Poddar v. Hamza-Haris (In re Hamza-Haris)

IN RE: MUHAMMAD S. HAMZA-HARIS and ASHLEY DAWN HARIS

GAUTAM PODDAR Plaintiff v. MUHAMMAD S. HAMZA-HARIS and ASHLEY DAWN HARIS Defendants

No. 18-42688

Adversary No. 19-4031

United States Bankruptcy Court, E.D. Texas, Sherman Division

September 17, 2021

FINDINGS OF FACT AND CONCLUSIONS OF LAW

HONORABLE JOSHUA P. SEARCY UNITED STATES BANKRUPTCY JUDGE

The Court held a trial on the above-entitled adversary proceeding on May 18, 2021. Mr. Gautam Poddar (the "Plaintiff") seeks a determination of whether an alleged debt owed to him by Mr. Muhammad Sayed Hamza-Haris and Mrs. Ashley Dawn Haris (the "Defendants" or "Debtors") should be excepted from discharge. In the "First Amended Complaint to Determine the Dischargeability of a Debt Pursuant to 11 U.S.C. § 523" (the "First Amended Complaint") Plaintiff contends that the debt allegedly owed to him by Defendants is nondischargeable under the exceptions set forth in 11 U.S.C. §§§ 523(a)(2)(A), (a)(4), and/or (a)(6). After trial, the Court took the matter under advisement. On that determination, the Court issues the following findings of fact and conclusions of law. This memorandum disposes of all issues pending before the Court.

I. FINDINGS OF FACT^[1]

On December 3, 2018, Defendants initiated the main bankruptcy case associated with this adversary proceeding (the "Case) by filing their voluntary petition for Chapter 7 relief under Title 11 of the United States Code (the "Bankruptcy Code").^[2] Defendants filed their original schedules in the Case on December 28, 2018.^[3] Plaintiff was not scheduled as a creditor by Debtors.^[4] The Case was closed without a discharge, but was later reopened and a discharge order was entered on June 26, 2020.^[5]

Plaintiff timely filed his Original Complaint on September 24, 2019, seeking to except his alleged claim from the scope of the discharge granted to Defendants as a debt procured by false representation, false pretenses, or actual fraud under 11 U.S.C. § 523(a)(2)(A), a debt for embezzlement or larceny under 11 U.S.C. § 523(a)(4), and/or a debt arising from willful and malicious injury by the Debtors to another entity or to the property of another entity.^[6] Defendant first answered on April 24, 2019 (the "Answer"), and later filed an amended answer on June 7, 2019 (the "First Amended Answer").^[7] On May 7, 2019, Plaintiff filed his First Amended Complaint with his former co-plaintiff, Angela Chiang.^[8] The Court terminated Ms. Chiang as a co-plaintiff in this adversary proceeding on October 8, 2019.^[9] In the "Scheduling Order Arising from the [sic] Initial Management Conference" (the "Scheduling Order"), the Court set the discovery deadline for February 28, 2020.^[10] The parties completed discovery and Plaintiff timely filed his Motion for Summary Judgment (the "Motion") on June 1, 2020, which the Court denied on June 29, 2020.^[11]

On June 29, 2020, the Court entered a "Notice and Order Regarding Final Pre-Trial Procedures in Adversary Proceeding" requesting input from the parties on scheduling a trial in this case.^[12] Only Plaintiff responded.^[13] The Court thereafter entered its Final Scheduling Order on August 10, 2020.^[14] Due to the ongoing Covid-19 pandemic, the trial was later rescheduled for and conducted on May 18, 2021.^[15] Because Defendants became pro se after the withdrawal of their counsel, prior to trial the Court attempted on multiple occasions to confirm their appearance at trial. Nonetheless, Defendants did not appear at trial, and as a result, the Court considered only their pleadings, previously filed exhibits, and relevant legal authorities in opposition to the evidence and testimony presented at trial by the Plaintiff.

Plaintiff and Mr. Hamza-Haris became acquainted through an online forum for "Audi car enthusiasts."^[16] They established a relationship through which Mr. Hamza-Haris completed vehicle repairs and modifications for Plaintiff.^[17]

On October 7, 2016, the Plaintiff was in a car accident (the "Accident") involving his 2004 Audi S4 (the "Car").^[18] His insurance company, State Farm, found the vehicle to be a total loss and reimbursed Plaintiff for $10, 730.46.^[19] Plaintiff retained the vehicle in order to repair the damage caused by the Accident, and to make modifications to enhance the car's value for a potential resale.^[20]

On the day of the Accident, Plaintiff texted Mr. Hamza-Haris, informing him of the damage to the Car.^[21] Mr. Hamza-Haris advised Plaintiff not to "mess" with the Car, and that he would either help repair it or strip it down to sell the parts.^[22] On October 24, 2016, after some communication concerning the Car and other potential business dealings, Mr. Hamza-Haris told the Plaintiff that "we need to file a supplement" once Plaintiff received his insurance check.^[23] On October 28, 2016, Plaintiff and Mr. Hamza-Haris further discussed repairing the Car, and Mr. Hamza-Haris informed the Plaintiff he intended "on having the whole car ready in less than a week."^[24] The Plaintiff expressed his surprise at this purported timeline, explaining that he expected the work to take "like a month," and that he was "not in a hurry."^[25] Approximately two and a half months later on January 14, 2017, Mr. Hamza-Haris indicated his displeasure concerning the situation with the Car, calling it a "headache" for which he had already "done so much work."^[26]

There is a gap in the messages produced by the Plaintiff from April 2017 until May 24, 2017.^[27] On May 29, 2017, Mr. Hamza-Haris met with the Plaintiff and his father.^[28] It is unclear from the evidence provided what occurred that spurred the next message on May 31, 2017, but Mr. Hamza-Haris ultimately indicated that he was prepared to file charges for harassment against the Plaintiff and/or his father, and that he was "blocking" the Plaintiff's number as "advised by [his] legal team."^[29]

Plaintiff did not provide any text messages or evidence of direct communication between himself and Ms. Haris, and testified that he "never really dealt with her [Ms. Haris]."^[30]

Plaintiff contends in the First Amended Complaint that he is entitled to $61, 342.93 from direct transfers he made to the Defendants on Venmo and the Cash App.^[31]The evidence submitted by the Plaintiff simply does not support this number. The gross total, which includes all direct transfers from the Plaintiff to Ms. Haris's account on either app, is $57, 843.90. This number does not account for transfers made by the Plaintiff to Ms. Haris prior to the Accident, transfers made from Ms. Haris to the Plaintiff, and other transfers clearly intended for unrelated expenses.^[32] When accounting for these transfers, the net total is $44, 152.48.

Notwithstanding the unrelated direct transfers, there are many transfers made by Plaintiff to Ms. Haris clearly related to car parts, repairs, or modifications, but it is unclear if they are directly related to the Car based on the evidence produced by Plaintiff.

The transfers clearly indicating expenses related to the Car post-Accident equal $30, 430.22.^[33] The remaining payments concerning car parts, repairs, or modifications not explicitly related to the Car equal $13, 722.26.^[34] This difference is significant because the payment history and pleadings evince an ongoing business relationship between the Plaintiff and Mr. Hamza-Haris.^[35] Such payments exhibit that many transfers relating to cars are irrelevant to this proceeding. Therefore the debt owed by Defendants to Plaintiff in relation to the Car totals $30, 430.22 (the "Car Debt.").

II. ANALYSIS AND CONCLUSIONS OF LAW

The Court has jurisdiction to consider the adversary complaint in this proceeding pursuant to 28 U.S.C. §§ 1334 and 157. This Court has the authority to enter final judgment on all issues raised in this adversary proceeding because it constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A), (I), and (J), and meets all constitutional standards for the proper exercise of full judicial power by this Court.

Plaintiff alleges that the Car Debt should be excepted from discharge pursuant to 11 U.S.C. §§§ 523(a)(2)(A), (a)(4), and/or (a)(6).^[36] When a plaintiff seeks to except a debt from a discharge granted to a debtor, the plaintiff must prove their claims by a preponderance of evidence. Grogan v. Garner, 498 U.S. 279, 286 (1991). All exceptions to discharge under 11 U.S.C. § 523 "must be strictly construed against a creditor and liberally construed in favor of a debtor so that the debtor may be afforded a fresh start." Hudson v. Raggio (Matter of Hudson), 107 F.3d 355, 356 (5th Cir. 1997). The Fifth Circuit, however, has ruled that there are limitations to this assumption, particularly in reference to the exceptions under 11 U.S.C. § 523 in which the debtor has allegedly committed fraud. Tummel v. Quinlivan (In re Quinlivan), 434 F.3d 314, 318-319 (5th Cir. 2005). Consequently, courts must balance a debtor's "fresh start" against protecting the victims of fraud. The Court will discuss each dischargeability exception claim in turn.

Nondischargeability Under 11 U.S.C. § 523(a)(2)(A)

Plaintiff contends that the Car Debt should be excepted from discharge under 11 U.S.C. § 523(a)(2)(A) as a debt obtained by false pretenses, false representation, or actual fraud. Plaintiff alleges that Defendants "knowingly made false pretenses, false representations, or actual fraud regarding their intended use of the Money Transfers and their intended actions providing service and repairs to the Plaintiff's vehicles."^[37] The Bankruptcy Code states:

"A discharge under § 727 of this title does not discharge an individual debtor from any debt for money, property or services...to the extent obtained by false pretenses, false representation, or actual fraud, other than a

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