Now Updating
In re: DIANN MARIE CATES

Summarizing by Lars Fuller

Chan v. DRM Enterprises, LLC (In re Chan)

Citation:
Chan v. DRM Enterprises, LLC (In re Chan), BAP No. CC-13-1607-TaSpD, 2014 WL 5033196 (B.A.P. 9th Cir. Oct. 8, 2014)
Tag(s):
Ruling:
Affirming the Bankruptcy Court, the Bankruptcy Appellate Panel of the Ninth Circuit held that a debt arising from the advances that the creditor made to the debtor's corporation was non-dischargeable under section 523(a)(2)(A) of the Bankruptcy Code because the debtor falsely represented that her company had the ability to repay the advances. In addition, the B.A.P. also held that the bankruptcy court did not abuse its discretion when it permitted the creditor's expert to testify that the debtor's company lacked the ability to repay the advances at issue.
Procedural context:
Appeal from the order of the United States Bankruptcy Court for the Central District of California determining that the debt owed to the creditor was non-dischargeable under section 523(a)(2)(A) of the Bankruptcy Code. The B.A.P. reviewed the Bankruptcy Court's (1) legal conclusion that the debt was non-dischargebale de nnovo, (2) factual determination that the creditor established each essential element of section 523(a)(2)(A) for clear error, and (3) decision to permit the creditor's expert to testify for an abuse of discretion.
Facts:
The debtor was an officer, director, sole-shareholder of a corporation that was intitially advanced money by the creditor pursuant to transactions that were effectively non-interest bearing loans. After the debtor's corporation began experiencing accounts payable issues, the creditor agreed to purchase goods on behalf of the debtor's company or to advance the payment of the debtor's corporation's accounts payable in exchange for the repayment of the advanced funds, plus a fee of two percent. Although the debtor initially caused her company to repay these advances, as the total amount of advances increased, the debtor eventually caused her corporation to cease repaying the advances. After the debtor filed for bankruptcy, the creditor commenced an adversary proceeding seeking a determination that its debts arising from the advances were non-dischargeabke under section 523(a)(2)(A). Following a trial at which the Bankruptcy Court heard testimony from the debtor, the creditor's CEO, and the Creditor's expert witness, the Bankruptcy Court issued an oral ruling in favor of the creditor. The debtor timely appealed this ruling.
Judge(s):
Taylor, Dunn, and Spraker, Bankruptcy Judges

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