In re: Andrew Stephan Hutchings and Gina Autore Hutchings

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: October 28, 2015
• Docket: CC-14-1421-PeTaKu
• Status: Unpublished

Opinion

FILED OCT 28 2015

1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 2 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-14-1421-PeTaKu ) 6 ANDREW STEPHAN HUTCHINGS and ) Bk. No. 2:12-bk-46632-ER GINA AUTORE HUTCHINGS, ) 7 ) Adv. No. 2:12-ap-02723-ER Debtors. ) 8 ) ) 9 ANDREW STEPHAN HUTCHINGS, ) ) 10 Appellant, ) ) 11 v. ) MEMORANDUM1 ) 12 BONDCORP REALTY SERVICES, ) INC., ) 13 ) Appellee. ) 14 ) 15 Argued and Submitted on July 23, 2015 at Pasadena, California 16 Filed - October 28, 2015 17 Appeal from the United States Bankruptcy Court 18 for the Central District of California 19 Honorable Ernest M. Robles, Bankruptcy Judge, Presiding _____________________________ 20 Appearances: David B. Lally argued for appellant; Edward P. Kerns 21 argued for appellee. _____________________________ 22 23 24 1 This disposition is not appropriate for publication. 25 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 26 Cir. BAP Rule 8024-1. 1 Before: PERRIS,2 TAYLOR, and KURTZ, Bankruptcy Judges. 2 3 In this adversary proceeding to determine the dischargeability 4 of a debt under § 523(a)(2)(A),3 debtor Andrew Hutchings (“debtor”) 5 appeals the judgment against him for $821,647.68, which the court 6 found nondischargeable. He challenges a number of the court’s 7 findings of fact. The judgment arose from a scheme in which debtor 8 used strawmen to obtain a loan for the purchase of property, 9 directing the purchase and loan application process in other 10 people’s names. 11 We conclude that the bankruptcy court did not err in finding 12 that the debt is nondischargeable under § 523(a)(2)(A), but REVERSE 13 and REMAND for the bankruptcy court to enter an amended judgment for 14 damages of $302,000. 15 FACTS4 16 Debtor is a licensed real estate agent/broker. During the 17 2 18 Honorable Elizabeth L. Perris, Bankruptcy Judge for the District of Oregon, sitting by designation. 19 3 Unless otherwise indicated, all chapter and section 20 references are to the federal Bankruptcy Code, 11 U.S.C. §§ 101- 21 1532, and all “Rule” references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. References to “FRE” are to 22 the Federal Rules of Evidence, FRE 101-1103. 23 4 Debtor failed to designate all of the pertinent documents as part of the record on appeal. Where as here the documents are 24 included in the court’s electronic docket, the panel can retrieve 25 them from the docket and consider them on appeal. See O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-958 26 (9th Cir. 1989).

2 1 events in 2006 and 2007 that led to this adversary proceeding, he 2 owned and was the sole employee of Clubhouse Properties, Inc. The 3 office for Clubhouse Properties was at debtor’s house. 4 In late September 2006, debtor’s father, Alfred Hutchings, Sr. 5 (“Hutchings, Sr.”), purchased a house on Ximeno Ave., Long Beach, 6 California (“the property”), for $629,500. On October 18, 2006, 7 Hutchings, Sr. transferred the property to Marc Anthony, who worked 8 for Hutchings, Sr. as a handyman, as a gift for no consideration. 9 On that same date, Anthony deeded the property to Isabel Esparza 10 through a grant deed evidencing a purchase price of $835,000. 11 In connection with the transaction from Anthony to Esparza, 12 Fred Rivera, a mortgage banker, submitted a loan application to 13 Bondcorp Realty Services, Inc. (“Bondcorp”), the appellee in this 14 appeal, seeking a loan based on the purchase price of $835,000. The 15 loan file included a Uniform Residential Loan Application, the 16 purchase agreement, a verification of employment, Esparza’s credit 17 report, and an appraisal showing the property was worth in excess of 18 $835,000. The loan application indicated that Esparza was self- 19 employed as a stock trader/investor earning approximately $30,000 20 per month. 21 Rivera obtained all of the information for the loan application 22 from debtor, who was the contact person for the loan. Before he 23 submitted the loan file to Bondcorp, Rivera contacted debtor and 24 told him that he needed verification of Esparza’s self-employment 25 income from an accountant, based on lender requirements of such 26 verification. The verification provided was a letter from Tax

3 1 Professionals, LLC, purportedly signed by Don Abrams, which was sent 2 via facsimile from debtor’s home office of Clubhouse Properties. It 3 verified that Esparza had been a customer of Tax Professionals since 4 1999 and that she generated income from her self-employment as a 5 stock trader/investor. 6 In fact, Esparza, who was the girlfriend of debtor’s brother, 7 had not been a customer of Tax Professionals. Instead, she was a 8 kindergarten teacher and had never been self-employed as a stock 9 trader/investor. 10 The verification letter was a forgery. Abrams, an employee of 11 Tax Professionals, had not prepared, signed, or transmitted the 12 letter, nor had he authorized debtor or Clubhouse Properties to use 13 his letterhead. Indeed, the letterhead was not one that Tax 14 Professionals used. Further, Abrams was acquainted with debtor, who 15 would come to the office on occasion. However, Abrams had never 16 spoken to Esparza. 17 Bondcorp obtained the loan documents from Rivera, with whom it 18 had done more than a hundred transactions. In approving the loan, 19 Bondcorp would check the borrower’s credit report and, for 20 applicants who were self-employed, would verify through an 21 accountant the borrower’s self-employment information. As already 22 discussed, Rivera provided such documents as part of the loan 23 package; he did not know that they were forged. 24 Bondcorp funded the loan in the amount of $751,250, using a 25 combination of two trust deeds, one for $626,250 and one for 26 $125,000. It relied on the forged income verification letter, along

4 1 with other documents, in approving the loan. 2 From the sale of the property, Anthony was issued a check, c/o 3 Clubhouse Properties, for $238,794.49, which was sent to debtor at 4 Clubhouse Properties. Esparza as buyer was issued a check, c/o 5 Clubhouse Properties, for $393.00, which was also sent to debtor at 6 Clubhouse Properties. Debtor deposited both checks in the Clubhouse 7 Properties bank account. Debtor never paid any of the funds from 8 the loan to either Esparza or Anthony. 9 Bondcorp sold the loan to Countrywide. Its agreement with 10 Countrywide required Bondcorp to indemnify Countrywide for any loss 11 or costs if the loan went into default. 12 Esparza never made any payments on the loan, and Countrywide 13 foreclosed. The property was sold at a foreclosure sale for 14 approximately $549,900. Bondcorp was required to and did pay 15 Countrywide $302,000 for Countrywide’s losses in connection with 16 this loan. 17 After debtor filed bankruptcy, Bondcorp filed this complaint, 18 seeking a determination that the debt owed by debtor to Bondcorp is 19 nondischargeable under § 523(a)(2)(A) and (B). At trial, the court 20 held against Bondcorp on the § 523(a)(2)(B) claim but found that 21 debtor had defrauded Bondcorp by his conduct in providing the Tax 22 Professionals letter to Rivera, and concluded that a debt of 23 $821,647.68 was nondischargeable under § 523(a)(2)(A). 24 Debtor appealed, challenging the § 523(a)(2)(A) judgment. 25 Bondcorp did not cross-appeal the judgment against it on the 26 § 523(a)(2)(B) claim.

5 1 JURISDICTION 2 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 3 §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. 4 § 158. 5 ISSUES5 6 1. Whether the bankruptcy court erred in finding that debtor made 7 a representation. 8 2. Whether the bankruptcy court erred in finding that Bondcorp 9 relied on the representation. 10 3. Whether the bankruptcy court erred in finding damages in the 11 amount of $821,647.68. 12 STANDARD OF REVIEW 13 The panel reviews a court’s legal conclusions de novo, and its 14 findings of fact for clear error. Hansen v. Moore (In re Hansen), 15 368 B.R. 868, 874 (9th Cir. BAP 2007). “A finding is ‘clearly 16 erroneous’ when although there is evidence to support it, the 17 reviewing court on the entire evidence is left with the definite and 18 firm conviction that a mistake has been committed.” United States 19 v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948). If the evidence 20 supports two views, “the trial judge’s choice between them cannot be 21 clearly erroneous.” Hansen, 368 at 875. Findings of fact based on 22 credibility are given particular deference. Oney v. Weinberg 23 (In re Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009). The panel 24 5 25 We have consolidated the issues identified in debtor’s Opening Brief because debtor’s numerous issues are difficult to 26 decipher.

6 1 will affirm the court’s factual finding “unless that finding is 2 illogical, implausible, or without support in inferences that may be 3 drawn from the record.” United States v. Hinkson, 585 F.3d 1247, 4 1263 (9th Cir. 2009).6 5 The court’s evidentiary rulings are reviewed for abuse of 6 discretion. Hansen, 368 B.R. at 875. The court abuses its 7 discretion if it applies the wrong legal standard or if its 8 application of the correct legal standard “is illogical, 9 implausible, or without support in inferences that may be drawn from 10 the record.” Hinkson, 585 F.3d at 1263. “To reverse an evidentiary 11 ruling, we must conclude that the error was prejudicial.” Hansen, 12 368 B.R. at 875. 13 DISCUSSION 14 Debtor argues that the bankruptcy court erred in finding that 15 the debt to Bondcorp is nondischargeable under § 523(a)(2)(A). To 16 establish that a debt is nondischargeable under § 523(a)(2)(A), a 17 creditor must show: 18 (1) misrepresentation, fraudulent omission or deceptive conduct by the debtor; (2) knowledge of the falsity or deceptiveness of 19 his statement or conduct; (3) an intent to deceive; (4) justifiable reliance by the creditor on the debtor’s 20 statement or conduct; and (5) damage to the creditor 21 6 22 Throughout his opening brief, debtor argues that the court’s findings are reviewed for abuse of discretion, citing Cortez 23 v. Am. Wheel, Inc. (In re Cortez), 191 B.R. 174 (9th Cir. BAP 1995). That case was an appeal of an order denying reopening of a case. 24 Here, the main issues are whether there is evidence to support the 25 bankruptcy court’s findings. A court’s findings are reviewed for clear error, not abuse of discretion. Fed. R. Bankr. P. 7052; Fed. 26 R. Civ. P. 52(a)(6); Hansen, 368 B.R. at 874.

7 1 proximately caused by its reliance on the debtor’s statement or conduct. 2 3 Turtle Rock Meadows Homeowners Ass’n v. Slyman (In re Slyman), 4 234 F.3d 1081, 1085 (9th Cir. 2000). 5 Debtor argues that the bankruptcy court erred in finding 6 (1) that debtor made a representation; (2) that Bondcorp relied on 7 any representation and that any reliance was reasonable or 8 justifiable; and (3) that Bondcorp’s damages were $832,647.68. 9 1. Representation 10 The bankruptcy court found that, in connection with the loan 11 application, debtor submitted a forged letter on a Tax Professionals 12 letterhead verifying that Esparza “generates income through self 13 employment as a stock trader/investor.” Exh. 85. The letter was 14 provided to Rivera to submit to Bondcorp in response to a request to 15 verify that Esparza was a self-employed bond trader with income of 16 $30,000 per month. There is no dispute that the representation in 17 the letter was false; in fact, Esparza was a kindergarten teacher. 18 Debtor argues in passing that the bankruptcy court erred in 19 admitting Exhibit 85 into evidence. The entirety of the argument in 20 his brief is: 21 Finally, the Court made errors of law by admitting into evidence Trial Exhibits 85, 95 and 96. They lacked foundation, 22 were hearsay, and lacked authentication. Appellant repeatedly objected to the introduction of those Exhibits yet without any 23 foundation or authentication the Court allowed them into evidence. See TR of 7/1/13 Page 83, lines 13-25. All of Pages 24 84 and 85, Page 86, Lines 1-17. This was an error of law. 25 Appellant’s Opening Brief at 15. 26 We need not consider whether admission of Exhibits 95 and 96

8 1 was proper; the bankruptcy court did not rely on those documents and 2 did not find that they constituted representations of debtor that 3 supported the § 523(a)(2)(A) claim. The court relied solely on 4 Exhibit 85; it is the admission of that exhibit that we must review. 5 As discussed above, evidentiary rulings are reviewed for abuse 6 of discretion. Hansen, 368 B.R. at 875. Although it is true that a 7 court abuses its discretion if it makes an error of law, Hinkson, 8 585 F.3d at 1261, debtor does not identify any error of law that the 9 bankruptcy court made. A court’s determination that the proponent 10 of an exhibit has laid an adequate foundation and properly 11 authenticated the exhibit is a factual determination. 12 In this case, the court admitted the exhibit after Rivera 13 testified that he had received the document from debtor, and that 14 the document had a Clubhouse Properties facsimile legend at the top. 15 Debtor does not explain why this testimony did not lay a proper 16 foundation or properly authenticate the document. The document is 17 not hearsay; it is not offered to prove the truth of the matter 18 asserted but instead to show that the statement was made.7 See 19 Vol. 2, Hon. Barry Russell, BANKRUPTCY EVIDENCE MANUAL § 801:4 at p.934 20 (2014-2015 Ed.). Debtor has not demonstrated that the court abused 21 22 7 The truth of the matter asserted in the letter was that 23 Esparza had been a customer of Tax Professionals since 1999 and that she had self-employment income as a stock trader/investor. The 24 court did not admit the exhibit or consider it as proof of those 25 statements; it admitted and considered the exhibit as proof that the statements, which were false, had been made and were transmitted to 26 Bondcorp.

9 1 its discretion in admitting the document. 2 Debtor argues that the evidence does not support the court’s 3 finding that debtor made a representation. Specifically, he argues 4 that there is no evidence that debtor wrote the Tax Professionals 5 letters, particularly in light of debtor’s testimony that he did not 6 write the letters. 7 The only letter on which the bankruptcy court relied is 8 Exhibit 85. Debtor is correct that there is no direct evidence that 9 debtor wrote the letter. Debtor denied that he wrote the letter or 10 that he sent it via facsimile to Rivera. However, the bankruptcy 11 court explained that debtor’s testimony was not credible. It relied 12 on the fact that the facsimile legend on the top of the letter 13 showed a telephone number that belonged to debtor’s business, 14 supporting its finding that the letter came from debtor’s home 15 office.8 Although debtor testified that he never used the main home 16 17 8 Debtor testified that he had phone records showing that 18 there was no call to Rivera from his home office on the date the fax was sent, but the phone records were not admitted into evidence 19 because they failed to include the date on which the fax was sent. 20 In his opening brief, debtor argues that, “when confronted with 21 Defendant’s telephone invoice for the day and time of the alleged Exhibit 85 fax from Appellant to Rivera, he could not explain how 22 his telephone number was on Appellant’s Exhibit 1.” Appellant’s Opening Brief at ¶ 57. Debtor’s counsel repeated the assertion at 23 oral argument, but did not provide any reference to the record. The portions of the transcript cited in the brief do not support that 24 statement; in fact, the transcript shows that debtor’s counsel 25 attempted to question Rivera regarding a document that he represented was debtor’s phone records, but the court sustained 26 (continued...)

10 1 office telephone to send faxes, he did not testify that it was 2 impossible to do that. The court also relied on the fact that 3 debtor was the only person who had access to the fax machine in his 4 home office. 5 The court also rejected the argument that the faxed letter came 6 from either Rivera or Bondcorp, explaining that those parties had 7 too much to lose by using falsified information for the loan. It 8 also considered the testimony of Abrams, the person who purportedly 9 signed the faxed letter, that the letterhead was not the letterhead 10 used by Tax Professionals, that he did not prepare the letter, and 11 that the signature on the document under his name was not in fact 12 his signature. The court noted that debtor was familiar with Tax 13 Professionals and knew Abrams personally. 14 Based on the evidence presented at trial, the court found that 15 debtor was the point person for the loan transaction: he opened the 16 escrow; he directed documents to go from escrow to him; and he 17 filled out escrow documents. Given all of this evidence, the court 18 concluded that debtor had in fact been the person who prepared and 19 sent the falsified Tax Professionals letter to Rivera. 20 Debtor has not shown that this finding was clear error. There 21 was evidence to support the finding that the facsimile telephone 22 23 8 (...continued) objections to the document and the questions based on the document 24 because the records were not the witness’s records, they had not 25 been admitted into evidence and there had been no foundation laid for them. Rivera never testified that his telephone number was or 26 was not on Appellant’s Exhibit 1 (the phone records).

11 1 number on the document was the number from debtor’s home office; 2 that debtor was the only person who worked in his home office; that 3 debtor was the mastermind behind the loan and was the person with 4 whom Rivera communicated; that Rivera had asked debtor for 5 verification of Esparza’s income; that Abrams had not written or 6 sent the letter himself; and that debtor deposited the loan proceeds 7 in the Clubhouse Properties bank account. Particularly in light of 8 the trial court’s finding that debtor’s testimony denying his 9 involvement in the preparation and transmission of the letter to 10 Rivera was not credible, we cannot say that the finding that debtor 11 prepared and transmitted the letter, which made the false 12 representation, was “illogical, implausible, or without support in 13 inferences that may be drawn from the record.” See Hinkson, 14 585 F.3d at 1263. 15 Debtor argues that there is no evidence of a loan because the 16 loan application that was offered into evidence was not admitted 17 because it was not signed. It is not clear what debtor is trying to 18 establish with this argument. It is undisputed that there was a 19 loan made to Esparza. The lack of a signed loan application does 20 not change that undisputed fact. 21 Debtor’s main complaint seems to be that debtor could not be 22 liable for a misrepresentation if he was not the buyer or the seller 23 or the applicant for the loan. However, the bankruptcy court found, 24 and there is evidence to support the finding, that debtor directed 25 the loan application process and provided the income verification 26 letter, which was a misrepresentation. A debtor need not have

12 1 received a benefit as a result of a misrepresentation; “whether the 2 debt arises from fraud is the only consideration material to 3 nondischargeability.” Muegler v. Bening, 413 F.3d 980, 983 (9th 4 Cir. 2005).9 Thus, the fact that debtor was not the named buyer, 5 seller, borrower, or agent for either buyer or seller is irrelevant, 6 where he made the misrepresentation that was fraudulent.10 7 The bankruptcy court did not err in finding that debtor made 8 the representation. 9 2. Reliance 10 Debtor next argues that the bankruptcy court erred in finding 11 that Bondcorp relied on the misrepresentation contained in the Tax 12 Professionals verification letter and that any reliance was 13 justifiable. 14 9 15 There is evidence that debtor did, in fact, receive a benefit. The testimony was that the proceeds of the loan that were 16 to go to the buyer and the seller were deposited into debtor’s Clubhouse Properties bank account, and that the proceeds were not 17 disbursed to either the buyer or the seller. 18 Debtor argues in his opening brief that Anthony signed the 19 proceeds check and that after the check cleared, Clubhouse Properties disbursed funds to Alfred Hutchings Jr. and Alfred 20 Hutchings Sr. He does not cite to any evidence to support those 21 assertions. The only testimony we could find that would support the assertions is debtor’s testimony that some of the proceeds of the 22 sale went to Hutchings Sr. In light of the trial court’s finding that debtor was not credible, the trial court was entitled to 23 disbelieve that testimony. 24 10 Debtor argues in passing that there was no evidence of 25 intent, because debtor never made a representation. He does not argue that, if there was a representation, the court erred in 26 finding intent.

13 1 Debtor’s argument that Bondcorp did not rely on the Tax 2 Professionals’ letter is premised primarily on the facts that there 3 was no testimony from a person with personal knowledge of the loan 4 transaction, that Bryan Bond of Bondcorp testified that he did not 5 see the letter until after the loan went into default, and that 6 Bondcorp relied on many documents including Countrywide’s 7 guidelines, not debtor’s representation, in approving the loan. 8 There was evidence to support the bankruptcy court’s finding of 9 reliance. Most importantly, there was testimony that Bondcorp 10 needed verification of Esparza’s income and that it would not have 11 made this loan if it had not gotten that verification. The fact 12 that Bondcorp also relied on other documents and guidelines does not 13 belie the fact that it would not have made the loan without the 14 income verification provided by debtor. 15 It is of no consequence that Bond did not see the document 16 until after the loan had gone into default. He was not the broker 17 who approved the loan, but testified about the company’s practices 18 in making loans such as the one involved here. 19 The bankruptcy court’s finding of reliance is not implausible 20 or illogical and is supported by inferences supported by the record. 21 Debtor also argues that any reliance was not reasonable or 22 justifiable. He first argues that justifiable reliance is measured 23 by an objective standard: the degree of care exercised by a 24 reasonably cautious person in the same transaction under similar 25 circumstances, citing Gertsch v. Johnson & Johnson, Fin. Corp. 26

14 1 (In re Gertsch), 237 B.R. 160, 167-168 (9th Cir. BAP 1999).11 2 Reliance for purposes of establishing fraud under 3 § 523(a)(2)(A) need not be reasonable, but it must be justifiable. 4 Field v. Mans, 516 U.S. 59, 74 (1995). This entails looking “to all 5 of the circumstances surrounding the particular transaction,” in 6 particular “the subjective effect of those circumstances upon the 7 creditor.” Eugene Parks Law Corp. Defined Benefit Pension Plan v. 8 Kirsch (In re Kirsh), 973 F.2d 1454, 1460 (9th Cir. 1992). 9 The general rule is that a person may justifiably rely on a representation even if the falsity of the representation could 10 have been ascertained upon investigation. In other words, negligence in failing to discover an intentional 11 misrepresentation is no defense. However, a person cannot rely on a representation if he knows that it is false or its falsity 12 is obvious to him. In sum, although a person ordinarily has no duty to investigate the truth of a representation, a person 13 cannot purport to rely on preposterous representations or close his eyes to avoid discovery of the truth. 14 15 Romesh Japra, M.D., F.A.C.C., Inc. V. Apte (In re Apte), 180 B.R. 16 223, 229 (9th Cir. BAP 1995), quoted with approval in Citibank 17 (S.D.), N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1090 (9th Cir. 18 1996). 19 The bankruptcy court found that Bondcorp’s reliance on the Tax 20 Professionals’ letter was justifiable because of its long history of 21 11 22 In his brief, debtor also provides a partial citation to another case, In re Hill. However, he provides only a year for the 23 decision but no other citation. At oral argument, counsel provided the bankruptcy judge’s name for that case, and we have located a 24 case captioned Nat’l City Bank v. Hill (In re Hill), 2008 WL 2227359 25 (Bankr. N.D. Cal. 2008). That case arose under § 523(a)(2)(B), which requires reasonable reliance. Here, the § 523(a)(2)(A) claim 26 requires proof of justifiable reliance.

15 1 doing business with Rivera, including the fact that no loan Rivera 2 originated for Bondcorp had ever gone into default. Debtor does not 3 point to anything about the letter that made its falsity obvious or 4 preposterous. The evidence was sufficient for the bankruptcy court 5 to find that Bondcorp’s reliance on the Tax Professionals’ income 6 verification letter was justified. 7 3. Damages 8 Finally, debtor argues that the evidence does not support the 9 court’s award of $821,647.68 in damages.12 He acknowledges evidence 10 to support damages of $302,000, but says there is no evidence to 11 support the higher amount awarded. He also complains that the court 12 did not take into account other amounts received by Bondcorp in 13 separate litigation against other participants in the loan 14 transaction. 15 Debtor does not provide any legal authority to support his 16 argument that any damages should have been reduced by amounts 17 Bondcorp received from other parties who were sued in state court on 18 this transaction. He may be claiming a right to a reduction of 19 damages under Cal. Code Civ. Proc. § 877(a), which provides that a 20 release by one tortfeasor reduces the claims against the other 21 tortfeasors. This rule requires that the settling parties be joint 22 tortfeasors who are liable to the plaintiff for the same injury. 23 22 AM.JUR.2D “Damages” at § 401 (2013). 24 25 12 He does not argue that the damages were not proximately 26 caused by the misrepresentation.

16 1 There is evidence that Bondcorp sued other participants in this 2 scheme, but no evidence of any amounts those defendants may have 3 paid in settlement of the claims. Nor does the evidence demonstrate 4 what claims Bondcorp pursued against the other parties. The non- 5 settling defendant, debtor, has the burden to show that he is 6 entitled to a reduction. 22 AM.JUR.2D “Damages” at § 401. In the 7 absence of evidence about what claims were pursued against other 8 parties and what amounts were paid in settlement of those claims, 9 debtor has not demonstrated that the court erred by failing to 10 reduce damages by amounts of settlement payments. 11 As for evidence supporting the amount of damages awarded, the 12 bankruptcy court said, “The Court finds that the plaintiff sustained 13 damages in the amount based upon the testimony – uncontradicted 14 testimony of Mr. Bond in the amount of $821,647.69.” 8/5/14 Tr. at 15 42:2-6.13 16 The transcript references to Bond’s testimony provided by the 17 parties in the briefs do not contain any testimony - uncontradicted 18 or otherwise - of Bond that Bondcorp’s damages were $821,647.69. 19 The testimony on June 30 cited by Bondcorp shows a loan origination 20 fee, administrative fee, and processing fee of $9,393.75, $395.00, 21 and $595.00, respectively. It also demonstrates that Bondcorp 22 funded two loans, of $626,250 and $125,000. There is no testimony 23 or evidence about how much Bondcorp was paid when it sold the loans 24 25 13 Although the court said it was awarding $821,647.69, the 26 judgment awards $821,647.68.

17 1 to Countrywide. The July 1 transcript includes Bond’s testimony 2 that, after Countrywide foreclosed on the property (which was sold 3 for $549,900), Bondcorp was required to and did indemnify 4 Countrywide by paying $302,000 for losses it incurred on these 5 loans.14 6 After oral argument, the panel issued an order requiring 7 Bondcorp to provide specific citations to the transcript that 8 support the amount of damages awarded. Bondcorp’s response does not 9 point to any testimony that supports the bankruptcy court’s 10 quantification of damages. We have reviewed the entire transcript 11 of Bond’s testimony and find no mention of damages in the amount 12 awarded by the court. 13 Bondcorp argues that the award of damages consisted of a number 14 of elements, “including attorney fees, costs, and other damages,” 15 Appellee’s Opening Brief at 23, and that it provided evidence of 16 even more damages than what the bankruptcy court actually found. 17 There was evidence of the amount of the loan, but the loan amount is 18 not the measure of damages; the loan was sold to Countrywide, for an 19 unspecified amount. There was no evidence of the amount of any 20 attorney fees or other damages. There was evidence of certain fees 21 charged for the loans (loan origination fee, administrative fee, 22 processing fee), but no explanation for why those fees should be 23 included in the award of damages. 24 25 14 The complaint in this case sought damages of $302,250 plus 26 interest and attorney fees.

18 1 The only evidence of damages that we find in the record is the 2 $302,000 indemnification payment that Bondcorp made to Countrywide. 3 Because the evidence at trial does not support the award of damages 4 in the amount of $821,647.68, the bankruptcy court clearly erred in 5 awarding that amount as damages. 6 4. Esparza’s testimony 7 Debtor argues that the court erred in holding debtor liable 8 when Esparza exercised her Fifth Amendment right against self- 9 incrimination, and in finding that Esparza was damaged by this loan 10 transaction. He says that her assertion of her rights showed that 11 she had something to hide and had no bearing on the issues before 12 the court.15 13 Whether Esparza was damaged had no bearing on the issues before 14 the court. It does not appear that the court’s statements about 15 Esparza were anything other than an explanation for why it found 16 that debtor, not Esparza, was the person in charge of the loan 17 transaction. Debtor has not demonstrated any error by the court’s 18 consideration of Esparza’s testimony or its conclusion that she was 19 harmed by the transaction. 20 CONCLUSION 21 The bankruptcy court did not err in finding that debtor 22 committed fraud in connection with the Esparza loan transaction and 23 24 15 Debtor does not provide any citation to the record to show 25 that he objected to Esparza’s testimony, and we could not find an objection to allowing her to testify despite her frequent assertions 26 of her Fifth Amendment right.

19 1 that the debt arising from that transaction is therefore 2 nondischargeable under § 523(a)(2)(A). However, the evidence does 3 not support the amount of its award of damages. The trial evidence 4 supports an award of damages in the amount of $302,000. 5 Therefore, we REVERSE and REMAND for the bankruptcy court to 6 enter an amended judgment awarding damages in the amount of 7 $302,000. The judgment is AFFIRMED in all other respects. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26