SLK Capital, LLC v. Beach, 651 B.R. 359

In 2015 Brian Beach bought a mixed-use property for $125,000 funded by $160,000 wired from his mother Mary Lou Reimer and her husband Louis Reimer; financial statements submitted to SLK listed that $160,000 as owner contribution (no private loan).
SLK made a series of loans to Beach’s Steaks & Spirits, LLC (three advances consolidated into a promissory note signed by Brian and guaranties); the loan documents contained representations that supplied financial statements were accurate and disclosed no undisclosed liabilities.
The business later defaulted; Forest County entered a stipulated judgment of $220,948.18 against Brian and the LLC; SLK then sued in bankruptcy seeking nondischargeability under 11 U.S.C. § 523(a)(2)(B) (and earlier theories later dismissed).
SLK alleged the $160,000 was a personal loan (undisclosed) and that the Balance Sheet/Source & Use statements were materially false and induced SLK’s reliance; Theresa Winger‑Beach was sued as well, on the theory she had ownership/participated in preparing the loan application.
At trial Brian and Theresa testified the $160,000 was a gift; Theresa did not sign loan documents; the court found SLK reasonably relied on the written statements but SLK failed to prove by a preponderance that the statements were materially false or that Brian intended to deceive.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does Theresa Winger‑Beach owe the debt?	Theresa had ownership/participated in preparing/submitting loan documents → liable.	Theresa was not an owner, did not sign loan documents, acted under Brian's direction.	Theresa is not liable; SLK presented no evidence she owned the LLC or signed loan docs; claim dismissed as to her.
Were the written statements materially false under § 523(a)(2)(B)?	The Source & Use and Balance Sheet mischaracterized the $160,000 as equity when it was a loan.	The $160,000 was a gift; no contemporaneous hallmarks or documentation of a loan.	Material falsity not established by a preponderance; doubt resolved for debtor.
Did SLK reasonably rely on the written statements?	SLK relied on the documents and loan officer Hansen’s assessment that $160,000 was owner ‘‘skin in the game.’'	SLK should have inquired further into source (bank statements/tax returns).	Reliance was reasonable: Hansen reviewed documents and did a UCC search; § 523(a)(2)(B)(iii) satisfied.
Did Brian have intent to deceive when submitting the statements?	Brian had motive to conceal a loan; failed to correct misstatements; later executed mortgage in favor of Reimers.	Brian was unsophisticated, lacked repayment terms/documentation, believed funds were a gift, no evidence of intent to hide.	Intent not proven; court credited Brian’s testimony and found no intent to deceive in 2015–2016.

Grogan v. Garner, 498 U.S. 279 (establishes preponderance standard for nondischargeability)
Lamar, Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752 (statement about a single asset can bear on financial condition)
In re Morris, 223 F.3d 548 (7th Cir.) (creditor’s reliance need not include exhaustive investigation)
Am. Grain Trimmers, Inc. v. Office Workers’ Comp. Programs, 181 F.3d 810 (7th Cir.) (explains preponderance proof standard)
Matter of Harasymiw, 895 F.2d 1170 (7th Cir.) (declines to second‑guess reasonable lending decisions)
Bombardier Capital Inc. v. Rodi (In re Rodi), 163 B.R. 1017 (N.D. Ill.) (timing of falsity and post‑application transfers relevant to intent and falsity)
Bartenwerfer v. Buckley, 143 S. Ct. 665 (addresses partner liability issues under state law relevant to third‑party liability arguments)