IN RE KHENAIZI

THOMAS L. PERKINS, United States Bankruptcy Judge.

This matter came before the Court for trial on a complaint for nondischargeability pursuant to 11 U.S.C. § 523(a)(2)(A) alleging that the Debtor had obtained a 1991 Honda Accord automobile and two $8,000 checks through false pretenses, a false representation, or actual fraud. The witnesses presented by each party told dramatically different versions of the same basic chain of events. The Court's decision turns on witness credibility and document authenticity.

A creditor must prove that a debt is nondischargeable by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). The exceptions to discharge should be strictly construed in favor of dischargeability. In re Hudson, 107 F.3d 355 (5th Cir. 1997). "Actual fraud" need not take the form of a misrepresentation but includes all forms of trickery, cunning and deceit by which one individual cheats or takes advantage of another. McClellan v. Cantrell, 217 F.3d 890 (7th Cir. 2000).

The Plaintiff, Munir K. Agaid (PLAINTIFF), and the Defendant, Yassar M. Al Khenaizi (DEBTOR), were acquaintances. They first met in August or September, 1999. They met through PLAINTIFF'S son, Maurice, who was employed at the Ponderosa Steak House located on Glen Avenue in Peoria, Illinois, a restaurant frequented by the DEBTOR and Ahmed Qatawnah. Qatawnah was part owner of a business known as Brother's Trading Company located on Prospect Avenue in Peoria Heights, Illinois. The DEBTOR was an employee of Brother's Trading Company at that time. Once he became acquainted with the DEBTOR and Qatawnah, the PLAINTIFF became a regular visitor at the Brother's Trading Company office.

Maurice, a high school student, owned a 1991 Honda Accord titled in his name. Maurice also owned or had access to drive a Mercury Cougar automobile. In the fall of 1999, Maurice was trying to sell the Honda. He resided with his father at a house located on Lake Street in Peoria Heights, Illinois, a short distance from the Brother's Trading Company office. Maurice testified that on the evening of October 4, 1999, the DEBTOR and Qatawnah came to his house without any advance notice while his father was in Chicago, Illinois. They told him that they had found a buyer for the 1991 Honda, that they had spoken to his father and that his father approved of the sale. Maurice testified that they persuaded him to sign the title over to the DEBTOR and to relinquish possession of the Honda to the DEBTOR and Qatawnah, which Maurice did. The PLAINTIFF testified that he did not approve of the deal and that when he returned from Chicago and found out what had happened, he contacted the DEBTOR who voluntarily returned the Honda to PLAINTIFF'S house a few days later.

The PLAINTIFF and Maurice both testified that shortly thereafter, the PLAINTIFF gave Maurice two $8,000 checks payable to and endorsed by the PLAINTIFF with instructions for Maurice to deposit the checks into the PLAINTIFF'S bank account. PLAINTIFF then returned to Chicago. Maurice testified that he placed the checks in the glove compartment of the Honda intending to deposit them when he found time. According to Maurice, the Honda, which was parked in front of his house, then disappeared. When he discovered that the Honda was missing, Maurice did not call the police but later the same day he saw the Honda parked in front of the Brother's Trading Company office.

He left a note for his father explaining the circumstances surrounding the car and then, to avoid his father's wrath, left for Detroit, Michigan, to see his mother for one week. Later that week, his father called him in Detroit and Maurice told his father that the two $8,000 checks were not deposited as instructed but were left in the glove compartment of the Honda.

The PLAINTIFF testified that on November 1, 1999, he went to the Brother's Trading Company office and confronted the DEBTOR and Qatawnah who were both there along with the Honda. The PLAINTIFF testified that the DEBTOR refused to give him the keys to the Honda so the PLAINTIFF obtained access to the Honda by breaking one of the windows with his hand. The PLAINTIFF testified that he searched the glove compartment for the two $8,000 checks, which were not there. According to the PLAINTIFF, a heated confrontation ensued between he and the DEBTOR over the missing checks when Dr. Benjamin Buelter intervened. Dr. Buelter, a chiropractor, is an owner and officer of Brother's Trading Company. The PLAINTIFF testified that Dr. Buelter settled the situation down and asked the parties to come over to his nearby chiropractic office to try to negotiate a resolution of the situation. The PLAINTIFF testified that a promissory note admitted into evidence as Plaintiff's Exhibit 4 was prepared and signed by the DEBTOR and the PLAINTIFF at Dr. Buelter's office. The note is dated November 1, 1999, in the amount of $20,000 representing, according to the PLAINTIFF, $16,000 for the two checks and $4,000 for the 1991 Honda. Also admitted into evidence as Plaintiff's Exhibit 5 is a copy of a letter dated November 1, 1999, signed by the DEBTOR purporting to be an admission of guilt for stealing the Honda and the two checks.

The PLAINTIFF testified that this document was written out and signed in front of him by the DEBTOR while at Dr. Buelter's office in response to PLAINTIFF'S threats to go to the police.

The PLAINTIFF subsequently retained Attorney Rodney Nordstrom to take collection action against the DEBTOR and Nordstrom wrote at least one demand letter to the DEBTOR. In response to Nordstrom's demand, the DEBTOR wrote a handwritten letter to Nordstrom dated January 21, 2000, offering to pay $25 per month to PLAINTIFF. The DEBTOR'S letter to Attorney Nordstrom is admitted into evidence as Defendant's Exhibit 7. Admitted as Plaintiff's Exhibit 6 is DEBTOR'S check to PLAINTIFF dated January 21, 2000, in the amount of $25. A second check is admitted as Plaintiff's Exhibit 7 dated February 21, 2000, in the same amount. Neither check was deposited by PLAINTIFF because he felt the amounts were too small.

The two $8,000 checks in question were admitted into evidence as Plaintiff's Exhibit 1 and Plaintiff's Exhibit 2. Plaintiff's Exhibit 2 is dated October 20, 1999, is payable to PLAINTIFF in the amount of $8,000, and is endorsed by PLAINTIFF. The DEBTOR'S endorsement appears below PLAINTIFF'S signature under the word "To:". The check was deposited by the DEBTOR into his account at the First National Bank of Chillicothe on October 22, 1999.

Plaintiff's Exhibit 1 is a check dated October 30, 1999, payable to PLAINTIFF in the amount of $8,000 bearing the endorsements of the PLAINTIFF and the DEBTOR in the same sequence and was deposited by the DEBTOR into his account on November 3, 1999, two days after the alleged altercation at Brother's Trading Company and two days after the time that PLAINTIFF claims that the DEBTOR signed a letter admitting guilt for stealing the two $8,000 checks. The PLAINTIFF also testified that other than the two $25 checks which he refused to accept, he never received any payments from the DEBTOR on the indebtedness evidenced by the $20,000 note. He also testified that he did not receive the Honda back from the DEBTOR even though he saw the DEBTOR driving it on the day of the DEBTOR'S First Meeting of Creditors following his Bankruptcy filing.

On May 2, 2000, the PLAINTIFF, through Attorney Todd A. Strong, filed a lawsuit against the DEBTOR in the Peoria County Circuit Court for collection of the $20,000 promissory note. A copy of the Summons and Complaint were admitted into evidence as Defendant's Exhibit 5. The Complaint makes no allegation of or reference to fraud, theft or any similar conduct by the DEBTOR. Rather, it is a simple promissory note collection suit, with the note being the only attached exhibit.

The DEBTOR'S version of events is quite different. The DEBTOR testified that shortly after meeting the PLAINTIFF in the Fall of 1999, he learned that the PLAINTIFF was trying to sell the 1991 Honda and had placed an advertisement in the Trading Post. After being unable to sell the Honda through the advertisement, the DEBTOR testified that the PLAINTIFF offered to sell it to him for the price of $4,000. The DEBTOR responded that he had no money to pay for it. The PLAINTIFF persisted and stated that he would let the DEBTOR pay for it over time. The DEBTOR testified that he agreed to buy the Honda and that the title was signed over to him by Maurice on October 4, 1999, at the Brother's Trading Company office.

This version of events was corroborated by Muawad Zahren. Mr. Zahren testified that he was at the Brother's Trading Company office on two different occasions when he overheard the PLAINTIFF offer to sell the Honda to the DEBTOR. On the second occasion, he overheard the PLAINTIFF offer to allow the DEBTOR to make payments over time and the DEBTOR agreed to buy the Honda at that time. Mr. Zahren testified that he was also present at the Brother's Trading Company office on October 4, 1999, when Maurice gave the title and the keys to the Honda to the DEBTOR.

The DEBTOR denied ever going to PLAINTIFF'S house and speaking with Maurice about the 1991 Honda. The DEBTOR testified that after receiving possession of the Honda on October 4, 1999, he never thereafter returned possession to the PLAINTIFF or to Maurice. He denied finding two $8,000 checks in the Honda's glove compartment which both the PLAINTIFF and Maurice say were not put there until the middle of October, 1999, around two weeks or so after the sale took place on October 4, 1999.

The DEBTOR testified that three to four days after he bought the Honda on October 4, 1999, the PLAINTIFF was again at the office of Brother's Trading Company and told the DEBTOR and Qatawnah that he had a number of $8,000 checks that he had obtained from a friend in Chicago. Qatawnah testified that the PLAINTIFF asked to deposit the checks into the Brother's Trading Company account but Qatawnah refused. The DEBTOR testified that the PLAINTIFF then offered to loan him some of the money. The DEBTOR told the PLAINTIFF that he needed $4,000. The DEBTOR testified that PLAINTIFF thereupon gave him one of the $8,000 checks as a loan and later gave him another of the $8,000 checks as an additional loan. The DEBTOR'S testimony in this regard was corroborated by that of Qatawnah.

The DEBTOR testified that he suggested to PLAINTIFF that they document the fact that he now owed $20,000 to the PLAINTIFF. The DEBTOR testified that he purchased a form promissory note at Office Depot. He testified that the promissory note was filled out and signed by him and the PLAINTIFF at the Brother's Trading Company office on November 1, 1999. This testimony was corroborated by Qatawnah. The DEBTOR identified Plaintiff's Exhibit 4 as the original promissory note.

The DEBTOR denied that any confrontation occurred on November 1, 1999, involving him and the PLAINTIFF, denied that Dr. Buelter was involved or that they went to Dr. Buelter's office that day. The DEBTOR also denied ever seeing Plaintiff's Exhibit 5 before, denied that it was a letter that he prepared and signed admitting guilt for stealing and claimed that the letter was a forgery. Dr. Buelter corroborated the DEBTOR'S version of events. He denied that he broke up any confrontation on November 1, 1999, denied that he met with any of the parties that day and denied that they were at his office on that day. Dr. Buelter testified that at the time of the events in question, the DEBTOR was a shareholder for a nominal amount in Brother's Trading Company but had not been involved with the company since early 2000.

Qatawnah testified that he witnessed the preparation of the promissory note at the office of Brother's Trading Company on November 1, 1999. Qatawnah also testified that he later witnessed the DEBTOR make three payments to the PLAINTIFF at the Brother's Trading Company office in the total amount of $13,000. Qatawnah testified that he believed that the PLAINTIFF and the DEBTOR both signed the promissory note at the Brother's Trading Company office. The DEBTOR testified that the note was filled out at the office but signed in front of a Notary at S S Title. The DEBTOR also testified that he made four payments to the PLAINTIFF totaling $17,300 leaving an unpaid balance of $2,700.

The PLAINTIFF denied that Plaintiff's Exhibit 5 was a forgery and reiterated his position that the DEBTOR wrote out and signed the letter admitting guilt for stealing at the same time that the promissory note was prepared at Dr. Buelter's office on November 1, 1999.

The Court has compared Plaintiff's Exhibit 5 and Defendant's Exhibit 7. One does not need to be a professional document examiner to see that Plaintiff's Exhibit 5 is a crudely manufactured false document intended to pass for an admission of guilt by the DEBTOR. As argued by the DEBTOR, it is obvious Plaintiff's Exhibit 5 was manufactured using parts of Defendant's Exhibit 7. The DEBTOR'S name and address as they appear at the top of Plaintiff's Exhibit 5 are exact copies of the DEBTOR'S name and address as it appears at the top of Defendant's Exhibit 7. The first seven words of the text of Plaintiff's Exhibit 5 are also an exact copy of the first seven words of the text of Defendant's Exhibit 7. The next three words of Plaintiff's Exhibit 5: "car theft, checks" appear to be printed with a different hand. The next three words: "to Munir Agaid" are also an exact copy from Defendant's Exhibit 7. The word "except" that appears at the end of the second line of Plaintiff's Exhibit 5 is an exact copy of the same word that appears in the second line of text of Defendant's Exhibit 7. Finally, the DEBTOR'S printed name and signature that appear on Plaintiff's Exhibit 5 are exact copies of the DEBTOR'S printed name and signature as they appear on Defendant's Exhibit 7.

This Court finds that Plaintiff's Exhibit 5 is not authentic. Through reasonable inference, it appears that Plaintiff's Exhibit 5 was manufactured, using a cut and paste methodology with the assistance of a photocopy machine. This Court also draws the fair and reasonable inference that Plaintiff's Exhibit 5 was manufactured by or at the direction of PLAINTIFF. Plaintiff's Exhibit 5 was used by PLAINTIFF at trial in an effort to bolster his claim that the DEBTOR committed fraud or was guilty of theft. PLAINTIFF clearly had a motive to manufacture Plaintiff's Exhibit 5.

This Court also finds that PLAINTIFF had the opportunity to manufacture Plaintiff's Exhibit 5 from Defendant's Exhibit 7. At trial, PLAINTIFF denied ever having seen Defendant's Exhibit 7. He did admit, however, that he retained Attorney Rodney Nordstrom to pursue collection against the DEBTOR. He also testified that he received the two $25 checks tendered by DEBTOR. The authenticity of Defendant's Exhibit 7 is not disputed. Defendant's Exhibit 7 is dated January 21, 2000, and references an enclosed check no. 0593 in the amount of $25. DEBTOR'S check no. 0593 in the amount of $25 payable to PLAINTIFF is admitted into evidence as Plaintiff's Exhibit 6 and PLAINTIFF admits he received the check although he did not cash it. From these facts, this Court draws the reasonable inference that DEBTOR mailed the original letter, a copy of which is admitted as Defendant's Exhibit 7, along with his check no. 0593 to Attorney Nordstrom and that Attorney Nordstrom forwarded the original or a copy of DEBTOR'S letter along with DEBTOR'S check to PLAINTIFF. PLAINTIFF thereby had possession of the original or a copy of Defendant's Exhibit 7 thereby giving him the opportunity to manufacture Plaintiff's Exhibit 5.

The Court also notes that Dr. Buelter denied any knowledge of Plaintiff's Exhibit 5 even though PLAINTIFF testified that Plaintiff's Exhibit 5 was written out by the DEBTOR in Dr. Buelter's presence on November 1, 1999. Further, if Plaintiff's Exhibit 5 was genuine, it would reasonably be anticipated that PLAINTIFF would have used it in the collection suit. The fact that it was not attached as an exhibit and no allegations of fraud or theft are made in the complaint, supports the conclusion that Plaintiff's Exhibit 5 was not yet in existence when the complaint was filed on May 2, 2000.

PLAINTIFF'S use of a false document impugns the credibility of his testimony. PLAINTIFF'S version of the events was corroborated, in part, by the testimony of his son, Maurice. Maurice testified, however, that he was quite fearful of his father's wrath and even left town and went to Detroit to avoid it. This Court believes it is not unlikely that PLAINTIFF'S son, a high school student, would fabricate testimony in order to please his father or avoid his father's ire.

The Court has considered the demeanor and manner of the witnesses who testified at trial in assessing the credibility of and weight to be accorded to the testimony of those witnesses. The Court has considered the documents admitted as exhibits at trial. The Court has also considered what inferences can reasonably be drawn from the direct and circumstantial evidence. After due deliberation, this Court finds that the DEBTOR'S version of events, as corroborated by Dr. Benjamin Buelter, Muawad Zahren and Ahmed Qatawnah, is truthful and that PLAINTIFF'S version of events, corroborated in part by his son, Maurice, is not truthful.

Specifically, the Court finds that the 1991 Honda Accord was sold for $4,000 to the DEBTOR and was not obtained by false pretenses, a false representation, or actual fraud. The Court further finds that the two $8,000 checks in question were given by PLAINTIFF to DEBTOR as a loan and were not obtained by false pretenses, a false representation, or actual fraud. Accordingly, the Court finds that the PLAINTIFF has failed to carry his burden of proof and that the debts in question are dischargeable.

Judgment should be entered in favor of the DEFENDANT and against the PLAINTIFF. A separate Order will be entered.

This Opinion constitutes this Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.

ORDER

For the reasons stated in an Opinion entered this day, this Court finds that the debts of Defendant to Plaintiff are dischargeable and Judgment is hereby entered in favor of the Defendant and against the Plaintiff.