Impulsora Del Territoria Sur, S.A. v. Cecchini (In Re Cecchini)

37 B.R. 671, 10 Collier Bankr. Cas. 2d 744, 1984 Bankr. LEXIS 6008
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedMarch 28, 1984
DocketBAP No. EC 82-1566-EAsV, Bankruptcy Nos. F 81-10688, F 81-01689, Adv. Nos. F 82-0084, F 82-0085
StatusPublished
Cited by22 cases

This text of 37 B.R. 671 (Impulsora Del Territoria Sur, S.A. v. Cecchini (In Re Cecchini)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Impulsora Del Territoria Sur, S.A. v. Cecchini (In Re Cecchini), 37 B.R. 671, 10 Collier Bankr. Cas. 2d 744, 1984 Bankr. LEXIS 6008 (bap9 1984).

Opinions

OPINION

ASHLAND, Bankruptcy Judge:

Impulsora Del Territoria Sur, S.A., dba Hotel Solmar (plaintiff) appeals from a judgment of the bankruptcy court which held that the debtors’ liability to the plaintiff is dischargeable.

We affirm.

FACTS

Plaintiff operates a hotel in Cabo San Lucas, Baja, Mexico. In April 1973, plaintiff entered into an agreement with an entity known as C.V.R. Investments (“CVR”). CVR was a partnership consisting of Joseph Cecchini, Peter Robustelli, and William van der Meer. The agreement provided that CVR would promote the plaintiff’s hotel in the United States by encouraging American tourists to travel to Mexico and stay in the plaintiff’s hotel.

As part of the agreement, plaintiff was to reimburse CVR for its expenses in hiring an agent to perform the actual promotional work. CVR hired Frank Tyrell. Mr. Ty-rell’s duties included receiving checks from American tourists for prepayment of hotel space at the plaintiff’s hotel. He would then forward these checks directly to the plaintiff. CVR would advance its own funds to pay Mr. Tyrell for his services. CVR would then periodically bill plaintiff to reimburse CVR for the sums it had advanced.

During the course of the agreement, Joseph Cecchini and Peter Robustelli came to believe that plaintiff was not reimbursing CVR for sums it advanced to Mr. Tyrell. They stopped receiving reimbursement checks from the plaintiff and believed that plaintiff was failing to perform under the [673]*673terms of their agreement. In reality, William van der Meer had intercepted plaintiff’s timely reimbursement payments and converted them to his own use without the knowledge or consent of either of his partners.

Acting upon his belief that plaintiff was indebted to CVR, Joseph Cecchini directed CVR’s controller and financial manager, Gerald Cabral, to instruct Mr. Tyrell to deliver any prepayment checks in his possession to CVR rather than to the plaintiff. Mr. Tyrell delivered about $3200.00 worth of checks to Mr. Cabral who, again at Mr. Cecchini’s direction, endorsed and converted the checks payable to the plaintiff.

Plaintiff discovered the missing funds after guests arrived at the hotel insisting that they had pre-paid for accommodations and the hotel had no record of their payment. Plaintiff sued Joseph Cecchini and Peter Robustelli in state court for damages and to recover the funds.

Cecchini and Robustelli were represented in the state court action by attorney Ross L. Sargent. They entered into a stipulated judgment in favor of the plaintiff in July 1977. During the negotiations which culminated in the stipulated judgment, Mr. Sargent represented to plaintiff’s counsel that the judgment debt would not be dischargea-ble in a bankruptcy proceeding because of his client’s willful and fraudulent conversion.

In October 1981, Cecchini and Robustelli each filed voluntary bankruptcy petitions. Plaintiff filed an adversary proceeding in each case seeking a determination that the debtors’ judgment liability to it was non-dischargeable. The bankruptcy court consolidated the adversary proceedings and held that the debtors’ liability to the plaintiff was dischargeable. The court refused to admit testimony concerning Mr. Sargent’s statements to plaintiff’s counsel regarding the non-dischargeability of the debt. Plaintiff now appeals.

ISSUES

The plaintiff contends that the trial court erred as follows:

1. The trial court excluded testimony regarding the statements made by Mr. Sargent as to the dischargeability of the debtors’ liability to the plaintiff.

2. The trial court incorrectly interpreted the phrase “willful and malicious” as it is used in 11 U.S.C. § 523(a)(6).

3. The trial court found that the plaintiff failed to carry its burden of proving that the debtors’ acted with intent to injure the plaintiff.

ANALYSIS

1. Admissibility of evidence issue

At the trial on this matter, plaintiff’s counsel attempted to testify as to the representations made to him by Mr. Sargent in the state court action. Debtors’ current counsel objected to the introduction of this testimony as hearsay, and on that basis, the court refused to admit it. The court also noted that the evidence might be excluda-ble under Rule 403 of the Federal Rules of Evidence which states, in pertinent part, that “... evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice.. .. ”

After sustaining the objection to the admissibility of the evidence pending further argument, the court allowed the parties to submit written briefs on the issue of admissibility. In its brief, the plaintiff contended that the testimony was not hearsay and directed the court’s attention to Rule 801(d) of the Federal Rules of Evidence which' states, in pertinent part:

“A statement is not hearsay if—
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(2) ... (t)he statement is offered against a party and is ... a statement by his agent or servant concerning a matter within the scope of his agency or employment, made during the existence of the relationship ... . ”

Plaintiff then cited authority to the court for the proposition that an attorney of a party is an agent whose statements may be admissible under this rule.

[674]*674In its memorandum of decision, the court agreed “for the sake of argument” that the statements offered by plaintiff were not hearsay pursuant to Rule 801(d). It went on to point out that, although not hearsay, the proffered evidence was still inadmissible. The court found that the statements were made in compromise negotiations and were, therefore, inadmissible under Rule 408 of the Federal Rules of Evidence. The court also found that, assuming the statements were not rendered inadmissible by Rule 408, they had very little probative value.

Plaintiff now contends that the trial court erred in refusing to admit this testimony under Rule 801(d). Plaintiff admits that Mr. Sargent’s statements were made during compromise negotiations, but argues that they are admissible as independent statements of fact.

A ruling by a trial judge on admissibility of evidence will not be disturbed on appeal unless there is a clear abuse of discretion. ierce Packing Co. v. John Morrell & Co., 633 F.2d 1362, 1364 (9th Cir.1980). The abuse of discretion standard provides that the trial court’s exercise of discretion should not be disturbed unless there is “a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors.” Anderson v. Air West, Inc., 542 F.2d 522, 524 (9th Cir.1976).

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Bluebook (online)
37 B.R. 671, 10 Collier Bankr. Cas. 2d 744, 1984 Bankr. LEXIS 6008, Counsel Stack Legal Research, https://law.counselstack.com/opinion/impulsora-del-territoria-sur-sa-v-cecchini-in-re-cecchini-bap9-1984.