BRUCE FOX, Bankruptcy Judge.
In the above-captioned adversary proceeding, the plaintiff, Adamar of New Jersey, Inc. t/a Tropicana Casino and Resort
Evidence was offered over a multi-day period
After consideration of the evidence presented and the parties' post-trial submissions, I find that the following material facts were proven.
1. Adamar is a business corporation organized under the laws of a state other than Pennsylvania with its principal place of business at 2831 Boardwalk, Atlantic City, New Jersey. At that location, Adamar operates a hotel and casino under the name Tropicana Casino and Resort. Complaint and Answer, ¶ 1.
2. The debtor, Linda August, is a self-employed consultant for events, such as fund raising and political campaigns. 1 N.T. at 129. She holds college and graduate degrees in music and music education, respectively. 1 N.T. at 138. Although sometimes referring to her consultancy business as Linda August & Associates, she has no employees and never established any business entity. 1 N.T. at 129-31.
3. In 2008, Ms. August reported gross income from her event planning business on her federal tax return of about $78,000, with a net profit of $37,060. In addition, she reported $11,600 in wages. Ex. P-8. On her 2008 federal tax return, she reported "other income" of $2,361,849 and deducted gambling losses in the same amount. Id.
4. In 2009, Ms. August reported on her federal tax return gross income of approximately $71,500 from her business, with net profits of $47,555, and wages of $7,450. Ex. P-9. On her 2009 federal tax return, she reported "other income" of $566,772, and gambling losses in the same amount. Id.
5. Ms. August first established a line of credit with Adamar on December 1, 1981. Joint Pretrial Statement, Uncontested Fact # # 3, 17; Complaint and Answer, ¶¶ 6, 24.
6. In order to obtain credit from Adamar, the gambling customer provides information on an initial credit application. That information includes the customer's name, address, employment information, income earned and assets held, outstanding indebtedness, and a list of any other casinos at which the patron has established credit. The completed application is signed by the customer. 1 N.T. at 23-24. Ms. August signed such an application. Ex. P-4.
7. During the initial credit application process, Adamar conducts a three-pronged investigation of the customer's credit-worthiness.
8. Once credit is approved and a credit line established, Adamar obtains a new credit report for the customer every two years. 1 N.T. at 26.
9. Adamar is required to check the credit customer's bank records every two years, but has discretion to do so more frequently. 1 N.T. at 26. Before any modification is made to a customer's credit limit, Adamar verifies that it has a bank account verification on file from within the past two years and may, but generally does not, check the average and current bank account balances. 1 N.T. at 28-29.
10. On an Adamar credit application dated December 17, 1988, Ms. August is listed as the owner of a manufacturing business called "Linda August & Associates." Her income is reported to be $50,000 per year, and she is identified as having $50,000 in other assets. She reports having no other outstanding indebtedness. Ex. P-4.
11. The credit application, which bears Ms. August's signature, contains the following statement, which is consistent with N.J. Admin. Code 19:45-1.27(a)(8):
Id.
12. During 2009 (and likely before that time) Ms. August traveled to Atlantic City, New Jersey to gamble almost every weekend at one or more of its casinos, including Adamar's Tropicana. 1 N.T. at 150. She had established lines of credit at many of those casinos, as well as casinos in Nevada, at least one as early as 1979. Joint Pretrial Statement, Uncontested Facts # # 4, 5; ex. D-2.
13. Since 1981, Ms. August has lost and repaid to Adamar more than $1 million. 1 N.T. at 41; see Joint Pretrial Statement, Uncontested Facts # # 17-18. Adamar records reflect that she borrowed during this period $2,277,000 (and thus repaid all but $65,000) and lost $1,380,000 in gambling at this casino. Ex. P-3.
14. Adamar provided Ms. August with a "player's card," referred to by Adamar as a "Diamond" card. 1 N.T. at 38. One purpose of the card is to allow the casino
15. Based upon such tracking activity, Adamar may award to the Diamond card customer gifts of food, beverages, entertainment, travel to other New Jersey casinos, and hotel accommodations. 1 N.T. at 35-36; 2 N.T. at 49; see ex. P-3.
16. Ms. August's preferred gambling activity is to bet on the slot machines. Occasionally she gambled at blackjack. Audiodisk 3:03.
17. Ms. August credibly testified that she did not always use her Diamond card when gambling at Adamar's casino. Sometimes she forgot to bring the card; sometimes she played two slot machines at the same time and used the card on only one machine. And sometimes she did not use the card for reasons of superstition. Audiodisk at 3:04-06.
18. Ms. August also received player's cards from other casinos. Those casinos used their cards as did Adamar: for tracking gambling wins and losses and in order to award gifts. She also did not always use her player's card when gambling at those other casinos. See 1 N.T. at 91 (referring to a notation from July 26, 2008 in Taj Mahal casino credit file, stating that Ms. August "does not always use the player card").
19. New Jersey law permits casinos to loan money to their customers. See N.J. Stat. Ann. 5:12-101.
20. In order to obtain such a loan, the customer must establish a line of credit with the casino, as Ms. August did with Adamar and other New Jersey casinos.
21. Upon application and approval, Adamar provides its customers with interest-free credit lines to finance their gambling activities. 1 N.T. at 40. The loans are without interest because Adamar expects, on average, that the customer will lose most if not all of the loan amount in gambling at its casino. 1 N.T. at 40.
22. Once a credit limit is established with Adamar, the customer may obtain cash or gambling chips from the casino at any time until the customer has borrowed her credit limit. 1 N.T. at 16, 20.
23. In order to obtain borrowed funds or chips with which to gamble, the customer must execute a counter check, known in casino parlance as "drawing a marker," in the amount to be loaned by the casino. A marker, prepared by the casino, is encoded with the customer's bank account information, so that the marker may be deposited into Adamar's account and drawn from the customer's bank account. 1 N.T. at 11.
24. Adamar uses a form marker for all markers executed at its casino. That form marker contains the following preprinted language: "I represent that I have received cash for the above amount and that said amount is on deposit at said bank or trust company in my name. It is free from claims and is subject to this check." Joint Pretrial Statement, Uncontested Fact # 8.
25. When a marker is given to the casino by a customer, Adamar has the authority from the customer to, but generally
26. After the marker is executed and the customer obtains the loan amount in cash or chips, Adamar retains the marker in its main cashier's cage until it is presented to the customer's bank for payment. The date on which the marker is presented for payment varies depending upon the amount of the marker. 1 N.T. at 17.
27. Prior to presentation at the customer's bank, the customer may redeem or reduce the outstanding marker(s), or she may consolidate several outstanding markers. To redeem a marker, the customer must present cash or chips to Adamar's cashier cage in an amount sufficient to eliminate the marker. 1 N.T. at 17.
28. Under New Jersey law, a casino may hold (i.e., not deposit) a marker in the amount of $1,000 or less for up to seven days. Markers between $1,000 and $5,000 may be held for up to 14 days. Markers over $5,000 may be held for up to 45 days. See N.J. Stat. Ann. 5:12-101(c); N.J. Admin. Code 19:45-1.28.
29. Adamar's policy, of which Ms. August was aware, see 1 N.T. at 145, is to hold markers over $5,000 for the maximum number of days allowed by law: 45 days. Adamar keeps track of the disposition time using a computer system that automatically calculates a deposit date for each marker issued. 1 N.T. at 18-19; exs. P-2a, b, c, d.
30. Adamar informally requests that its customers use funds borrowed from it in Adamar's casino only, and reduce outstanding markers with available funds before leaving the premises. 1 N.T. at 37-38. This request is not in writing. 1 N.T. at 42. Thus, a customer can obtain a loan from Adamar, but use some of the borrowed funds at another casino. 1 N.T. at 38-39, 49-50.
31. When receiving markers from a customer, Adamar typically will not confirm the amount of funds then on deposit in the customer's bank account. See 1 N.T. at 28-29.
32. Adamar receives frequent reports from Central Credit for each of its gambling customers that has an outstanding credit line. See ex. P-1. If that report reveals that the customer did not pay an outstanding marker when due, because the marker has been returned to another casino for insufficient funds, Adamar automatically suspends that customer's credit privileges at its casino. 1 N.T. at 22; see generally N.J. Admin. Code 19:45-1.27(j). However, after Adamar learns from Central Credit that the customer has repaid the delinquent marker, Adamar reestablishes its credit line for that customer. 1 N.T. at 33-34; see generally N.J. Admin. Code 19:45-1.27(j) ("Any patron having a check returned to any casino unpaid by the patron's bank shall have his credit privileges suspended at all New Jersey casino licensees until such time as the returned check has been paid in full or the reason for the derogatory
33. Similarly, if an Adamar customer fails to repay an Adamar marker when presented for payment, Adamar immediately suspends the customer's credit line. See 1 N.T. at 70-72; 2 N.T. at 56; ex. P-1.
35. When determining whether to increase a credit limit, Adamar places primary importance on its own experience with the customer and upon the Central Credit gaming report. This report shows the customer's historic ability to repay her markers, which in gambling idiom is referred to as the customer's "play and pay history." 2 N.T. at 53:
(Testimony of Mr. Salvatore Perice, Adamar Executive Director of Casino Credit).
36. If a customer requests an increase in her credit limit when that customer has outstanding but not delinquent markers owing to Adamar, Adamar typically requires the gambling customer to have lost a majority of the outstanding balance before it will increase the credit line. For example, if a customer with a $25,000 credit line seeks to increase that line to $30,000, Adamar would verify from its Diamond card tracking records that the customer had lost a majority of the outstanding $25,000 before raising that customer's credit limit. 2 N.T. at 54.
37. During her lengthy credit history with Adamar, Ms. August, on occasion, had Adamar markers returned for insufficient funds. This resulted in her credit line being suspended. Ex. P-1. After she repaid those delinquent markers, her credit line was restored. 1 N.T. at 33-34; ex. P-1.
38. Furthermore, Ms. August had markers returned to other casinos for insufficient funds. Adamar was aware of this through its receipt of Central Credit gaming reports and acted accordingly to suspend her credit line. 1 N.T. at 33; ex. P-1.
39. For example, Ms. August executed two markers totaling $12,500 to Adamar on December 26, 2008. 1 N.T. at 70. These checks were presented for payment and were returned to Adamar for insufficient funds on February 17, 2009. 1 N.T. at 70; ex. P-1. An Adamar employee informed Ms. August of this delinquency and of the suspension of her credit privileges until the markers were repaid. 1 N.T. at 71.
40. On or about February 17, 2009, Ms. August reinstated her previously approved credit line in the amount of $60,000 by paying in full her returned markers. Ex.
41. Ms. August, with her credit line restored, executed two markers in favor of Adamar on February 21, 2009 in the amounts of $15,000 and $26,000, respectively. Complaint and Answer, ¶¶ 7, 10. Ms. August knew those markers would be presented to her bank for deposit 45 days later: April 7, 2009. Joint Pretrial Statement, Uncontested Fact # 9.
42. The balance in Ms. August's Commerce/TD Bank checking account on February 21, 2009 was $2,038.73. Ex. P-10; 1 N.T. at 142.
43. Ms. August executed another marker in favor of Adamar on February 27, 2009 for $19,000. Complaint and Answer, ¶ 10; Ex. P-2d.
44. The balance in Ms. August's checking account on February 27, 2009 was $975.14. Ex. P-10.
45. The marker executed on February 27, 2009 exhausted Ms. August's $60,000 credit limit with Adamar.
46. On February 28, 2009, Ms. August sought and was granted a credit limit increase of $6,000. Ex. P-1; 1 N.T. at 14. Mr. Perice, the Executive Director of Casino Credit for Adamar's Tropicana Casino in Atlantic City, made the decision to increase Ms. August's credit limit. 1 N.T. at 46.
47. In making that decision, Mr. Perice considered a credit report obtained on December 6, 2008, a Central Credit gaming report obtained on February 28, 2009, and a bank verification that was obtained within the past two years. The bank verification contained the average balance over the life of the account, the then current balance, whether the account was a personal account, whether the customer could sign a loan, and the opening date of the account. 1 N.T. at 46-47.
48. Ms. August executed an additional marker in favor of Adamar on February 28, 2009 for $6,000. Complaint and Answer, ¶ 11.
49. The balance in Ms. August's checking account on February 28, 2009 was still $975.14. Ex. P-10.
50. New Jersey's Administrative Code directs that casinos record in their credit files "[a] brief summary of the key factors relied upon in approving or reducing the requested credit limit and any changes thereto[.]" N.J. Admin. Code 19:45-1.27(f)(2). As with the February 20, 2009 entry, the reason given on February 28, 2009 in approving the credit line increase was: "BK income & assets Play Reviewed not on ML 1:27A."
52. In February 2006, Adamar had verified that the debtor's bank account held a current balance of "L-4" (probably meaning low four digits). Ex. P-1. The next actual verification of the current bank balance occurred on April 2, 2009. Ex. P-1.
53. Adamar also kept track of outstanding markers written by the debtor to itself and other casinos. On February 26, 2009, Adamar verified that certain outstanding markers had been paid by the debtor to other casinos. Ex. P-1.
54. Consistent with Adamar practice, Mr. Perice did not seek to determine the balance of Ms. August's bank account as of February 28, 2009 when he approved her increased credit limit. 1 N.T. at 47-48.
55. Since Ms. August already had obtained $60,000 of credit when she sought an increase on February 28, 2009, Mr. Perice testified that: "I'd have to look at computer printouts, but I would say that if she owed [$]60,000 when I gave her the [$]66[,000] that she would have had to have lost a majority of the [$]60[,000] she already owed." 2 N.T. at 54. In other words, Mr. Perice verified in some manner (possibly from Adamar's tracking records) that Ms. August had lost more than $30,000 of the $60,000 already borrowed.
56. Ms. August's credit line was suspended by Adamar on March 10, 2009 because the Central Credit reports obtained by Adamar disclosed that she had markers that came due in March 2009 returned from her bank to other casinos. Ex. P-1.
57. However, Adamar records also reflect that by April 2, 2009 it was prepared to restore her credit line,
58. The four Adamar markers executed by Ms. August on February 21st, 27th, and 28th, totaling $66,000, were sent for deposit after 45 days and all were returned to Adamar for insufficient funds. Joint Pretrial Statement, Uncontested Fact # 19.
59. As a result, Ms. August's credit line with Adamar was suspended on or about April 7, 2009. Id., Uncontested Fact # 22.
60. Ms. August's credit lines at other casinos that received the Central Credit gaming report were also suspended on or about April 7, 2009. See 1 N.T. at 107-08 (Taj Mahal records reflecting credit suspension in April 2009).
61. The actual markers executed on February 21, 2009 were returned to Adamar on April 14, 2009. The marker executed on February 27 was returned on April 20, 2009. The marker executed on February 28 was returned April 21, 2009. Ex. P-1; 1 N.T. at 72. As the credit line
62. When each of the February 2009 markers was returned, Adamar's collections department sent Ms. August a letter and statement of account. The letter informed her that her marker had been returned unpaid and that she should communicate with the casino. Each letter and statement included the outstanding balance. 1 N.T. at 72-73; ex. P-5.
63. Ms. August spoke with Ms. Lynn Mazzeo-Amoriello, the Director of Collections for Adamar, regarding the unpaid markers on or about April 28, 2009.
64. Ms. August informed Ms. Mazzeo-Amoriello that she was having financial difficulties. Ms. August testified that those difficulties stemmed from a loss of event-planning business and tax delinquency problems. Ms. Mazzeo-Amoriello explained that Adamar would need monthly payments on the debt commencing in May 2009. 1 N.T. at 73.
65. Ms. Mazzeo-Amoriello testified that she has no record of an agreement having been reached with Ms. August regarding a monthly repayment plan. 1 N.T. at 79. There was no evidence in the debtor's credit file that such an agreement had been reached.
66. Ms. August remitted checks for $500 each to Adamar on May 26, 2009 and June 26, 2009. Joint Pretrial Statement, Uncontested Fact # 25. Those two checks were cashed and reduced her outstanding obligation to $65,000.
67. During the period between February 21, 2009, when Ms. August executed the first marker that gives rise to this proceeding, and April 7, 2009, when Ms. August's credit line was suspended, Ms. August executed markers at other casinos which were returned for insufficient funds after April 7, 2009. These markers include:
Casino Dates Executed Amount Outstanding Borgata Hotel and Casino 3/9/09-4/4/09 $137,000 Trump Taj Mahal Hotel and Casino 3/9/09-4/4/09 $108,000 Caesar's Casino, Las Vegas 3/15/09-3/18/09 $ 30,000
Joint Pretrial Statement, Uncontested Facts ## 13-15; 1 N.T. at 100 (stipulating that markers drawn from Taj Mahal were returned unpaid).
68. The markers executed at the Borgata and the Taj Mahal casinos also contained preprinted language similar to that found on the markers executed at Adamar's casino. Joint Pretrial Statement, Uncontested Fact # 16.
69. According to Adamar's tracking records, between February 20, 2009 and February 28, 2009, Ms. August lost $24,119.40 at its casino. Of this sum, $8,349.15 was lost on February 28, 2009. Thus, Adamar believes that Ms. August "walked" or left its casino on February 28, 2009 with $41,880.60 of borrowed funds unspent. 1 N.T. at 76-77.
70. These records are inconsistent with the testimony of Mr. Perice that he would have determined on February 28, 2009—when he granted Ms. August an increase in her credit line to $66,000—that she had already lost more than half the $60,000 already borrowed, or more than $30,000, before approving this increase. 2 N.T. at 54.
72. It is stipulated that on March 15, 2009, Ms. August borrowed $30,000 from Caesar's casino in Las Vegas, that her markers were returned approximately 30 days later for insufficient funds, and that, based upon tracking use of Ms. August's player's card at that casino, she lost $11,992 of those borrowed funds. 1 N.T. at 116-119.
73. The records of the Taj Mahal casino reflect that between March 9, 2009 and April 4, 2009, when Ms. August obtained $108,000 in credit, her player's card tracking reflects losses of $69,800 at this casino. 1 N.T. at 101.
74. Similarly, the records of the Borgata casino show borrowing of $137,000 between March 9, 2009 and April 4, 2009, and losses of $75,000. Audiodisk at 2:02-2:06.
75. Adamar asserts, based upon those records, that Ms. August obtained or "walked with" $191,188.60 in cash from its casino and the other three casinos between February 21, 2009 and April 4, 2009. This allegation was unproven. Due to the inability of casinos to track Ms. August's losses while gambling without using her player's cards, which Ms. August had a tendency to do, as well as their inability to determine whether Ms. August used the funds borrowed to gamble at other casinos in Atlantic City and Las Vegas, these tracking records provide incomplete proof of the disposition of these borrowed funds.
76. I further find that after April 4, 2009—as will be addressed below—Ms. August still had a strong propensity to gamble.
77. Between February 21, 2009 and April 6, 2009, Adamar's records reflect that Ms. August repaid markers issued to other casinos in an amount in excess of $120,000. Ex. P-1.
78. Adamar's tracking records (based upon use of the Diamond card) show that Ms. August continued to gamble at its casino on a cash basis after her credit was suspended on April 7, 2009. On April 10, 2009, Ms. August lost $2,398. She lost $6,008 on April 25, 2009 and $401 on a May 2, 2009. She lost $99 on May 23, 2009 and, on a visit spanning May 31, 2009 until June 1, 2009, Ms. August lost $905. She also lost $109 on June 6. On July 3, 2009 Ms. August lost $503, and on August 1 she won $13. Ex. P-3.
79. Taj Mahal's tracking records reveal that Ms. August continued to gamble on a cash basis after April 4, 2009. That play was summarized at trial by Taj Mahal's collections manager as follows: "The 24th of April, '09, lost 20 bucks. May 1st, '09, lost 1,670. On 5/8/09, won 11,141. On 5/16/09, lost $10,085. On 5/22/09, lost $9,694. On 5/29/09, won $395. On 6/5/09, lost $4,491. June 12th, '09, lost $2,732. On June 19th, '09, lost $1,941. On June 27th, won $260. On July 3rd, lost $2,979. On
80. To the extent that these tracking records are accurate, it appears that Ms. August continued to gamble after her credit was suspended; however, her inability to gamble on credit restricted the extent of her gambling, as the sums won or lost are far more modest then her 2009 results before April 7th. See Joint Pretrial Statement, Statement of Uncontested Facts # 23 ("There was little gambling by the Defendant after April 7, 2009."); ex. P-9 (reflecting gambling winnings and losses of more than $566,000 in 2009).
81. The debtor made numerous deposits and withdrawals from her bank accounts first with Commerce/TD Bank and later with PNC Bank: between February 21, 2009 and April 6, 2009 (the day before her credit line was suspended); between April 7, 2009 and December 3, 2009 (the day of her bankruptcy filing); and between December 4, 2009 and September 15, 2010 (postpetition). Exs. P-10, P-11. Those deposits and withdrawals are summarized on Attachment A to this memorandum.
82. Approximately $8,900 of these deposits were derived from the sale by Ms. August of her personal property on eBay between May 2009 and June 2010. Audiodisk 3:20-3:21; ex. P-11.
83. These deposits and withdrawals do not support Adamar's contention that "[s]he had significant amounts of cash [about $200,000] stashed away [after April 6, 2009] which she wanted to keep without having to pay back her casino debts." Plaintiff's Posttrial Memorandum, at 24. Instead, they reflect that after April 6, 2009, the debtor was in financial difficulties, had virtually no cash on the date she filed her bankruptcy petition, and continued to gamble, but for far lesser stakes than before, after her credit lines were suspended.
84. Ms. August filed a voluntary petition in bankruptcy under chapter 7 on December 3, 2009.
85. Her Bankruptcy Schedules I and J reflect monthly income and expenses of approximately $5,770. Bankruptcy Schedule B reveals that the debtor has only one outstanding bank account, containing $575.
I reach the following legal conclusions in this proceeding.
1. Adamar holds a valid enforceable claim against the debtor in the amount of $65,000.
2. Adamar had the burden to prove by a preponderance of the evidence that its claim is not dischargeable by virtue of section 523(a)(2)(A) and/or (B).
3. Adamar did not meet its burden of proving actual reliance, a necessary element under section 523(a)(2).
4. Adamar could raise a new claim during trial for relief under 11 U.S.C.
5. Adamar had the burden to prove by a preponderance of the evidence that its claim is not dischargeable by virtue of section 523(a)(6).
6. Adamar did not meet its burden of proving that its $65,000 claim arose by willful and malicious conduct of the debtor.
7. Adamar's claim under section 523(a)(2) was substantially justified. As a result, the debtor is not entitled to relief under section 523(d).
Adamar raises four related grounds in contending that its $65,000 claim against the debtor should be held nondischargeable. It maintains that the debtor obtained money by false representation within the scope of section 523(a)(2)(A). It also argues that the debtor obtained money by false pretenses, which is also prohibited by section 523(a)(2)(A). In addition, Adamar contends that the debtor obtained money using a false financial statement within the meaning of section 523(a)(2)(B). Finally, Adamar asserts that the debtor willfully and maliciously injured it, rendering the debt nondischargeable under section 523(a)(6).
The debtor responds that none of these claims for relief were proven. She also argues that her distressed financial circumstances prevented her from repaying her February 2009 markers to Adamar, but that she fully intended to pay them at the time she signed them, as she had repaid many other markers to Adamar over the years. She further denies any scheme to defraud Adamar and other casinos in February 2009 by borrowing money with the expectation of discharging her debts in bankruptcy.
Before addressing these legal assertions and the debtor's opposition thereto, I must address a preliminary issue.
There is no dispute that the debtor in this adversary proceeding borrowed $66,000 from the plaintiff in February 2009 and only repaid $1,000 of that sum. There is also no dispute that the money was lent to the debtor by a New Jersey casino to enable her to gamble in that casino.
Section 523(a) provides that certain "debts" are not dischargeable. A debt is defined in section 101(12) as a "liability on a claim." A "creditor" is an entity that has a claim against the debtor. 11 U.S.C. § 101(10). And a claim means "a right to payment, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." 11 U.S.C. § 101(5)(A).
In re Roland, 294 B.R. 244, 249 (Bankr. S.D.N.Y.2003) (citations omitted); see, e.g., In re McKendry, 40 F.3d 331, 337 (10th Cir.1994); In re Bundick, 303 B.R. 90, 103 (Bankr.E.D.Va.2003) ("An action to determine the dischargeability of a debt under § 523(a) has two components. . . . The first step requires that the creditor establish
Since 1794, Pennsylvania law has included a version of section 1 of the Statute of Queen Anne, enacted in 1710 in Great Britain, which, in effect, prohibits enforcement of gambling debts. 73 P.S. § 2031. New Jersey has a similar statute, N.J. Stat. Ann. 2A:40-3. New Jersey courts, however, have held that its Casino Control Act amended that earlier statute, and "that a loan made for casino gambling in Atlantic City[, New Jersey] is legal." Gottlob v. Lopez, 205 N.J.Super. 417, 420, 501 A.2d 176 (1985). Thus, under New Jersey law, Ms. August's debt to Adamar is enforceable. See Adamar of New Jersey, Inc. v. Scandrett, 2006 WL 3590057 (N.J.Sup.Ct.App.Div.2006). But if Pennsylvania law is applicable this obligation may not be enforceable,
Whether an entity holds an enforceable claim against the debtor is generally determined by relevant non-bankruptcy law, typically state law.
Travelers Casualty and Surety Co. of America v. Pacific Gas and Elec. Co., 549 U.S. 443, 450-51, 127 S.Ct. 1199, 167 L.Ed.2d 178 (2007) (citations omitted); see, e.g., Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 161, 67 S.Ct. 237, 91 L.Ed. 162 (1946) ("What claims of creditors are valid and subsisting obligations against the bankrupt at the time a
In determining which state law is relevant, I must consider federal common law choice of law principles. When bankruptcy litigation involves a dispute arising from federal substantive law, such as 11 U.S.C. § 523(a), federal common law principles typically will govern. See generally Gluck v. Unisys Corp., 960 F.2d 1168, 1179 n. 8 (3d Cir.1992) (holding that federal common law governs disputes involving ERISA); In re Miller, 292 B.R. 409, 413 (9th Cir. BAP 2003). Thus, in decisions involving objections to discharge and nondischargeability, courts have applied federal common law rather than the forum state's choice of law approach to determine relevant state law. See, e.g., Matter of Crist, 632 F.2d 1226, 1229 (5th Cir.1980), cert. denied, 451 U.S. 986, 101 S.Ct. 2321, 68 L.Ed.2d 844 (1981); In re Segretario, 258 B.R. 541, 544-45 (Bankr.D.Conn.2001). This is appropriate because the underlying adversary proceeding involves either the debtor's right to a bankruptcy discharge or the scope of that discharge, both of which involve important federal interests. See generally Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934) (citations omitted):
For example, in Vanston Bondholders Protective Committee v. Green, where the validity of a proof of claim in a bankruptcy case was at issue, the Court relied upon federal conflicts of law principles to determine the validity of the claim. 329 U.S. at 162, 67 S.Ct. 237. See also In re Lindsay, 59 F.3d 942, 948 (9th Cir.1995) ("In federal question cases with exclusive jurisdiction in federal court, such as bankruptcy, the court should apply federal, not forum state, choice of law rules."), cert. denied sub nom. Lindsay v. Beneficial Reinsurance Co., 516 U.S. 1074, 116 S.Ct. 778, 133 L.Ed.2d 730 (1996).
In general, "federal choice of law rules apply the law of the jurisdiction with the most significant relationship with the action." In re Gaston & Snow, 243 F.3d 599, 605 (2d Cir.2001), cert. denied sub nom. Erkins v. Bianco, 534 U.S. 1042, 122 S.Ct. 618, 151 L.Ed.2d 540 (2001); see also In re Olsen Industries, Inc., 2000 WL 376398, at *11 (D.Del.2000). New Jersey, which is the location of the casino to which Ms. August repeatedly traveled, and is the location where she obtained her loans and executed the markers at issue in this proceeding, has the most significant relationship to this adversary proceeding. The issuance of such loans is heavily regulated by New Jersey. Therefore, I conclude that New Jersey law is applicable and Adamar holds an enforceable claim for $65,000 against this debtor. See In re Miller, 292 B.R. at 414 (and cases cited); see also In re Simpson, 319 B.R. 256, 265 (Bankr.M.D.Fla.2003) (Nevada casino held a valid claim against a Florida resident who had left unpaid markers at the casino,
As noted above, Adamar seeks relief under section 523(a)(2). 11 U.S.C. § 523(a) states that "[a] discharge under section 727 . . . does not discharge an individual debtor from any debt—
See generally Field v. Mans, 516 U.S. 59, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995); In re Brady, 243 B.R. 253, 258 (E.D.Pa.2000); In re Lee, 2000 WL 815928, at *2 (Bankr. E.D.Pa.2000).
In parsing the language of section 523(a)(2)(A), courts have drawn a distinction between a "false representation" and "false pretenses":
In re Giquinto, 388 B.R. 152, 165 n. 26 (Bankr.E.D.Pa.2008); see, e.g., In re Brandon, 297 B.R. 308, 313 (Bankr.S.D.Ga. 2002); Matter of Haining, 119 B.R. 460, 463-64 (Bankr.D.Del.1990); In re Weinstein, 31 B.R. 804, 809 (Bankr.E.D.N.Y. 1983).
As observed by another bankruptcy court:
In re Soliz, 201 B.R. 363, 369 (Bankr. S.D.N.Y.1996).
For a plaintiff to prevail under the false representation provision of section 523(a)(2)(A) it must demonstrate that:
In re Antonious, 358 B.R. 172, 182 (Bankr. E.D.Pa.2006) (citations omitted); see In re Hilley, 124 Fed.Appx. 81, 82 (3d Cir.2005) (non-precedential).
In re Khafaga, 419 B.R. 539, 546 (Bankr. E.D.N.Y.2009) (quoting In re Hambley, 329 B.R. 382, 396 (Bankr.E.D.N.Y.2005)).
Whether asserting that a false representation or false pretenses were made and warrant relief under section 523(a)(2)(A), a showing of justifiable reliance and causation of loss must be made. See, e.g., In re Antonious, 358 B.R. at 182; In re Ali, 321 B.R. 685, 690 (Bankr. W.D.Pa.2005). Justifiable reliance is a lower standard than reasonable reliance, but nonetheless requires that the creditor prove that it actually relied upon the alleged misrepresentation or false pretenses. See Owens v. Owens, 155 Fed.Appx. 42, 44-45 (2d Cir.2005); In re Spigel, 260 F.3d 27, 32 (1st Cir.2001):
The creditor need not prove, however, that such actual reliance was reasonable, only justifiable. As recently observed by the Seventh Circuit Court of Appeals:
Ojeda v. Goldberg, 599 F.3d 712, 717 (7th Cir.2010).
Moreover, when seeking a determination under section 523(a)(2), the plaintiff/creditor bears the burden of proving all the elements of nondischargeability by a preponderance of the evidence. See, e.g., In re Graham, 973 F.2d 1089, 1101 (3d Cir.1992) (citing Grogan v. Garner, 498 U.S. 279, 288, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991)). Furthermore, when evaluating whether a debtor intended to deceive a creditor by her misrepresentations or false pretenses, a court must evaluate the debtor's intention, Field v. Mans, 516 U.S. at 59, 116 S.Ct. 437, at the time the misrepresentation, either express or implied, was made. Matter of Jadusingh, 2001 WL 360701, at *2 (E.D.Pa.2001). Such intent may be proven by circumstantial evidence. See, e.g., In re Giquinto, 388 B.R. at 166.
Relief under section 523(a)(2)(B) requires that Adamar prove that its claim against Ms. August for money loaned and unpaid was based upon the debtor's use of a writing that is (i) materially false; (ii) respecting Ms. August's financial condition; (iii) on which Adamar reasonably relied; and (iv) that Ms. August caused to be made or published with intent to deceive. See, e.g., In re Cohn, 54 F.3d 1108, 1114 (3d Cir.1995). In discussing materiality, the Third Circuit Court of Appeals referred favorably to a definition set forth in In re Bogstad, 779 F.2d 370, 375 (7th Cir.1985) (citations omitted):
The Third Circuit further explained:
In re Cohn, 54 F.3d at 1114.
Insofar as reasonable reliance under section 523(a)(2)(B) is concerned, the Third Circuit has set forth this standard:
In re Cohn, 54 F.3d at 1117 (citations omitted).
In applying this standard, however, the Third Circuit instructed: "Section 523(a)(2)(B)(iii), however, requires that the creditor actually rely on the debtor's statement. Accordingly, if it were reasonable to rely on a debtor's statement, but the creditor did not in fact rely upon the false statement, [section 523(a)(2) ](B)(iii) would not be satisfied." Id., 54 F.3d at 1115 (emphasis in original).
In seeking a determination that its $65,000 claim against Ms. August is nondischargeable under section 523(a)(2), Adamar initially relies upon preprinted language found on all of the February 2009 unpaid markers signed by Ms. August: "I
Adamar contends that this signed statement on the four unpaid February 2009 markers is both a false representation under section 523(a)(2)(A) and a materially false written statement of the debtor's financial condition under section 523(a)(2)(B). As to the latter, at least two reported decisions support Adamar's contention that such a statement on a gambling marker will constitute a written financial statement. See In re Ridge, 2010 WL 3632818, at *4 (Bankr.E.D.Va.2010); In re Poskanzer, 143 B.R. 991, 1000 (Bankr.D.N.J.1992). I shall further accept arguendo Adamar's implicit contention that the preprinted language on its markers was "material" within the meaning set forth by the Third Circuit in In re Cohn, 54 F.3d at 1114, quoted above.
Nonetheless, I agree with the debtor's position that Adamar failed to meet its burden of proving that it actually relied upon the preprinted language on those markers when extending credit to Ms. August in February 2009. In other words, Adamar did not demonstrate that, when reinstating on February 20th and then increasing the debtor's credit line on February 28th, first to $60,000 and then to $66,000, it either justifiably relied or reasonably relied upon Ms. August's signed statements that on February 21st, February 27th, and February 28, 2009, she had funds in her bank account at least equal to the amount of her outstanding markers.
First, Adamar's extensive credit file on this debtor, exhibit P-1, reveals that it first established a $60,000 credit limit for Ms. August some months before February 2009. Ex. P-1. The credit line was increased from $55,000 to $60,000 temporarily in August 2008 and made permanent in September 2008. Id.
Only the $6,000 added credit limit was approved at the time of the unpaid markers. Thus, the initial decision to extend Ms. August $60,000 in credit was not based upon any representations made by her in February 2009. Furthermore, the February 2009 increase from $60,000 to $66,000, first a temporary increase which is crossed out and a permanent one approved, contains the very same remarks in her credit file as were made in 2008: "BK Income & Assets Play Reviewed not on ML 1:27A."
Moreover, once Adamar established a credit limit for a customer, that customer was authorized to sign markers up to the credit limit without further verification or investigation by Adamar. Thus, in accepting a marker from Ms. August, Adamar
Second, Adamar acknowledged that in accepting Ms. August's markers in February 2009, it intended to present them for payment, if necessary, no earlier than April 2009. No agreement or understanding was either sought or reached prohibiting the debtor from withdrawing funds in her bank account between February 2009 and April 2009. Thus, the status of Ms. August's bank account in February 2009 would not insure an ability to repay 45 days later. Perhaps for that reason, Adamar never checked on her outstanding account balance when accepting her markers in February 2009.
Third, and most important, Adamar acknowledged that in accepting her four markers in February 2009, it was relying upon her "play and pay" history with it (and with other casinos as detailed in numerous Central Credit reports): a history that spanned almost thirty years. Since 1981, Ms. August had repaid Adamar markers in excess of $2 million. She was a valued gambling customer to this casino. As Adamar's credit manager sensibly testified, the casino, in deciding whether to extend credit, is attempting to assess the customer's ability to repay the loan:
2 N.T. at 53.
As one court recently observed in considering the application of section 523(a)(2) to an unpaid gambling debt owed to a different New Jersey casino, but one using similar preprinted language on its markers:
In re Ridge, 2010 WL 3632818, at *5 (footnote omitted); see also In re Simpson, 319 B.R. 256, 261 (Bankr.M.D.Fla.2003) ("Plaintiffs' reliance instead was on Defendant's Pay and Play history").
Accordingly, without persuasive evidence that it actually relied upon the preprinted statement on its markers, Adamar has not demonstrated that such statement,
Adamar also vigorously contends that the debtor obtained her casino credit under false pretenses within the meaning of section 523(a)(2). It maintains that, when she borrowed funds in February 2009, Ms. August had no intention of either gambling with or repaying those funds. It relies upon its tracking records, and those of other casinos, to support its contention that the debtor intended to and did "walk" with almost $200,000 from Adamar and other casinos between February 28, 2009 and April 4, 2009.
When Ms. August received $66,000 in credit in late February 2009, she made an implied representation, independent from any preprinted language on her markers, of an intention to gamble with the funds and repay this debt. See, e.g. In re Anastas, 94 F.3d 1280, 1285 (9th Cir.1996). If she did not have such an intention, I agree with Adamar that the debtor would have obtained this credit under false pretenses. See, e.g., id., 94 F.3d at 1285.
I find, however, Adamar's contention of false pretenses, for which it again had the burden of proof, also unproven.
First, Adamar's position relies heavily upon casino tracking data. The accuracy of that data is undermined by the debtor's credible testimony, supported by the credit file at another casino, that she did not always use her player cards when gambling at casinos. As the tracking data is dependent upon such player card use, the data is at best incomplete.
Second, the evidence is overwhelming that Ms. August in February 2009 was an habitual gambler, often relying upon credit to participate in this activity. Every weekend saw her travel to one or more casinos in Atlantic City or Las Vegas. The debtor also knew that her failure to honor her markers would suspend her credit lines at Adamar and all other casinos that subscribed to the Central Credit report. Such suspensions had happened before.
The ability to obtain casino credit for gambling purposes has been viewed by at least one commentator as a strong marker repayment incentive to the habitual gambler:
Aaron, Gambling Markers and Bankruptcy, 2004 Norton Am. Surv. of Bankr.Law Part I, § D (Oct. 2004) (footnotes omitted).
Adamar offers no reason for Ms. August to suddenly decide in February 2009, after extensive and habitual gambling for decades, to limit future gambling activities to those on a cash only basis. There was no evidence that she decided to cease gambling. And there was clear evidence that she knew that unpaid markers would suspend her credit at all casinos.
Third, there is no evidence of Ms. August either earning a six-figure income during her many years as a habitual gambler, or of receiving gifts or bequests that would finance her gambling activities. Nevertheless, she was able to repay Adamar more than $2 million in markers over many years. Moreover, apparently Ms. August did win her bets on occasion, as she disclosed more than $2 million in winnings in 2008 and $566,000 in winnings in 2009. Given the parties' stipulation that
Fourth, the evidence revealed that on April 6, 2009, the debtor had but $405 in cash in her bank account. See Attachment A. Thus, Adamar implies that the debtor was hiding almost $200,000 in cash at that time. Its evidence though—deposit and withdrawal records after April 6, 2009 from her two bank accounts—is at least equally consistent, if not more so, with the source of such deposits being her gambling winnings at smaller stakes, as well as the sale of personal items on eBay and business income.
Fifth, Ms. August honored markers that came due before April 6, 2009, including those in March 2009 owing to other casinos. She also made two $500 payments toward her credit line with Adamar in May and June 2009. Such conduct undermines Adamar's assertion that she schemed to defraud all casinos beginning in February 2009.
In sum, based upon her extensive gambling and credit history with Adamar, her repayment over the years of more than $2 million, her substantial if not consistent gambling winnings, as well as the debtor's credible testimony on this point, I find that Ms. August believed in February 2009 that she would be able to repay Adamar the $66,000 she borrowed, and intended to do so, presumably from her gambling winnings. Such a belief may have defied the odds, particularly when gambling on the slot machine; however, this belief does not support Adamar's conclusion that Ms. August never intended in February 2009 to repay it and obtained her loans under false pretenses. See In re Hall, 228 B.R. 483, 490 (Bankr.M.D.Ga.1998) ("So long as the debtor has an honest, even if unreasonable, belief that he will get lucky at gambling and pay off his debts then this Court is satisfied that the debtor has the requisite intent to repay."); In re Scocozzo, 220 B.R. 850 (Bankr.M.D.Pa.1998); In re Murphy, 190 B.R. 327, 334 (Bankr.N.D.Ill.1995) ("In this case, considering all the circumstances, the Court finds that at the time the Debtor incurred the debts at issue he intended to repay them and believed (however unreasonably) that he would have the means to do so from his gambling and investments. The Debtor had for years successfully relied on such `income' to pay off his credit card debt."); see also In re Pusateri 432 B.R. 181, 201 (Bankr. W.D.N.C.2010) ("twelve year exemplary borrowing history" with the credit union was evidence of the debtor's intent to repay the debt).
In so concluding that Adamar did not meet its evidentiary burden on this point, I find distinguishable the facts in In re Poskanzer, 143 B.R. 991 (Bankr.D.N.J.1992), a decision relied upon by Adamar. Not only was there no evidence presented of that debtor's "play and pay history" in that case, but the debtor in Poskanzer was found to have undertaken a substantial "gambling spree" while contemplating bankruptcy:
Id., 143 B.R. at 999; see In re Miller, 310 B.R. 185, 198 (Bankr.C.D.Cal.2004) (distinguishing Poskanzer as involving a debtor that obtained "more than $875,000 in credit from various casinos less than 30 days before filing his bankruptcy petition.").
In contrast, there is no credible evidence that the debtor here undertook a gambling spree in late February 2009, with the contemplation of bankruptcy. Instead, the debtor testified that economic reversals in her business, including problems with taxing authorities (probably coupled with gambling losses) prevented her from honoring her markers.
Therefore, Adamar did not establish that it provided credit to the debtor based upon false pretenses.
In addition, Adamar contends that it is entitled to relief under section 523(a)(6). This claim was not raised in its complaint nor in the parties' final joint pretrial statement. Thus, the debtor objected at trial to consideration of this newly raised claim.
Federal Rule of Bankruptcy Procedure 7015 incorporates Fed.R.Civ.P. 15 in adversary proceedings. Rule 15(b)(1) states in relevant part:
Therefore, if a defendant objects to evidence presented at trial for being outside the scope of the claims raised by the plaintiff in his pleadings, and if the defendant has not expressly or implicitly consented to a determination of the additional claim, a court may admit the evidence and treat the underlying complaint as amended to encompass this additional claim if the presentation of the merits of the action will be subserved and the opposing party is not thereby prejudiced. See, e.g., Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449, 457 (10th Cir.1982); Seybold v. Francis P. Dean, Inc., 628 F.Supp. 912, 914 (W.D.Pa.1986). As the Third Circuit Court of Appeals has instructed:
Evans Products Co. v. West American Ins. Co., 736 F.2d 920, 924 (3d Cir.1984) (citations omitted); see, e.g., Still v. Regulus Group LLC, 2004 WL 32378, at *1 (E.D.Pa.2004); see generally Lundy v. Hochberg, 79 Fed.Appx. 503, 506 (3d Cir. 2003).
Ms. August did not expressly or implicitly consent to the plaintiff's attempt to assert a section 523(a)(6) claim at trial. I may, nevertheless, admit the evidence and treat the underlying complaint as amended if I find that doing so would be helpful to
In this proceeding, Adamar's evidence in support of its claim under section 523(a)(6), as will be discussed below, is in essence a variant of its false pretense claim: that Ms. August, in February 2009, intended to wrongfully borrow funds from casinos without any intention of repayment. See Plaintiff's Posttrial Memorandum, at 17. As the debtor was fully prepared to oppose this contention at trial, it would not be prejudicial to consider this alternative theory. See In re Gelhaar, 2010 WL 4780314, at *5 n. 3 (Bankr. N.D.Ill.2010); In re Ruderson, 2007 WL 4570581, at *5 (Bankr.N.D.Ohio 2007); 3 Moore's Federal Practice 3d, § 15.18[2] (2010) ("[T]he opposing party is not prejudiced by evidence that only presents a new legal theory, but is based on the facts and circumstances constituting the claims already set out in the unamended pleadings.").
Section 523(a)(6) of the Bankruptcy Code provides:
To prevail, the plaintiff must establish the elements of section 523(a)(6) by a preponderance of the evidence. See, e.g., In re Keaty, 397 F.3d 264, 270 (5th Cir. 2005); In re Scarborough, 171 F.3d 638, 641 (8th Cir. 1999); see generally Grogan v. Garner, 498 U.S. 279, 291, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
Prior to the enactment of the 1978 Bankruptcy Code, bankruptcy courts found that a nondischargeable injury arose whenever the debtor's conduct was at least reckless and was done without just cause. Tinker v. Colwell, 193 U.S. 473, 487, 24 S.Ct. 505, 48 L.Ed. 754 (1904); see In re Conte, 33 F.3d 303, 306 (3d Cir.1994) (discussing pre-1978 case law). Courts have concluded, however, relying in part upon the legislative history accompanying the 1978 legislation, that Congress intended that section 523(a)(6) have a higher standard than just recklessness. In re Conte, 33 at 306; H.R.Rep. No. 595, 95th Cong., 2d Sess. 365 (1978) ("`[W]illful' means deliberate or intentional. To the extent that Tinker v. Colwell . . . held that a looser standard is intended, and to the extent that other cases have relied on Tinker to apply a `reckless disregard' standard, they are overruled.").
Thus, the United States Supreme Court, in Kawaauhau v. Geiger, 523 U.S. 57, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998), narrowly defined the phrase "willful and malicious" used in section 523(a)(6). The Court construed section 523(a)(6) as limited in scope to intentional torts:
Id. at 61-62, 118 S.Ct. 974 (emphasis in original); see also In re Markowitz, 190 F.3d 455, 464 (6th Cir.1999).
Similarly, the Third Circuit Court of Appeals has observed:
In re Conte, 33 F.3d at 307; see In re Su, 290 F.3d 1140, 1144 (9th Cir.2002) ("§ 523(a)(6) renders debt nondischargeable when there is either a subjective intent to harm, or a subjective belief that harm was substantially certain.").
Accordingly, "[a]n injury is willful and malicious under the Code only if the actor purposefully inflicted the injury or acted with substantial certainty that injury would result." In re Conte, 33 F.3d at 305. "We hold that actions are willful and malicious within the meaning of § 523(a)(6) if they either have a purpose of producing injury or have a substantial certainty of producing injury." Id. at 307; see, e.g., In re Jacobs, 381 B.R. 128, 144-45 (Bankr. E.D.Pa.2008).
Here, Adamar contends that section 523(a)(6) is applicable because Ms. August willfully borrowed money from it and other casinos without any intention of repayment and with a design to discharge her obligations under the Bankruptcy Code. Plaintiff's Posttrial Memorandum, at 16. For the reasons stated above, this contention was unproven. The evidence presented does not support a finding that the debtor acted upon such a scheme. That is, Adamar failed to prove that in February 2009, Ms. August, who had borrowed from and repaid loans to Adamar for almost 30 years, suddenly decided that she would borrow and intentionally not repay, knowing the consequential effect it would have upon her gambling habit. Thus, section 523(a)(6) does not preclude the discharge of Adamar's claim. See In re Miller, 310 B.R. at 202; In re Poskanzer, 143 B.R. at 1000.
Last for determination is Ms. August's request that she is entitled to an award of costs and attorney's fees against Adamar pursuant to 11 U.S.C. § 523(d). That provision states:
Thus, to qualify for this statutory fee-shifting provision, five criteria must be met: the creditor must bring a nondischargeability complaint under section 523(a)(2); the creditor's complaint under section 523(a)(2) must involve a "consumer debt"; the consumer debt must be found to be dischargeable; the court must find that the creditor's nondischargeability complaint was not "substantially justified"; and there must be no special circumstances which would make the award of attorney's fees unjust. See, e.g., In re Ritter, 404 B.R. 811, 831 (Bankr.E.D.Pa. 2009).
Congress borrowed the phrase "substantially justified" from the Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A). See, e.g., In re Hunt, 238 F.3d 1098, 1103 (9th Cir.2001) (citing S.Rep. No. 98-65, at 9 (1983)). The Third Circuit has defined this phrase when applying EAJA as follows:
Johnson v. Gonzales, 416 F.3d 205, 210 (3d Cir.2005) (citations omitted). To establish a reasonable basis in both law and fact under EAJA requires: "(1) a reasonable basis in truth for the facts alleged, (2) a reasonable basis in law for the theory propounded, and (3) reasonable support in the facts alleged for the legal theory advanced." Brinker v. Guiffrida, 798 F.2d 661, 664 (3d Cir.1986).
In the bankruptcy context under section 523(d), one commentator has concluded that those same elements apply:
4. Collier on Bankruptcy, ¶ 523.08[8] (16th ed. 2010) (footnotes omitted).
In this proceeding, Adamar contended that Ms. August decided in February 2009 to obtain loans from it and other casinos without intending to use those funds to gamble, and to "walk" away with those funds without repaying them. If proven, such a contention could support relief under section 523(a)(2). It also maintained that the debtor made a false representation when signing her markers. In support thereof Adamar relied heavily upon tracking records it kept and those kept by other casinos, and upon In re Poskanzer.
Upon careful review of all of the evidence, I concluded that Adamar did not prove its contention: because the tracking records were incomplete; because those records were in conflict with other evidence presented, including evidence from the credit file of another casino; and based upon the credibility of the testimony introduced at trial. Furthermore, the facts in Poskanzer were distinguishable from those ultimately proven at trial.
Nevertheless, I also conclude that Adamar's section 523(a)(2) claims were substantially justified within the meaning of
An appropriate order will be entered.
AND NOW, this 3rd day of March 2011, for the reasons given in the accompanying opinion, it is hereby ordered that judgment be entered in favor of the defendant and against the plaintiff on the plaintiffs claims under 11 U.S.C. § 523(a)(2) and (a)(6). The defendant's $65,000 debt to the plaintiff is dischargeable.
And it is further ordered that judgment be entered in favor of the plaintiff and against the defendant on the defendant's counterclaim under 11 U.S.C. § 523(d).
Attachment A Summary of Account Cash Flows 2/21/09-4/6/09 General Cleared Deposits Debits ATM Fees ChecksNSF Checks Commerce: 188,091.79 11,302.61 2,660.50 1,115.00 251,931.00 139,883.59PNC: 0.00 0.00 0.00 0.00 0.00 0.00Total: Combined Balance on 2/21/09: 2,038.73Total Credits 2/21/09-4/6/09: 188,091.79Total Debits 2/21/09-4/6/09: 267,009.11Combined Balance on 4/6/09: 405.00 (some checks from 2/26 Commerce statement cleared prior to date listed on statement)4/7/09-12/3/09 General Cleared Deposits Debits ATM Fees Checks NSF Checks Commerce: 3,484.24 770.74 1,903.50 1,090.00 0.00 275,000.00PNC: 76,327.15 17,996.89 31,033.93 564.48 26,759.41 6,377.59Total: 79,811.39 18,767.63 32,937.43 1,654.48 26,759.41 281,377.59Combined Balance on 4/6/09: 405.00Total Credits 4/7/09-12/3/09: 79,811.39Total Debits 4/7/09-12/3/09: 80,118.95Combined Balance on 12/3/09: 2.4412/4/09-Present General Cleared Deposits Debits ATM Fees Checks NSF Checks Commerce: 0.00 0.00 0.00 0.00 0.00 0.00PNC: 172,563.77 19,318.49 75,458.10 1,929.18 73,935.12 2,016.00Total: 172,563.77 19,318.49 75,458.10 1,929.18 73,935.12 2,016.00Combined Balance on 12/4/09: 2.44Total Credits 12/4/09-9/15/10: 172,563.77Total Debits 12/4/09-9/15/10: 170,640.89Combined Balance on 9/15/10: 1,925.32
