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NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP Nos. CC-17-1266-STaF

 ) CC-17-1269-STaF

JOEL WERNER and CATHLEEN )

WERNER, ) Bk. No. 8:08-bk-11153-CB

 )

Debtors. ) Adv. No. 8:10-ap-01104-CB

_______________________________)

 )

JASON SCOTT WICKAM, )

 )

Appellant, )

 )

v. ) MEMORANDUM*

 )

ALAN IVAR; DEBORAH IVAR; DAVID )

ROCHE, )

 )

Appellees. )

_______________________________)

Argued and Submitted on February 22, 2018

at Pasadena, California

Filed – February 13, 2019

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding

 

Appearances: Robert R. Anderson argued for appellant Jason

Scott Wickam; Michael J. Carras of Conforti &

Carras argued for appellees Alan Ivar, Deborah

Ivar, and David Roche. 

 

Before: SPRAKER, TAYLOR, and FARIS, Bankruptcy Judges.

FILED

FEB 13 2019

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

* This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8024-1.
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Memorandum by Judge Faris 

Concurrence in Part and Dissent in Part by Judge Spraker

INTRODUCTION

 Chapter 111 debtor Jason Scott Wickam appeals from a

nondischargeability judgment under § 523(a)(2)(A) in favor of

plaintiffs Alan Ivar, Deborah Ivar, and David Roche. This is the

second nondischargeability judgment that the bankruptcy court has

entered in the underlying adversary proceeding. In a prior

appeal from the first nondischargeability judgment, we vacated

and remanded for further findings.

On remand, the bankruptcy court made additional findings

that adequately supported the nondischargeability judgment

against Mr. Wickam. We discern no clear error.

Mr. Wickam also appeals from the denial of his postjudgment

motion under Civil Rule 59(e). The bankruptcy court did not

abuse its discretion in denying this motion. Therefore, we

AFFIRM.

FACTS

A. Prebankruptcy events

1. The formation of Mr. Wickam’s real estate development

business and commencement of the Coral Blue project

In November 2005, Mr. Wickam and Joel Werner formed

Connexian Investments, Inc. (“Connexian”) to develop real estate. 

1 Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

all “Rule” references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037. All “Civil Rule” references are to

the Federal Rules of Civil Procedure.

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Each held a fifty percent interest in Connexian, and they planned

to use Connexian to purchase vacant land and build luxury homes

on that land. At the time they created Connexian, neither had

any direct experience in real estate development. Mr. Wickam had

worked as a general building contractor and Mr. Werner owned a

business marketing products. Neither had previously worked with

the other, as they had met for the first time shortly before they

went into business together.

Connexian’s first development project involved the

construction of four multi-million dollar homes on four lots on

Coral Blue Street in Ladera Ranch, California (the “Coral Blue

Project”). Connexian, through Mr. Wickam and Mr. Werner,

contracted to purchase these four vacant lots for just under

$1 million per lot. Mr. Wickam estimated a total development cost

for the Coral Blue Project of $13 million.

Originally, the purchase contract required Connexian to

close by May 1, 2006. Connexian, through Mr. Werner and

Mr. Wickam, deposited $80,000 into escrow pursuant to the

purchase contract. Connexian, however, was unable to procure

financing from conventional lenders to purchase the lots. 

Connexian negotiated several extensions for the purchase based on

additional deposits of funds into escrow. Connexian deposited a

total of $220,000.

While negotiating the extensions of time to purchase the

lots, Connexian retained RSD Group, Inc. (“RSD”) to assist it in

raising the money needed for the project. RSD agreed to invest

$400,000 in the Coral Blue Project and referred Connexian to

Point Center Financial for additional financing. Point Center

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Financial was a “hard money lender.”

2. Connexian’s financing and the plaintiffs’ initial

investments

In June 2006, Point Center Financial and Connexian entered

into a loan placement and fee agreement to fund the purchase of

all four Coral Blue Project lots and to pay the development and

construction costs for two of the homes (Lots 23 and 28). Point

Center Financial agreed to lend Connexian $6,587,100 but only if

Connexian raised an additional $1,615,085. Connexian informed

Point Center Financial that it had the money necessary to close

on the financing. On August 3, 2006, however, Point Center

Financial told Mr. Wickam and Mr. Werner that it was unable to

fund $2,148,800 of the $6,587,100 loan amount. Point Center

Financial advised Mr. Wickam and Mr. Werner that it would use its

best efforts to obtain the additional funding.

This was not the only funding shortfall Mr. Wickam and

Mr. Werner faced. Several months earlier, RSD informed

Mr. Wickam and Mr. Werner that it was not able to fund the

$400,000 it had promised. Consequently, with RSD’s assistance,

Mr. Wickam and Mr. Werner began searching for other investors.

Around the same time, Mr. Wickam and Mr. Werner formed Coral

Blue, LLC, a California limited liability company, for the stated

purpose of purchasing, developing, selling, and managing the four

lots at the Coral Blue Project.

a. The Ivars’ first investment ($216,000)

RSD introduced Alan and Deborah Ivar to the Coral Blue

Project investment opportunity sometime in early August 2006. 

During a period of roughly two or three weeks, the Ivars had

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multiple meetings and discussions with Mr. Wickam and Mr. Werner

regarding the project. The Ivars also toured the Coral Blue

Project lots with Mr. Wickam. The Ivars maintained that the

issue of project loan financing came up several times during

these meetings. They testified that they were told (presumably

during these meetings) that the project loan financing was “in

place” and that Mr. Wickam and Mr. Werner were using a

“conventional lender.” The Ivars said they understood this to

mean a traditional bank was financing the project and not a hard

money lender. The Ivars described their understanding of hard

money lending as loans to borrowers who are not creditworthy. 

They further testified that they did not want to invest in

projects funded with hard money loans.

The Ivars also reviewed documents provided to them by

Mr. Werner and Mr. Wickam, including a subscription agreement and

operating agreement for Coral Blue, LLC dated as of August 18,

2006. The operating agreement was signed by Mr. Wickam and

Mr. Werner and had signature lines for the Ivars. The operating

agreement reflects that the Ivars made a $216,000 capital

contribution to Coral Blue, LLC and held 216,000 governance units

and economic units for the limited liability company. Schedule 1

also listed Mr. Werner and his wife as having made a capital

contribution, as well as five other investors, including RSD. 

(Mr. Roche, the other plaintiff and appellee, was not listed as

an investor; as we explain below, he invested in Coral Blue, LLC

roughly one month later, in September 2006.)

The Ivars made their first investment in Coral Blue, LLC on

or about August 28, 2016. The Ivars gave Mr. Wickam and

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Mr. Werner a check in the amount of $216,000 made payable to

Coral Blue, LLC.2 In exchange for their investment, the Ivars

received not only membership units in Coral Blue, LLC but also an

“Unsecured Promissory Note” made in their favor by Connexian for

$216,000. Mr. Wickam and Mr. Werner signed the promissory note on

behalf of Connexian. The note provided for repayment within a

year and for interest to accrue at an annual rate of twenty-five

percent. Notwithstanding the note, the Ivars saw themselves as

equity investors in Coral Blue, LLC, which they understood would

purchase and develop the Coral Blue Project lots. The Ivars

testified that they did not consider the promissory note from

Connexian to be significant. 

b. Mr. Roche’s investment ($200,000)

Unlike the Ivars, Mr. Roche previously knew Mr. Wickam from

working with him on other projects in the construction industry. 

During the summer of 2006, Mr. Wickam approached Mr. Roche about

investing in the Coral Blue Project. Over the course of a month

or so, Mr. Wickam contacted Mr. Roche on numerous occasions to

discuss the project. By early September 2006, Mr. Wickam began

to pressure Mr. Roche to invest in the Coral Blue Project. On

September 9, 2006, Mr. Roche made a check payable to Connexian

2 The Ivars’ $216,000 check was not included in the parties’

excerpts of record. However, a copy of this check, and many

other trial exhibits, are attached to the plaintiffs’ post-remand

motion for a post-appeal judgment. We have exercised our

discretion to take judicial notice of these and other bankruptcy

court documents not included in the parties’ excerpts. See 

Rivera v. Curry (In re Rivera), 517 B.R. 140, 143 n.2 (9th Cir.

BAP 2014), aff’d in part, dismissed in part, 675 F. App’x 781

(9th Cir. 2017).

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for $125,000, and on September 12, 2006, he made another check

payable to Connexian in the amount of $75,000, for an aggregrate

total investment of $200,000.

Mr. Roche’s testimony regarding his pre-investment

understanding of the project’s loan financing was very similar to

the Ivars’: “conventional financing” through a “traditional

bank.” According to Mr. Roche, Mr. Werner made the specific

representation to him that the project had conventional

financing, and Mr. Wickam contemporaneously validated

Mr. Werner’s representation by immediately telling him that

everything was taken care of.

Like the Ivars, Mr. Roche also believed that Coral Blue, LLC

was going to purchase the four lots and hold title to them. 

Specifically, during his pre-investment meetings with Mr. Wickam

and Mr. Werner, Mr. Roche testified that he was told that Coral

Blue, LLC “was the vehicle to purchase four lots, build and sell

four homes for profit on Coral Blue [S]treet.” He also testified

that someone expressly told him that the four lots would be

purchased in the name of Coral Blue, LLC.

Like the Ivars, Mr. Roche received and signed a subscription

agreement for Coral Blue, LLC. The subscription agreement signed

by Mr. Roche is dated September 13, 2006. The record does not

include an operating agreement signed by Mr. Roche; only an

operating agreement dated June 6, 2006, signed by Mr. Wickam and

Mr. Werner with a space for Mr. Roche’s signature. That

operating agreement does not disclose any other members in Coral

Blue, LLC other than Mr. Werner, Mr. Wickam, and Mr. Roche,

despite the fact that the Ivars had become members about a month

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earlier.

3. The purchase of the Coral Blue Project lots 

On September 15, 2006, both the Point Center Financial loan

and Connexian’s purchase of the lots closed. The parties

stipulated that monies were transferred from Coral Blue, LLC’s

accounts to Connexian to fund the closing. Specifically, Coral

Blue, LLC had less than $14,000 in its bank accounts on August

30, 2006, just prior to the depositing of the Ivars’ first

investment check. The parties agreed that the Ivars’ $216,000

check was deposited into Coral Blue, LLC’s bank account on either

August 30 or 31, 2006. The parties further agreed that, prior to

the closing of Connexian’s purchase of the lots, “all but $41.33

of the money in the Coral Blue, LLC checking account and $215.53

of the Coral Blue, LLC savings account had been transferred into

the Connexian checking account. The balance in those two

accounts remained at about that level until the accounts were

closed in 2008.” 

As a result of the sale, Connexian became the owner of

record of the four Coral Blue Project lots, subject to a recorded

deed of trust in favor of Point Center Financial. Both the note

and deed of trust prohibited Connexian from selling or further

encumbering the lots without Point Center Financial’s prior

written consent.

4. The Ivars’ second investment ($600,000)

By November 2016, construction had begun on the first two

lots. Around this time, Mr. Wickam and Mr. Werner approached the

Ivars to make an additional investment in the Coral Blue Project.

Mr. Wickam and Mr. Werner explained that they wanted to get an

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early start on construction for the second pair of lots and

needed additional funding for “bricks and sticks,” which Mr. Ivar

understood to mean actual construction costs. 

As a result, the Ivars invested another $600,000 in two

installments. The Ivars paid the first installment by check

dated December 29, 2006 to Connexian in the amount of $200,000.

Connexian deposited the funds into its bank account that same

day. Also on December 29, 2006, the parties signed escrow

instructions for the $200,000 loan. According to the escrow

instructions, the Ivars were to receive a $200,000 note from

Connexian payable in thirty days, bearing seven percent interest,

secured by a second priority deed of trust against Lots 26 and 27

of the Coral Blue Project. Consistent with these instructions,

Mr. Werner, on behalf of Connexian, executed a promissory note

and a deed of trust against Lots 26 and 27, also dated that same

day. The Ivars claimed that neither of them noticed the thirtyday term of the note. The Ivars also testified that Mr. Wickam

and Mr. Werner instructed them not to record the trust deed

because it (and the note) were “simply another layer of

protection for [the Ivars’] investment in Coral Blue II LLC.”

The Ivars paid the remaining $400,000 to Connexian by check

dated April 18, 2007. While the two installments were paid

several months apart, the Ivars apparently viewed both of them as

part of their second investment because in exchange for these

funds they received 600,000 membership units in a new company:

Coral Blue II, LLC. According to the Ivars, Mr. Wickam and

Mr. Werner represented that their $600,000 investment would be

repaid with a twenty-five percent share of the net proceeds from

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the future sale of Lots 26 and 27. There was no promissory note

or deed of trust for the $400,000 investment.

Mr. Wickam and Mr. Werner, on behalf of Coral Blue II, LLC,

and Mr. Ivar signed a Limited Liability Company Operating

Agreement of Coral Blue II, LLC. That document is dated March

27, 2007, roughly two months after the $200,000 promissory note

came due, and several weeks before the Ivars paid the $400,000

installment. Paragraph 2.6 of the Coral Blue II, LLC operating

agreement described the company’s business purpose similar to

Coral Blue, LLC’s, including “purchasing, developing, selling and

managing residential properties.” Whereas paragraph 2.6 of the

Coral Blue, LLC operating agreement specifically identified the

four Coral Blue Project lots as the object of the company’s

business purpose, the Coral Blue II, LLC operating agreement did

not refer to any specific property.

Consistent with the Ivars’ understanding of their $600,000

investment, the operating agreement for Coral Blue II, LLC shows

the Ivars as owning 600,000 governance and economic units for the

entity. Connexian is listed as owning the remaining 1,800,000

units in Coral Blue II, LLC. Mr. Wickam and Mr. Werner also gave

the Ivars a document that the Ivars refer to as an “Investment

Breakdown,” executed on April 18, 2007, the same day the Ivars

paid their $400,000 to Connexian. The Investment Breakdown

projected that the Ivars would receive $702,062.50 from the sale

of the houses to be built on Lots 26 and 27, attributable to a

twenty-five percent interest. 

5. Refinancing negotiations, default and foreclosure

Connexian obtained a second loan from Point Center Financial

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for $6 million in August 2007 to fund construction on Lots 26 and

27. Although the record is not entirely clear, it appears that,

by this point, a substantial amount of construction work had been

completed on Lots 23 and 28, and work had begun on Lots 26 and

27. While the parties were still working on closing this second

loan, they began working on refinancing the first Point Center

Financial loan. The first loan matured on October 1, 2007

without an agreement for refinancing. Even so, the parties

continued to negotiate refinancing through most of October 2007.

During the post-maturity refinancing negotiations, Point

Center Financial learned that Connexian had encumbered all four

Coral Blue Project lots with junior liens, in violation of the

terms of both Point Center Financial loans. Point Center

Financial also was concerned that the construction of the houses

on Lots 23 and 28 had suffered from significant cost overruns and

had not been timely completed. As of October 2007, the houses on

those lots still were not sufficiently completed to be marketed

for sale. Ultimately, Point Center Financial declined to

refinance the first loan, accelerated the second loan, and

foreclosed on all four lots. Neither the Ivars nor Mr. Roche

ever received any payments on their investments. 

B. Mr. Wickam’s bankruptcy filing and the plaintiffs’ 

nondischargeability action

The Ivars and Mr. Roche jointly sued Mr. Wickam first in

California state court and later, after Mr. Wickam filed his

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bankruptcy case, in the bankruptcy court.3

The plaintiffs brought to trial claims under § 523(a)(2)(A)

and § 523(a)(4). At trial, the bankruptcy court only decided the

former claim. The bankruptcy court entered judgment holding

Mr. Wickam liable for the Ivars’ and Mr. Roche’s investments and

finding the debt to be nondischargeable under § 523(a)(2)(A). 

The bankruptcy court subsequently amended its judgment to include

a certification pursuant to Civil Rule 54(b).

C. Appeal of the bankruptcy court’s decision

Mr. Wickam appealed the bankruptcy court’s judgment. We

vacated and remanded, noting that the bankruptcy court’s amended

statement of decision did not contain sufficient findings. We

expressed particular concern that the bankruptcy court’s ruling

lumped together all three investments made by the Ivars and

Mr. Roche, even though the bankruptcy court’s one clear finding

of misrepresentation arguably only applied to the Ivars’ first

investment. To the extent the fraud committed against the Ivars

was based on a misrepresentation regarding ownership of the four

lots, we also expressed a concern that the two notes and one deed

of trust the Ivars received from Connexian raised serious

questions regarding proximate cause and reliance. Finally, we

3 Mr. Wickam filed his bankruptcy case in Colorado, so the

plaintiffs commenced their nondischargeability action against him

in the Colorado bankruptcy court. The Colorado bankruptcy court

later granted the plaintiffs’ motion to transfer venue of the

adversary proceeding to United States Bankruptcy Court for the

Central District of California, where it was consolidated with

four related adversary proceedings in Mr. Werner’s pending

bankruptcy case. The parties to the other adversary proceedings

later settled, leaving only the nondischargeability action

against Mr. Wickam for trial.

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identified as problematic the absence of any specific findings on

intent to deceive, knowledge of falsity and justifiable reliance. 

D. Post-remand proceedings

On remand, the plaintiffs filed a motion requesting postremand entry of judgment. In support of this motion, the

plaintiffs relied on all of their trial testimony and exhibits,

and presented to the court detailed proposed findings of fact,

which separately covered each investment. Mr. Wickam filed

detailed and specific objections to most of the plaintiffs’

proposed findings. In large part, he contended that the record

did not support the plaintiffs’ proposed findings.

Ultimately, the bankruptcy court adopted virtually all of

the plaintiffs’ findings as originally proposed, with only

limited revisions. The bankruptcy court then re-entered judgment

on the § 523(a)(2)(A) claim in favor of the plaintiffs.

E. Motion to reopen evidence or alter or amend the judgment

Mr. Wickam timely moved to reopen the record and to alter or

amend the judgment. He sought to have the court consider “new

evidence” regarding Mr. Ivar’s criminal fraud conviction arising

out of his practice as a chiropractor. He also sought to ensure

that the court had given due consideration to the declaration

testimony of Mr. Werner, which Mr. Wickam had filed in advance of

trial. The bankruptcy court entered an order denying the motion

on August 31, 2017. Mr. Wickam timely appealed from the

nondischargeability judgment and the denial of the post-judgment

motion.

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

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§§ 1334 and 157(b)(2)(I), and we have jurisdiction under

28 U.S.C. § 158.

ISSUES

1. Whether the bankruptcy court erred when it determined that

the plaintiffs had established all of the elements for

nondischargeable fraud under § 523(a)(2)(A)?

2. Whether the bankruptcy court erred when it denied

Mr. Wickam’s motion to reopen the record and to alter or

amend the judgment?

STANDARDS OF REVIEW

In appeals from judgments under § 523(a), we review the

bankruptcy court’s findings under the clearly erroneous standard

and its legal conclusions de novo. Oney v. Weinberg (In re

Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009), aff’d, 407 F.

App’x 176 (2010). 

The bankruptcy court’s credibility findings are entitled to

particular deference and only will be disturbed if clearly

erroneous. Id. Findings of fact are clearly erroneous only if

they are illogical, implausible, or without support in the

record. Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th

Cir. 2010). 

We review the bankruptcy court’s denial of a motion under

Civil Rule 59(e) for an abuse of discretion. Ybarra v. McDaniel,

656 F.3d 984, 998 (9th Cir. 2011). The bankruptcy court abused

its discretion if it applied the wrong legal standard or its

findings of fact were illogical, implausible, or without support

in the record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d

820, 832 (9th Cir. 2011).

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DISCUSSION

A. The bankruptcy court did not err in determining that the

debt owed to the Ivars and Mr. Roche was nondischargeable

under § 523(a)(2)(A).

1. Elements of nondischargeable fraud

The parties do not dispute that the bankruptcy court

identified the correct elements for determining whether

Mr. Wickam’s liability arose from a fraudulent, nondischargeable

act. Those well-established elements are: 

(1) misrepresentation, fraudulent omission or deceptive

conduct by the debtor; (2) knowledge of the falsity or

deceptiveness of his statement or conduct; (3) an

intent to deceive; (4) justifiable reliance by the

creditor on the debtor’s statement or conduct; and

(5) damage to the creditor proximately caused by its

reliance on the debtor’s statement or conduct.

In re Weinberg, 410 B.R. at 35 (quoting Turtle Rock Meadows

Homeowners Ass’n v. Slyman (In re Slyman), 234 F.3d 1081, 1085

(9th Cir. 2000)). 

The plaintiffs have asserted a mixture of affirmative

misrepresentations and omissions. While the elements are largely

the same for a claim for fraudulent misrepresentation by

omission, in such situations there is no representation upon

which one could justifiably rely. Titan Grp., Inc. v. Faggen,

513 F.2d 234, 239 (2d Cir. 1975), cited with approval in Apte v.

Romesh Japra, M.D., F.A.C.C., Inc. (In re Apte), 96 F.3d 1319,

1323 (9th Cir. 1996). For this reason, “All that is necessary is

that the facts withheld be material in the sense that a

reasonable investor might have considered them important in the

making of this decision. This obligation to disclose and this

withholding of a material fact establish the requisite element of

causation in fact.” In re Apte, 96 F.3d at 1323 (quoting

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Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128,

153-54 (1972)). 

We consider these elements and the extent to which they

apply to each of the plaintiffs’ discrete investments.

2. The Ivars’ $216,000 investment

a. The fraudulent misrepresentations and omissions

The Ivars insisted at trial that Mr. Wickam misrepresented

the Coral Blue Project’s financing and the ownership of the lots

to induce them to invest. The bankruptcy court found that

Mr. Wickam fraudulently misrepresented these matters by failing

to disclose that (1) the project’s loan financing was subject to

a one-year term; (2) the lender had advised Mr. Wickam and

Mr. Werner that it could not fund $2.1 million of the $6.6

million loan; (3) the lender was a hard money lender as opposed

to a conventional lender; and (4) Connexian, instead of Coral

Blue, LLC, was the entity arranging to purchase the four lots. 

The bankruptcy court sometimes referred to Mr. Wickam’s

conduct as affirmative fraudulent misrepresentation. At other

times, however, the court identified the conduct as fraudulent

omission. The confusion appears to derive from the Ivars’

testimony regarding their understanding of the financing and

ownership of the lots. They stated on several occasion that

these matters were discussed in the presence of both Mr. Wickam

and Mr. Werner but do not attribute any specific representations

to Mr. Wickam individually. The parties’ post-remand briefs and

their appeal briefs treat Mr. Wickam’s conduct as a species of

fraudulent omission. In light of the parties’ agreement

regarding the nature of Mr. Wickam’s fraud, we treat his conduct

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as a case of fraudulent omission as well.

Our principal concern regarding the omissions as the basis

for fraudulent misrepresentation lies with whether Mr. Wickam had

a duty to disclose. As he correctly argues, an omission is not

actionable fraud absent a duty to disclose. In re Apte, 96 F.3d

at 1323–24. We may look to the Restatement (Second) of Torts

(“Restatement”) for guidance on what constitutes nondischargeable

fraud in general, and whether Mr. Wickam was under a duty to

disclose in particular. Id. (citing Field v. Mans, 516 U.S. 59,

70 (1995)). In relevant part, the Restatement specifies that a

party to a business transaction must disclose to the other party,

before the transaction is consummated:

(b) matters known to him that he knows to be necessary

to prevent his partial or ambiguous statement of the

facts from being misleading; and

 . . .

(e) facts basic to the transaction, if he knows that

the other is about to enter into it under a mistake as

to them, and that the other, because of the

relationship between them, the customs of the trade or

other objective circumstances, would reasonably expect

a disclosure of those facts.

Restatement § 551(2)(b), (e).

The bankruptcy court did not make any express finding

concerning Mr. Wickam’s duty to disclose. Under other

circumstances, the absence of specific findings on this issue

could be a severe or even fatal impediment to our review in light

of the bankruptcy court’s duty to provide sufficient findings to

support its ruling. See Civil Rule 52(a)(1) (made applicable to

adversary proceeding by Rule 7052); see also Simeonoff v. Hiner,

249 F.3d 883, 891 (9th Cir. 2001); First Yorkshire Holdings, Inc.

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v. Pacifica L 22, LLC (In re First Yorkshire Holdings, Inc.), 470

B.R. 864, 871 (9th Cir. BAP 2012). On the other hand, when the

record is fully developed and is sufficient to support the

bankruptcy court’s ultimate conclusion, we need not remand for

further findings. Simeonoff, 249 F.3d at 891. Nor is remand

necessary when, as here, the appellate court reasonably can infer

from the bankruptcy court’s findings other facts that would

suffice to support the bankruptcy court’s decision. Brock v. Big

Bear Mkt. No. 3, 825 F.2d 1381, 1384 (9th Cir. 1987); see also

Wells Benz, Inc. v. United States ex rel. Mercury Elec. Co., 333

F.2d 89, 92 (9th Cir. 1964) (stating that appellate court must

construe the trial court’s findings favorably, such that any

doubt as to what the trial court meant is resolved in favor of

upholding rather than invalidating the bankruptcy court’s

judgment).

Here, remand is unnecessary. The elements of fraudulent

omission were correctly set forth in the parties’ post-remand

briefs, and the court had that information available to it when

it found that Mr. Wickam’s conduct amounted to fraudulent

omission. Therefore, we reasonably can infer that the bankruptcy

court found that Mr. Wickam owed a duty to disclose fully and

completely the ownership and financing of the Coral Blue Project.

The record sufficiently supports this implicit finding.

Mr. Wickam and Mr. Werner misled the Ivars during their in-person

meetings by stating that conventional project loan financing was

“in place.” In reality, Connexian had procured financing from a

hard money lender that was at least $2.1 million short of what it

needed and was for a term of only one year. While the evidence

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presented at trial is ambiguous as to whether Mr. Wickam actually

made these representations, he was at least present when they

were made. Similarly, Mr. Wickam either made representations, or

was present when Mr. Werner made representations, while

Mr. Wickam and Mr. Werner were urging the Ivars to invest in

Coral Blue, LLC and share in the profits from its development of

the four lots it was to purchase. Moreover, Mr. Wickam signed

the subscription agreement and operating agreement for the Ivars’

investment in Coral Blue, LLC, reinforcing the representation

that Coral Blue, LLC would own, develop and sell these

properties. These statements misled the Ivars to believe that

they were investing in a company that would own and develop the

four lots using financing that had been procured from a

conventional lender. Both Mr. Wickam and Mr. Werner had a duty

to disclose the omitted financing and ownership information in

order to avoid misleading the Ivars. See Restatement § 551(2)(b)

& cmt. g.

Second, the financing of the project and ownership of the

lots were fundamental to the project and the Ivars’ investment. 

A party to a business transaction has a duty to disclose when:

(1) the omitted information is “basic” to the transaction;

(2) the nondisclosing party knew that the adverse party, in

entering into the transaction, was operating under a mistaken

belief concerning the omitted information; and (3) it was

reasonable under the circumstances for the adverse party to

expect disclosure of the omitted information. See Restatement

§ 551(2)(e).

As the Ivars explained, based on their discussions with

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Mr. Wickam and Mr. Werner and the documents Mr. Wickam and

Mr. Werner signed and gave them, they expected to obtain a return

on their investment from Coral Blue, LLC’s development and sale

of the lots. Yet, Coral Blue, LLC never acquired the lots and

had no rights in the lots or to participate in their sales. 

Moreover, when the Ivars invested, Coral Blue, LLC had no

capitalization apart from their $216,000 investment, and even

those funds were promptly transferred to Connexian. Even with

the Ivars’ investment, Connexian had a $2.1 million shortfall in

its construction financing and was required to repay the Point

Center Financial loan within a year. Each of these facts strikes

at the heart of the Ivars’ investment. Mr. Wickam was under a

duty to accurately and fully disclose the ownership of the lots

and the nature of the project financing. 

b. Knowledge of falsity

The bankruptcy court found that, before the Ivars’ first

investment, Mr. Wickam knew that the first Point Center Financial

loan was underfunded, that the term of this loan was for one year

and that Point Center Financial was a hard money lender.

Mr. Wickam admitted these facts. 

As for the omission regarding ownership of the lots,

Mr. Wickam claims that the the bankruptcy court’s finding

regarding his knowledge of falsity was clearly erroneous. 

According to Mr. Wickam, there was a last-minute decision

dictated by Point Center Financial, or by the escrow company

handling the closing, to switch from Coral Blue, LLC as the

purchaser/owner to Connexian. 

Mr. Wickam relies on his declaration testimony to support

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this position. But the bankruptcy court found Mr. Wickam not

credible generally, and nothing he has said on appeal persuades

us that the bankruptcy court’s credibility finding was clearly

erroneous. More to the point, there were numerous admitted facts

and exhibits demonstrating that, from the inception of the

project, Connexian was slated to be the owner of the four lots.

It was Connexian, not Coral Blue, LLC, that contracted to

purchase the lots. Connexian negotiated the extensions of time

to purchase the lots and made the deposits necessary to obtain

those extensions. It was also Connexian that applied for the

construction loan from Point Center Financial to finance the

purchase of the lots. The record is devoid of any references

that identified Coral Blue, LLC as a party to these transactions

(apart from Mr. Wickam’s and Mr. Werner’s representations to the

Ivars and Mr. Roche).

The record amply demonstrates that Mr. Wickam knew the true

nature of the project financing, and that Connexian rather than

Coral Blue, LLC owned the four lots, at the time the Ivars made

their investment in Coral Blue, LLC. In short, the bankruptcy

court’s findings that Mr. Wickam knew that his nondisclosure of

the project’s financing and ownership was false and deceptive

were not clearly erroneous.

c. Intent to deceive

The bankruptcy court found that Mr. Wickam failed to

disclose the above-referenced information regarding the project

loan financing and Connexian’s bid to obtain ownership of the

lots for the sole purpose of inducing the Ivars to make their

$216,000 investment. This is a finding of intent to deceive.

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Seldom do fraud defendants provide direct evidence of their

intent to deceive. See Tustin Thrift & Loan Ass’n v. Maldonado

(In re Maldonado), 228 B.R. 735, 738 (9th Cir. BAP 1999). 

Instead, bankruptcy courts typically must infer intent (or the

absence of intent) from circumstantial evidence. Id.

Nothing Mr. Wickam has argued on appeal persuades us that

the bankruptcy court’s intent finding was clearly erroneous. 

Essentially, he argues that he was just in charge of the

construction. He maintains that he relied on Mr. Werner to

properly and truthfully present the investment opportunity to the

Ivars, so he could not have formed an intent to deceive them. 

But the bankruptcy court did not believe Mr. Wickam’s version of

events. 

The record again supports the bankruptcy court’s inference

that Mr. Wickam played an active and purposeful role in the

solicitation of the Ivars’ investment in Coral Blue, LLC. The

Ivars testified that Mr. Wickam was a party to their discussions

concerning Coral Blue, LLC’s purchase and development of the four

lots and the financing of that project. Mr. Wickam also was

involved in Connexian’s purchase of the lots from the beginning,

including its funding. Given Mr. Wickam’s active participation

in the financing and purchase of the lots, his solicitation of

the Ivars’ investment is difficult to explain as anything other

than fraudulent. The record supports the bankruptcy court’s

finding that Mr. Wickam omitted information with the intent to

deceive the Ivars for the purpose of obtaining their investment. 

d. Materiality

As indicated above, in cases of fraudulent omission,

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bankruptcy courts are required to make a finding of materiality

in lieu of finding justifiable reliance. In re Apte, 96 F.3d at

1323. An omission is material if a reasonable investor would

have wanted to know the information before investing. Id. Thus,

the materiality issue focuses on what a reasonable investor would

want to know. See id. In essence, the plaintiffs are presumed

to have relied on the omission if it was material. See id. 

Here, the bankruptcy court found that the information

regarding the project loan financing and Connexian’s bid to

obtain ownership of the lots was material and that any reasonable

investor would have wanted to know this information before

investing. More specifically, the bankruptcy court found that a

reasonable investor would have wanted to know that the first

Point Center Financial loan was for a one-year term, that the

loan was underfunded by $2.1 million, and that Point Center

Financial was a hard money lender. The bankruptcy court further

found that a reasonable investor would have wanted to know that

Connexian, instead of Coral Blue, LLC, was the entity with the

contractual right to purchase the four lots. 

As previously discussed, the financing of the Coral Blue

Project and ownership of the lots were fundamental to any

reasonable investor’s decision to invest in Coral Blue, LLC. The

findings that the omissions were material were not illogical,

implausible or unsupported by the record. Accordingly, they were

not clearly erroneous. 

e. Causation and damages

The bankruptcy court found that Mr. Wickam’s omissions

caused the Ivars to lose their $216,000 investment. He has not

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challenged on appeal the amount of damages the plaintiffs

suffered, but he disputes that his conduct caused the plaintiffs

to suffer those damages.

Again, we turn to the Restatement for guidance. Under the

Restatement, the causation inquiry is twofold. A finding of

causation requires the bankruptcy court to determine the

existence of: (1) causation in fact, and (2) legal causation. A 

misrepresentation or omission is a cause in fact if it was “a

substantial factor” in determining the course of conduct leading

to the loss. Restatement §§ 546, 548A; see also Sharfarz v.

Goguen (In re Goguen), 691 F.3d 62, 70 (1st Cir. 2012). The

misrepresentation or omission is the legal cause of damages if

the creditor’s loss reasonably could be expected to result from

the reliance. Restatement § 548A.

In most cases of fraudulent inducement, like here, the loss

necessarily flows from the acts induced. See Restatement

§ 549(1) (stating that fraud damages include: (a) the difference

between the value of what plaintiff actually received and its

purchase price; and (b) all other pecuniary loss suffered as a

result of the plaintiff’s reliance upon the misrepresentation). 

This has been the correct measure for determining the loss

flowing from fraudulently induced conduct for well over a

century. See Sigafus v. Porter, 179 U.S. 116, 122-23 (1900).

As to all of the omissions, the bankruptcy court found that,

if the Ivars had known the true facts, they would not have made

their $216,000 investment. This finding is not challenged on

appeal. “If the misrepresentation has in fact induced the

recipient to enter into the transaction, there is causation in

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fact of the loss suffered in the transaction.” Gem Ravioli, Inc.

v. Creta (In re Creta), 271 B.R. 214, 219 (1st Cir. BAP 2002)

(quoting Restatement § 546). The Ivars invested their $216,000

into Coral Blue, LLC because Mr. Wickam and Mr. Werner led them

to believe that Coral Blue, LLC would own four lots and had the

financing to develop them. These misrepresentations were the

cause in fact of their investment, and, as a result, their loss. 

We acknowledge that this Panel expressed concern in its

prior decision regarding the existence of the unsecured

promissory note made by Connexian in favor of the Ivars covering

the same $216,000 investment. The Ivars explained, however, that

they understood that they were purchasing equity in Coral Blue,

LLC, and would be paid through the sale of the developed lots.

The Ivars testified that they paid little or no attention to the

promissory note from Connexian. The Ivars invested in Coral

Blue, LLC. They expected to recover their investment and share

in profits from Coral Blue, LLC after it developed the lots it

was supposed to purchase using the conventional financing

Mr. Werner and Mr. Wickam said it had. In truth, Coral Blue, LLC

had no assets, no conventional financing, and no ability to

return the Ivars’ investment, much less make any profit. The

Ivars’ only prospect of payment was tied to an unsecured promise

to repay their investment with interest from an otherwise unknown

corporation. The record supports the bankruptcy court’s finding

that these misrepresentations about Coral Blue, LLC were a

substantial factor in their loss, satisfying the causation in

fact requirement. 

Mr. Wickam’s challenge as to causation goes more directly to

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legal causation. He asserts that the Ivars’ loss actually was

caused by Point Center Financial’s decision to foreclose and by

the 2008 crash of the residential real estate market. This

argument, however, does not negate the foreseeability of the

Ivars’ loss, given Mr. Wickam’s misrepresentations that Coral

Blue, LLC had conventional financing to purchase and develop real

property that it never owned. Rather, Mr. Wickam effectively

contends that the market crash and the foreclosure were

intervening causes of the loss that absolve him of liability. 

But the Restatement reflects a much more limited role for

intervening causes in relationship to legal causation: 

In determining what is foreseeable as a result of the

misrepresentation, the possibility of intervening

events is not to be excluded altogether. Thus, when

the financial condition of a corporation is

misrepresented and it is subsequently driven into

insolvency by reason of the depressed condition of an

entire industry, which has no connection with the facts

misrepresented, it may still be found that the

misrepresentation was a legal cause of the recipient's

loss, since it may appear that if the company had been

in sound condition it would have survived the

depression, and hence that a loss of this kind might

reasonably have been expected to follow.

Restatement § 548A, cmt. b.

Here, Mr. Wickam’s position ignores the reality of the

transaction and the facts presented at trial. Point Financial

Center’s financing came due in one year, a fact that Mr. Wickam

and Mr. Werner knowingly concealed from the Ivars. Connexian

also failed to complete the construction on the first two lots

within that year, causing the default that led Point Financial

Center to foreclose on Connexian’s lots. The loss from a

speculative, underfunded, and misrepresented construction project

was wholly foreseeable, if not inevitable.

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The bankruptcy court’s findings adequately addressed

causation and damages. They are supported by the record, and 

they are not clearly erroneous.

3. Mr. Roche’s $200,000 investment

Mr. Roche testified to his understanding of hard money

lending as lending to a borrower who is not creditworthy and who

is a bad risk to the lender. He maintained that, had he known

that the Coral Blue Project was relying on a hard money lender

for its loan financing, he would not have invested in the

project. 

Mr. Roche additionally insisted that, had he known about the

one-year term for the Point Center Financial loan, and the fact

that more than $2 million of the Point Center Financial loan was

unfunded, he would not have invested his $200,000 in the Coral

Blue Project. 

As Mr. Roche explains, he only learned after he made his

$200,000 investment that the four lots were purchased in

Connexian’s name rather than in the name of Coral Blue, LLC. He

maintains that, had he known Coral Blue, LLC was not going to

hold title to the properties, he would not have invested his

$200,000.4

The bankruptcy court’s findings regarding Mr. Roche’s

$200,000 investment were very similar to its findings regarding

the Ivars’ $216,000 investment. The bankruptcy court found the

4 According to Mr. Roche, he had no involvement with or

knowledge of Connexian at the time of his investment. This was

not strictly true, as both of his investment checks were made

payable to Connexian. The record is not clear why Mr. Roche paid

money to Connexian for an investment in Coral Blue, LLC.

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same four omissions regarding ownership of the lots and the

project’s loan financing.5 

The evidence supporting the bankruptcy court’s fraud

findings with respect to Mr. Roche’s $200,000 investment does not

materially differ from the evidence adduced concerning the Ivars’

$216,000 investment. We similarly uphold the bankruptcy court’s

fraud findings in favor of Mr. Roche on his $200,000 investment. 

4. The Ivars’ $600,000 investment

The bankruptcy court grouped the Ivars’ second and third

payments into a unitary second investment. The court’s findings

as to the combined $600,000 investment focused on two different

misrepresentations: a misrepresentation that Mr. Wickam and

Mr. Werner needed the additional funding for “bricks and sticks”

and a misrepresentation regarding the organizational status of

Coral Blue II, LLC.

The bankruptcy court also found that, but for the

misrepresentations that induced the Ivars to make their first

$216,000 investment, they would not have made the second $600,000

5 There was one additional fraudulent omission the

bankruptcy found with respect to Mr. Roche’s investment: that

Mr. Wickam and Mr. Werner failed to disclose to Mr. Roche the

existence of other investors in Coral Blue, LLC. Mr. Roche

complained that the copy of the Coral Blue, LLC operating

agreement he was given only listed himself, Mr. Wickam and

Mr. Werner as members. It did not list the Ivars or several

other Coral Blue, LLC investors (presumably solicited by

Mr. Wickam and Mr. Werner). Nonetheless, Mr. Roche admitted that

he did not receive his copy of the Coral Blue, LLC operating

agreement or his subscription agreement until after he invested. 

Consequently, the omission of some of the Coral Blue, LLC

investors from the membership list in his copy of the operating

agreement does not support Mr. Roche’s claim that he was

defrauded into investing in the Coral Blue Project.

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investment. The bankruptcy court reasoned that the loss of the

second investment flowed from the initial misrepresentations.

We conclude that the bankruptcy court’s findings concerning

the “bricks and sticks” misrepresentation were not clearly

erroneous and were sufficient to support its judgment as to the

second investment.

The bankruptcy court found that Mr. Wickam told the Ivars

that their second investment funds would be used for “bricks and

sticks,” meaning direct development expenses for Lots 26 and 27.

This finding is supported by the Ivars’ testimony and is not

clearly erroneous.

The bankruptcy court next found that this representation was

false because Mr. Wickam and Mr. Werner used a substantial

portion of those funds for other purposes, including payments to

themselves. Mr. Wickam argues that this finding was wrong

because Mr. Werner testified that all of the Ivars’ $600,000

actually was used for the development of the two lots. But this

argument ignores the parties’ stipulation of admitted facts. 

Mr. Wickam agreed that there was little or no money in

Connexian’s account when the Ivars’ funds were deposited and that

immediately after the deposit, Connexian made substantial

payments not related to the development of the lots. These

included payments to Mr. Wickam and Mr. Werner. These admitted

facts support the bankruptcy court’s finding that Mr. Wickam

misrepresented the need for and purpose of the additional

$600,000 investment from the Ivars.

Mr. Wickam challenges the bankruptcy court’s finding that he

knew that the “bricks and sticks” misrepresentation was false and

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that he made the misrepresentation with the intent to deceive the

Ivars. He argues that no evidence supports these findings. But,

as we have observed above, direct evidence of fraudulent

knowledge and intent to deceive is rarely available because

people rarely confess to fraud. Therefore, courts may and

usually must rely on inferences from other evidence. In this

case, the bankruptcy court did not commit clear error when it

inferred Mr. Wickam’s mental state from the admitted facts that

he was in charge of construction budgets and Mr. Wickam and

Mr. Werner immediately used most of the Ivars’ second investment

for other purposes, including a payment to Mr. Wickam himself.

Mr. Wickam also challenges the bankruptcy court’s finding

that the Ivars justifiably relied on the “bricks and sticks”

misrepresentation when they made their second investment.

In Field v. Mans, the United States Supreme Court held that

fraud under § 523(a)(2)(A) requires only a showing of justifiable

reliance rather than the higher standard for reasonable reliance. 

The Court clarified that a creditor’s reliance was to be

evaluated using a subjective standard: “a person is justified in

relying on a representation of fact ‘although he might have

ascertained the falsity of the representation had he made an

investigation.’” 516 U.S. at 71 (citing Restatement § 540). In

contrast to reasonable reliance, the Supreme Court explained that

“[j]ustification is a matter of the qualities and characteristics

of the particular plaintiff, and the circumstances of the

particular case, rather than of the application of a community

standard of conduct to all cases.” Id.; see also Citibank (S.

Dakota), N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1090 (9th

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Cir. 1996). 

While justifiable reliance is broader than reasonable

reliance, it is not without limits. Again citing to the

Restatement, the Court in Field acknowledged that one is still

“required to use his senses, and cannot recover if he blindly

relies upon a misrepresentation the falsity of which would be

patent to him if he had utilized his opportunity to make a

cursory examination or investigation.” Field, 516 U.S. at 71

(quoting Restatement § 541, cmt. a). The Supreme Court further

elaborated:

justifiable reliance is the standard applicable to a

victim’s conduct in cases of alleged misrepresentation

and that “[i]t is only where, under the circumstances,

the facts should be apparent to one of his knowledge

and intelligence from a cursory glance, or he has

discovered something which should serve as a warning

that he is being deceived, that he is required to make

an investigation of his own.”

Id. at 71-72 (citing W. Prosser, Law of Torts § 108, p. 718 (4th

ed. 1971)) (emphasis added).

Accordingly, while a plaintiff’s negligence, by itself, is 

insufficient to defeat a finding of justifiable reliance, the

plaintiff “cannot close his eyes and blindly rely” on whatever

the debtor says. In re Apte, 96 F.3d at 1322-23 (citing In re

Eashai, 87 F.3d at 1090-91). In other words, the justifiable

reliance standard does not permit the plaintiff to ignore red

flags that obviously call into question the truth of the debtor’s

representations regarding the transaction. See, e.g., Yim v.

Chaffee (In re Chaffee), BAP No. CC-16-1241-TaFC, 2017 WL

1046057, at *6-7 (9th Cir. BAP Mar. 17, 2017), aff’d, 713 F.

App’x 641 (9th Cir. Feb. 23, 2018); Edgewater Place, Inc. v. Real

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Estate Collateral Mgmt. Co. (In re Edgewater Place, Inc.), No. ED

CV 98-281 RT, 1999 WL 35136576, at *7 (C.D. Cal. May 18, 1999);

Mandalay Resort Grp. v. Miller (In re Miller), 310 B.R. 185, 198-

99 (Bankr. C.D. Cal. 2004). 

In this case, there was no reason for the Ivars to doubt

Mr. Wickam’s representation that he and Mr. Werner would use the

Ivars’ second investment for “bricks and sticks,” meaning direct

development costs for the second pair of Coral Blue Project

lots.6

Finally, Mr. Wickam contends that the misrepresentations

were not the proximate cause of the Ivars’ loss of their second

investment. He relies on the same arguments that he advances in

connection with the Ivars’ first investment. Those arguments

have no more merit when applied to the second investment than

they have with respect to the first.

B. The bankruptcy court did not err in denying Mr. Wickam’s

motion to reopen the record and to alter or amend the

judgment.

By way of his post-judgment motion, Mr. Wickam sought two

things: (1) to ensure that the bankruptcy court had duly

considered Mr. Werner’s declaration testimony; and (2) to have

6 The dissent concludes that there were too many “red flags”

of deception to sustain a finding of justifiable reliance. We

appreciate the dissent’s careful and thorough dissection of the

evidence. We acknowledge that the presentation of the Ivars’

case leaves much to be desired and that the question is a close

one. We note, however, that the Ivars faced a low bar at trial –

they only had to show that a “casual glance” would not have

revealed the fraud – and that Mr. Wickam faces a high bar on

appeal: the clearly erroneous standard of review. We think that

Mr. Wickam has not carried his heavy burden of showing that the

bankruptcy court committed clear error when it decided that the

Ivars had carried their light burden.

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the court reopen the record to consider Mr. Ivar’s conviction

arising from referral kickback activities he engaged in as a

chiropractor. On appeal, Mr. Wickam only challenges the

bankruptcy court’s denial of relief with respect to the evidence

of Mr. Ivar’s conviction. In addition, Mr. Wickam concedes that

Mr. Ivar’s conviction is not directly relevant to his investor

activities that are the subject of the underlying adversary

proceeding. Instead, Mr. Wickam claims that the conviction

undermines Mr. Ivar’s credibility as a witness. He urges that,

based on the conviction, the bankruptcy court should have, at a

minimum, reassessed the credibility of Mr. Ivar’s story regarding

his investments or, alternately, stricken his testimony in its

entirety. 

 To support his motion, Mr. Wickam relied on Civil Rule

59(e), which is made applicable in adversary proceedings by Rule

9023. Relief under Civil Rule 59(e) requires the movant to

demonstrate either newly discovered evidence, clear error,

manifest injustice, or an intervening change in the law. 

Zimmerman v. City of Oakland, 255 F.3d 734, 740 (9th Cir. 2001). 

On appeal, Mr. Wickam solely relies on the newly discovered

evidence prong of Civil Rule 59(e). To support his entitlement

to relief under this prong, Mr. Wickam needed to establish:

(1) the evidence was discovered after trial, (2) the

exercise of due diligence would not have resulted in

the evidence being discovered at an earlier stage and

(3) the newly discovered evidence is of such magnitude

that production of it earlier would likely have changed

the outcome of the case.

Defenders of Wildlife v. Bernal, 204 F.3d 920, 929 (9th Cir.

2000).

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The transcript from the hearing on the motion reflects that

the bankruptcy court considered these factors and found that

Mr. Wickam had not met his burden to establish all of them. Most

importantly, the bankruptcy court was not persuaded regarding the

third element: that the newly discovered evidence was of such a

magnitude that production of it earlier likely would have changed

the outcome of the case. Id.

On this record, we cannot say that the bankruptcy court’s

finding on this third element was clearly erroneous. This is

especially true here, given that Mr. Wickam’s newly discovered

evidence was not directly connected to the conduct and events

that were at issue in the underlying adversary proceeding.

Accordingly, the bankruptcy court did not commit reversible

error when it denied Mr. Wickam’s postjudgment motion.

CONCLUSION

For the reasons set forth above, we AFFIRM the bankruptcy

court’s nondischargeability judgment and its denial of

Mr. Wickam’s postjudgment motion under Civil Rule 59(e).

Concurrence in Part and Dissent in Part begins on next page.

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SPRAKER, Bankruptcy Judge, concurring in part and dissenting in

part.

I concur with the reasoning and conclusions reached in

subsections A.2. and A.3. of the Discussion section of the

majority decision. Those sections affirm the bankruptcy court’s

ruling that Mr. Wickam fraudulently induced the Ivars’ first

investment, and Mr. Roche’s sole investment, in Coral Blue, LLC. 

In subsection A.4., the majority similarly affirms the bankruptcy

court’s ruling that Mr. Wickam fraudulently induced the Ivars’

second investment. I disagree. In my view, the bankruptcy

court’s justifiable reliance finding concerning the Ivars’ second

investment irreconcilably conflicts with its findings regarding

the Ivars’ first investment. Based on this, I believe that the

bankruptcy court’s conclusion that the Ivars justifiably relied

on the misrepresentation relating to the second investment is

illogical, and, therefore, clearly erroneous. I would reverse

the judgment as to the Ivars’ second investment, and I dissent to

that limited extent. 

A. The Clearly Erroneous Standard.

This appeal demonstrates the inherent tension in the clearly

erroneous standard. As the Supreme Court aptly has explained,

If the [factfinder’s] account of the evidence is

plausible in light of the record viewed in its

entirety, [the appellate court] may not reverse it even

though convinced that had it been sitting as the trier

of fact, it would have weighed the evidence

differently. Where there are two permissible views of

the evidence, the factfinder’s choice between them

cannot be clearly erroneous.

Anderson v. City of Bessemer City, 470 U.S. 564, 573–74 (1985). 

Anderson held that appellate courts overstep the bounds of their

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duty if they merely substitute their judgment of the facts in

place of the factfinder’s. As Anderson put it, the appellate

court must not decide factual issues de novo. Id. at 573.

On the other hand, the clearly erroneous standard is not a

“blank check” that permits a trial court, sitting without a jury,

to make any findings it deems necessary to reach its desired

result. At bottom, the standard sets forth a rule of reason. 

The factfinder’s view of the evidence is not “permissible” – and

is clearly erroneous – when it is “‘illogical or implausible’ or

lacks ‘support in [reasonable] inferences that may be drawn from

facts in the record.’” United States v. Hinkson, 585 F.3d 1247,

1261 (9th Cir. 2009) (en banc) (quoting Anderson, 470 U.S. at

577). When factual issues are controlling, the deferential

nature of the clearly erroneous standard does not permit

appellate courts to shy away from “meticulous” and

“comprehensive” review of the record to ensure that the findings

are logical, plausible and supported by the record. See

Anderson, 470 U.S. at 581 (Powell, J., concurring). With the

standard in mind, I turn my attention to my concerns with the

bankruptcy court’s determination of fraud as to the Ivars’ second

investment.1 

1 I focus my discussion upon the element of justifiable

reliance. But the court’s findings as to knowledge of falsity

and intent also merit a brief mention. The court based its

findings on these elements upon statements in the Ivars’

declarations that “Mr. Werner and Mr. Wickam indicated it was a

perfect time to get an early start on lots 26 and 27 and needed

additional funds for ‘bricks and sticks’ on the project which I

understood to mean actual construction costs.” Alan Ivar Decl.

(Sept. 20, 2013) at ¶ 67; Deborah Ivar Decl. (Sept. 20, 2013) at

(continued...)

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B. The Justifiable Reliance Finding.

Mr. Wickam argues that the court erred in finding that the

Ivars justifiably relied on the “bricks and sticks”

misrepresentation in making their second investment of $600,000. 

While there was nothing suspicious concerning the statement that

the Ivars’ funds would be used for “bricks and sticks,” the Ivars

were aware of numerous other red flags concerning their second

investment. In my opinion, the Ivars failed to prove that they

justifiably relied on the bricks and sticks misrepresentation

when they ignored those red flags. 

To briefly recap, the Ivars’ second investment consisted of

a $200,000 installment paid in December 2006, and a $400,000

installment paid in April 2007. As Mr. Wickam points out, the

Ivars contend that they were investing this time in Coral Blue

II, LLC to develop lots 26 and 27, but they paid their investment

funds to Connexian rather than Coral Blue II, LLC. In exchange

for their $200,000 installment, the Ivars received a 30-day

1(...continued)

¶ 67. While these statements establish that Mr. Wickam made, or

was aware of, these representations they fall short of

establishing that Mr. Wickam knew the falsity of the statement or

intended to deceive the Ivars at that time. There is simply

nothing in the statements cited by the bankruptcy court that goes

to knowledge of falsity or intent. However, the court made two

other findings that arguably support its knowledge and intent

determinations. First it found that, at the time Connexian

received the Ivars’ two payments comprising the second

investment, the business accounts “were at or near a zero

balance.” And second, it found that Mr. Wickam received payments

shortly after each investment. Mindful of the deference given to

the bankruptcy court’s factual findings, I cannot say that its

findings of knowledge and intent are clearly erroneous based on

the totality of the evidence. 

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promissory note from Connexian bearing 7% interest. They also

received a deed of trust from Connexian against lots 26 and 27 to

secure repayment of the promissory note. The record reflects

that, at the time the Ivars made their $200,000 installment, they

did not receive a single document from, or about, Coral Blue II,

LLC.

Four months later, the Ivars paid an additional $400,000 to

Connexian for an additional investment in Coral Blue II, LLC. 

This time, the Ivars did receive and sign an operating agreement

for Coral Blue II, LLC at the time they made this second payment.

Like the first installment payment, this second installment was

paid to Connexian rather than Coral Blue II, LLC. The Ivars did

not receive a promissory note in exchange for their $400,000

payment, though by this time Connexian’s 30-day note for the

prior $200,000 “loan” already was in default. They testified

that they understood they would receive 25% of the net proceeds

from the sales of lots 26 and 27. The Ivars failed to address

Mr. Wickam’s justifiable reliance argument in their appeal brief.

The majority decision thoroughly sets forth the metes and

bounds of the justifiable reliance standard and there is no need

to reiterate those points here. However, it bears repeating that

the subjective nature of the standard cuts both ways. See Field

v. Mans, 516 U.S. 59, 76 (1995). Because justifiable reliance

focuses on the circumstances of the individual case and

particularly on the fraud plaintiffs’ state of mind, the

plaintiffs must be charged with all knowledge (and beliefs) they

admit to having. See generally Id. at 71-72 (holding that

justifiable reliance focuses on the knowledge, intelligence, and

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other “qualities and characteristics of the particular plaintiff,

and the circumstances of the particular case, rather than [on]

the application of a community standard of conduct to all

cases.”).

Although creditors are not generally required to investigate

their debtors, this does not mean that they are never required to

investigate. Yim v. Chaffee (In re Chaffee), BAP No.

CC-16-1241-TaFC, 2017 WL 1046057, at *6-7 (9th Cir. BAP 2017),

aff’d, 713 F. App'x 641 (9th Cir. Feb. 23, 2018), at *7 (quoting

Eugene Parks Law Corp. Defined Benefit Plan v. Kirsh (In re

Kirsh), 973 F.2d 1454, 1460 (9th Cir. 1992)). Rather,

justifiable reliance “turns on a person’s knowledge under the

particular circumstances.” Citibank (S. Dakota), N.A. v. Eashai

(In re Eashai), 87 F.3d 1082, 1090 (9th Cir. 1996). The court

“must look to all of the circumstances surrounding the particular

transaction, and must particularly consider the subjective effect

of those circumstances upon the creditor.” In re Chaffee, 2017

WL 1046057 at *7 (emphasis added). When fraud plaintiffs receive

information that, given the circumstances and their level of

knowledge and intelligence, should warn them that the defendant

might be deceiving them, they cannot blindly rely on the

defendant’s representations. Field, 516 U.S. at 71-72(citing W.

Prosser, Law of Torts § 108, p. 718 (4th ed. 1971)); see, e.g.,

In re Eashai, 87 F.3d at 1091 (“We will not allow a creditor, who

has been put on notice of the debtor’s intent not to repay, to

extend credit and then later claim nondischargeability on the

basis of fraud”); McClammer v. Holmes (In re Holmes), 570 B.R.

610, 621 (Bankr. W.D. Mo. 2017) (holding that at some point

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multiple misrepresentations precluded a finding of justifiable

reliance); Cooper v. Lemke (In re Lemke), 423 B.R. 917, 924 (10th

Cir. BAP 2010) (no justifiable reliance where plaintiff continued

to lend money after red flags arose). “Reliance falls below the

justifiable standard when ‘red flags’ are ignored.” Hopper v.

Lewis (In re Lewis), 551 B.R. 41, 49 (Bankr. E.D. Cal. 2016). 

The Ivars’ $600,000 investment was not their first

transaction with Mr. Wickam and Mr. Werner, and they are charged

with that history. Importantly, they carry with them the

representations on which they relied to enter into their first

investment on this project. The Ivars testified that when they

made their first investment they believed Coral Blue, LLC owned

the four Coral Blue lots. They also understood that Coral Blue,

LLC would develop the four lots, and they would be paid from the

sale of those lots. Based on this understanding, the Ivars

further testified that Coral Blue, LLC’s role in the transaction

was critical to them. As the Ivars put it, had they known that

Coral Blue, LLC was not going to own the four lots, they would

not have made their first investment. The bankruptcy court

credited this testimony in its findings, and the majority

decision relies upon these findings in affirming the Ivars’

claims for fraudulent misrepresentation as to the first

investment. I concur in this conclusion. 

And yet, only a few months later, in the midst of making

their decision to invest an additional $200,000 in December 2006,

the Ivars were asked to invest in a new entity but on the same

project in which they had previously invested. As they explained

it, the Ivars were to be paid from two of the same lots that

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Coral Blue, LLC previously committed to sell to fund payment on

the Ivars’ first investment. Moreover, in making their $200,000

payment to Connexian, the Ivars were confronted with proof,

provided to them by Mr. Wickam and Mr. Werner, that Coral Blue,

LLC did not own two of the four lots. Connexian did. And the

Ivars paid the $200,000 to Connexian. Instead of receiving any

interest in Coral Blue II, LLC at the time they first paid

Connexian, the Ivars received a 30-day promissory note from

Connexian secured by two of the lots Coral Blue, LLC supposedly

owned. At that time, they were instructed not to record that

deed of trust. Even overlooking the instruction not to record

the deed of trust, Connexian’s deed of trust goes to the

ownership of the lots. This directly conflicts with the Ivars’

fundamental understanding of their first investment made only a

couple of months earlier: that Coral Blue, LLC owned and was

developing all four Coral Blue lots, including lots 26 and 27. 

 The Ivars are charged with the knowledge gained in their

first transaction, and the two transactions are inherently

inconsistent. The Ivars testified that ownership and development

of the Coral Blue lots was critically important to them, and they

would not have made their first investment had they known that

Coral Blue, LLC did not own all four lots. Given that, it was

neither logical, nor plausible, that the Ivars justifiably relied

on any further solicitation statements when they knew three

different entities controlled by Mr. Werner and Mr. Wickam had

made conflicting claims of ownership and the right to develop the

Coral Blue lots. The Ivars were not entitled to turn a blind eye

to the competing claims of ownership, multiple entities,

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secretive collateral, and the breach of the $200,000 promissory

note in making their second investment. There were simply too

many red flags for the Ivars to ignore before making their second

investment.

It was the Ivars’ burden of proof to establish all of the

elements necessary to establish nondischargeability under

§ 523(a)(2)(A), including justifiable reliance. See Field, 516

U.S. at 66; Grogan v. Garner, 498 U.S. 279, 284–85 (1991); see

also Sachan v. Huh (In re Huh), 506 B.R. 257, 262 (9th Cir. BAP

2014) (en banc). Yet the Ivars did not even attempt to address

the red flags that existed at the time they made their second

investment. There is nothing in the record remotely explaining

what they were thinking about the introduction of Coral Blue II,

LLC and Connexian into the project.2 The record is totally

devoid of any explanation as to how they thought they would be

paid by the two Coral Blue entities from the sale of the same two

lots that Connexian owned. 

In sum, I conclude that the bankruptcy court committed clear

error when it found that the Ivars justifiably relied on the

2 There was some discussion at trial regarding the Ivars’

separate investment in another Wickam and Werner project in

Colorado in which Connexian was involved. That matter, and any

relationship with Connexian’s ownership of the Coral Blue lots,

was not developed. More importantly, it does not alter the

Ivars’ testimony that they would not have made their first

investment in Coral Blue, LLC if they had known that the four

lots would not be owned by the entity in which they were

investing. Yet they invested in Coral Blue II, LLC with

knowledge that Coral Blue, LLC should have owned the lots and

that Connexian claimed to own the lots.

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“bricks and sticks” misrepresentation.3 The finding is

illogical, implausible, and not supported by the record. Because

the Ivars failed to prove an element of their § 523(a)(2)(A)

claim as to their second investment, I would reverse the judgment

excepting that debt from discharge.

3 The bankruptcy court alternately found that Mr. Wickam and

Mr. Werner fraudulently induced the Ivars’ second investment by

misrepresenting the organizational status of Coral Blue II, LLC.

According to the Ivars, they were falsely led to believe that

Coral Blue II, LLC filed its Articles of Organization with the

California Secretary of State in March 2007, when in fact the

Articles of Organization were not filed until several months

later. Neither the parties nor the majority decision focus on

this alternate fraud ground. This fraud finding is problematic

for several reasons. For instance, the representation occurred

after the Ivars paid the first $200,000 of their second

investment. Second, in light of the transactional irregularities

noted above, the Ivars could not have justifiably relied on the

organizational status misrepresentation any more than they relied

on the “bricks and sticks” misrepresentation. Most importantly,

there is a lack of proximate cause in relation to this

misrepresentation. See Ghomeshi v. Sabban (In re Sabban), 384

B.R. 1, 6-7 (9th Cir. BAP 2008) (noting similar causal disconnect

between statutory disgorgement debt and plaintiff’s alleged fraud

loss).

The bankruptcy court further held that the fraud pertaining

to the Ivars’ first investment supported the nondischargeability

of the debt arising from their second investment. The Ivars

press this point on appeal: “Had Wickam not engaged in fraud in

the first place, the Ivars would not have invested their initial

$216,000 and thereafter not been in a position to have invested

an additional $600,000.” The majority decision does not address

this holding because it relies on the fraud holding pertaining to

the “bricks and sticks” representation. Suffice it to say that

there is no logical way Mr. Wickam’s misrepresentations that

induced the Ivars’ first investment also could have induced the

Ivars’ second investment in a different entity. See generally

Cohen v. De La Cruz, 523 U.S. 213, 220-23 (1998) (indicating that

debt must flow from the fraud to be nondischargeable); In re

Sabban, 384 B.R. at 6-7 (same).

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