Memorandum of Decision Re: Conversion of Cows

FOR THE NORTHERN DISTRICT OF CALIFORNIA In re DAVID and MARY LENARDO,                                       No. 1-89-02136        Debtors. ___________________________/ ERNEST F. MENDES & SONS,        Plaintiff,    v.                                                                                      A.P. No. 1-90-0034 DAVID and MARY LENARDO,      Defendant. ______________________________/
Memorandum of Decision
     Debtors David and Mary Lenardo are dairy farmers. In May of 1988, they agreed to purchase 108 cows from plaintiff Ernest F. Mendes & Sons for $150,000.00. The terms of the sale were $15,000.00 down and the balance in the form of a promissory note secured by the cows. The security agreement provided that the cows were not to be moved from the debtors' farm or sold without the consent of the plaintiff. In violation of the security agreement, David Lenardo sold 58 of the cows at auction and used the proceeds to keep his farm going. Plaintiff seeks to have its claim against the Lenardos declared nondischargeable under section 523(a)(6) of the Bankruptcy Code as a willful and malicious injury to its collateral. It also seeks to have the debt declared nondischargeable under section 523(a)(2)(B) on account of a false financial statement in writing, although no such writing was produced.      There was some evidence presented that David Lenardo may have at one time provided plaintiff with a writing containing false information, although this is denied by Lenardo. However, without seeing the writing itself it is impossible for the court to determine whether reliance on such a document was reasonable. The oral descriptions of the alleged writing were nowhere near detailed enough to establish liability under section 523(a)(2)(B). Accordingly, the court denies relief under this section due to insufficientevidence.      Not every conversion of collateral gives rise to a nondischargeable debt. In re Littleton, 106 B.R. 632 (9th Cir. BAP 1989). However, Lenardo admitted that he knew that selling the cows was a breach of his agreement with plaintiff, and nonetheless proceeded to do so. Plaintiff had in no way acquiesced in the sales. Accordingly, the requisite intent for nondischargeability has been established. In re MacNeil, 102 B.R. 766 (9th Cir. BAP 1989). Lenardo's need for the funds to keep his dairy going is not an excuse for his acts.      Plaintiff argues that it is entitled to have the entire amount of its debt declared nondischargeable, or at the least have judgment for the cows on the basis of what producing cows are worth, as it alleges that through mismanagement the value of the cows was diminished. However, the proper measure of damages for conversion of collateral is what the secured creditor could have recovered if it had been allowed to take possession and dispose of the collateral. In re Littleton, supra, at 635. There is no evidence that this is anything other than what Lenardo sold the cows for.      Accordingly, plaintiff shall have a nondischargeable judgment against defendant David Lenardo in the sum of $40,489.26, plus costs of suit. There being no evidence presented as to any wrongdoing by Mary Lenardo, the complaint will be dismissed as to her.      This memorandum constitutes findings and conclusions pursuant to FRCP 52(a) and Bankruptcy Rule 7052. Counsel for plaintiff shall submit an appropriate form of judgment.
Dated: October 12, 1990                                                                              _______________________                                                                                                                      Alan Jaroslovsky                                                                                                                      U.S. Bankruptcy