Haig v. Shart (In re Shart)
- Summarized by Joel Newell , Ballard Spahr, LLP
- 11 years 3 months ago
- Citation:
- 9th Cir. BAP No. CC-14-1065-SpDTa (November 14, 2014)
- Tag(s):
-
- Ruling:
- Clear error is not demonstrated by pointing to conflicting evidence in the record.
Since no partnership ever existed, Ms. Schardt is not vicariously liable for any of the partnership debts. Appellant (creditor) must establish a debtor's individual culpability rather than relay solely on the co-debtor's / partner's bad acts. The Appellant did not meet their burden of proving that Ms. Schardt knew or should have known of Mr. Shart's fraudulent activities.
- Procedural context:
- This is Appellant's second appeal from the bankruptcy court. In the first appeal, the Ninth Cir. BAP upheld the bankruptcy court's determination that Ms. Schardt was not directly liable for fraud; however, remanded the case to determine whether Ms. Schardt was vicariously liable. Appellant appealed the bankruptcy court's determination that no partnership existed and there was no basis to impute liability to Ms. Schardt.
- Facts:
- On remand the bankruptcy court reviewed testimony and further evidence to determine (1) whether Ms. Schardt was vicariously liable for her huband's (Mr. Shart) fraud as a business partner and (2) whether Ms. Schardt knew or should have known of his fraudulent conduct. Mr. Shart resided at what was commonly referred to as the "Farm" in Tennessee and Ms. Schardt resided in California. Prior to the commencement of the bankruptcy, the Appellant and Mr. Shart had a business relationship regarding the purchase of horses, boarding and training of horses. Disputes arose between the Appellant and Mr. Shart regarding payments remitted to Greystone Equestrian Center ("Greystone"), and amounts Greystone asserted Appellant owed to Greystone. Greystone was the name of the "Farm" that Mr. Shart operated. The Appellant asserted that Ms. Schardt sent a FedEx package to the Appellant with an accounting of Appellant's payments remitted to Greystone. Ms. Schardt testified that she did not recall sending the package and the handwriting on the package was not her handwriting. Mr. Schardt testified that sometimes he would use Ms. Schardt's FedEx account because Greystone did not have one. Additionally, the Appellant relied on letters Ms. Schardt sent to four clients of Greystone; however, the letters state that Ms. Schardt was writing as the wife of Mr. Shart and co-owner of the real property; not as a partner. The bankruptcy court detailed that Ms. Schardt's "involvement" in Mr. Shart's business occurred primarily in 2009; however, the fraudulent actions of Mr. Shart against the Appellant occurred in 2007. Therefore, Ms. Schardt was not a partner of Mr. Shart's in Greystone and not vicariously liable for Mr. Shart's fraudulent activities.
- Judge(s):
- SPRAKER, DUNN and TAYLOR
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