Now Updating
In re: DIANN MARIE CATES

Summarizing by Lars Fuller

Wickam v. Ivar (In re Werner)

Citation:
Wickam v. Ivar (In re Werner), BAP No. CC–14–1314–TaKuD, 2015 WL 5048151 (B.A.P. 9th Cir. Aug. 25, 2015)
Tag(s):
Ruling:
Concluding that the bankruptcy court failed to make sufficient or complete findings with respect to the creditors/plaintiffs’ claims arising from failed real estate investments and each element of section 523(a)(2)(A) of the Bankruptcy Code, the Bankruptcy Appellate Panel of the Ninth Circuit vacated the bankruptcy court’s judgment that the creditors/plaintiffs’ claims were nondischargeable under section 523(a)(2)(A) of the Bankruptcy Code and remanded to the bankruptcy court with instructions that it make additional findings. In addition, the BAP affirmed the bankruptcy court in part, holding that the bankruptcy court did not err by considering the debtor’s prior tax returns and statements of financial affairs to find that he was not credible as a witness.
Procedural context:
Creditors/plaintiffs commenced an adversary proceeding against the debtor seeking a determination that their claims were nondischargeable under section 523(a)(2)(A) of the Bankruptcy Code. Following a successful petition for a transfer of venue to the Central District of California, the bankruptcy court consolidated four related adversary proceedings, including the creditors/plaintiffs’ proceeding against the debtor. After the other adversary proceedings settled, the bankruptcy court held a one-day trial and took the matter under submission. Ultimately, the bankruptcy entered judgment in favor of the creditors/plaintiffs. The debtor appealed. The BAP reviewed the bankruptcy court’s findings of fact for clear error and its conclusions of law de novo.
Facts:
The debtor co-founded a real estate construction company to build high-end homes. In early 2006, the construction company contracted to purchase four lots to complete its first project. To finance the purchase and construction of two houses, the construction company borrowed money from a hard-money lender on a secured basis. To raise additional funds, the construction company sold equity in its subsidiary to the creditors/plaintiffs in two separate transactions. Although the transactions were executed within one month of each other, the respective supporting documents did not reference the other investment. One of the creditors/plaintiffs also received an unsecured promissory note in the amount of his investment. Subsequently, the other creditor lent the construction company additional funds. Repayment of this subsequent loan was secured by junior liens against two of the lots. In 2007, the construction company borrowed additional funds from the hard-money lender. The construction company could not refinance the first loan and ultimately defaulted. Upon that default, the hard-money lender learned of the junior liens, which violated the express terms of its loans. As a result, the hard-money lender accelerated repayment of the second loan. Unable to repay the loan, the construction company ceased doing business and the debtor filed for bankruptcy. The creditors/plaintiffs then joined forces and commenced an adversary proceeding against the debtor seeking a determination that their claims were nondischargeable under section 523(a)(2)(A) of the Bankruptcy Code.
Judge(s):
Taylor, Dunn, and Kurtz, Bankruptcy Judges

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