Opinion
Case No. 8:19-bk-00048-RCT Adv. No. 8:19-ap-00162-RCT
03-18-2021
In re Durim Halimi, Debtor. Tampa Title Investments, LLC, a Florida limited liability company, Plaintiff, v. Durim Halimi, Defendant.
Chapter 7 MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
Plaintiff, Tampa Title Investments, LLC ("Tampa Title"), moves for summary judgment on its non-dischargeability complaint against Debtor-Defendant Durim Halimi (the "Debtor"). Tampa Title seeks final determination that the debt resulting from an alleged title fraud scheme is non-dischargeable under § 523(a)(2)(A) and § 727(a)(2) of the Bankruptcy Code. Debtor generally denied the allegations of the complaint, but failed to respond to Tampa Title's summary judgment motion.
Doc. 28.
11 U.S.C. §§ 101-1532 ("Code" or "Bankruptcy Code").
Doc. 4.
Based on the summary judgment record, the Court finds the debt owed to Tampa Title is excepted from discharge under § 523(a)(2)(A). The Court construes Tampa Title's invocation of § 727(a)(2) as an alternative ground for objecting to discharge of this debt, and as such, it is denied as moot.
Background
The facts are not disputed. Debtor ran Prespa Enterprises, LLC ("Prespa"), a used car dealership in Tampa, Florida. In June 2016, Prespa entered into an agreement with Tampa Title under which Tampa Title extended Prespa a loan/line of credit up to $600,000 to buy floor plan inventory (i.e. used vehicles). The agreement was memorialized by a Floor Plan Line Mastery Promissory Note, Floor Plan Line of Credit Agreement, and Commercial Security Agreement (collectively the "Floor Plan Agreements"). To secure payment under the Floor Plan Agreements, Prespa granted Tampa Title a first-priority security interest in, inter alia, all the inventory on its car lot and all accounts receivable for cars sold through its "Buy-Here, Pay-Here" financing program. Debtor also executed a Continuing and Unconditional Guaranty, agreeing to be personally liable for obligations arising under the Floor Plan Agreements.
Doc. 28 Ex. A (Affidavit of Joshua C. Horrocks ("Horrocks Aff.")) ¶ 6; Doc 28 Ex. B (Affidavit of Richard Finney ("Finney Aff.")) ¶ 14.
Horrocks Aff. ¶¶ 6, 7.
Doc. 28 Ex. A (Floor Plan Line Mastery Promissory Note; Floor Plan Line of Credit Agreement; Commercial Security Agreement)).
Horrocks Aff. ¶ 8; Doc. 28 Ex. A (Commercial Security Agreement).
Doc. 28 Ex. A (Continuing and Unconditional Guaranty).
The Floor Plan Line of Credit Agreement ("Line of Credit Agreement") obligated Prespa to pay down its line of credit as it sold inventory financed by Tampa Title (the "pay as sold" or "PAS" provision). For cash sales, Prespa was to repay the advanced funds, as allocated to the vehicle sold, within three days of delivery to the customer. For vehicles sold under the "Buy-Here, Pay-Here" financing program, Prespa was required to repay twenty percent of the advanced funds upon the sale of the car and the remaining eighty percent when the buyer paid-off the vehicle. On receipt of the required payment from Prespa, Tampa Title was to release the certificate of title to Prespa, who could then deliver the title to the customer purchasing the vehicle. Tampa Title retained the titles to perfect its security interest in the vehicles it financed and to ensure compliance with the PAS provision.
Doc. 28 Ex. A (Floor Plan Line of Credit Agreement) at 12.
Id.
Horrocks Aff. ¶ 9; Doc. 28 Ex. A (Floor Plan Line of Credit Agreement) at 12.
Id.
Horrocks Aff. ¶ 11.
Shortly after Debtor filed his chapter 7 bankruptcy, Tampa Title engaged Richard Finney of JGF Solutions to conduct an on-site audit of Prespa. At the time of the audit, Tampa Title held sixty titles for vehicles sold under the "Buy-Here, Pay-Here" financing program. Mr. Finney reviewed Prespa's dealer records and other sale information for each of the vehicles. His audit revealed that customers had paid-off thirty-five vehicles, yet Prespa had not paid anything to Tampa Title for those sales. Prespa also sold the accounts receivable for eleven vehicles to Mid-Atlantic Federal Credit Union, notwithstanding Tampa Title's security interest and possession of the titles.
Finney Aff. ¶ 3.
Finney Aff. ¶ 11.
Finney Aff. ¶ 14.
Finney Aff. ¶ 16. Twelve vehicles were paid-off by the buyer within one year of Debtor's bankruptcy petition date.
Finney Aff. ¶ 17.
Debtor and Prespa facilitated the scheme to avoid paying Tampa Title by obtaining duplicate certificates of title from the Florida Department of Highway Safety and Motor Vehicles ("Florida DMV"), without Tampa Title's knowledge or consent. To acquire these titles, Debtor falsely declared under penalty of perjury that the original certificates of title were lost, stolen, or destroyed. Debtor, of course, knew that the titles were safely with Tampa Title. Indeed, at the audit, Debtor admitted to this practice, referring to it as "double dipping."
Finney Aff. ¶ 16; Horrocks Aff. ¶ 14.
Horrocks Aff. ¶ 14.
Horrocks Aff. ¶ 15; Finney Aff. ¶ 16.
Finney Aff. ¶ 16.
Summary Judgment Standard
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." The party seeking summary judgment bears "the initial burden to show ..., by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial." Once the moving party has met its burden, the non-movant must show the existence of a genuine issue of material fact. In opposing a motion for summary judgment a "party may not rely on his [, her, or their] pleadings to avoid judgment ...."
Fed. R. Civ. P. 56(a) made applicable here by Fed. R. Bankr. P. 7056.
Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991).
Id.; Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 593-94 (11th Cir. 1995)
Ryan v. Int'l Union of Operating Eng'rs., Local 675, 794 F.2d 641, 643 (11th Cir. 1986).
Although Debtor did not respond to Tampa Title's motion for summary judgment, "[s]ummary judgment is not automatically granted by virtue of a non-movant's silence." Nonetheless, "[i]f a nonmovant fails to respond to a summary judgment motion, then the movant's assertions of facts supported by record evidence may be deemed 'undisputed for purposes of the motion.'" In such situations, the court may "grant summary judgment if the motion and supporting materials — including the facts considered undisputed — show that the movant is entitled to it." Finally, the Court is under no obligation to "scour uncited portions of the record in search of evidence that might bolster [Debtor's] position."
Williams v. Aircraft Workers Worldwide, Inc., 832 F. Supp.2d 1347, 1352 (S.D. Ala. 2011).
Fed. R. Civ. P. Rule 56(e)(3); see United States v. One Piece of Real Property Located at 5800 SW 74th Ave., Miami, Fla., 363 F.3d 1099, 1101 (11th Cir. 2004).
Quinn v. Deutsche Bank Nat. Tr. Co., No. CIV.A. 13-0115-WS-C, 2014 WL 977632, at *6 (S.D. Ala. Mar. 12, 2014), aff'd, 625 F. App'x 937 (11th Cir. 2015) (citing Fed. R. Civ. P. Rule 56(c)(3), "[t]he court need consider only the cited materials" on summary judgment.); King v. ST Aerospace Mobile, Inc., No. CIV.A. 12-0360-WS-B, 2013 WL 2635926, at *1 n.1 (S.D. Ala. June 11, 2013) ("This Court will not scour uncited portions of these exhibits in hopes of unearthing potentially helpful factual nuggets that the parties have not addressed.").
Discussion
Tampa Title contends Debtor's title fraud should result in a non-dischargeable debt. Section 523(a)(2)(A) excepts from discharge any debt "for money, property ... or an extension ... of credit, to the extent obtained by ... false pretenses, a false representation, or actual fraud ...." To prevail under this section, Tampa Title must prove the traditional elements of common law fraud. Actual fraud, the conduct at issue in this proceeding, is "deception or trickery committed with wrongful intent." As with all § 523(a)(2)(A) claims, a debtor's intent to deceive must be actual, not implied. Whether a debtor intended to deceive depends on the totality of the circumstances.
SEC v. Bilzerian (In re Bilzerian), 153 F.3d 1278, 1281 (11th Cir. 1998).
In re Utter, 2017 Bankr. LEXIS 766, 2017 WL 1091875, at *3 (Bankr. M.D. Fla. Mar. 22, 2017) (citing Husky Int'l Electronics, Inc. v. Ritz, 136 S. Ct. 1581, 1586, 194 L. Ed. 2d 655 (2016)).
Veazey v. Sutton (In re Sutton), 550 B.R. 917, 923 (Bankr. N.D. Ga. 2016).
J. Thompson Investments, LLV v. Soderstrom (In re Soderstorm), 524 B.R. 835, 841 (Bankr. M.D. Fla. 2015); Bropson v. Thomas (In re Thomas), 217 B.R. 650, 653 (Bankr. M.D. Fla. 1998).
Here, the undisputed facts establish the requisite elements of § 523(a)(2)(A) by a preponderance of the evidence. Debtor wrongfully and fraudulently obtained Tampa Title's money, property, and/or financing by falsely obtaining duplicate titles and keeping the money that should have been paid to Tampa Title. Debtor controlled Prespa and was directly involved in the fraudulent conduct. Debtor not only guaranteed the obligation to Tampa Title, but over the course of two-and-half years, he repeatedly, knowingly, and falsely represented under oath that titles were lost, stolen, or destroyed. Tampa Title lost both its collateral (the titles and the cars themselves) and the resulting sale proceeds.
See Conseco v. Howard (In re Howard), 261 B.R. 513, 519 (Bankr. M.D. Fla. 2001) (finding the elements of § 523(a)(2)(A) were met under comparable circumstances).
Ford Motor Credit Co. v. Owens, 807 F.2d 1556, 1559-60 (11th Cir. 1987) (finding an individual debtor personally liable to the injured party and the debt to be nondischargeable where the debtor was an officer of the corporation and actively participated in the wrongful conduct, i.e. he did not turnover proceeds to a creditor in violation of the floor plan agreement); Creal Dallas v. Viciedo (In re Viciedo), 612 B.R. 233, 241 (Bankr. M.D. Fla. 2020); In re Penton, 299 B.R. 701, 707-08 (Bankr. S.D. Ga. 2003) (finding an individual debtor personally liable under similar circumstances as Owens because the debtor "was in control of the ... business and that he used such control to cause injury ..."); Champion Home Builders Co. v. Tarrant (In re Tarrant), 84 B.R. 831, 833 (Bankr. M.D. Fla. 1988) (identifying individual debtors could be held personally liable for nondischargeable debts where they were responsible for the day-to-day operations of the corporation).
Exceptions to the discharge of a debt exist to "prevent a debtor from avoiding the consequences of his wrongful conduct by filing a bankruptcy case." In light of this statutory purpose, summary judgement is appropriate.
In re Monson, 522 B.R. 721, 733 (Bankr. M.D. Fla. 2015), aff'd, 661 F. App'x 675 (11th Cir. 2016).
It is therefore ORDERED:
1. Tampa Title's motion for summary judgment (Doc. 28) is GRANTED to the extent provided herein.
2. The Court will enter a separate judgment declaring the debt owed to Tampa Title by Debtor is non-dischargeable under § 523(a)(2)(A) of the Bankruptcy Code.
ORDERED.
Dated: March 18, 2021
/s/_________
Roberta A. Colton
United States Bankruptcy Judge