Cessna et al v. Brock et al

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UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF CALIFORNIA
In re:
JAMES CLAY BROCK,
Debtor(s).
________________________________
WILLIAM R. CESSNA, individually
and as Trustee of the Cessna
1993 Trust,
Plaintiff(s),
v.
JAMES CLAY BROCK, individually
and as Trustee of the James C.
and Dorothy E. Brock Family
Trust dated November 14, 1996,
Defendant(s).
________________________________
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Case No. 24-24919-B-7
Adversary No. 25-2021
DECISION AFTER TRIAL
I.
Introduction
Trial on claims alleged under 11 U.S.C. §§ 523(a)(2) and
523(a)(6) was held on January 26, 2026.1 David A. Diepenbrock
and Carly M. Moran appeared for plaintiff William R. Cessna
(“Plaintiff”). David A. Smyth appeared for defendant and chapter
7 debtor James C. Brock (“Defendant”).
Plaintiff testified, Defendant testified, Defendant’s son
1The Complaint identifies the § 523(a)(2) claim without
distinction between §§ 523(a)(2)(A) and (a)(2)(B). The trial
brief filed on January 5, 2026, makes clear the § 523(a)(2) claim
is a claim under § 523(a)(2)(A).
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Randy Brock testified. The alternate direct testimony
declaration of Shasta County Sheriff’s Department Lt. Timothy
Estes and its attached report were admitted into evidence without
appearance by Lt. Estes upon the parties’ stipulation.2
Plaintiff’s and Defendant’s trial exhibits were all admitted into
evidence in the absence of objections. Plaintiff’s late-
submitted Exhibit 17 was admitted into evidence by stipulation.
Plaintiff’s Request for Judicial Notice in Support of Trial
Brief filed on January 5, 2026, and Plaintiff’s Supplemental
Request for Judicial Notice filed on January 26, 2026, were
granted in part and denied in part for the reasons stated on the
record. Plaintiff’s Memorandum of Points and Authorities in
Support of Motion for Judgment [FRCP, 52(c)] filed on January 26,
2026, was denied for the reasons stated on the record. All
evidentiary objections stated on the record are incorporated
herein and made a part hereof by this reference.
Having heard and considered the testimony, observed the
demeanor of the witnesses as they testified, read and considered
the parties’ trial briefs, and thoroughly reviewed and considered
all of the evidence, the court issues its findings of fact and
conclusions of law below. See Fed. R. Civ. P. 52(a); Fed. R.
Bankr. P. 7052. If there are any conflicts between these written
findings of fact and conclusions of law and the court’s oral
2Lt. Estes testified about a report he prepared following an
investigation he conducted into Defendant’s financial activities
after he was contacted out of concern by Plumas Bank manager
Donna Hamilton. Ms. Hamilton suspected Defendant may be the
victim of elder abuse due to irregular banking transactions and
withdrawals of large amounts of cash Defendant reported he was
sending to undisclosed third-parties.
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statements on the record, these written findings of fact and
conclusions of law control. Playmakers LLC v. ESPN, Inc., 376
F.3d 894, 896 (9th Cir. 2004).
II.
Findings of Fact and Conclusions of Law
Plaintiff and Defendant are both octogenarians. Both reside
in a small, close-knit community where they have lived for most,
if not the entirety, of their lives. Plaintiff and Defendant
differ significantly in their physical condition and mental
acuity.3
Prior to events that led to this adversary proceeding,
Plaintiff and Defendant were very close friends for over 40
years. They met when they worked together at a lumber facility
where they often ate lunch together. They played music together,
danced on what apparently was an impressive dance floor Defendant
built at his house, and they generally socialized with each other
and with each other’s family for four decades.
Things changed in 2018 when Defendant was convinced beyond
any doubt that he won a substantial cash price in a Spanish
3Plaintiff testified that he processes his own lumber,
operates a meat packing business, and owned and operated a
logging business for over thirty years. Defendant testified that
he is skilled at operating and repairing machinery and tools;
however, he left school before he finished the fourth grade, he
can read but often does not understand all the words, he does not
understand complex, technical or legal terms, his math and
spelling skills are not good, and he suffers from long-term and
some short-term memory problems. These differences are relevant
to this decision.
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lottery.4 Although the dollar amount of the cash winnings
changed because Defendant was given different numbers by lottery
“agents” or “officials,” Defendant believed he won either four
million dollars, two-hundred fifty million dollars, or one
billion dollars. Defendant believed he won so much money that he
would “own the valley.”
Defendant was told by lottery “agents” or “officials” that
before he could collect his lottery winnings he had to pay
expenses associated with the winnings. Defendant was also told
these expenses had to be paid in cash sent in boxes to addresses
the lottery “agents” or “officials” designated. Defendant paid
these purported expenses with $85,000 of his own money. When
that was not enough, Defendant obtained more money from Plaintiff
that was also sent to lottery “agents” or “officials.”
The parties stipulated that between February 5, 2018, and
July 6, 2018, Plaintiff transferred $317,500 to Defendant. The
stipulated dates and amounts of the transfers are as follows:
(1) $ 15,000 on February 5, 2018;
4Defendant’s son testified that his father’s belief that he
won a significant lottery cash prize was so firm and so
unshakeable that his father would have terminated their
relationship had he tried to intervene in his father’s financial
affairs or otherwise prevent his father from acting on his belief
he was a lottery winner. Valuing his relationship with his
father, and recognizing that his father needs assistance with
daily living activities, Defendant’s son testified that he chose
to not intervene in his father’s financial affairs. Defendant’s
son has moved in with Defendant and assists Defendant with daily
living activities. The emotion in Defendant’s voice and his
demeanor as he testified also leaves the court with no doubt that
Defendant truly, honestly, and whole-heartedly believed he won a
substantial cash prize in a Spanish lottery. Of course, there
was no lottery, Spanish or otherwise, and there were no lottery
winnings. More on this later.
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(2) $100,000 on February 8, 2018;
(3) $150,000 on February 15, 2018;
(4) $ 2,500 on March 5, 2018;
(5) $ 25,000 on March 16, 2018;
(6) $ 5,000 on March 26, 2018;
(7) $ 15,000 on May 22, 2018; and
(8) $ 5,000 on July 6, 2018.
Witness Credibility & Additional Background
On the issue of credibility, the court finds Defendant to be
a very credible witness and the court believes Defendant’s
testimony. Defendant testified that his alternate direct
testimony declaration is truthful and he would not include
anything in the declaration that was untruthful or that would
subject him to perjury. Defendant understood what perjury
means.5 More important is that Plaintiff vouched for Defendant’s
credibility. Plaintiff testified during trial that he has known
Defendant to be an honest man his entire life and that he had
never known Defendant to lie in 2018 or at any other time.
Although Plaintiff appeared to be a good and forthright man,
his testimony on two critical points was inconsistent and
contradictory. These points of contradiction also provide
5Plaintiff introduced prior deposition testimony regarding
non-disclosure of personal property owned by Defendant’s son and
stored on Defendant’s property or at Defendant’s residence as
evidence that Defendant and/or Defendant’s son somehow lack
credibility because the property was not disclosed in Defendant’s
bankruptcy schedules. The court gives this testimony no weight.
Property owned by Defendant’s son, regardless of where it is
located or stored, is not property of Defendant’s bankruptcy
estate under 11 U.S.C. § 541(a) and therefore need not be
disclosed in Defendant’s bankruptcy schedules.
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additional background for this decision.
Point one concerns Defendant’s use of the money he received
from Plaintiff. Plaintiff’s trial testimony on this point is
conflicting. Plaintiff initially testified during trial that
Defendant did not tell him how the money was used. Plaintiff
later contradicted himself and testified that Defendant told him
the money was being used to “send in” to get lottery “winnings.”
Plaintiff’s initial trial testimony on this point is also
inconsistent with his prior testimony in an amended declaration
filed in a May 2023 state court action Plaintiff filed against
Defendant. The amended declaration was admitted into evidence
without objection as Defendant’s Exhibit D. Plaintiff testified
in ¶ 4 of the declaration that Defendant told him “he needed the
money to pay expenses for transaction under which he expected to
receive a substantial monetary payment.” For his part, Defendant
testified convincingly during a deposition that he told Plaintiff
the money was being used to pay lottery winning collection
expenses. The transcript of Defendant’s deposition was admitted
into evidence without objection as Plaintiff’s Exhibit 16.
Point two concerns collateral. Plaintiff testified that
Defendant gave him deeds to three parcels of real property and
that he relied on these deeds as collateral in the event he was
not repaid by Defendant.6 Plaintiff testified during trial and
in ¶¶ 7-8 of his alternate direct testimony declaration that he
asked Defendant for this collateral after the first two transfers
6Plaintiff testified that he did not consult a lawyer after
he received the deeds, he did not have loan documents drafted,
and he did not know what a deed of trust was.
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of $15,000 and $100,000, respectively, and before the third
transfer of $150,000. However, in ¶ 5 of the amended state court
declaration referenced above, Plaintiff testified he asked
Defendant for the three properties as collateral after the first
transfer of $15,000 and before the second transfer of $100,000.
Plaintiff also testified in ¶ 21 of his alternate direct
testimony declaration that he transferred the “money discussed
above [i.e., the $317,500] solely as a personal accommodation to
a longtime friend.” (Emphasis added).
Giving substantial weight to Plaintiff’s unequivocal
endorsement of Defendant’s life-long honesty and integrity, and
considering Plaintiff’s inconsistent and contradictory testimony
on at least two critical issues, the court finds Defendant to be
the more credible witness overall. Defendant’s testimony is
consistent, credible, reliable, and probative and the court
believes Defendant. The court gives Defendant’s testimony
substantially more weight than it gives Plaintiff’s testimony.
The § 523(a)(2)(A) Claim
One of the elements Plaintiff must prove to prevail on the §
523(a)(2)(A) claim is justifiable reliance. Field v. Mans, 516
U.S. 59, 74-75 (1995). Plaintiff bears the burden of proving
this element by a preponderance of the evidence. Grogan v.
Gardner, 498 U.S. 279, 291 (1991); American Express Travel
Related Services Company Inc. v. Hashemi (In re Hashemi), 104
F.3d 1122, 1125 (1996) (stating that creditor must prove each
element of a § 523(a)(2)(A) claim by a preponderance), cert.
denied, 520 U.S. 1230 (1997). Plaintiff has not met this burden.
Plaintiff has not established by a preponderance of the
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evidence that he relied on the deeds (or on anything else) as
collateral for repayment of the money transferred to Defendant.
The evidence is clear that the parties did not contemplate
collateral at the inception of the transfers and Plaintiff’s
conduct after he received the deeds is inconsistent with
Plaintiff obtaining the deeds as security for repayment. More
important is that contradictions and inconsistencies in
Plaintiff’s testimony about the timing of the purported request
for collateral render the entirety of Plaintiff’s testimony about
reliance on the deeds as collateral suspect, not credible, and
unreliable. But the most convincing and probative evidence that
Plaintiff did not rely on the deeds (or anything else) as
collateral for the money he transferred to Defendant is
Plaintiff’s own direct testimony that he transferred the entirety
of the $317,500 to Defendant “solely as a personal accommodation
to a longtime friend.” (Emphasis added).
What is an accommodation or, more specifically, what is a
“personal accommodation?” Blacks’s Law Dictionary defines an
“accommodation” as follows: “An arrangement or engagement made
as a favor to another, not upon a consideration received. . . .
The word implies no consideration.” Accommodation, Black’s Law
Dictionary, (rev. 5th Ed., 1979); see also Svenhard’s Swedish
Bakery v. Bakery and Confectionary Union and Industry
International Pension Fund (In re Svenhard’s Swedish Bakery), 154
F.4th 1100, 1104 (9th Cir. 2025) (referring to Black’s Law
Dictionary for a common definition of “accommodation” as “[a]n
arrangement or engagement made as a favor to another”);
Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories,
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724 F.Supp. 605, 610-11 (S.D. Ind. 1989) (referring to Black’s
Law Dictionary for definition of “accommodation” to mean no
expectation of consideration). Adding “solely” and “personal”
into the context of the “accommodation” term highlights the
“accommodation” testimony and reinforces the court’s conclusion
that Plaintiff gave Defendant the $317,500 as a favor-a personal
favor-to a longtime friend whose honesty he did not question and
without any expectation of or reliance on collateral.
So then, on what, if anything, did Plaintiff rely for the
return of the money he transferred to Defendant? The weight of
the evidence, primarily Defendant’s prior deposition testimony,
supports the conclusion that Plaintiff relied on Defendant’s
representations regarding the collection and sharing of lottery
winnings for repayment. However, Plaintiff’s reliance on these
representations, even if misrepresentations, would not be
justifiable.
“[J]ustifiable reliance is a subjective standard that looks
to the qualities and characteristics of the particular plaintiff,
the knowledge and relationship of the parties, and the
circumstances of the particular case[.]” In re Robinson, 640
B.R. 741, 745 n.5 (Bankr. D. Nev. 2021). There generally is no
duty to investigate unless there are “red flags.” Field, 516
U.S. at 71-72. As the BAP explained in Obara v. AFC Cal, LLC (In
re Obara), 2014 WL 2211768 (9th Cir. BAP May 28, 2014):
The justifiable reliance standard generally does not
entail a duty to investigate; a person may be justified
in relying on a representation even if he might have
ascertained the falsity of the representation had he
made an investigation. However, a creditor’s duty to
investigate arises by virtue of suspicious
circumstances. Thus, justifiable reliance does not
exist where a creditor ignores red flags.
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Id. at *10 (cleaned up); Wickman v. Ivar (In re Werner), 2019 WL
641411, *13 (9th Cir. BAP Feb. 13, 2019) (“[T]he justifiable
reliance standard does not permit the plaintiff to ignore red
flags that obviously call into question the truth of the debtor’s
representations regarding the transaction[.]”), aff’d,, 817
Fed.Appx. 432 (9th Cir., July 23, 2020).
Defendant’s deposition testimony reflects that there were
numerous “red flags” here that Plaintiff, a businessman of over
thirty years who is in good physical health and mentally acute,
should have investigated as suspicious but which Plaintiff
deliberately chose to ignore because, as Plaintiff testified, how
Defendant used the $317,500 was none of his business. For
example, Defendant’s assertion that he won a substantial cash
prize in a foreign lottery should have triggered some suspicion
for Plaintiff. Another “red flag” for Plaintiff should have been
Defendant’s explanation that lottery expenses had to be paid in
advance before the lottery winnings could be collected. Another
should have been that the pre-collection lottery expenses had to
be paid in extremely large amounts of cash. And still another
should have been that the cash to pay these pre-collection
lottery expenses had to be sent to lottery “agents” or
“officials.” The point here is that Plaintiff intentionally
ignored Defendant’s suspicious activity and, in so doing, can not
now establish that any reliance on Defendant’s collection of
lottery winnings for repayment was justifiable.7
7Although a subjective standard, when determining
justifiable reliance the court may consider how far the purported
reliance strays from what would be objectively reasonable. See
Robinson, 640 B.R. at 745 n.5. Plaintiff’s deliberate decision
to ignore numerous “red flags” is alone sufficient to undermine
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The § 523(a)(6) Claim
Section 523(a)(6) excepts from discharge a debt for a
willful and malicious injury. See 11 U.S.C. § 523(a)(6). As the
Ninth Circuit explained in Barboza v. New Form, Inc. (In re
Barboza), 545 F.3d 702, 706 (9th Cir. 2008):
Section 523(a)(6) of the Bankruptcy Code provides that
an individual debtor may not discharge a debt for
willful and malicious injury by the debtor to another
entity or to the property of another entity. The
malicious injury requirement is separate from the
willful injury requirement. A willful injury is a
deliberate or intentional injury, not merely a
deliberate or intentional act that leads to injury. A
malicious injury involves (1) a wrongful act, (2) done
intentionally, (3) which necessarily causes injury, and
(4) is done without just cause or excuse.
Id. at 706 (cleaned up).
The court is not persuaded that Defendant deliberately or
intentionally injured Plaintiff or that Defendant was
substantially certain Plaintiff would be injured by his conduct.
Quite the opposite. Defendant testified convincingly that he
intended to provide Plaintiff with a benefit for the money he
received from Plaintiff by sharing-perhaps splitting-his lottery
winnings with Plaintiff. In other words, Defendant’s intent was
to reward-not harm-Plaintiff for helping him collect lottery
winnings. This is not willful and malicious conduct.
any justifiable reliance here. Nevertheless, the court notes
that Defendant’s banking transactions involving large amounts of
cash Defendant was sending to undisclosed third-parties caused
Plumas Bank’s manager enough concern to contact the Shasta County
Sheriff’s Department and report Defendant as a potential victim
of elder abuse. These activities also caused Lt. Estes enough
concern to initiate an investigation, contact family members, and
report Defendant’s activities to county Adult Protective
Services.
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III.
Conclusion
William Shakespeare said it best: “Neither a borrower nor a
lender be; / For loan oft loses both itself and friend ...”
(Hamlet, Act 1, Scene 3).
Based on the foregoing:
Judgment will be entered for Defendant and against Plaintiff
with Plaintiff taking nothing on the claim under 11 U.S.C. §
523(a)(2)(A) in the First Cause of Action of the Complaint.
Judgment will be entered for Defendant and against Plaintiff
with Plaintiff taking nothing on the claim under 11 U.S.C. §
523(a)(6) in the Second Cause of Action of the Complaint.
Defendant’s debt to Plaintiff as alleged in the Complaint
and as filed in Claim 1-1 arising from and based on the transfers
referenced hereinabove is dischargeable and is discharged in
Defendant’s chapter 7 case.
Defendant is awarded costs as the prevailing party. A
signed Bill of Costs must be filed by February 25, 2026.
If supported by Fed. R. Bankr. P. 9011, Defendant may file a
motion for attorney’s fees under 11 U.S.C. § 523(d). Any such
motion shall be filed and served by March 18, 2026.
A separate judgment will issue.
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INSTRUCTIONS TO CLERK OF COURT
SERVICE LIST
The Clerk of Court is instructed to send the attached
document, via the BNC, to the following parties:
David A. Diepenbrock
400 Capitol Mall 11th Fl
Sacramento CA 95814
David Ashley Smyth
3478 Buskirk Ave., #1000
Pleasant Hill CA 94523
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