Che v. Ly

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
In re:
Alen L. Ly
Debtor.
CHAPTER 7
Case No.: 2:12-bk-25257-TD
Adv. No.: 2:12-ap-01970-TD
MEMORANDUM DECISION
Michelle V. Che
Plaintiff,
v.
Alen L. Ly
Defendant.
Date: May 27, 2014
Time: 9:00 a.m.
Courtroom: 1345
Trial on the second amended complaint filed February 6, 2013 by Michelle Che
(Che) against Alen Ly was held on May 27, 2014. The trial was conducted by written
declarations and live cross examination of witnesses pursuant to a Trial Setting Order
entered November 15, 2013, an Amended Pretrial Stipulation, and an Order Approving
Amended Pretrial Stipulation entered March 18, 2014, as well as supplemental orders.
FILED & ENTERED
JUN 23 2014
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	penning
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Che pursued causes of action seeking nondischargeability pursuant to 11 U.S.C. §§
523(a)(2) and (a)(6). The testimony presented was brief. Only a few witnesses were
cross examined: Bunnary Sophea, Alen Ly and Vanessa Ly were cross examined by
Plaintiff, who then rested her case. Defendant called Che for cross examination,
followed by rebuttal examination by Plaintiff. Defendant called Alen Ly for rebuttal
examination, then rested his case. Plaintiff called Che for further rebuttal. Closing
arguments followed and the matter was taken under advisement based on the
testimony, documentary evidence and trial briefs.
Che’s legal theories were (1) that Alen Ly had defrauded her by forging Che’s
signature on a grant deed purportedly from Che to Alen Ly, and (2) that Alen Ly’s
conduct was wilful and malicious and had caused Che’s to suffer from Alen Ly’s
intentional infliction of emotional distress.
Most of the live testimony was frank, straightforward and credible. Che testified
in Cambodian with the assistance of an interpreter. In some instances, Che’s live
testimony was unusually emotional, nervous and frenetic, especially on cross
examination — guarded, defensive, inappropriately hesitant, and inconsistent. When
Che was under cross examination on critical points, Che was not a credible witness.
One of Che’s causes of action was based upon 11 U.S.C. § 523(a)(2), without
specifying either § 523(a)(2)(A) or § 523(a)(2)(B). Under § 523(a)(2)(A),
nondischargeablity may be sought for any debt for money, property, services, or an
extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a
false representation, or actual fraud, other than a statement respecting the debtor’s or
an insider’s financial condition. Five elements must be proved to enable a creditor to
prevail on a claim under § 523(a)(2)(A): (1) a misrepresentation of fact, fraudulent
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omission or deceptive conduct by the debtor; (2) the debtor’s knowledge of the falsity or
deceptiveness of the statement or conduct; (3) the debtor’s intent to deceive; (4)
justifiable reliance by the creditor on the debtor’s statement or conduct; and (5) damage
to the creditor proximately cause by its reliance on the debtor’s statement or conduct.
American Express Travel Related Servs. Co. v. Hashemi (In re Hashemi), 104 F.3d
1122, 1125 (9th Cir. 1996); Citibank (South Dakota), N.A. v. Eashai (In re Eashai), 87
F.3d 1082, 1086 (9th Cir. 1996). Here, Che acknowledged that she had talked to Alen
Ly only once, in early 2006 after Vanessa Ly bought a pharmacy from Che. Alen Ly
accompanied Che to her bank to help Che sign over her pharmacy bank accounts to
Vanessa Ly, Alen’s sister. There was no evidence of any other conversation between
Alen Ly and Che. There was no evidence that Alen Ly took any action that was an
intentional effort on his part to deceive or injure Che or her financial interests.
Under § 523(a)(2)(B), the creditor must prove that the debtor used a statement in
writing that is materially false, respecting a debtor’s or insider’s financial condition, on
which the creditor reasonably relied in furnishing money, property, services, or credit to
the debtor. The trial evidence failed to prove any materially false writing by Alen Ly on
which Che relied that caused her to furnish anything of value to Alen Ly.
Pursuant to § 523(a)(6), a debt is nondischargeable when incurred by a debtor
when such debt is “for willful and malicious injury by the debtor to another entity or to
the property of another entity . . . .” In order for the debt to be nondischargeable under
§ 523(a)(6), the bankruptcy court must find an injury inflicted by debtor that was both
willful and malicious. Matter of Ornsby, 591 F.3d 1199, 1206 (9th Cir. 2010). “The
Supreme Court in Kawaauhau v. Geiger (In re Geiger), 523 U.S. 57, 118 S.Ct. 974, 140
L.Ed.2d 90 (1998), made it clear that for section 523(a)(6) to apply, the actor must
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intend the consequences of the act, not simply the act itself.” Ornsby at 1206, citing
Geiger at 60.
The testimony, written and oral, about the witnesses’ relationships and business
transactions was conflicting on almost all material issues. The documentary evidence
was limited. Che’s only evidence of fraud or willful and malicious injury was a 2011
superior court default judgment entered against Alen Ly. Ex. 6. Che was awarded no
damages. The judgment recited that a 2006 grant deed from Che to Alen Ly was a
forgery. The judgment ordered a transfer of the Myrtle home to Che and enjoined Alen
Ly from approaching within 100 feet of the home.
Here, Che claimed damages of either $150,000 or $300,000 pursuant to §§
523(a)(2)(A) and (a)(6), but Che failed to prove by a preponderance of the evidence, or
at all, how Alen Ly caused Che any loss, monetarily or otherwise, as a result of any
conduct or representation by or chargeable against Alen Ly. Che failed to prove any
financial details of her Myrtle home ownership necessary to establish that she suffered
any financial loss for which Alen Ly should be held responsible. Che produced no
evidence regarding what became of her $495,000 mortgage debt secured by the Myrtle
home. Such debt appears to have been discharged in a 2006 completed escrow
between Che and Alen Ly. See Exs. A, B, C, and 4.
The trial evidence established a March 2006 written agreement signed by Che to
sell Myrtle to Alen Ly. The agreement was expressed by Che’s valid written signature
on amended escrow instructions, written evidence of a sale agreement. Ex. A. These
instructions provided for the payoff of Che’s earlier 2006 $495,000 mortgage secured by
Myrtle. Alen Ly obtained a $393,750 new first mortgage loan secured by Myrtle that
was recorded in July 2006. Ex. 4. Che’s evidence was insufficient to refute Alen Ly’s
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persuasive and credible testimony that his second mortgage secured by Myrtle,
recorded in December 2006 to secure a $250,000 line of credit, was arranged to
document a line of credit agreement that Alen Ly negotiated with another bank but
never drew upon.
In the end, the court infers from the conflicting, scant evidence that in 2006, Alen
Ly, with Che’s written agreement, paid off Che’s mortgages on Myrtle, replaced Che’s
mortgages on the Myrtle home with two mortgages Alen Ly arranged with his own
banks, one in the amount of $373,750 to close the 2006 escrow, and a later second
mortgage to secure a line of credit agreement for $250,000 that Alen Ly never drew
upon.
Che has failed to prove that she suffered consequential damages in any amount
proximately caused by Alen Ly. Che has provided no credible or convincing evidence,
and really no evidence at all, that Alen Ly made any false representation to Che. Che
failed to prove any justifiable reliance on her part based on wrongful conduct by Alen Ly.
In the end, Che’s trial evidence proved only that somehow, an early 2006 grant deed to
the Myrtle property was forged by somebody, not necessarily by Alen Ly or chargeable
against Alen Ly.
Che’s evidence with respect to her claim of intentional infliction of emotional
distress fails as well. The Che evidence is superficial at best and insufficient to support
Che’s claims. In essence, Che’s evidence proved no more than that she was really
upset by what happened with respect to her Myrtle property in 2006. The court finds
that Che’s evidence in this regard is insufficient and unpersuasive of any liability on Alen
Ly’s part under §523(a)(6).
In the court’s view, there were many red herrings in Che’s pleadings and
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evidence, primarily focused on three people: Alen Ly’s sister Vanessa Ly, Bunnary
Sophea, and maybe, Vanessa’s mother-in-law. No third party testimony or testimony
about third parties commenting on their conclusion that Alen Ly was the forger was
anything other than unconvincing, unpersuasive hearsay. No third party evidence
persuades the court that the forgery should be attributed to Alen Ly. Che’s evidence
does not support Che’s claims of wrongdoing by Alen Ly.
Che’s case comes down to her 2011 superior court judgment that a 2006
recorded grant deed to Myrtle in favor of Alen Ly was a forgery. Even here, neither the
superior court judgment nor the trial evidence establishes that Alen Ly was the forger or
in any fashion was implicated directly or indirectly in the forgery. Neither the superior
court judgment nor the trial evidence here proves by a preponderance, or at all, that
Alen Ly fraudulently transferred Che’s Myrtle property to himself. The judgment
assesses no damages against Alen Ly, though obviously, Alen Ly was the beneficiary of
the 2006 grant deed.
Che acknowledged that she signed escrow instructions in March 2006 confirming
and documenting her agreement to sell the Myrtle property to Alen Ly. Though she said
she was not aware of signing such an agreement, her claim in this regard was not
credible, given her acknowledged experience with buying and selling businesses and
real property with a lawyer’s help. The court is left to speculate as to how this Alen
Ly/Che written agreement came about and by whom or why the 2006 grant deed may
have been signed with a signature imitating Che’s signature. Nothing in this conflicting
record is sufficient to support a judgment denying dischargeability to Alen Ly under any
legal theory urged by Che.
Finally, Che asserted the principles of claim preclusion and issue preclusion to
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support her claims here. The court has considered those claims as Che expressed
them in her pleadings and closing statements by her counsel. The court finds Che’s
preclusion principles unpersuasive here. The evidence that Che produced to support
her claim in this regard was too diffuse and unpersuasive. The judgment entered in
2011 by the superior court was a default judgment. It contains no specific findings
against Alen Ly but rather rests on the abstract finding that the deed was forged. See
Ex. 6. The judgment does not provide an adequate basis to support issue or claim
preclusion regarding fraud or willful and malicious injury against Alen Ly on any basis
other than speculation. That is an inadequate basis to support either claim.
Che’s evidence does not explain her motivation in the transactions discussed. It
does not adequately explain the financial details of Che’s ownership or interest in the
Myrtle property. It does not establish any damages Che suffered, what any of her
dealings with Alen Ly cost her out of pocket, or for that matter, where Che emerged
financially in relation to the Myrtle property based on any wrongdoing Che alleged
against Alen Ly.
Judgment will be entered in favor of Alen Ly by dismissing Che’s claims against
him.
Date: June 23, 2014
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