443 B.R. 808
8th Cir. BAP2011Background
- Debtor and wife formed Lanadar Corp. in 1985 to operate a home improvement business and transferred gold coins to Lanadar in 2005.
- In 2005 American Distributors, a Missouri corporation, was formed; Debtor personally guaranteed its loan from Bank.
- Debtor and wife filed two personal financial statements listing gold, silver, platinum coins and mutual funds, with ownership indeterminate.
- Bank renewed the 2006 loan in 2008; Debtor again guaranteed, with similar financial statements omitting clear ownership of assets.
- In 2009, Debtor released a second mortgage in exchange for a CD; American Distributors was liquidated, leaving a Bank claim of about $170,484.20, and Debtor filed for Chapter 7.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Material falsity of statements | Bank argues statements misrepresent ownership and liens on coins and funds. | Lindsey contends statements portrayed assets under de facto control and disclosed liabilities. | Not clearly erroneous that statements were not materially false. |
| Materiality standard under 523(a)(2)(B) | Bank contends omissions/ownership issues would affect credit decision. | Court found assets were controllable and still available to pay debts. | Bank failed to prove material misrepresentation; no clear error. |
| Reasonable reliance | Bank relied on statements for credit extensions. | Bank evidence showed other factors; may not have relied on statements. | Court did not require finding Bank relied on statements; and any reliance finding not clearly erroneous. |
| Intent to deceive | Debtor knew ownership issues and LIEN statuses; intended to deceive. | Debtor disclosed assets and cooperated; no deceptive intent found. | No clear error; record supports lack of requisite intent. |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (1991) (preponderance standard for nondischargeability elements)
- Pontow, 111 F.3d 604 (8th Cir. 1997) (reliance reviewed for totality of circumstances)
- In re Freier, 604 F.3d 583 (8th Cir. 2010) (clear error review for 523(a)(2)(B) elements)
- In re Simpson, 29 B.R. 202 (Bankr. N.D. Iowa 1983) (circumstantial evidence of intent to deceive standard)
- In re Van Horne, 823 F.2d 1285 (8th Cir. 1987) (intent evaluation in 523(a)(2)(A)/(B) contexts)
- Cutcliff v. Reuter, 427 B.R. 727 (Bankr. W.D. Mo. 2010) (tenancy by entirety ownership implications in reliance)
- Blodgett v. Comm'r, 394 F.3d 1030 (8th Cir. 2005) (credibility determination afforded deference)