Jafarpour v Shahrokhi, 091801 FED8, 01-6034

Docket Nº:01-6034
Party Name:Jafarpour v Shahrokhi
Case Date:August 28, 2001
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit





No. 01-6034 MN

United States Bankruptcy Appellate Panel FOR THE EIGHTH CIRCUIT

Submitted: August 28, 2001

September 18, 2001

Appeal from the United States Bankruptcy Court for the District of Minnesota

Before Koger, Chief Judge, William A. Hill and Schermer, Bankruptcy Judges.

William A. Hill, Bankruptcy Judge

John K. Jafarpour appeals from a bankruptcy court(FN1) order entered in favor of Gholah Hossein Shahrokhi. The order granted Shahrokhi summary judgment as to Jafarpour's claims that a default judgment entered in state court in his favor against Shahrokhi is non-dischargeable under 11 U.S.C. § 523(a)(4) and (6). For the reasons set forth below, we affirm the order of the bankruptcy court.


Shahrokhi was the principal and operator of a commercial enterprise, Minnesota Taxi. Shahrokhi owned taxicabs and leased them to independent contractors who operated the taxicabs, primarily servicing the Minneapolis-St. Paul International Airport.

Jafarpour entered into a taxicab lease agreement with Shahrokhi on December 11, 1992. Although Jafarpour signed the lease, Shahrokhi did not. Pursuant to the lease, Shahrokhi was responsible for major repairs to the taxicab as well as the cost of insurance, licenses, and other expenses necessary to meet taxicab regulations of the Metropolitan Airport Commission, a political subdivision with jurisdiction of taxicab operations at the Minneapolis-St. Paul Airport. Jafarpour was responsible for routine maintenance and any damage to the taxicab. For his use of the taxicab, Jafarpour paid Shahrokhi $240.00 per week. By affidavit, Jafarpour stated that Shahrokhi told him that $120.00 of the weekly rent was to reimburse him for the expense of procuring and maintaining insurance for the taxicab. Shahrokhi gave Jafarpour an insurance identification card to display in the taxicab.

Prior to leasing the taxicab to Jafarpour, in October 1992, Shahrokhi contacted Paul Taylor, a licensed insurance agent for American Midwest Agency, Inc. ("American Midwest") seeking automobile insurance coverage for his taxicabs. By affidavit, Taylor stated that in November 1992, Shahrokhi gave him a check in the amount of $10,125.00 as a partial down payment on the insurance policies for his taxicabs, including the taxicab ultimately leased to Jafarpour. Taylor further stated that he advised Shahrokhi that the total amount of the down payment would be $15,400.00 to bind the coverage on the taxicabs, and that the taxicabs would not be insured until the full amount of the down payment was paid to American Midwest.

On October 27, 1992, Shahrokhi filed an Application for Certificate of Title with the Minnesota Department of Public Safety, Driver and Vehicle Services. The application included Shahrokhi's certification and declaration that the taxicab ultimately leased to Jafarpour, a 1989 Chevrolet Caprice, was insured through Credit General Insurance Company ("Credit General"). Shahrokhi identified a Credit General policy number in the application. On November 4, 1992, Taylor provided the Metropolitan Airport Commission documentation certifying that the taxicab was insured under an insurance policy with Credit General, as required under Minnesota law and the Metropolitan Airport Commission. Taylor also issued Shahrokhi insurance identification cards to display in the taxicabs. It was one of these cards that Shahrokhi ultimately gave to Jafarpour to display in his leased taxicab. In his affidavit, Taylor stated he issued the certificates of insurance with the Metropolitan Air Commission and the insurance identification cards to Shahrokhi at the request of Shahrokhi, and as a favor to him, but that both he and Shahrokhi were fully aware that the taxicabs were uninsured.(FN2)

From December 11, 1992, to January 20, 1993, Jafarpour engaged in the maintenance and use of the taxicab. On January 20, 1993, Jafarpour was getting gasoline at a gas station when he slipped and fell on the ice-covered pavement near the gas pumps. Jafarpour sustained bodily injuries, and incurred expenses for medical care and treatment. In his affidavit, Jafarpour stated he incurred medical expenses "in excess of $27,395.00."

Following his injury on January 20, 1993, Jafarpour submitted his claim to American Midwest and Credit General for insurance coverage and benefits. American Midwest did not respond. Credit General denied coverage and refused to pay benefits, claiming it did not insure the taxicab involved in the incident.(FN3)

On May 27, 1994, Jafarpour applied to the Minnesota Automobile Assigned Claims Bureau for personal injury no-fault benefits. Jafarpour's claim was assigned to State Farm Insurance Company ("State Farm"). Under Minnesota law, Minn. Stat. § 65B.44, Jafarpour was entitled to economic loss benefits, including personal injury protection medical expense benefits in the amount of $20,000.00. According to Jafarpour, State Farm ultimately paid him the Assigned Claims Plan limit of $20,000.00, issuing its first payment for wage loss benefits on February 1, 1995.

The Social Security Administration issued a decision and ruling on June 25, 1996, finding Jafarpour to be permanently disabled due to the effects of depression and post traumatic stress disorder. He was found to be effectively disabled from April 11, 1993, and is receiving Social Security benefits.

Jafarpour brought an action against Shahrokhi, Taylor and American Midwest in a Minnesota state court in 1999. Shahrokhi was served by substitute service and did not respond to Jafarpour's complaint. Jafarpour moved for a default judgment. There was no appearance for or on behalf of Shahrokhi at the hearing on the default judgment motion, and on August 14, 1999, the state court issued its findings of fact, conclusions of law, and order for judgment. In its findings of fact, the state court found that as a direct and proximate cause of Shahrokhi's breach of contract, breach of fiduciary obligations, misrepresentations and/or fraud, Jafarpour suffered personal, emotional, mental and physical distress; suffered from related bodily and physical injuries; and incurred expenses. The state court entered judgment in favor of Jafarpour against Shahrokhi in the amount of $445,937.27, plus costs and attorney fees. (No. DJ 99-006054). The state court did not provide an explanation as to how it arrived at the amount of the judgment.

Shahrokhi filed a Chapter 7 bankruptcy petition on September 12, 2000. On Schedule F of his petition, Shahrokhi, relying on the state court judgment, listed Jafarpour as an unsecured creditor in the amount of $447,148.00. Jafarpour commenced a pro se adversary proceeding on December 11, 2000, objecting to the discharge of the state court default judgment on the grounds of fraud or misrepresentation, 11 U.S.C. § 523(a)(2)(A), breach of fiduciary duty, 11 U.S.C. § 523(a)(4), and willful and malicious injury, 11 U.S.C. § 523(a)(6). Shahrokhi moved for summary judgment as to Jafarpour's claims, and after a hearing on the motion, the bankruptcy court granted dismissal of Jafarpour's claims of breach of fiduciary duty and willful and malicious injury, leaving for...

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