Van Zandt v. Mbunda

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re ) Bankruptcy Case
WILEHARDA KILIAN MBUNDA, ) No. 10-34095DM
)
) Chapter 7
Debtor. )
___________________________________)
THOMAS VAN ZANDT, EXECUTOR FOR ) Adversary Proceeding
ESTATE OF EVALINE JEANNE MALIS, ) No. 10-3267DM
)
Plaintiff, )
)
v. )
)
WILEHARDA KILIAN MBUNDA, )
)
Defendant. )
___________________________________)
MEMORANDUM DECISION ON MOTION TO
DISMISS LARCENY CLAIM
On May 13, 2011, the court held a hearing on the motion of
defendant Wileharda Kilian Mbunda (“Debtor”) to dismiss Count 2 of
the amended complaint of Thomas Van Zandt, Executor for the Estate
of Evaline Jeanne Malis (“Plaintiff”), objecting to the
dischargeability of debt. In Count 2 of the Amended Complaint,
Plaintiff contended that a debt arising from a loan made to Debtor
by Plaintiff was excepted from discharge as a “debt for
. . . larceny” under section 523(a)(4).
For the purposes of the motion to dismiss, the court assumes
that the factual allegations of the complaint are true. From 1993
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Signed and Filed: June 07, 2011
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
June 09, 2011
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 10-03267 Doc# 25 Filed: 06/07/11 Entered: 06/09/11 10:30:32 Page 1 of 5

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through 2005, Ms. Malis made loans and guaranteed lines of credit
for Plaintiff. In 2005, when Ms. Malis was 85 and in poor health,
Ms. Malis refinanced her personal residence in order to loan
$200,000 to Debtor. Plaintiff contends that Ms. Malis made these
loans based on misrepresentations made by Debtor knowingly and
with intent to deceive. Plaintiff also alleges that Debtor’s
conduct constituted “financial abuse” of an elder under California
Welfare and Institutions Code section 15610.30, and that Ms.
Malis’ consent was not freely given, thereby supporting a finding
of larceny.
While the conduct alleged by Plaintiff may give rise to a
claim under section 523(a)(2) of the Bankruptcy Code, it does not
support a claim for larceny under section 523(a)(4). "For purposes
of section 523(a)(4), a bankruptcy court is not bound by the state
law definition of larceny but, rather, may follow federal common
law, which defines larceny as a ‘felonious taking of another’s
personal property with intent to convert it or deprive the owner
of the same.’" In re Ormsby , 591 F.3d 1199, 1205 (9th Cir.
2010), citing 4 Collier on Bankruptcy ¶ 523.10[2] (15th ed. rev.
2008). Common law larceny “requires a taking of property from the
possession of another without his consent and with intent to
permanently deprive him of possession.” In re Wilson, 114 B.R.
249, 252 n. 10 (Bankr. E.D. Cal. 1990), citing United States v.
Sellers, 670 F.2d 853, 854 (9th Cir. 1982).
In the amended complaint, Plaintiff concedes that Ms. Malis
loaned $200,000 to Debtor; Debtor did not take the money initially
without her consent. Plaintiff has not alleged facts that Ms.
Malis was incapable of consent. A violation of California Welfare
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Case: 10-03267 Doc# 25 Filed: 06/07/11 Entered: 06/09/11 10:30:32 Page 2 of 5

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and Institutions Code section 15610.30, which establishes an
independent cause for damages for taking or obtaining property of
an elder for a wrongful use or with intent to defraud, does not
vitiate consent. Whether that consent was wrongfully or
fraudulently obtained would be the subject of the section
523(a)(2) claims. Even if Debtor used the funds for a purpose
other than represented or had no present intent to repay the loan,
the misuse or misappropriation of the funds is not larceny for the
purposes of section 523(a)(4). See e.g., In re Marsh, 2011 WL
1671562 (Bankr. N.D. Ga. Mar. 21, 2011) (plaintiff gave debtor
$200,000 to apply to purchase of property to be used as
collateral; debtor did not use funds for that purpose, but instead
converted them for other purposes. Debtor’s misuse of funds,
albeit by means of misrepresentation, was not larceny); In re
Giarratano, 299 B.R. 328, 338 (Bankr. D. Del. 2003), aff’d, 358
B.R. 106 (D. Del. 2004) (debtor obtained $12,000 from creditor by
misrepresenting the purpose for which she sought it; court held
that obtaining the funds by false pretenses did not constitute
common law larceny).
As Ms. Malis intended to (and did) turn over the $200,000 to
Debtor as a loan, that amount was not taken without her consent
for the purposes of determining “larceny.” Certainly, her consent
may have been based on misinformation or fraudulent
representations, but that lack of "informed consent" would be the
basis of Plaintiff’s claim under section 523(a)(2).
Counsel for Debtor should upload an order granting the motion
to dismiss the larceny claim for the reasons stated in this
memorandum decision. He should also file a separate proof of
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Case: 10-03267 Doc# 25 Filed: 06/07/11 Entered: 06/09/11 10:30:32 Page 3 of 5

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service showing that he served Plaintiff’s counsel with a copy of
the proposed order in accordance with B.L.R. 9021-1. Trial on the
remaining count of the amended complaint will proceed on September
20, 2011, at 9:30 a.m.
**END OF MEMORANDUM DECISION**
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Case: 10-03267 Doc# 25 Filed: 06/07/11 Entered: 06/09/11 10:30:32 Page 4 of 5

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COURT SERVICE LIST
Thomas Van Zandt
P.O. Box 1804
Mill Valley, CA 94942
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Case: 10-03267 Doc# 25 Filed: 06/07/11 Entered: 06/09/11 10:30:32 Page 5 of 5