Bank of Cordell v. Sturgeon (In re Sturgeon)

Summarized by Steven Mulligan , Coan, Payton & Payne, LLC
12 years 9 months ago

Citation:

Case No. WO-12-043 (B.A.P. 10th Cir. May 14, 2013) (published)

Tag(s):

Ruling:

False representations are express misrepresentations while false pretenses includes conduct and material omissions and is defined as any series of events, when considered collectively, that create a contrived and misleading understanding of a transaction, in which a creditor is wrongfully induced to extend money or property to the debtor. False representations and implied misrepresentations that are intended to create and foster a false impression by co-conspirators in furtherance of a fraudulent scheme may be attributed to a debtor who is an active, willing and knowing participant in the fraudulent scheme for purposes of Section 523(a)(2)(A). The BAP found that the evidence supported the Bankruptcy Court’s finding that Debtor was an active, knowing participant in a fraudulent scheme to deceive the Appellee through a series of false representations and false pretenses that created a contrived and misleading understanding by the Appellee, and that the Debtor thereby intended to deceive the Appellee.

Procedural context:

Debtor appealed the Bankruptcy Court’s finding that Appellee’s debt was nondischargeable under §§ 523(a)(2)(A) and (a)(2)(B); factual findings reviewed for clear error. Since the BAP affirmed the finding of nondischargeability under § 523(a)(2)(A), it did not address the § 523(a)(2)(B) issue.

Facts:

Debtor and his father conducted cattle operations and funded cattle purchases with loans from the Appellee which were secured by the cattle. Checks received from cattle sales were made jointly to Debtor’s cattle company and the Appellee. Debtor, his father and brother also created a sham partnership to market cattle which received deposits and funds on every head of cattle sold. The three had commodity accounts at a brokerage firm and had to fund margin calls. They used loan advances, the deposits received by the sham partnership and proceeds from unreported cattle sales to make the margin calls rather than purchase cattle or pay such receipts to the Appellee. After an audit by the Appellee, 896 head of cattle were unaccounted for.

Judge(s):

Nugent, Romero, Jacobvitz

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