611 B.R. 145 (Bkrtcy.D.Mass. 2020), 18-10781-FJB, In re Zaw Aung

Docket Nº:18-10781-FJB
Citation:611 B.R. 145
Opinion Judge:Frank J. Bailey, United States Bankruptcy Judge
Party Name:IN RE ZAW M. AUNG, Debtor Atlantic Trade LLP and Mohsen Ghorbani, Plaintiffs v. Zaw M. Aung, Defendant Adversary Proceeding 18-1071
Attorney:Robert R. Thomas, Harvey, Kleger & Thomas, Methuen, MA, for Plaintiffs. Thomas Benner, Logan A. Weinkauf, Benner & Weinkauf, P.C., Plymouth, MA, for Defendant.
Case Date:January 31, 2020
Court:United States Bankruptcy Courts, First Circuit

Page 145

611 B.R. 145 (Bkrtcy.D.Mass. 2020)

IN RE ZAW M. AUNG, Debtor Atlantic Trade LLP and Mohsen Ghorbani, Plaintiffs

v.

Zaw M. Aung, Defendant

No. 18-10781-FJB

Adversary Proceeding 18-1071

United States Bankruptcy Court, D. Massachusetts

January 31, 2020

Page 146

Robert R. Thomas, Harvey, Kleger & Thomas, Methuen, MA, for Plaintiffs.

Thomas Benner, Logan A. Weinkauf, Benner & Weinkauf, P.C., Plymouth, MA, for Defendant.

MEMORANDUM OF DECISION

Frank J. Bailey, United States Bankruptcy Judge

Page 147

By the sole remaining count in this adversary proceeding, the plaintiffs seek a determination that a judgment debt owed them by the defendant and chapter 13 debtor, Zaw M. Aung, is excepted from discharge in this bankruptcy case by operation of Bankruptcy Code § 523(a)(2)(A). After a trial on this count, I now enter the following findings of fact and conclusions of law under Fed.R.Civ.P. 52(a)(1), made applicable by Fed. R. Bankr. P. 7052.

PROCEDURAL HISTORY

On March 6, 2018, Zaw Aung ("Aung") filed a petition for relief under chapter 13 of the Bankruptcy Code. In the bankruptcy case thereby commenced, Mohsen Ghorbani ("Ghorbani") and Atlantic Trade LLP ("Atlantic Trade") (together, "the Plaintiffs") jointly filed the complaint commencing the present adversary proceeding. It seeks relief in four counts. By an earlier order, the Court dismissed Counts III and IV for failure to state a claim on which relief could be granted. In the two remaining counts, the Plaintiffs seek a determination that Aung’s judgment debt is excepted from the discharge that Aung seeks in this chapter 13 case: in Count I, under 11 U.S.C. § 523(a)(2)(A); and in Count II, under § 523(a)(4).1 The Court held a trial on these counts. The parties then submitted proposed findings and conclusions, after which the Court heard closing arguments. In neither their proposed conclusions nor their closing arguments did the Plaintiffs seek conclusions or demand relief under § 523(a)(4); during closing arguments, their attorney clarified that they now seek relief solely under § 523(a)(2)(A). They have thus waived their reliance on Count II. Only Count I remains to decide.

In Count I, the Plaintiffs contend that their judgment against Aung is one for money obtained by false pretenses, a false representation, and actual fraud. The gravamen of this count is that by some combination of false representations and false pretenses, Aung represented and otherwise led the Plaintiffs to believe that he owned three sushi businesses that he was offering for sale to the Plaintiffs, that they relied on these representations and were justified in doing so, and in reliance thereon the Plaintiffs paid Aung $90,000 for his interests in the businesses, but that Aung in fact had no interests in the businesses in question. Aung contends that his role was always that of a mere broker and that he never represented or led the Plaintiffs to believe that the rights he was selling were his own.

FINDINGS OF FACT

The parties agreed to the introduction of thirteen exhibits and offered the testimony of only two witnesses, Ghorbani and Aung. The stories told by the two witnesses were widely divergent. I found Ghorbani to be credible and Aung not. My findings of fact are as follow.

1. In 2009, Ghorbani was a real estate agent living in Mashpee, Massachusetts, on Cape Cod. In the course of his work, he met Thwe Nu Aye, a/k/a Caroline ("Caroline"), when she responded to an ad that he had placed for a unit for rent, a winter rental. He showed her a unit and arranged for her to rent it. They became friends. After this winter rental expired, Caroline lived for a time with Ghorbani, including

Page 148

during the months of November and December 2010.

2. Caroline told Ghorbani that she was the owner of and sushi chef at the sushi bars in two Stop & Shop supermarkets, in Falmouth and Mashpee, Massachusetts. Ghorbani and his wife enjoyed sushi, frequented Caroline’s sushi bars, and enjoyed what she served up. In 2010, Caroline asked Ghorbani to become a partner in her sushi preparation business; she would handle the operations, and he would be a "silent partner." Ghorbani agreed, and for that purpose they established Atlantic Trade, LLP ("Atlantic Trade") as their sushi preparation partnership. Caroline, the "operations partner," ran the two sushi counters.

3. Later in 2010, Caroline suggested to Ghorbani that they expand the business, and to that end, she introduced Ghorbani to Aung. Ghorbani testified, and I find, that Caroline2 told Ghorbani at this time that Aung "has" a sushi business at the Roche Brothers supermarket in Mashpee "that he wants to sell." They reasoned that Atlantic Trade would then control all the supermarket sushi bars in the Mashpee and Falmouth area and have the entire market to itself, without competition.

4. I find that as of this time, Caroline had an existing relationship with Aung. Aung’s testimony that he had no prior knowledge of or relationship to Caroline, and that he met her for the first time only when or after Ghorbani first approached Aung about acquiring the sushi concession in the Mashpee Roche Brothers, is not credible.

5. Aung did not then or ever have an ownership interest in the sushi bar in the Mashpee Roche Brothers or in any sushi bar in any store. When he met Ghorbani in November 2010, he was employed as a sushi chef for Lwin Family Co., d/b/a Hissho Sushi ("Hissho"), which operated the sushi bar at the Roche Brothers in Mashpee and employed Aung as the sushi chef at that sushi bar (and that one only).

6. After meeting Aung at the Roche Brothers Mashpee store, Aung met with Ghorbani at Ghorbani’s home in November 2010. Ghorbani testified credibly, and I find, that at that meeting, Aung held himself out to be the owner and operator of three sushi bars, the one at the Roche Brothers in Mashpee and two others elsewhere, which he was willing to sell. Aung denied that he ever represented to Ghorbani that he owned any of the sushi bars in issue; this denial is not credible, contradicted as it is by several documents that Aung later signed that identified him as the owner and seller of the three sushi bars in issue.

7. Aung then offered to sell the Mashpee location to Atlantic Trade. They negotiated and agreed on a purchase price of $15,000.

8. Aung testified that he never told or lead Ghorbani to believe that he owned an interest in the Mashpee sushi bar and that he did not offer to sell such an interest to Ghorbani. Rather, he testified, he offered to act as a broker between Ghorbani and Hissho. (It is undisputed that the right to operate a sushi bar at the Roche Brothers in Mashpee belonged to Hissho.) For several reasons, this testimony is not credible. Ghorbani had never before served as a broker with Hissho; he did not know and, even in conjunction with this transaction with Ghorbani, does not purport to have ever communicated with anyone at Hissho

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senior to his own immediate supervisor at the Mashpee store; in Exhibit 1 (discussed below), he represented in writing that he was the "seller" of rights as to the Mashpee sushi bar and agreed and promised to sell that interest to Atlantic Trade; and, though he contends that a broker was necessary to help a prospective operator to obtain the franchise rights as to a high volume sushi bar, such as the one in the Roche Brothers in Wellesley, even he does not contend that a broker would have served any purpose in helping Atlantic Trade obtain from Hissho an interest in the Mashpee location.

9. After Aung made his offer and the parties agreed on a price, Ghorbani himself (not through counsel) drafted a one-page document entitled "Bill of Sale 1" that he testified, and I find, reflected their agreement. Despite its title, it is not a bill of sale (a record of a transaction that has already occurred) but the memorialization of a purchase and sale agreement. It states (in its entirety): This contract is made this 13 day of November 2010 between: Buyer: Atlantic Trade LLP Representing (sic) by Mr. Mohsen Ghorbani and Mr. Zaw Mow Aung as seller.

The seller is selling the % 100 (sic) interest in sushi counter that is located at the Roche Brothers Supermarket Inc located at: 11 Commercial Street Mashpee, MA 02649-3481 for amount of $15,000.00.

The buyer will pay the seller the amount of $5000.00 on or before 11/15/2010 as a deposit and balance of $10,000.00 after the contract has been drafted and assigned by the Hissho Company Management the direct representative of Roche Brothers Supermarket Company acknowledge Atlantic Trade LLP as the new owner/vendor/contractor. The date of the above contract assignment has to be on or before November 28, 2010.

If this deal was (sic) not able to go through the seller must return the deposit % 100 to...

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1 practice notes
  • In re Boudreau, 121120 FED01BC, RI 19-056
    • United States
    • Federal Cases United States Bankruptcy Courts First Circuit
    • December 11, 2020
    ...falls within the jurisdiction given the district court in 28 U.S.C. § 1334(b) . . . ." Atl. Trade LLP v. Aung (In re Aung), 611 B.R. 145, 153 (Bankr. D. Mass. 2020); accord Jung v. IRS (In re Jung), 597 B.R. 872, 876 (Bankr. W.D. Wis. 2019) ("[A] determina......
1 cases
  • In re Boudreau, 121120 FED01BC, RI 19-056
    • United States
    • Federal Cases United States Bankruptcy Courts First Circuit
    • December 11, 2020
    ...falls within the jurisdiction given the district court in 28 U.S.C. § 1334(b) . . . ." Atl. Trade LLP v. Aung (In re Aung), 611 B.R. 145, 153 (Bankr. D. Mass. 2020); accord Jung v. IRS (In re Jung), 597 B.R. 872, 876 (Bankr. W.D. Wis. 2019) ("[A] determina......