conduct and good faith in

relation to the gems. In re Gannon, 173 B.R. 313, 317 (Bkrtcy.S.D.N.Y. 1994).

In this case, Polinski has not met his burden. The evidence is undisputed that Polinski accepted

several hundred thousand dollars worth of gems from wholesalers and middle men and failed to either pay for

them or return them. Polinski has not produced one single document showing where the gems went. He

could have sold them all legitimately, or they could all be under his pillow.

Polinski blames his inability to produce documentation on a fire which occurred at his retail location in

July, 2005. The fire does not justify Polinski’s failure to produce records of his sales of jewelry for two

reasons. First, there is no evidence that the fire destroyed any records; the fire only caused a disruption in

Polinski’s business. Second, Polinski admitted that he sold many items for cash, so that there never was a

record to be lost or destroyed. Polinski’s cavalier disregard for records of his sales may be usual in the

course of a small jewelry business, but it makes it impossible for the court to grant him a discharge.

For the foregoing reasons, judgment will be entered denying Polinski a discharge. Plaintiff shall

recover its costs of suit. The portion of the complaint seeking a determination of the dischargeability of

plaintiff’s claim is accordingly moot, and will be dismissed without prejudice.

This memorandum constitutes the court’s findings and conclusions pursuant to FRCP 52(a) and

FRBP 7052. Counsel for plaintiff shall submit an appropriate form of judgment forthwith.

Dated: January 15, 2008 SAlan Jaroslovsky

U.S. Bankruptcy Judge 

 

Case: 07-01032 Doc# 18 Filed: 01/15/08 Entered: 01/15/08 13:31:14 Page 3 of 3