Swift Financial, LLC fka Swift Financial Corporati v. Cohen

Opinion

Daren M. Schlecter, Esq. (SBN 259537) Law Office of Daren M. Schlecter, A Prof. Corp. 1925 Century Park East, Suite 1180 FILED & ENTERED Los Angeles, CA 90067 Telephone (310) 553-5747 DEC 07 2020 Telecopier (310) 553-5487 Attorney for Plaintiff/Creditor 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 r B icA t N ofK CR aU liP foT rC nY ia COURT BY b a k c h e l l DEPUTY CLERK NOT FOR PUBLICATION CHANGES MADE BY COURT UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA LOS ANGELES DIVISION

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

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

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

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

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

or impact on the debtor's overall financial status.

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

Debtor to repay any of the advance.

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

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

inventory of Perfume Dynasty, LLC but failure to do so establishes Defendant’s conversion of the collateral where Defendant’s unilateral transfer of all of the inventory of the business for pennies on the dollar is evidence of intent to defraud with no reasonable expectation of continuation of business operations, which demonstrates embezzlement of Plaintiff’s collateral. Transamerica Commercial Fin. Corp. v. 2. Defendant’s lack of sales records and Littleton (In re Littleton), 942 F.2d 551, 555 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. intent to defraud. BAP 1997) Transamerica Commercial Fin. Corp. v. 3. Defendant’s closing of Perfume Dynasty, Littleton (In re Littleton), 942 F.2d 551, 555 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. given is evidence of Defendant’s intent to BAP 1997) defraud. Transamerica Commercial Fin. Corp. v. 4. Defendant’s default on his first payment Littleton (In re Littleton), 942 F.2d 551, 555 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. Defendant’s intent to defraud. BAP 1997)

Transamerica Commercial Fin. Corp. v. 5. Defendant’s use of the Advance monies to 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 (In re Wada), 210 B.R. 572, 576–77 (9th Cir. Defendant’s intent to defraud. BAP 1997) Transamerica Commercial Fin. Corp. v. 6. Defendant’s failure to pay any amount of Littleton (In re Littleton), 942 F.2d 551, 555 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. to defraud. BAP 1997)

Transamerica Commercial Fin. Corp. v. 7. Defendant’s use of multiple unexplained Littleton (In re Littleton), 942 F.2d 551, 555 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. account is evidence of Defendant’s intent to BAP 1997) defraud.

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

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

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

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

pennies on the dollar would result in injury

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

Advance to pay off vendors instead of

purchasing inventory would result in injury

to Swift based on the security interest

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

wrongful act which necessarily produced

harm and was without just cause or excuse.

5. Defendant’s act paying off other vendors Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1209 (9th Cir.2001); Transamerica instead of purchasing inventory with the Commercial Fin. Corp. v. Littleton (In re Littleton), 942 F.2d 551, 554(9th Cir.1991) Advance money from Swift showed malice because it was a wrongful act which necessarily produced harm and was without just cause or excuse. Petralia v. Jercich (In re Jercich), 238 F.3d 6. Defendant’s act of accepting the Swift 1202, 1209 (9th Cir.2001); Transamerica Advance at the time he was closing or Commercial Fin. Corp. v. Littleton (In re Littleton), 942 F.2d 551, 554(9th Cir.1991) planning on closing Perfume Dynasty showed malice because it was a wrongful act which necessarily produced harm and was without just cause or excuse. F.T.C. v. Publishing Clearing House, Inc., 104 7. Defendant’s Statement of Genuine Issues of F.3d 1168, 1171 (9th Cir. 1997) Material Fact in Dispute in Support of Opposition to Motion for Summary Judgment Pursuant to Local Rule 56-2, filed on November 3, 2020, is insufficient to create a genuine issue of material fact because the Statement is a conclusory, self- serving declaration, lacking detailed facts and any supporting evidence. DATED: August 26, 2020 Law Office of Daren M. Schlecter /s/ Daren M. Schlecter By: _____________________________ Daren M. Schlecter, Esq. 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 entered concurrently herewith, the court grants Plaintiff's motion for summary judgment. Hitt 1]

Date: December 7, 2020 Robert Kwan United States Bankruptcy Judge 30