In Re Jeannie Niles, Debtor. Rita G. Otto v. Jeannie Niles
106 F.3d 1456
9th Cir.
1997
Check Treatment

*1 capital gains controversy, he should not have assessed the to tax penalty. addition

been

Accordingly, part. dissent NILES,

In re Jeannie Debtor. OTTO, Appellant,

Rita G. NILES, Appellee.

Jeannie

No. 95-55968. Appeals,

United States Court

Ninth Circuit.

Argued and Submitted Nov.

Decided Feb.

I. FACTUAL AND PROCEDURAL

BACKGROUND Appellant Rita G. Otto and her husband Dr. Evan L. Otto invested their retirement estate, money using in real appellee Jeannie *3 a property Niles as broker and manager. bought property Niles sold and at Dr. Otto’s direction. Niles also collected rents loan and payments Ottos, for the secured tenants for their rental properties, payments and made loans, on taxes, insurance, their behalf for and cleaning proper- maintenance and of the ties. property

Niles also acted as a manager for people. several other The funds collected behalf of all her clients went into the same property account; management expenses properties for all the managed she paid out of the account. same Niles with- also drew from property this account manage- ment percent fees of gross about ten of the Ottos, rents received. For the as for her clients, other kept separate ledgers, she re- Timothy Blackmar, Principe, D. Stevens & flecting respective balances in the ac- Principe, CA, Diego, San appellant. for count. Howell, CA, J. Diego, William San for early Dr. Otto decided retire. appellee. He asked Niles to inform the Ottos

status of their holdings real estate and in- come. Niles told the Ottos that she had borrowed, lost, or misappropriated around $130,000 of their money. retirement day next Dr. Otto committed suicide. Mrs. Otto obtained a judgment state court against stipulation, Niles based on HAWKINS, Before: FERNANDEZ and breach of agreement a settlement pur- Judges, SCHWARZER,* Circuit Senior ported to resolve a number Otto’s claims Judge. District against her. Niles then filed for Chapter under seeking discharge of her SCHWARZER, Judge: Senior District debt to Otto. adversary pro- Otto filed an ceeding, contending that Niles’ debt appeal This calls on us to determine who dischargeable because it resulted defal- bears the burden of in a nondischarge- by fiduciary. cation a ability proceeding 11 U.S.C. brought by a creditor alleging At court, the trial in Otto “defalcation while acting a capac- made certain arising claims out of Niles’ ity.” We must also decide whether loans by handling of property management ac- a client to his real agent (1) estate and not count: $2,600 for an interest repaid allegedly she received from one of Otto’s 523(a)(4). (2) retained; borrowers and for four install- * Schwarzer, Honorable William W claims, Senior United particular, Otto made other a claim Judge States District for funds, the Northern District of that Niles had embezzled which were not California, sitting by designation. preserved appeal. cy found—correctly—that $3,333 loan she had Niles was personal on a ments of paid, acting as a with to the that were not but from Otto taken (3) full; property management account and this is not as she accounted for $3,579.60 disputed. Because allegedly taken from an account Niles collected rents capacity in her as a licensed changed positive balance of the Ottos real Niles when broker, $1,568.09 estate Cal.Bus. & negative balance of Prof.Code (4) 10131(b) broker), (defining for a real by enclosing parentheses; it in estate required pay to which she was not enti- was either those funds di- commission rectly to or to hold them in bankruptcy court found these the Ottos a trust tled. The $16,512.93, items, fund account in aggregating to be “book- accordance the Ottos’ instructions, dischargeable. she was the trustee of ex- keeping errors” $8,914 press that a cheek for trust. Cal.Bus. & Prof.Code court also found *4 Strehlow, 10145(a)(1); § deposited of the and Batson v. 68 Cal.2d received on behalf Ottos 662, 674, Cal.Rptr. 441 by personal account rather 68 P.2d 101 Niles into her (1968) (“The account, property management imposes on a real estate than into the 523(a)(4). agent obligation § nondischargeable ‘the same of undivided ser- under loyalty imposes a vice and that on trustee arising claims out of Otto also asserted ”); beneficiary.’ in favor of his Cal.Civ.Code by to Niles and personal loans the Ottos 2322(e). Thus, § “the “prepaid commissions.” to her of express ... from an [arose] or technical trust funds, repaid of these borrowed Niles some imposed that was before and without refer- more. At the time but continued to borrow wrongdoing ence to the that caused the filed, bankruptcy petition was Niles owed the Lewis), debt.” Lewis Scott 97 F.3d $49,000 approximately in loans and another (9th Cir.1996) (citing Ragsdale 1185 $40,000 “prepaid in commissions.” Otto con- (9th Haller, Cir.1986)). 780 F.2d 796 repay these tended that the failure fiduciary. a a amounts was element, remaining It oc is the dischargeable court found them to be The defalcation, poses currence of loans. problem Although in case. the bank this judg The entered ruptcy court found that a relation in ment for Otto the amount existed, judgment ship it rendered for Niles ap the district court affirmed. Otto now claim, finding only on all but one defalca jurisdiction peals. We have under U.S.C. accepted tion to have occurred when Niles 158(d) §§ We review issues of law 1291.. Ottos, $8,914 kept then behalf findings de novo and of fact for clear error. found, money. bankruptcy judge with The Lazar), Feder v. Lazar $7,000 respect to the amounts of Cir.1996). $9,512.93, adequately that Niles had ex them, not receive the plained that she did II. OF CLAIMS DISCHARGEABILITY funds, merely bookkeep and that THE TO PROPERTY RELATING findings ing The court’s oral contin errors.2 MANAGEMENT ACCOUNT ued: A under 11 debt is Niles testified the rents went into Mrs. “1) express § where an trust U.S.C. account, management account. trust 2) existed, caused fraud or the debt was testimony. been no rebuttal There’s 3) defalcation, the debtor acted as money in a put that she evidence is at the time the debt to the creditor I don’t trust account and the bills. Levinson, Klingman v. was created.” contrary. I don’t any evidence to the have (7th Cir.1987). 1292, 1295 F.2d have a CPA. have an accountant. don’t [sic, expert?] com- operator dispute respect I don’t have There is no Honor, not the bankrupt- ing saying: in ‘Tour that’s elements. The the first and third it, finding she did not receive it is retain 2. Because Niles herself testified that she received clearly been Otto to erroneous. but had authorized you—I you 654, 657-58, right I can tell can show case. S.Ct. 112 L.Ed.2d go there’s a check that didn’t in.” 755 now Court deter language § mined that the as well as bankruptcy judge that the Otto contends legislative history predecessor, its and its failing impose erred the burden on (1976 ed.), § U.S.C. 35 are silent with prove complied Niles to that she with her proof to the standard of discharge for the i.e., fiduciary duty, that she did not commit a exceptions. Id. at was, bankruptcy judge defalcation. Similarly they are silent the issue of who course, credibility entitled to assess the 523(a)(4). proof § has the under accept testimony witnesses and to Niles’s Compare 362(g) U.S.C. 523 with id. rejecting while Otto’s. But here the court (assigning proof burdens motion for gaps also rested its decision on in Otto’s 363(o) stay), § (assigning relief from burdens preference evidence rather than on for Niles’ proof property); motion for use of testimony. say We thus cannot (assigning Bankr.Rule 4005 burden to credi assignment proof court’s of the burden of objecting discharge tor U.S.C. case, error, this if it was was harmless. See 727). law, Looking to case we find few Battaglia Battaglia), v. United States dealing decisions with the issue of allocation Cir.1981) (error of the burden to nondischargeabili establish regarding assignment of burden of re- 523(a)(4). ty In Coburn Co. of *5 quired reversal where decision rested on (In Nicholas), Beaumont v. Nicholas re 956 gaps testimony); Holcomb, Larez v. 16 (5th 110, Cir.1992), court, 114 F.2d the with (9th Cir.1994) 1513, (errors F.3d 1518 in as- discussion, out stated that “the burden signing proof ordinarily burden of require on prove [rests] the creditor to that the debt reversal). We must therefore determine § falls within the exception.” In prove where the burden lies defalcation. (In Little), Cappella v. Little re 163 B.R. 497 Federal law (Bankr.E.D.Mich.1994), however, defines what consti the court tutes a defalcation: it “misappropriation is a held that under both state and federal law money of trust funds or any fiduciary held in proof the burden of of defalcation rests on capacity; properly [the] failure to account debtor/fidueiary. the Waskew Cf. Semilof v. Lewis, (In such funds.” Waskew), (Bankr. 97 F.3d at (quoting 34, 1186 re 191 B.R. 37-39 (6th 1990)). Dictionary S.D.N.Y.1995) Black’s Law 417 ed. (applying in impos state law governs Federal law also the ing allocation of production debtor); the burden of Erie proof burden of Materials, (In to establish nondischarge- Oot), Inc. v. Oot re 112 B.R. ability. Garner, Grogan 279, 497, See v. (Bankr.N.D.N.Y.1989) (same).3 498 U.S. 501 denied, -, Generalized S.Ct. 2532, statements that the creditor bears cert. - U.S. 116 135 proving nondischargeability (1996); the burden of (In Stone), L.Ed.2d 1055 Stone v. Stone re arising provisions (Bankr.N.D.Ala.1996) common in cases under other (citing 199 B.R. 753 au See, 697, § e.g., Thirtyacre, allocating In re 36 F.3d thorities proving to debtor burden of (7th Cir.1994); (In Goldberg "ability 700 pay” v. Scarlata re and “detriment” Scarlata), 521, (7th Cir.1992); § 523(a)(15)(A)(alimony)). 979 F.2d 524 Corp. Transamerica Comm. Fin. v. Littleton Two decisions in addition to those cited in the Littleton), 551, 554, (9th Cir.1991). 942 F.2d 556 say, authority, text without that the creditor has exceptions general principle But to this have also the burden "establish” defalcation under long Smith, recognized. 523(a)(4). been See Hill v. 260 Young Fowler Bros. v. 592, 595, 219, 220, 1367, U.S. 43 Young), Cir.1996), S.Ct. 67 L.Ed. 419 91 F.3d 1371 the (1923) (debtor prove must that creditor omitted court stated that the creditor must establish a knowledge from schedule had actual ruptcy proceedings); of bank and a defalcation commit- see, e.g., United States fiduciary ted in the relationship. course of the 108, Bridges, Cir.1990) (same); 894 F.2d 111 Because the creditor had failed to establish a (In Woodcock), however, Woodcockv. Chemical Bank fiduciary relationship, 45 the court did not 363, (10th Cir.) (debtor F.3d 367 Thomas, has burden of reach the defalcation issue. In In re proving 502, hardship element of (7th Cir.1984), court, undue 523(a)(8), excepts which concluding debts for student while that the creditor had met its denied, - U.S.-, discharge), loans from cert. by showing by burden defalcation defendants 97, (1995); 116 S.Ct. 133 Pennsylva L.Ed.2d 52 when used the trust fund for their own Higher Agency nia Educ. Assistance purposes, v. Faish by relying reached that conclusion Faish), 298, (3d Cir.1995) (same), Re 301 proof by “the expendí- absence of defendants of

1461 that, policy depart apparent amend reasons to from the of evidence In the absence adopting Bankruptcy Act in 1970 and ing principles, settled law treatment of the state 1978, impose Congress intended to 523 proof appropriate remains the on a particular burden sub silentio point of reference. 523(a)(4) exception, asserting the creditor established, Here bank Otto 111 S.Ct. at 498 U.S. Niles, ruptcy fiduciary, court found that as a point of appropriate that we conclude $8,914.59, misappropriated had a check for imposed burden the com reference is the committing thus a defalcation within the That, course, was the back mon law. Lewis, meaning of the Act. 97 F.3d at See Congress legislated ground against which 1186. That evidence also established that exception discharge fidu when Niles violated her duties under ciary added to the Bank was first law. law the California Under California ruptcy Astoria Fed. Sav. & Act 1867. See burden then shifts to the to render Solimino, 104, 108, Loan Ass’n v. 501 U.S. accounting. Mfg. an Paramount v. Mo 2169-70, Co. 115 L.Ed.2d 96 111 S.Ct. han, Cal.App.2d Cal.Rptr. (1991) 16 legislate (“Congress is understood to adjudi background Some decisions establish an even against a of common-law Thus, catory principles. activating fiduciary’s where a common- lesser standard for principle Strehlow, is well established duty to account. See Batson v. .... may given Congress take it as 589, 598, courts Cal.Rptr. Cal.2d P.2d legislated expectation (“When has (1968) principal ques principle apply except will “when a agent in tions the acts done the course ”) (cita contrary purpose to the is evident.’ agency east omitted); tions see also United States prove latter he acted with the utmost 529, 534, Texas, 507 U.S. good principal_”); faith toward the Ken (1993) (same); L.Ed.2d 245 Glick, Cal.App.2d nard v. 7 Cal. *6 Hanover Bank & Trust Co. v. Central (1960). 88, Rptr. 91 (2d Herbst, 510, 511, 114 A.L.R. 769 These decisions are consistent with J.) Cir.1937) (L. Hand, (describing history of generally, places common which bur law the Moreover, 1970, exception). until acting fiduciary explain on one as a to all den general proof of was the issue of the burden principal’s transactions taken on the behalf.4 ly applying com determined state courts (Second) 10, example, law, For the Restatement Grogan, at 284 n. mon see 498 U.S. of 10; 382, Agency, 111 at n. in the absence of section comment e states: S.Ct. 658 performed properly: project”: his duties tures for the Green Market "Unless show that he has they they compels can show what Green Market costs action account render the "[t]he paid plaintiff]” fiduciary explain the from the [funds received the under oath.” to books Birchett, liability (Va.) (1841); Leigh for those funds is a Townes v. 12 173 Stull, debt. Id. at 505. supra. thus could not es- The defendant cape liability simply by remaining silent or Historically, placed law has on the common generally misap- testifying that were not funds proving faithful fiduciaries the burden of their Instead, fiduciary propriated. under a the “accounting." for an ness to their trust in actions duty to render an account that Warren, Annotation, Availability Eq See H.D. of expended and should show in detail the items Remedy Accounting Principal Between uitable of when, whom, purposes show to and for what 1310, (1949) Agent, (citing A.L.R.2d 1312 and Pomeroy, Equity Jurisprudence, 3 payments the were made so the beneficiaries 1420); 5th ed. accuracy can a reasonable test of the of make Eichengrun, Remedying Remedy see also Joel the the accounts. The should be clear accounts Accounting, 60 464 The Ind.L.J. of not, presump- are all and accurate and if obligation accounting triggered to render an is against the trustee and all obscurities tions by proof plaintiff property the to entrusted adversely to him. doubts are to be taken See, and fiduciary relationship. the in a defendant Dakouras, Alexopoulos v. 48 Wis.2d 179 Co., e.g., Dairy Rhodes v. Little Falls 230 A.D. omitted); (1970) (citation (1930), N.W.2d opin 245 N.Y.S. 432 without aff'd Co., ion, Updike Ill.App.3d (1931); also 256 N.Y. 177 N.E. 140 see also Wolf 876, 882-883, Stull, 529 N.E.2d 999- Accounting, 124 Ill.Dec. Melissa K. Accounts (1988); Jur.2d, Holekamp, Engelsmann Am 66. Once 1966). established, (Mo. to S.W.2d 382 is the burden is the defendant States, proves agent or the principal

If the admits United Cir. 1988) (“When agent possession has come into customary that the ... approach money thing principal, or other for the placing would result the burden proving agent has the burden of that he party position who is not in a better to principal disposed it to the or of it has produce required proof, the courts have authority. in accordance with his hesitated allocate the burden to the opposing party.”). Imposing this burden (Second) Trusts, See also Restatement policies also reinforces the substantive be § 172 cmt. b. fiduciary by ensuring hind that fiducia places The burden that the common law perform obligations faithfully ries will to account is more than a shift- generally and with care. See Restatement ing coming of the burden of forward with (Second) Trusts, (duty § 172 to render (8 Scott, evidence. In Landis v. 32 Pa. Ca- accounts); (Second) Agency, Restatement (Pa.1859), sey) example, an action for (same). § 382 accounting against an executor who acted as a to the decedent’s Finally, this allocation burden of estate, Supreme Pennsylva- real Court of policies underlying is consistent with nia said: bankruptcy law. As the Court observed duty ... keep regular of a trustee Bankruptcy Code “limits the imperative. and correct accounts is If he opportunity completely for a unencumbered not, every presumption does of fact beginning new to the ‘honest but unfortunate ” against impose upon him. He cannot his debtor.’ 498 U.S. at principal obligation prove ... [what] Grogan Court reasoned that it was un- actually By failing he has received.... likely Congress, in fashioning the stan- keep accounts, and submit he assumes the dard of proof, would have favored the inter- repelling presumption giving perpetrators est of fraud a fresh disproving negligence faithless- start protecting over the interest in victims ... prima ness. He is facie accountable fraud; here, similarly unlikely it is for all the all properties, rents of dur- Congress would have favored faithless trust- ing period agency, the whole of his and he ees over the victims of their breaches. Id. discharged cannot be from such accounta- conclude that We Otto satisfied her burden bility, except by proof that he did not proof by establishing that Niles was them, collect and could not collect them fiduciary to whom funds had been entrusted. *7 diligence. faithful exercise of due The burden then shifted to Niles to account 502-03; Id. 32 Pa. at Bank-One cf. Rockford fully for all by funds received her for Otto’s (In Mayer N.A. v. Mayer), 173 B.R. benefit, by persuading the trier of fact that (N.D.Ill.1994) (applying pro burden of complied she fiduciary with her duties with duction, rather than proof, burden of in ac respect questioned to all transactions. Be- tion for fraud U.S.C. bankruptcy cause the placing court erred in 523(a)(2)(A)), aff'd, Cir.), 51 F.3d 670 proving the defalcation on — denied, U.S. -, 563, 133 cert. 116 S.Ct. Otto, judgment must be vacated with L.Ed.2d 488 $9,512.93 respect to the items and principles Basic of the law of fiducia the matter remanded for proceedings further place ries therefore the burden to render an opinion. consistent with this accounting fiduciary on the principal once the has shown that funds have been entrusted to III. DISCHARGEABILITY OF “LOANS” fiduciary and not over or otherwise AND “PREPAID COMMISSIONS” Imposing accounted for. that burden is also consistent with policy relevant consider With to Otto’s claims based ations. The Niles, evidence of what funds were on loans to bankruptcy court found by received and how there was no evidence that Niles did not applied likely is to be more repay accessible to the intend to finding loans and that is fiduciary than principal. to the clearly See Welsh not erroneous. occupied ground that Niles “a on the that it was a

Otto asserts matter of discre- continuing with her bankruptcy tion for the court.

clients,” by borrowing and that from them By personal capacity failing repay, failing altogether

her to rule on duty loyalty. interest, request her But a for bankruptcy she breached only “fiduciary” purposes debtor is court did not exercise its discretion. The 523(a)(4), imposes state law an ex where district court should have remanded for a at press or trust on the funds issue. bankruptcy determination court. Lewis, may, 97 F.3d at 1185. A III, Hall, See trustee Oaks Woodlake Phase Ltd. v. circumstances, Assoc., in some breach the Hall, Bayoutree Bayou Ltd. duty loyalty by taking a Assoc., Ltd.), loan from the tree (Second) Trusts, Restatement Cir.1991). trust. See Because the debt the court found Stowell, 1; cmt. Estate 595 A.2d nondischargeable to be arose under state (Me.1991). But none of the law, 498 U.S. at property loans to Niles were taken from the prejudgment the award of interest on management Each account. was made governed by that debt is also state law. Un account, separate Dr. Otto to Niles from a law, prejudgment der California interest is a Taking which he controlled. these loans did right right matter of where there is a vested fiduciary duty. breach “damages particu to recover certain” as of a 3287(a). Here, day. lar Cal.Civ.Code bankruptcy The further $8,914, amount of which the court found to be prepaid found that commissions were owing, and whatever other amounts the court dischargeable loans rather than trust funds. remand, may owing find to be are a sum law, , parties state the intent of the is Under particular day, entitling certain as of a. Otto controlling determining whether prejudgment liability interest. The of funds is a loan or creation of a trust. nondischargeable that interest is it because is Bank, 41 Abrams v. Crocker-Citizens Nat. ancillary to a debt. See (1974); Cal.Rptr. Cal.App.3d Florida v. Ticor Title Ins. Co. Breninc, of California Partnership see also Altura Inc. Florida), (Bankr.9th 164 B.R. Inc.), Group, re B.I. Financial Services Cir.1994). (9th Cir.1988). ques The finding tion was one of fact and the court’s clearly

was not erroneous. V. CONCLUSION argues “prepaid Otto that even if the Accordingly, judgment we VACATE the funds, commissions” were loans and not trust insofar as determined that the sums repay the failure to them was a breach of $7,000 debts, dischargeable fiduciary duty parties because the and REMAND to the court for agreed repay that she would the loans proceedings opin- further consistent with this offsetting any future commissions earned. respects judgment ion. all other court declined to credit the parties AFFIRMED. shall bear *8 testimony support in of that contention. appeal. own costs on was, moreover, testimony There that Niles’ taking of each of the later-earned commis FERNANDEZ, Judge, concurring Circuit specifically sions was authorized the Ot- dissenting: supports tos. evidence the bank Substantial ruptcy finding court’s that Niles breached no I part, respectfully I concur in but dissent fiduciary duty by failing subsequent to offset agree properly part. I that Niles was commissions. amount, $8,914 discharge a of the but denied agree by any that is not in issue. I also PRE IV. JUDGMENT INTEREST bankruptcy standard the court erred when against court did not Otto on the amount. rule decided However, regarding request prejudgment arguments Otto’s interest. Otto’s flawed, seriously and I district court to award interest amount are declined majority’s contrary nondischargeable under from the determi- due to embezzlement dissent 523(a)(4)). § nation. my opinion, exceedingly In that is an wise not think that place, In the first do is, purpose rulé. One quality quantity discussions of the indeed, “to reheve unfortunate honest pre proof required when a creditor seeks to perpetual bondage to debtors creditors_” debt, discharge vent of a are relevant to the Joseph Story, Commentar- persuasion. issue of who has ies on the Constitution the United States Supreme Court’s decision in Gro Thus the (2d 1851). § 1106 ed. No doubt that should 281, Garner, 279, 285-87, 111 gan v. 498 U.S. apply “perpetrators not to of fraud” or to 654, 659, (1991), 656, 112 L.Ed.2d 755 certain other disfavored classes debtors. help does not us to decide this case. 287, Grogan, 498 U.S. at 111 S.Ct. at 659. It argued attempt could be that all who to pertinent What is more is the fact that the just discharge debts dishonest some preventing discharge a debtor’s bankrupt sense and that an honest is an creditor, upon has been held to fall oxymoron. thing, But we assume no such upon not the debtor. That rule has been obtaining and the burden of a determination universally applied discharge almost to the that someone is in a class of disfavored debt- 523,1 exceptions including §in contained ors, who must continue to shoulder the sins 523(a)(4). See, § exception e.g., past, of their is one that should rest with the (In Young Young), Fowler Bros. v. re 91 person prevent discharge— who seeks to Cir.1996) (creditor F.3d By way, repre- the creditor. as far as prove fiduciary relationship to existed and concerned, hensibility why I fail to prevail defalcation occurred honest, negligent, fiduciary but should be 523(a)(4)); § Coburn Co. Beaumont v. harshly person treated more than a who has (In Nicholas), Nicholas re 956 F.2d committed an out and out act of fraud (5th Cir.1992) (the ultimate burden is on others. creditor tó show that debt falls within indeed, may, There be times when circum 523(a)(4) exception for defalcation fidu presumption stances will call out Thomas, ciary); In re 729 F.2d 505-06 class, the creditor does fall into a disfavored (7th Cir.1984) (creditor satisfied its burden of but that should not affect the ultimate bur establishing nondischargeabihty by showing persuasion. den of See Waskew Semilof its created a trust and that (In Waskew), (Bankr. re 191 B.R. 36-38 occurred); debtor see also S.D.N.Y.1995) (creditor must establish that Thornton), Schlecht v. Thornton re 544 debtor committed a acting defalcation while (9th Cir.1976) (burden F.2d fiduciary, may as statutory but benefit from on creditor to show debt presumption of diversion under state’s lien misappropriation by fiduciary due to law); Materials, (In Oot), Erie Inc. v. re Oot 35(a)(4) predecessor which was (Bankr.N.D.N.Y.1989) 112 B.R. 523(a)(4), fiduciary capacity (creditor but must establish that the debt arose shown); Thirtyacre, through exception defalcation for cf. (7th Cir.1994) (creditor apply, may “had the burden but statutory benefit from a prove by preponderance presumption or inference of the evidence diversion under law). state Cappella that her debt hen But see excep met one of the Little (Bankr. Little), 163 B.R. Sec., discharge”); Goldberg tions to Inc. v. E.D.Mich.1994) (creditor prelimi must as a Scarlata), Scarlata nary matter establish that the debtor re Cir.1992) (“The object burden is on capacity, ceived funds then bur *9 ing creditor prove exceptions to dis prove they den shifts to debtor to charge.”); Transamerica Commercial Fin. properly applied). Littleton), Corp. v. Littleton (9th Cir.1991) (creditor short, did not meet In I would not destabilize this area showing its burden of bankruptcy debt was erecting special of bur- 1. All references are to Title 11 of United States Code. persuasion single discharge for this

den exception. begin The burden should and FIREMAN’S FUND INSURANCE COM remain with the creditor. In this case PANIES; Switzerland General Insur be Otto’s. should Company; ance Continental Insurance that, Beyond Otto, I agree Company; cannot C.A.M.A.T.; Samvirke Insur regardless persuasion of where the burden ance; Highlands Insurance; New York judge, bankruptcy lies. The who is the trier Marine & Company; General Insurance fact, Niles, explained believed and she Lloyd’s York; Royal of New Insurance making up each one of the items Company America; Great American $9,512.23 amount was based a mere Company; Insurance St. Paul Fire & accounting error of of one kind or another. Company, Marine Insurance Plaintiffs- part One entering was an error an interest Appellants-Cross-Appellees, was, from the borrower which fact, never even received. part Another was misplaced parenthesis. Those were which, said, PARTNERSHIP, ALASKAN PRIDE

amounts she as never even Trustee; component Key Bank, final existed. The Trustee; was an amount as Christi forgiven by the creditor because he had been Seattle, ania Bank Beneficiary, De charging the somewhat excessive interest fendants-Appellees-Cross-Appellants. per rate of 25% Again, annum on a loan. if Nos. 95-35579. believed, satisfactorily she responded any placed upon her. Given her evidence United States Appeals, Court of testimony,” and “no rebuttal Ninth Circuit. judge believed, chose to believe her. Once prevail. she should have and did That Argued and Submitted Nov. 1996. not affected persuasion weight all of the because was on one side—(cid:127) Memorandum filed Jan. Niles’. Decided Feb.

Finally, agree that the court should have decided the interest issues I, purpose. however,

would remand for that attempt give

would not guidance further subject

or instructions on the because dowe complete picture

not have the before us. example,

For we do not know the terms agreement

the settlement or of the state judgment, both of which probably

merged separate all of Otto’s claims into one. uncertainty, face of that I hesitate to advisory opinion

issue on what ultimate might

decision be called for.

Thus, disagree because I posi- with Otto’s facts,

tion both the law I respect-

fully majority opinion’s dissent from the de- part

termination II regarding

$9,512.13 amount, although I concur with

part portion III and in a part IV of that

opinion.