Court Opinion

ID: 2677498
Source: CourtListenerOpinion
Date Created: 2014-06-06 21:00:34.703826+00
Date Added: 2024-06-11T13:11:45.945464
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              JUN 06 2014

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

In re: JOSEPH H. PARKS and TIFFANY               No. 12-60073
M. PARKS,
            Debtors,                             BAP No. 11-1565

JOSEPH H. PARKS, DBA Pool
Construction Services,                           AMENDED MEMORANDUM*

              Appellant,
  v.

ANGELUS BLOCK CO., INC.,

              Appellee.

                          Appeal from the Ninth Circuit
                           Bankruptcy Appellate Panel
            Kirscher, Markell, and Dunn, Bankruptcy Judges, Presiding

                       Argued and Submitted April 11, 2014
                              Pasadena, California

Before: N.R. SMITH and MURGUIA, Circuit Judges, and MCNAMEE, Senior
District Judge.**

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

       **     The Honorable Stephen M. McNamee, Senior U.S. District Judge for
the District of Arizona, sitting by designation.
      Parks appeals the bankruptcy court’s decision (affirmed by the bankruptcy

appellate panel) that his obligation to Angelus Block Co., Inc., is excepted from

discharge under 11 U.S.C. § 523(a)(2)(A).

      We review de novo the bankruptcy appellate panel’s decision. Steelcase Inc.

v. Johnston (In re Johnston), 21 F.3d 323, 326 (9th Cir. 1994). We review the

bankruptcy court’s findings of fact for clear error and its conclusions of law de

novo. Id. Our review also considers the “fresh start policy”: “exceptions to

discharge should be strictly construed against an objecting creditor and in favor of

the debtor.” Snoke v. Riso (In re Riso), 978 F.2d 1151, 1154 (9th Cir. 1992).

      We will reverse a bankruptcy court’s evidentiary ruling only for an abuse of

discretion that also prejudiced the complaining party. Johnson v. Neilson (In re

Slatkin), 525 F.3d 805, 811 (9th Cir. 2008).

                                           I.

      A debtor is not discharged in bankruptcy from any debt “for money,

property, services, or an extension, renewal, or refinancing of credit, to the extent

obtained by—false pretenses, a false representation, or actual fraud.” 11 U.S.C.

§ 523(a)(2)(A). To prevail on a § 523(a)(2)(A) claim, a “creditor must demonstrate

by a preponderance of the evidence” the following five factors:

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      (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.

Turtle Rock Meadows Homeowners Ass’n v. Slyman (In re Slyman), 234 F.3d

1081, 1085 (9th Cir. 2000). Whether the creditor has established each element is a

finding of fact that we review for clear error. See, e.g., Eugene Parks Law Corp.

Benefit Pension Plan v. Kirsch (In re Kirsch), 973 F.2d 1454, 1456 (9th Cir. 1996)

(per curiam); First Beverly Bank v. Adeeb (In re Adeeb), 787 F.2d 1339, 1342 (9th

Cir. 1986).

1.    “[T]he nondisclosure of a material fact in the face of a duty to disclose”

constitutes a fraudulent representation under § 523(a)(2)(A). See Apte v. Japra (In

re Apte), 96 F.3d 1319, 1323-24 (9th Cir. 1996). Parties to a business transaction

owe each other a duty of disclosure “if [one] knows that the other is about to enter

into [the transaction] under a mistake as to [facts basic to the transaction], 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.” Id. at 1324 (internal quotation marks omitted).

                                          -3-
      The bankruptcy court did not clearly err in finding that Parks failed to

disclose a material fact when he did not disclose to Angelus the owner of the four

Lang properties.1 That nondisclosure is material, because Parks was aware of the

importance to Angelus of knowing “the destination and use of the materials in

question.” Further, this omission is actionable under § 523(a)(2)(A), because Parks

owed Angelus a duty to disclose. Though Angelus submitted no evidence of a

special relationship or customs of the trade, other objective circumstances, In re

Apte, 96 F.3d at 1324, gave rise to the duty. Specifically, the number of prior

transactions between Parks and Angelus, the ratio of Reiger properties to Lang

properties in the subdivision, and Parks’s knowledge that Angelus needed to know

the owner of each property to file a mechanic’s lien together created a duty to

disclose between Parks and Angelus. See also Citibank (S.D.), N.A. v. Eashai (In re

Eashai), 87 F.3d 1082, 1089 (9th Cir. 1996) (noting that a duty to disclose exists

when a debtor creates a “facade” that conceals fraudulent intentions not to pay

back a debt).

2.    The bankruptcy court did not clearly err when it concluded that “Parks knew

he was giving the impression through nondisclosure that the materials” ordered for

      1
       Parks claims his disclosure of the properties’ addresses was equivalent to
disclosing the owner. He has not provided relevant authority supporting this view.

                                         -4-
the four Lang properties were for Rieger properties. That Parks knew of his non-

disclosure is substantiated by the bankruptcy court’s “plausible” view of the

evidence, Anderson v. City of Bessemer, 470 U.S. 564, 573-74 (1985), that Parks

was trying to get Rieger to pay for the supplies used on the Lang properties.

3.    The bankruptcy court did not clearly err in finding that Parks “failed to

disclose [the owner of the four Lang properties] with an intent to deceive so as to

accomplish the goal of having Mr. Rieger pay for the amounts that would have

been owed on the Lang project.” Again, we decline to upset the bankruptcy court’s

plausible view of the evidence, especially where heavily intertwined with its

credibility determinations. See Duckett v. Godinez, 109 F.3d 533, 535 (9th Cir.

1997).

4.    The bankruptcy court did not clearly err in finding that Angelus’s reliance

on Parks’s omission was justifiable. Angelus had received the necessary

information from Parks on over 82 Rieger properties. When Parks ordered

materials for the first Lang property, he notified Angelus of its owner. Under those

circumstances, it was not unjustifiable for Angelus to rely on Parks to inform it

when he ordered materials within the same vicinity of so many Rieger properties

for a non-Rieger property. See Field v. Mans, 516 U.S. 59, 71 (1995).

                                         -5-
5.    Here, the bankruptcy court did not clearly err in finding that Parks’s

omission caused Angelus’s damage: “As a consequence of the non-disclosure,

[Angelus] was unable to obtain a lien on the Lang project and the evidence is that

there remain amounts due with respect to the materials supplied to the Lang

project.” Accord In re Apte, 96 F.3d at 1323.

      Parks’s claim of no causation, because Angelus was actually paid by Rieger

for the materials used on the Lang properties, fails. The bankruptcy court found,

within its discretion, that Parks improperly directed Angelus to apply payment

from Rieger to the Lang projects, and this error was eventually corrected by

Angelus.

                                          II.

      The bankruptcy court’s discretionary evidentiary rulings need not be

reversed. Spasojevic’s testimony struck for lack of personal knowledge was

cumulative of other evidence, so there was no prejudice; Spasojevic’s testimony

struck as hearsay was properly excluded, because Parks offered it for the truth of

the matter asserted. In re Slatkin, 525 F.3d at 811.2

      2
        To the extent Spasojevic’s testimony was offered to impeach Rieger’s
testimony, the bankruptcy court did not abuse its discretion in concluding that
Spasojevic’s testimony did not contradict Rieger’s “specific” testimony regarding
the lack of an agreement between Parks and Rieger. In re Slatkin, 525 F.3d at 811.

                                          -6-
                                         III.

      The bankruptcy court’s oral ruling, which incorporated by reference

Angelus’s post-trial brief, was explicit enough to give us a clear understanding of

its factual findings and legal conclusions. That suffices under Federal Rule of

Procedure 52(a). Irish v. United States, 225 F.2d 3, 8 (9th Cir. 1955).

      AFFIRMED.

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