Skinner v. Huggins (In re Skinner)

Summarized by Lars Fuller , BakerHostetler
11 years 2 months ago

Citation:

Skinner v. Huggins, BAP No. AZ-13-1445-DJuKi (BAP 9th Cir. Dec. 10, 2014)

Tag(s):

Ruling:

The BAP for the Ninth Circuit affirmed the bankruptcy court (D. Arizona) judgment in favor of creditor on 11 USC 523(a)(2)(A) dischargeability claim, and affirmed bankruptcy court's finding that debtor intended to defraud creditor. Sole issue on appeal was whether bankruptcy court properly found that debtor intended to defraud creditor based on circumstantial evidence of debtor's financial condition at the time of the misrepresentation, and its conclusion that debtor knew or should have known that he could not fulfill promise, notwithstanding debtor's testimony that he did not intend to defraud creditor. Bankruptcy court ruled that circumstantial evidence of debtor's financial distress, and debtor's failure to apply any of the sale proceeds to payment of the first lien, refuted debtor's testimony that he did not intend to defraud buyer. Bankruptcy court concluded that given debtor's financial circumstances, his representation that he would pay off lien demonstrated a reckless indifference to truth, and that debtor knew or should have known that he could not fulfill promise to pay off lien. Debtor's representation that he would pay of lien was so far beyond his financial reality as to be deceptive, and sufficient to support the finding that debtor intended to defraud buyer. The BAP ruled that the bankruptcy court's finding, based on the record, was not clearly erroneous, and affirmed.

Procedural context:

After bankruptcy court entered judgment in favor of plaintiffs/creditors on 11 USC 523(a)(2)(A) dischargeability claim, defendants/debtors appealed to the 9th Circuit BAP.

Facts:

Debtor made a handshake deal with creditor to sell a collector vehicle that was encumbered by a lien. As part of the handshake deal, debtor promised to pay off the lien. Creditor believed that debtor would apply the sale proceeds entirely to payment of the lien, including proceeds from debtor's subsequent sale of real estate that buyer transferred to debtor as partial consideration for purchase of the vehicle. Debtor did not apply any of the sale proceeds toward payment of the lien. First lienholder subsequently foreclosed, repossessing vehicle from buyer. Debtor maintained that he fully intended to pay off lien, and never intended to defraud buyer/creditor. However, debtor significant financial distress had no objectively reasonable prospect of resolution, as debtor's debts were increasing while his only hope for revenue was from speculative, contingent, prospective real estate transactions.

Judge(s):

Dunn, Jury, and Kirscher

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