Kim v. Sun (In re Sun)
- Summarized by Steven Mulligan , Coan, Payton & Payne, LLC
- 9 years 5 months ago
- Citation:
- Kim, et al. v. Sun, et al. (In re Sun), Case No. CO-14-050 (B.A.P. 10th Cir. August 11, 2015). Published.
- Tag(s):
-
- Ruling:
- Culture can be a factor when determining justifiable reliance under 523(a)(2)(A). Repeated substitution of property can show a scheme to permanently deprive plaintiffs of their money for purposes of 523(a)(4). When a party has been fraudulently induced to enter a contract, it is not appropriate to apply the benefit-of-the-bargain rule to determine damages. Plaintiffs must elect either to rescind the entire contract to restore the conditions existing before the agreement was made, or to affirm the entire contract and recover the difference between the actual value of the benefits received and the value of those benefits if they had been as represented. In the absence of applicable federal law regarding prejudgment interest, it is appropriate to look to state law and the federal court is free to choose any interest rate which will fairly compensate the plaintiff for the delay in the receipt of payment.
- Procedural context:
- The Bankruptcy Court found that (i) debts to the plaintiffs were nondischargeable under sections 523(a)(2)(A), (a)(4) and (a)(6); (ii) plaintiffs were entitled to benefit-of-the-bargain damages, and: (iii) plaintiffs were entitled to prejudgment interest at the rate of 8% per annum from the date the debt was incurred to the date of the Bankruptcy Court’s judgment. The BAP affirmed the nondischargeability findings; reversed the decision on the benefit-of-the-bargain damages and remanded for damages calculations, and affirmed on the prejudgment interest rate. The nondischargeability findings are reviewed for clear error; damages calculations are reviewed for clear error while the methodology to calculate damages is reviewed de novo, and; an award of prejudgment interest is reviewed for an abuse of discretion.
- Facts:
- Defendants convinced plaintiffs to purchase real property for $900,000. Rather than use the money to buy the property, defendants documented the deal as a purchase by plaintiffs of 50% of defendants’ entity that owned the property. Later, defendants told plaintiffs that they were going to put the entity into bankruptcy and to avoid losing their investment, plaintiffs needed to exchange their entity interest for interest in a promissory note. Then, defendants told the plaintiffs that in order to protect their investment, they needed to exchange their interest in the promissory note for stock in another entity. Ultimately, plaintiffs recovered $109,794 on their investment. The Bankruptcy Court awarded plaintiffs $1,042,206, plus prejudgment interest at 8% per annum, compounded annually, plus postjudgment interest at the rate set forth in 28 U.S.C. § 1961, plus costs.
- Judge(s):
- Karlin, Somers, Hall (Hall)
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