In re: Anthony Thomas and Wendi Thomas At Emerald, LLC, NV-16-1058-KuLJu

Background

Anthony and Wendi Thomas (debtors) appealed a bankruptcy-court judgment that Anthony Thomas’ $4.5 million stipulated judgment debt to Kenmark Ventures, LLC is nondischargeable under 11 U.S.C. § 523(a)(2)(A).
Kenmark lent $6.1 million to Electronic Plastics (a company Thomas heavily invested in/acted for); Kenmark claims loans were secured by a 21,000-carat uncut "Thomas emerald" and documented by notes and security agreements signed by Thomas.
Kenmark’s principal, Tersini, testified Thomas provided an $800 million appraisal for the emerald but did not disclose an earlier $400,000 appraisal or that Thomas paid between $20,000 and $60,000 for the stone; Kenmark says these omissions induced the lending.
Other alleged nondisclosures/misrepresentations included: Electronic Plastics’ CEO’s felony conviction, pending IP litigation with e-smart, and overstated commercial readiness of a biometric smartcard product.
Bankruptcy court found Thomas signed the loan/security documents, withheld the $400,000 appraisal and low purchase price, and made misleading representations; it implicitly found intent and causation and ruled the $4.5M debt nondischargeable. The BAP affirmed.

Issues

Issue	Plaintiff's Argument (Kenmark)	Defendant's Argument (Thomas)	Held
Whether the debt is nondischargeable under § 523(a)(2)(A) for fraud by nondisclosure	Thomas concealed material facts about the emerald (prior $400,000 appraisal, low purchase price) and made misleading representations; Kenmark relied and was damaged	No actionable false statement: Thomas argues no proof of the emerald’s true value, and claims signatures were forged; disputes intent to deceive and duty to disclose	Affirmed: nondischargeable; emerald-related nondisclosures were actionable fraud and supported judgment
Whether the bankruptcy court made sufficient findings of intent and causation	Kenmark argued findings support implied intent and causation based on record and Restatement § 551 principles	Thomas argued court failed to make explicit findings on intent/knowledge and record lacked support for those elements	Affirmed: court’s implicit findings of intent and causation are supported by record and permissible inferences
Whether nondisclosure was material and actionable and whether Thomas had a duty to disclose	Kenmark: the omitted appraisals/purchase price were material and Thomas had a duty because his $800M appraisal was a partial/ambiguous statement that would mislead	Thomas: no duty to disclose and no clear proof materiality or falsity of representations	Affirmed: omissions were material; duty to disclose existed under Restatement (Second) of Torts § 551(2)(b) as Thomas’ partial statements were misleading
Whether the transaction was a loan secured by the emerald or an equity investment / whether signatures were forged	Kenmark: executed loan documents and consistent communications show a secured loan; signatures genuine	Thomas: characterizes funds as equity and claims forgery of loan documents	Affirmed: bankruptcy court credited Kenmark; credibility choices were permissible and not clearly erroneous

Key Cases Cited

Turtle Rock Meadows Homeowners Ass’n v. Slyman, 234 F.3d 1081 (9th Cir. 2000) (elements for nondischargeable fraud under § 523(a)(2)(A))
Field v. Mans, 516 U.S. 59 (1995) (Restatement guidance may inform fraud/nondisclosure analysis under § 523)
Apte v. Romesh Japra, M.D., F.A.C.C., Inc. (In re Apte), 96 F.3d 1319 (9th Cir. 1996) (nondisclosure can be actionable and justifiable reliance may be presumed for material omissions)
Tallant v. Kaufman (In re Tallant), 218 B.R. 58 (9th Cir. BAP 1998) (treating actionable nondisclosure as equivalent to affirmative misrepresentation)
Retz v. Samson (In re Retz), 606 F.3d 1189 (9th Cir. 2010) (standard for reviewing factual findings for clear error)
Anderson v. City of Bessemer City, 470 U.S. 564 (1985) (deference to factfinder where two permissible views of evidence exist)