Saberi v. Bhutani

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

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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.
Case: 04-03160 Doc# 17 Filed: 11/17/05 Entered: 11/18/05 15:42:38 Page 3 of 8

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28 1 This sum consists of the $6,000 deposit, the $6,447 return-
of-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.
Case: 04-03160 Doc# 17 Filed: 11/17/05 Entered: 11/18/05 15:42:38 Page 5 of 8

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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
Case: 04-03160 Doc# 17 Filed: 11/17/05 Entered: 11/18/05 15:42:38 Page 6 of 8

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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