Court Opinion

ID: 4253637
Source: CourtListenerOpinion
Date Created: 2018-03-12 15:00:29.072178+00
Date Added: 2024-06-11T14:43:36.362004
License: Public Domain

NONPRECEDENTIAL DISPOSITION
                To be cited only in accordance with Fed. R. App. P. 32.1

               United States Court of Appeals
                                For the Seventh Circuit
                                Chicago, Illinois 60604

                               Submitted March 9, 2018 *
                                Decided March 12, 2018

                                        Before

                         DIANE P. WOOD, Chief Judge

                         WILLIAM J. BAUER, Circuit Judge

                         DAVID F. HAMILTON, Circuit Judge

No. 17-2462

IN RE: CHRISTOPHER C. FREUND                Appeal from the United States District
     Debtor.                                Court for the Eastern District of Wisconsin.

EDWARD O. ALLEN,                            No. 16-CV-1222-JPS
   Creditor-Appellant,
                                            J.P. Stadtmueller,
      v.                                    Judge.

CHRISTOPHER C. FREUND,
     Debtor-Appellee.

                                      ORDER

      Edward Allen filed an adversary proceeding in Christopher Freund’s
bankruptcy, seeking a determination that Freund owed him a nondischargeable debt
under 11 U.S.C. § 523(a)(2)(A) based on Freund’s alleged fraud in foreclosing on his

      *
         We have agreed to decide the case without oral argument because the briefs and
record adequately present the facts and legal arguments, and oral argument would not
significantly aid the court. See FED. R. APP. P. 34(a)(2)(C).
No. 17-2462                                                                         Page 2

property. After a trial, the bankruptcy court entered judgment for Freund, concluding
that he had no fraudulent intent and had not induced Allen to rely on any false
representations. Allen appealed to the district court, which affirmed. He now appeals to
this court, arguing that the bankruptcy court reached the wrong conclusions from the
evidence. We see no clear error in the bankruptcy judge’s findings, so we affirm.

       This case arises out of a failed real-estate transaction. Allen offered to sell a
building to Freund, who expressed interest in buying it but was able eventually to
obtain it at a much lower sum through foreclosure. Allen previously had racked up
more than $250,000 in debts related to the property—a primary mortgage held by M&I
Bank, a judgment lien held by Chase Bank, and a debt to the City of Milwaukee for back
property taxes. He listed the property for sale, and Freund wrote him to express interest
in buying it. Allen showed Freund the property and told him that he wanted the
proceeds of the building’s sale to cover his three outstanding debts. Freund said that the
building would be suitable for his needs, but he asked Allen if “the bank” might be
persuaded to “take less” for the property than what he owed, presumably through a
short sale. Allen said he thought it might, and he gave Freund contact information for a
lender at M&I Bank, the primary mortgage holder. Freund met with the lender and
asked if the bank would “take less” for the mortgage, but the bank declined.

       At that point Freund took steps to obtain the property at a sum far below the
$250,000 Allen hoped to recoup. Through his company, J Crawford Investment LLC, he
bought the mortgage note from M&I for $10,500. Since Allen was delinquent on the
mortgage, J Crawford then foreclosed on it. At a sheriff’s sale, J Crawford purchased the
property back for the value of Allen’s outstanding debt to J Crawford, approximately
$116,000. A few months later J Crawford transferred the property to Freund, enabling
him to obtain the property clear of the M&I mortgage; Allen received nothing.

      Two years after the sheriff’s sale, Freund filed for Chapter 13 bankruptcy.

       A few months later, Allen filed an adversary complaint, alleging that Freund
owed him the value of the failed sale, and that the debt should not be discharged in
Freund’s bankruptcy. See 11 U.S.C. § 523(a)(2)(A). He contended that Freund’s decision
to buy the mortgage note instead of purchasing the property from him outright was
fraudulent. According to Allen, when Freund expressed interest in the property and
proposed seeking a short sale from the bank, Freund fraudulently induced him to give
him the mortgage lender’s information, leading to the foreclosure.
No. 17-2462                                                                            Page 3

        The bankruptcy court held a bench trial to determine whether Freund was liable
for false pretenses, false representations, or fraud under 11 U.S.C. § 523(a)(2)(A), and
ultimately ruled in Freund’s favor. The bankruptcy judge concluded that Freund made
no representations that he would buy Allen’s property or that he would try to reach a
deal with M&I on Allen’s behalf. Further, the judge found, Freund had never intended
to deceive Allen about buying the property from him: Freund initially was interested in
buying the building, and merely changed his mind when M&I offered to sell him the
note. Finally, the judge found, since Allen had testified to knowing that real-estate
contracts could not be made orally in Wisconsin, he could not justifiably have relied on
any oral agreement with Freund, either to sell the property or to seek a short sale.

       Allen appealed to the district court, which affirmed for largely the same reasons
stated by the bankruptcy court.

        On appeal to this court, Allen contends that the bankruptcy judge erroneously
concluded that Freund made no false pretenses or representations, and committed no
fraud. He asks us to reweigh the facts and reach different conclusions from the
bankruptcy judge. But we do not find facts on our own or reweigh the evidence
presented to the bankruptcy judge, In re Generes, 69 F.3d 821, 825 (7th Cir. 1995);
see Goodpaster v. City of Indianapolis, 736 F.3d 1060, 1070 (7th Cir. 2013), and we conclude
that the bankruptcy judge here committed no clear error. Allen points to no evidence
other than his own unsubstantiated assertions that Freund harbored any intent to
defraud him. “Scienter, or intent to deceive,” is a “required element under
§ 523(a)(2)(A) whether the claim is for a false representation, false pretenses, or actual
fraud.” In re Yotis, 548 B.R. 485, 495 (Bankr. N.D. Ill. 2016); see In re Davis, 638 F.3d 549,
553 (7th Cir. 2011); McClellan v. Cantrell, 217 F.3d 890, 894 (7th Cir. 2000). The
bankruptcy judge credited Freund’s testimony that he at one time was genuinely
interested in buying the property, and that circumstances altered his plans. Allen now
identifies facts that he regards as “circumstantial evidence” of Freund’s fraudulent
intent (i.e., Freund’s lack of interest in speaking with the secondary lienholder, his
purchase of the note for less than the debt was worth, and his delay in talking to Allen
after speaking to M&I). We do not see how these facts are relevant, let alone how the
bankruptcy judge could have clearly erred by crediting Freund’s version of events over
Allen’s. See In re Generes, 69 F.3d at 825.

      Finally Allen raises an evidentiary challenge, contending that the bankruptcy
judge wrongly prevented him from introducing photos of the property at the
trial—photos that, he says, could have impeached Freund’s testimony about the
No. 17-2462                                                                        Page 4

condition of the property not being as good as Allen believed. But the condition of the
property was not relevant (the photos were taken after the events at issue in the trial),
and in any event Freund did not testify about these issues. The bankruptcy judge acted
well within his discretion by determining that any such impeachment was not
necessary and that the photos were irrelevant for any other purpose.

      Allen’s remaining contentions lack merit and we will not discuss them further.

       The judgment of the district court upholding the bankruptcy judge’s decision is
therefore AFFIRMED.