Now Updating
In re Barbara Wigley

Summarizing by Bradley Pearce

Shah v. Chowdaury (In re Chowdaury)

Citation:
In re Chowdaury, 13-1346 (B.A.P. 9th Cir. 2014)
Tag(s):
Ruling:
The United States Bankruptcy Appellate Panel of the Ninth Circuit (the “BAP”) affirmed the ruling of the United States Bankruptcy Court for the Eastern District of California, denying the Creditor’s non-dischargeability action. The BAP found that the Creditor failed to present evidence demonstrating the Debtor’s conduct proximately caused the Creditor to incur damages, because (i) the Debtor did not make any misrepresentations or false promise at or before the time the Creditor loaned money, and (ii) the Creditor failed to present evidence demonstrating justifiable reliance or any statement or act of the Debtor where the Creditor elected to forebear from debt collection
Procedural context:
Appeal from the United States Bankruptcy Court for the Eastern District of California’s decision to the BAP for judgment in favor of the Debtor against the Creditor’s 11 U.S.C § 523(a)(2)(A) claims. The United States Bankruptcy Appellate Panel of the Ninth Circuit reviewed the Bankruptcy Court’s conclusions of law de novo, its factual findings for clear error, and its exercise of discretion for abuse thereof
Facts:
Syed S. Chowdaury (the “Debtor”) owned and operated two hotel properties in Lake Tahoe, California (collectively, the “Hotels”). In 2003, the Debtor experienced financial difficulties and sought loans from his local bank, which his banker denied. The Debtor’s banker then referred him to Nitin Shah (the “Creditor”), who agreed to loan money to the Debtor. The Creditor advanced between $219,000.00 to $257,000.00 (the “2003 Advances”) to the Debtor without any formal loan documentation or clear agreement or understanding regarding the repayment terms of the 2003 Advances. In 2004, the Debtor requested additional money from the Creditor; however, the Creditor refused to advance additional funds unless the Debtor signed a promissory note covering the 2003 Advances (the “Note”). The Debtor signed the Note which provided for 10% interest, and a principal amount of $205,000.00, to be substantiated by cancelled check copies and other papers. The Note provided three repayment terms which were payable: a) upon demand, b) upon the refinance of the Hotels, or c) upon the refinance of one of the Hotels. Before signing the note, Debtor paid a total of $14,000.00 to the Creditor for the 2003 Advances. The Creditor did not make any more advances after the Debtor signed the Note. Thereafter, the Debtor refinanced the Hotels but did not pay the Creditor. In 2009, the Creditor filed a civil action after learning of the refinancing transactions. In 2011, the Debtor filed his chapter 7 bankruptcy case during the pendency of the civil action. The Creditor then filed his adversary proceeding pursuant to 11 U.S.C. § 523(a)(2)(A)
Judge(s):
Honorable Judge Frank L. Kurtz, Honorable Judge Meredith A. Jury, Honorable Laura S. Taylor

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