Dominion Virginia Power v. Robinson (In Re Robinson)Dominion Virginia Power v. Robinson (In Re Robinson)
MEMORANDUM OPINION
This matter came on for trial on January 25, 2006, upon the Complaint by Dominion Virginia Power to Determine Non-Dischargeability of Debt Pursuant to § 523 of the Bankruptcy Code. At the conclusion of the trial, the Court took this matter under advisement. The Court has jurisdiction over these proceedings pursuant to 28 U.S.C. §§ 157(b)(2) and 1334(b). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. Upon consideration of the evidence and arguments presented by counsel at the trial and the pleadings submitted, the Court makes the following findings of fact and conclusions of law.
I.
PARTIES AND PROCEDURAL HISTORY
Duane L. Robinson (“Robinson”) filed under Chapter 7 of the Bankruptcy Code on January 31, 2005. Dominion Virginia Power (“Dominion”) filed an adversary complaint on April 6, 2005 (the “Complaint”) to determine the nondisehargeability of certain debt owed to Dominion by Robinson. The Complaint alleges that Robinson owes Dominion $4,056.29 for unauthorized usage of electricity. Pl.
The trial in this case was originally scheduled for October 19, 2005; however, on September 29, 2005 Dominion filed a Motion for Summary Judgment. This Court heard the Motion for Summary Judgment on October 19, 2005 and denied the Motion on the grounds that “there [were] material factual issues in dispute that would influence the Court in its conclusion as to whether there [was] fraudulent intent or willful and malicious injury shown.” Summary Judgment Hearing Tr., October 19, 2005, at 48. Further, the Court set the matter for trial on January 25, 2006. 1 Dominion filed its list of Exhibits on January 13, 2006 and the exhibits were admitted into evidence as they were not objected to. 2 Dominion’s witness list, filed with this Court on January 13, 2006, included Susan McAllister, Dominion Credit Administrator; David Yeager, Dominion Service Technician; Barbara Bronson, Supervisor of Dominion Revenue Protection; Duane Robinson, the Defendant; and any other additional witnesses necessary for rebuttal purposes. However, Susan McAllister and Robinson were the only two witnesses who testified at trial. Prior to trial, on January 24, 2005, the parties agreed to the following joint stipulation of facts:
In or about January 2004, Dominion discovered the meter for the Defendant’s residence had been illegally tampered with, resulting in no utility being recorded for the Defendant’s residence from June 2001 through January 2004 as a result of a potential link being manually removed. Dominion did not remove thepotential link. The parties acknowledge that anyone could have had access to the meter for the Defendant’s residence.
Stipulations of Fact, at 1-2.
II.
FINDINGS OF FACT
On or about June 25, 2001, Robinson opened an account with Dominion in order to receive electricity service for his residence located at 301 Chautauqua Avenue, Apartment 1, Portsmouth, Virginia 23707 (the “Service Address”). On or about January 2004, Dominion discovered the meter for the Service Address had been tampered with and directed a service technician to replace the meter. Upon examining the meter, Dominion discovered that a link on the back of the meter had been tampered with and the meter was not properly registering the actual electricity consumed at the Service Address.
Sometime between 2004 and 2005, Dominion informed Robinson that he owed Dominion $4,056.29 for this unregistered electricity consumption. 3 After Dominion informed Robinson of this debt, he called Dominion and requested a breakdown of the charges. Dominion provided Robinson with a breakdown of the charges per his request, and on January 18, 2005, Robinson sent a letter to Dominion whereby he acknowledged the $4,056.29 debt but stated that he was financially unable to pay the entire balance in a lump sum and requested a payment plan. 4 Pl. Exh. 9.
On January 31, 2005, Robinson filed for relief pursuant to Chapter 7 of the Bankruptcy Code. He listed Dominion on his Schedule F as holding an unsecured nonpriority claim in the amount of $4,056.39. Dominion sent Robinson a letter on February 1, 2005, which stated that Robinson owed $4,056.29 for “unauthorized use of electric service” (“Dominion Debt”) and stated that if Robinson did not pay the requested amount by February 10, 2005, his electricity service would be disconnected. Pl. Exh. 4. Dominion filed this adversary proceeding on April 6, 2005 and requested that the Court determine the Dominion Debt to be nondis-chargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (a)(6).
Dominion’s Records for the Service Address
It is uncontested that Robinson moved into the Service Address in June of 2001; however, Dominion’s records are unclear regarding when the Service Address was vacant and/or occupied prior to June 2001. According to Dominion, its records reflect that from February 2000 to approximately October 2000 there was a different account holder residing at the Service Address and Dominion submitted Plaintiffs Exhibit Six as evidence of this other account holder’s billing records. Pl. Exh. 6. Further, Dominion submitted Plaintiffs Exhibit One as evidence of Robinson’s account usage, billing records, payment records and meter readings. Pl. Exh. 1; Tr. at 5. However, it is unclear to this Court why Plaintiffs Exhibit One, which is allegedly the billing records for Robinson, reflects bills for March 30, 2000 through October 25, 2000. Pl. Exh. 1, at 08. It is uncontested that said billing dates occurred prior to Robinson residing at the Service Address and that Robinson did not move into the Service Address until June 2001.
Nevertheless, Dominion’s Exhibit One begins with the monthly billing date of March 30, 2000. Pl. Exh. 1, at 08. Further, Exhibit One depicts monthly billing dates from March 30, 2000 through October 25, 2000, but then has a gap period in the billing history (“gap period”) and Plaintiffs Exhibit One skips from the October 25, 2000 billing date to a July 31, 2003 billing date. 5 Id.
Susan McAllister, Credit Administrator for the Revenue Protection Department of Dominion (“McAllister”), testified that Dominion issues its customers computer generated invoices each month. Further, she testified that the gap period reflected in the account documents is due to a programmer error that deleted the computer records. 6 She also testified that Dominion does not know how the error occurred, when the error occurred, or who the programmer was that caused the error. Additionally, McAllister stated that Dominion investigated the gap period in the records but Dominion determined because of the error that it could not bring up the account history through its computer archives. Therefore, Dominion was unable to present to the Court any written evidence regarding Dominion’s billing records for the Service Address during the gap period and there is no documentary evidence as to the electricity usage or billing amounts for the Service Address for this approximately two and one-half year period.
B.
Meter Tampering
It is not entirely clear to this Court how Dominion discovered Robinson’s meter had been tampered with; nevertheless, the
McAllister testified that the reason Dominion believes Robinson is responsible for the meter tampering is because Robinson benefitted from the tampering. However, Dominion stipulated to the fact “that anyone could have had access to the meter for the Defendant’s residence.” Stipulations of Fact, at 1. Further, Dominion admitted it has no concrete or physical evidence that Robinson actually is the one who tampered with the meter. When questioned at trial, Robinson admitted that he benefitted from the meter failing to register electricity, but he denied that he engaged in meter tampering.
According to Dominion, Robinson’s meter was the only meter tampered with at the complex where the Service Address is located and the type of tampering that occurred, whereby a link was removed from the meter, is a very specific form of tampering and the result of intentional tampering. 8 McAllister stated that for a link to be removed from a meter, the meter would have to be physically taken from the meter base and a screwdriver would be necessary to unscrew the link. Tr. at 11. She further testified that this type of tampering is not something a novice person or layperson could do without knowledge or skill of utility meters; 9 however, Dominion did not present any evidence that suggests Robinson has such sophisticated knowledge. In fact, Robinson testified that he is trained as a nurse and has no technical or electrical experience. Further, Robinson’s testimony reveals that there are approximately 12 meters total in his complex, he lives approximately 500 feet away from the meters, and the meter associated with his Service Address is in plain view from the sidewalk and accessible to others.
There was no evidence presented at trial that reflects exactly when the meter tampering occurred. According to the testimony of McAllister, Dominion believes that the meter tampering occurred around the time Robinson moved into the Service Address; however, Dominion does not have any records that specifically reflect when the tampering occurred. Tr. at 37. Dominion believes the tampering occurred sometime after October 25, 2000, as Do
Additionally, McAllister testified that after Dominion replaced the tampered meter in January 2004 with a new meter, Dominion performed a reading on the tampered meter. Further, McAllister stated that this meter reading reflected that approximately only 700 kilowatts were used between October 25, 2000 and the January 2004 date when the meter was replaced. She also testified that 700 kilowatts reflects approximately only a month’s usage. Tr. at 8. However, according to Dominion’s account records, there were months when the prior tenant only used approximately 200 or 300 kilowatts. 10 Pl. Exh. 6.
Under the evidence presented at trial, there is no way to determine exactly when the meter tampering occurred. It could have occurred during the six to eight month time period when the apartment was supposedly vacant in 2000. McAllister testified that Dominion does not know if the landlord showed the apartment to potential tenants, and consequentially admitted that Dominion would not know whether a potential tenant thus tampered with the meter. Tr. at 29. Additionally, McAllister admitted that because of the gap in the records, Dominion does not know whether there was any usage, legal or illegal, during the months the Service Address was supposedly vacant. Tr. at 38. Further, McAllister testified that the only thing that leads Dominion to conclude Robinson is the responsible party is because he benefitted from the meter tampering. Id.
C.
Robinson’s Electric Bills
The parties stipulated to the fact that no utility usage was recorded for the Service Address from June 2001 through January 2004. Stipulations of Fact, at 1. However, because of the deletion of the records, Dominion was unable to produce any written evidence regarding what, if anything, Dominion billed Robinson for gap period between June 2001 to July 2003. The only written evidence that Dominion submitted regarding Robinson’s electrical bills commences with the billing date of July 31, 2003. Pl. Exh. 1, at 08. Dominion’s billing records indicate that Robinson’s electrical bills were only $8.40 per billing period for July 2003 through January 2004 and that the bills reflected zero electrical usage during that time.
Id.
McAllister testified that a bill for $8.40 indicates that Dominion is billing the customer only the basic flat customer usage fee of $8.40. She also testified that a bill in said amount depicts that the meter was not registering any electrical usage for the customer during
Because of the programmer error, there is no way for the Court to determine exactly what Robinson was billed during the gap period. McAllister alleges that from June 2001 to July 2003, Robinson should have been receiving invoices for $8.40 from Dominion and that said invoices should have reflected zero electrical usage for the meter at the Service Address. Tr. at 23. However, McAllister admitted that because of the deletion in records there is no written evidence or computer records to indicate what, if anything, Robinson was billed before July 2003. Tr. at 42. Further, she admitted that the only thing that substantiates the fact that Robinson was ever billed by Dominion is her belief that Dominion bills every customer monthly. Id. However, Robinson admitted that he received electrical bills from Dominion during the gap period. Therefore, the dispute is not over whether or not Robinson was billed but rather over the amount of the bills. Further, because the evidence provides that Robinson received bills for $8.40 from Dominion between July 2003 and January 2004, the inquiry may be narrowed to what Robinson was billed (or not billed) during the gap period.
Dominion argued that from June 25, 2001 through January 2004, Robinson never received a utility bill from Dominion which was higher than $10 per month; however, Robinson disputed this fact. 11 Robinson stated during his Deposition conducted by Dominion (“Deposition”) that he recalled his average electric bill to be around $30 per month in 2003. Pl. Exh. 11, at 15. At trial, Dominion attempted to contradict Robinson’s Deposition testimony by referring Robinson to Plaintiffs Exhibit 1, which reflects that Robinson’s electric bill was $8.40 per month for the period from July 31, 2003 to January 05, 2004. Pl. Exh. 1, at 08-09. 12 However, Robinson testified at trial that he thought he was being truthful when he answered the Plaintiffs Interrogatories and the questions during the Deposition. He further stated that he answered the questions from memory because he no longer has records of these bills. Robinson also testified that he always paid his electric bill in cash and that he always shred his electric bill upon receipt of the next month(s) bill. In addition, Robinson stated that he never paid much attention to his electrical bill and he assumed Dominion was billing him for the correct amount.
D.
Servicing the Meter
McAllister testified that Dominion determines the amount of electrical consumption that a customer is utilizing through a human meter reader. Every month a meter reader from Dominion goes to each house or apartment and reads the meter associated with the dwelling unit. Dominion admitted at trial that it is not always the same person who reads the meter each month and that the meter reader uses a
The evidence is unclear as to why it took Dominion until January of 2004 to determine the meter at the Service Address was not properly recording usage. McAllister did not testify regarding why or how Dominion learned the meter was failing to record electricity usage in January 2004; however, McAllister testified that prior to 2005, Dominion did not have a formal method of tracking unauthorized usage. Tr. at 24. She further testified that Dominion has millions of customers and that it is not unusual for accounts to register zero usage for a period of time; thus, there were no flags raised by the zero usage. Tr. at 23. McAllister also testified Dominion now has set procedures for checking on accounts that register zero usage, but that these procedures did not exist during the period when Robinson’s unrecorded electricity usage was occurring. In fact, in January 2005, Dominion created the Revenue Protection Department (the “Department”). 13 The Department oversees issues regarding unauthorized use, illegal use, and non-billed utility use.
III.
ARGUMENTS
Dominion argues that the Dominion Debt should be non-dischargeable under §§ 523(a)(2) and (a)(6). Dominion argues the debt should be non-dischargeable under § 523(a)(2) because Robinson either tampered with the meter or had knowledge of the tampering and still continued to use Dominion’s electricity. Dominion also argues Robinson’s use of the unauthorized electricity constitutes fraud and/or a misrepresentation of Robinson’s electricity consumption. Additionally, Dominion contends that fraud can be proven through circumstantial evidence and that the circumstantial evidence proves that Robinson is liable for fraudulent conduct. Further, Dominion argues it relied on the readings provided by the tampered meter and Robinson’s subsequent payment of the electricity bill, and contends Robinson had a duty to disclose the improper billing and usage to Dominion.
Dominion argues it is entitled to judgment under § 523(a)(6) because this is a case of intentional meter tampering whereby a link was removed from the back of the meter which caused the meter to fail to register the actual electricity being consumed at the Service Address. Further, Dominion argues such tampering constitutes willful and malicious injury to Dominion, and Robinson is the only person who benefitted from the tampering. Dominion also argues that Robinson knew he was receiving un-billed for electricity and that this receipt of the electricity is proof of Robinson’s intent to injury Dominion. In addition, Dominion argues that a “willful and malicious” act can be proven through circumstantial evidence and the circumstantial evidence in this case proves Robinson is liable for such a act.
The presence of any metering device found to have been altered, tampered with, or bypassed in a manner that would cause the metering device to inaccurately measure and register the degree, amount or quantity of service supplied or which would cause the service to be diverted from the recording apparatus of the meter shall be prima facie evidence of intent to violate and of the violation of this section by the person to whose benefit it is that such service be unmetered, unregistered or diverted.
Va.Code § 18.2-163 (2005).
Robinson admits that he received a benefit from the energy usage; however, he argues through counsel that the mere fact that he benefítted does not mean he is guilty of tampering with the meter. Additionally, Robinson’s counsel argues that every debtor benefits from a discharge in bankruptcy, and if the test to determine whether to discharge a debt is whether the debtor benefitted, then no debt is dis-chargeable. Further, Robinson’s counsel argues that while Robinson admits that he received the benefit of the energy usage, the fact that he received the benefit of the energy usage does not infer he had knowledge that he was receiving the benefit; rather, Robinson assumed Dominion was billing him correctly. Additionally, Robinson’s counsel argues the duty was on Dominion, not Robinson, to notice the meter was not registering usage properly.
Robinson also argues that he did not act willfully and maliciously. Robinson’s counsel argues that § 523(a)(6) requires a willful and malicious act and that Robinson did not tamper with the meter or have knowledge of the tampering and thus is not liable under § 523(a)(6). Additionally, in support of the argument that Robinson did not tamper with the meter, Robinson’s counsel points to the fact that Robinson is a trained nurse with no experience or training in electronics. He further argues that Dominion presented no evidence that Robinson tampered with the meter and highlights the parties stipulation that anyone could have had access to the meter as evidence that Dominion does not know who tampered with the meter. Stipulations of Fact, at 1-2.
IV.
CONCLUSIONS OF LAW
As this Court has previously discussed, one of the most important benefits of the Bankruptcy Code is its ability to offer a debtor a fresh start.
KMK Factoring, L.L.C. v. McKnew (In re McKnew),
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition: ...
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity.
11 U.S.C. §§ 523(a)(2) and 523(a)(6) (2005).
15
The plaintiff has the burden of proof under § 523 and the plaintiff must prove non-dischargeability by a preponderance of the evidence.
Grogan v. Garner,
A.
State Law Presumptions
Before this Court discusses the applicable § 523 provisions, because Dominion argued that the allegation that Robinson engaged in “willful and malicious” conduct and/or fraudulent conduct can be substantiated by the Tariffs and Virginia Criminal Code § 18.2-163, this Court will start by examining these two provisions in the context of bankruptcy.
16
It is well-settled that whether a debt is nondischargeable pursuant to § 523 is governed by federal law.
Kline’s Serv. Center v. Fitzgerald (In re Fitzgerald),
B.
Circumstantial Evidence
Section 523(a)(2) and 523(a)(6) cases often lack direct evidence and thus the plaintiff must rely on circumstantial evidence to prove the debtor’s state of mind. This Court has previously held that in § 523(a)(2) cases “direct proof of intent (i.e., the debtor’s state of mind) is nearly impossible to find .... ”
Elrod v. Bowden (In re Bowden),
Dominion admitted that it does not have any direct evidence that Robinson tampered with the meter by stipulating to the fact that “anyone could have had access to the meter for the Defendant’s residence.” Stipulations of Fact, at 2. Nevertheless, Dominion argues the circumstantial evidence indicates that Robinson engaged in fraud and “willful and malicious” conduct. Therefore, against this backdrop, this Court must assess whether the circumstantial evidence demonstrates that Robinson’s conduct was fraudulent and/or “willful and malicious” by a preponderance of the evidence and thereby prohibits the discharge of Robinson’s debt to Dominion. Given that Dominion’s § 523(a)(6) claim is based entirely on circumstantial evidence and any conclusions formed by the Court in its analysis of § 523(a)(6) may impact the Court’s § 523(a)(2) discussion, this Court will start its discussion by examining § 523(a)(6).
§ 523(a)(6)
Willful and Malicious Injury
Dominion alleges that Robinson tampered with the meter or had knowledge of such meter tampering and thus he caused a willful and malicious injury to Dominion. 18 While Dominion admits that it was unable to obtain sufficient evidence to prove Robinson tampered with the meter, Dominion argues “willful and malicious” injury to Dominion can be proven through circumstantial evidence. Further, Dominion alleges Robinson received unauthorized services from Dominion and that Robinson knew he was receiving the un-billed service; thus, Robinson intended to convert Dominion’s property and he caused a willful and malicious injury to Dominion.
Section 523(a)(6) prohibits discharge for an individual debtor from any debt “for willful and malicious injury by the debtor to another entity or to the property of another entity.” 11 U.S.C. § 523(a)(6) (2005). The United States Supreme Court changed the landscape of § 523(a)(6) non-dischargeability proceedings in its decision
Kawaauhau v. Geiger,
Courts focused on both the malice prong and the willful prong of § 523(a)(6). The word “willful” was defined as “a deliberate or intentional act which necessarily leads to injury.” In proving intent prior to Geiger, the creditor was only required to show the debtor’s act was intentional; there was no requirement to show that the injury was intended. When an act, such as conversion, was done intentionally and produced harm without just cause or excuse, it was willful and malicious for purposes of § 523(a)(6), without proof of a specific intent to injure. Intent to injure was established by showing that the debtor intentionally performed an act which necessarily caused injury or that was certain to ca[u]se injury.
Id. at 74 (citations omitted). Thus, a debt- or could not discharge under § 523(a)(6) any intentional act, which necessarily caused an injury, even if the debtor never intended the resulting injury.
Geiger
substantively and dramatically changed this analysis. The defendant physician in
Geiger
attempted to treat a patient’s injured foot. 523 U.S.. at 59,
The word “willful” in (a)(6) modifies the word “injury,” indicating that nondis-chargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury. Had Congress meant to exempt debts resulting from unintentionally inflicted injuries, it might have described instead “willful acts that cause injury.” Or, Congress might have selected an additional word or words, i.e., “reckless” or “negligent,” to modify “injury.” Moreover, as the Eighth Circuit observed, the (a)(6) formulation triggers in the lawyer’s mind the category “intentional torts,” as distinguished from negligent or reckless torts. Intentional torts generally require that the actor intend “the consequences of an act,” not simply “the act itself.”
Id.
at 61-62,
The Kawaauhaus’ more encompassing interpretation could place within the excepted category a wide range of situations in which an act is intentional, but injury is unintended, i.e., neither desired nor in fact anticipated by the debtor. Every traffic accident stemming from an initial intentional act — for example, intentionally rotating the wheel of an automobile to make a left-hand turn without first checking oncoming traffic' — could fit the description. A “knowing breach of contract” could also qualify. A construction so broad would be incompatible with “well-known” guide that exeep-tions to discharge “should be confined to those plainly expressed.”
Id.
at 62,
In Geiger, however, the Supreme Court cited with approval two of its prior decisions, which concerned conversion of a creditors’ property, 19 clarifying that to find a conversion non-dischargeable, there must be an intentional injury. Furthermore, the Supreme Court reminded that, with reference to claims of conversion, “not every tort judgment for conversion is exempt from discharge.”
There is no doubt that an act of conversion, if willful and malicious, is an injury ... within the scope of this exception .... But a willful and malicious injury does not follow as of course from every act of conversion, without reference to the circumstances. There may be a conversion which is innocent or technical, an unauthorized assumption of dominion without willfulness or malice. There may be an honest but mistaken belief, engendered by a course of dealing, that powers have been enlarged or incapacities removed. In these and like cases, what is done is a tort, but not a willful and malicious one.
Davis v. Aetna Acceptance Co.,
Decisions shortly after
Geiger
concluded that § 523(a)(6) required a showing of an intentional tort with a subjective standard of intent.
In re Powers,
decided by this Court, is illustrative.
Branch Banking & Trust Co. of Va. v. Powers (In re Powers),
Likewise, this Court must apply a subjective standard of intent and determine whether the debtor, Stewart M. Powers, intended to cause injury to the plaintiff, BB & T, by delivering his Portfolio Account to First Union when BB & T had a prior security interest in the account. First, the Court must examine the intentional acts of the defendant. The defendant stipulated that he directed Paine Webber to deliver his Portfolio Account to First Union without advising BB & T. The defendant’s transfer of funds was an intentional act done to subordinate the plaintiffs interest in the Portfolio Account to that of First Union. However, the debtor’s intentional transfer of the plaintiffs collateral to First Union standing alone is not enough to satisfy the requirements of § 523(a)(6), when he asserted that the subordination would not injure BB & T’s chances of being paid in full as he intended to pay its loan off over time. The debtor also expected to pay the First Union loan according to its terms which would have the effect of restoring the collateral to BB & T.
Clearly, the defendant’s act of subordinating the plaintiffs interests in his Portfolio Account was an improper act, but the Court is bound by the subjective intent of the debtor in determining whether the injury to the plaintiff was intended. However, the defendant’s intent was to pay the plaintiff the balance due it, even though he subordinated its interest to First Union.
Id.
at 76-77;
see also Roumeliotis v. Popa (In re Popa),
A subsequent case decided by the Fifth Circuit Court of Appeals advocated a slight erosion in this standard.
In Miller v. J.D. Abrams, Inc. (In re Miller),
In an unpublished opinion, the Tenth Circuit Court of Appeals rejected the substantial certainty approach of the Fifth Circuit, concluding that “the ‘willful and malicious injury’ exception to discharge-ability in § 523(a)(6) turns on the state of mind of the debtor, who must have wished to cause injury or at least believed it was substantially certain to occur.” Via
The Ninth Circuit Court of Appeals has also weighed in the
post-Geiger
analysis. In
Petralia v. Jercich (In re Jereich),
In Geiger, the Court did not answer the question before us today-the precise state of mind required to satisfy § 523(a)(6)’s “willful” standard. The Geiger Court did, however, cite with approval its prior decision of McIntyre v. Kavanaugh and the Restatement (Second) of Torts § 8A.
In McIntyre, the debt arose from the debtor’s conversion of the creditor’s property. Holding that this debt was excepted from discharge under § 523(a)(6), the Court indicated that a wrongful act that is voluntarily committed with knowledge that the act is wrongful and will necessarily cause injury meets the “willful and malicious” standard of § 523(a)(6). Similarly, the Restatement definition of intent cited by the Geiger Court requires the actor either to desire the consequences of an act or to know the consequences are substantially certain to result. Under this definition, the actor’s deliberate act with knowledge that the act is substantially certain to cause injury is sufficient to establish willful intent.
This definition is consistent with the approach this court took in the post-Geiger case of In re Bailey, [197 F.3d 997 (9th Cir.1999)] where we stated that “[t]he conversion of another’s property without his knowledge or consent, done intentionally and without justification and excuse, to the other’s injury, constitutes a willful and malicious injury within the meaning of § 523(a)(6).”
We hold, consistent with the approaches taken by the Fifth and Sixth Circuits, that under Geiger, the willful injury requirement of § 523(a)(6) is met when it is shown either that the debtor had a subjective motive to inflict the injury or that the debtor believed that injury was substantially certain to occur as a result of his conduct. We believe that this holding comports with the purpose bankruptcy law’s fundamental policy ofgranting discharges only to the honest but unfortunate debtor.
Id. at 1207-08.
Prior to
Geiger,
the Fourth Circuit Court of Appeals had little trouble concluding a debtor who misappropriated or converted another’s property would not receive discharge of the obligation under § 523(a)(6) of the Bankruptcy Code.
See, e.g., St Paul Fire & Marine Ins. Co. v. Vaughn,
Cases subsequent to considering whether acts of conversion constitute willful and malicious injury have focused on the distinction as to whether the conversion was an intentional one or merely a reckless or negligent conversion of property.
Compare Peklar v. Ikerd (In re Peklar),
The problem with conversion cases ... is that rarely are the debtors acting out of a desire to injure the creditors, even though the injury to the creditor, although not desired, is almost always substantially certain to result from a debtor’s actions. Thus, the key in conversion cases is to analyze each set of circumstances on a case-by-case basis to determine whether the conversion is in the nature of an intentional tort orwhether the conversion is the result of a negligent or reckless tort — but not willful or malicious.
Avco Fin. Servs. of Billings v. Kidd (In re Kidd),
The common law tort of conversion does not fall neatly into either of Justice Ginsberg’s categories because the conduct it reaches spans both. At common law, a defendant who is shown to have exercised dominion over a plaintiffs property is liable for the resulting conversion, even where she reasonably and innocently believes the property is her own. At the other end of the spectrum, common law conversions encompasses torts, like embezzlement, that are also prosecutable as crimes.
Haemonetics v. Dupre,
Conversion cases also require careful consideration of the nature of the injury suffered by the creditor when a court considers whether a debtor “intended” to cause the specific harm inflicted. As one court has observed:
The creditor’s true injury occurs on an abstract level. It is the debtor’s invasion of the creditor’s legally protected right. The court should focus on this injury, as opposed to the resulting damage, when it asks whether the injury was intentional. When it does so, the answer will usually be relatively obvious because the debtor’s action is the injury. For example, in a case involving assault and battery, the true injury is not the creditor’s broken jaw, but rather, the unconsented to touching that produced the broken jaw. Consequently, the question to ask is not whether the debt- or intended to break the creditor’s jaw, but instead, whether the debtor intended to hit the creditor. In defamation cases, the true injury is not the damage to the creditor’s reputation; it is the publication of falsehoods about the creditor that led to the damaged reputation. Consequently, the proper question is not whether the debtor intended to injure the creditor’s reputation, but instead, whether the debtor intended to publish the defamatory remarks. Similarly, in the conversion of collateral scenario, the true injury is not that the creditor’s debt goes unpaid. The true injury is that the creditor’s collateral was wrongly or improperly disposed of and that the proceeds were used for purposes other than payment of the obligation that property secured. Consequently, the proper question is not whether the debtor intended that its secured creditor would go unpaid. Instead, the question to ask is whether the debtor intended to improperly use the creditor’s collateral and/or its proceeds for purposes other than the payment of the debt that property secured. If so, there is an intentional injury.
ABF, Inc. v. Russell (In re Russell),
Malice does not mean the same thing for nondischargeability purposes under § 523(a)(6) as it does in contexts outside of bankruptcy. In bankruptcy, debtor may act with malice without bearing any subjective ill will toward plaintiff creditor or any specific intent to injure same. See In re Stanley,66 F.3d at 667 (citing St. Paul Fire & Marine Ins. Co. v. Vaughn,779 F.2d 1003 , 1008-09 (4th Cir.1985)). The Fourth Circuit defines malice as an act causing injury without just cause or excuse. See In re Powers,227 B.R. at 73 .
Debtor’s subjective mind set is central to the inquiry as to whether debtor acted deliberately in knowing disregard of a creditor’s rights in property. In fact, a plaintiff creditor can even establish malice on an implied basis from a showing of debtor’s behavior, as well as a presentation of the surrounding circumstances. See St. Paul Fire & Marine Ins. Co.,779 F.2d at 1010 (“[i]mplied malice, which may be shown by the acts and conduct of the debtor in the context of their surrounding circumstances, is sufficient under ... § 523(a)(6).”); Hagan v. McNallen (In re McNallen),62 F.3d 619 , 625 (4th Cir.1995). What is required is that plaintiff prove that debt- or’s injurious act was done deliberately, intentionally and with knowing disregard for plaintiffs rights. See In re Stanley,66 F.3d at 667 .
Johnson v. Davis (In re Davis),
Finally, this Court is reminded that “[s]ince a debtor in a § 523(a)(6) case is unlikely to admit that he or she intended to cause injury, or that he or she was substantially certain that injury would result, this state of mind can be established through circumstantial evidence.”
In re Sweeney,
Against this backdrop, this Court must assess whether the conduct of Robinson constitutes “willful and malicious injury” prohibiting the discharge of Robinson’s debt to Dominion. First, accepting the parties’ stipulation, this Court concludes that anyone could have had access to meter. Stipulations of Fact, at 2. Secondly, given the fact that Dominion stated at the Summary Judgment Hearing that Dominion was no longer pursuing the § 526(a)(6) claim with regard to injury to the property of Dominion because Dominion was unable to obtain sufficient evidence to prove Robinson actually was the individual who tampered with the meter, this Court determines that Dominion admitted that it does not have enough evidence to determine Robinson deliberately and intentionally tampered with the meter. Summary Judgment Hearing, at 2-3.
McAllister testified that the only reason Dominion concluded that Robinson was responsible for the meter tampering is because he received a benefit; thus, Dominion appears to be arguing that the mere fact that Robinson benefitted proves that he “willfully and maliciously” injured Dominion. Further, Dominion attempted to rely on the Virginia Code to bolster its argument that because Robinson benefit-ted there exists a presumption that Robinson is liable. Counsel for Robinson does not deny that Robinson received the benefit of the energy usage; however, he argues that the mere fact that Robinson benefitted does not equate to a finding of liability. He further argues that if the measure of whether a debt is dischargea-ble is whether the debtor benefitted from the debt, then no debt is dischargeable.
This Court concludes that the mere fact that the debtor benefitted is not enough to determine
per se
that the debt is non-dischargeable. After
Geiger,
courts have frequently concluded that conversion alone is not enough to prevent discharge, as conversion standing alone does not prove the debtor possessed the requisite intent.
See e.g., Kawaauhau v. Geiger (In re Geiger)
The question then for this Court is not whether Robinson benefitted from the meter failing to register electricity consumption, but whether Robinson intentionally tampered with the meter or whether the receipt of the benefit was done with the intent to convert the electrical service. Dominion admitted that it is without sufficient evidence to prove that Robinson tampered with the meter and McAllister testified to the fact that Dominion only concluded Robinson was liable because he benefitted; nevertheless Dominion attempted to argue that the circumstantial evidence proves Robinson must have engaged in meter tampering. These competing arguments espoused by Dominion are factually bipolar as Dominion is essentially admitting that it cannot prove Robinson tampered with the meter yet arguing in the same breath that the evidence indicates that he engaged in meter tampering; the Court will nevertheless consider whether the circumstantial evidence proves by a preponderance of the evidence that Robinson tampered with the meter.
The circumstantial evidence presented in this case is contradictory. Certainly, it is rather suspicious that the meter at the Service Address registered that only 700 kilowatts were used between October 2000 and July 2003. Additionally, the fact that Robinson never questioned Dominion when his electric bill went from approximately $8.00 to $80.00 in the period of one month and the fact that he did not protest the $4,056.39 debt, easts doubt on his innocence. However, this is not a ease where all of the circumstantial evidence is one-
While the most incriminating evidence against Robinson is the fact that the meter allegedly stopped working sometime between the time the prior tenant moved out and the time when he moved into the Service Address, the ability of this evidence to incriminate Robinson is substantially diminished by the material incompleteness of the billing records for the Service Address. As previously discussed, because of the error that resulted in Dominion’s billing records from October 25, 2000 to July 31, 2003 being deleted, it is impossible to determine when the meter stopped registering usage and thus when the tampering occurred. Therefore, this Court is not presented with a situation where Dominion can prove that the meter was working properly when Robinson moved into the Service Address and that only after Robinson moved into the residence the meter failed to register usage. Nor is this a situation where Dominion can determine exactly when the last tenant moved out of the Service address or rule out the possibility that a potential tenant tampered with the meter during the time the Service Address was allegedly vacant. Tr. at 28-29. Thus, given the facts presented in this case, the Court is unable to determine by a preponderance of the evidence that Robinson engaged in meter tampering.
Dominion argues that even if it cannot prove that Robinson tampered with the meter, Robinson is still liable for intentionally converting Dominion’s energy. Dominion further argues that Robinson knew he was not being correctly billed for the electrical service yet he continued to use Dominion’s electricity; thus, Robinson was intentionally converting Dominion’s property and the debt should be exempt from discharge under § 523(a)(6). In contrast, Robinson admits he benefitted from the meter failing to register electricity; however, he argues that he had no knowledge that the meter had been tampered with nor did he realize the meter was failing to record electricity usage. In support of the argument that he did not realize the meter was failing to properly record electricity usage, Robinson testified he paid his monthly electric bill without paying a lot of attention to the details. In addition, he alleges this is the first time he has lived alone, that he did not realize his electric bill reflected zero electrical usage, and that he paid the amount he was billed and assumed Dominion was billing him correctly.
Given the parties competing arguments, the question to be determined by the Court is whether the receipt of the benefit was intentional, or merely “innocent” or “technical?”
Davis v. Aetna Acceptance Co.,
The circumstantial evidence presented in these instances, here again, is contradictory. The evidence relied on by Dominion is countered by the gap period in the billing records, evidentiary contradictions, and the difficulty of distinguishing between intentional and negligent conduct when there is no direct evidence of intent. First, this Court is not persuaded that the timing of the alleged tampering is circumstantial evidence that Robinson intended to convert Dominion’s property. The Court finds the timing evidence particularly unpersuasive in light of the fact that Dominion has no billing or usage records for the Service Address during the alleged time period of the tampering. While Robinson stipulated to the fact that the meter at the Service Address had been tampered with and this resulted in “no utility being recorded for the Defendant’s residence from June 2001 through January 2004,” this stipulation does not preclude a finding that the meter was tampered with prior to Robinson residing at the Service Address. Stipulations of Fact, at 1. Dominion suggests that the fact that the meter only registered 700 kilowatts between October 2000 and January 2004 is evidence that the tampering must have occurred around the time Robinson moved into the Service Address; however, Dominion was unable to provide the Court with billing records for the period between October 2000 to July 2003. Further, McAllister testified that Dominion does not have anything in its file that reflects when the tampering occurred or when the Service Address was vacant. 21 Tr. at 28, 37 and 42. Given that there are no records for the Service Address between October 2000 and July 2003, this Court finds the evidence inconclusive regarding when the tampering occurred. Quite simply, it is possible the tampering could have occurred prior to Robinson residing at the Service Address which thereby makes it plausible that Robinson did not have any knowledge of the tampering.
Dominion also alleges that Robinson should have noticed his electric bills were for $8.40 and that the said bills showed zero electrical usage. Dominion further alleges that Robinson’s payment of the bills and failure to contact Dominion about the inaccurate billing is evidence of Robinson’s intentional conversion of Dominion’s property. In contrast, Robinson argues that he did not realize the bills showed zero electrical usage and that he relied on
Robinson’s evidence was also perplexing at times. Robinson stipulated to the fact that no utility usage was recorded for the Service Address from June 2001 to January 2004; yet, in his Deposition answer, Robinson stated that his average bill was $30.00 in 2003. Pl. Exh. 11, at 15. Further, while Dominion’s billing records indicate that Robinson was only billed $8.40 per month from July 2003 to January 2004, Robinson, in his response to Plaintiffs Interrogatories, denied the allegation that he never received a utility bill from Dominion that was higher than $10 per month. PL. Exh. 10, at 4. In addition, counsel for Dominion attempted to weaken Robinson’s credibility by highlighting the fact that Robinson testified at the Deposition that he always paid the bill when he received it and that he also paid the bill in a timely manner while also highlighting the fact that Dominion’s records reveal that Robinson was not always timely in the payment of his electrical bill. Pl. Exh. 11, at 9-10; Pl. Exh. 1, at 04.
These discrepancies are troubling to the Court; however, given the fact that Dominion is missing extensive billing records from the time period in question, the Court gives little weight to the evidence in regards to its ability to contradict Robinson. For example, there is nothing in the records to indicate what Robinson was billed before July 2003 or whether he paid his bills in a timely fashion before July 2003. 22
Further, this Court finds reliance on Plaintiffs Exhibit One to contradict Robinson problematic because of issues concerning this document. First, as already noted, this Court is troubled by the substantial gap period reflected in Plaintiffs Exhibit One. Secondly, Dominion submitted Plaintiffs Exhibit One as evidence of Robinson’s account usage, billing, payments and meter readings and Exhibit One has the name “Duane L. Robinson” in the left corner; however, the billing date depicted in the Exhibit starts on March 30, 2000, which is approximately fourteen months before Robinson allegedly moved into the Service Address. 23 Tr. at 5-6; Pl. Exh. 1, at 08.
Further, even assuming Robinson realized his electric bills were for unusually
Dominion further argues that in 2004 Robinson received a monthly electric bill of approximately $80.00 after the meter was replaced and did not question the bill is circumstantial evidence of the fact that Robinson knew he was previously receiving un-billed for electricity. Robinson testified that the reason he did not question the substantially higher bill is because Dominion contacted him about the replacement of the meter. Further, he stated that he got a letter from Dominion informing him that the meter at the Service Address was defective. The evidence regarding the time-frame of the communication between Robinson and Dominion is conflicting. The evidence is uncontested that Dominion replaced the meter at the Service Address in January 2004. Therefore, if Robinson received the approximately $80.00 dollar bill for electricity and the letter stating the meter at the Service Address was faulty around the same time, he would have learned about the faulty meter around February of 2004. Pl. Exh. 1, at 09. In contrast, McAllister testified that Dominion did not contact Robinson until 2005. However, her testimony was difficult to interpret regarding when Dominion contacted Robinson; thus, this Court is unable to determine a clear time-line.
24
Further, if Dominion waited until 2005 to contact Robinson, the delay in notification is perplexing and unexplained. The non-recording of the meter was discovered in January 2004; thus, it makes little sense that Dominion would delay until 2005 to contact Robinson. Given the aforementioned confusing testimony and the fact that this Court does not have a copy of the initial communication between Dominion and Robinson, we cannot know if the substantially higher electric bill and the initial communication were close in time. If the electric bill and the initial communication to Robinson were close in time, it is certainly understandable why Robinson did not contact Dominion about the substantially higher electric bill — he would have known the meter had been replaced and thus the bills were higher because of the new meter. Given the fact that the evidence is inconclusive regarding
Finally, Dominion argued that Robinson’s agreement to pay the $4,056.29 debt is circumstantial evidence that Robinson knew he was receiving un-billed for electricity. Dominion alleges that it initially told Robinson that the $4,056.29 debt was for energy theft; however, Robinson alleges to the contrary. Nevertheless, Robinson does admit that he was told that the debt existed due to the meter failing to register the electricity consumed at the Service Address. Further, Robinson stated that after Dominion informed him of said debt, he called Dominion and requested a breakdown of the charges. Dominion provided Robinson with a breakdown of charges and Dominion alleges that this breakdown of charges indicated the debt was for “energy theft.” 25 However, as previously discussed, the Court was not given a copy of the initial communication that Dominion sent to Robinson regarding the debt and Plaintiffs Exhibit Five is not dated; therefore, this Court is unable to determine what, if anything, Robinson was initially told regarding the debt.
Nevertheless, regardless of whether Robinson knew the demand of Dominion was for “energy theft,” this Court finds that Robinson’s acceptance of the debt does not establish that he intentionally and knowingly stole electricity. Robinson testified that he did not dispute the debt because he assumed he owed the money since Dominion told him the meter at the Service Address had failed to record his electricity consumption. Additionally, Robinson admits he received a benefit from the electricity; in fact, Robinson stated in his answer to Plaintiffs Interrogatories: “[defendant believed the debt was owed because he, in fact, used the electricity and relied on the accuracy and veracity of Dominion Virginia Power in calculating the usage.” Pl. Exh. 10, at 8. However, acknowledging that a benefit was received and agreeing to pay for the benefit in hindsight does not lead to the inference that the debtor must have intentionally converted the benefit. Further, Robinson testified that he did not question Dominion about its basis for determining the meter had been tampered with because he did not think it was within his rights. In addition, the evidence shows that Dominion threatened to disconnect Robinson’s service if he did not pay the debt by February 10, 2005. 26 Pl. Exh. 4. Therefore, given the aforementioned analysis, this Court is not persuaded that the fact that Robinson accepted and acknowledged the debt constitutes sufficient proof that he “maliciously and willfully” injured Dominion.
Weighing all the evidence, the Court is unable to conclusively determine Robinson’s conversion of Dominion’s electricity was intentional as opposed to innocent or
In the case sub judice this Court is left with numerous unanswered questions and evidentiary contradictions; therefore, the Court concludes Dominion failed to meet its burden of proof under § 523(a)(6) of the Bankruptcy Code.
D.
§ 523(a)(2)(A)
False Pretenses, False Representation, or Actual Fraud
Dominion asserts that Robinson’s debt is nondischargeable as a debt arising from false pretenses, false representation, or actual fraud. As this Court has previously held, to make a debt non-dischargeable under § 523(a)(2)(A), the plaintiff must prove the following elements:
(1) That the debtor made a representation;
(2) That at the time the representation was made, the debtor knew the representation was false;
(3) That the debtor made the false representation with the intention of deceiving the creditor;
(4) That the creditor relied on such representation; and
(5) That the creditor sustained the alleged loss and damage as the proximate result of the false representation.
Elrod v. Bowden (In re Bowden),
1. Did Robinson Make a Representation?
Representations are either express or implied. “A false representation
There is no evidence that Robinson made any express or overt false representations to Dominion. For example, there is no evidence that Robinson made any false statements regarding his electricity usage or billing to Dominion during the period of time when the alleged unauthorized energy usage was occurring. Therefore, this case is distinguishable from cases where the debtor verbally represented something to the creditor but then engaged in activities that contradicted his express statements.
In re McKnew,
If the evidence established that Robinson had tampered with the meter, the Court would have to consider whether his tampering and subsequent acceptance and payment of the electric bill was a misrepresentation intended to create and foster a false impression that the meter was registering electricity properly. However, while Dominion presented some circumstantial evidence which tends to suggest Robinson tampered with meter or knew the meter had been tampered with, there was also evidence presented at trial that suggests Dominion has no idea nor any ability to prove who tampered with the meter. Further, Dominion admitted that it cannot prove Robinson actually tampered with the meter. After weighing all the evidence, the Court concludes the circumstantial evidence does not equate to a finding that Robinson tampered with the meter or had knowledge of the meter tampering.
28
Therefore, what distinguishes this case from many other § 523(a)(2)(A) cases is the fact that there is no proof that Robinson engaged in any physical or verbal affirmative act.
See generally Elrod v. Bowden (In re Bowden),
Dominion argues that even without direct proof that Robinson tampered with the meter, Robinson is nevertheless liable under § 523(a)(2)(A) because Robinson knew that he was not being accurately billed for his electricity usage and Robinson’s subsequent use of the electricity was fraudulent. Further, Dominion argues that Robinson’s failure to disclose the fact that his bills were inaccurate constitutes fraud and a misrepresentation. Robinson, on the other hand, argues that his failure to contact Dominion regarding his electric bills is not fraudulent; rather, it is indicative of the that he never paid much attention to his bills. In addition, he argues
This Court has previously held that “[f]raud and misrepresentation may be established by a failure to disclose on the part of the debtor where such failure creates a false impression which is known by the debtor.”
In re McKnew,
There is some circumstantial evidence that indicates that Robinson may have been aware that his electric bills were unusually low; however, that alone does not prove Robinson engaged in meter tampering. Nor does the fact that Robinson’s bills were unusually low prove that Robinson thus must have realized that someone tampered with the meter. The Court will not rehash its discussion of the circumstantial evidence except to note that the Court concluded during its discussion of § 523(a)(6) that the circumstantial evidence does not establish by a preponderance of the evidence that Robinson must have had knowledge of the tampering and thus fraudulently used the unmetered electricity service. Further, the evidence does not establish that Robinson’s failure to notify Dominion about his bills constitutes an omission that equates to a representation. This Court concludes that this case is distinguishable from most other cases where misrepresentations were implied by silence. For example, merely paying a utility bill as it comes due is distinguishable from a case where the debtor had a independent duty to disclose information.
Trizna & Lepri v. Malcolm (In re Malcolm),
For the reasons discussed above, Dominion did not meet its burden of convincing the Court that Robinson made a false representation or engaged in fraudulent conduct. Therefore, the first element of § 523(a)(2)(A) has not been satisfied, and since all of the elements must be proven in the conjunctive under § 523(a)(2)(A) in order for a debt to be declared non-dischargeable, Dominion has failed to persuade the Court that this provision is applicable. However, for the exercise of analyzing Dominion’s claim in its entirety, the Court will consider the remaining elements of § 523(a)(2)(A).
2. Did Robinson know the Representation was False?
To make a debt non-dischargeable, the plaintiffs must prove the debtor knew or should have known the representation was false when made.
Koma v. Brooks (In re
Brooks),
3. Did Robinson Intend to Deceive?
“Because direct proof of intent (i.e. the debtor’s state of mind) is nearly impossible to obtain, the creditor may present evidence of the surrounding circumstances from which intent may be inferred.”
Universal Bank, N.A. v. Grause (In re Grause),
This Court has also previously held that “the Court may infer intent to deceive from the surrounding circumstances.”
KMK Factoring, L.L.C. v. McKnew (In re McKnew),
4.Did Dominion Justifiably Rely on the Representations?
Assuming arguendo that Dominion has proven the first three elements,
Dominion argues that it relied on Robinson’s payment of the electricity bill as an indication that Robinson was being properly billed. Further, Dominion alleges in its Complaint that Dominion relied on the meter readings provided by the tampered meter with respect to the quantity of electricity being used at the Service Address. Pl. Compl., at 4. As previously discussed, in order for Dominion to even begin to convince the Court that it relied on the tampered meter or Robinson’s payment as a representation, Dominion would have to convince the Court that Robinson engaged in meter tampering or had knowledge of the tampering. However, even assuming argumendo that Dominion had proven that Robinson engaged in meter tampering and subsequently continued to receive the benefit of the unregistered electricity, Dominion’s reliance argument is flawed.
As this Court has previously held, “plaintiffs are not required to continually look over an entity’s shoulder.”
In re McKnew,
As previously stated, “|j]ustification is a matter of ... the circumstances of the particular case ....”
In re Field,
Dominion acknowledges that it did not realize that the meter was failing to register electricity until approximately January 2004, even though the meter allegedly failed to record the utility being used at the Service Address since at least June of 2001. Stipulations of Fact, at 1. Further, Dominion admits that the meter is read every month by a meter reader employed by Dominion. In addition, Robinson alleges that he paid his monthly bill in cash at a Dominion service center. While the general rule is that creditors do not have to constantly verify every representation that the debtor makes, justifiable reliance is not without its limits and a creditor is “required to use his senses and cannot recover if he blindly relies upon a misrepresentation the falsity of which would be patent to him.”
In re Field,
While the failure of the meter to register electricity might not have been a patent indicator of fraud initially, it appears to this Court that at some point over a two and half year period Dominion should have determined such a meter reading, whereby the meter recorded zero electricity usage, was worthy of investigation. In addition, since Robinson alleges he paid his bills in cash, it is difficult for this Court to comprehend why during that two and half year time period a Dominion representative never investigated the reason Robinson was only paying $8.40. Further, and perhaps more importantly, its necessary to distinguish that this is not a case where the debtor made false statements about his own financials; rather this is a case where the very bills that were allegedly “misrepresentations” were created by the creditor. Additionally, this is not a case where the creditor received numerous representations from the debtor and thus its understandable that one indicator of fraud is “hardly sufficient to negate the numerous other circumstances which justified [the creditor’s] reliance on [the debtor’s] misrepresentations.”
In re McKnew,
This ease is also fundamentally different than other tampering cases, because the instrumentality in this case belonged to the creditor not the debtor. Dominion, unlike the typical plaintiff, was in a position to investigate “red flags.” Dominion’s disregard of the “red flags,” dictates that Dominion’s reliance on Robinson was not justified.
Giovanni v. Grayson, Kubli & Hoffman, P.C. (In re Giovanni),
Under the present facts, even if Robinson knew about the inaccuracy of the bills, Dominion was not justified in relying on Robinson’s payment as evidence of the accuracy of the bill or meter. Robinson’s meter readings and electrical bills should have been “red flags” to the monthly meter readers and to any Dominion representative who processed the bills and accepted payment from Robinson. Dominion argues that the fact that meter was recording zero electricity usage was not a “red flag” because its not unusual for accounts to have zero usage. Further, McAllister testified that “when somebody moves out, the account will record nothing.” Tr. At 23. While this Court understands that a period of a few months of zero usage might not be a red flag, this Court concludes that a period of approximately two and a half years surely should have raised a “red flag.” It would be inequitable to allow Dominion to act unreasonably and untimely in its investigation of fraud yet
5. Did Dominion’s Damages Proximately Result from Robinson’s Representations
If the Court had found that Robinson’s actions satisfied the other elements of § 523(a)(2)(A), the final issue would be whether or not the plaintiffs harm resulted from the debtor’s representations. Proximate cause is both (1) causation in fact “loss suffered by one who justifiably relies upon the truth of the matter misrepresented, if his reliance is a substantial factor in determining the course of conduct that results in his loss;” and (2) legal causation, “if the loss might reasonably be expected to occur from the reliance.” Restatement (Second) of Torts §§ 546, 548A;
see also In re Britton,
Assuming
arguendo
that Robinson made a misrepresentation and this misrepresentation led to Dominion’s inaccurate billing of Robinson, there is a causal connection between the misrepresentation and Dominion’s harm. The misrepresentation impaired Dominion’s ability to collect its proper payment from Robinson; therefore, Dominion’s collection ability and profit from providing the electricity service was reduced by the misrepresentation. Unlike in some cases, the financial loss in the case
sub judice
makes it apparent that there was a direct relationship between the creditor’s loss and the debtor’s actions.
See In re Grant,
E.
Attorney Fees
Robinson, in his Response to Dominion’s Complaint, requested that the Court award him reasonable legal fees and costs. Response to Compl., at 1-2. However, Robinson did not raise the issue of legal fees and costs at trial. Further, he presented no evidence to the Court regarding the amount of fees requested or the reasonableness of fees.
Additionally, ignoring the evidentiary problem, the Court finds that Dominion’s Complaint was substantially justified and thus the parties should be responsible for their own costs and fees. Section 523(d) of the Bankruptcy code provides:
If a creditor requests a determination of dischargeability of a consumer debt under subsection (a)(2) of this section, and such debt is discharged, the court shall grant judgment in favor of the debtor for the costs of, and a reasonable attorney’s fee for, the proceeding if the court finds that the position of the creditor was not substantially justified, except that the court shall not award such costs and fees if special circumstances would make the award unjust.
11 U.S.C. § 523(d) (2005). The circumstantial evidence presented, while not enough to meet Dominion’s preponderance of evidence burden, indicates that Dominion had a reasonable basis for bringing the Complaint.
See generally Walker v. Star USA Fed. Credit Union (In re
Walker),
V.
SUMMARY
The Court has great sympathy for Dominion given the frustration and annoyance it experiences whenever a customer utilizes its services without paying for it. Dominion’s efforts to curb fraud are commendable. However, in the end, the Court was presented with a particularly challenging factual scenario, but was not given all the necessary pieces to solve the puzzle. For the aforementioned reasons, the Court concludes that Dominion failed to meet its burden of proof pursuant to §§ 523(a)(2) and (a)(6). Therefore, the Dominion Debt is dischargeable. Robinson is not entitled to attorney fees and costs pursuant to § 523(d) because Dominion had substantial justification for bringing the Complaint.
A separate order will issue.
The Clerk shall direct copies of this Memorandum Opinion to John M. Craig, Esquire, Counsel for the Plaintiff, and Glenn R. Tankersley, Esquire, Counsel for the Defendant.
Notes
. At the Summary Judgment Hearing, counsel for Dominion stated that Dominion was no longer pursuing one of the two possible § 523(a)(6) claims. Under § 523(a)(6), Dominion must prove willful and malicious injury by Robinson to the property of Dominion (the meter) or willful and malicious injury to the entity (Dominion). Counsel stated that Dominion was no longer pursuing non-dis-chargeability on the basis of injury to property because Dominion was unable to obtain sufficient evidence to prove that Robinson actually tampered with the meter. Therefore, this Court will only consider Dominion’s § 523(a)(6) claim with regard to injury to Dominion.
. Plaintiff’s Exhibit List included Exhibits 1- 11. Exhibit 1 is account documents; Exhibit 2 is Dominion’s Terms and Conditions ("Tariffs”); Exhibit 3 is Service/Field Order remarks; Exhibit 4 is the February 1, 2005 letter to Robinson; Exhibit 5 is Dominion's Investigated Energy Theft Summary of Related Charges; Exhibit 6 is the Meter Billing History for the prior tenant; Exhibit 7 is a Form Invoice issued by Dominion since January 2003; Exhibit 8 is Excerpts from the Deposition Transcript of Robinson; Exhibit 9 is the January 18, 2005 letter that Robinson sent to Dominion; Exhibit 10 is Robinson’s Response to Plaintiff's First Set of Requests for Admission ("Plaintiff’s Interrogatories”); and Exhibit 11 is Excerpts from Deposition Transcript of Robinson.
During the trial, Dominion requested that it be allowed to introduce an internal newsletter on meter tampering into evidence. The newsletter titled "Energy Diversion Case of the Month” (the "Case”) was admitted into evidence as Plaintiff’s Exhibit 12. Initially counsel for Robinson objected to the Case being introduced into evidence because he was not given a copy of it prior to trial nor did counsel for Dominion give him a copy of the Case at trial. Counsel for Dominion argued the Case should be admitted into evidence as a business record and counsel for Robinson, after being shown the Case, stated he had no objection to the Case being admitted into evidence. Therefore, the Case was admitted as Plaintiff’s Exhibit 12.
. While it is undisputed that Dominion discovered the meter tampering around January 2004, this Court is unable to determine exactly when Robinson was told of the $4,056.29 debt. McAllister's testimony regarding when Dominion first contacted Robinson is ambiguous. Counsel for Robinson aslced McAllister whether Robinson was contacted in early 2004 and McAllister testified "yes." Tr. at 35. Counsel for Robinson then followed-up his question about whether Robinson was contacted in early 2004 by asking, “is that correct, or early 2005?," whereby McAllister responded "[w]e contacted him in 2005.” Id. Robinson did not testify regarding the exact date he was first contacted by Dominion about the debt; however, he acknowledged the debt in a letter he wrote to Dominion on January 18, 2005. Pl. Exh. 9. In the letter Robinson wrote to Dominion acknowledging the debt, Robinson stated, "I have been noti-fied via a letter that I owe a balance of $4056.39.” Id. Further, Robinson testified that when he first learned of the debt, he requested a breakdown of the charges. In addition, it was after he received this breakdown of the charges that he sent the January 18, 2005 letter. Therefore, Dominion must have initially contacted Robinson sometime after January 2004 and prior to January 18, 2005.
. In his letter to Dominion, Robinson stated, "I do not deny this debt." Pl. Exh. 9. While Robinson admitted the debt in the letter, he did not reference "energy theft” in the letter. Therefore, the Court concludes the letter is only evidence that Robinson admits that he owes a debt for non-billed for electricity usage and the letter is not evidence of an admission or denial of the "energy theft” charge.
. Dominion’s Exhibit One, in relevant part, is included to illustrate this gap period:
Date Meter Read Use Total Amt
02/02/04 895 895 83.32
01/05/04 76884 0 8.40
12/03/03 76884 0 8.40
10/29/03 76884 0 8.40
09/30/03 76884 0 8.40
08/29/03 76884 0 8.40
07/31/03 76884 0 8.40
10/25/00 76160 277 27.85
09/29/00 75883 717 61.91
08/31/00 75166 741 63.77
08/01/00 74425 831 71.05
07/01/00 73594 278 27.92
06/01/00 73315 172 19.57
05/02/00 73144 274 27.61
03/30/00 72670 322 31.33
Pl. Exh. 1, at 08.
. Robinson’s account is allegedly not the only Dominion account that had information deleted from it; McAllister testified that there were other accounts during this time period where the records were deleted. Tr. at 41.
.The "Service/Field Order Remarks” submitted to the Court as Plaintiff's Exhibit Three provide that at some point on or before January 12, 2004, Dominion created a service order which requested the service technician to check for a non-recording meter or meter tampering at the Service Address. Pl. Exh. 3. Therefore, while the facts are not entirely clear regarding how Dominion became aware of the non-recording meter, the facts clearly reveal that in early 2004 Dominion sent a service technician to check on the meter because Dominion became concerned the meter was not properly registering service.
. At trial, Dominion introduced the "Energy Diversion Case of the Month” (the "Case”), which was admitted into evidence as Plaintiff's Exhibit 12. The Case is a copy of a monthly newsletter item that Dominion created to educate its employees about specific forms of meter tampering. This particular Case was designed to educate Dominion employees about the type of meter tampering that is alleged to have occurred in the present case. Pl. Exh. 12.
. McAllister testified that it is her experience that people could be severely injured if they tamper with a meter and do not know what they are doing. Tr. at 39.
. Plaintiff's Exhibit Six, which is the prior account holder’s billing record, reveals that while he was billed for 700 to 800 kilowatts some months that there were other months that he was he billed for less kilowatts. For example, in June 2000, the prior tenant was billed for 172 kilowatts and in July 2000 he was billed for 278 kilowatts. Pl. Exh. 6.
. Robinson, in his answer to Plaintiff's Interrogatories, denied the assertion that he had never received a utility bill from Dominion from June 25, 2001 through January 2004 that was higher than $10 per month. Pl. Exh. 10, Interrogatory No. 3, at 4.
. Counsel for Dominion referred Robinson to Plaintiff's Exhibit One and asked Robinson to explain the 8.40 bills from July 31, 2000 to January 1, 2004; however, the Court ruled that there was no basis for Robinson to have to explain the account records since the records belong to Dominion.
. As Plaintiff's Exhibit Twelve explains, Dominion now has a policy of instructing metering services to check for non-recording meters whenever an active account shows zero KWh usage for three months. Pl. Exh. 12. However, McAllister's testimony makes it clear that such a policy was not in effect during the time period when Robinson's meter was not registering service. These types of policies for discovering non-recording meters are all part of the new Revenue Protection Department of Dominion, which was not formed until January 2005.
. While Dominion argued the Tariffs and the Virginia Code create a presumption of liability, counsel for Dominion also admitted at trial, when questioned by the Court, that Dominion recognizes such state law presumptions do not apply in bankruptcy proceedings.
. The citations and quotations in this Memorandum Opinion to Title 11 of the United States Code are to those section in effect at the time Robinson’s Complaint was filed, not to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which took effect October 17, 2005.
. During the trial, Dominion attempted to rely on the Tariffs and the Virginia Code to bolster its argument; however, counsel for Dominion also admitted to the Court that these presumptions have no applicability in a bankruptcy proceeding. Therefore, this Court concludes that counsel for Dominion conceded that these presumptions are not applicable in the present bankruptcy case; nevertheless, for the sake of a complete record the Court will address whether the presumptions are applicable in a bankruptcy proceeding.
. Because Dominion did not present any evidence indicating that it had brought an action against Robinson in state court and received a final judgment, this Court does not have an issue where res judicata or collateral estoppel is determinative.
. As previously noted, Dominion stated at the Summary Judgment Hearing that it was only pursuing the § 523(a)(6) claim in regards to damage to Dominion for the utility service and that Dominion was no longer pursuing the (a)(6) claim of physical damage to the meter. See supra, fn. 1, at 2.
.
McIntyre
v.
Kavanaugh,
. In Virginia "a person is liable for conversion for the wrongful exercise or assumption of authority over another's goods, depriving the owner of their possession, or any act of dominion wrongfully exerted over property in denial of, or inconsistent with, the owner's rights.”
Simmons v. Miller,
. Counsel for Dominion, as part of his closing argument and in response to the Court's questions, attempted to argue that the evidence establishes that the previous tenant moved out of the Service Address in October 2000. However, McAllister testified that because of the record deletion, it is impossible to tell when the property became vacant. Tr. at 28 and 42.
. For example, since the invoices between October 2000 and June 2003 were deleted, there is no way to conclusively establish the exact amount of Robinson’s electric bills for the gap period. Tr. at 42. The evidence only shows that Robinson's bills were for $8.40 for half of 2003 and that leaves the other half of the year, and the previous two years, unaccounted for. Pl. Exh 1, at 08.
. Additionally, if Plaintiff's Exhibit One intended to include the records of the prior tenant, it is unclear why the account history depicted in Plaintiff's Exhibit One begins with the billing date of March 30, 2000 and thus does not list the February 02, 2000 or March 04, 2000 billing date that is reflected in Plaintiff's Exhibit Six. Pl. Exh. 1, at 08 and Pl. Exh. 6.
. For example, counsel for Robinson asked McAllister whether Robinson was contacted in early 2004, and McAllister testified "yes.” Counsel for Robinson then followed-up his question about whether Robinson was contacted in early 2004 by asking, “is that correct, or early 2005?” whereby McAllister responded “[w]e contacted him in 2005.” Tr. at 35. In addition, while the letter Robinson sent to Dominion accepting the $4056.39 debt is dated January 18, 2005 and references the fact that Robinson was notified via a letter that he owed the debt, this January 18, 2005-letter does not state when Robinson was initially contacted by Dominion. Pl. Exh. 9.
. Dominion alleges that Plaintiff's Exhibit Five, "Dominion Virginia Power Investigated Energy Theft Summary of Related Charges,” is a copy of the breakdown of the charges that Dominion provided to Robinson. Pl. Exh. 5.
. Plaintiff's Exhibit Four is dated February 1, 2005; therefore, Robinson had already acknowledged the debt before Dominion threatened to disconnect his service. Pl. Exh. 4. As already discussed, this Court was not given a copy of Dominion’s initial communication with Robinson; therefore, this Court has no way of determining whether Dominion alleged in that communication that "service [would] be disconnected” if Robinson failed to accept the debt. Id. Regardless of the timing, this Court finds the threat illustrative of the fact that many debtors would agree to pay such a debt in order to continue receiving service.
. As these cases illustrate and most recently
Foley & Lardner v. Biondo (In re
Blondo),
. See pages 339-344 for further discussion of this Court’s weighing of the circumstantial evidence and conclusion that the evidence does not establish that Robinson engaged in meter tampering or had knowledge of the tampering.