Cessna v. Brock: Dischargeability Ruling on Lottery Fraud

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Feb. 18, 2026 Get Citation Alerts Download PDF Add Note

William R. Cessna, individually and as Trustee of the Cessna 1993 Trust v. James Clay Brock, individually and as Trustee of the James C. and Dorothy E. Brock Family Trust dated November 14, 1996

United States Bankruptcy Court, E.D. California

• Citations: None known
• Docket Number: 25-02021

• Precedential Status: Unknown Status

• Opinion

• Authorities (7)

• Cited By (0)

• Summaries (0)

• Similar Cases (23K)

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Trial Court Document

1 UNITED STATES BANKRUPTCY COURT
2 EASTERN DISTRICT OF CALIFORNIA
3
In re: ) Case No. 24-24919-B-7
4 )
JAMES CLAY BROCK, ) Adversary No. 25-2021
5 )
)
6 Debtor(s). )
_____________________________)
7 )
WILLIAM R. CESSNA, individually )
8 and as Trustee of the Cessna )
1993 Trust, )
9 )
)
10 Plaintiff(s), )
)
11 v. )
)
12 JAMES CLAY BROCK, individually )
and as Trustee of the James C. )
13 and Dorothy E. Brock Family )
Trust dated November 14, 1996, )
14 )
)
15 Defendant(s). )
_____________________________)
16
17 DECISION AFTER TRIAL
18 I.
19 Introduction
20 Trial on claims alleged under 11 U.S.C. §§ 523 (a)(2) and
21 523(a)(6) was held on January 26, 2026.1 David A. Diepenbrock
22 and Carly M. Moran appeared for plaintiff William R. Cessna
23 (“Plaintiff”). David A. Smyth appeared for defendant and chapter
24 7 debtor James C. Brock (“Defendant”).
25 Plaintiff testified, Defendant testified, Defendant’s son
26
27
1The Complaint identifies the § 523(a)(2) claim without
28 distinction between §§ 523(a)(2)(A) and (a)(2)(B). The trial
1 Randy Brock testified. The alternate direct testimony
2 declaration of Shasta County Sheriff’s Department Lt. Timothy
3 Estes and its attached report were admitted into evidence without
4 appearance by Lt. Estes upon the parties’ stipulation.2
5 Plaintiff’s and Defendant’s trial exhibits were all admitted into
6 evidence in the absence of objections. Plaintiff’s late-
7 submitted Exhibit 17 was admitted into evidence by stipulation.
8 Plaintiff’s Request for Judicial Notice in Support of Trial
9 Brief filed on January 5, 2026, and Plaintiff’s Supplemental
10 Request for Judicial Notice filed on January 26, 2026, were
11 granted in part and denied in part for the reasons stated on the
12 record. Plaintiff’s Memorandum of Points and Authorities in
13 Support of Motion for Judgment [FRCP, 52(c)] filed on January 26,
14 2026, was denied for the reasons stated on the record. All
15 evidentiary objections stated on the record are incorporated
16 herein and made a part hereof by this reference.
17 Having heard and considered the testimony, observed the
18 demeanor of the witnesses as they testified, read and considered
19 the parties’ trial briefs, and thoroughly reviewed and considered
20 all of the evidence, the court issues its findings of fact and
21 conclusions of law below. See Fed. R. Civ. P. 52(a); Fed. R.
22 Bankr. P. 7052. If there are any conflicts between these written
23 findings of fact and conclusions of law and the court’s oral
24
25 2Lt. Estes testified about a report he prepared following an
investigation he conducted into Defendant’s financial activities
26 after he was contacted out of concern by Plumas Bank manager
Donna Hamilton. Ms. Hamilton suspected Defendant may be the
27 victim of elder abuse due to irregular banking transactions and
withdrawals of large amounts of cash Defendant reported he was
28 sending to undisclosed third-parties.
1 statements on the record, these written findings of fact and
2 conclusions of law control. Playmakers LLC v. ESPN, Inc., 376 3 F.3d 894, 896 (9th Cir. 2004).
4
5 II.
6 Findings of Fact and Conclusions of Law
7 Plaintiff and Defendant are both octogenarians. Both reside
8 in a small, close-knit community where they have lived for most,
9 if not the entirety, of their lives. Plaintiff and Defendant
10 differ significantly in their physical condition and mental
11 acuity.3
12 Prior to events that led to this adversary proceeding,
13 Plaintiff and Defendant were very close friends for over 40
14 years. They met when they worked together at a lumber facility
15 where they often ate lunch together. They played music together,
16 danced on what apparently was an impressive dance floor Defendant
17 built at his house, and they generally socialized with each other
18 and with each other’s family for four decades.
19 Things changed in 2018 when Defendant was convinced beyond
20 any doubt that he won a substantial cash price in a Spanish
21
22
23 3Plaintiff testified that he processes his own lumber,
operates a meat packing business, and owned and operated a
24
logging business for over thirty years. Defendant testified that
25 he is skilled at operating and repairing machinery and tools;
however, he left school before he finished the fourth grade, he
26 can read but often does not understand all the words, he does not
understand complex, technical or legal terms, his math and
27 spelling skills are not good, and he suffers from long-term and
some short-term memory problems. These differences are relevant
28 to this decision.
1 lottery.4 Although the dollar amount of the cash winnings
2 changed because Defendant was given different numbers by lottery
3 “agents” or “officials,” Defendant believed he won either four
4 million dollars, two-hundred fifty million dollars, or one
5 billion dollars. Defendant believed he won so much money that he
6 would “own the valley.”
7 Defendant was told by lottery “agents” or “officials” that
8 before he could collect his lottery winnings he had to pay
9 expenses associated with the winnings. Defendant was also told
10 these expenses had to be paid in cash sent in boxes to addresses
11 the lottery “agents” or “officials” designated. Defendant paid
12 these purported expenses with $85,000 of his own money. When
13 that was not enough, Defendant obtained more money from Plaintiff
14 that was also sent to lottery “agents” or “officials.”
15 The parties stipulated that between February 5, 2018, and
16 July 6, 2018, Plaintiff transferred $317,500 to Defendant. The
17 stipulated dates and amounts of the transfers are as follows:
18 (1) $ 15,000 on February 5, 2018;
19
20 4Defendant’s son testified that his father’s belief that he
won a significant lottery cash prize was so firm and so
21 unshakeable that his father would have terminated their
relationship had he tried to intervene in his father’s financial
22 affairs or otherwise prevent his father from acting on his belief
he was a lottery winner. Valuing his relationship with his
23 father, and recognizing that his father needs assistance with
daily living activities, Defendant’s son testified that he chose
24
to not intervene in his father’s financial affairs. Defendant’s
25 son has moved in with Defendant and assists Defendant with daily
living activities. The emotion in Defendant’s voice and his
26 demeanor as he testified also leaves the court with no doubt that
Defendant truly, honestly, and whole-heartedly believed he won a
27 substantial cash prize in a Spanish lottery. Of course, there
was no lottery, Spanish or otherwise, and there were no lottery
28 winnings. More on this later.
1 (2) $100,000 on February 8, 2018;
2 (3) $150,000 on February 15, 2018;
3 (4) $ 2,500 on March 5, 2018;
4 (5) $ 25,000 on March 16, 2018;
5 (6) $ 5,000 on March 26, 2018;
6 (7) $ 15,000 on May 22, 2018; and
7 (8) $ 5,000 on July 6, 2018.
8 Witness Credibility & Additional Background
9 On the issue of credibility, the court finds Defendant to be
10 a very credible witness and the court believes Defendant’s
11 testimony. Defendant testified that his alternate direct
12 testimony declaration is truthful and he would not include
13 anything in the declaration that was untruthful or that would
14 subject him to perjury. Defendant understood what perjury
15 means.5 More important is that Plaintiff vouched for Defendant’s
16 credibility. Plaintiff testified during trial that he has known
17 Defendant to be an honest man his entire life and that he had
18 never known Defendant to lie in 2018 or at any other time.
19 Although Plaintiff appeared to be a good and forthright man,
20 his testimony on two critical points was inconsistent and
21 contradictory. These points of contradiction also provide
22
23 5Plaintiff introduced prior deposition testimony regarding
non-disclosure of personal property owned by Defendant’s son and
24
stored on Defendant’s property or at Defendant’s residence as
25 evidence that Defendant and/or Defendant’s son somehow lack
credibility because the property was not disclosed in Defendant’s
26 bankruptcy schedules. The court gives this testimony no weight.
Property owned by Defendant’s son, regardless of where it is
27 located or stored, is not property of Defendant’s bankruptcy
estate under 11 U.S.C. § 541 (a) and therefore need not be
28 disclosed in Defendant’s bankruptcy schedules.
1 additional background for this decision.
2 Point one concerns Defendant’s use of the money he received
3 from Plaintiff. Plaintiff’s trial testimony on this point is
4 conflicting. Plaintiff initially testified during trial that
5 Defendant did not tell him how the money was used. Plaintiff
6 later contradicted himself and testified that Defendant told him
7 the money was being used to “send in” to get lottery “winnings.”
8 Plaintiff’s initial trial testimony on this point is also
9 inconsistent with his prior testimony in an amended declaration
10 filed in a May 2023 state court action Plaintiff filed against
11 Defendant. The amended declaration was admitted into evidence
12 without objection as Defendant’s Exhibit D. Plaintiff testified
13 in ¶ 4 of the declaration that Defendant told him “he needed the
14 money to pay expenses for transaction under which he expected to
15 receive a substantial monetary payment.” For his part, Defendant
16 testified convincingly during a deposition that he told Plaintiff
17 the money was being used to pay lottery winning collection
18 expenses. The transcript of Defendant’s deposition was admitted
19 into evidence without objection as Plaintiff’s Exhibit 16.
20 Point two concerns collateral. Plaintiff testified that
21 Defendant gave him deeds to three parcels of real property and
22 that he relied on these deeds as collateral in the event he was
23 not repaid by Defendant.6 Plaintiff testified during trial and
24 in ¶¶ 7-8 of his alternate direct testimony declaration that he
25 asked Defendant for this collateral after the first two transfers
26
27 6Plaintiff testified that he did not consult a lawyer after
he received the deeds, he did not have loan documents drafted,
28 and he did not know what a deed of trust was.
of $15,000 and $100,000, respectively, and before the third
2 transfer of $150,000. However, in 7 5 of the amended state court
31 declaration referenced above, Plaintiff testified he asked
Defendant for the three properties as collateral after the first
5] transfer of $15,000 and before the second transfer of $100,000.
6] Plaintiff also testified in @ 21 of his alternate direct
7! testimony declaration that he transferred the “money discussed
8 || above [i.e., the $317,500] solely as a personal accommodation to
longtime friend.” (Emphasis added).
10 Giving substantial weight to Plaintiff’s unequivocal
11 |} endorsement of Defendant’s life-long honesty and integrity, and
12 || considering Plaintiff’s inconsistent and contradictory testimony
13 at least two critical issues, the court finds Defendant to be
14 |} the more credible witness overall. Defendant’s testimony is
15 || consistent, credible, reliable, and probative and the court
16 || believes Defendant. The court gives Defendant’s testimony
17} substantially more weight than it gives Plaintiff’s testimony.
18 The § 523 (a) (2) (A) Claim
19 One of the elements Plaintiff must prove to prevail on the §
20 (2) (A) claim is justifiable reliance. Field v. Mans, 516
59, 74-75 (1995). Plaintiff bears the burden of proving
22 this element by a preponderance of the evidence. Grogan v.
23 Gardner, 498 U.S. 279, 291 (1991); American Express Travel
Related Services Company Inc. v. Hashemi (In re Hashemi), 104 25 F.3d 1122, 1125 (1996) (stating that creditor must prove each
26 element of a § 523(a) (2) (A) claim by a preponderance), cert.
27 || denied, 520 U.S. 1230 (1997). Plaintiff has not met this burden.
28 Plaintiff has not established by a preponderance of the
-7-

1 evidence that he relied on the deeds (or on anything else) as
2 collateral for repayment of the money transferred to Defendant.
3 The evidence is clear that the parties did not contemplate
4 collateral at the inception of the transfers and Plaintiff’s
5 conduct after he received the deeds is inconsistent with
6 Plaintiff obtaining the deeds as security for repayment. More
7 important is that contradictions and inconsistencies in
8 Plaintiff’s testimony about the timing of the purported request
9 for collateral render the entirety of Plaintiff’s testimony about
10 reliance on the deeds as collateral suspect, not credible, and
11 unreliable. But the most convincing and probative evidence that
12 Plaintiff did not rely on the deeds (or anything else) as
13 collateral for the money he transferred to Defendant is
14 Plaintiff’s own direct testimony that he transferred the entirety
15 of the $317,500 to Defendant “solely as a personal accommodation
16 to a longtime friend.” (Emphasis added).
17 What is an accommodation or, more specifically, what is a
18 “personal accommodation?” Blacks’s Law Dictionary defines an
19 “accommodation” as follows: “An arrangement or engagement made
20 as a favor to another, not upon a consideration received. . . .
21 The word implies no consideration.” Accommodation, Black’s Law
22 Dictionary, (rev. 5th Ed., 1979); see also Svenhard’s Swedish
23 Bakery v. Bakery and Confectionary Union and Industry
24 International Pension Fund (In re Svenhard’s Swedish Bakery), 154 25 F.4th 1100, 1104 (9th Cir. 2025) (referring to Black’s Law
26 Dictionary for a common definition of “accommodation” as “[a]n
27 arrangement or engagement made as a favor to another”);
28 Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories,
1 724 F.Supp. 605, 610-11 (S.D. Ind. 1989) (referring to Black’s
2 Law Dictionary for definition of “accommodation” to mean no
3 expectation of consideration). Adding “solely” and “personal”
4 into the context of the “accommodation” term highlights the
5 “accommodation” testimony and reinforces the court’s conclusion
6 that Plaintiff gave Defendant the $317,500 as a favor-a personal
7 favor-to a longtime friend whose honesty he did not question and
8 without any expectation of or reliance on collateral.
9 So then, on what, if anything, did Plaintiff rely for the
10 return of the money he transferred to Defendant? The weight of
11 the evidence, primarily Defendant’s prior deposition testimony,
12 supports the conclusion that Plaintiff relied on Defendant’s
13 representations regarding the collection and sharing of lottery
14 winnings for repayment. However, Plaintiff’s reliance on these
15 representations, even if misrepresentations, would not be
16 justifiable.
17 “[J]ustifiable reliance is a subjective standard that looks
18 to the qualities and characteristics of the particular plaintiff,
19 the knowledge and relationship of the parties, and the
20 circumstances of the particular case[.]” In re Robinson, 640 21 B.R. 741, 745 n.5 (Bankr. D. Nev. 2021). There generally is no
22 duty to investigate unless there are “red flags.” Field, 516
23 U.S. at 71-72. As the BAP explained in Obara v. AFC Cal, LLC (In
24 re Obara), 2014 WL 2211768 (9th Cir. BAP May 28, 2014):
25 The justifiable reliance standard generally does not
entail a duty to investigate; a person may be justified
26 in relying on a representation even if he might have
ascertained the falsity of the representation had he
27 made an investigation. However, a creditor’s duty to
investigate arises by virtue of suspicious
28 circumstances. Thus, justifiable reliance does not
1 Id. at *10 (cleaned up); Wickman v. Ivar (In re Werner), 2019 WL
2 641411, *13 (9th Cir. BAP Feb. 13, 2019) (“[T]he justifiable
3 reliance standard does not permit the plaintiff to ignore red
4 flags that obviously call into question the truth of the debtor’s
5 representations regarding the transaction[.]”), aff’d,, 817 6 Fed.Appx. 432 (9th Cir., July 23, 2020).
7 Defendant’s deposition testimony reflects that there were
8 numerous “red flags” here that Plaintiff, a businessman of over
9 thirty years who is in good physical health and mentally acute,
10 should have investigated as suspicious but which Plaintiff
11 deliberately chose to ignore because, as Plaintiff testified, how
12 Defendant used the $317,500 was none of his business. For
13 example, Defendant’s assertion that he won a substantial cash
14 prize in a foreign lottery should have triggered some suspicion
15 for Plaintiff. Another “red flag” for Plaintiff should have been
16 Defendant’s explanation that lottery expenses had to be paid in
17 advance before the lottery winnings could be collected. Another
18 should have been that the pre-collection lottery expenses had to
19 be paid in extremely large amounts of cash. And still another
20 should have been that the cash to pay these pre-collection
21 lottery expenses had to be sent to lottery “agents” or
22 “officials.” The point here is that Plaintiff intentionally
23 ignored Defendant’s suspicious activity and, in so doing, can not
24 now establish that any reliance on Defendant’s collection of
25 lottery winnings for repayment was justifiable.7
26
7Although a subjective standard, when determining
27
justifiable reliance the court may consider how far the purported
28 reliance strays from what would be objectively reasonable. See
Robinson, 640 B.R. at 745 n.5. Plaintiff’s deliberate decision
1 The § 523(a)(6) Claim
2 Section 523(a)(6) excepts from discharge a debt for a
3 willful and malicious injury. See 11 U.S.C. § 523 (a)(6). As the
4 Ninth Circuit explained in Barboza v. New Form, Inc. (In re
5 Barboza), 545 F.3d 702, 706 (9th Cir. 2008):
6 Section 523(a)(6) of the Bankruptcy Code provides that
an individual debtor may not discharge a debt for
7 willful and malicious injury by the debtor to another
entity or to the property of another entity. The
8 malicious injury requirement is separate from the
willful injury requirement. A willful injury is a
9 deliberate or intentional injury, not merely a
deliberate or intentional act that leads to injury. A
10 malicious injury involves (1) a wrongful act, (2) done
intentionally, (3) which necessarily causes injury, and
11 (4) is done without just cause or excuse.
12 Id. at 706 (cleaned up).
13 The court is not persuaded that Defendant deliberately or
14 intentionally injured Plaintiff or that Defendant was
15 substantially certain Plaintiff would be injured by his conduct.
16 Quite the opposite. Defendant testified convincingly that he
17 intended to provide Plaintiff with a benefit for the money he
18 received from Plaintiff by sharing-perhaps splitting-his lottery
19 winnings with Plaintiff. In other words, Defendant’s intent was
20 to reward-not harm-Plaintiff for helping him collect lottery
21 winnings. This is not willful and malicious conduct.
22
23
24
any justifiable reliance here. Nevertheless, the court notes
25 that Defendant’s banking transactions involving large amounts of
cash Defendant was sending to undisclosed third-parties caused
26
Plumas Bank’s manager enough concern to contact the Shasta County
Sheriff’s Department and report Defendant as a potential victim
27
of elder abuse. These activities also caused Lt. Estes enough
28 concern to initiate an investigation, contact family members, and
report Defendant’s activities to county Adult Protective
1 III.
2 Conclusion
3 William Shakespeare said it best: “Neither a borrower nor a
4 lender be; / For loan oft loses both itself and friend ...”
5 (Hamlet, Act 1, Scene 3).
6 Based on the foregoing:
7 Judgment will be entered for Defendant and against Plaintiff
8 with Plaintiff taking nothing on the claim under 11 U.S.C. §
9 523(a)(2)(A) in the First Cause of Action of the Complaint.
10 Judgment will be entered for Defendant and against Plaintiff
11 with Plaintiff taking nothing on the claim under 11 U.S.C. §
12 523(a)(6) in the Second Cause of Action of the Complaint.
13 Defendant’s debt to Plaintiff as alleged in the Complaint
14 and as filed in Claim 1-1 arising from and based on the transfers
15 referenced hereinabove is dischargeable and is discharged in
16 Defendant’s chapter 7 case.
17 Defendant is awarded costs as the prevailing party. A
18 signed Bill of Costs must be filed by February 25, 2026.
19 If supported by Fed. R. Bankr. P. 9011, Defendant may file a
20 motion for attorney’s fees under 11 U.S.C. § 523 (d). Any such
21 motion shall be filed and served by March 18, 2026.
22 A separate judgment will issue.
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1 INSTRUCTIONS TO CLERK OF COURT
SERVICE LIST
2
The Clerk of Court is instructed to send the attached
3 document, via the BNC, to the following parties:
4 David A. Diepenbrock
400 Capitol Mall 11th Fl
5 Sacramento CA 95814
6 David Ashley Smyth
3478 Buskirk Ave., #1000
7 Pleasant Hill CA 94523
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