FOR THE NORTHERN DISTRICT OF CALIFORNIA In re DOLORA DEGEER,                                                       No. 92-11376      Debtor. ___________________________/ DENNIS C. SHEA, et al.,      Plaintiffs,    v.                                                                               A.P. No. 92-1298 DOLORA DEGEER,      Defendant. ______________________________/ Memorandum of Decision      In October, 1989, debtor and defendant Dolora DeGeer and plaintiff Dennis Shea entered into a written agreement for the development of a parcel of real property. The agreement provided that DeGeer would manage the project, and that Shea would be responsible for one-third of the expenses of the project.      Shea has brought this adversary proceeding for the purpose of establishing a nondischargeable debt against DeGeer. He claims that he paid a total of $65,000.00 to DeGeer based on her representations that this was "his share" of the expenses. After he had made these payments, he obtained an accounting from De Geer showing that the total expenses were about $65,000.00, so that he had paid for all the expenses and not just one-third. He accordingly alleges the debt is nondischargeable under section 523(a)(2) of the Bankruptcy Code.      Shea's testimony is contradicted by DeGeer. She says that she only told him that the very first payment was "his share." As to the later payments, she says she told Shea that she was experiencing severe financial problems and that she need the payments to keep the project going. According to her, Shea was to receive interest on the funds he advanced in excess of his one-third responsibility and that he would be reimbursed when the construction loan was funded. The loan never was funded, and the property was lost to foreclosure.      The burden of proof is on plaintiff to prove his case by a preponderance of the evidence. After hearing the evidence, the court finds that DeGeer's version is more believable than Shea's. Shea could not testify as to exactly what DeGeer told him, and did not claim that DeGeer had expressly lied to him. He only stated that DeGeer "clearly implied" that he was only paying his share. Since he admits that her financial problems were discussed, the court finds it more likely than not that DeGeer's version of the facts is the more accurate and that Shea's version is the result of selective memory after the project was lost, or at best poor communication between him and DeGeer. The court also notes that there is no hint of wrongdoing or misappropriation of funds on DeGeer's part. It appears that she did her best to complete the project, used Shea's funds for partnership purposes, and lost the project under circumstances which do not in any way give rise to a nondischargeable debt.      Although the court has adopted DeGeer's version of the facts, it notes that even if the court found as urged by Shea it would not render judgment in his favor. As an element of fraud, Shea must establish that he relied on the misrepresentations of the debtor. When asked by his own counsel whether he would have given the funds to DeGeer if he knew the truth, he did not respond with the typical emphatic negative the court is used to hearing from defrauded creditors. Instead, he responded that he might have made the payments anyway. His own testimony makes it probable that he would have made the payments under any circumstances, requiring an agreement to be reimbursed out of the construction loan and perhaps interest, just as DeGeer says he was promised.      Since Shea has not met his burden of showing any false statement, and since the court finds no reliance even if the statements were false, judgment shall be entered in favor of DeGeer, who shall recover her costs of suit.      Counsel for DeGeer shall submit an appropriate form of judgment forthwith. This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a) and FRBP 7052.
Dated: June 3, 1993                                                                               _______________________                                                                                                                      Alan Jaroslovsky                                                                                                                      U.S. Bankruptcy