606 B.R. 51
N.D. Cal.2019Background
- Allure Labs employed Markushevska as bookkeeper (June 2014–Sept. 2015); she had access to financial records and could issue checks.
- Markushevska fabricated invoices and checks, forged signatures, made 63 fraudulent checks payable to "M. Aviles" and deposited $137,059.10 into a joint account with her husband, then moved funds to her personal account.
- Allure sued in state court and later brought an adversary proceeding in bankruptcy court seeking a determination of nondischargeability and treble damages, fees, and costs under Cal. Penal Code § 496(c).
- Bankruptcy Court found Markushevska’s debt nondischargeable under 11 U.S.C. § 523(a)(6) but denied treble damages/fees under § 496(c), concluding a thief must engage in "additional conduct" beyond the elements of § 496(a) to recover under § 496(c).
- District Court reversed: it held Markushevska violated § 496(a) (receipt/concealment of stolen property) and that § 496(c) requires only a violation of § 496(a) to authorize treble damages, fees, and costs; the Bankruptcy Court’s "additional conduct" rule was legal error.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Markushevska’s conduct satisfied Cal. Penal Code § 496(a) (receipt of stolen property) | Markushevska received and concealed embezzled funds; stipulated facts meet the three elements (stolen property, possession, knowledge). | A thief cannot logically "receive" property she stole; or § 496(a) requires concealment/withholding beyond mere receipt. | Held: § 496(a) elements satisfied; embezzlement + possession + knowledge (and concealment) establish violation. |
| Whether § 496(c) authorizes treble damages, attorneys’ fees, and costs for a defendant who stole the property | § 496(c) authorizes civil recovery when § 496(a) is violated; no extra "additional conduct" element is required. | Bankruptcy Court (and some district cases) argued a thief must have engaged in extra conduct beyond § 496(a) to avoid the dual-liability concern and trigger § 496(c). | Held: § 496(c) requires only a § 496(a) violation; the Bankruptcy Court erred in imposing an "additional conduct" requirement. |
| Whether prior federal decisions imposing an "additional conduct" rule (Grouse River, Agape) were controlling | Plaintiff argued those cases misread California law and Bell v. Feibush. | Defendants relied on those decisions to support the additional-conduct theory. | Held: District Court rejected Grouse River and Agape as misinterpretations of California authority; relied instead on California cases (notably Switzer). |
| Remedy and posture on remand | Appellant sought treble damages, attorneys’ fees, and costs under § 496(c) based on stipulated facts. | Appellees opposed § 496(c) relief absent additional conduct. | Held: Reversed Bankruptcy Court; case remanded for proceedings consistent with finding that § 496(c) recovery is available where § 496(a) is violated. |
Key Cases Cited
- Verdugo-Gonzalez v. Holder, 581 F.3d 1059 (9th Cir.) (defines the three elements of receipt of stolen property under California law)
- People v. Anderson, 210 Cal. App. 3d 414 (Cal. Ct. App.) (same elements for § 496(a))
- Switzer v. Wood, 35 Cal. App. 5th 116 (Cal. Ct. App.) (holding that a violation of § 496(a) alone suffices to trigger § 496(c) civil liability)
- Bell v. Feibush, 212 Cal. App. 4th 1041 (Cal. Ct. App.) (discussed in relation to the scope of § 496(a) violations; court rejected reading Bell as imposing an "additional conduct" requirement)
- People v. Kunkin, 9 Cal.3d 245 (Cal. 1973) (recognizing embezzlement as a form of theft for § 496 purposes)