-1- IN THE UNITED STATES BANKRUPTCY COURT FOR THE

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-1- IN THE UNITED STATES BANKRUPTCY COURT FOR THE Powered By Docstoc
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07/19/2005
                                  IN THE UNITED STATES BANKRUPTCY COURT
                                     FOR THE EASTERN DISTRICT OF TEXAS
                                             SHERMAN DIVISION

             IN RE:                              §
                                                 §
             DINO J. ANTOVONI,                   §                           Case No. 01-44837
                                                 §                           (Chapter 7)
                    Debtor.                      §
             ___________________________________ §
                                                 §
             CHRIS THOMAS and ARTHUR             §
             WHITNEY WHEATON,                    §
                                                 §
                    Plaintiffs,                  §
                                                 §
             v.                                  §                           Adv. No. 02-4207
                                                 §
             CITIBANK, DINO ANTOVONI,            §
             Individually, CARGO CONNECTIONS,    §
             INC., COLLIN CREEK TRAVEL,          §
             GREEN’S GOLD AND DIAMONDS,          §
             INC., and STEVE and KATHY SLIGER, §
             owners of DALLAS JEWELRY            §
             EXCHANGE/SLIGER JEWELRY,            §
             formerly known as PRESTON GOLD &    §
             DIAMONDS,                           §
                                                 §
                    Defendants.                  §

                              MEMORANDUM OPINION GRANTING, IN PART,
                            DEFENDANT’S MOTION FOR SUMMARY JUDGMENT1

                      This dispute arises out of several credit card charges made by Mr. Dino Antovini

             on Citibank credit card accounts issued to Chris Thomas and Arthur Whitney Wheaton

             (collectively, the “Plaintiffs”). In their complaint, as amended, the Plaintiffs assert three

             causes of action against Citibank: (1) a claim for breach of contract; (2) a claim for usury;

             and (3) a claim for violations of the Texas Deceptive Trade Practices – Consumer


                      1
                        This Memorandum Opinion is not designated for publication and shall not be considered as
             precedent, except under the respective doctrines of claim preclusion, issue preclusion, the law of the case or
             as to other evidentiary doctrines applicable to the specific parties in this proceeding.


                                                                  -1-
Protection Act (the “DTPA”), as set forth in section 17.41, et seq., of the Texas Business

and Commerce Code. In its answer to the Plaintiffs’ complaint, as amended, Citibank

asserts two counterclaims against the Plaintiffs: (1) a suit on a sworn account; and (2) an

action for breach of contract.

       This matter is before the Court on Defendant Citibank (South Dakota), N.A.’s

Amended Motion for Summary Judgment (the “Motion for Summary Judgment”),

Plaintiff Chris Thomas and Arthur Whitney Wheaton’s Response (the “Response”), and

Defendant Citibank (South Dakota), N.A.’s Reply to Plaintiff’s Response (the “Reply”).

In its Motion for Summary Judgment, Citibank requests judgment on all of the Plaintiffs’

claims against it. Citibank also requests judgment on its claim against the Plaintiffs for

breach of contract.    The Plaintiffs oppose Citibank’s Motion for Summary Judgment,

arguing that a genuine issue of material fact exists as to whether the disputed charges

were authorized by the Plaintiffs.

                      I. SUMMARY JUDGMENT STANDARDS

       Motions for summary judgment are authorized by Rule 56 of the Federal Rules of

Civil Procedure, as adopted and applied to this proceeding by Rule 7056 of the Federal

Rules of Bankruptcy Procedure. The entry of a summary judgment is appropriate “if the

pleadings, depositions, answers to interrogatories, and admissions on file, together with

the affidavits, if any, show that there is no genuine issue as to any material fact and that

the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett,

477 U.S. 317, 322 (1986) (quoting FED. R. CIV. P. 56(c)). If a summary judgment

motion is properly supported, a party opposing the motion may not merely rest upon the

contents of its pleadings, but must demonstrate the existence of specific facts constituting




                                            -2-
a genuine issue of material fact for which a trial is necessary. Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248-49 (1986) (citing FED. R. CIV. P. 56(e)).

       The party seeking summary judgment always bears the initial responsibility of

informing the court of the basis for its motion. Celotex, 477 U.S. at 323. If the burden of

persuasion at trial must be borne by the non-moving party, the party moving for summary

judgment may satisfy the burden of production under Rule 56 by either (1) submitting

affirmative evidence that negates an essential element of the non-moving party's claim, or

(2) demonstrating that the non-moving party's evidence is insufficient to establish an

essential element of the non-moving party's claim. Celotex, 477 U.S. at 331; Lavespere v.

Niagra Machine & Tool Works, Inc., 910 F.2d 167, 178 (5th Cir. 1990). The party

opposing the motion must show more than a “mere disagreement” between the parties,

Calpetco 1981 v. Marshall Exploration, Inc., 989 F.2d 1408, 1413 (5th Cir. 1993), or that

there is merely “some metaphysical doubt as to the material facts.” Matsushita, 475 U.S.

at 586. However, “[t]he issue of material fact which must be present in order to entitle a

party to proceed to trial is not required to be resolved conclusively in favor of the party

asserting its existence; rather, all that is required is that sufficient evidence supporting the

claimed factual dispute be shown to require a jury or judge to resolve the parties’

differing versions of the truth at trial.” Anderson, 477 U.S. at 248-249.

       Local District Court Rule CV-56 (made applicable to this proceeding by Local

Bankruptcy Rule 7056) provides that the party moving for summary judgment must

include in its motion a “Statement of Material Facts” in a specified format. A party

opposing a motion for summary judgment must file a “Statement of Genuine Issues” in

response to the movant’s statement of material facts, with specified references to proper




                                              -3-
summary judgment evidence indicating that a genuine issue of material fact exists.2 In

resolving a summary judgment motion, any material facts claimed by the moving party

and supported by admissible evidence are admitted by the non-movant, unless the non-

movant timely controverts such material facts with proper summary judgment evidence

of its own. The Court will not engage in a comprehensive search for the existence of an

undesignated genuine issue of material fact.

        In this case, the evidence submitted by the parties produces the following body of

uncontested facts:

                                   II. UNCONTESTED FACTS

        The Plaintiffs are Citibank credit card holders and, at all relevant times, were

roommates. The Plaintiffs are social acquaintances of Antovoni.

        The Plaintiffs gave their Citibank credit card information to Antovoni on or

before November 27, 2000. Thereafter, Antovoni made the following charges to Plaintiff

Thomas’ Citibank account:

        11/27/2000        Greene’s Gold & Diamond                      $27,000
        11/27/2000        MLT Vacations                                $3,220.70
        12/1/2000         Preston Gold & Diamond                       $12,862.00
        12/4/2000         MLT Vacations                                $1,632

        On November 27, 2000, Antovoni placed a charge on Plaintiff Wheaton’s

Citibank account for $27,000 at Greene’s Gold & Diamond.

        Antovoni later returned the merchandise for cash.

        In December 2000, the Plaintiffs received billing statements from Citibank

reflecting the charges by Antovoni.             The Plaintiffs noticed the charges but did not


        2
         The purpose of this rule is to streamline the resolution of summary judgment motions and to
make explicit the parties’ respective obligations with regard to such motions. See generally, Waldridge v.
American Hoechst Corp., 24 F.3d 918, 921-22 (7th Cir. 1994).


                                                    -4-
immediately dispute them.

       Antovoni wrote a check for $3,000 to Citibank and a check for $2,000 to Plaintiff

Thomas, each dated January 17, 2001. At some point, Antovoni and Plaintiff Thomas

discussed the possibility of Antovoni obtaining a home equity loan to repay Plaintiff

Thomas.     Plaintiff Thomas, who was a loan officer for Compass Bank, submitted

Antovoni’s information to Compass Bank for a home equity loan.             The loan was

declined.

       Plaintiff Thomas reported his credit card information stolen on April 10, 2001.

Plaintiff Wheaton reported his credit card information stolen on April 25, 2001. Plaintiff

Thomas signed an Affidavit of Unauthorized Use on April 19, 2000, and Plaintiff

Wheaton signed an Affidavit of Unauthorized Use on May 11, 2001.

       In the initial report to Citibank, Plaintiff Thomas suggested that the information

might have been stolen during a holiday party at their house.           In a subsequent

conversation with Citibank’s fraud investigator, Chip Bulin, on June 26, 2001, Plaintiff

Thomas denied that he knew Antovoni. Plaintiff Wheaton likewise denied that he knew

Antovoni.

       In the Plaintiffs’ Original Complaint in this action, the Plaintiffs alleged in

paragraph 16 that “Defendant Dino Antovoni, while a social guest of Plaintiffs took the

credit card numbers he found in Plaintiffs’ home….” However, in paragraph 16 of the

Plaintiffs’ Third Amended Complaint, the Plaintiffs state that “Defendant Dino Antovoni

was at one time given Plaintiffs’ credit card account numbers because he told both

Plaintiffs that his company had in stock two Sony Playstation video systems.”




                                           -5-
       Antovoni and one of his companies, Cargo Connections, Inc., filed for bankruptcy

on November 21, 2001.

       On March 12, 2002, the Plaintiffs initiated identical adversary proceedings in Mr.

Antovoni’s case and in the bankruptcy case filed by Cargo Connections, Inc.

       The Plaintiffs have offered several explanations for the delay in contacting

Citibank to report the theft of their credit cards. In a deposition in connection with this

action, Plaintiff Thomas testified that they traveled to New Zealand for several weeks

during February. Additionally, Plaintiff Thomas testified that he was afraid of physical

violence from Antovoni.

       In a deposition in connection this adversary proceeding, Antovoni testified that he

had a business arrangement with the Plaintiffs whereby the Plaintiffs allowed him to use

their credit cards in exchange for payment form Antovoni. Antovoni explained that the

Plaintiffs would obtain air miles, while Antovoni would obtain short term financing for

his business. There is no evidence, however, that the Plaintiffs actually received any

such benefit from Antovoni’s use of their credit card accounts.

       The Plaintiffs have not paid Citibank for the disputed charges on their credit

cards. As of the filing of the Motion for Summary Judgment, Plaintiff Wheaton owed

Citibank $37,613.15 and Plaintiff Thomas owed Citibank $61,435.04.

                                   IV. DISCUSSION

              A. Plaintiffs’ Breach of Contract Claim Against Citibank

       The Truth in Lending Act (“TILA”), enacted in 1968, is codified at 15 U.S.C.A.

§§1601 et seq. and applies to most consumer credit transactions. Section 1643(a) of

TILA limits a cardholder’s liability for the unauthorized use of the credit card and is




                                            -6-
echoed in the Plaintiffs’ credit card agreements, which provide that the Plaintiffs may be

liable for the unauthorized use of their cards, but not for more than $50. Additionally,

§1643(b) of TILA provides as follows:

       In an action by a card issuer to enforce liability for the use of a credit card,
       the burden of proof is upon the card issuer to show that the use was
       authorized or, if the use was unauthorized, then the burden of proof is
       upon the card issuer to show that the conditions of liability for the
       unauthorized use of a credit card, as set forth in subsection (a) of this
       section, have been met.

15 U.S.C.A. §1643(b).

         TILA defines “authorized use” as (1) the use of a credit card by a person other

than the cardholder (2) who does not have actual, implied or apparent authority for such

use and (3) from whom the cardholder receives no benefit. 15 U.S.C.A. §1602(o). In this

case, there is no dispute that Antovoni used the Plaintiffs’ credit card numbers, and there

is no evidence that the Plaintiffs received any benefit from such use. The issue boils

down to whether Antovoni had actual, implied or apparent authority to place charges

upon the Plaintiffs’ credit card accounts.

       If a cardholder has given the card to another voluntarily, most courts hold the

cardholder liable for the person’s use which occurred before any notice of a possible

unauthorized use was given to the card issuer. See, e.g,, Michigan Nat. Bank v. Olson,

723 P.2d 438, 442 (Wash. App. 1986 ) (citing Martin v. American Express, Inc., 361

So.2d 597 (Ala. Civ. App. 1978)). Even if the cardholder has only authorized the person

to use the credit card for a specific purpose, it is not an “unauthorized use” within the

meaning of TILA if the person uses the card for another purpose. Milwaukee v. Town of

Newport, 396 N.W.2d 345 (Wis. App. 1986). Any other construction would permit a

cardholder to defraud the issuer by allowing others to run up large charges on the card



                                             -7-
and then limit the cardholder's liability to $50 by notifying the issuer. See Martin v.

American Express, Inc., 361 So.2d 597, 601 (Ala. Civ. App. 1978).

         In this case, there is no dispute that the Plaintiffs voluntarily gave their credit card

information to Antovoni. Additionally, Citibank has submitted the affidavit of Mr. Bulin

to establish that the Plaintiffs actually authorized several of the charges they now dispute.

         Mr. Bulin states in his affidavit that he has more than ten years of experience as a

fraud investigator with Citibank and that he has become familiar with the records

maintained by Citibank in the course of its regularly conducted business activities. Those

records and, in particular, Citibank’s contact notes reflect that Citibank had direct contact

with Plaintiff Thomas regarding both the $27,000 charge by Greene’s Gold & Diamond

and the $12,862 charge by Preston Gold & Diamond. Citibank’s contact notes likewise

reflect that Citibank had direct contact with Plaintiff Wheaton regarding the $27,000

charge on his account at Greene’s Gold & Diamond. 3

         A copy of the contact notes are attached to Mr. Bulin’s affidavit. Based on these

notes, Mr. Bulin states that Citibank initially refused to allow the $27,000 charge on

Plaintiff Thomas’ account. Twelve minutes after Citibank placed a fraud early warning

referral on the account, an individual identifying himself as Plaintiff Thomas called


         3
           The Plaintiffs seek to strike these portions of Mr. Bulin’s affidavit, arguing that Mr. Bulin lacks
sufficient personal knowledge to testify about the contents of Citibank’s records or the telephone
conversations between the Plaintiffs and representatives of Citibank. However, an authenticating witness
for business records need only be familiar with the business record keeping procedures in order to be a
“qualified witness” for purposes of Rule 803(6) of the Federal Rules of Evidence. See, e.g., Dyno Constr.
Co. v. McWane, Inc., 198 F.3d 567, 575-576 (6th Cir. 1999). Lack of personal knowledge of the recorded
events goes not to admissibility, but to the weight to be accorded the testimony and the exhibits. See, e.g.,
In re Sol Bergman Estate Jewelers, Inc., 225 B.R. 896, 901 (6th Cir. BAP 1998). In this case, Mr. Bulin
states in an affidavit that he has been employed by Citibank as a fraud investigator for more than ten years.
He explains in his affidavit that the contact notes were made at or near the time of the occurrences
described in the notes by a person with knowledge of the matters described in the notes. Further, Mr. Bulin
explains that the contact notes are business records kept as a regular practice by Citibank. Mr. Bulin clearly
understands Citibank’s record keeping system and is a qualified witness, and the disputed portion of his
testimony is admissible for purposes of summary judgment.


                                                     -8-
Citibank, passed Citibank’s verification procedure, and authorized the charge. Two days

later, Citibank called Plaintiff Thomas at his business phone to re-verify the charge. The

next day, an individual identifying himself as Plaintiff Thomas spoke with Citibank,

passed Citibank’s verification procedure, and authorized the charge. Similarly, Citibank

did not allow the $12,862 charge by Preston Gold & Diamond to go through and placed a

fraud early warning referral on Plaintiff Thomas’ account. Thirty minutes later, Citibank

received a call from Plaintiff Thomas’ home telephone number.4 The caller identified

himself as Plaintiff Thomas, passed Citibank’s verification procedure, and authorized the

charge.

          With regard to Plaintiff Wheaton, Citibank initially refused to allow the $27,000

charge by Greene’s Gold & Diamond. Citibank placed a fraud early warning referral on

the account and left a message on Plaintiff Wheaton’s answering machine at his home

telephone number.         Two minutes later, Plaintiff Wheaton called Citibank, passed

Citibank’s verification procedure, and authorized the charge.

          In their Response, the Plaintiffs assert that genuine issues of material fact exist as

to whether they actually authorized the charges. The Plaintiffs argue that Mr. Bulin’s

affidavit assumes, without evidence, that Citibank followed its customary verification

procedure and sought to verify the identities of the individuals it spoke with regarding the

charges by Antovoni. The Plaintiffs also suggest that, even if Citibank followed its

customary verification procedure, the questions Citibank typically asks (name, address

and mother’s maiden name) are so simple that another person could have satisfied

Citibank that they were the Plaintiffs.

          4
          Mr. Bulin’s notation on the contact notes regarding whether Plaintiff Thomas called Citibank
from his home telephone number or some other number was discussed by Mr. Bulin in his deposition and
does not render the contact notes unreliable or inadmissible, as the Plaintiffs argue.


                                                  -9-
       In support of their Response, the Plaintiffs attach excerpts from their depositions

and the depositions of Antovoni, Mr. Bulin, and Jo Ann Antovoni. Other than the

excerpts from Mr. Bulin’s deposition, the Response does not cite to any particular

portions of the attached depositions. However, the Court notes that on page 21 of

Plaintiff Thomas’ deposition, he denies that he spoke with Citibank and authorized any

charges. Similarly, on page 18 of Plaintiff Wheaton’s deposition, he refers to the $27,000

charge on his credit card as unauthorized.

       This Court grants summary judgment only if the case presents no genuine issue as

to any material fact and the moving party is entitled to judgment as a matter of law.

FED.R.CIV.P. 56(e). The Court must consider the evidence in the light most favorable to

the nonmovant, but if no reasonable juror could find for the nonmovant, then summary

judgment is warranted. E&J Gallo Winery v. Spider Webs Ltd., 286 F.3d 270, 274 (5th

Cir. 2002). In this case, the Plaintiffs have offered affidavit testimony contradicting

Citibank’s claim that the Plaintiffs orally authorized the charges to their cards. Because

there appears to be a contested issue of material fact as to whether Antovoni’s use of the

Plaintiffs’ cards was authorized, the Court concludes Citibank’s request for summary

judgment on the Plaintiffs’ breach of contract claim should be denied.

                       B.Plaintiffs’ Usurious Interest Rate Claim

       A usurious transaction is composed of three elements: (1) a loan of money; (2) an

absolute obligation to repay the principal; (3) and the extraction of a greater

compensation than allowed by law for the use of the money by the borrower. First Bank

v. Tony’s Tortilla Factory, Inc., 877 S.W.2d 285, 287 (Tex. 1994). Where the transaction

appears lawful on its face, the party claiming usury has the burden of proof. Grotjohn




                                             -10-
Precise Connexiones Intern., S.A. v. JEM Financial, Inc., 12 S.W.3d 859, 875 (Tex. App.

- Texarkana, 2000).

       In this case, the parties do not dispute that the first two elements have been met.

However, Citibank claims that there is no evidence that it contracted, charged, or

received interest that exceeded the maximum amount allowed by law. Citibank offered

affidavits by Tanya F. Harder regarding the balance owing on each of the account and the

rates charged. Since the transactions appear lawful on their face, the burden of proof is

on the Plaintiffs to establish usury. The Plaintiffs have not offered any evidence to prove

an extraction greater than the law permits. The Court, therefore, concludes that the

Plaintiffs have failed to satisfy their burden to demonstrate the existence of specific facts

constituting a genuine issue of material fact for which a trial is necessary.

                C. Plaintiffs’ Texas Deceptive Trade Practice Act Claim

       The Plaintiffs are seeking relief under the DTPA because their credit card contract

stipulates that they will not be liable for unauthorized charges made on their cards.   The

Plaintiffs argue that they have testified under oath that they gave no authorization and

that Citibank has failed in its contractual obligation to remove the charges. The Plaintiffs

contend that Citibank misrepresented its willingness to comply with this term of the

contract and that Citibank’s misrepresentation violates the DTPA.

       The purpose of the DTPA is to “protect consumers against false, misleading, and

deceptive trade practices, unconscionable actions, and breaches of warranty.” TEX. BUS.

& COM. CODE §17.44. However, non-performance of a contractual promise alone is not

sufficient to constitute a violation of the DTPA. Crawford v. Ace Sign, Inc., 917 S.W.2d

12, 13 (Tex. 1996).        As explained in Crawford, absent fraud or some other




                                            -11-
unconscionable act, a mere breach of contract does not constitute a deceptive act or

misrepresentation under the DTPA. Id. at 13.

       In this case, the Plaintiffs have offered no evidence of intent to defraud or any

other unconscionable act by Citibank. Citibank’s conduct gives rise to liability only

because it allegedly breaches the parties' credit card agreements.        Accordingly, the

Plaintiffs have not established any genuine issue of material fact, and Citibank is entitled

to judgment as a matter of law on the Plaintiffs’ DTPA claim.

                        D. Citibank’s Breach of Contract Claim

       Citibank moves for summary judgment against the Plaintiffs because the Plaintiffs

have failed to tender performance under their credit card agreements by paying their bills.

The essential elements for a breach of contract claim are: (1) the existence of a valid

contract; (2) the party seeking to enforce the contract performed or tendered performance;

(3) the defendant breached the contract; and (4) the non-breaching party suffered

damages. Hussong v. Schwan’s Sales Enterprises, Inc., 896 S.W.2d 320 (Tex. App. -

Houston [1st Dist.]1995, no pet.). Additionally, as discussed previously, the credit card

agreements are governed by TILA.

       The parties do not dispute the existence of the credit card agreements or that the

Plaintiffs have not paid Citibank for the charges by Antovoni. With regard to Citibank’s

performance of its obligations under the agreements, the Court has previously addressed

the Plaintiffs’ contention that the charges by Antovoni were unauthorized and determined

that a genuine issue of material fact appears to exist. Accordingly, the Court concludes

that there is likewise a genuine issue of material fact as to whether Citibank has

performed its obligations under the credit card agreements.




                                           -12-
                                    IV. CONCLUSION

       For the foregoing reasons, the Court concludes that the Plaintiffs have failed to

offer any summary judgment proof to establish a fact issue with regard to their claims

against Citibank for usurious interest and violations of the Texas DTPA and that Citibank

is entitled to judgment as a matter of law on those claims. However, Citibank has failed

to establish that no genuine issue of material fact exists as to the parties’ cross claims for

breach of contract. Accordingly, Citibank’s Motion for Summary Judgment should be

granted in part and denied in part.         The Court will enter an appropriate order

incorporating this Memorandum Opinion.



                                                      Signed on 7/18/2005

                                                                                        SR
                                           HONORABLE BRENDA T. RHOADES,
                                           UNITED STATES BANKRUPTCY JUDGE




                                            -13-

				
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