NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

:

In re: :

: Bankruptcy No. 09-13388 (MBK)

GREGG F. WULSTER, : Adv. Proc. No. 09-2015 (MBK)

:

Debtor. :

 :

:

GREGG F. WULSTER, : CIVIL ACTION NO. 11-3407 (MLC)

:

Appellant, :

:

v. : MEMORANDUM OPINION

:

KAREN PFEIFFER, :

:

Appellee. :

 :

Appellant, Gregg F. Wulster (“Appellant”), appeals from part

of an order of the United States Bankruptcy Court for the

District of New Jersey (“Bankruptcy Court”) entered on March 18,

2011 (“3-18-11 Order”), in an adversary proceeding between

Appellant and Karen Pfeiffer (“Appellee”). (Dkt. entry no. 1,

Not. of Appeal; dkt. entry no. 7, Appellant Br.) The 3-18-11

Order, inter alia, ordered that Appellee was “entitled to entry

of a nondischargeable default judgment in the amount of

$15,800.00 with respect to debts due and owing . . . arising from

the unauthorized cash advances and forgeries.” See Adv. Proc.

No. 09-2015, dkt. entry no. 53, 3-18-11 Order. Appellee, the

complainant in the adversary proceeding, has opposed the appeal. 

(Dkt. entry no. 8, Appellee Br.) For the reasons stated herein,

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this Court will affirm the part of the 3-18-11 Order that held

certain debts owed to Appellee to be nondischargeable.

BACKGROUND

Appellant and Appellee commenced a romantic relationship in

or around 1997, and had two children together. Bankr. No. 09-

13388, dkt. entry no. 52, 3-17-11 Opinion (“Bankr. Op.”) at 3. 

The relationship apparently deteriorated sometime around 2007. 

Id. at 3-4. 

Appellant filed a voluntary petition for relief under

Chapter 7 of the United States Bankruptcy Code (the “Code”) on

February 12, 2009. See Bankr. No. 09-13388, dkt. entry no. 1. 

The Bankruptcy Court appointed a Trustee on February 17, 2009.

See Bankr. No. 09-13388, dkt. entry no. 3. 

Appellee brought an adversary proceeding against Appellant

on July 8, 2009 (the “adversary proceeding”). Adv. Proc. No. 09-

2015, dkt. entry no. 1, Compl. The Complaint therein sought

relief under 11 U.S.C. § 523. Id. Specifically, Appellee

alleged that certain debts were nondischargeable in Appellant’s

bankruptcy because Appellant (1) converted funds by forging

Appellee’s signature and taking cash advances against credit card

lines of credit, and (2) interfered with the sale of real

property held by Appellant and Appellee as tenants in common and

failed to fully buy the Appellee out of her share of the

property. Id. Default was entered against Appellant in the

adversary proceeding. Adv. Proc. No. 09-2015, dkt. entry no. 7,

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Entry of Default. The allegations relating to the real property

are not at issue in this appeal, insofar as the Bankruptcy Court

found the debts arising from the sale of that property were

dischargeable. 3-18-11 Order at 2. Relevant to this appeal,

Appellee alleged that between 2002 and 2004, Appellant “took cash

advances from various credit card accounts opened in [her] name

by forging [her] signature on credit card convenience checks” and

hiding the forgery by intercepting the credit card statements at

their shared residence. Bankr. Op. at 4-5. She also alleged

that Appellant converted proceeds from a settlement by forging

her signature on a $6,000 trust account check paid to Appellee in

satisfaction on a lemon law settlement on a Ford F350 truck

titled solely in Appellee’s name. Bankr. Op. at 5.

Appellee moved to strike Appellant’s answer and affirmative

defenses for failure to provide discovery, and the Bankruptcy

Court entered an order granting that relief. Adv. Proc. No. 09-

2015, dkt. entry no. 34, 11-16-10 Order. The Bankruptcy Court

denied Appellant’s motion for reconsideration of the 11-16-10

Order on January 11, 2011. Adv. Proc. No. 09-2015, dkt. entry

no. 47, 1-11-11 Order. Before entering a default judgment

against Appellant in the adversary proceeding, the Bankruptcy

Court scheduled a proof hearing with respect to the alleged debts

described in the Complaint. Adv. Proc. No. 09-2015, dkt. entry

no. 35, Not. of Hr’g. The proof hearing was held on February 18,

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2011. Adv. Proc. No. 09-2015, dkt. entry no. 49. The Bankruptcy

Court reserved decision and permitted the parties to file posthearing submissions relating to the exact amounts due and owing

to Appellee, but ultimately relied upon the “Summary of Debts”

chart presented at the proof hearing. Bankr. Op. at 10 nn.4-5;

id. at 12, Summary of Debts; Adv. Proc. No. 09-2015, dkt. entry

no. 50, Pl. Exhibits; dkt. entry no. 51, Def. Post-Trial

Submission.

The Bankruptcy Court considered Appellee’s complaint seeking

a declaration of nondischargeability of the monies owed her for

the alleged forgery of checks under the 11 U.S.C. § 523(a)(6)

exception for a “willful and malicious injury,” namely,

conversion, rather than the exception for fraud under 11 U.S.C. §

523(a)(2). Bankr. Op. at 8 n.3. Finding that in order to

prevail on that count, Appellee had to first establish that a

conversion occurred under New Jersey law, and second, that the

conversion was unlawful and malicious, the Bankruptcy Court found

that Appellant’s conduct did amount to conversion, and that the

conversion was willful and malicious within the meaning of 11

U.S.C. § 523(a)(6). Bankr. Op. at 9-10. Accordingly, the

Bankruptcy Court determined the amount of damages, finding that

Appellant had made unauthorized cash advances in the amount of

$44,037.30, but had already reimbursed the Appellee in the amount

of $21,297.15, and certain other balances had been satisfied,

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such that the amount remained owing to Appellee was $9,800. Id.

at 10-11. With respect to the lemon law settlement, the

Bankruptcy Court found that Appellant owed Appellee the proceeds

of the forged check, or $6,000. Thus, the Bankruptcy Court

entered a nondischargeable default judgment in the amount of

$15,800 against the Appellant with respect to these debts. 

Id. at 11; 3-18-11 Order at 2.

Appellant appeals from the Bankruptcy Court’s findings

regarding the amount of nondischargeable debt owed to Appellee,

complaining that “at the proof hearing . . . [Appellee] did not

have” a “bottom line amount due to” her, and states that he does

not “think it is fair that at a trial if a plaintiff is

unprepared after two years with the most important detail of all,

what is owed, and that the court give an extra ten days to come

up with a number after [Appellant] presented all [his] evidence.” 

(Appellant Br. at ¶ 3.) He contends that he actually overpaid

Appellee in reimbursing her for the misappropriated funds. (Id.

at ¶ 9.) He apologizes for not fully supporting this argument in

his post-proof hearing submission, and revisits the Bankruptcy

Court’s ruling striking his answer and affirmative defenses for

failure to provide discovery by arguing that misconduct by

Appellee and her attorney resulted in his failure to timely

respond to the motion to strike. (Id. at ¶ 6.) As to the lemon

law settlement, he states that he “now . . . has a document from

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[Appellee] stating she only wanted half the amount” and

requesting that the fact that he was without a vehicle be taken

into consideration. (Id. at ¶ 10.) Appellant contends that

Appellee’s own Summary of Debts chart shows that Appellant “paid

her $55,700.89” and that the Bankruptcy Court found that he owed

Appellee $44,037.30, and requests that the part of the 3-18-11

Order entering default judgment of nondischargeable debt of

$15,800 be “vacated/overturned.” (Id. at ¶ 11.)

DISCUSSION

I. Jurisdiction and Standard of Review

A district court has appellate jurisdiction over a

bankruptcy court’s final judgments, orders, and decrees. 28

U.S.C. § 158(a). Orders entering a default judgment may be

considered final orders. See, e.g., In re Victor Int’l, Inc., 97

Fed.Appx. 365, 366 (3d Cir. 2004). A district court reviews a

bankruptcy court’s “legal determinations de novo, its factual

findings for clear error, and its exercise of discretion for

abuse thereof.” In re Am. Classic Voyages Co., 405 F.3d 127, 130

(3d Cir. 2005) (quotation and citation omitted); see

Fed.R.Bankr.P. 8013 (“On an appeal the district court . . . may

affirm, modify, or reverse a bankruptcy judge’s judgment, order,

or decree or remand with instructions for further proceedings. 

Findings of fact, whether based on oral or documentary evidence,

shall not be set aside unless clearly erroneous. . . .”). 

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II. Nondischargeability of Debts Under Section 523

Section 523 of the Code provides exceptions to discharge of

debts in bankruptcy. It provides that a discharge under, inter

alia, Chapter 7 of the Code “does not discharge an individual

from any debt . . . for willful and malicious injury by the

debtor to another entity or the property of another entity.” 11

U.S.C. § 523(a)(6). The party objecting to the dischargeability

of a debt bears the burden of proving by a preponderance of the

evidence that the particular debt falls within one of the

exceptions to discharge enumerated in Section 523(a). Grogan v.

Garner, 498 U.S. 279, 291 (1991); In re Singer, No. 10-45, 2010

WL 3732944, at *4 (D.N.J. Sept. 17, 2010). 

An injury is “willful and malicious” within the meaning of

Section 523 “when the actor purposefully inflicts injury or acts

in such a manner that he is substantially certain that injury

will result.” In re Hawkins, 231 B.R. 222, 228 (D.N.J. 1999)

(citation omitted). Mere reckless or negligent conduct does not

fall within the scope of Section 523(a)(6). Kiwaauhau v. Geiger,

523 U.S. 57, 63-64 (1998).

The Bankruptcy Court found that the injury asserted by

Appellee was the conversion of funds from her lines of credit and

the lemon law settlement check, observing that “New Jersey law

defines conversion as ‘the intentional exercise of dominion or

control over personal property that seriously interferes with the

right of another to control it.’” Bankr. Op. at 8 (citing

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Pollen v. Comer, No. 05-1656, 2007 WL 1876489, at *11 (D.N.J.

2007)). The Bankruptcy Court observed that conversion “is not a

per se willful and malicious injury to the property of another,”

but the requisite mental state, knowledge that actual harm to the

creditor was substantially certain, may be established by

circumstantial evidence. Bankr. Op. at 6, 9. 

Appellant does not challenge the Bankruptcy Court’s finding

that Appellant converted funds from Appellee’s line of credits

and the lemon law settlement. He makes an argument for the first

time on appeal that this conversion was not willful and malicious

because Appellee “told [him] to sign the checks on her behalf”

and because the conversion was done “to benefit [their] family

and expedite [their] family’s moving into the house [they] were

building together.” (Appellant Br. at ¶¶ 6-7.) However, these

new arguments may not be considered for the first time on appeal. 

See, e.g., In re Howard Komendant, C.P.A., P.C., No. 10-2140,

2010 WL 2925167, at *2 (D.N.J. July 19, 2010). 

The Bankruptcy Court found that Appellant had “offered no

just cause of excuse for his conduct” in converting the

Appellee’s funds, either before or after the proof hearing, and

therefore the circumstantial evidence established that Appellant

“knew that drawing over $40,000 on several of [Appellee’s] credit

cards, without express or implied consent, and forging her

signature in the process,” as well as his “calculated theft of

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the lemon law settlement proceeds,” were “substantially certain

to harm the [Appellant] . . . particularly . . . in light of

[Appellant’s] awareness and contribution to the parties’ mounting

debt,” so as to satisfy the Section 523(a)(6) standard by a

preponderance of the evidence. Bankr. Op. at 10 (citing In re

Littleton, 942 F.2d 551, 554 (9th Cir. 1991)). The Court finds

no error in the Bankruptcy Court’s determination.

Appellant argues, circularly, that because he overpaid

Appellee with respect to the debts owed her, “there was no

malicious intent or harm to [Appellee].” (Appellant Br. at ¶ 7.) 

This argument goes to the Bankruptcy Court’s determination of

damages, not willful and malicious intent. The Bankruptcy

Court’s damages determination was a factual issue with which this

Court finds no clear error. Appellant’s post-proof hearing

submission to the Bankruptcy Court contains no calculations or

specific allegations regarding credit card account balances or

the lemon law settlement proceeds that would lead the Court to

believe the Bankruptcy Court erred in accepting the Appellee’s

Summary of Debts chart as an accurate representation that $9,800

remained unpaid by Appellant of the willfully and maliciously

converted line of credit funds and $6,000 with respect to the

lemon law settlement. See Adv. Proc. No. 09-2015, dkt. entry no.

51. Similarly, Appellant’s argument regarding alleged

overpayments to Appellee entirely lacks support. (See Appellant

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Br. at ¶¶ 9-10 (referencing “a handwritten agreement between

[Appellant and Appellee] of what [Appellant has paid Appellee]”

that Appellee “agreed to and used in her” Summary of Debts chart

and “a document from [Appellee] stating she only wanted half the

amount” of the lemon law settlement proceeds, but enclosing

neither).) In contrast, Appellee supported the Summary of Debts

chart with annotated credit card statements showing the

disposition of the debts. Adv. Proc. No. 09-2015, dkt. entry no.

50-2, Summary of Debts chart and supporting exhibits. 

Having reviewed the parties’ submissions and the record

below, the Court finds no error in either the Bankruptcy Court’s

findings of fact or conclusions of law, which resulted in the

entry of a nondischargeable $15,800 default judgment against

Appellant. The Court will therefore affirm the part of the 3-18-

11 Order of the Bankruptcy Court in issue. 

CONCLUSION

For the foregoing reasons, the Court will affirm the part of

the 3-18-11 Order of the Bankruptcy Court entering a

nondischargeable default judgment of $15,800 against Appellant

and in favor of Appellee. The Court will issue an appropriate

order.

 s/ Mary L. Cooper 

MARY L. COOPER

United States District Judge

Dated: February 22, 2012 

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