Zavacky v. Nabong (In re Nabong)

614 B.R. 67

IN RE: Wilson Maniego NABONG, Debtor.

Liew Zavacky f/k/a Saelee, Plaintiff,

v.Wilson Nabong, Defendant.

Case No. 18-00178-GS

Adversary Proceeding No. 18-90031-GS

United States Bankruptcy Court, D. Alaska.

Signed December 30, 2019

John C. Pharr, Anchorage, AK, for Plaintiff.

J. Mitchell Joyner, Anchorage, AK, for Defendant.

POST-TRIAL MEMORANDUM DECISION

GARY SPRAKER, United States Bankruptcy Court

Debtor Wilson Nabong (Mr. Nabong) and his then-girlfriend Liew Zavacky (Ms. Zavacky) opened an e-cigarette business together in Anchorage, Alaska. Ms. Zavacky invested her savings and incurred additional debt to open and initially operate the business. Approximately one year later, the couple ended their personal relationship. After they parted, Mr. Nabong promised to repay Ms. Zavacky the funds she invested in the business. He failed to do so. Ms. Zavacky sued Mr. Nabong in state court for the amount owed. The state court conducted a trial and entered oral findings of fact and conclusions of law in favor of Ms. Zavacky. Mr. Nabong filed his bankruptcy case before the state court entered judgment. Ms. Zavacky now seeks an order determining that the debt Mr. Nabong owes her is excepted from his discharge under 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(15). For the reasons stated below, the court finds that Ms. Zavacky has not established a basis to except the debt from Mr. Nabong's discharge.

FACTS

Mr. Nabong and Ms. Zavacky met in 2005, and decided to live together during that same year.¹ The following year, the couple had a child.² In 2007, Mr. Nabong transferred title to a four-plex rental property (Four-plex) that he had owned with a prior girlfriend to himself and Ms. Zavacky.³ Ms. Zavacky and Mr. Nabong were never married.⁴

In 2014, while employed elsewhere Mr. Nabong and Ms. Zavacky opened an e-cigarette business together, Bloo Monkey Vapes.⁵ A business license was issued to Ms. Zavacky and Mr. Nabong as partners of Bloo Monkey Vapes on April 8, 2014, with an expiration date of December 31, 2015.⁶ The license identified the business as a partnership.⁷ To open and operate the business, Ms. Zavacky committed over $23,000.00 in personal savings and a $5,000.00 loan from her parents to the business. She also opened a line of credit and multiple credit cards to finance the business.⁸ Ms. Zavacky left her job to run the new business, while Mr. Nabong helped as he could while working a graveyard shift as a plant operator at Providence Hospital.⁹ The business reported a loss of approximately $94,000.00 on its 2014 tax return.¹⁰

In the spring of 2015, Ms. Zavacky and Mr. Nabong ended their personal relationship.¹¹ In connection with their parting, they discussed what to do with the Four-plex and the business.¹² Mr. Nabong claims that he wanted to leave the state of Alaska. He testified that he offered both the Four-plex and the business to Ms. Zavacky, who declined.¹³ Ms. Zavacky asserts that instead, she agreed to give Mr. Nabong her interest in the Four-plex and the business in exchange for his promise to repay her the amounts she had invested in the business.¹⁴ Mr. Nabong was to make periodic payments to her of $300.00-$1,000.00.¹⁵

The parties agree that they never drafted or signed any written agreement detailing the terms by which Ms. Zavacky would transfer her ownership in the business and the Four-plex to Mr. Nabong. Similarly, there is no written agreement concerning Mr. Nabong's obligation to repay Ms. Zavacky for the monies she contributed to the business partnership. Strikingly, the parties never agreed upon the exact amount of Mr. Nabong's debt owed to Ms. Zavacky or the timing for repayment. Nor was there any mention of interest. Similarly, there is no evidence as to when Ms. Zavacky was supposed to transfer her interests in the business and the Four-plex to Mr. Nabong. Rather, the only writing referencing an agreement between the parties is a text message Mr. Nabong sent to Ms. Zavacky during this period in 2015 stating: "Just quit being angry and I promise I'll get everything back to you!!"¹⁶

After sending the text, Mr. Nabong began making payments to Ms. Zavacky in June 2015. The payments varied in amount. Mr. Nabong made at least one payment monthly between June 2015 and February 2016. His last payment was made in December 2016. Some of the payments included notations, summarized in Ms. Zavacky's closing argument brief as follows:¹⁷

DATE	AMOUNT	COMMENT	ECF NO. 27-4
6/22/15	$300	Fathers Day	p. 157
7/7/15	$1,000	Baby Mama	p. 158
7/27/15	$1,000	Baby Mama	p. 163
8/27/15	$800	Winter Clothes	p. 169
9/14/15	$500	N/A	p. 171
9/14/15	$300	N/A	p. 171
9/25/15	$300	Laylas Birthday	p. 176
10/26/15	$500	Hush Up	p. 183
11/6/15	$560	Will Pay Back	p. 184
11/25/15	$350	Laylas Momma	p. 189
1/5/16	$350	Lordy Lordy	p. 196
1/22/16	$350	Laylas	p. 197
2/18/16	$350	Trying	p. 204
9/22/16	$350	Child Support/Laylas Birthday	p. 208
12/19/16	$2,000	Child Support	p. 215

In the state court proceeding, Ms. Zavacky testified that eleven of the fourteen payments made by Mr. Nabong were either wholly or at least partially attributable to the debt.¹⁸ The parties agree that the last two payments were for child support.¹⁹

After Ms. Zavacky and Mr. Nabong ended their relationship, Mr. Nabong offered his sister the opportunity to run the e-cigarette business, which she did from August 2015 until November 2015.²⁰ Shortly before the business license for the partnership expired on December 31, 2015, Mr. Nabong filed Articles of Organization for Bloo Monkey Vapes LLC, naming himself as registered agent for the company and listing himself as its sole official with the title of "organizer."²¹ The certificate of organization for Bloo Monkey Vapes LLC was issued the same day.²² There was no testimony regarding the transfer of assets from the partnership to the limited liability company, but the clear inference from the evidence is that after the partnership expired in December 2015 the e-cigarette business was run through the newly created Bloo Monkey Vapes LLC.

A few months later, on March 29, 2016, Mr. Nabong's then-girlfriend (now wife) Jennifer Swanson filed a statement of change of registered agent for Bloo Monkey Vapes LLC, naming herself as the registered agent for the company.²³ Mr. Nabong testified that he sold Bloo Monkey Vapes LLC to Jennifer for $10.00 in March of 2016.²⁴ On October 24, 2016, Jennifer filed a notice of change of officials with the State of Alaska, naming herself (as Jennifer Pastrana Masloff) as 100% member and manager of the company.²⁵ Jennifer has since owned and operated the e-cigarette business.

On June 13, 2016, a Notice of Default under Deed of Trust, listing Mr. Nabong and Ms. Saelee as owners, was recorded to commence foreclosure against the Four-plex.²⁶ The foreclosure sale was scheduled for September 21, 2016.²⁷ Ms. Zavacky testified that in 2016, she was contacted by someone allegedly representing Mr. Nabong who advised her that the Four-plex was in foreclosure, and who told Ms. Zavacky to convey her interest in the Four-plex to Mr. Nabong in order to protect her credit score.²⁸ Following the phone conversation, Ms. Zavacky did just that; she executed a quitclaim deed transferring her interest in the Four-plex to Mr. Nabong.²⁹ The quitclaim deed was recorded on August 31, 2016.³⁰ Several months later, on January 17, 2017, a Loan Modification Agreement was recorded capitalizing $24,140.50 in past due payments and extending the term of the loan, which was in Mr. Nabong's name only.

On January 23, 2017, Mr. Nabong commenced an action against Ms. Zavacky in state court regarding the custody of their child.³¹ Ms. Zavacky filed a counterclaim against Mr. Nabong, asserting that he owed her money pursuant to their June 2015 agreement.³² The state court conducted a trial on her counterclaim. At the conclusion of testimony on May 16, 2018, the state court read its findings of fact and conclusions of law into the record.³³ The court ruled in favor of Ms. Zavacky, stating that "[t]here was an oral contract and there was a breach. The amount that should have been paid was $52,296.47. It wasn't. Amount's due as of July 1, 2015...This is the order of the Court. It's final...the appeal time starts when I sign the judgment...."³⁴

On June 11, 2018, Mr. Nabong commenced his bankruptcy under chapter 13, prior to entry of the state court judgment against him. He listed $59,821.63 under Schedule E/F as a noncontingent, liquidated, undisputed unsecured claim, referencing the state court proceeding case number (3AN-17-04358 CI).³⁵ He also listed the state court proceeding as "pending" under item 9 of his Statement of Financial Affairs.³⁶ Yet, Mr. Nabong did not identify this debt as owed to Ms. Zavacky. Instead, he listed the creditor's name as Anchorage District Court, Alaska. Ms. Zavacky was not listed on his mailing matrix.³⁷

On July 16, 2018, Mr. Nabong filed an amended Schedule J reflecting a negative monthly net income of over $800.³⁸ On July 20, 2018, Mr. Nabong moved to convert his case to chapter 7.³⁹ The court granted the motion and converted his case to chapter 7 on July 23, 2018.⁴⁰ Pursuant to the court's Notice of Chapter 7 Bankruptcy Case, the deadline for objections to Mr. Nabong's discharge was set for October 22, 2018.⁴¹ On the last day for challenging the nondischargeability of debts, Ms. Zavacky filed her Complaint for Determination of Dischargeability Pursuant to Sections [sic] 523 of the Bankruptcy Code (Complaint). Pursuant to the Complaint, Ms. Zavacky seeks a determination that the debt owed to her by Mr. Nabong is excepted from his discharge under §§ 523(a)(2)(A) and 523(a)(15). Mr. Nabong's discharge was entered on October 23, 2018, subject to the determination of the dischargeability of his debt owed to Ms. Zavacky.⁴²

The court held a trial in this proceeding on June 7, 2019. Ms. Zavacky's closing argument was presented in writing on July 8, 2019.⁴³ Mr. Nabong's closing argument was presented in writing on July 26, 2019.⁴⁴

LEGAL ANALYSIS

A. Denial of Dischargeability Under...