First Citizens Nat'l Bank of Upper Sandusky v. Mann (In re Mann)

• Decision Date: 30 September 2022
• Docket Number: Case No. 20-32869,Adv. Pro. No. 21-03019
• Citation: 646 B.R. 444
• Parties: IN RE: Lucille L. MANN and John H. Mann, Debtors. The First Citizens National Bank of Upper Sandusky, Plaintiff, v. Lucille L. Mann and John H. Mann, Deceased, Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Ohio

646 B.R. 444

IN RE: Lucille L. MANN and John H. Mann, Debtors.The First Citizens National Bank of Upper Sandusky, Plaintiff,

v.Lucille L. Mann and John H. Mann, Deceased, Defendants.

Case No. 20-32869

Adv. Pro. No. 21-03019

United States Bankruptcy Court, N.D. Ohio, Western Division.

Signed September 30, 2022

Derek R. Dailey, Saull Law Offices, Upper Sandusky, OH, for Defendants.

Douglas A. Stephan, Michael David Stultz, Stultz & Stephan, Ltd., Tiffin, OH, for Plaintiff.

MEMORANDUM OF DECISION AND ORDER REGARDING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

John P. Gustafson, United States Bankruptcy Judge

First Citizens National Bank of Upper Sandusky ("Plaintiff"), an unsecured creditor in this Chapter 7 case, commenced this adversary proceeding by filing a Complaint seeking a determination of the dischargeability of a debt, consisting of credit card charges owed to Plaintiff by Defendants Lucille L. Mann and John H. Mann ("Manns"), the Chapter 7 debtors.¹ Plaintiff's Complaint alleged that the debt should be excepted from discharge on alternative legal theories under 11 U.S.C. § 523(a)(2)(A). Plaintiff has filed a Motion for Summary Judgment against Lucille L. Mann ("Defendant"). Defendant did not file a response. The matter is now decisional.

JURISDICTION AND VENUE

The district court has jurisdiction over this adversary proceeding under 28 U.S.C. § 1334(b) as a civil proceeding arising in or related to a case under Title 11. This proceeding has been referred to this court by the district court under its general order of reference. 28 U.S.C. § 157(a) ; General Order 2012-7 of the United States District Court for the Northern District of Ohio. Proceedings to determine the dischargeability of debts are core proceedings that the court may hear and decide. 28 U.S.C. § 157(b)(1) and (b)(2)(I). Venue is proper under 28 U.S.C. § 1409(a).

The Claims Register reflects that on April 12, 2021, a claim was filed on behalf of Plaintiff. [Case No. 20-32869, Claim No. 5-1]. Plaintiff's claim against Defendant was not listed as liquidated in the Manns’ Schedules; it appears no court has yet determined either liability or damages. [Case No. 20-32869, Doc. #1, Schedule E/F, p. 21]. However, bankruptcy courts can enter a judgment that fixes the amount, if any, of unliquidated claims in the context of determining the dischargeability of the underlying debt. Hart v. S. Heritage Bank (In re Hart ), 564 F. App'x 773, 775–76 (6th Cir. 2014) ; Waldman v. Stone , 698 F.3d 910, 919–20 (6th Cir. 2012) ; Longo v. McLaren (In re McLaren ), 3 F.3d 958, 965–66 (6th Cir. 1993).

This Memorandum of Decision constitutes the court's findings of fact and conclusions of law under Fed. R. Civ. P. 52, made applicable to this adversary proceeding by Fed. R. Bankr. P. 7052. Regardless of whether specifically referred to in this Memorandum of Decision, the court has examined the submitted materials, considered all of the evidence, and reviewed the entire record in the case.² Based upon that review, and for the reasons discussed below, the court finds, at this stage of the proceeding, that Plaintiff has not established that this debt is nondischargeable.

FACTUAL BACKGROUND

At the time the bankruptcy petition was filed, the Manns were retired. The Manns had a combined monthly income of $3,966.52, consisting of social security and pension or retirement income, with monthly expenses of $2,730.50, according to Schedules I and J. During the pendency of this adversary proceeding, John H. Mann passed away. Defendant Lucille L. Mann, the remaining Defendant, is elderly. There is no evidence that she is financially sophisticated.

Although the record is not clear as to the reason, it appears Defendant's daughter had a power-of-attorney over at least some of the Defendant's financial affairs. [Doc. #1, ¶15].

Plaintiff attached a partial transcript of Defendant's deposition.³ The submitted portions of the transcript does not include any questions about Defendant's age, occupation, or background.⁴

Nearly twenty years ago, in February 2003, Lucille L. Mann and John H. Mann obtained a "preapproved" credit card from Plaintiff. [Doc. #44-2, p. 6]. The card was used for ordinary purposes. [Doc. #44-1, p. 10:10–25]. For example, the card was used for oil changes and getting "gas for [Defendant's] car." [Id. , pp. 17:10–14, 22:15–20]. The card was also used for some ordinary purposes during the period of this gift card scam. [Doc. #44-1, pp. 41–42].

In addition to this credit card, Defendant also had a checking and savings account with Plaintiff. [Doc. #1, ¶13].

In October or November 2019, Defendant began purchasing gift cards for an unknown third party she met online.⁵ [Doc. #1, ¶¶12–15]; [Doc. #44-1, p. 22:3–8]. Defendant first used money from her checking and savings account with Plaintiff to purchase the gift cards. [Doc. #1, ¶13]. A family member, likely Defendant's daughter through a power-of-attorney, closed the checking and savings account with Plaintiff and informed Defendant that purchasing these gift cards was a scam. [Id. , ¶¶14–15]; [Doc. #44-1, pp. 19:19–24, 21:15–19].

However, Defendant did not stop making purchases. Instead, between November 2019 and December 2019, Defendant turned to using her credit card to buy gift cards. [Doc. #44-1, p. 26:4–7]. The credit card account was also with Plaintiff. [Doc. #1, ¶¶8–11]. The charges, consisting of gift cards, purchased at grocery stores and drug stores, were unlike her previous charges on that card. [Doc. #1, ¶¶12, 17]; [Doc. #44-1, pp. 21–39, 41–42]. Like the gift cards purchased with money from her checking and savings account, the gift cards purchased with the credit card were not for Defendant. [Doc. #44-1, pp. 13:13–18, 17:15–21, 22:3–20, 26:1–3]. Instead, these gift cards were for an unknown third party. [Id. ]. For each purchased gift card, Defendant "was being scammed." [Id. , p. 13:4–12].

I. The Nature of the "Scam."

This unknown third party's arrangement with Defendant was relatively straight forward. [Doc. #1, ¶¶12–15]; [Doc. #44-1, p. 22:3–8].

First, the unknown third party requested that Defendant go to a nearby grocery store or drug store to buy one or more gift cards. [Doc. #44-1, pp. 13:4–25, 17:15–24, 18:1–15]. In return, the unknown third party promised Defendant a "big amount of money after [Defendant] paid this much money to him." [Id. , p. 18:5–11]. Defendant believed by purchasing these gift cards she "was supposed to get a large amount of money." [Id. , p. 17:22–25]. After buying the gift cards, Defendant would then send the unknown third party the card's information. [Id. , pp. 13:11–21, 21:3–7, 22:3–8].

Next, the unknown third party knew that to incur more charges, he would need to make "payments" on Defendant's account. [Doc. #1, ¶19]; [Doc. #44-1, p. 19:4–18]. However, all of these "payments" made by the unknown third party were ultimately disallowed or rejected. [Id. , p. 22:21–23]. Despite these "payments" ultimately being rejected, they accomplished and facilitated the purchase of gift cards. These "payments" increased Defendant's available credit, allowing further purchases to be immediately made, despite Defendant's credit limit being $12,000.00. [Id. , p. 19:4–18]; [Doc. #44-2, pp. 41–42]. For example, after the unknown third party would make a "payment," on that same day he would request that the Defendant go to a nearby grocery store or drug store to buy one or more gift cards, and then asked Defendant to send him the information on the gift cards. [Doc. #44-1, p. 22:3–8]. Once the balance neared the $12,000.00 limit again, the unknown third party would make a "payment," and then on that same day would request that the Defendant go buy more gift cards. [Doc. #44-1, pp. 41–42].

However, Defendant was unaware of these "payments" on her credit card account by the unknown third party. [Doc. #44-1, pp. 19:19–24, 21:15–19]. After the fact, Defendant realized that these purported "payments" were not "real money," [Id. , p. 18:12–18], and her deposition testimony describes her as falling for a scam in which she was used, allowing the scammer to repeatedly tap her account.

Defendant did not believe she had to pay the credit card charges used to purchase gift cards. [Id. , p. 22:9–14]. The reason Defendant did not believe she had to pay the credit charges was because the unknown third party assured Defendant that he would pay back the credit card debt consisting of purchased gift cards. [Id. , pp. 17:22–25, 18:1–4, 21:15–23, 22:9–14, 26:13–16, 30:7–16]. And, "payments"—although ultimately disallowed—were made to Plaintiff by the scammer. [Id. , p. 18:16–18].

Thus, it was Defendant's testimony at her deposition that she was relying on the unknown third party to ultimately pay the gift card charges.⁶ But, Defendant did not rely on the unknown third party to make the specific interval "payments" that replenished her available credit, making credit immediately available.⁷ Defendant testified she was unaware that this unknown third party was in possession of the information needed to make payments and did not know that he made the interval "payments." [Id. , pp. 17:6–9, 19:19–24].

In fact, this unknown third party did have the necessary information to make the credit card payments.⁸ Plaintiff attached an Affidavit of Jennifer A. Romich, the Senior Vice President and Chief Lending Officer with the bank, averring that this necessary "confidential information" included the name on the credit card, the credit card's expiration date, billing zip code, the last four digits of the account owner's social security number, the maiden name of the account owner's mother, and the account owner's birthdate. [Doc. #44-2, p. 3, ¶¶5, 12].

For Defendant's December 2019 credit card statement cycle, Defendant had made over $40,000.00 in purchases, far in excess of her credit limit of $12,000.00. [Doc. #44-1, pp. 34–37].

Summarizing Defendant's deposition testimony, her testimony reflects that she held a belief while she incurred...