Keeton v. Flanagan (In re Flanagan)

Citation:
Keeton v. Flanagan (In re Flanagan), B.A.P. Nos. NV-13-1188, NV-13-1189 (9th Cir. B.A.P., February 26, 2014) (Not for Publication)
Tag(s):
Ruling:
The Bankruptcy Appellate Panel of the Ninth Circuit ("BAP") affirmed in part the judgment of the Bankruptcy Court determining, among other things, the non-dischargeability of a claim under Bankruptcy Code Section 523(a)(2)(A) (false pretenses), while reversing a determination of non-dischargeability under Bankruptcy Code Section 523 (a)(4) (embezzlement), because the money at issue had been loaned, no longer belonged to the lender, and could not be the subject of an embezzlement claim. The BAP further held that an award for prejudgment interest, attorneys fees, and costs should have been granted where the non-dischargeable claim arose under state law that provided for such remedies.
Procedural context:
Appeal and cross-appeal from the Bankruptcy Court for the District of Nevada (J. Beesley), entering a judgment for non-dischargeability of a claim under Bankruptcy Code Section 523, reviewed de novo.
Facts:
Appellant and creditor, Robert Keeton ("Keeton"), filed an adversary proceeding against the debtor, Stephen Flanagan ("Flanagan"), alleging the non-dischargeability of a claim arising from the loss of $200,000 given to Flanagan in connection with a redevelopment project in Minnesota. The BAP upheld the determinations of the Bankruptcy Court that the claim was non-dischargeable under Bankruptcy Code Section 523(a)(2)(A) (false pretenses) but denying its non-dischargeability under 523(a)(6) (willful and malicious injury) and (a)(19) (securities violation). However, the BAP reversed the Court's finding that the claim was non-dischargeable under 523(a)(4) (embezzlement) on the grounds that the funds had been "loaned" and, as such, no longer belonged to Keeton and could not be the subject of an embezzlement claim. As to damages, the BAP upheld the Court's finding that Alaska's Uniform Trade Practices Act had not been violated and treble damages were not justified, because real estate transactions are not within the law's scope. However, it reversed the Court's denial of a post-trial motion for prejudgment interest, attorneys' fees and costs, holding that, where the underlying claim in a non-dischargeable judgment would have given rise to such remedies if litigated under applicable state law, they must be granted in Bankruptcy Court. Finally, the BAP upheld the Bankruptcy Court's failure to grant relief from stay in response to an impermissible oral motion.
Judge(s):
Taylor, Jury, and Kirscher, Bankruptcy Judges

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