FOR THE NORTHERN DISTRICT OF CALIFORNIA
DOLORA DEGEER, No. 92-11376
DENNIS C. SHEA, et al.,
v. A.P. No. 92-1298
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
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
Dated: June 3, 1993 _______________________