Hernandez v. Hernandez

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
SAN FERNANDO VALLEY DIVISION
In re:
GIOVANNI HERNANDEZ,
Debtor.
JUAN CARLOS HERNANDEZ,
Plaintiff,
v.
GIOVANNI HERNANDEZ,
Defendant.
Case No.: 1:24-bk-10532-MB
Chapter 7
Adv. No.: 1:24-ap-01033-MB
MEMORANDUM OF DECISION
AFTER TRIAL
I. INTRODUCTION
This adversary proceeding arises out of the debtor-defendant's failed business venture to grow
and sell cannabis. In addition to relying on his own capital, he received funding from Plaintiff (among
other sources), which funding the Plaintiff now seeks to have declared a nondischargeable debt.
Plaintiff generally alleges that the funding at issue was obtained by fraud and constitutes a debt resulting
from a willful and malicious injury. On May 20-21 and June 1, 2026, the Court held a trial in this
FILED & ENTERED
SEP 30 2026
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	Cetulio
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adversary proceeding. James Franklin Drake IV of Mendez & Sanchez, A.P.C. appeared on behalf of
plaintiff Juan Carlos Hernandez ("Plaintiff"). Defendant Giovanni Hernandez ("Defendant") appeared
on his own behalf.
For the reasons set forth below, the Court holds that Plaintiff has failed to meet his burden to
establish nondischargeability.
II. JURISDICTION, ADJUDICATIVE AUTHORITY & VENUE
The Court has jurisdiction over this adversary proceeding because it arises under section 523(a)
of the Bankruptcy Code.1 See 28 U.S.C. § 1334(b); see also General Order No. 13-05 (C.D. Cal. July 1,
2013), at ¶ 1. Because Plaintiff's operative complaint solely concerns nondischargeability under sections
523(a)(2), (4) and (6), this Court has exclusive jurisdiction. See 11 U.S.C. § 523(c)(1); Rein v. Providian
Fin. Corp., 270 F.3d 895, 904 (9th Cir. 2001). This is a core proceeding. See 28 U.S.C. § 157(b)(2)(I)
("Core proceedings include … determinations as to the dischargeability of particular debts").
For the same reasons, the Court has the adjudicative authority to enter final orders in this
adversary proceeding. See Wellness Int'l Network, Ltd. v. Sharif, 575 U.S. 665 (2015); Deitz v. Ford (In
re Deitz), 760 F.3d 1038 (9th Cir. 2014) (authority to adjudicate nondischargeability encompasses
authority to liquidate debt and enter final judgment). Venue is proper because the trial was held in the
district and division where this chapter 7 case is pending. See 28 U.S.C. § 1409(a).
At the conclusion of trial, the Court took this matter under submission. Having considered all
admitted testimony and documentary evidence, and having accorded the weight it deems appropriate to
such evidence, the Court hereby makes its written findings of fact and conclusions of law. See Fed. R.
Civ. P. 52(a)(1) (providing that Court shall make findings of fact and conclusions of law after close of
evidence in non-jury trial); Fed. R. Bankr. P. 7052 (providing that Fed. R. Civ. P. 52 applies in an
adversary proceeding).
1 Unless the context suggests otherwise, a "chapter" or "section" ("§") refers to the Bankruptcy Reform
Act of 1978, as amended, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"). A "Rule" refers to the
Federal Rules of Bankruptcy Procedure or other federal or local rule, as the context indicates. Other
terms shall have the meanings ascribed to them in the Bankruptcy Code, the Rules, or herein.
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III. FACTUAL AND PROCEDURAL BACKGROUND
A. The Parties and Their Prior History
Plaintiff is a property manager and private driver. Adv. Dkt. 65 at 17:23–24.2 He has held these
occupations for over thirty years. Id. at 18:1. Defendant, apart from operating the business at issue in
this adversary proceeding, has worked driver and delivery jobs, Adv. Dkt. 66 at 125, 133–34, and from
at least January to March of 2024, was an independent salesman at GD Construction, Case Dkt. 1 at 31
(¶ 1).3
Plaintiff and Defendant have known each other for approximately twenty years. Adv. Dkt. 65 at
19; Adv. Dkt. 66 at 164, 320–21. According to Plaintiff, their families were close. Adv. Dkt. 66 at 322–
23 (Plaintiff stating, "I know them for the last 20 years. I know [sic] him, his family. H[e] used to know
my mom, my father, my whole family."). According to Plaintiff's friend and neighbor, Gustavo Andres
Giraldo, Plaintiff and Defendant were friends. Adv. Dkt. 66 at 16:8–9.
During the relevant time period, Plaintiff was the manager of an apartment building located at
10020 Zelzah Avenue in Northridge, California ("The Liora"). Adv. Dkt. 66 at 15–18, 61, 163–64.
Plaintiff lived at The Liora while working there. Adv. Dkt. 66 at 59, 167:16–18. At the beginning of
2021, Defendant moved into an apartment at The Liora. Adv. Dkt. 66 at 61. Defendant shared the
apartment with his mutual friend and then-roommate, Jhony Mendoza. Adv. Dkt. 65 at 61–62; Adv. Dkt.
66 at 59–62.
B. Defendant Formed El Patron LLC, Procured Initial Investors
In 2021, Defendant decided to form a new business called "El Patron," which would engage in
the indoor cultivation, manufacturing and distribution of cannabis or marijuana products. In May 2021,
Defendant formed El Patron LLC, a California limited liability company, with the assistance of an
accountant named Shakeel "Sam" Ahmed. Dkt. 66 at 203–07. El Patron LLC was organized on May
2 When citing a specific page or pages of a document filed in the bankruptcy case ("Case Dkt.") or the
adversary proceeding ("Adv. Dkt."), the Court uses only those page numbers that are generated by
CM/ECF and appear in the document's header.
3 The Court takes judicial notice of Defendant's schedules and all other papers filed in Defendant's
bankruptcy case and in this adversary proceeding. See, e.g., The Golden Gate v. Marincovich, 286 F.
105, 106 (9th Cir. 1923) ("Every court takes judicial notice of its own records in the same case.").
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12, 2021, when Ahmed filed articles of organization with the California Secretary of State. See Cal.
Corp. Code § 17702.01(d) ("A limited liability company is formed when the Secretary of State has filed
the articles of organization."); Adv. Dkt. 62-1 at 61 (Pl. Tr. Ex. 5); Adv. Dkt. 62-2 at 2 (Def. Tr. Ex. A).4
Thereafter, Defendant obtained an internet domain name for El Patron and had Giraldo, his neighbor at
the time, create a company logo. Adv. Dkt. 66 at 8–9.
Defendant was the sole member and manager of El Patron LLC. Adv. Dkt. 66 at 201:6–20,
209:3–10; see also Case Dkt. 1 at 12 (¶ 19 of Schedule A/B, containing Defendant's declaration under
penalty of perjury that he owned 100% of El Patron LLC). Although the record contains no operating
agreement for El Patron LLC, the documentary evidence corroborates Defendant's testimony. See, e.g.,
Adv. Dkt. 62-2 at 3 (El Patron LLC's statement of information filed with the California Secretary of
State), 4 (notice of IRS's issuance of EIN for El Patron LLC, describing Defendant as sole member);
Adv. Dkt. 62-1 at 2–3 (promissory note between parties, stating that "[i]f [Defendant] fails to make the
full payment …, [Defendant] will turn over the full ownership … of El Patron LLC to [Plaintiff].").
Similarly, witnesses testified that they understood Defendant to be "the one who made the decisions,"
see, e.g., Adv. Dkt. 66 at 19:23–24, and who maintained the company's operations, see, e.g., Adv. Dkt.
65 at 203:4–13. In terms of financial management, Defendant and his then-roommate, Mendoza,
handled "all the payments," i.e., the company's accounts payable and receivable. Adv. Dkt. 66 at 19–20.
4 At trial, Plaintiff introduced a second document purporting to be Articles of Incorporation for El Patron
LLC. See Adv. Dkt. 62-1 at 63 (Pl. Tr. Ex. 6). Like Trial Exhibit 5, the document admitted as Trial
Exhibit 6 shows a recordation date of May 12, 2021. The only material difference between these
documents is the name of the party listed as the agent for service of process. In Trial Exhibit 5, only
Defendant is listed. Adv. Dkt. 62-1 at 61. In Trial Exhibit 6, both Defendant and Camilo Correa
Stahelin are listed. As best the Court can tell, Plaintiff introduced Exhibit 6 to suggest that Defendant
altered the document to somehow induce Stahelin—a non-party to this action—to invest in El Patron
LLC. The Court takes judicial notice that Trial Exhibit 6 was not, in fact, recorded with the California
Secretary of State. See Fed. R. Evid. 201(b)(2), (d); Gerritsen v. Warner Bros. Ent., Inc., 112 F. Supp.
3d 1011, 1033-34 (C.D. Cal. 2015) (taking judicial notice of business entity profile from the California
Secretary of State's website); Business Search for "202113710471", Cal. Sec'y of State,
https://bizfileonline.sos.ca.gov/search/business (last visited June 20, 2026). Whatever its provenance,
the Court is not persuaded by the evidentiary record before it that Defendant altered the document or
used it to induce action by anyone, let alone, Stahelin. Defendant testified that before trial, he had never
seen Trial Exhibit 6 and had no idea where it came from. Adv. Dkt. 66 at 209–10. The Court finds this
testimony credible. Further, the Court notes that any fraudulent inducement of Stahelin, even if
demonstrated, would not have established that Plaintiff was fraudulently induced in any way.
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Defendant secured the financial and management support of two initial investors: Camilo
Toledo-Pérez ("Toledo") and Iván Camilo Correa-Stahelin ("Correa"), two individuals from Bogotá,
Colombia. Adv Dkt. 65 at 190–92. Although it appears that their involvement started even earlier, on
August 25, 2021, Defendant and his initial investors held a meeting on behalf of the business by Zoom
teleconference. Adv. Dkt. 62-2 at 113 (meeting minutes). The minutes of the meeting indicate that the
attendees discussed El Patron LLC's projected budget, financial strategies, and the investors'
commitments and projected distributions. Id. Although the record is unclear how much money was
actually invested by the Bogota Investors, the parties agreed at this meeting that they each would invest
in El Patron LLC as follows: $112,250 from Toledo, $102,750 from Correa, and $100,000 from
Defendant. Id. The parties further agreed that "[p]rofits after tax" during the first year of operation
would be distributed as follows: 25% to Toledo, 25% to Correa, and 50% to Defendant. Id. In addition
to funding, Correa brought his prior experience growing cannabis in Columbia. Adv. Dkt. 65 at 138:11-
16, 142:15-23.
C. El Patron LLC Leases, Begins Improvements to Growing Facility
From May to June 2021, Defendant, with the assistance of Correa, scoped out potential locations
to set up El Patron LLC's operations. See Adv. Dkt. 65 at 137–38, 180:18–21. They first looked in the
City of Los Angeles but quickly determined that it was "too costly." Id. at 137:22–23. They then
physically visited potential locations "in cities like Adelanto, Oxnard, and [determined that those cities]
were no longer issuing licenses" to cannabis businesses. Id. at 137:23–24, 138:3–7. Defendant testified
that it "was very hard to find" a place suitable for the business. Adv. Dkt. 66 at 307–08. Eventually,
they "went to California City," and were led to believe by city officials that they could "get a license for
cultivating and manufacturing" cannabis "in three" or "[f]our months." Adv. Dkt. 65 at 137–38, 181:8–
13, 211–12. Defendant then spoke to a realtor, and they settled on a barebones warehouse, one of four
located at 22510 Curtiss Place, California City, California 93505 (the "Property"). Adv. Dkt. 66 at 302,
308.
On June 28, 2021, El Patron LLC entered into a two-year lease of the 2,000-square-foot
warehouse, Unit B/200 at the Property (the "Facility"). Adv. Dkt. 62-2 at 9–15 (the "Lease"). At the
time it was leased, the Facility was in an unfinished state. It was entirely empty, with "no walls," "no
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electricity, no plumbing, no insulation, nothing." Adv. Dkt. 65 at 181–82, 183:15–18; Adv. Dkt. 66 at
308:7–21. Apparently, the only thing the Facility had was a slab foundation, exterior walls, some
framing, and a roof. See Adv. Dkt. 65 at 211; Adv. Dkt. 66 at 303; Adv. Dkt. 62-2 at 102 (composite of
six photos depicting the Facility's condition in June to July 2021). Because it was so unfinished, it did
not come with a certificate of occupancy, a document issued by the city which (a) verifies a building's
compliance with applicable building codes and other laws, and (b) allows a building to be used for its
intended purpose.
The base rent under the Lease was $5,000 per month, plus a security deposit equal to one
month's rent. Adv. Dkt. 62-2 at 9 (§§ 3.A.1, 6.A). The total due to the landlord the day after signing
was $10,000. Id. at 10 (§ 7.E).5 The lease stated that El Patron LLC would be responsible for "interior
build out and site improvements to [the Facility] … [which] include but [are] not limited to sewer
connections, water connections, natural gas connections, electrical connections, fencing and any other
site improvements required by the city for certificate of occupancy." Id. at 13 (§ 40.2). Further, the
"Lease [wa]s contingent upon [El Patron LLC] receiving [a] local conditional use permit for cannabis
business activities from … California City. " Id. at 13 (§ 40.4).
Defendant signed the Lease on behalf of El Patron LLC. Id. at 14. Defendant personally
guaranteed payment of all amounts owed under the Lease, including rent, attorney's fees, and any court
costs in the event of default by El Patron LLC. Id. at 14. On June 29, 2021, Defendant personally paid
the $5,000 security deposit owed under the Lease via a cashier's check from his personal account at JP
Morgan Chase Bank, N.A. ("Chase"). Adv. Dkt. 62-2 at 16. He similarly paid the $2,500 rent for
September of 2021 from his personal Chase account. Id. at 18.
Right away, Defendant set out to improve the Facility with "7 grow rooms, [a] storage room, [an]
office, [and a] bath[room]." See Adv. Dkt. 62-2 at 89 (project description); Adv. Dkt. 66 at 309:7–8.
Defendant began the process of hiring contractors and laborers to "do the wir[ing], the plumbing, [and]
the electrical," including installing a panel to connect the main power line to the Facility. Adv. Dkt. 66
5 For the second and third months, the rental rate was reduced to $2,500 to allow for build out of the
space and the local permitting process. Id. at 13 (§ 40.4)
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at 308. They also installed brand-new air-conditioning equipment suitable for the operations. Adv. Dkt.
66 at 21, 309:8.
In addition to basic improvements, Defendant worked on getting the Facility ready for cannabis
cultivation. With the assistance of Correa, Defendant obtained two-level racks on which to place the
plants. Adv. Dkt. 66 at 308:25; Adv. Dkt. 62-2 at 192–94 (composites of photos depicting racks). In
light of anticipated humidity levels in the Facility, they procured and applied a very expensive mold-
resistant paint because any mold would "affect the plants." Adv. Dkt. 66 at 309:1–5.
Defendant and Correa purchased approximately 90 lights for growing operations. Adv. Dkt. 66
at 308:22–25; Adv. Dkt. 62-2 at 192–94 (composites of photos depicting installed lights). They
purchased the lamps in Los Angeles with cash provided by Correa. Adv. Dkt. 65 at 180. Because of the
intensity of the lights and the heat produced by them, Defendant and Correa also purchased and installed
several fans to maintain airflow in the grow rooms.6 Adv. Dkt. 65 at 145:20–23; Adv. Dkt. 66 at 309:6;
Adv. Dkt. 62-2 at 192–94 (composites of photos depicting 3-blade fans on floor and walls).
Moreover, Defendant hired Giraldo, and later Mendoza, to install a drip irrigation system for the
plants, which required approximately 10 full days of labor and was completed in September of 2022.
Adv. Dkt. 66 at 9–10, 53–54; Adv. Dkt. 62-2 at 190–94 (composites of photos depicting drip irrigation
lines). After completion of the irrigation system work, Defendant paid off Giraldo in varying
installments over the course of a few months. Adv. Dkt. 66 at 55.
All told, Defendant spent "[a]round $400,000" of funds from the company's investors to build
out the Facility. Adv. Dkt. 66 at 299, 303.
D. Despite Numerous Challenges and Delays, Defendant Sets Up The Business
The record is replete with evidence that Defendant was genuinely vexed by bureaucratic
procedures and other "red tape" that prevented El Patron LLC from becoming legally operational in the
three or four months that he initially believed feasible. Notwithstanding Plaintiff's complaints at trial
that there were many delays and that Defendant often made excuses for those delays, the Court is
6 Although Correa assisted with procuring the necessary technology for indoor cultivation, he
understood his role to be that of an investor, whereas Defendant "w[as] responsible for" taking care of
the plants and maintaining operations. Adv. Dkt. 65 at 203:4–13.
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persuaded that these challenges were real, that they were necessitated by Defendant's desire to operate
the business legally, and that ultimately Defendant overcame these bureaucratic challenges.
1. It Took Defendant Over a Year to Obtain California City's Approval
Despite Defendant and Correa's belief that El Patron LLC could "get a license for cultivating and
manufacturing" cannabis from California City "in three" or "[f]our months," Adv. Dkt. 65 at 137–38,
181:8–13, 211–12, the process ultimately took much longer.
In July of 2021, a few weeks after signing the Lease, Defendant completed the requisite
fingerprinting and identity verification, and applied to California City's public works department for a
cannabis business permit. Adv. Dkt. 62-2 at 38 ("City of California City Cannabis Permit Procedure"),
39–40 (copy of first two pages of application); see also Adv. Dkt. 46 at 29–38 (copy of application
pages 1–2 and 6–13). Defendant personally paid the requisite $17,000 in fees via cashier's checks made
from his personal accounts with Chase and Wells Fargo Bank, N.A. ("Wells Fargo"). Adv. Dkt. 62-2 at
41 (copy of application fee receipt), 42–45 (copies of checks to California City). On July 14, 2021,
California City issued a "Zoning Verification Letter," determining that El Patron LLC's proposed
cannabis cultivation business was located outside a 1,000-foot radius of any "sensitive use," as required
by city ordinance. Adv. Dkt. 62-2 at 93.
On November 15, 2021, Defendant, in his personal capacity as owner and developer of the
Facility under the Lease, signed an indemnification agreement with California City. Adv. Dkt. 62-2 at
48–54. The agreement stated that:
[Defendant] shall defend (with legal counsel chosen by CITY), indemnify, and hold
harmless the CITY from and against any and all claims … brought by anyone challenging
the validity and/or legality of the [City's permit allowing El Patron LLC to operate a
marijuana cultivation business;] the process followed[; and] the legality of [Defendant's]
business [and its] operation….
Id. at 48–49 (§ 2). Further, Defendant agreed to "pay all costs of defense, including but not limited to,
attorneys' fees and costs, City Staff time, and City Attorney time." Id.7
7 The copy of the indemnification agreement in the record is not countersigned by California City, but
the fact that the city presented it to Defendant for his signature, and that Defendant agreed to be bound
by its terms, is nonetheless relevant evidence that Defendant went out of his way to meet the city's
various demands of his business.
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On December 6, 2021, California City issued a "Notice of Local Compliance Underway," which
allowed El Patron LLC to begin the process of obtaining the necessary cannabis licenses from the State
of California. Adv. Dkt. 62-2 at 46–47. On February 17, 2022, Defendant paid by debit card a total of
$1,155 in fees to California City for an application for staff development review and for fire inspections.
Adv. Dkt. 62-2 at 94–95.
On March 2, 2022, an inspector with California City's building department inspected and
approved of the rough framing (walls/shear panels), insulation, rough mechanical, and rough plumbing
improvements at the Facility. Adv. Dkt. 62-2 at 89, 109 (composite of six photos depicting Facility's
interior condition in March of 2022).
On January 27, 2022, an inspector with California City's building department inspected and
approved the rough electrical improvements at the Facility. Adv. Dkt. 62-2 at 89 (inspection record
card), 108 (composite of six photos depicting electrical improvements and inspector's van). The
inspector returned on February 3, 2022, inspecting and approving Defendant's underground plumbing
improvements at the Facility. Id. at 89, 107 (composite of six photos depicting the underground
plumbing improvements).
On May 24, 2022, California City's fire department completed its inspection of the Facility,
finding no violations. Adv. Dkt. 62-2 at 97–100 (fire inspection report), 111 (composite of two photos
depicting at least six fire extinguishers inside the Facility). That same day, California City's building
department completed its final inspection and approved of Defendant's improvements to the Facility. Id.
at 89, 110 (composite of six photos depicting Facility's interior condition on May 24, 2022). On June 8,
2022, California City issued a certificate of occupancy for the Facility. Adv. Dkt. 62-2 at 91.
On July 1, 2022, California City issued to El Patron LLC two renewed business permits: one for
cannabis cultivation and one for cannabis distribution. Adv. Dkt. 62-2 at 63, 65. Defendant appears to
have paid via check a total of $18,890 in fees to renew the two permits. Id. at 64, 66 (copies of carbon
transfers of checks); see also Adv. Dkt. 46 at 95 (California City's renewal notice regarding to El Patron
LLC's cannabis cultivation business permit).
On November 2, 2022, Defendant paid California City another $340 in fees for a site plan review
(SPR) application regarding the Facility and for fire inspections. Adv. Dkt. 62-2 at 101. On December
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8, 2022, California City's interim city manager and acting planning director approved the SPR
application regarding the Facility. Adv. Dkt. 46 at 74–84.
2. El Patron LLC Had Difficulties in Reliably Accessing Banking Services
In September or October of 2021, El Patron LLC's deposit account with Chase was summarily
closed. See Adv. Dkt. 62-2 at 120–41 (El Patron LLC's Chase account statements for July 21 to Oct. 29,
2021), 142 (account closure letter re: Defendant's personal account at Chase). Defendant understood the
sudden closure happened because El Patron LLC was engaged in marijuana-related activities, and Chase
was unwilling to provide banking services due to potential consequences Chase could face under federal
law. See Adv. Dkt. 66 at 190–92, 210, 215–19.
After the Chase account closure, Defendant caused El Patron LLC to open an account with Bank
of America, N.A ("BofA"). Id. at 220; see also Adv. Dkt. 62-2 at 143–61 (El Patron LLC's BofA
account statements for Sept. 20 to Dec. 31, 2021), 21–31 (various check images and other transaction
records concerning El Patron LLC's BofA account). He deposited with BofA a cashier's check from
Plaintiff in the amount of $30,000, but BofA held the funds for "almost 20 days," creating a cash crunch
because Defendant "had to pay some people." Adv. Dkt. 66 at 220.
On Plaintiff's advice, Defendant caused El Patron LLC to open an account at Wells Fargo. Id.
Apparently, Plaintiff had some friends who worked at Wells Fargo's Northridge branch, where Plaintiff
maintained a personal account, and he believed the business would receive better service there than with
Chase or BofA. See id. To his credit, Plaintiff was correct; Defendant testified that he "didn't have any
issue [getting] a money order for $3,000" in only "like … one day." Id. at 220:16–18.
3. Defendant Faced Delays But Ultimately Obtained Permission from
the State and its Various Agencies
On December 12, 2021, Defendant applied to the California State Water Resources Control
Board for waiver of waste discharge requirements for discharges of waste to a community sewer system
associated with indoor cannabis cultivation activities. Adv. Dkt. 62-2 at 76–79.
On December 13, 2021, Defendant submitted to the California Department of Fish and Wildlife a
self-certification that El Patron LLC's cannabis cultivation project would not substantially modify any
river, stream or lake. Adv. Dkt. 62-2 at 80–87.
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On January 25, 2022, Defendant paid by check a $2,170 fee to file a specialty indoor cultivation
application with the California Department of Cannabis Control, Adv. Dkt. 62-2 at 59, plus a $1,000 fee
to file a specialty indoor distributor application, id. at 60.
On April 21, 2022, the California Department of Cannabis Control issued to El Patron LLC a
provisional adult-use, specialty indoor cannabis distributor license. Adv. Dkt. 62-2 at 58, 61. On April
19, 2022, Defendant paid a $1,500 fee for the distributor license. Id. at 60.
On August 2, 2022, the California Department of Cannabis Control issued to El Patron LLC a
provisional adult-use, specialty indoor cannabis cultivation license. Adv. Dkt. 62-2 at 56. Defendant
paid by check a $19,540 fee for the license. Id. at 57.
On August 31, 2022, the Eastern Kern Air Pollution Control District issued an "Authority to
Construct" permit to El Patron LLC. Adv. Dkt. 62-2 at 71–73. Defendant paid a total of $689 in permit
fees, split across two credit cards. Id. at 69–70, 74–75.
* * *
Considering this substantial documentary evidence of Defendant's earnest efforts to operate the
business in a lawful manner, the Court finds credible Defendant's repeated testimony that he tried to "do
everything legally." See Adv. Dkt. 66 at 237:8–12, 246:14, 285:3, 290:5.
E. Defendant Solicits Plaintiff's Participation in the Business
The trial record does not establish a comprehensive accounting of all the sources and uses of
cash by El Patron LLC. In terms of sources, it does show that Defendant invested $20,000 to $30,000 of
his own money to start the business. Adv. Dkt. 66 at 291. It shows that Defendant obtained $75,000 to
$100,000 for the business from an individual named Raunaq Anand, with whom Defendant previously
worked. Id.; Adv. Dkt. 65 at 41:8, 42–46. Although the timeline and amounts are less than clear, the
record shows that Plaintiff advanced money to Defendant for use by El Patron LLC.
Plaintiff testified at trial that he began making advances to Defendant for use by El Patron LLC
after a dinner in December of 2021, with Defendant and Defendant's sister, Lina, at her Simi Valley
home. Adv. Dkt. 65 at 20, 63:10–12. According to Plaintiff, Defendant told him that El Patron "was his
dream come true, that he had already [sic] experience in cannabis, that he knew how to operate
everything, that he had already [sic] his business running. He also invited [Plaintiff] to go and see …
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where [Defendant] had his business." Adv. Dkt. 65 at 21:1–8. Defendant purportedly explained to
Plaintiff that "[h]e was working with [California] City" to obtain permits for the business, that "[t]hey
were in process," and that "he was just waiting for" them. Adv. Dkt. 65 at 21:25–22:5. Defendant also
purportedly indicated that, at that time, "he ha[d] vendors already waiting for" the cannabis product. Id.
at 22:14–17.
According to Plaintiff, Defendant asked Plaintiff for an investment of $100,000 to get El Patron
LLC up and running. Adv. Dkt. 65 at 22:18–23:1. In return, Defendant allegedly orally promised
Plaintiff "twenty percent of … the winnings when he sells" the cannabis product. Id. at 23:2–9; 68:13–
25. Sometime after the dinner, Plaintiff and his wife visited Defendant's existing cannabis cultivation
operation, which was located in California City, California.8 Adv. Dkt. 65 at 21:9–18. While there,
Plaintiff saw Defendant "had plants already there growing up." Id. at 21:18.9
Later in December of 2021, or January of 2022, Defendant and his then-roommate, Mendoza,
prepared "a presentation—a business plan—operational plan and financial strategy" to show Plaintiff.
Adv. Dkt. 65 at 60:6–8; Adv. Dkt. 66 at 111:4–8; Adv. Dkt. 62-2 at 164–172 (copy of presentation
slides). Defendant actually prepared two versions of the presentation, but the first nine slides of each
8 Plaintiff did not "remember the name of the city," but testified that it was located "two hours north" of
the courthouse off "Freeway 14." Adv. Dkt. 65 at 21:13–14. The Court takes judicial notice of the fact
that California City is approximately a two-hour drive from the courthouse and is located east of State
Route 14. See Fed. R. Evid. 201(b)(1), (d) (providing that "at any stage of the proceeding," the court
may take judicial notice of "a fact that is not subject to reasonable dispute because it … is generally
known within the trial court's territorial jurisdiction.").
9 Although the Court does not doubt that a dinner took place in December 2021, and that Defendant
solicited funds from Plaintiff, the Court did not find Plaintiff's testimony regarding the details of that
dinner or Defendant's purported representations credible or reliable. For one thing, it appears that
discussions between the parties about an "investment" in El Patron LLC began long before December,
i.e., as early as August 9, 2021. More importantly, the documentary evidence admitted at trial shows
that Plaintiff started making advances to Defendant in November of that year—well before the dinner
took place. See Adv. Dkt. 62-1 at 59 (top left photo, cashier's check no. 0069112511 and top right
photo, cashier's check no. 0069112546). Furthermore, the Court found Plaintiff's testimony internally
inconsistent regarding the status of the business at the time of December 2021 solicitation. Compare
Adv. Dkt. 65 at 21 (testifying that the business was "already . . . running") with id. at 22–23 (testifying
that the business needed money "to get [El Patron LLC] up and running…."). Although Plaintiff's
testimony suggested that he did not advance funds until after visiting the facility and seeing plants
already growing there, the first group of plants were not purchased until September of 2022. See Adv.
Dkt. 62-2 at 177.
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were identical; the text accompanying the tenth and last slide, titled "RETURN INVESTMENTS," was
the only difference between the two. Adv. Dkt. 66 at 181:19–182:9.
The two versions contained alternative proposed terms of how El Patron LLC would calculate
the return owed on Plaintiff's investment. Adv. Dkt. 66 at 177:1–5, 178:14–23. The first version
("Option A") stated that Plaintiff would receive a return on his investment "in six months after the first
harvest paid with in [sic] the time frame or sooner." Adv. Dkt. 62-2 at 172. Option A further stated that
the return would be "15% interest per 1 month per 1 year," and included a sample calculation of
"$30,000 * 15% interest = $4,500 per month." Id. In contrast, the second version ("Option B") stated
"1,000 plants = 100 pounds * $1,500 = $150,000 * 15% = $22,500 – taxes – operating cost." Adv. Dkt.
66 at 177:14–16.10
Defendant sent the presentations to Plaintiff via email, which Plaintiff read, after which Plaintiff
met with Defendant and Mendoza to discuss "which deal … was better for [Plaintiff] and for [them]."
Adv. Dkt. 65 at 60, 62, 68; Adv. Dkt. 66 at 178:16–179:1, 181:13–17. Defendant testified that after
showing Plaintiff the presentation, Plaintiff said, "'Okay. Let's do it.'" Adv. Dkt. 66 at 285:18.
According to Defendant, the parties opted to proceed under Option B, i.e., that Plaintiff could receive a
lump sum return of up to $22,500 on his investment or loan. Adv. Dkt. 66 at 177:7–9, 184. The parties
did not reduce their agreement to writing. Adv. Dkt. 66 at 184:22–185:2. According to Defendant, the
parties did not discuss whether there would be any use restrictions on the funds Plaintiff advanced for
use by El Patron LLC, such as whether Defendant could be paid a salary from the company. Id. at 276–
77; see also Adv. Dkt. 65 at 27 (Plaintiff's testimony, "Q. Did you ever talk to [Defendant] about his
salary and his wages? A. No, sir, never.").
Notably, Plaintiff began making advances to Defendant before either the December 2021 dinner
or the subsequent business presentation. On November 2, 2021, Plaintiff gave $20,000 to Defendant via
a cashier's check payable to him personally. Adv. Dkt. 62-1 at 59 (top left photo, cashier's check no.
0069112511). On November 23, 2021, Plaintiff gave $60,000 to Defendant via a cashier's check
10 Although the Court was shown Option B at trial, and the Court identified it as Impeachment Exhibit
C, no party moved to admit that exhibit into evidence. See Adv. Dkt. 66 at 174–75. Nevertheless, a
copy of Option B/Impeachment Exhibit C appears in Defendant's answer to Plaintiff's second amended
complaint. See Adv. Dkt. 46 at 145.
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payable to him personally. Adv. Dkt. 62-1 at 59 (top right photo, cashier's check no. 0069112546).11 At
trial, Plaintiff confirmed he received the presentation only after he had begun giving money to
Defendant. Adv. Dkt. 65 at 71:13–72:22. In his words, Plaintiff received the presentation "[s]omewhere
in the middle" of his various advances of funds. Id. at 72:14; see also Adv. Dkt. 65 at 72:1–22 (Plaintiff
testifying that prior to the business presentation, Defendant had already "started making excuses" as to
why the business had not yet generated returns).
Nevertheless, after the presentation, Plaintiff made more advances. On January 5, 2022, for
instance, Plaintiff and Defendant visited a local branch of Plaintiff's bank. Adv. Dkt. 65 at 28:2–8, 63:6–
12. While there, Plaintiff purchased a cashier's check in the amount of $120,000 and handed it to
Defendant then and there. Id.; Adv. Dkt. 62-1 at 59 (bottom left photo, cashier's check no. 0069110255).
The cashier's check was payable to Defendant personally. Id. According to Defendant, all the money
Plaintiff gave him went to El Patron LLC. Adv. Dkt. 66 at 277–78. Remarkably, Plaintiff testified that
Defendant never made any "oral representations that he was going to pay [Plaintiff] back." Adv. Dkt. 65
at 29–30.
In April of 2022, Defendant began receiving threatening correspondence from Anand, an early
investor (or lender) to the business. Adv. Dkt. 65 at 40–41, 44–45; Adv. Dkt. 62-2 at 118 (text messages
from Anand to Defendant stating, "Money is due today," "75 K," "I am not gonna [sic] call again bro,"
and "I'll be knocking doors soon."). Defendant turned to Plaintiff for help. According to Plaintiff,
Defendant needed help repaying Anand because the threats were preventing Defendant from
"concentrat[ing] in [sic] the business." Adv. Dkt. 65 at 42–46.
On April 20, 2022, Plaintiff and Defendant together visited the Northridge branch of Wells
Fargo, where Plaintiff maintained an account. Adv. Dkt. 65 at 82; Adv. Dkt. 62-2 at 119. Plaintiff
purchased a cashier's check payable to "Raunaq Anand" in the amount of $72,500, and immediately
"gave it to" Defendant. Adv. Dkt. 65 at 82. That same day, Defendant had the cashier's check
personally delivered to Anand. See Adv. Dkt. 62-3 at 42 (messages to Plaintiff from Defendant,
This advance was substantially repaid shortly thereafter. On December 6, 2021, Defendant repaid
Plaintiff $58,000. Adv. Dkt. 62-4 at 2, 6, 7. The circumstances surrounding this advance and prompt
repayment are unclear from the record.
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disclosing address in Pico-Robertson area of Los Angeles, followed by photo of man extending his arm
through passenger door window of vehicle and towards driver).12
In addition to the cashier's checks identified above (i.e., $20,000, $60,000, $120,000, and
$72,500), Plaintiff testified that he gave additional cashier's checks to Defendant as advances for El
Patron LLC, but did not produce them at trial. See Adv. Dkt. 65 at 54:16–17 (Plaintiff's testimony that
"It's [sic] supposed to be more checks."), 95:20–22 (Plaintiff's testimony that "I don't have the copies of
all the other [checks] because the cashier check [sic] have been very hard to trace."); see also id. at
54:18–20 (Plaintiff's counsel indicating that, although other checks allegedly exist, these are "what we
have;" they were the only ones Plaintiff was "able to get from [Defendant].").13 Thus, although Plaintiff
argued at trial that Defendant owes him a total of $325,000, the Court has only seen and heard credible
evidence of an outstanding debt totaling $214,500 (i.e., $20,000 check + $60,000 check + $120,000
check + $72,500 check - $58,000 repayment).14
Moreover, the Court finds as a general matter that Plaintiff's testimony regarding his dealings
with Defendant were frequently inconsistent, unreliable and lacking in credibility. For instance, Plaintiff
testified that his conversation with Defendant about the need to pay off Anand occurred at the end of
October of 2022. Adv. Dkt. 65 at 43. This is directly contradicted by the date of the cashier's check to
pay Anand: April 20, 2022. Adv. Dkt. 62-2 at 119. Likewise, Plaintiff initially testified that the purpose
of this advance was to fund the business (i.e., stating that Defendant represented it would be used only
for that purpose). Adv. Dkt. 65 at 46. Upon further inquiry, however, Plaintiff changed his story,
acknowledging that the funds were used to pay off Anand and the amount added to the loan balance
12 Plaintiff testified that he did not recall receiving these messages. Adv. Dkt. 65 at 80-81. The Court
finds Plaintiff's lack of recollection to be not credible.
13 Notably, Plaintiff never filed a motion to compel compliance with any subpoena duces tecum he
served, or to compel responses to any requests for discovery, whether propounded on his own bank, on
Defendant, or on any other entity. See Adv. Dkt. 50 (order setting Dec. 31, 2025, as discovery cutoff).
Moreover, Plaintiff's proposed pretrial stipulation indicated "that there are no outstanding discovery
disputes." Adv. Dkt. 52 at 6:22–23. Moreover, at the beginning of trial, Plaintiff testified on direct
examination that "[f]rom the top of [his] head," he sent checks to Defendant for the business "about
three or four times" only, each of which were in the form of a cashier's check. Adv. Dkt. 65 at 28:12–17.
14 Ultimately, the precise amount is inconsequential because the Court concludes that any debt arising
from Plaintiff's advances is dischargeable.
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owed by Defendant to Plaintiff. Adv. Dkt. 65 at 47. Similarly, Plaintiff testified that he gave the funds
"personally to [Defendant]," Adv. Dkt. 65 at 46–47, but later acknowledged that he ordered the cashier's
check payable to Anand only, see Adv. Dkt. 65 at 82–83; Adv. Dkt. 62-2 at 119 (copy of check payable
to Raunaq Anand).
F. El Patron LLC Leases a Second Facility
On June 27, 2022, Defendant caused El Patron LLC to lease a second warehouse next to the
Facility, Unit 300 at the Property (the "Second Facility"). See Adv. Dkt. 66 at 117, 300–01; see also
Adv. Dkt. 46 at 2 (¶ 1), 91 ("Addendum No. 1" to lease for Second Facility). The Second Facility was
completed and did not require a build-out by the company. Adv. Dkt. 66 at 304–05. It already had air
conditioning, plumbing, electrical, drywall, interior walls and doors, and overall "was in good
condition." Adv. Dkt. 66 at 305–06. Defendant never made tenant improvements at the Second Facility,
such as installing growing racks and lights, and never cultivated cannabis there because he "was waiting
for the permits." Adv. Dkt. 66 at 299, 306–07. The only expenses the company incurred for the Second
Facility were the rent and some power bills. Id. at 307.
G. The First Harvest Is Mostly Unsuccessful
In September of 2022, Defendant caused El Patron LLC to purchase 930 clones (i.e., propagated
cuttings of cannabis plants) from VBF Brands, Inc. using cash. Adv. Dkt. 62-2 at 177 (invoice for
clones of following cannabis strains: Slurty3, SFV OG, Gelato 41, High Society and Baccio Mintz). In
August and September of 2022, Defendant or his sister, Lina, caused the business to make two other
wire transfers from its deposit account at Wells Fargo, purportedly for more clones. See Adv. Dkt. 62-2
at 178–79. By December of 2022, El Patron LLC had purchased 1,920 clones, spread across five out of
the seven grow rooms. Adv. Dkt. 62-2 at 187 (company's plant inventory dated Dec. 2022). On January
11, 2023, the company purchased another 50 clones of Blank Runtz strain. Adv. Dkt. 62-2 at 180. Each
plant was inventoried by a blue RFID tag provided by the State. See Adv. Dkt. 65 at 201–03; Adv. Dkt.
62-2 at 181, 188–91 (photos of tags).
To prune and take care of the plants, El Patron LLC employed an average of three laborers as
needed. Adv. Dkt. 66 at 64–65, 253; Adv. Dkt. 62-2 at 194 (second photo in composite, depicting two
laborers pruning plants). Defendant testified that he still "had to be close to … them," as he was
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ultimately responsible for the company's operations and "ha[d] to know everything about cultivation."
Adv. Dkt. 66 at 253. Defendant also hired Mendoza to do some cleanup and maintenance work. Id. at
115.
Of the approximately 2,000 plants comprising El Patron LLC's first cultivation at the Facility,
only about 100 survived. Adv. Dkt. 66 at 95, 243. Most of the first crop was decimated by pests. Id. at
242. In January of 2023, El Patron LLC performed its first harvest, reaping only thirty pounds of dried,
sellable cannabis flower. Adv. Dkt. 66 at 94, 230, 243; Adv. Dkt. 62-2 at 197–98 (composites of photos
of harvest process). On January 30, 2023, Defendant caused El Patron LLC to sell that product to
Herbal Remedies Caregivers, Inc. for $18,236.77. Adv. Dkt. 66 at 231; Adv. Dkt. 62-2 at 202 (invoice);
see also Adv. Dkt. 62-2 at 200–01 (purchaser's cannabis distribution license), 203–04 (cannabis transfer
form and transportation manifest).
H. Business Operations Falter and Ultimately Cease
After the first harvest failed in January of 2023, Defendant tried again with a second crop of
2,000 cannabis plants. Adv. Dkt. 66 at 85. On January 10, 2023, El Patron LLC purchased least 150
clones from VBF Brands, Inc. using cash. Adv. Dkt. 62-2 at 207 (invoice for 50 Black Runtz strain
clones, 50 Pink Runtz strain clones, and 50 Gelato 41 strain clones).
The costs of running an indoor grow operation were much higher than Defendant anticipated; he
testified the business was bleeding money left and right, and in his words, "was [going] crazy." Adv.
Dkt. 66 at 248–56. To trim costs, Defendant stopped using laborers and began doing the cultivation
work all by himself. Id. Although he had initially taken a monthly salary of approximately $4,000 per
month from June of 2021 to April of 2022, for a total of around $40,000, he stopped because "there was
no money," and he needed "to pay everybody first" before he could "care about [himself]." Id. at 279–
80. To make matters worse, "everybody was expecting the first harvest to get the money back," which
was an overwhelming failure. Id. In recalling this period in his life, Defendant stated "I was killing
myself." Id. at 256.
When the second crop began, Defendant "was out of cash," "was illiquid," and could not pay the
electricity bill. Id. at 249, 258. The business had only $3,000 on hand at the time. Id. at 258. In
February or March of 2023, Defendant made arrangements with the Facility's electric utility provider,
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Southern California Edison ("Edison"), to pay an $8,000 balance that had become past due. Id. at 255.
Correa sent him $4,000 to help pay the power bill. Id. at 249. Defendant ultimately paid Edison $8,000,
buying him more time "to try to get some money" to keep the lights on at the Facility. Id. at 256. When
he did not come up with the money, Edison cut the power. Id.; see also Adv. Dkt. 62-2 at 225 (Edison
disconnection notice dated Aug. 3, 2023). As a result, the grow lights and air conditioning turned off,
marking the final chapter of El Patron LLC's time in operation. The power never went back on. Adv.
Dkt. 66 at 245.
Defendant testified that in May or June of 2023, state inspectors visited the Facility. Adv. Dkt.
66 at 243–46. According to Defendant, the inspectors determined that the cannabis product was not safe
"for human consumption" due to the humidity levels in the Facility, which were the result of the air
conditioning system losing power. Id. The inspectors indicated that the company's product could not be
harvested or sold, and they permanently shut down the grow operation. Id. Pursuant to the state's
mandate, Defendant threw away all the plants from the company's second and final crop. Id.
El Patron LLC reported net losses on its tax returns for all three tax years that it was in operation.
In tax year 2021, the company's losses exceeded $100,000. Adv. Dkt. 66 at 234. Its losses exceeded
$200,000 in 2022. Adv. Dkt. 66 at 232–33. Finally, in 2023, the company reported around $800,000 in
losses. Id. at 235–36. The tax preparer that Defendant used for his personal and the company's tax
returns testified that "he ha[d] a lot of losses." Id. at 135.
I. Defendant Issues a Promissory Note to Plaintiff
On March 29, 2023, Defendant executed and notarized a promissory note in favor of Plaintiff.15
Adv. Dkt. 62-1 at 2–8 (the "Note"). The Note stated that its purpose was to document Defendant's
promise to "repay a loan proffered to him by [Plaintiff] on different dates and in different amounts which
were completed in September 2022. This loan was in the amount of … $400,000[, and Defendant] was
to use the loan for the creation and maintenance of El Patron LLC." Id. at 2. However, the Note also
stated that Defendant owed Plaintiff $520,000, which debt would become fully matured on September
15 The Note is somewhat ambiguous as to whether the party to be charged under the Note was Defendant
or El Patron LLC. The Note states that, "[t]he undersigned, Giovanni Hernandez … a United States
citizen, domiciled in Los Angeles, California, is the borrower in this agreement." Adv. Dkt. 62-1 at 2.
However, Defendant signed the Note as "Giovanni Hernandez, EL PATRON, LLC." Id. at 7.
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30, 2026, with monthly installments in various amounts due beginning June 15, 2023. Id. at 2–5. The
Note indicated that it was secured by: (a) Defendant's ownership interest in El Patron LLC, and (b)
Defendant's ownership interest "of a lot … located [on] Jamison Street, California City, California
93505," further identified by assessor's parcel number (APN) 302-080-24 in Kern County, California.16
Id. at 2–3. Finally, the Note contained a unilateral attorney's fee provision, which stated that Defendant
"will assume all legal costs and any other expenses that [Plaintiff] must incur to recover their [sic]
money under this loan." Id. at 6. But see Cal. Civ. Code § 1717(a) (making reciprocal an otherwise
unilateral contractual obligation to pay attorney's fees and costs).
Plaintiff initially testified that he signed the Note because Defendant sought relief from their
agreed-upon interest rate. Adv. Dkt. 65 at 27:4–6 (Defendant "sa[id] the interest … was too much, and
he needed the interest [to be] less," to which Plaintiff replied, "fine, no problem."). Plaintiff later
testified that the Note was his idea. Id. at 29. Plaintiff asked Defendant for the Note "to make it …
more firm," "to have a document that [sic] prove the business and the money that [Plaintiff] was giving
to [Defendant]," and because Defendant had never said he would pay Plaintiff back. Id. at 29–30.
Defendant testified that he had virtually no money at the time he signed the Note, Adv. Dkt. 66 at 258–
16 Defendant's schedule A/B disclosed no legal or equitable interest in any residence, building, land or
other real estate. Case Dkt. 1 at 10 (¶ 1). Plaintiff testified that Defendant previously purchased "a five-
acre lot in California City" to "build another … cannabis" operation, which Defendant subsequently
"lost … because he didn't have money to pay for it." Adv. Dkt. 66 at 325–26. The Court takes judicial
notice of the Kern County Assessor Recorder's website, see Fed. R. Evid. 201(b)(2), (d), which indicates
that the property identified by APN No. 302-080-24 is only 2.51 acres. Assessor Property Search, Kern
Cty. Assessor Recorder, https://www.kerncounty.com/government/departments/assessor-
recorder/property/assessor-property-search (Under "Search by," select "APN," and under "Search term,"
enter "302-080-24") (last visited June 21, 2026). However, the eastern parcel adjoining that lot,
identified by APN No. 302-080-19, also is 2.51 acres, and it is only accessible from a public road
(Jamison Street) by crossing the western lot. See Assessor's Parcel Map, Kern Cty. Assessor Recorder,
https://assessorapps.kerncounty.com/PropertySearch/DocViewPages/DocViewAssessorMaps.aspx?apn=
30208024 (last visited June 21, 2026). While it may be plausible that Defendant at some point had an
ownership interest in real property, there is no credible evidence in the record of that. And even if he
did, the record before the Court supports only that Plaintiff had, at best, an unperfected security interest
in only half of the alleged acreage. See Cal. Civ. Code §§ 1213–1218 (providing that encumbrance of
real property is unperfected if not duly recorded in county where property is situated).
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59, and he received no new money from Plaintiff in connection with execution of the Note, id. at 263–
64.17
J. Plaintiff Visits the Property Unannounced, Begins Pressuring Defendant
In the spring or summer of 2023, Plaintiff and his friend, Giraldo, visited the Property. Adv. Dkt.
65 at 24:18–26:18; Adv. Dkt. 66 at 33–34. Together, they made the long drive from The Liora in
Northridge to the Property in California City. Adv. Dkt. 66 at 41:13–18. This time, unlike Plaintiff's
original visit to Defendant's operation, Plaintiff visited without Defendant having invited him. Adv. Dkt.
65 at 24:20–21. Plaintiff arrived unannounced because, according to him, Defendant "never told [him]
anything," including whether any product had been sold. Id. at 24:18. Giraldo testified that the purpose
of the visit was to verify if El Patron LLC was still operating at the Facility "because [Plaintiff] told
[Giraldo] that he was having money problems with [Defendant];" specifically, "some money had been
lost with El Patron LLC." Adv. Dkt. 66 at 11.
When they arrived, Plaintiff and Giraldo were unable to go inside the Facility. Adv. Dkt. 66 at
29–30. The Facility was enclosed by a fence that "was about 30 or 40 feet" from its exterior walls. Id.
at 27–28. They could not see inside because "there wasn't a single" window into the Facility. Id. at
30:7. They saw what appeared to be "dead marijuana plants that had been tossed next to the fence" at
the far end of the Property, but "they were too far away" to see clearly. Id. at 26:10–12, 27–28, 30:13.
Giraldo also testified that around this time, he observed Plaintiff "pressuring [Defendant]
because [Plaintiff] wanted to see results" from the operation and "for his investment." Adv. Dkt. 66 at
35–39. Plaintiff testified that he began calling Defendant and asking for his money back. Adv. Dkt. 65
at 31. In general, Plaintiff stated he was upset because Defendant appeared to "think[] he was God and
… capable of doing everything with money that wasn't [sic] belong to him." Adv. Dkt. 66 at 326:8–10.
Giraldo testified that when he ran into Defendant at The Liora, Defendant appeared noticeably
"overwhelmed" and in a "poor disposition." Adv. Dkt. 66 at 35–39. Giraldo believed that Defendant
17 It is not clear to the Court whether Plaintiff's advances were originally intended as an equity
investment rather than a loan, and, if the former, whether the note transformed the nature of the
obligation to a debt. Neither of the parties addressed the issue at trial. Nevertheless, adjudication of
those issues is not necessary. Assuming for the sake of analysis that the advances constitute a debt, the
Court concludes below that such debt is not dischargeable.
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"was very concerned because he wanted to give [Plaintiff] some results, some kind of statement or
something to show [Plaintiff] that the business was going well." Id.
K. Plaintiff Learns of An Alleged Threat by Defendant, Seeks Restraining Order
Plaintiff testified that, in 2023, he obtained a restraining order against Defendant based on a
threat Defendant allegedly made, outside of Plaintiff's presence, to physically harm Plaintiff or have him
physically harmed.
In an effort to demonstrate at trial that Defendant made this threat, Plaintiff offered his own
testimony and that of Correa. According to Plaintiff, Correa told him that "[Defendant] called someone
in his presence saying that [Defendant] 'had a nail in his shoe, and he needed to get rid of him.'" Adv.
Dkt. 65 at 33–34. Plaintiff understood this to mean that Defendant wanted to "get[] rid of" or "kill" him.
Adv. Dkt. 65 at 35:15–20. When Plaintiff heard this, he "got … very, very afraid" because he believed
his "life was in threat," especially considering that he was learning of this threat from Correa, someone
Plaintiff had "never met … in the past" and who "didn't know nothing [sic] about [Plaintiff]." Adv. Dkt.
65 at 36:2–8. Plaintiff thereafter called Defendant's sister, Lina, and "told her all about the threat." Adv.
Dkt. 66 at 325. Plaintiff acknowledged at trial that he has no recording of Defendant making any threat,
Adv. Dkt. 65 at 60, has no text message of Defendant making any threat, id. at 61, and that Defendant
never committed any violent act against him, id. at 61.
Correa initially testified at trial that he was present, somewhere in Los Angeles County, with
Defendant and Mendoza, when Defendant "called a guy in Mexico City, … his partner" and said "'Bro,
help me get this rock from off of my shoe that is digging into me.'" Id. at 172:3–4. After a beat,
Defendant's next words allegedly were, "'Take this stone from off my shoe. But not here where I live.
Do it where you live,' meaning in … Tijuana," a city Correa knows Plaintiff to frequent for medical
treatments. Adv. Dkt. 172:6–8, 172:12–14. Correa understood Defendant's statements to be a threat of
physical violence against Plaintiff, stating that Defendant had "dark intentions." Adv. Dkt. 65 at 172:15,
175:10–13. Correa testified that he does not have a recording of any threat made by Defendant. Adv.
Dkt. 65 at 213–14.
Near the conclusion of his testimony, however, Correa acknowledged that he "found all this out
through [Mr. Mendoza], starting with the … death threats that [Defendant] made towards [Plaintiff]."
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Adv. Dkt. 65 at 172:20–22. In other words, Correa recanted his testimony that he had personally heard
Defendant make a threat towards Plaintiff. For this reason, the Court finds that the entirety of Correa's
testimony about Defendant's alleged threats is inadmissible hearsay. See Fed. R. Evid. 801; see also Adv.
Dkt. 65 at 172–73 ("THE COURT: … the portion of the testimony where [Correa] refers to things that
[Mr. Mendoza] may have told him is hearsay and not particularly helpful. … MR. DRAKE: No
problem."). And even if not inadmissible hearsay, the Court finds (i) Correa lacked personal knowledge
of Defendant's alleged phone call, see Fed. R. Evid. 602 ("A witness may testify to a matter only if
evidence is introduced sufficient to support a finding that the witness has personal knowledge of the
matter."), and (ii) his testimony regarding the phone call otherwise lacks credibility or any indicia of
reliability.18
L. Plaintiff Files State Court Lawsuit Against Defendant
On November 8, 2023, Plaintiff filed a complaint against El Patron LLC and Defendant in the
Los Angeles Superior Court, initiating a civil action entitled Hernandez v. El Patron LLC, et al., Case
No. 23STCV27391 ("State Court Action"). Adv. Dkt. 62-1 at 18–37 ("State Court Complaint"); see,
e.g., Rosales-Martinez v. Palmer, 753 F.3d 890, 894 (9th Cir. 2014) ("It is well established that we may
take judicial notice of judicial proceedings in other courts."). In the State Court Complaint, Plaintiff
sought damages and equitable relief under the following causes of action: (1) breach of written contract;
(2) common count: money lent; (3) breach of implied in fact contract; (4) breach of implied covenant of
good faith and fair dealing; (5) fraud & deceit: false promise; (6) unjust enrichment; and (7) promissory
estoppel. Id. On November 13, 2023, the Los Angeles Superior Court issued a summons in the State
Court Action.19 Adv. Dkt. 62-1 at 10.
18 When questioned by Plaintiff's counsel, Mendoza (the source of the alleged hearsay), testified that he
"didn't hear" any threats made by Defendant towards Plaintiff about repayment of the debt at any time.
Adv. Dkt. 66 at 109:8–11. The Court found Mendoza's testimony credible. Mendoza's testimony
corroborated Defendant's testimony, which the Court also finds credible, that the alleged phone call and
threat never occurred. Dkt. 66 at 264–66.
19The record contains no proof of service of this summons on Defendant. However, in a declaration of
Plaintiff's counsel filed on May 8, 2024, in support of Plaintiff's motion for relief from the automatic
stay, counsel indicated that a trial or hearing was scheduled to begin on May 16, 2024. Case Dkt. 14 at 6
(¶ 5.d).
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M. Defendant Files Bankruptcy, Plaintiff Files Nondischargeability Complaint
Towards the end of 2023 or beginning of 2024, Defendant moved out of his apartment at The
Liora, purportedly for nonpayment of rent. Adv Dkt. 66 at 62; see also Case Dkt. 1 at 22 (¶4.13 of
Schedule E/F, disclosing a debt to Plaintiff for "rent" in scheduled amount of $10,075, and indicating an
unlawful detainer or eviction proceeding had been initiated against him under LASC No.
23CHSC00753). Mendoza stayed in the complex, where he still lives today with two other friends.
Adv. Dkt. 66 at 62.
1. Defendant's Chapter 7 Bankruptcy Case
On April 1, 2024, Defendant filed a chapter 7 petition with this Court, initiating his bankruptcy
case. Case Dkt. 1. As of that date, Defendant had no assets of value which he did not claim as exempt
under California law. Id. at 10–16 (Schedules A/B and C). Defendant's primary assets were less than
$1,500 in cash and deposits of money, personal belongings such as clothes and household furnishings,
and a car that was almost entirely encumbered by the auto finance company's secured loan.20 Id. at 10–
17.
In his Schedule E/F, Defendant disclosed the following unsecured business debts: a debt to
Plaintiff in the scheduled amount of $400,000, arising out of the State Court Action, id. at 22 (¶ 4.12); a
debt to Correa in the amount of $369,750 for money loaned, id. at 22 (¶ 4.11); a debt to Toledo in the
amount of $112,250 for money loaned, id. at 19 (¶ 4.3); a debt in the amount of $70,000 in rent owed on
the Facility, which he guaranteed, id. at 18 (¶ 4.1); a debt to Edison in the amount of $24,757.37 for
utilities at the Facility, id. at 23 (¶ 4.16); and a debt of an unknown amount potentially owed on a wage
claim that laborer Maria Chavez filed against him and the company, pending with the California
Department of Industrial Relations under Case No. WC-CM-931439, id. at 24 (¶ 4.17).
Even though the Court issued a notice indicating that "[n]o property appears to be available to
pay creditors" and stating, "please do not file a proof of claim now," Case Dkt. 7 at 2 (¶ 10), Plaintiff
filed a claim, see Proof of Claim No. 1-1. Plaintiff's proof of claim asserts an unsecured debt in the
20 Defendant apparently lost this car after filing bankruptcy. See Adv. Dkt. 34 at 2:8–9 (Defendant's
former counsel's motion to withdraw, stating "Defendant is 'judgment proof' to the extent that he has no
assets and not even a car.").
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amount of $604,931.51, which is comprised of the principal under the Note, a $60,000 contractual
penalty for defaulting under the Note, and interest calculated using the "default pre-judgment interest
rate" of 7% under California law. Id.
On May 8, 2024, Plaintiff filed a motion for relief from the automatic stay to proceed with the
State Court Action. Case Dkt. 14. On July 12, 2024, the Court held a hearing in which it granted
Plaintiff's stay relief motion as unopposed, permitting Plaintiff to proceed to final judgment in the State
Court Action. Case Dkt. 28 (minute entry after hearing).21
On May 13, 2024, the chapter 7 trustee filed a Report of No Distribution, indicating that after
making "a diligent inquiry into the financial affairs of" Defendant, she determined "there is no property
available for distribution from the estate over and above that exempted by law." Case Dkt. 17.
2. The Adversary Proceeding
On July 5, 2024, Plaintiff filed a nondischargeability complaint against Defendant, initiating this
adversary proceeding. Adv. Dkt. 1 ("Complaint"). On September 17, 2024, after a hearing on
Defendant's motion to dismiss the Complaint, the Court dismissed Plaintiff's claims under sections
523(a)(4) and (6), and 727(a)(2) with leave to amend. Adv. Dkt. 12.
On October 12, 2024, Plaintiff filed a first amended complaint against Defendant. Adv. Dkt. 15
("FAC"). On January 17, 2025, after a hearing on Defendant's motion to dismiss the FAC, the Court
dismissed Plaintiff's claims under sections 523(a)(4) and (6) with leave to amend, and dismissed
Plaintiff's claim under section 727(a) "with prejudice." Adv. Dkt. 36 (emphasis in original).
On June 13, 2025, Plaintiff filed a second amended complaint. Adv. Dkt. 43 ("SAC"). In the
SAC, Plaintiff alleged causes of action under sections 523(a)(2)(A), (4) and (6). Id. at 5–11.22 On
September 26, 2025, Defendant filed an answer to the SAC. Adv. Dkt. 46.
21 Plaintiff's counsel never lodged a proposed order memorializing the Court's ruling. See Local Bankr.
R. 9021-1(b)(1)(A) (providing that attorney for prevailing party must prepare proposed order).
22 The SAC is erroneously captioned "Second Amended Adversary Complaint Objecting to Entry of
Discharge Pursuant to 11 U.S.C. §§ 727(a) and (c)," Adv. Dkt. 43 at 1. The SAC further impermissibly
states that "Plaintiff … objects to the entry of discharge in [Defendant's] bankruptcy case pursuant to
[section] 727(a)(4)," id. at 1:18–21, and it impermissibly alleges that "Defendant is not eligible for
discharge … pursuant to [section] 727(a)(2)," id. at 2:1–2. Consistent with the Court's prior ruling
dismissing Plaintiff's section 727 claim with prejudice, the Court has disregarded these references. The
only claims considered at trial were those arising from Bankruptcy Code section 523.
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From at least August 12, 2024, Defendant was represented by attorney Sevan Gorginian. See
Adv. Dkt. 6 (Defendant's motion to dismiss Complaint). On February 7, 2025, the Court entered an
order granting Gorginian's motion to be relieved as counsel of record to Defendant due to unpaid legal
fees. Adv. Dkt. 40 (order); Adv. Dkt. 34 (motion). Thereafter, Defendant, who is not a lawyer or even a
native English speaker, defended himself in this adversary proceeding, throughout discovery, at his
deposition, and at trial.
IV. ANALYSIS
In a nondischargeability action under section 523(a) of the Bankruptcy Code, the creditor-
plaintiff has the burden of proving all the elements of its claim by a preponderance of the evidence.
Grogan v. Garner, 498 U.S. 279, 291 (1991); see also Fed. R. Evid. 301 ("In a civil case, … the party
against whom a presumption is directed has the burden of producing evidence to rebut the
presumption."). Exceptions to discharge are strictly construed against the creditor and in favor of the
debtor to effectuate the fresh start policies under the Bankruptcy Code. Snoke v. Riso (In re Riso), 978
F.2d 1151, 1154 (9th Cir. 1992).
The theme of Plaintiff's trial presentation was to suggest that Defendant did not establish a
legitimate business, was incompetent in that effort, was dishonest in his business dealings, and that he
improperly diverted the funds of El Patron LLC for personal purposes. Plaintiff not only failed to
persuade the Court of these premises, but missed the mark in terms of the applicable legal standards for
his claims. The nondischargeability of debts is governed by Bankruptcy Code section 523(a). Plaintiff's
evidentiary presentation barely addressed the legal elements required by the statute, let alone met his
burden to show that each of these elements was satisfied.
After two days of trial testimony, the Court is left with the firm conviction that Defendant used
the money he received from Plaintiff (and raised from others) to start a legitimate and legally permitted
cannabis growing operation that failed despite his sincere, best efforts. The fact that the business failed,
that Defendant was at the helm, and that there may be unresolved questions as to precisely why it failed,
are not sufficient to satisfy the Plaintiff's burden. It was up to the Plaintiff to show, by a preponderance
of the evidence, that the requirements for nondischargeability under Bankruptcy Code sections
523(a)(2), (a)(4) or (a)(6) were met. Plaintiff failed to do so.
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N. False Representation, False Pretenses or Actual Fraud Under Section 523(a)(2)(A)
Section 523(a)(2)(A) of the Bankruptcy Code provides that a chapter 7 discharge does not
discharge an individual debtor from 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…." 11 U.S.C. § 523(a)(2)(A). “A false representation is an express misrepresentation, while a
false pretense refers to an implied misrepresentation or conduct intended to create and foster a false
impression.” Reingold v. Shaffer (In re Reingold), 2013 WL 1136546, at *3 n.4 (B.A.P. 9th Cir. Mar. 19,
2013) (citing In re Young, 91 F.3d 1367, 1374 (10th Cir. 1996)); see Shannon v. Russell (In re Russell),
203 B.R. 303, 312 (Bankr. S.D. Cal. 1996).
To prevail on a section 523(a)(2)(A) claim concerning a false pretense or false representation, a
plaintiff must prove by a preponderance of the evidence the following five elements:
(1) misrepresentation, fraudulent omission or deceptive conduct by the debtor; (2)
knowledge of the falsity or deceptiveness of the [their] statement or conduct; (3) an
intent to deceive; (4) justifiable reliance by the creditor on the debtor’s statement or
conduct; and (5) damage to the creditor proximately caused by its reliance on the
debtor’s statement or conduct.
Oney v. Weinberg (In re Weinberg), 410 B.R. 19, 35 (B.A.P. 9th Cir. 2009) (quoting Turtle Rock
Meadows Homeowners Ass'n v. Slyman (In re Slyman), 234 F.3d 1081, 1085 (9th Cir. 2000)).
Representations made without an intent to perform may satisfy the first three requirements of
section 523(a)(2)(A). Rubin v. West (In re Rubin), 875 F.2d 755, 759 (9th Cir. 1989). Because intent is
difficult to prove through direct evidence, it "'may be established by circumstantial evidence, or by
inferences drawn from a course of conduct.' Therefore, in determining whether the debtor had no
intention to perform, a court may look to all the surrounding facts and circumstances…." Id. at 607
(internal citations omitted) (quoting In re Devers, 759 F.2d 751, 753–54 (9th Cir. 1985)); see also
Citibank (S.D.), N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1087 (9th Cir. 1996) ("[A] court may infer
the existence of the debtor's intent … if the facts and circumstances of a particular case present a picture
of deceptive conduct by the debtor.").
At the outset, Plaintiff has presented no credible evidence at trial that Defendant made any "false
representations" to Plaintiff prior to any of the advances, induced Plaintiff's advances under "false
pretenses," or committed any other actual fraud. To the contrary, based on all of the facts and
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circumstances adduced at trial, the Court is persuaded that Defendant sought, obtained and used the
money he borrowed from Plaintiff for the intended purposes of establishing and operating El Patron
LLC. That one of Plaintiff's advances was used to retire Defendant's debt to Anand is unpersuasive.
The purpose of his advance was expressly disclosed by Defendant and agreed to by Plaintiff. Moreover,
retirement of the debt owing to Anand was clearly related to the needs and business objectives of El
Patron LLC.
Meanwhile, the fact that Defendant caused El Patron LLC to pay himself a salary for a period of
time, or cover business related expenses is likewise unavailing. The Court concludes that this did not
breach any representation made by Defendant, let alone a representation made at the time with knowing
falsity and an intent to deceive. As noted, the Court did not find credible Plaintiff's testimony claiming
that Defendant represented to him that El Patron LLC would not compensate Defendant, but did find
credible Defendant's testimony to the contrary.
Moreover, the fact that Defendant executed the Note to memorialize Plaintiff's advances does not
remedy these infirmities but rather underscores another hole in his case. Plaintiff argues that Defendant
signed the Note with neither an intent nor an ability to make good on his commitments. But the
argument fails. Plaintiff could not have been damaged by reliance on any promise or representation
made in the Note because the funds had long since been advanced by Plaintiff. At the time the Note was
executed, moreover, Plaintiff knew that El Patron LLC was struggling operationally and financially. The
Court is persuaded that this is precisely why Plaintiff asked Defendant to execute the Note. Thus, even
if Defendant misrepresented his ability to perform (which was not established), any reliance by Plaintiff
would not have been justified under the circumstances.23
23 In an apparent effort to impugn Defendant's character and suggest wrongdoing, Plaintiff testified
during rebuttal that, in or around 2005, Defendant left Los Angeles for Colombia because "the police or
FBI was looking for" Defendant after he purportedly had "taken $300,000 from a lady for real estate."
Adv. Dkt. 66 at 320–21. Curiously, Plaintiff also testified that he "personally visited [Defendant] in
Colombia" "[a]bout 10, 12 times" "between 2010 and 2020." Adv. Dkt. 65 at 319. But none of this
testimony satisfies any element of Bankruptcy Code section 523(a)(2). Indeed, if Plaintiff's testimony is
believed, and he was aware of serious allegations of fraud against Defendant in connection with another
transaction, reliance on any representation by Defendant in connection with Plaintiff's advances would
not have been justified.
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Because Plaintiff failed to establish the elements of his cause of action under section
523(a)(2)(A), the Court will enter judgment thereon against Plaintiff and in favor of Defendant.
O. Embezzlement or Defalcation Under Section 523(a)(4)
Section 523(a)(4) of the Bankruptcy Code excepts from discharge debts for embezzlement, fraud
or defalcation while acting in a fiduciary capacity, and larceny.
Federal law controls the definition of "embezzlement" in section 523(a)(4). First Del. Life Ins.
Co. v. Wada (In re Wada), 210 B.R. 572, 576 (B.A.P. 9th Cir. 1997). "Embezzlement is defined as 'the
fraudulent appropriation of property by a person to whom such property has been [e]ntrusted or into
whose hands it has lawfully come.'" Id. (quoting Moore v. United States, 160 U.S. 268, 269 (1895)). To
prevail on a claim for embezzlement, the proponent must prove that: (1) the proponent entrusted its
property to a nonowner; (2) the nonowner appropriated the property to a use other than that for which it
was entrusted; and (3) the circumstances indicate fraud. See Transamerica Com. Fin. Corp. v. Littleton
(In re Littleton), 942 F.2d 551, 555 (9th Cir. 1991); Peltier v. Van Loo Fiduciary Servs., LLC (In re
Peltier), 643 B.R. 349, 360 (B.A.P. 9th Cir. 2022).
The statute also excepts from discharge debts for "fraud or defalcation while acting in a fiduciary
capacity." 11 U.S.C. § 523(a)(4). Whether a debtor is a fiduciary for the purposes of section 523(a)(4)
is a question of federal law. Lewis v. Scott (In re Lewis), 97 F.3d 1182, 1185 (9th Cir. 1996). "The
broad, general definition of fiduciary—a relationship involving confidence, trust and good faith—is
inapplicable in the dischargeability context." Ragsdale v. Haller, 780 F.2d 794, 796 (9th Cir. 1986).
Instead, the fiduciary relationship must "arise from an express or technical trust that was imposed prior
to the wrongdoing that caused the debt." Plyam v. Precision Dev. (In re Plyam), 530 B.R. 456, 471
(B.A.P. 9th Cir. 2015) (citing Ragsdale, 780 F.2d at 796). "In other words, the fiduciary relationship
must exist 'before the wrong and without reference to it.'" Uriostegui v. Dowling (In re Uriostegui), 669
B.R. 49, 54 (B.A.P. 9th Cir. 2025) (quoting Ragsdale, 780 F.2d at 796). However, state law determines
whether the requisite trust relationship exists. See Lewis, 97 F.3d at 1185; Mele v. Mele (In re Mele), 501
B.R. 357, 363–64 (B.A.P. 9th Cir. 2013).
Finally, the statute excepts from discharge debts for "larceny." 11 U.S.C. § 523(a)(4).
Bankruptcy courts look to the federal common law to define larceny for purposes of section 523(a)(4).
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In re Quinones, 537 B.R. 942 (Bankr. N.D. Cal. 2015) (citing In re Ormsby, 591 F.3d 1199, 1206 (9th
Cir. 2010). Federal common law defines larceny as a "felonious taking of another's personal property
with intent to convert it or deprive the owner of the same." Id. (citing In re Ormsby, 591 F.3d at 1206).
"Larceny is distinguished from embezzlement in that the original taking of the property was unlawful."
In re Montes, 177 B.R. 325, 332 (Bankr. C.D. Cal. 1994).
Plaintiff does not argue—and could not establish—either a fraud or defalcation while acting in a
fiduciary capacity, or larceny. The former is not available because Plaintiff failed to demonstrate the
existence of a fiduciary relationship between Plaintiff and Defendant arising from an express or
technical trust. The two parties clearly had a debtor-creditor relationship but not a fiduciary
relationship, as contemplated by the statute and caselaw. Meanwhile, larceny is not a viable claim
because there is no evidence that Defendant feloniously took any property belonging to Plaintiff. To the
contrary, the record establishes that Plaintiff voluntarily advanced funds to Defendant for his use in
operating El Patron LLC.
Plaintiff's principal argument is that Defendant misappropriated funds that Plaintiff entrusted to
him for the operation of El Patron LLC. This sounds closest to a claim for embezzlement, but the record
does not support such a claim. The evidence uniformly shows that Plaintiff did not "entrust" funds to
Defendant "as a nonowner" of the funds. Instead, it shows that Plaintiff voluntarily advanced funds to
Defendant. Specifically, every cashier's check Plaintiff made for El Patron LLC (with the exception of
the Anand check) was made payable to Defendant personally. Notwithstanding the parties' mutual
intent that Defendant use these funds in connection with El Patron LLC (which he did), Defendant
became the owner of the funds upon transfer. Defendant could not embezzle the funds from himself.
To the extent Plaintiff suggests that El Patron LLC was the owner of the funds, any claim for
embezzlement would belong to El Patron, LLC, not Plaintiff.
Moreover, Plaintiff failed to demonstrate that Defendant "appropriated the property to a use
other than that for which it was entrusted." As for this element, Plaintiff's counsel argued during closing
that "Defendant conceded in his sworn testimony" that he diverted funds from the company for his
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personal use.24 Adv. Dkt. 67 at 40–41. But Defendant's testimony was precisely the opposite:
THE COURT: Did you keep for your personal use any of the money that … Plaintiff …
loaned to you?
THE WITNESS: No, your Honor. …
THE COURT: You're sure?
THE WITNESS: Yes.
THE COURT: It all went to the business?
THE WITNESS: Yes.
Adv. Dkt. 66 at 278; see also id. at 282–83 (during Plaintiff's cross-examination of Defendant, "THE
COURT: … did you take any funds from the company, other than [your] salary…, for personal
expenses? THE WITNESS: No, your Honor."). The Court finds Defendant's testimony on these points
credible.25
Aside from the lack of testimonial evidence, the Court further notes Plaintiff failed to offer any
documentary evidence that would establish improper use of any funds transferred to El Patron LLC.
Plaintiff did not offer any bank statements or other financial records of El Patron LLC and did not use at
24 Plaintiff's counsel apparently was referring to only a certain portion of Defendant's testimony. See
Adv. Dkt. 66 at 221–22. That testimony simply does not hold the weight Plaintiff gives it. Plaintiff's
counsel elicited this portion of testimony with vague, misleading questions that assumed facts not in
evidence and mischaracterized prior testimony, making Defendant's alleged admissions entirely
unhelpful to the Court. Defendant testified that because many checks for El Patron LLC were payable
only to him personally, he would deposit them into his personal bank account and then transfer the funds
to El Patron LLC's account. Id. He elsewhere credibly testified that, prior to him moving all banking
services to Wells Fargo, El Patron LLC's bank would sometimes delay depositing the funds from his
account. When fairly summarized in light of this context, Defendant's testimony was that if a hold
occurred, he would not touch the funds pending transfer from his personal account, unless doing so
would prevent him from timely paying wages owed to the company's employees. See id.
25 In response to counsel's mischaracterization of the record during Plaintiff's closing arguments, the
Court elaborated on why it had asked Defendant these questions:
[T]he reason why I asked the clarifying question was that I thought that the record was not
clear, and it came from a very … vague questioning on your part that didn't distinguish
between [Plaintiff and the two other investors in El Patron LLC]. That's … why I asked
the question clarifying about the funds that came from [Plaintiff]. [B]ut the transcript is
what it is[,] and I'll take a look.
Adv. Dkt. 67 at 40–41.
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trial (let alone question Defendant about) the financial records of El Patron LLC that Defendant put into
evidence.
Because Plaintiff failed to establish the elements of his cause of action under section 523(a)(4),
the Court will enter judgment thereon against Plaintiff and in favor of Defendant.
P. Willful and Malicious Injury Under Section 523(a)(6)
Section 523(a)(6) of the Bankruptcy Code provides that a chapter 7 discharge does not discharge
an individual debtor from any debt "for willful and malicious injury by the debtor to another entity or to
the property of another entity." 11 U.S.C. § 523(a)(6). The "willful" and "malicious" requirements are
conjunctive and subject to separate analysis. Jett v. Sicroff (In re Sicroff), 401 F.3d 1101, 1105 (9th Cir.
2005); see also Carrillo v. Su (In re Su), 290 F.3d 1140, 1146 (9th Cir. 2002) ("[T]he 'malicious' injury
requirement of § 523(a)(6) is separate from the 'willful' requirement.").
A "willful" injury is a "deliberate or intentional injury, not merely a deliberate or intentional act
that leads to injury." Kawaauhau v. Geiger, 523 U.S. 57, 61 (1998) (emphasis in original). Debts
"arising from recklessly or negligently inflicted injuries do not fall within the compass of § 523(a)(6)."
Id. at 64. It suffices, however, if the debtor knew that harm to the creditor was "substantially certain to
occur as a result of [the debtor’s] conduct." Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1208 (9th
Cir. 2001).
Maliciousness requires (1) a wrongful act; (2) done intentionally; (3) which necessarily causes
injury; (4) without just cause or excuse. Id. at 1146–47. "[T]he 'done intentionally' element of a
'malicious' injury brings into play the same subjective standard of intent which focuses on the
[tortfeasor]'s knowledge of harm to the creditor." Thiara v. Spycher Bros. (In re Thiara), 285 B.R. 420,
434 (B.A.P. 9th Cir. 2002); see also Jercich, 238 F.3d at 1209. This definition "does not require a
showing of biblical malice, i.e., personal hatred, spite, or ill-will." Murray v. Bammer (In re Bammer),
131 F.3d 788, 791 (9th Cir. 1997) (emphasis in original).
When analyzing a claim under section 523(a)(6), courts look at: (1) whether the debtor's conduct
was tortious under state law; and (2) whether the tortious conduct resulted in willful and malicious
injury. Jercich, 238 F.3d at 1205–08. "[A]n intentional breach of contract cannot give rise to non-
dischargeability under § 523(a)(6) unless it is accompanied by conduct that constitutes a tort under state
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law." Lockerby v. Sierra, 535 F.3d 1038, 1040 (9th Cir. 2008); see also Jercich, 238 F.3d at 1206
("[T]o be excepted from discharge under § 523(a)(6), a breach of contract must be accompanied by
some form of 'tortious conduct' that gives rise to 'willful and malicious injury.' ... To determine whether
[the debtor]'s conduct was tortious, we look to California state law.").
Plaintiff argued that Defendant's obligation for advances made by Plaintiff is nondischargeable
because of the personal threat Defendant later made against Plaintiff. But this argument also fails.
First, Plaintiff failed to persuade the Court that Defendant actually made a personal threat against him.
Plaintiff's knowledge of the alleged threat was based on hearsay within hearsay, and the Court is not
persuaded by the record that the threat, or even the phone call to a third party in which the threat
allegedly was made, ever occurred. Second, Defendant's debt to Plaintiff did not arise from the alleged
threat. Defendant's debt arose from Plaintiff's multiple loans to Defendant, which occurred long before
the alleged threat occurred. Third, Plaintiff has failed to demonstrate any actual injury or compensable
damage resulting from the alleged threat.26
Because Plaintiff failed to establish the elements of his cause of action under section 523(a)(6),
the Court will enter judgment thereon against Plaintiff and in favor of Defendant.
V. CONCLUSION
For the foregoing reasons, the Court will enter judgment in favor of Defendant and against
Plaintiff on each of Plaintiff's claims under sections 523(a)(2), (4) and (6). The Court will prepare a
judgment consistent with this memorandum.
26 Because Plaintiff failed to demonstrate that any threat or resulting injury occurred, it is arguably
unnecessary (and nonsensical) to address whatever intent Defendant may have had. Nevertheless, the
Court notes that Plaintiff also failed to persuade the Court that if such a threat occurred, that Defendant
had the requisite subjective intent to cause harm to Plaintiff.
Date: September 30, 2026
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