Grout v. Cripe (In re Cripe)
- Summarized by Albert Sheen , U.S. Bankruptcy Court
- 10 years 10 months ago
- Citation:
- B.A.P. No. AZ-13-1106-DPaKu (9th Cir. B.A.P. Feb. 20, 2014) [Not for Publication]
- Tag(s):
-
- Ruling:
- In an unpublished decision, the Ninth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court, holding that the bankruptcy court did not clearly err when it found that a debtor's misrepresentation was not the proximate cause of his former business partners' loss. Although the debtor misrepresented his academic credentials, the LLC agreement between debtor and his business partners did not require members to hold any particular degree. Moreover, the business partners failed to present sufficient evidence to show that the debtor's misrepresentation was a substantial factor in causing the complained-of financial loss. As a result, the debt arising therefrom was not excepted from discharge under 11 U.S.C. § 523(a)(2).
- Procedural context:
- Appeal from the Bankruptcy Court for the District of Arizona, holding that the debtors' misrepresentation was not the proximate cause of their former business partners' loss and discharging the debtors from any debt arising therefrom, reviewed for clear error.
- Facts:
- Curtis Cripe and his wife operated a business known as CrossRoads Institute, Inc. ("CrossRoads"), which provided services related to brain development, function, and ability remediation. Dr. Martha Grout and her husband brought their minor child to CrossRoads and became acquainted with Cripe. Cripe represented to Dr. Grout that he had obtained certain academic credentials. Cripe and Dr. Grout became business partners, ultimately forming an LLC where each was a 50% member. The LLC purchased an office building, and Cripe and Dr. Grout each executed personal guaranties on the purchase. Both Cripe and Dr. Grout operated their business out of the office building. When Dr. Grout learned that Cripe had misrepresented his academic credentials, she severed all personal and business connections with him. Litigation ensued between the parties in state court. Cripe and his wife then filed a chapter 11 petition. Dr. Grout and her husband filed an adversary proceeding, seeking a determination that Cripe's misrepresentation was the cause of business losses, and that the debt arising therefrom was excepted from discharge under 11 U.S.C. § 523(a)(2).
- Judge(s):
- Dunn, Pappas, Kurtz
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