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In re Hussain

United States Bankruptcy Appellate Panel For the Ninth Circuit

April 15, 2014

In re: SYED SHAHZAD HUSSAIN, Debtor. SYED SHAHZAD HUSSAIN, Appellant,
v.
PATRICIA MALIK; SHAFQAT MALIK; DAVID SEROR, TRUSTEE,

Argued and Submitted at Pasadena, California March 20, 2014

Page 418

[Copyrighted Material Omitted]

Page 419

Appeal from the United States Bankruptcy Court for the Central District of California. Bk. No. SV 11-14331-VK, Adv. No. SV 11-01434-VK. Honorable William V. Altenberger,[**] Bankruptcy Judge, Presiding.

John R. Habashy of the Habashy Law Firm for appellant Syed Shahzad Hussain.

Peter D. Gordon of Peter D. Gordon & Associates for appellees Patricia Malik and Shafqat Malik.

Before: TAYLOR, DUNN, and KIRSCHER, Bankruptcy Judges.

OPINION

Page 420

TAYLOR, Bankruptcy Judge:

Debtor Syed Shahzad Hussain appeals from the bankruptcy court's judgment denying his chapter 7 discharge pursuant to § 727(a)(3).[1] We AFFIRM.

FACTS

In 2006, appellees Patricia Malik and Shafqat Malik met with real estate brokers Syed Zakir Hussain (" Zakir Hussain" )[2] and Raza Ali regarding potential investment opportunities. Zakir Hussain and Ali owned and operated Real Realty.

The first investment proposal involved the purchase of a gas station located in Simi Valley, California. Based on representations made by Real Realty, the Maliks believed that, in exchange for an initial investment, Mrs. Malik would hold a 25% interest in a four-person partnership, SJPJ Partners, that, in turn, would own and operate the gas station. The Debtor was slated as another 25% partner. Amenable to the proposed venture, the Maliks invested $62,500.

The gas station sale closed eight months later. Just before the closing, however, Zakir Hussain approached Mrs. Malik for additional, " emergency" financing in order to complete the sale. The Maliks agreed and tendered an additional $100,000. The sale apparently closed two days later.

Unbeknownst to the Maliks, however, SJPJ Partners neither purchased the gas station nor otherwise acquired title. Instead, the Debtor purchased the gas station and was the sole owner. Eventually the Maliks learned the details of the purchase and demanded repayment directly from the Debtor. The Debtor later provided Zakir Hussain with two signed, but otherwise blank, checks payable from a personal bank account. Zakir Hussain completed the checks, making both payable to Patricia Malik and in the amounts of $62,500 and $100,000. He then transferred both checks to the Maliks; both checks were returned for insufficient funds by the Debtor's bank.

In 2010, the Maliks commenced an action in state court against the Debtor, among others, relating to the purchase and sale of the gas station. Facing that action and a failing gas station business, the Debtor filed his bankruptcy case in April 2011. Not long after, he lost the gas station to foreclosure.

Page 421

The Maliks objected to the Debtor's discharge pursuant to § 727(a)(3), among other § 727(a) grounds, and also sought to except the $162,500 debt from discharge under various provisions of § 523(a). The bankruptcy court, after a one-day trial, found that the Debtor failed to maintain adequate records or to justify his failure to do so and ruled in favor of the Maliks on the § 727(a)(3) claim. It denied the remainder of ...


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