## United States Bankrup tcy Appellate P anel FOR THE EI GHT H CIRCUI T

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No. 1 1- 60 43

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In re: *

* In re: Jef frey T ho m s, al so kn own as * Je ff Th om s; Su e Tho m s, *

* Deb to rs

. *

* Van Dael e Bro s., In c., *

* App eal fro m

th e Uni te d S ta te s Pl ai nt iff – Ap pe ll an t, * Ban kr up tc y Co ur t fo r th e Nor th ern
* Dis tri ct of I owa

v. *

* Je ffre y Tho m s, *

* Defen da nt – Ap pe ll ee, *

__ __ _
Su bm it te d: Nov em

be r 18 , 20 11 Fi le d: Decem

be r 22 , 20 11

__ __ _
Befo re SC HERMER, VENTERS, AND SALA DINO, Ban kr up tc y Ju dg es

.

__ __ _ VENTERS, Bank ru pt cy

Ju dg e.

The Pl ai nt iff

, Van Dael e Bro s., In c., ap pe al s th e or de r of th e ba nk ru pt cy co ur t 1
de te rm in in g th a t d eb t owe d to it by Deb to r Je ffre y Tho m s is no t ex cep te d fro m

The Ho no rab le Pau l J . Kil bu rg , Ban kr up tc y Ju dg e fo r th e Nor th ern Dis tri ct 1 of Iowa

.di sc ha rg e un de r 11 U.S.C. § 5 23 (a)( 6) . For th e reas on s st at ed be lo w, we affi rm th e

ba nk ru pt cy

co ur t’s d eci si on

.

BACKGRO UND
Bec au se we fin d th at th e ba nk ru pt cy co ur t’s de ci si on was su pp or te d by th e weal th of th e ev id en ce, we ad op t wit h few m od ifi cat io ns th e fact ua l ba ck gr ou nd se t

ou t b y th e b an kr up tc y

co ur t.

In Feb ru ary 20 08 Je ffre y Tho m s ap pr oa ch ed Je rry Van D a e le
, a pr in ci pa l of
Van Dael e Bro s., In c., to refi na nc e th e de bt se cu red by Tho m s’s cat tl e he rd

. Tho m s 2

p r o p o s e d t o se ll hi s he rd of 24 co ws an d 5 y earl in g he ife rs to Pl ai nt iff fo r $7 5,0 0 0

an d th en to le as e th em ba ck fo r fiv e an nu al le as e pa y m en ts of $1 8,7 84 .23

. Tho m s

wou ld ret ai n po ss es si on an d res po ns ib il it y fo r th e cat tl e, whi ch wou ld be ke pt on a lo t own ed by Tho m s’s ne ig hb or

. Tho m s pr ep ared th e do cu m en ts fo r th e sa le an d le as eb ack . Neit he r pa rty was rep res en te d b y an att or ne y

.

To fin an ce th e pu rch as e, Van Dael e ob ta in ed a lo an fro m Kern dt Bro s. Sav in gs Ban k th ro ug h hi s co mp a n y , Van Dael e Bro s., In c. Van Dael e te st ifi ed th at he

co nt in ue s to m ak e pa y

m en ts on th at lo an

. The tra ns act io n was fin al iz ed on Mar ch 1,
20 08
, an d Tho m s us ed th e $7 5,0 00 pa y m e n t f r om Pl ai nt iff to pa y of

f a lo an wit h
Co m m un it y Ban k.

At th e ti m e of th e tra ns act io n, Tho m s was em pl oyed as a lo an of

fic er at Kern dt
Bro s. Sav in gs Ban k. He ha d be en Van Dael e’s le nd in g o f f i c e r a t t h e ba nk fo r
ap pr ox im at el y te n y ea rs

. Van Dael e te st ifi ed th at he was wil li ng to he lp Tho m s be cau se he co ns i d ered Tho m s a fri en d an d he tru st ed Tho m s be cau se of Tho m s’s

po si ti on at th e ba nk

. He al so te st ifi ed th at he un de rs to od th at he was pu rch as in g th e

Alt ho ug h t he na m ed App el la nt is Van Dae le Bro s., In c., all of t he act s 2
up on whi ch th e App el la nt ba se s i ts § 5 23 (a)( 6) cla im were al le ge dl y

di rect ed at Je rry Van Dae le pe rs on al ly.

2cat tl e fo r $7 5,0 00 an d t ha t th e Deb to r wou ld le as e th em fro m hi m an d k eep th em

at hi s pro pe rty. Van Dael e m ai nt ai ns th at Tho m s m ad e o ral as su ran ces an d agr eed to

no ti fy Van Dae le of a ny chan ge s i n t he nu m be r of cat tl e.

In Aug us t 20 08 Tho m s lo st hi s job at th e ba n k

. H e te st ifi ed th at he in it ia ll y be li ev ed th at he co ul d m ak e th e f i r s t a n n u a l pa y m en t un de r th e le as e th e fo ll owi ng Mar ch by fin di ng a job at an ot he r ba nk

. As it tu rn ed ou t, Tho m s was on ly ab le to fin d

pa rt- ti m e job s an d hi s in co m e dr op pe d to ap pr ox im at el y $4 0,0 00 pe r y ear, be fo re
ta xe s. Th om s d efau lt ed on th e fi rs t an nu al pa y m en t d ue Marc h 1 , 20 09

.

Ju st ov er 30 da y s la te r, on Apr il 3, 20 09
, Van Dael e pi ck ed up twen ty 20 co ws

an d 7 cal ve s fro m Tho m s’s cat tl e lo t. Tho m s was no t aware of th e rep os se ss io n un ti l
la te r; ap pa ren tl y , no on e was aro un d whe n th e cat tl e were pi ck ed up

. Tho m s’s fat he r, Fred Tho m s, cl ai m s fiv e of th e co ws were hi s, no t th e Deb to r’s or Van Dael e’s. Fred Tho m s ha s fil ed two rep le vi n act io ns ag ai ns t Van Dael e ba se d on th e rem ov al of hi s fiv e co ws. He di sm is se d th e fir st act io n jus t be fo re tri al an d th e o t h e r r e main s
pe nd in g i n t he Iowa Dis tri ct Co ur t i n F ay et te Co un ty.

A few da ys a f

t er th e rep os se ss io n, Tho m s at te m pt ed to pa y th e 20 09 an nu al

p a ym en t wit h a ch eck writ te n by hi s da ug ht er, Em il y

. Tho m s te st ifi ed th at Em il y ob ta in ed a lo an fr o m a fri en d of hi s, Gary Zim m erm an , to he lp Tho m s m ak e th e
pa y m en t. Zim

m erm an lo an ed Em il y $2 0,0 00 in th e be li ef th at sh e was go in g to us e th e m on ey fo r co ll eg e ex pe ns es

. Van Dael e refu se d to acce pt th e ch eck an d

ap pa ren tl y to ld Tho m s th at if he wan te d th e cat tl e ba ck
, he wou ld ha ve to pa y of f th e who le de bt as s et ou t i n t he do cu m en ts Tho m s h ad pre pa red

.

App aren tl y , th e ne xt ti m e th e pa rti es di sc us se d th e m at t e r w a s in Aug us t or Sep te m be r 20 09 whe n Van Dael e sa w Deb to r at th e fai rg ro un ds an d to ld hi m he was
go in g to ha ve to se ll th e cat tl e be cau se it was to o co st ly t o ke ep feed in g an d cari ng fo r th em . Tho m s t es ti fie d t ha t h e res po nd ed : “ You ’ve g ot to do what y ou ’ve g ot to

3d o

. ” V a n Dael e so ld a m ajor it y of th e cat tl e in Sep te m be r 20 09
, an d by th e en d o f
20 09 or earl y 20 10 he h a d so ld al l th e cat tl e, rece iv in g ap pr ox im at el y $2 0,0 00 to $2 3,0 00 in to ta l pr oc eed s. He es ti m at es th at he sp en t ap pr ox im at el y $1 0,0 00 fo r th e feed in g an d care of th e Cat tl e fro m th e ti m e he rep os se ss ed th em un ti l th ey were so ld

.

STANDARD OF REVIEW
W e rev ie w th e Ban kr up tc y Co ur t's fact ua l f i n d i n g s fo r cl ear erro r an d it s

co nc lu si on s of la w de no vo

. The Pl ai nt iff do es no t as se rt th at th e ba nk ru pt cy co ur t 3

erre d in it s ap pl ic at io n of § 52 3( a)(6 ); rat he r, it as se rts th at th e co ur t's fact ua l fin di ng s

were cl earl y erro ne ou s. “ A fin di ng is ‘clear ly err o n e o u s ’ whe n al th ou gh th ere is

ev id en ce to su pp or t it
, t h e r e v i e win g co ur t on th e en ti re ev id en ce is le ft wit h a de fin it e an d fir m co nv ic ti on th at a m is ta ke ha s be en co m m it te d.” If th e Ban kr up tc y

4
Co ur t's acco un t of th e ev id en ce is pl au si b l e i n l i g ht of th e reco rd vi ewed in it s

en ti ret y , w e may no t rev ers e m erel y be cau se we m ig ht ha ve de ci de d th e is su e di ffer en tl y

. “ W he re th ere are two pe rm is si bl e vi ews of th e ev id en ce, th e fact fin de r's

5
ch oi ce b et ween th em

can no t b e cl earl y

erro ne ou s.” 6

DISCUSS IO N Sect io n 52 3( a)(6 ) ex cep ts fro m di sc ha rg e de bt s fo r an in jury th at is bo th wil lfu l

an d m al ic io us

. In th is co nt ex t, th e te rm “ wil lfu l” m ean s th at th e in jury, no t m erel y 7

Se e Flo re t, L.L.C . v. Sen de cky ( In re S en de cky ), 28 3 B .R. 76 0, 7 63 (B.A.P. 3 8t h C ir. 2 00 2)

. Id

. ; And er

so n v . Bess emer

Cit y , 47 0 U.S. 5 64 , 57 3, 1 05 S.Ct . 15 04 , 15 11
, 4 84 L.Ed.2d 51 8 (1 98 5)

.
Se e And er

so n v . Bess emer

Cit y , 47 0 U.S. at 57 3– 74 , 10 5 S .Ct. at 15 11

. 5

Id

. 6

11 U.S.C. § 5 23 (a)( 6) (W es t 2 01 0)

. 7

4th e act le ad in g to th e in jury, m us t be de li be rat e o r i n t en ti on al ; an d a “ m al ic io us ” 8
in jury is on e th at is ta rg et ed at th e cred it or , in th e se ns e th at th e co nd uc t is cert ai n or al m os t ce rta in to cau se fin an ci al ha rm

. 9

Dis ti ll ed to it s es se nc e, th e App el la nt ’s arg um en t is th at th e ba nk ru pt cy co ur t sh ou ld ha ve fo un d Tho m s’s de bt to the A pp el la nt no nd is ch arg eab le un de r § 52 3( a)(6 ) be cau se th e ev id en ce al le ge dl y sh owe d t ha t: 1) Th om s an d hi s fat he r were pa rtn ers in th e cat tl e bu si ne ss , 2) Tho m s fai le d to ad eq ua te ly ex pl ai n a de crea se in th e nu m be r of ca t t l e, 3) Tho m s fai le d to ad eq ua te ly di sc lo se on hi s ba nk ru pt cy sc he du le s an d

st at em en t of fin an ci al affa irs th e App el la nt ’s rep os se ss io n of th e cat tl e an d Tho m s’s de bt to th e App el la nt , and 4) Tho m s lie d to Gary Zim m erm an to ge t a $ 20 ,00 0 l oa n
to try to m ak e th e fi rs t l eas e p ay m en t.

Pu tt in g as id e th at th ere was li tt le or no ev id en ce th at Tho m s an d hi s fat he r were
pa rtn ers an d th at th e ba nk ru pt cy co ur t fo un d Th om s’s exp la na ti on of th e de crea se 1 0
in he rd si ze – ap pa ren tl y se ve ral co ws were lo st to si ck ne ss an d di se as e – cred ib le
, 1 1

no ne of th es e fact s, al on e or to ge th er, is su ffi ci en t to warra nt a fin di ng th at Tho m s’s de bt to th e App el la nt is no nd is ch arg eab le un de r § 5 23 (a)( 6)

.

Ka wa au ha u v . Geig er , 52 3 U.S. 5 7, 6 1– 62 , 11 8 S .Ct. 9 74 , 97 7, 1 40 8 L.Ed.2 d 9 0 (1 99 8)

.
In r e Ma ds en , 19 5 F .3d 98 8, 9 89 (8t h C ir. 1 99 9)

. 9

At m os t t he tes ti m on y

sh owe d t ha t Th om s's fat he r oc cas io na ll y co ve red 1 0
pu rch as es of s up pl ie s wh ic h Th om s re pa id an d Th om s o nc e m en ti on ed trying to

se tt le hi s an d h is fat he r’s di sp ut es wit h Van Dael e to ge th er.

Defere nc e m

us t b e g iv en to th e b an kr up tc y co ur t's ev al ua ti on of t he 1 1 cred ib il it y

of wi tn es se s. Fed .R.Ci v.P . 52 (a). Se e a ls o L an ea r v. S af ewa y Gro cer y , 84 3 F .2d 29 8, 3 01 (8t h C ir.1 98 8)

.

5The ex is te nc e of a pa rtn ers hi p be twee n Tho m s an d hi s fat he r do es no t, by it se lf,

crea te an y in fere nc e th at th ey co ns pi red to de frau d Van Dael e. The reco rd is de vo id of an y affi rm at iv e ev id en ce th at Tho m s so ld or ot he r w i se di sp os ed of th e m is si ng
cat tl e wit h th e in te nt to ha rm Van Dael e (p ers on al ly or Van Dael e Bro s., In c.), whi ch

ev id en ce is ne ces sa r y t o ex cep t a de bt fro m di sc ha rg e un de r § 52 3( a)(6 ). The 1 2
al le ge d om is si on s fro m Tho m s’s sc he du le s in cl ud ed th e de bt t o V a n Dael e, whi ch

om is si on wou ld u n de rm in e – rat he r th an su pp or t – th e App el la nt ’s co nt en ti on th at Tho m s in te nd ed al l al on g to di sc ha rg e hi s de bt to th e App el la nt

. And
, fin al ly, th e fact
th at Tho m s was w il li ng to go to gr eat (al be it di sh on es t) le ng th s to bo rro w m on ey to
rep ay th e App el la nt weig hs st ro ng ly ag ai ns t a fin di ng th at Tho m s co ns pi red wit h hi s fat he r to de frau d t he App el la nt

.

As no te d ab ov e, a f

a c t f i n d er’s ch oi ce of on e of two pe rm is si bl e vi ews of th e

e vi de nc e can no t be cl earl y erro ne ou s. Here, th e App el la nt ha s pr e s e n t e d a n 1 3
in te rp ret at io n o f t he ev id en ce whi ch is le ss pl au si bl e th an th e ba nk ru pt cy co ur t’s
in te rp ret at io n, whi ch att rib ut ed Tho m s’s fa il ur e to rep ay th e App el la nt pr im ari ly t o Tho m s’s un an ti ci pa te d lo ss of a hi gh er-p ay in g job

. The refo re, we m us t affi rm th e ba nk ru pt cy co ur t’s de te rm in at io n th at Tho m s’s de bt to th e App el la nt is no t ex cep te d fro m di sc ha rg e u nd er 1 1 U.S.C. § 52 3( a)(6 ).

CONCLUSI ON

Fo r th e rea so ns st at ed ab ov e, we affi rm th e b an kr

up tc y co ur t’s d eci si on

.

1 2 Se e, e.g

. , W

er ne r v. Hof

man n , 5 F.3 d 11 70
, 11 72 (8 th Ci r. 19 93 ) (h ol di ng th at fai lu re to ret ur n th e co rrec t nu m

be r of cat tl e up on te rm in at io n of a da iry cat tl e le as e di d no t

co ns ti tu te a wil lfu l an d m al ic io us in jury un de r § 52 3( a)(6 ) in th e ab se nc e of ev id en ce th at th e d is crep an cy

res ul te d fr om

a de li be rat e at te m

pt to cau se fin an ci al ha rm ).

Se e su pr a n. 6

. 1 3

6