FINDINGS OF FACT AND CONCLUSIONS OF LAW
The Court finds that the following have been proven by Plaintiff by a preponderance of the evidence:
Findings of Fact
1. Plaintiff, Western Surety Company, is a surety company fully authorized to do business in the State of Texas.
2. Defendants/Debtors, Tony Edwin Swanks and Felisha Yolanda Swanks (the "Swanks") filed a Chapter 7 proceeding under Title 11 of the United States Code on April 25, 2014.
3. On or about April 26, 2013, the Debtors purchased a motor vehicle, specifically a used 2006 BMW 3 Series with VIN WBAVB13556KX44054 (the "BMW") from Gowdy Auto Sales ("Gowdy").
4. In connection with the purchase of the BMW, the Debtors entered into that certain Motor Vehicle Retail Installment Contract (the "Contract") with Gowdy in which the Debtors financed $15,100.00 and agreed to repay said sum beginning May 26, 2013 with monthly payments in the amount of $500.46 each month.
5. The Contract provides that the Debtors are giving Gowdy a security interest in the BMW.
6. Pursuant to a Master Dealer Agreement between Bonfire Capital Group, LLC and Gowdy, Bonfire held possession of the original Certificate of Title to the BMW.
7. The Debtors signed a Right of Repossession document at the time of their purchase of the BMW, also on April 26, 2013 in which the Debtors agreed if they failed to make a payment, Gowdy could repossess the BMW.
8. The Debtors also signed a document called We Owe on April 26, 2013 with Gowdy in which the Debtors agreed that Gowdy owed nothing further to the Debtors.
9. The Contract was assigned by Gowdy to Bonfire on or about May 10, 2013.
10. Bonfire was in possession of the original Certificate of Title at the time that the Contract was assigned to Bonfire by Gowdy.
11. On May 13, 2013, Bonfire sent a letter to the Debtors welcoming them and advising them that the Contract had been assigned by Gowdy to Bonfire and directing them to make all future payments to "Bonfire Capital Group, LLC and provided instructions on where to send future payments.
12. On May 25, 2013, the Debtors made the first monthly installment payment due under the Contract to Bonfire through a Western Union speed pay payment in the amount of $500.46.
13. On June 27, 2013, in connection with Felisha Swanks' attempt to apply for a Texas Certificate of Title to the BMW in her name, the State of Texas sent Felisha Swanks a letter advising her that it would need certain evidence and a surety bond66. The Debtors were represented by bankruptcy counsel during their underlying bankruptcy case. They have also filed multiple bankruptcy cases in the past. The court finds the Debtors to have been sophisticated enough to understand the questions and significance of the bankruptcy Schedules and Statement of Financial Affairs.
Conclusions of Law
1. This Court has jurisdiction of this matter under
28 U.S.C. § 1334 (a) and (b).
2. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) and (J).
3. Venue is proper for this action as Debtors/Defendants' Chapter 7 bankruptcy proceeding is pending in this District.
Section 523 (a) (2)
4. The debt of the Defendant Felisha Swanks to Western should not be discharged under Section 523 (a)(2)(A) of the Bankruptcy Code because it was obtained by false pretenses, a false representation, or actual fraud.
5. When Debtor Felisha Swanks applied for a bonded title, she represented that she was in possession of the BMW and that there were no liens on the BMW. In fact, both she and Tony Edwin Swanks had granted a security interest in the BMW to Gowdy. Even if Felisha Swanks was unaware that the security interest was assigned to Bonfire, she signed the Contract which clearly indicated she was granting a security interest in the BMW to Gowdy.
Section 523 (a) (4)
6. The conduct of the Debtors constitutes embezzlement within the meaning of Section 523 (a)(4) of the Bankruptcy Code. As such, the debt of the Debtors to Western is not dischargeable under Section 523 (a)(4) of the Bankruptcy Code. "Embezzlement" is a "fraudulent" appropriation of property by a person to whom such property has been entrusted, or into whose hands it has lawfully come". "Embezzlement" applies when a debtor unlawfully appropriates property after it has been entrusted to the Debtor's care.
7. The Debtors have misappropriated the BMW to the exclusion of first Gowdy, then Bonfire, then Western's interest in the BMW.
8. The Debtors claim they sold the BMW and kept the proceeds. If in fact the Debtors sold the BMW, they had an obligation to turn over the proceeds and failed to do so.
9. Western received none of the proceeds from the sale of the BMW.
10. The Debtors have not disclosed the true whereabouts of the BMW in this case.22. The Debtors are not entitled to a discharge under Section 727(a)(5) of the Bankruptcy Code.
23. The Debtors have failed to explain satisfactorily any loss of assets or deficiency of assets to meet their liabilities.
24. The Debtors have failed to amend their schedules despite being admonished by the Trustee to do so in their 341 meeting.
25. Judgment should be rendered for Western Surety Company against the Debtors, jointly and severally, for the principal amount of $14,898.87, plus reasonable attorney's fees and costs in the amount of $__________ for attorney's services rendered through the trial of this matter. The Judgment shall also award Western Surety Company a lien on the subject BMW and order the Debtors to use all reasonable and best efforts to turn over possession and control of the BMW to Western Surety Company or its agents, as Western Surety Company may direct, along with the keys and all other documents appurtenant thereto, within 14 days of the date of the Judgment, and to execute any documents that Western Surety Company reasonably requests in order to obtain a Certificate of Title from the State of Texas.
26. The entire amount of the judgment is non-dischargeable.
27. The Debtors are denied their discharge.
28. This Court has the authority to liquidate the debt of the Swanks to Western Surety Company and rendering a monetary judgment in favor of Western Surety Company under See Morrison v. Western Builders of Amarillo (In the Matter of Morrison), 555 F.3d 473, 479-80 (5th Cir. 2009).
29. The non-dischargeable debt of the Debtors to Western Surety Company consists of all amounts that have been misappropriated, in addition to interest, attorney's fees, and costs. Cohen v. De La Cruz, 523 U.S. 213, at 222, 118 S.Ct. 1212, 140 L.Ed. 2d 341 (1998) (discharge exception prevents discharge of all liability resulting from the debt, including treble damages, attorney's fees, and costs); Neo Ventures v. Hamann (In re Hamann), 2010 WL 2985887, at p. 5-6 (Bankr. W.D. Tex. July 27, 2010) (recovery allowed if state court permits); Western Surety Company v. Dauterman (In re Dauterman) 156 B.R. 976, at 981-82 (Bankr. N. D. Ohio 1993) (plain language of 11 U.S.C. §523 suggests that dischargeability is an "all or nothing" proposition. . . . . In fact, the exceptions to discharge tend to punish the dishonest debtor, requiring recompense in accordance with the actual loss sustained).
To the extent that any finding of fact constitutes a conclusion of law or any conclusion law constitutes a finding of fact, Western Surety Company requests that such finding or conclusion be considered as such.
The following constitutes the ruling of the court and has the force and effect therein described.
Signed August 4, 2015
/s/ _________
United States Bankruptcy Judge
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