Swift Financial, LLC fka Swift Financial Corporati v. Cohen

• Court: United States Bankruptcy Court, C.D. California
• Decided: December 7, 2020
• Docket: 2:18-ap-01296
• Status: Unknown

Opinion

1 Daren M. Schlecter, Esq. (SBN 259537) Law Office of Daren M. Schlecter, A Prof. Corp. 2 1925 Century Park East, Suite 1180 FILED & ENTERED Los Angeles, CA 90067 3 Telephone (310) 553-5747 DEC 07 2020 Telecopier (310) 553-5487 4 Attorney for Plaintiff/Creditor 5 Swift Financial, LLC fka Swift Capital Corporation, Inc C CL enE tR raK l U D. iS st. r B icA t N ofK CR aU liP foT rC nY ia COURT BY b a k c h e l l DEPUTY CLERK 6 NOT FOR PUBLICATION 7 CHANGES MADE BY COURT UNITED STATES BANKRUPTCY COURT 8 CENTRAL DISTRICT OF CALIFORNIA 9 LOS ANGELES DIVISION 10

11 In re: Case No.: 2:18-bk-17205-RK 12 AVI COHEN, Chapter 7 13 Adv. No. 2:18-ap-01296-RK 14 Debtor. SWIFT FINANCIAL, LLC, fka SWIFT SEPARATE STATEMENT OF 15 CAPITAL CORPORATION, INC., UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW IN SUPPORT 16 Plaintiff, OF PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT; ORDER 17 v. THEREON

18 AVI COHEN, Pursuant to LBR 7056-1(b)(2)

19 Date: October 7, 2020 Time: 2:30 p.m. 20 Location: SEE CONCURRENTLY FILED NOTICE, COURTCALL ONLY 21 Defendant. 22

23 TO THE HONORABLE JUDGE ROBERT KWAN, UNITED STATES 24 BANKRUPTCY JUDGE, TO DEFENDANT AVI COHEN AND ALL OTHER PARTIES IN 25 INTEREST: 26 Plaintiff Swift Financial, LLC hereby submits its Separate Statement of Uncontroverted 27 Facts and Conclusions of Law (“SUFCL”): 1 A. Swift’s 11 U.S.C §523(a)(2)(A) Claim 2 UNDISPUTED MATERIAL FACTS EVIDENCE SHOWING FACTS ARE 3 NOT SUBJECT TO DISPUTE 4 1. On or about May 31, 2017, Avi Cohen Declaration of Bonnie Carey at ¶8, Exhibit “A” 5 (“Debtor” or “Cohen”) completed an online 6 application for his business Perfume 7 Dynasty with various contact and financial 8 details in support of the application. 9 2. On the Application, Cohen indicated he Declaration of Bonnie Carey at ¶9 10 needed the advance from Swift to “purchase 11 inventory” and represented his monthly 12 gross sales as $83,333.33. 13 3. Concurrently with the application, Declaration of Bonnie Carey at ¶10 14 Debtor provided documentation to support 15 the information contained in the Application 16 consisting of 4 months of bank statements, 17 proof of active status in the Secretary of 18 State, Business EXP report (which confirms 19 the borrowers business address, active 20 status, ownership and then confirms their 21 trade history), Driver's License and portions 22 of a TLO investigative report (“Financial 23 Documentation”). 24 25 26 27 1 4. On or about May 31, 2017, Swift and Declaration of Bonnie Carey at ¶11, Exhibit 2 Cohen entered into a Future Receivables “B” 3 Sales Agreement for an advance of 4 $75,000.00 to his business Perfume 5 Dynasty, LLC (the “Agreement” or 6 “FRSA”). 7 5. In addition to agreeing that Cohen Declaration of Bonnie Carey at ¶11, Exhibit 8 would guarantee the debt, he agreed to give “B”; Declaration of Daren M. Schlecter at ¶12, 9 Swift two business bank accounts to initiate Exhibit “E”, Defendant’s Answer to Adversary 10 a weekly ACH debt to repay the advance, Complaint, within ¶12. 11 and granted Swift a security interest in 12 Debtor’s collateral, including sales and 13 inventory. 14 6. Subsequently, and in reliance on the Declaration of Bonnie Carey at ¶12; 15 Application and Financial Documentation, Declaration of Daren M. Schlecter at ¶12, 16 Swift wired $75,000.00 to Cohen on June Exhibit “E”, Defendant’s Answer to Adversary 17 2, 2017 in exchange for his agreement to Complaint, within ¶11. 18 repay $92,175.00 in weekly draws in the 19 amount of $2,560.42 until paid in full (the 20 “Advance”). 21 7. On or about June 2, 2017, Swift caused Declaration of Bonnie Carey at ¶13, Exhibit 22 a UCC Financing Statement to be filed with “C"; Declaration of Daren M. Schlecter at ¶12, 23 the California Department of State. Exhibit “E”, Defendant’s Answer to Adversary 24 Complaint, within ¶12. 25 26 27 1 8. The Agreement further required Declaration of Daren M. Schlecter at ¶12, 2 Perfume Dynasty through Debtor, to Exhibit “E”, Defendant’s Answer to Adversary 3 provide and maintain an irrevocable ACH Complaint, within ¶12. 4 debit to allow Plaintiff to take of future 5 receivables to satisfy the amount of 6 receivables purchased. 7 9. Defendant’s company Perfume Dynasty, Declaration of Daren M. Schlecter at ¶¶5-6, 8 LLC incurred at least $63,110.31 in Exhibit “B” 9 business debt at the time he sought monies 10 for the advance from Swift, and which 11 remain unpaid. 12 10. Just days later, in or about June, 2017, Declaration of Daren M. Schlecter at ¶12, 13 Perfume Dynasty by and through Debtor, Exhibit “E”, Defendant’s Answer to Adversary 14 defaulted on his first payment under the Complaint, within ¶13. 15 Agreement, failed to inform Plaintiff prior 16 to debiting payments that there were 17 insufficient funds in the bank account 18 identified under the Agreement, and failed 19 to maintain a bank account that could satisfy 20 the Obligation. 21 11. Debtor maintained multiple other bank Declaration of Daren M. Schlecter at ¶12, 22 accounts into which he continued to deposit Exhibit “E”, Defendant’s Answer to Adversary 23 and thus divert sales receipts without Complaint, within ¶13. 24 repaying Swift. 25 26 27 1 12. Debtor knew at the time he received the Declaration of Daren M. Schlecter at ¶12, 2 Advance from Swift that he had closed or Exhibit “E”, Defendant’s Answer to Adversary 3 was planning on closing Perfume Dynasty, Complaint, within ¶20; see also ¶9, Exhibit “C” 4 LLC. – Certified Copy of 341a Transcript at p. 12, 5 Lines 1-12; see also ¶14, Exhibit “F” (Requests 6 for Admission (“RFA”) No. 9 & 13, ¶17, 7 Exhibit “H” (late responses to Requests for 8 Admissions), which Plaintiff asserts are both 9 deemed admitted by operation of law. 10 RFA No. 9: Admit that YOUR first payment to 11 repay Swift under the AGREEMENT bounced 12 in early June, 13 13 2017. 14 RFA No. 13: Admit that YOU knew YOU 15 could not repay the ADVANCE to Swift on 16 May 31, 2017 17 18 19 20 21 22 23 24 25 26 27 1 13. Defendant knew at the time he took the Declaration of Daren M. Schlecter at ¶14, 2 Advance from Swift that he had insufficient Exhibit “F” (Requests for Admission No. 9 & 3 monies to repay Swift as of May 31, 2017. 13, ¶17, Exhibit “H” (late responses to 4 Requests for Admissions), which Plaintiff 5 asserts are both deemed admitted by operation 6 of law. 7 8 RFA No. 11: 9 Admit that there were sufficient monies from 10 May 31, 2017 to November, 2017 to repay the 11 18 ADVANCE under the AGREEMENT. 12 13 RFA No. 13: 14 Admit that Perfume Dynasty, LLC did not have 15 two full time employees as represented in the 16 28 attached Application YOU submitted to 17 Swift on May 31, 2017 18 19 14. Defendant did not use the monies from Declaration of Daren M. Schlecter at ¶9, 20 Swift to purchase inventory, but to pay off Exhibit “C” – Certified Copy of 341a 21 vendors. Transcript at p. 12, Lines 2-12. 22 23 24 25 26 27 1 15. According to Swift’s records, Swift’s first Declaration of Bonnie Carey at ¶14. 2 attempt to withdraw monies from Debtor’s 3 bankruptcy account in the amount of 4 $2,560.42 bounced on or about June 9, 5 2017, resulting in an NSF fee. Thus, 6 Debtor made no payments towards the 7 Loan. 8 16. Defendant admitted at his 341(a) Declaration of Daren M. Schlecter at ¶9, 9 meeting of creditors that at the time he closed Exhibit “C” – Certified Copy of 341a 10 his business, he gave away all of his inventory Transcript at p. 7, Lines 14-25, p. 8, Lines 1-3 11 for pennies on the dollar. 12 17. Defendant admitted at his 341(a) Declaration of Daren M. Schlecter at ¶9, 13 meeting of creditors that he closed Perfume Exhibit “C” – Certified Copy of 341a 14 Dynasty, LLC in or about June, 2017. Transcript, p. 7, Lines 14-18 [Closed the 15 business about a year and half before 341a, 16 which was on September 6, 2018] 17 18. After defaulting, Swift began phone and Declaration of Bonnie Carey at ¶15. 18 in writing collection efforts. On or about July 19 10, 2017, Swift emailed a hold demand to 20 Paypal pursuant to the UCC Financing 21 Statement and guarantee under the FRSA. 22 19. Debtor used his Paypal account(s) to Declaration of Bonnie Carey at ¶15; 23 operate Perfume Dynasty, LLC. Declaration of Daren M. Schlecter at ¶9, 24 Exhibit “C” – Certified Copy of 341a 25 Transcript at p 15-17. 26 27 1 20. Debtor/Defendant did not keep any Declaration of Daren M. Schlecter at ¶9, 2 documents showing the sales of Perfume Exhibit “C” Certified Copy of 341a Transcript 3 Dynasty, LLC, including for July, 2017. at p. 15, Lines 1-8 4 21. Debtor did not keep track of sales in the Declaration of Daren M. Schlecter at ¶9, 5 operation of Perfume Dynasty, LLC. Exhibit “C” Certified Copy of 341a Transcript 6 at p. 5, Lines 19-24. 7 22. Debtor’s bankruptcy petition shows that his Declaration of Daren M. Schlecter at ¶¶3-4, 8 2017 and 2018 gross income from Exhibit “A” 9 operating a business was $0.00. 10 23. Based on the Debtor’s bankruptcy petition Declaration of Daren M. Schlecter at ¶¶3-4, 11 and testimony at his 341a meeting of Exhibit “A” (page 32/33 of Debtor’s 12 creditors, Perfume Dynasty, LLC was bankruptcy petition showing no gross income 13 struggling financially at the time the from operation of his business); 14 advance was made to Debtor/Defendant. Declaration of Daren M. Schlecter at ¶9, 15 Exhibit “C” – Certified Copy of 341a 16 Transcript at p. 7, Lines 14-25, p. 12, Lines 1- 17 12; 18 Declaration of Daren M. Schlecter at ¶12, 19 Exhibit “E”, Defendant’s Answer to Adversary 20 Complaint, within ¶¶ 13, 20 21 24. Swift was never provided notice of any of Declaration of Bonnie Carey at ¶16. 22 Debtor Avi Cohen's bankruptcy filings. 23 Swift discovered the current bankruptcy 24 filing only after the Debtor had filed for 25 bankruptcy and Swift contacted him in 26 continuing collection efforts in or about 27 July 9, 2018. LAW SUPPORTING 1 CONCLUSIONS OF LAW CONCLUSIONS OF LAW 2 In re Greene, 96 B.R. 279, 283 (9th Cir. BAP 1. Defendant’s representation that he was 3 1989). using monies from Swift to purchase 4 inventory was materially false if it included 5 information which is “substantially 6 inaccurate” and is of the type that would 7 affect the creditor's decision making 8 process; to except a debt from discharge, the 9 creditor must show not only that the 10 statements are inaccurate, but also that they 11 contain important and substantial untruths. 12 Advanta Nat'l Bank v. Kong (In re Kong), 239 2. Defendant’s statement of monthly sales of 13 B.R. 815, 826 (BAP 9th Cir.1999) $83,333.00 on his Application without any 14 basis or supporting documentation 15 constitute a materially fraudulent 16 misrepresentation as a reckless indifference 17 to the actual facts, without examining the 18 available source of knowledge which lay at 19 hand. 20 In re Heckencamp, 110 B.R. 1, 2 (Bankr. C.D. 3. Debtor’s Lack of sale records may be 21 1989)(Borrower had no records to show what relevant in considering misrepresentations he did with the money) 22 made under 11 U.S.C. §523(a)(2)(A). 23 Citibank (South Dakota) N.A. v. Lee (In re Lee), 4. A debtor’s promise while not intending to 24 186 B.R. 695, 699 (9th Cir. BAP 1995) pay or knowing that payment would be 25 impossible is actionable under 11 U.S.C. 26 §523(a)(2)(A). 27 In re Cole, 226 B.R. 647, 656, fn 12 (9th Cir. 1 5. Defendant’s ability to repay may be a factor 1998) 2 in determining the debtor's intent. In re Eashai, 87 F.3d 1082, 1090 (9th Cir. 3 6. The Court may conclude “intent to deceive” 1996); In re Brody, 2017 WL 992408 at *7 (9th 4 based on circumstantial evidence, including Cir. BAP 2017). 5 drawing inferences from the Debtor’s actions 6 and the surrounding circumstances. Field v. Mans, 516 U.S. 59, 73-76 (1995); In re 7 7. Swift reliance on Defendant was justifiable Eashai, 87 F.3d 1082, 1090 (9th Cir. 1996) 8 given the extent of Swift’s investigation into 9 the continued operation of Perfume Dynasty, 10 LLC 11 U.S.C. §523(a)(2)(A); Britton v. Price (In re 11 8. Defendant’s representations caused Swift Britton), 950 F.2d 602, 604 (9th Cir.1991) 12 damages, including the utter failure of Debtor 13 to repay any of the advance. 14 15 B. Swift’s 11 U.S.C §523(a)(2)(B) Claim 16 UNDISPUTED MATERIAL FACTS EVIDENCE SHOWING FACTS ARE 17 NOT SUBJECT TO DISPUTE 18 1. On or about May 31, 2017, Avi Cohen Declaration of Bonnie Carey at ¶8, Exhibit “A” 19 (“Debtor” or “Cohen”) completed an online 20 application for his business Perfume Dynasty 21 with various contact and financial details in 22 support of the application. 23 2. On the Application, Cohen indicated he Declaration of Bonnie Carey at ¶9 24 needed the advance from Swift to “purchase 25 inventory” and represented his monthly gross 26 sales as $83,333.33. 27 1 3. Concurrently with the application, Debtor Declaration of Bonnie Carey at ¶10 2 provided documentation to support the 3 information contained in the Application 4 consisting of 4 months of bank statements, 5 proof of active status in the Secretary of 6 State, Business EXP report (which confirms 7 the borrowers business address, active status, 8 ownership and then confirms their trade 9 history), Driver's License and portions of a 10 TLO investigative report (“Financial 11 Documentation”). 12 4. Subsequently, and in reliance on the Declaration of Bonnie Carey at ¶12; 13 Application and Financial Documentation, Declaration of Daren M. Schlecter at ¶12, 14 Swift wired $75,000.00 to Cohen on June 2, Exhibit “E”, Defendant’s Answer to Adversary 15 2017 in exchange for his agreement to repay Complaint, within ¶11. 16 $92,175.00 in weekly draws in the amount 17 of $2,560.42 until paid in full (the 18 “Advance”). 19 20 21 22 23 24 25 26 27 1 5. Defendant knew at the time he took the Declaration of Daren M. Schlecter at ¶14, 2 Advance from Swift that he had insufficient Exhibit “F” (Requests for Admission No. 9 & 3 monies to repay Swift as of May 31, 2017. 13, ¶17, Exhibit “H” (late responses to 4 Requests for Admissions), which Plaintiff 5 asserts are both deemed admitted by operation 6 of law. 7 8 RFA No. 11: 9 Admit that there were sufficient monies from 10 May 31, 2017 to November, 2017 to repay the 11 18 ADVANCE under the AGREEMENT. 12 13 RFA No. 13: 14 Admit that Perfume Dynasty, LLC did not have 15 two full time employees as represented in the 16 28 attached Application YOU submitted to 17 Swift on May 31, 2017 18 Declaration of Daren M. Schlecter at ¶9, 19 6. Debtor/Defendant did not keep any Exhibit “C” Certified Copy of 341a Transcript 20 documents showing the sales of Perfume at p. 15, Lines 1-8 21 Dynasty, LLC, including for July, 2017. Declaration of Daren M. Schlecter at ¶9, 22 7. Debtor did not keep track of sales in the Exhibit “C” Certified Copy of 341a Transcript 23 operation of Perfume Dynasty, LLC. at p. 5, Lines 19-24. Declaration of Daren M. Schlecter at ¶¶3-4, 24 8. Debtor’s bankruptcy petition shows that his Exhibit “A” 25 2017 and 2018 gross income from operating a 26 business was $0.00. 27 1 9. Based on the Debtor’s bankruptcy petition Declaration of Daren M. Schlecter at ¶¶3-4, 2 and testimony at his 341a meeting of creditors, Exhibit “A” (page 32/33 of Debtor’s 3 Perfume Dynasty, LLC was struggling bankruptcy petition showing no gross income 4 financially at the time the advance was made to from operation of his business); 5 Debtor/Defendant. Declaration of Daren M. Schlecter at ¶9, 6 Exhibit “C” – Certified Copy of 341a 7 Transcript at p. 7, Lines 14-25, p. 12, Lines 1- 8 12; Declaration of Daren M. Schlecter at ¶12, 9 Exhibit “E”, Defendant’s Answer to Adversary 10 Complaint, within ¶¶ 13, 20

11 LAW SUPPORTING CONCLUSIONS OF LAW 12 CONCLUSIONS OF LAW Lamar, Archer & Cofrin, LLP v. Appling, 138 13 1. Swift’s Application qualifies as a statement S.Ct. 1752, 1760-1761 (2018) 14 “respecting the debtor's or an insider's 15 financial condition” Lamar, Archer & Cofrin, LLP v. Appling, 138 16 2. Debtor’s statement of gross monthly sales S.Ct. 1752, 1760-1761 (2018) 17 was a statement that has a direct relation to

18 or impact on the debtor's overall financial 19 status.

26 27 First Interstate Bank of Nevada v. Greene (In re 1 3. Given Defendant’s general lack of sales Greene), 96 B.R. 279, 283 (9th Cir. BAP 1989) 2 record keeping, keeping documents, and 3 representation of zero gross income on his 4 bankruptcy petition, his statement of gross 5 monthly sales was a materially false 6 statement which painted a substantially 7 untruthful picture of his financial condition 8 by misrepresenting information of the type 9 which would normally affect the decision to 10 grant credit. In re Gertsch, 237 BR 160, 170 (9 th Cir. BAP 11 4. Swift’s reliance on Defendant was reasonable 1999); In re Candland (9th Cir. 1996) 90 F3d 12 given the extent of Swift’s financial 1466, 1470 13 review/diligence into the sales and general 14 financial condition of Perfume Dynasty, LLC, 15 including the lack of any indication that the 16 Application was inaccurate or otherwise false. 11 U.S.C. §523(a)(2)(B); Candland v. 17 5. Defendant’s representations caused Swift Insurance Co. of N. America (In re Candland), 18 damages, including the utter failure of 90 F.3d 1466, 1469 (9th Cir.1996).

19 Debtor to repay any of the advance.

26 27 1 C. Swift’s 11 U.S.C §523(a)(4) Claim 2 UNDISPUTED MATERIAL FACTS EVIDENCE SHOWING FACTS ARE 3 NOT SUBJECT TO DISPUTE 4 1. On or about May 31, 2017, Avi Cohen Declaration of Bonnie Carey at ¶8, Exhibit “A” 5 (“Debtor” or “Cohen”) completed an online 6 application for his business Perfume 7 Dynasty with various contact and financial 8 details in support of the application. 9 2. Concurrently with the application, Debtor Declaration of Bonnie Carey at ¶10 10 provided documentation to support the 11 information contained in the Application 12 consisting of 4 months of bank statements, 13 proof of active status in the Secretary of 14 State, Business EXP report (which confirms 15 the borrowers business address, active 16 status, ownership and then confirms their 17 trade history), Driver's License and portions 18 of a TLO investigative report (“Financial 19 Documentation”). 20 21 22 23 3. On or about May 31, 2017, Swift and Cohen Declaration of Bonnie Carey at ¶11, Exhibit 24 entered into a Future Receivables Sales “B” 25 Agreement for an advance of $75,000.00 to 26 his business Perfume Dynasty, LLC (the 27 “Agreement” or “FRSA”) 1 4. In addition to agreeing that Cohen Declaration of Bonnie Carey at ¶11, Exhibit 2 would guarantee the debt, he agreed to “B”; Declaration of Daren M. Schlecter at ¶12, 3 give Swift two business bank accounts Exhibit “E”, Defendant’s Answer to Adversary 4 to initiate a weekly ACH debt to repay Complaint, within ¶12. 5 the advance, and granted Swift a 6 security interest in Debtor’s collateral, 7 including sales and inventory. 8 5. Subsequently, and in reliance on the Declaration of Bonnie Carey at ¶12; 9 Application and Financial Declaration of Daren M. Schlecter at ¶12, 10 Documentation, Swift wired $75,000.00 Exhibit “E”, Defendant’s Answer to Adversary 11 to Cohen on June 2, 2017 in exchange Complaint, within ¶11. 12 for his agreement to repay $92,175.00 in 13 weekly draws in the amount of 14 $2,560.42 until paid in full (the 15 “Advance”). 16 6. On or about June 2, 2017, Swift caused Declaration of Bonnie Carey at ¶13, Exhibit 17 a UCC Financing Statement to be filed “C"; Declaration of Daren M. Schlecter at ¶12, 18 with the California Department of State. Exhibit “E”, Defendant’s Answer to Adversary 19 Complaint, within ¶12. 20 21 22 7. The Agreement further required Declaration of Daren M. Schlecter at ¶12, 23 Perfume Dynasty through Debtor, to Exhibit “E”, Defendant’s Answer to Adversary 24 provide and maintain an irrevocable Complaint, within ¶12. 25 ACH debit to allow Plaintiff to take of 26 future receivables to satisfy the amount 27 of receivables purchased. 1 8. Just days later, in or about June, 2017, Declaration of Daren M. Schlecter at ¶12, 2 Perfume Dynasty by and through Debtor, Exhibit “E”, Defendant’s Answer to Adversary 3 defaulted on his first payment under the Complaint, within ¶13. 4 Agreement, failed to inform Plaintiff prior 5 to debiting payments that there were 6 insufficient funds in the bank account 7 identified under the Agreement, and failed 8 to maintain a bank account that could satisfy 9 the Obligation. 10 9. Debtor maintained multiple other bank Declaration of Daren M. Schlecter at ¶12, 11 accounts into which he continued to deposit Exhibit “E”, Defendant’s Answer to Adversary 12 and thus divert sales receipts without Complaint, within ¶13. 13 repaying Swift. Declaration of Daren M. Schlecter at ¶12, 14 10. Debtor knew at the time he received the Exhibit “E”, Defendant’s Answer to Adversary 15 Advance from Swift that he had closed or Complaint, within ¶20; see also ¶9, Exhibit “C” 16 was planning on closing Perfume Dynasty, – Certified Copy of 341a Transcript at p. 12, 17 LLC. Lines 1-12; see also ¶14, Exhibit “F” (Requests 18 for Admission (“RFA”) No. 9 & 13, ¶17, 19 Exhibit “H” (late responses to Requests for Admissions), which Plaintiff asserts are both 20 deemed admitted by operation of law. 21 RFA No. 9: Admit that YOUR first payment to 22 repay Swift under the AGREEMENT bounced 23 in early June, 24 13 2017. 25 RFA No. 13: Admit that YOU knew YOU 26 could not repay the ADVANCE to Swift on May 31, 2017 27 1 11. Defendant knew at the time he took the Declaration of Daren M. Schlecter at ¶14, 2 Advance from Swift that He Had Exhibit “F” (Requests for Admission No. 9 & 3 Insufficient Monies to Repay Swift as of 13, ¶17, Exhibit “H” (late responses to 4 May 31, 2017 Requests for Admissions), which Plaintiff 5 asserts are both deemed admitted by operation 6 of law. 7 8 RFA No. 11: 9 Admit that there were sufficient monies from 10 May 31, 2017 to November, 2017 to repay the 11 18 ADVANCE under the AGREEMENT. 12 13 RFA No. 13: 14 Admit that Perfume Dynasty, LLC did not have 15 two full time employees as represented in the 16 28 attached Application YOU submitted to 17 Swift on May 31, 2017 18 19 12. Defendant did not use the monies from Declaration of Daren M. Schlecter at ¶9, 20 Swift to purchase inventory, but to pay off Exhibit “C” – Certified Copy of 341a 21 vendors. Transcript at p. 12, Lines 2-12. 22 23 24 25 26 27 1 13. According to Swift’s records, Swift’s first Declaration of Bonnie Carey at ¶14. 2 attempt to withdraw monies from Debtor’s 3 bankruptcy account in the amount of 4 $2,560.42 bounced on or about June 9, 5 2017, resulting in an NSF fee. Thus, Debtor 6 made no payments towards the Loan. 7 14. Defendant admitted at his 341(a) meeting of Declaration of Daren M. Schlecter at ¶9, 8 creditors that at the time he closed his Exhibit “C” – Certified Copy of 341a 9 business, he gave away all of his inventory Transcript at p. 7, Lines 14-25, p. 8, Lines 1-3 10 for pennies on the dollar. 11 15. Defendant admitted at his 341(a) meeting of Declaration of Daren M. Schlecter at ¶9, 12 creditors that he closed Perfume Dynasty, Exhibit “C” – Certified Copy of 341a 13 LLC in or about June, 2017. Transcript, p. 7, Lines 14-18 [Closed the 14 business about a year and half before 341a, 15 which was on September 6, 2018] 16 16. After defaulting, Swift began phone and in Declaration of Bonnie Carey at ¶15. 17 writing collection efforts. On or about July 18 10, 2017, Swift emailed a hold demand to 19 Paypal pursuant to the UCC Financing 20 Statement and guarantee under the FRSA. 21 17. Debtor used his Paypal account(s) to operate Declaration of Bonnie Carey at ¶15; 22 Perfume Dynasty, LLC. Declaration of Daren M. Schlecter at ¶9, 23 Exhibit “C” – Certified Copy of 341a 24 Transcript at p 15-17. 25 18. Debtor/Defendant did not keep any Declaration of Daren M. Schlecter at ¶9, 26 documents showing the sales of Perfume Exhibit “C” Certified Copy of 341a Transcript 27 Dynasty, LLC, including for July, 2017 at p. 15, Lines 1-8 1 19. Debtor did not keep track of sales in the Declaration of Daren M. Schlecter at ¶9, 2 operation of Perfume Dynasty, LLC. Exhibit “C” Certified Copy of 341a Transcript 3 at p. 5, Lines 19-24. 4 20. Debtor’s bankruptcy petition shows that his Declaration of Daren M. Schlecter at ¶¶3-4, 5 2017 and 2018 gross income from Exhibit “A” 6 operating a business was $0.00. 7 21. Based on the Debtor’s bankruptcy petition Declaration of Daren M. Schlecter at ¶¶3-4, 8 and testimony at his 341a meeting of Exhibit “A” (page 32/33 of Debtor’s 9 creditors, Perfume Dynasty, LLC was bankruptcy petition showing no gross income 10 struggling financially at the time the from operation of his business); 11 advance was made to Debtor/Defendant. Declaration of Daren M. Schlecter at ¶9, 12 Exhibit “C” – Certified Copy of 341a 13 Transcript at p. 7, Lines 14-25, p. 12, Lines 1- 14 12; 15 Declaration of Daren M. Schlecter at ¶12, 16 Exhibit “E”, Defendant’s Answer to Adversary 17 Complaint, within ¶¶ 13, 20 LAW SUPPORTING 18 CONCLUSIONS OF LAW CONCLUSIONS OF LAW 19 Transamerica Commercial Fin. Corp. v. 1. While Defendant entered into the 20 Littleton (In re Littleton), 942 F.2d 551, 555 Agreement with Swift, the assets of Perfume (9th Cir.1991). First Del. Life Ins. Co. v. Wada 21 (In re Wada), 210 B.R. 572, 576–77 (9th Cir. Dynasty by the granting of a security BAP 1997); In re Montes, 177 B.R. 325, 331 22 (Bankr. C.D. Cal. 1994) 23 interest and subsequent UCC lien against

the sales became Swift’s property to satisfy 24 repayment of the Agreement. Defendant’s 25 ability to relinquish collateral consisting of 26

27 inventory of Perfume Dynasty, LLC but 1 failure to do so establishes Defendant’s 2 conversion of the collateral where 3 Defendant’s unilateral transfer of all of the 4 inventory of the business for pennies on the 5 dollar is evidence of intent to defraud with 6 no reasonable expectation of continuation of 7 business operations, which demonstrates 8 embezzlement of Plaintiff’s collateral. Transamerica Commercial Fin. Corp. v. 9 2. Defendant’s lack of sales records and Littleton (In re Littleton), 942 F.2d 551, 555 10 tracking sales is evidence of Defendant’s (9th Cir.1991); First Del. Life Ins. Co. v. Wada (In re Wada), 210 B.R. 572, 576–77 (9th Cir. 11 intent to defraud. BAP 1997) Transamerica Commercial Fin. Corp. v. 12 3. Defendant’s closing of Perfume Dynasty, Littleton (In re Littleton), 942 F.2d 551, 555 13 LLC at or about the time the Advance was (9th Cir.1991); First Del. Life Ins. Co. v. Wada (In re Wada), 210 B.R. 572, 576–77 (9th Cir. 14 given is evidence of Defendant’s intent to BAP 1997) 15 defraud. Transamerica Commercial Fin. Corp. v. 16 4. Defendant’s default on his first payment Littleton (In re Littleton), 942 F.2d 551, 555 17 under the Agreement is evidence of (9th Cir.1991); First Del. Life Ins. Co. v. Wada (In re Wada), 210 B.R. 572, 576–77 (9th Cir. 18 Defendant’s intent to defraud. BAP 1997)

19 Transamerica Commercial Fin. Corp. v. 5. Defendant’s use of the Advance monies to 20 Littleton (In re Littleton), 942 F.2d 551, 555 pay off other vendors is evidence of (9th Cir.1991); First Del. Life Ins. Co. v. Wada 21 (In re Wada), 210 B.R. 572, 576–77 (9th Cir. Defendant’s intent to defraud. BAP 1997) 22 Transamerica Commercial Fin. Corp. v. 23 6. Defendant’s failure to pay any amount of Littleton (In re Littleton), 942 F.2d 551, 555 24 the Advance is evidence Defendant’s intent (9th Cir.1991); First Del. Life Ins. Co. v. Wada (In re Wada), 210 B.R. 572, 576–77 (9th Cir. 25 to defraud. BAP 1997)

26 Transamerica Commercial Fin. Corp. v. 7. Defendant’s use of multiple unexplained Littleton (In re Littleton), 942 F.2d 551, 555 27 bank accounts, including a separate Paypal (9th Cir.1991); First Del. Life Ins. Co. v. Wada (In re Wada), 210 B.R. 572, 576–77 (9th Cir. 1 account is evidence of Defendant’s intent to BAP 1997) 2 defraud.

3 4 D. Swift’s 11 U.S.C §523(a)(6) Claim 5 UNDISPUTED MATERIAL FACTS EVIDENCE SHOWING FACTS ARE 6 NOT SUBJECT TO DISPUTE 7 1. On or about May 31, 2017, Avi Cohen Declaration of Bonnie Carey at ¶8, Exhibit “A” 8 (“Debtor” or “Cohen”) completed an online 9 application for his business Perfume 10 Dynasty with various contact and financial 11 details in support of the application. 12 2. Concurrently with the application, Debtor Declaration of Bonnie Carey at ¶10 13 provided documentation to support the 14 information contained in the Application 15 consisting of 4 months of bank statements, 16 proof of active status in the Secretary of 17 State, Business EXP report (which confirms 18 the borrowers business address, active 19 status, ownership and then confirms their 20 trade history), Driver's License and portions 21 of a TLO investigative report (“Financial 22 Documentation”). 23 24 25 26 3. On or about May 31, 2017, Swift and Cohen Declaration of Bonnie Carey at ¶11, Exhibit 27 entered into a Future Receivables Sales “B” 1 Agreement (“FRSA”) for an advance of 2 $75,000.00 to his business Perfume 3 Dynasty, LLC (the “Agreement”). 4 4. In addition to agreeing that Cohen would Declaration of Bonnie Carey at ¶11, Exhibit 5 guarantee the debt, he agreed to give Swift “B”; Declaration of Daren M. Schlecter at ¶12, 6 two business bank accounts to initiate a Exhibit “E”, Defendant’s Answer to Adversary 7 weekly ACH debt to repay the advance, Complaint, within ¶12. 8 and granted Swift a security interest in 9 Debtor’s collateral, including sales and 10 inventory. 11 5. Subsequently, and in reliance on the Declaration of Bonnie Carey at ¶12; 12 Application and Financial Documentation, Declaration of Daren M. Schlecter at ¶12, 13 Swift wired $75,000.00 to Cohen on June 2, Exhibit “E”, Defendant’s Answer to Adversary 14 2017 in exchange for his agreement to repay Complaint, within ¶11. 15 $92,175.00 in weekly draws in the amount of 16 $2,560.42 until paid in full (the “Advance”). 17 6. On or about June 2, 2017, Swift caused a Declaration of Bonnie Carey at ¶13, Exhibit 18 UCC Financing Statement to be filed with “C"; Declaration of Daren M. Schlecter at ¶12, 19 the California Department of State. Exhibit “E”, Defendant’s Answer to Adversary 20 Complaint, within ¶12. 21 22 23 24 25 7. The Agreement further required Perfume Declaration of Daren M. Schlecter at ¶12, 26 Dynasty through Debtor, to provide and Exhibit “E”, Defendant’s Answer to Adversary 27 maintain an irrevocable ACH debit to allow Complaint, within ¶12. 1 Plaintiff to take of future accounts 2 receivables to satisfy the amount of 3 receivables purchased. 4 8. Just days later, in or about June, 2017, Declaration of Daren M. Schlecter at ¶12, 5 Perfume Dynasty by and through Debtor, Exhibit “E”, Defendant’s Answer to Adversary 6 defaulted on his first payment under the Complaint, within ¶13. 7 Agreement, failed to inform Plaintiff prior 8 to debiting payments that there were 9 insufficient funds in the bank account 10 identified under the Agreement, and failed 11 to maintain a bank account that could satisfy 12 the Obligation. 13 9. Debtor maintained multiple other bank Declaration of Daren M. Schlecter at ¶12, 14 accounts into which he continued to deposit Exhibit “E”, Defendant’s Answer to Adversary 15 and thus divert sales receipts without Complaint, within ¶13. 16 repaying Swift. 17 18 19 20 21 22 23 Declaration of Daren M. Schlecter at ¶12, 24 10. Debtor knew at the time he received the Exhibit “E”, Defendant’s Answer to Adversary 25 Advance from Swift that he had closed or Complaint, within ¶20; see also ¶9, Exhibit “C” 26 was planning on closing Perfume Dynasty, – Certified Copy of 341a Transcript at p. 12, 27 LLC. Lines 1-12; see also ¶14, Exhibit “F” (Requests for Admission (“RFA”) No. 9 & 13, ¶17, 1 Exhibit “H” (late responses to Requests for 2 Admissions), which Plaintiff asserts are both 3 deemed admitted by operation of law. 4 RFA No. 9: Admit that YOUR first payment to 5 repay Swift under the AGREEMENT bounced 6 in early June, 13 2017. 7 RFA No. 13: Admit that YOU knew YOU 8 could not repay the ADVANCE to Swift on 9 May 31, 2017 10 Declaration of Daren M. Schlecter at ¶14, 11. Defendant knew at the time he took the Exhibit “F” (Requests for Admission No. 9 & 11 Advance from Swift that he had insufficient 13, ¶17, Exhibit “H” (late responses to 12 Requests for Admissions), which Plaintiff monies to repay Swift as of May 31, 2017. asserts are both deemed admitted by operation 13 of law.

14 RFA No. 11: 15 Admit that there were sufficient monies from May 31, 2017 to November, 2017 to repay the 16 18 ADVANCE under the AGREEMENT. RFA No. 13: 17 Admit that Perfume Dynasty, LLC did not have two full time employees as represented in the 18 28 attached Application YOU submitted to 19 Swift on May 31, 2017

21 12. Defendant did not use the monies from Declaration of Daren M. Schlecter at ¶9, 22 Swift to purchase inventory, but to pay off Exhibit “C” – Certified Copy of 341a 23 vendors. Transcript at p. 12, Lines 2-12. 24

26 27 1 13. According to Swift’s records, Swift’s first Declaration of Bonnie Carey at ¶14. 2 attempt to withdraw monies from Debtor’s 3 bankruptcy account in the amount of 4 $2,560.42 bounced on or about June 9, 5 2017, resulting in an NSF fee. Thus, Debtor 6 made no payments towards the Loan. 7 14. Defendant admitted at his 341a meeting of Declaration of Daren M. Schlecter at ¶9, 8 creditors that at the time he closed his Exhibit “C” – Certified Copy of 341a 9 business, he gave away all of his inventory Transcript at p. 7, Lines 14-25, p. 8, Lines 1-3 10 for pennies on the dollar. 11 15. Defendant admitted at his 341a meeting of Declaration of Daren M. Schlecter at ¶9, 12 creditors that he closed Perfume Dynasty, Exhibit “C” – Certified Copy of 341a 13 LLC in or about June, 2017. Transcript, p. 7, Lines 14-18 [Closed the 14 business about a year and half before 341a, 15 which was on September 6, 2018] 16 16. After defaulting, Swift began phone and in Declaration of Bonnie Carey at ¶15. 17 writing collection efforts. On or about July 18 10, 2017, Swift emailed a hold demand to 19 Paypal pursuant to the UCC Financing 20 Statement and guarantee under the FRSA. 21 22 17. Debtor used his Paypal account(s) to operate Declaration of Bonnie Carey at ¶15; 23 Perfume Dynasty, LLC. Declaration of Daren M. Schlecter at ¶9, 24 Exhibit “C” – Certified Copy of 341a 25 Transcript at p 15-17. 26 27 1 18. Debtor/Defendant did not keep any Declaration of Daren M. Schlecter at ¶9, 2 documents showing the sales of Perfume Exhibit “C” Certified Copy of 341a Transcript 3 Dynasty, LLC, including for July, 2017. at p. 15, Lines 1-8 4 19. Debtor did not keep track of sales in the Declaration of Daren M. Schlecter at ¶9, 5 operation of Perfume Dynasty, LLC. Exhibit “C” Certified Copy of 341a Transcript 6 at p. 5, Lines 19-24. 7 20. Debtor’s bankruptcy petition shows that his Declaration of Daren M. Schlecter at ¶¶3-4, 8 2017 and 2018 gross income from Exhibit “A” 9 operating a business was $0.00. 10 21. Based on the Debtor’s bankruptcy petition Declaration of Daren M. Schlecter at ¶¶3-4, 11 and testimony at his 341a meeting of Exhibit “A” (page 32/33 of Debtor’s 12 creditors, Perfume Dynasty, LLC was bankruptcy petition showing no gross income 13 struggling financially at the time the from operation of his business); 14 advance was made to Debtor/Defendant. Declaration of Daren M. Schlecter at ¶9, 15 Exhibit “C” – Certified Copy of 341a 16 Transcript at p. 7, Lines 14-25, p. 12, Lines 1- 17 12; 18 Declaration of Daren M. Schlecter at ¶12, 19 Exhibit “E”, Defendant’s Answer to Adversary 20 Complaint, within ¶¶ 13, 20 21 22 23 LAW SUPPORTING 24 CONCLUSIONS OF LAW CONCLUSIONS OF LAW 25 Carrillo v. Su (In re Su), 290 F.3d 1140, 1142 1. Defendant acted willfully because he could 26 (9th Cir.2002). only have known that the transfer of 27 1 Perfume Dynasty LLC’s inventory for

2 pennies on the dollar would result in injury

3 to Swift based on the security interest 4 granted in Swift’s favor. Carrillo v. Su (In re Su), 290 F.3d 1140, 1142 5 2. Defendant acted willfully because he could (9th Cir.2002). 6 only have known that the use of the

7 Advance to pay off vendors instead of

8 purchasing inventory would result in injury

9 to Swift based on the security interest

10 granted in Swift’s favor. Carrillo v. Su (In re Su), 290 F.3d 1140, 1142 11 3. Defendant acted willfully because he could (9th Cir.2002). 12 only have known that his closing or 13 planning on closing Perfume Dynasty at or 14 about the time he accepted the Advance 15 from Swift would result in injury to Swift 16 based on the security interest granted in 17 Swift’s favor. Petralia v. Jercich (In re Jercich), 238 F.3d 18 4. Defendant’s act of giving away Perfume 1202, 1209 (9th Cir.2001); Transamerica 19 Dynasty’s inventory for pennies on the Commercial Fin. Corp. v. Littleton (In re Littleton), 942 F.2d 551, 554(9th Cir.1991). 20 dollar showed malice because it was a

21 wrongful act which necessarily produced

22 harm and was without just cause or excuse.

26 5. Defendant’s act paying off other vendors Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1209 (9th Cir.2001); Transamerica 27 instead of purchasing inventory with the Commercial Fin. Corp. v. Littleton (In re Littleton), 942 F.2d 551, 554(9th Cir.1991) 1 Advance money from Swift showed malice 2 because it was a wrongful act which 3 necessarily produced harm and was without 4 just cause or excuse. Petralia v. Jercich (In re Jercich), 238 F.3d 5 6. Defendant’s act of accepting the Swift 1202, 1209 (9th Cir.2001); Transamerica 6 Advance at the time he was closing or Commercial Fin. Corp. v. Littleton (In re Littleton), 942 F.2d 551, 554(9th Cir.1991) 7 planning on closing Perfume Dynasty 8 showed malice because it was a wrongful 9 act which necessarily produced harm and 10 was without just cause or excuse. F.T.C. v. Publishing Clearing House, Inc., 104 11 7. Defendant’s Statement of Genuine Issues of F.3d 1168, 1171 (9th Cir. 1997) 12 Material Fact in Dispute in Support of 13 Opposition to Motion for Summary 14 Judgment Pursuant to Local Rule 56-2, filed 15 on November 3, 2020, is insufficient to 16 create a genuine issue of material fact 17 because the Statement is a conclusory, self- 18 serving declaration, lacking detailed facts 19 and any supporting evidence. 20 21 22 23 24 DATED: August 26, 2020 Law Office of Daren M. Schlecter 25 /s/ Daren M. Schlecter 26 By: _____________________________ 27 Daren M. Schlecter, Esq. 1 ORDER The above Separate Statement of Uncontroverted Facts and Conclusions of Law as reviewe and modified by the court is hereby adopted and so ordered. By separate order being filed and 3 entered concurrently herewith, the court grants Plaintiff's motion for summary judgment. 4 IT IS SO ORDERED. 5 Hitt 6 7 8 9 10 1] 12 13 14 15 16 17 18 19 20 21

23 Date: December 7, 2020 24 Robert Kwan United States Bankruptcy Judge 25 26 27 28 30