The Bank of Las Vegas v. Duran

1All statutory and rule references are to the Bankruptcy
Code and Rules before the effective date of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
JOSE R. DURAN,
Debtor. 	No. 7-05-12450 SS
The BANK OF LAS VEGAS,
Plaintiff,
v.
JOSE R. DURAN,
Defendant 	Adversary No. 05-1140 S
FINDINGS OF FACT AND CONCLUSIONS
OF LAW AFTER TRIAL ON THE MERITS
This matter came before the Court for trial on the merits of
Plaintiff The Bank of Las Vegas’ (“Bank’s”) complaint objecting
to the dischargeability of its debt. 	Plaintiff appeared through
its attorney Ben Mondragon. 	Defendant (“Debtor”) appeared
through his attorney Daniel J. Behles. 	This is a core
proceeding. 	28 U.S.C. § 157(b)(2)(I) 1 .
Bank seeks to hold its claim nondischargeable under 11
U.S.C. §§ 523(a)(2)(A), (B), (4) and (6). 	Those sections
provide:
(a) A discharge under section 727, 1141, 1228(a),
1228(b), or 1328(b) of this title does not discharge an
individual debtor from any debt--
...
(2) for money, property, services, or an extension,
renewal, or refinancing of credit, to the extent
obtained by--
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2Throughout these proceedings it has not been clear what
exactly “Duran’s Used Cars” is. 	There is conflicting testimony
that it was Father’s sole proprietorship, a joint venture of
Father and Manny, and an entity in which Debtor may have owned a
percentage interest. 	At closing, Bank’s attorney stated that
even after trial it was unsure whether or not Debtor owned or had
owned any part of the Business. 	Father testified that it was
always, and continues to be, his own business. 	Some confusion
may arise from the fact that only Father possesses a motor
vehicle dealer’s license. 	When Debtor started buying and selling
cars on his own, he “used” his father’s license. 	While the
parties probably understood whose inventory and other assets were
whose, this understanding is not documented in any evidence
before the Court.
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(A) false pretenses, a false representation, or actual
fraud, other than a statement respecting the debtor's
or an insider's financial condition;
(B) use of a statement in writing--
(I) that is materially false;
(ii) respecting the debtor's or an insider's financial
condition;
(iii) on which the creditor to whom the debtor is
liable for such money, property, services, or credit
reasonably relied; and
(iv) that the debtor caused to be made or published
with intent to deceive;
...
(4) for fraud or defalcation while acting in a
fiduciary capacity, embezzlement, or larceny;
...
(6) for willful and malicious injury by the debtor to
another entity or to the property of another entity[.]
FINDINGS OF FACT
1. 	“Years ago” Debtor’s father Jose Duran, Jr. (“Father”) and
Debtor’s uncle Manny Duran were in business as Duran’s Used
Cars 2 (the “Business”) and opened a line of credit (“LOC”)
with Bank.
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2. 	William Melton (“Melton”) testified at trial on behalf of
Bank. 	He is an Assistant Vice-President and loan officer.
He started working for the Bank in July, 2002.
3. 	The LOC came up for renewal around May, 2001. 	Bank
understood that Debtor intended to become a part of the
Business. 	There is no evidence before the Court that Bank
required any loan documentation from the Business itself at
this time. 	Rather, Bank sought and obtained a Business
Plan, a Profit and Loss Statement and a Personal Financial
Statement (“PFS”) from Debtor as a condition of renewing the
Business’ LOC.
4. 	The Business Plan (Bank Ex. 14), which has no date and is
not signed, is reproduced here:
STATEMENT OF PURPOSE
BUSINESS PLAN
FOR
DURAN’S USED CARS
I, Robert Duran III, dba Duran’s Used Cars am
seeking a line of credit in the amount of $75,000.
This would be used to purchase cars and have
enough inventory to successfully operate a used
car business. 	This used car dealership has been
in operation for over 40 years originally started
by my grandfather, Robert Duran, Sr. then by my
father Robert Duran, Jr. and his brother Manny
Duran. 	My family has been doing business with the
Bank of Las Vegas for many years. 	I too would
like to be able to successfully operate a used car
business. 	This line of credit should be
sufficient to finance this business so it can
operate as a viable profitable business.
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3Debtor convincingly testified that the Bank knew Debtor’s
motive was to obtain his own LOC so he could buy cars and sell
them from the Business lot under his father’s dealer’s license,
and that Bank understood he had no ownership interest in the
Business.
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This Business Plan does not state that Debtor actually is
yet in business 3. 	Rather, he would like to operate a
business. 	Furthermore, the Business Plan can hardly be
called that. 	It contains no projections or forecasts, lists
no assets, and provides no information on which the Bank
could rely to extend credit.
5. 	The Profit and Loss Statement is for the period January,
2001 through April, 2001. 	It shows sales from the Business
of $125,645, but then seems to claim that Debtor had a 40%
interest, or sales for him of $50,258. 	It lists Debtor’s
expenses of $4,001 and states a net of $46,257. 	Notably,
there is no cost of sales listed, so as a financial
statement it is meaningless. 	Additionally, the inventory
figures are obviously the Business’ inventory because the
total sales are subtracted from this number. 	It does not
show that Debtor owned any inventory at all. 	There was no
evidence presented that the Bank ever inquired further about
Debtor’s 40% interest or asked for any documentation of it.
Furthermore, Bank should have realized at this point that
something was not right, because despite its security
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4Debtor convincingly testified that he sat down with a
Secretary at the Bank and she prepared this document. 	He was
unaware that she listed a 40% business interest; his agreement
with Father was to share proceeds from his car sales on a car by
car basis.
5Debtor convincingly testified that he sat down with a
Secretary at the Bank and she prepared this document.
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interests, it had not been paid on $125,645 of sales. 	The
Court finds that Bank did not rely on this statement 4 .
6. 	Debtor’s PFS lists his residential lot (“Lots 14-16") as
worth $40,000 with no mortgage against it. 	It also states
that he has only a 50% interest in the property, or personal
equity of $20,000. 	It lists no value of his business, no
value of his ownership interest in the Business, no
inventory, and no business assets, equipment or fixtures.
He lists his occupation as “Manager, Duran’s Used Cars.”
The PFS lists no debt, although it discloses a monthly
payment of $524.01 for a mobile home purchase. 	It is
unsigned. 	The PFS is incomplete on its face. 	Bank offered
no proof and did not argue at trial that any entry on the
PFS was inaccurate at the time it was executed.
Furthermore, the Court finds that Bank did not rely on the
PFS 5.
7. 	On June 8, 2001, Debtor and Father, the co-owner of Lots 14-
16, executed a mortgage in the amount of $75,000 to Bank,
secured by Lots 14-16. 	Melton testified that this mortgage
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was additional collateral for the LOC. 	This property is the
same property that Debtor identified on his PFS as having a
value of $40,000 weeks earlier.
8. 	Melton testified that Bank believed Debtor and Father co-
owned the Business. 	There are no documents in evidence that
Debtor ever owned any share of the business. 	Father
testified that if Debtor had told Bank he owned 40% of the
business he was lying. 	However, Melton also testified that
the Bank file said there was a positive banking relationship
and that the Bank intended to help Debtor take over the
business. 	Bank knew that Debtor did not have a motor
vehicle dealer’s license. 	According to Debtor, Bank also
knew that he had no property of any value.
9. 	Also on June 8, 2001, Bank did an “annual renewal” of the
LOC, extending it to June 8, 2002. 	The Commercial Security
Agreement listed the borrowers as Debtor d/b/a Duran’s Used
Cars and Father. 	The primary purpose of the loan was
designated “Business.” 	The face amount of the LOC was
$75,000. 	The collateral was Business’ inventory. 	The loan
was signed by both borrowers “Individually.”
10. 	On June 20, 2001, Bank filed a UCC-1 Financing Statement in
the names of “Duran’s Used Cars; Robert Duran III; Robert
Duran Jr.” 	It covered “all used cars in borrower’s place of
business (Duran’s Used Cars; 900 East Prince; Las Vegas, NM)
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together with all related equipment now owned or hereafter
acquired.” 	It was signed by Duran’s Used Cars, “by” Father,
and by Debtor, individually.
11. 	In 2003, Debtor’s 2002 income tax returns became due. 	Bank
Exhibit 11 is an unsigned, undated copy of the Debtor’s
federal tax return. 	The first page of Schedule C, income
from self-employment, is missing. 	Bank did not explain this
omission, although Melton testified that he had seen it at
some point. 	Overall, the return shows gross income of
$34,401 and total tax liability of $8,202. 	This left net
spendable income of $26,199. 	It also shows, on page 2 of
Schedule C, that there was no beginning or ending inventory
for Debtor’s business.
12. 	Melton did not testify when the Bank actually received this
tax return, but did testify that Bank relied on it to extend
credit. 	He did not testify for which loan renewal this
return was relied on; the only bank transactions after this
point reduced the LOC. 	The Court finds that it was
unreasonable to rely on this tax return, if the Bank
actually did so, because it is undated and unsigned and
shows little income from which to repay a $65,000 loan.
13. 	Melton became involved with the LOC account in June or July,
2003.
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6The loan history, Bank exhibit 22, shows a $5,200 draw
about this time.
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14. 	On June 27, 2003, Father executed a Quit-claim Deed to
Debtor for Lots 14-16. 	The copy in evidence does not show
it was ever recorded.
15. 	On July 2, 2003, Father and Debtor jointly executed a
Warranty Deed to Debtor for Lots 14-16. 	The deed was filed
for record on July 2, 2003. 	This fact does not impact on
Bank’s security.
16. 	Bank Exhibit 22 is a loan history for the July 2003 LOC
renewal. 	It shows a series of draws and repayments, with
the balance starting at $58,585 and ending at $64,584, when
it was renewed by a July 20, 2004 note. 	The printout shows
a draw on September 18, 2003 which Bank claims was for a
2000 Ford Pickup (“Ford”).
17. 	Father testified that he and Debtor purchased the Ford on
September 25, 2003. 	He borrowed $12,940 personally from the
Bank (Debtor Exhibit 7). 	The loan documents state the
purpose of Father’s loan was to purchase autos for resale.
Father testified that he combined his $12,940 with $5,000
from Debtor to fund the purchase 6 . 	Somehow, sometime, the
Ford’s title was presented to the Bank as additional
collateral. 	Father obtained a duplicate title to the Ford
in June, 2004, and sold it at a Colorado auction. 	He
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7Debtor testified that he told Bank he could only afford
$300 payments, but Bank insisted on the $600. 	Shortly
thereafter, Bank called the loan.
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received net proceeds of $18,290. 	Father used the funds to
pay off his note to Bank for $13,181.96 and put the rest of
the money in Debtor’s checking account. 	The Court cannot
find from the evidence that the amount deposited in Debtor’s
checking account was ever repaid to the Bank. 	See also Bank
Exhibit 22 (only $1,320 credited to LOC from June to August
2004).
18. 	Exhibit B is the title for the Ford. 	Bank claims it
advanced $11,295 for its purchase on September 12, 2003.
The Court does not believe this version of events, finding
Father’s documentation more credible. 	The LOC was
repeatedly paid down after this time, but Bank was unable to
identify any deposit corresponding to the Ford so claims it
was not paid on this vehicle.
19. 	On July 2, 2004, Debtor alone signed a promissory note (Bank
Exhibit 1) to Bank in the amount of $65,175, payable at 9%
interest, payable $600 7 per month for 11 months with a final
payment of about $64,468.71 due August 4, 2005. 	It lists
Lots 14-16 and the UCC-1 assets as collateral. 	This note
was a continuation of the LOC. 	Attached to the note is the
“Committee Sheet/Loan Approval” documents from the Bank
file. 	While mostly incomplete, this sheet lists total
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8This demonstrates that the loan committee knew that the
value of Lots 14-16 plus all Business inventory was only $60,000.
9The record is silent how Bank knew this.
Page -10-
collateral value securing the note at $60,000 8. 	The
“Primary Source of Repayment” is stated as
“Business/Income.” 	The Committee comments were “Loan in
Excess of Supervisory LTV. 	Very long banking relationship.”
20. 	Melton testified that at this renewal Debtor asked to become
the “proprietor” and Father asked to be released from the
LOC. 	The Bank complied with both requests because there was
a good banking relationship.
21. 	Melton also testified that at the 2004 renewal Bank knew
that the Business had cash flow problems 9, which is why the
Bank set the note up for monthly payments. 	Bank also
visited the used car lot and noticed a shortage of vehicles,
which is why it lowered the LOC from $75,000 to $65,000.
“The information didn’t fit,” according to Melton.
22. 	Melton testified that Bank obtained no documents to renew
the loan in 2004. 	There was no other evidence presented
that Bank obtained any information on either Debtor’s
personal financial condition or the Business’ financial
condition at any time since the June 2001 renewal (except,
obviously, Debtor’s 2002 tax return). 	Melton did not know
why Bank had not asked for more current information, and
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admitted there was no reason to rely on statements over 2
years old. 	He also admitted it would not be reasonable to
rely on 2 year old documents, and admitted that the long-
standing banking relationship was enough to renew the loan.
23. 	Bank Exhibits 12 and 23 are likewise of no help. 	They
purport to be the Business’ inventory levels. 	However, they
are undated and there was no testimony presented as to who
prepared these listings or for what purpose. 	Bank did not
tie these documents to any extension or renewal of credit.
Bank’s attorney conceded at closing argument that Bank did
not call upon the Business for regular periodic inventory
levels.
24. 	Bank exhibits 20 and 21 merely show that Debtor obtained
commercial insurance in his name for the period 6/20/2000 to
6/20/2002. 	They prove nothing.
25. 	At trial, Debtor admitted to using some of the LOC for
personal expenses. 	However, he convincingly testified that
the advances on the LOC were generally used for inventory,
to pay for “bad business decisions”, repairs, and general
business expenses. 	Bank presented no evidence on the amount
of draws used for personal purposes, but urges that the
Court declare the entire balance nondischargeable anyway.
26. 	Debtor filed a voluntary chapter 7 proceeding on March 30,
2005.
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27. 	Bank timely filed this adversary proceeding to determine
dischargeability of debt.
28. 	Debtor testified at the first meeting of creditors that Lots
14-16 were now worth $15,000 to $25,000. 	Bank presented no
evidence at trial that the $40,000 listed in the PFS in 2001
was inaccurate at the time.
29. 	Bank Exhibit 13 is Debtor’s credit report as of May, 2005.
The Court finds this exhibit irrelevant.
30. 	At the time of trial in this case, Father had closed the
Business but still had 3 cars in inventory. 	Father
testified that the Business was his and his brother’s, and
that Debtor’s business was a separate business of buying and
selling his own cars “under our license.”
31. 	At the time of trial of this case, Bank had not foreclosed
on any of its collateral. 	Melton testified that without
foreclosing, and without knowing the current inventory
levels of the Business, the Bank did not know its damages or
how to calculate them. 	Melton testified that Bank had 3
titles at the time of trial, one was the Ford, and the other
2 vehicles were still on the lot.
32. 	Overall, the Court found the Debtor to be credible. 	The
Court also finds that Debtor is financially unsophisticated
and did not understand the import of the documents he was
preparing or having prepared in his name. 	The Court finds
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that he did not adopt the Profit and Loss Statement as his
own, nor did he adopt the PFS, both of which were prepared
by the Bank. 	At trial, Debtor seemed surprised of the
content of those documents and their meanings.
33. 	The Court found Melton to be credible, but his knowledge of
what transpired before he took over the loan file in 2003 is
not as persuasive as Debtor’s and Father’s versions of the
events.
34. 	The Court assumes that there were other times that Debtor
may have made representations to the Bank about the
Business, but Bank has not come forward with details of
those representations.
CONCLUSIONS OF LAW
“[E]xceptions to discharge are to be narrowly construed, and
because of the fresh start objectives of bankruptcy, doubt is to
be resolved in the debtor's favor.” 	Bellco First Fed. Credit
Union v. Kaspar (In re Kaspar), 125 F.3d 1358, 1361 (10th Cir.
1997). 	The Creditor must prove its case by a preponderance of
the evidence. 	Grogan v. Garner, 498 U.S. 654, 661 (1991).
Section 523(a)(2)(A)
A claim will not be dischargeable under this subsection “if
the following elements are proven: (1) the debtor made a false
representation; (2) the debtor made the representation with the
intent to deceive the creditor; (3) the creditor relied on that
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10 The Fowler Bros. Court used the term “reasonable”
reliance, but the Supreme Court has held that § 523(a)(2)(A)
requires only justifiable, and not reasonable, reliance in the
case of Field v. Mans, 516 U.S. 59, 74 (1995). 	This Court has
applied that standard rather than the reasonable reliance
standard articulated in Fowler Bros. v. Young. 	In order for the
Plaintiff to have justifiable reliance on a representation under
11 U.S.C. § 523(a)(2)(A), the Plaintiff need only perform a
cursory inspection of the representation to the extent that it
should be very obvious that the representation is fraudulent.
Field v. Mans, 516 U.S. 59, 71 (1995). 	Justifiable reliance is
not reasonable reliance, so the objective reasonable person
standard does not apply; it is merely what a cursory examination
of the representation would uncover. 	Id. at 72.
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representation; (4) the creditor's reliance as [justifiable] 10 ;
(5) the debtor's representation caused the creditor to sustain a
loss.” 	Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1373
(10th Cir.1996).
This claim will be dismissed. 	The Bank did not prove there
were misrepresentations. 	The Bank did not prove the Debtor
intended to deceive it. 	The Court finds that Bank did not rely
on the representations it introduced into evidence, but rather
relied on a long term family banking relationship to extend and
renew credit. 	The Bank’s reliance, if any, was not justifiable
under the circumstances because both the documents before it were
deficient and also even a cursory followup would have revealed
facts such as Debtor had no interest in the Business and had
virtually no property and little income.
Section 523(a)(2)(B)
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Under § 523(a)(2)(B), Bank's burden of proof was to
establish that the Debtor used a “statement in writing” (1) that
is materially false; (2) respecting his financial condition; (3)
on which the creditor reasonably relied; and (4) which the Debtor
caused to be made or published with the intent to deceive.
Bellco First Federal Credit Union v. Kaspar (In re Kaspar), 125
F.3d 1358, 1359 (10 th Cir. 1997). 	To come within the exception
of § 523(a)(2)(B), the statement, to be “in writing,” must either
have been written by the debtor, signed by the debtor, or written
by someone else but adopted and used by the debtor. Id. at 1361.
The requirement of a writing is a basic precondition to
nondischargeability under section 523(a)(2)(B). 	Id.
This claim will be dismissed. 	The Bank did not prove Debtor
adopted the Profit and Loss Statement or the PFS. 	The Court
finds to the contrary: Debtor did not adopt these documents and
was surprised by their content when he saw them. 	Neither were
signed. 	There is no evidence he even saw them at the time they
were prepared. 	Secondly, Bank did not prove that any of these
statements were false at the time they were composed. 	It is
possible that, under the sharing of profits agreement that the
Debtor had in 2001, he did have 40% of the sales from the lot in
early 2001. 	The Court finds that the Bank did not reasonably
rely on these writings in 2001 or at any later time in extending
or renewing credit. 	Even Bank admitted it was not reasonable to
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rely on documents over two years old when renewing the LOC.
Finally, the Court finds that Debtor did not intend to deceive
the Bank.
Section 523(a)(4) - fiduciary capacity
Under Section 523(a)(4), Bank’s burden of proof was to
establish: (1) a fiduciary relationship existed between the
Debtor and Bank, and (2) fraud or defalcation was committed by
the Debtor in the course of that fiduciary relationship. 	Fowler
Bros., 91 F.3d at 1371.
Whether there is a fiduciary relationship between
Defendant and Plaintiff is a threshold issue to the
determination of dischargeability under 11 U.S.C. §
523(a)(4). 	Antlers Roof-Truss & Builders Supply v.
Storie (In re Storie), 216 B.R. 283, 286 (10th Cir. BAP
1997); 	In re Neal, 324 B.R. 365, 370 (Bankr. W.D.
Okla.2005) (citation omitted). 	The fiduciary duty
contemplated by 11 U.S.C. § 523(a)(4) is very narrow.
See Holaday v. Seay (In re Seay), 215 B.R. 780, 786
(10th Cir. BAP 1997) (noting that the Tenth Circuit in
Fowler Bros. v. Young (In re Young), 91 F.3d 1367 (10th
Cir.1996) interpreted the phrase “fiduciary capacity”
narrowly.); 	In re Neal, 324 B.R. 365, 370 (Bankr. W.D.
Okla.2005) (“The Tenth Circuit has taken a very narrow
view of the concept of fiduciary duty under this
section.”). 	Whether a fiduciary duty within the
meaning of 11 U.S.C. § 523(a)(4) exists is a question
of federal law, but state law is relevant to the
determination of whether a trust relationship exists.
Storie, 216 B.R. at 286; 	Young, 91 F.3d at 1371.
Fiduciary duty within the meaning of 11 U.S.C. §
523(a)(4) is present only when there is an express or
technical trust. 	See Allen v. Romero, 535 F.2d at 621
(“[T]he exception under § 17(a)(4) [the predecessor
under the former Bankruptcy Act to § 523(a)(4) ]
applies only to technical trusts and not those which
the law implies from a contract.”) (citation omitted).
“Trusts imposed by state statutes are technical trusts,
which may lead to the existence of a fiduciary
relationship.” 	Neal, 324 B.R. at 370. 	See also, In
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re Woods, 284 B.R. 282, 288 (D.Colo.2001) (noting that
“[a] technical trust may arise as a result of defined
obligations imposed upon the debtor by state or federal
statute.”) (citing Allen v. Romero, 535 F.2d at 622).
However, “[n]either a general fiduciary duty of
confidence, trust, loyalty, and good faith, nor an
inequality between the parties' knowledge or bargaining
power, is sufficient to establish a fiduciary
relationship for purposes of dischargeability.” 	Young,
91 F.3d at 1372 (citations omitted).
Foxworth Galbraith Lumber Co., Inc. v. Manelos (In re Manelos),
337 B.R. 409, 412-13 (Bankr. D. N.M. 2006).
The Court finds no fiduciary duty in this case. 	The Bank’s
relationship with the Debtor was simply Debtor/Creditor. 	Bank
had a lien on property, it was not the beneficiary of any trust.
Even if New Mexico state law imposed some sort of fiduciary duty
on licensed motor vehicle dealers, Debtor was not a licensed
motor vehicle dealer, and Bank knew this.
Section 523(a)(4) - embezzlement
Klemens v. Wallace (In re Wallace), 840 F.2d 762, 765 (10th
Cir. 1988), defines embezzlement under federal common law for
purposes of Section 523(a)(4) as the fraudulent appropriation of
property by a person to whom such property has been entrusted or
into whose hands it has lawfully come. 	See also Rech v. Burgess
(In re Burgess), 106 B.R. 612, 621 (Bankr. D. Neb. 1989)(Same.)
The only items of property at issue is the Ford. 	This will
be dealt with under Section 523(a)(6) below.
Section 523(a)(4) - larceny
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Larceny is the fraudulent and wrongful taking and carrying
away of the property of another with intent to convert the
property to the taker's use without the consent of the owner.
As distinguished from embezzlement, the original taking of the
property was unlawful. 4 Resnick, Sommer and King, Collier on
Bankruptcy, ¶ 523.10[2] at 523-76 (15th ed. Revised). 	Larceny is
distinguished from embezzlement only as to the original taking
and possession of property being unlawful rather than authorized.
Id. 	See also Burgess, 106 B.R. at 622.
The only items of property at issue is the Ford. 	This will
be dealt with under Section 523(a)(6) below.
Section 523(a)(6)
The Supreme Court has explained that this statute
refers only to “acts done with the actual intent to
cause injury.” 	Kawaauhau v. Geiger, 523 U.S. 57, 61,
118 S.Ct. 974, 140 L.Ed.2d 90 (1998). Non-
dischargeability under § 523(a)(6) requires proof of
two elements-that the injury is both willful and
malicious. 	Panalis v. Moore (In re Moore), 357 F.3d
1125, 1129 (10th Cir.2004)(holding that there must be
proof of both a “willful act” and “malicious injury” to
establish nondischargeability under § 523(a)(6)); see
also Mitsubishi Motors Credit of Am., Inc. v. Longley
(In re Longley), 235 B.R. 651, 655 (10th Cir. BAP 1999)
(collecting opinions interpreting § 523(a)(6)). 	A
“willful act” is one in which the debtor must “ ‘desire
AAA [to cause] the consequences of his act or AAA believe
[that] the consequences are substantially certain to
result from it.’ ” Moore, 357 F.3d at 1129 (quoting
Longley, 235 B.R. at 657). A malicious injury occurs
when there is proof that the debtor either intended the
resulting injury or intentionally took action that was
substantially certain to cause the injury. 	Id. 	The
test for this element is a subjective one: the court
must determine what the debtor knew or intended with
respect to the consequences of his actions. 	Id.
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Page -19-
McCain Foods USA Inc. V. Shore (In re Shore) 317 B.R. 536, 542
(10th Cir. BAP 2004).
The Court finds that Debtor’s act of obtaining a duplicate
registration and selling the Ford constitutes and willful and
malicious conversion of Bank’s property. 	The Court finds that
once Bank established it had a lien on the Ford and advanced
money for that Ford, it had the right to be repaid from the Ford.
The Court also finds that once Bank established these facts, the
burden of proof shifted to Debtor to show that the Bank had been
repaid. 	Debtor did meet this burden of proof. 	Therefore, the
Court finds that the $5,200 advanced on the LOC for the purchase
of the Ford is nondischargeable in this proceeding.
CONCLUSION
For the reasons set forth above, the Court dismisses the
Bank’s claims under 11 U.S.C. §§ 523(a)(2)(A), (B), and (4). 	The
Court awards Bank judgment on its claim under 11 U.S.C. §
523(a)(6) in the amount of $5,200. 	A separate judgment will
enter.
Honorable James S. Starzynski
United States Bankruptcy Judge
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Page -20-
copies to:
Ben Mondragon
1920 7th St
Las Vegas, NM 87701-4956
Daniel J Behles
226-A Cynthia Loop NW
Albuquerque, NM 87114-1100
Case 05-01140-s Doc 20 Filed 09/18/06 Entered 09/18/06 11:44:43 Page 20 of 20