Court Opinion

ID: 811591
Source: CourtListenerOpinion
Date Created: 2012-11-08 16:22:02+00
Date Added: 2024-06-11T18:00:41.790092
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 12-1138
                        ___________________________

              In re: Jeffrey Scott Unterreiner; Lisa Marie Unterreiner

                              lllllllllllllllllllllDebtors

                             ------------------------------

                    The Samuel J. Temperato Revocable Trust

                             lllllllllllllllllllllAppellant

                                          v.

                 Jeffrey Scott Unterreiner; Lisa Marie Unterreiner

                             lllllllllllllllllllllAppellees
                                    ____________

                    Appeal from the United States Bankruptcy
                      Appellate Panel for the Eighth Circuit
                                 ____________

                          Submitted: September 19, 2012
                             Filed: November 8, 2012
                                  ____________

Before MELLOY and BENTON, Circuit Judges, and BAKER,1 District Judge.
                          ____________

      1
       The Honorable Kristine G. Baker, United States District Judge for the Eastern
District of Arkansas, sitting by designation.
MELLOY, Circuit Judge.

      Jeffrey and Lisa Unterreiner (together, "the Unterreiners") filed for bankruptcy
on October 30, 2006. The Samuel J. Temperato Revocable Trust ("the Trust") filed
an Adversary Complaint against the Unterreiners, claiming the Unterreiners owed a
nondischargeable debt to the Trust under 11 U.S.C. § 523. The Bankruptcy Court
granted summary judgment to the Trust. The Bankruptcy Appellate Panel ("BAP")
reversed, holding that the Trust was not entitled to judgment as a matter of law
because the Trust could not meet the statutory requirements of 11 U.S.C. § 523. The
Trust appealed. We affirm.

                                             I.

       Mr. Unterreiner and Ed Radetic2 were sole shareholders of King William
Management Company ("King William"). King William operated three Dairy Queen
stores in Missouri. Dairy Queen of Greater St. Louis ("DQSTL") was the franchisor
of King William's stores. The Trust owns DQSTL. Crest Oelke ("Oelke") was a
trustee of the Trust. Oelke was also affiliated with DQSTL.

      In December 2005, King William was in such poor financial shape that it could
not continue to operate without a loan. Oelke arranged for Cass Bank ("Cass") to
make a loan of $235,000 ("the loan") to King William. To secure the loan, the
Unterreiners signed personal guarantees as well as a Commercial Security Agreement
("Security Agreement"). DQSTL also guaranteed the loan. The Unterreiners did not
speak with Oelke, with anyone from the Trust, with anyone from Cass, or with
anyone from DQSTL before signing the loan documents. Indeed, until the Trust filed
its Complaint, the Unterreiners did not know the Trust owned DQSTL and did not
even know the Trust existed.

      2
          Neither Ed Radetic nor his wife is a party to this action.

                                            -2-
       The Security Agreement listed King William as borrower. The Security
Agreement listed the Unterreiners and Ed Radetic and his wife as the guarantors.
Finally, the Security Agreement listed "all business assets located at 1036 N. Sprigg
Street, Cape Girardeau, MO 63701 and 31 S. Kingshighway, Cape Girardeau, MO
63703" as collateral.3 Some four years before Cass made the loan to King William,
the Trust had signed a separate agreement with Cass under which the Trust
guaranteed all of DQSTL's obligations to Cass. However, the Trust was not
mentioned in the Security Agreement and was not a guarantor of the King William
loan, except in its capacity as a blanket guarantor of DQSTL.

       Cass distributed the loan directly to DQSTL. DQSTL retained a portion of the
loan as partial repayment of King William's outstanding debt to DQSTL under the
franchise agreement and distributed the remainder of the loan to King William.
Approximately a year after Cass distributed the loan, Mr. Unterreiner informed Cass
that, contrary to statements in the Security Agreement, King William did not actually
own most of the collateral. Thus, the Security Agreement contained a
misrepresentation. The Unterreiners claimed they did not read the loan documents,
including the Security Agreement, before signing.

      King William defaulted on the loan in December 2007, and Cass pursued the
Unterreiners on their guaranty. On June 20, 2008, Cass released the Unterreiners
from any further liability on the loan in exchange for a payment of $20,000. Cass
then made a demand on the Trust for payment of the outstanding balance of the loan.

      On October 31, 2008, the Trust filed an Adversary Complaint against the
Unterreiners. The Trust claimed the Unterreiners, as co-guarantors of the loan, owed

      3
        1036 N. Sprigg Street and 31 S. Kingshighway were evidently the locations
of two of King William's Dairy Queen stores.

                                         -3-
a debt to the Trust that was nondischargeable under 11 U.S.C. § 523.4 The Trust
claimed it had reasonably relied on the misrepresentation in the Security Agreement
when it guaranteed DQSTL's obligations and when it allowed DQSTL to guaranty the
loan. The Trust also alleged the Unterreiners knew the Security Agreement contained
a misrepresentation at the time the Unterreiners signed the Security Agreement.

      The Trust moved for summary judgment. The Bankruptcy Court found that
DQSTL had reasonably relied on the Unterreiners' misrepresentation when DQSTL
guaranteed the loan. The Bankruptcy Court held that the Unterreiners' obligation to
the Trust was nondischargeable and granted summary judgment to the Trust.

       The Unterreiners appealed, and the BAP reversed. The BAP held that the Trust
could not fulfill the statutory requirements under § 523(a)(2)(B) to render a debt
nondischargeable. The BAP concluded (1) the Unterreiners did not receive anything
from the Trust when the Unterreiners made the misrepresentation; (2) the Trust could
not have relied on the Security Agreement when it guaranteed DQSTL's obligations,
because the Trust agreed to guaranty DQSTL's obligations years before Cass made
the loan; and (3) any representations in the Security Agreement were made to Cass,
not to the Trust. Finally, the BAP questioned, but did not decide, whether the
Security Agreement qualified as a "writing respecting the debtor's financial
condition."

                                         II.

      "Summary judgment is appropriate when, viewing the record in the light most
favorable to the nonmoving party, there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law." Henning v. Mainstreet

      4
        After the Trust filed its Adversary Complaint, both the Trust and DQSTL
settled their obligations on the loan with Cass.

                                         -4-
Bank, 538 F.3d 975, 978 (8th Cir. 2008). "In an appeal from the BAP, this court
independently reviews the bankruptcy court's decision, applying the same standard
of review as the BAP. Fact findings by the bankruptcy court are reviewed for clear
error; its conclusions of law are reviewed de novo." Terry v. Standard Ins. Co., 687
F.3d 961, 963 (8th Cir. 2012) (citations omitted).

      11 U.S.C. § 523(a)(2)(B) excepts from discharge a debt

      (2) for money, property, services, or an extension, renewal, or
      refinancing of credit, to the extent obtained by - -
      . . . (B) use of a statement in writing - -
              (i) that is materially false;
              (ii) respecting the debtor's or an insider's financial condition;
              (iii) on which the creditor to whom the debtor is liable for such
              money, property, services, or credit reasonably relied; and
              (iv) that the debtor caused to be made or published with intent to
              deceive . . . .

"To prevail under § 523(a)(2)(B), the Plaintiff has to establish by a preponderance of
the evidence" all elements of the statute. Jacobus v. Binns, 328 B.R. 126, 130 (B.A.P.
8th Cir. 2005). We agree with the BAP that the Trust cannot establish all the
elements. Specifically, the Trust cannot establish that the Unterreiners obtained
money, property, services, or credit from the Trust, nor can the Trust establish that it
relied on the Unterreiners' misrepresentation.

      First, the Unterreiners did not receive "money, property, services, or an
extension, renewal, or refinancing of credit" from the Trust when the Unterreiners
made the misrepresentation. As the BAP stated:

      To succeed in having a debt excepted from discharge under § 523(a)(2),
      the creditor is required to prove that the debtors obtained money,
      property, services or an extension, renewal or refinancing of credit from
      it at the time of the misrepresentation. Marcusen v. Glen (In re Glen),

                                          -5-
      639 F.3d 530, 533 (8th Cir. 2011) (citing In re Dougherty, 179 B.R. 316,
      322 (Bankr. M.D. Fla. 1995) ("In other words, the debtor himself must
      have obtained the money or property and he must have received it from
      the claimant.")).5 The representations in the [Security Agreement] were
      made to [Cass], not to the Trust, and the loan was made by [Cass], not
      by the Trust. Simply stated, Mr. and Mrs. Unterreiner did not receive
      any money or property from the Trust concurrent with the
      representation.

The Trust suggests the Unterreiners received the guaranty of DQSTL concurrent with
the misrepresentation, but as the BAP pointed out, DQSTL is not a party to this
action. Whether or not the guaranty of DQSTL falls within § 523(a)(2) is not at issue.

       Second, the Trust cannot show it reasonably relied on the Unterreiners'
misrepresentation when it guaranteed DQSTL's obligations. The Trust's liability for
the loan arose from the Trust's blanket guaranty of DQSTL's obligations to Cass, not
from the loan agreement. The Trust's blanket guaranty predated the loan by some
four years. As the BAP noted, "[s]ince the Trust's guaranty was already in existence,
it could not possibly have relied on the misrepresentations in the [Security
Agreement]." Whether DQSTL relied on the Security Agreement in making its
guaranty of the loan is not at issue because DQSTL is not a party to this action.

      Since the Trust cannot meet at least two of the statutory requirements, we need
not address the remaining requirements. We do not determine whether the Security
Agreement was a statement "respecting the debtor's or an insider's financial
condition." Furthermore, we need not review the additional issues of material fact the
Unterreiners raise, including whether the Trust is a creditor to whom the Unterreiners

      5
       Although Glen involved § 523(a)(2)(A), and not § 523(a)(2)(B), both sections
share the requirement under subsection (2) that the debt be for "money, property,
services or an extension, renewal, or refinancing of credit."

                                         -6-
are liable and whether the Unterreiners made the misrepresentation with intent to
deceive.6

                                          III.

       The Trust is not entitled to judgment as a matter of law because it cannot meet
all the requirements of § 523(a)(2)(B) to except a debt from discharge. The
Unterreiners did not obtain money, property, or services from the Trust, and the Trust
did not rely on the Unterreiners' misrepresentation when it guaranteed DQSTL's
obligations. We affirm the BAP's ruling, vacate the award of summary judgment to
the Trust, and direct judgment for the Unterreiners.
                        ______________________________

      6
        We dismiss the Trust's argument that it may recover from the Unterreiners on
the basis that "a guarantor who satisfies a judgment which has been rendered against
other coguarantors jointly and severally, is subrogated to creditor's rights as judgment
creditor against the other coguarantors." The Trust has not satisfied any judgment
against the Unterreiners. We also dismiss the suggestion that the Trust may recover
from the Unterreiners by standing in the shoes of Cass as a creditor. The Trust
received no assignment from Cass. Moreover, even assuming the Trust could raise
Cass's rights against the Unterreiners, Cass released the Unterreiners from any further
liability for the loan—Cass has no surviving rights against the Unterreiners, so the
Trust would have no rights to assert.

                                          -7-