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Jared C. Walters, Trustee v. Jeanne A. Gallegos, et al.

Summarizing by David Treacy

Lopez v. Raicevic (In re Lopez)

Case Type:
Case Status:
BAP No. SC-15-1335-YJuF (9th Circuit, Feb 01,2017) Not Published
The BAP for the 9th Circuit affirmed the ruling of the bankruptcy court (S.D. Cal.) granting summary judgment in favor of creditors/plaintiffs on 523(a)(2)(A) dischargeability claim based on issue preclusion arising out of state court judgment. BAP agreed that state court verdict contained findings for intentional misrepresentation that matched elements of 523(a)(2)(A). BAP agreed that findings in separate adversary did not compel different outcome. Discharge of debt against co-defendants in state court action who stipulated to judgment in state court without findings of fraud inapplicable.
Procedural context:
Creditors sued debtor in dischargeability adversary, and moved for summary judgment based on state court judgment. Bankruptcy court granted motion for summary judgment and debtor appealed to BAP for 9th Circuit.
Debtor (Lopez), an attorney, represented two individuals (Mr. & Mrs. Travis) in negotiating a work out of a defaulted loan. Two individuals (Raicevics) sold real property (a shopping center) to Mr. Travis as trustee of a family trust, and took back a $1.45 million promissory note secured by the real property. The Travises later substituted their residence as collateral, and for an additional loan of $100k. The Travises defaulted on the loan, and retained Lopez and his firm to seek further substitution of collateral. Lopez sent the Raicevics a proposed pledge agreement for the substitution of personal property collateral, with various representations that the Travises would remain current. The Raicevics accepted the offer, but Lopez filed to perfect a security interest on their behalf. The Travises separated and sold their residence, from which the Raicevics would have received $588,000 from the proceeds. The Travises later sold the shopping center for more than $40 million, netting $3.5 million, but failed to pay the Raicevics. The Raicevics sued Lopez, his firm, and the Travises in state court. The Travises stipulated to a judgment, and filed bankruptcy. The Raicevics obtained a fraud judgment against Lopez and his law firm based on transaction. Lopez filed bankruptcy, and Raicevics brought adversary to except debt from discharge under 523(a)(2)(A). They filed motion for summary judgment based on fraud judgment and issue preclusion. Lopez objected, and cross-moved for summary judgment. The bankruptcy court granted Raicevics' motion, finding their debt nondischargeable pursuant to 523(a)(2)(A), and denied Lopez's motion. Lopez appealed to BAP. State court claims were for intentional misrepresentation, negligent misrepresentation, and financial elder abuse. State court verdict contained findings for intentional misrepresentation that matched elements of 523(a)(2)(A).
Yun, Jury, Faris

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