Hernandez v. General Mills Federal Credit Union (In re Hernandez)

Summarized by Bradley Pearce , Pearce Law PLLC
8 years 8 months ago

Case Type:

Consumer

Case Status:

Affirmed

Citation:

16-3111 (8th Circuit, Jun 14,2017) Published

Tag(s):

Ruling:

Affirming the decision of the district court (D. Minn.) that a creditor's debt was nondischargeable under § 523(a)(2)(A). The evidence showed that the debtor had defrauded the creditor by, among other things, forging his grandparents' signatures to mortgage documents. The creditor's action was not untimely; there was no evidence that the creditor discovered the fraud more than six years before filing § 523 action. Prior state court litigation, in which the creditor had crossclaimed against the debtor, had no preclusive effect because it had been dismissed without prejudice.

Procedural context:

Following a trial on the merits, the bankruptcy court (Bankr. D. Minn.) ruled that the complaining creditor had proven by a preponderance of the evidence that the debtor's debt to the creditor was not dischargeable under § 523(a)(2)(A). The district court affirmed, and the debtor appealed to the 8th Circuit.

Facts:

In 2003, the debtor's grandparents deeded their residence to the debtor, retaining a life estate in the residence. The debtor and his grandparents then refinanced the residence with a loan from the complaining creditor. Debtor later obtained a home equity loan in his own name from the creditor. Subsequently, in 2004 and 2005, the debtor refinanced the residence or obtained new financing secured by his grandparents' house, each time signing the mortgage documents as his grandparents' attorney in fact. In 2009, the debtor's grandparents, with the assistance of the debtor's aunt, filed a civil complaint against the debtor and the creditor, alleging fraud. This case was dismissed because the grandparents were incapable of engaging in mediation or attending a pretrial conference. The creditor had crossclaimed against the debtor. The creditor and the debtor, as codefendants in this civil action, filed a stipulation of dismissal without prejudice. A summary of these events, and quotations from the debtor's grandmother and aunt, appeared in the St. Paul newspaper in 2011. The bankruptcy court accepted the newspaper article and hearsay testimony of the debtor's aunt and of his sister as evidence (!) over the debtor's hearsay objections. Less than six years after the civil action had been filed, the debtor filed his Chapter 7 case and the creditor filed its nondischargeability complaint. During the § 523 trial, the debtor pled the Fifth Amendment rather than answer a question regarding the identity of a person who allegedly notarized powers of attorney purportedly executed by the debtor's grandparents. The debtor also pled the Fifth Amendment when asked if he had provided false information in one of the loan applications. While the 8th Circuit took exception to the bankruptcy court's hearsay rulings, it ruled that the debtor had not been prejudiced by such rulings.

Judge(s):

BENTON, BEAM, MURPHY

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!