In re: Jon W. Chaffee

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: March 17, 2017
• Docket: CC-16-1241-TaFC
• Status: Unpublished

Opinion

FILED MAR 17 2017 1 NOT FOR PUBLICATION 2 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-16-1241-TaFC ) 6 JON W. CHAFFEE, ) Bk. No. 8:14-bk-12834-SC ) 7 Debtor. ) Adv. No. 8:14-ap-01215-SC ______________________________) 8 ) B. CASEY YIM, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) JON W. CHAFFEE, ) 12 ) Appellee.** ) 13 ______________________________) 14 Argued and Submitted on February 23, 2017 at Pasadena, California 15 Filed – March 17, 2017 16 Appeal from the United States Bankruptcy Court 17 for the Central District of California 18 Honorable Scott C. Clarkson, Bankruptcy Judge, Presiding 19 Appearances: B. Casey Yim, pro se. 20 21 Before: TAYLOR, FARIS, and CLEMENT,*** Bankruptcy Judges. 22 23 * This disposition is not appropriate for publication. 24 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 25 See 9th Cir. BAP Rule 8024-1(c)(2). 26 ** Debtor–Appellee did not file a brief. 27 *** The Hon. Fredrick E. Clement, United States Bankruptcy 28 Judge for the Eastern District of California, sitting by designation. 1 INTRODUCTION 2 B. Casey Yim appeals from the bankruptcy court’s judgment 3 in favor of debtor Jon Chaffee in an adversary proceeding 4 objecting to discharge of Yim’s claim under § 523(a)(2)(A) and 5 (a)(2)(B).1 We AFFIRM the bankruptcy court. 6 FACTS 7 On June 10, 2013, Yim agreed to sell Debtor property in 8 Newport Beach for $2,475,000. To memorialize the agreement, 9 they entered into a purchase and sale agreement (the “PSA 10 Contract”). For the purposes of this nondischargeability 11 action, Debtor and Yim stipulated to, among others, the 12 following facts: 13 5. The transaction was to be performed as an “All Cash” 14 transaction without loan or financing contingencies 15 permitted to the buyer (Chaffee). PSA Contract, paras. 3. 16 J. and K (Plaintiff’s Trial Exhibit 1). 17 6. Specifically, under the aforesaid PSA Contract, para. 3.j., 18 the transaction was expressly stated to be an “All Cash” 19 transaction, without loan or financing contingencies. 20 7. Under para. 3.K. of the PSA Contract (Plaintiff’s Trial 21 Exh. 1), debtor-defendant agreed and represented, in 22 writing, that “Buyer’s failure to secure alternate 23 financing does not excuse buyer from the obligation to 24 purchase the property and close escrow as specified in this 25 purchase agreement [the ‘PSA Contract’ herein]” 26 27 1 Unless otherwise indicated, all chapter and section 28 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.

2 1 8. At the time the parties entered into the PSA Contract, the 2 debtor-defendant did not intend to perform the contract as 3 an “All Cash” transaction without a loan or funding 4 contingency to be obtained from a third party lending or 5 financing source. 6 9. At the time the parties entered into the PSA Contract, the 7 debtor defendant did not have liquid assets or cash of his 8 own to purchase the subject property as an “All Cash” 9 transaction. 10 10. At the time the parties entered into the transaction, the 11 debtor defendant did not have any written or contractual 12 commitment from any third party lending or financing source 13 to provide the funds need to permit defendant to purchase 14 the subject property as an “All Cash” transaction. 15 11. At the time the parties entered into the PSA Contract, 16 defendant could not and had no financial ability to perform 17 the contact as an “All Cash” transaction as represented in 18 his written PSA Contract signed by him on or about June 10, 19 2013. (Exhibit 1) 20 12. Defendant Chaffee never intended to perform the subject PSA 21 contract dated June 10, 2013, as an “All Cash” transaction 22 without any third-party loan or financing contingency at 23 the time the parties entered into the PSA Contract and at 24 all times thereafter. 25 13. Defendant instead intended to perform by making financing 26 arrangements for payment funding from some other third 27 party lending or financing source. 28 14. Defendant did not disclose to Plaintiff his intent to not

3 1 perform as an “All Cash” transaction. 2 15. Defendant did not disclose to plaintiff-Seller his true 3 intent to condition his performance upon loans or financing 4 arrangements from third-party lending or financing sources. 5 16. Plaintiff relied on Defendants “selected method of 6 financing” under the PSA Contract as “All Cash” in entering 7 into the PSA Contract with defendant. 8 17. Under the PSA Contract, para. 3 (K) (Plaintiff's Exhibit 9 1), the parties expressly covenanted and represented, in 10 writing, as follows: 11 “Seller has relied on Buyer’s representation of the 12 type of financing specified (including, . . . all cash). 13 If buyer seeks alternate financing, (i) Seller has no 14 obligation to cooperate with Buyer’s efforts to obtain such 15 financing; and (ii) Buyer shall also pursue the financing 16 method specified in this Agreement. Buyer’s failure to 17 secure alternate financing does not excuse Buyer from the 18 obligation to purchase the Property and close escrow as 19 specified in this Agreement.” 20 18. Defendant did not have his own funds, nor did he obtain 21 third-party loan financing to pay the purchase price, and 22 therefore breached the subject PSA Contract by failure to 23 pay by the contracted closing date, July 10, 2013. 24 19. Plaintiff was able to find and arrange for another buyer 25 for the property to mitigate his damages; however the 26 replacement buyer’s contracted re-sale price was only 27 $2,375,000, or $100,000 lower that Defendant’s contract 28 price; and did not close until Dec. 13, 2013.

4 1 In September 2013, Yim sued Debtor in California state 2 court for breach of contract and specific performance. Yim 3 obtained a default judgment for $328,166.08, plus post-judgment 4 interest. 5 Debtor files bankruptcy; Yim brings a nondischargeability 6 action. In May 2014, Debtor filed a voluntary chapter 7 7 petition. Yim later commenced an adversary proceeding seeking 8 to hold the default judgment nondischargeable under § 523(a)(2). 9 Eventually, the parties prepared a joint pretrial stipulation 10 and proposed order. After some procedural missteps, the matter 11 was set for trial by declaration. Yim submitted a trial brief, 12 his declaration, and his trial exhibits. Debtor also submitted 13 a declaration and trial exhibits. 14 The bankruptcy court heard the matter, but Debtor did not 15 appear. On Yim’s oral motion, the bankruptcy court struck 16 Debtor’s declaration and trial exhibits. The bankruptcy court 17 reviewed the pretrial order and factual admissions; it then 18 engaged in an extensive colloquy with Yim about the case. 19 Finally, the hearing concluded with the bankruptcy court’s oral 20 ruling that Yim failed to prove the required elements by a 21 preponderance of the evidence. The bankruptcy court later 22 issued a memorandum decision. Bankruptcy Court’s Memorandum of 23 Decision Regarding Non-Dischargeability Proceeding Under 24 §§ 523(a)(2)(A) and (a)(2)(B), Aug. 19, 2016 (“Mem. Dec.”). Yim 25 does not challenge the decision under § 523(a)(2)(B) on appeal. 26 The bankruptcy court then entered judgment in Debtor’s favor and 27 against Yim. Yim timely appealed. 28

5 1 JURISDICTION 2 The bankruptcy court had jurisdiction under 28 U.S.C. 3 §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. 4 § 158. 5 ISSUE 6 Whether the bankruptcy court erred in determining that 7 Yim’s claim is dischargeable. 8 STANDARD OF REVIEW 9 We review the bankruptcy court’s conclusions of law de novo 10 and its factual findings for clear error. Carrillo v. Su 11 (In re Su), 290 F.3d 1140, 1142 (9th Cir. 2002); Anastas v. Am. 12 Sav. Bank (In re Anastas), 94 F.3d 1280, 1283 (9th Cir. 1996) 13 (“A finding of whether a requisite element of section a [sic] 14 523(a)(2)(A) claim is present is a factual determination 15 reviewed for clear error.”); see also Eugene Parks Law Corp. 16 Defined Benefit Plan v. Kirsh (In re Kirsh), 973 F.2d 1454, 1456 17 (9th Cir. 1992) (“The determination of justifiable reliance 18 [under § 523(a)(2)(A)] is a question of fact subject to the 19 clearly erroneous standard of review.”). 20 “Clearly erroneous review is significantly deferential, 21 requiring that the appellate court accept the [trial] court’s 22 findings absent a definite and firm conviction that a mistake 23 has been made.” United States v. Syrax, 235 F.3d 422, 427 (9th 24 Cir. 2000). The bankruptcy court’s choice among multiple 25 plausible views of the evidence cannot be clear error. United 26 States v. Elliott, 322 F.3d 710, 714 (9th Cir. 2003). A factual 27 finding is clearly erroneous, however, if, after examining the 28 evidence, the reviewing court “is left with the definite and

6 1 firm conviction that a mistake has been committed.” Anderson v. 2 City of Bessemer City, 470 U.S. 564, 573 (1985) (internal 3 citation omitted). 4 DISCUSSION 5 Section 523(a)(2)(A) excepts from discharge a debt 6 resulting from “false pretenses, a false representation, or 7 actual fraud, other than a statement respecting the debtor’s or 8 an insider’s financial condition.” 11 U.S.C. § 523(a)(2)(A). 9 The creditor bears the burden of proving § 523(a)(2)(A)’s 10 applicability by a preponderance of the evidence. Ghomeshi v. 11 Sabban (In re Sabban), 600 F.3d 1219, 1222 (9th Cir. 2010). In 12 the Ninth Circuit, the five elements for a § 523(a)(2)(A) 13 nondischargeability claim are: 14 (1) misrepresentation, fraudulent omission or deceptive conduct by the debtor; (2) knowledge of the 15 falsity or deceptiveness of [the debtor’s] statement or conduct; (3) an intent to deceive; (4) justifiable 16 reliance by the creditor on the debtor's statement or conduct; and (5) damage to the creditor proximately 17 caused by its reliance on the debtor's statement or conduct. 18 19 Turtle Rock Meadows Homeowners Ass’n v. Slyman (In re Slyman), 20 234 F.3d 1081, 1085 (9th Cir. 2000); see In re Sabban, 600 F.3d 21 at 1222; Oney v. Weinberg (In re Weinberg), 410 B.R. 19, 35 (9th 22 Cir. BAP 2009). 23 We start with a notable absence: Debtor. Debtor did not 24 file a brief in this appeal. He also failed to show up at the 25 July 27, 2016 hearing, which was to be a trial on the merits.2 26 27 2 In affirming, we do not condone Debtor’s non- 28 participation.

7 1 Accordingly, the bankruptcy court essentially transformed the 2 trial into a default prove-up hearing and engaged Yim (an 3 attorney) in a substantive conversation about his case’s merits. 4 That said, we do not treat the discussion as evidentiary because 5 the bankruptcy court did not receive Yim’s testimony under oath 6 (other than through his declaration). 7 The bankruptcy court concluded that Yim failed to prove any 8 of the elements by a preponderance of the evidence. Thus, to 9 prevail in this appeal, Yim must show that the bankruptcy court 10 erred in every respect. 11 A. The bankruptcy court properly concluded that Yim failed to establish the first and second elements of § 523(a)(2)(A). 12 13 Considering the first and second elements in tandem, the 14 bankruptcy court concluded that Yim failed to prove either that 15 Debtor made a representation that he knew at the time was false 16 or that Debtor made a fraudulent omission. We consider each 17 separately. 18 A knowing misrepresentation. The bankruptcy court 19 explained: 20 Plaintiff never alleged that Defendant made an oral promise or representation at all. The only source of 21 any alleged misrepresentation is the Agreement, the AKM Letter, and the joint pretrial stipulation. In 22 other words, Plaintiff does not point to any other source (oral or written) for Defendant’s alleged 23 misrepresentation. However, none of the sources cited by Plaintiff support his assertion that Defendant 24 “Represented that he had sufficient liquid cash assets to perform without requiring loan financing.” 25 26 Mem. Dec. at 6. 27 On appeal, Yim argues that the bankruptcy court erred by 28 substituting its interpretation of the Agreement for the

8 1 parties’ “mutual understanding” of the Agreement as reflected in 2 the joint stipulation. He asserts the “fraud, false pretense 3 and false representation claim in this case is simple.” Aplt’s 4 Opening Br. at 5. In particular, he argues: 5 The PSA represented an offer made by debtor to purchase the property as an “All Cash” transaction, 6 which the parties stipulated meant that there would be no loan or financing contingency allowed to the 7 debtor-buyer. . . . The parties stipulated to the meaning of these terms of the PSA contract—“All Cash; 8 no loan contingency.” 9 Id. at 11—12 (record citations omitted). Yim essentially 10 interprets Debtor’s checking the “all cash” box as a 11 representation that when Debtor signed the Agreement on June 10, 12 2013, he had the cash on hand to pay $2,475,000. But nothing 13 Yim points to establishes this representation; we thus agree 14 with the bankruptcy court. As the bankruptcy court observed, 15 Yim pointed to only three sources: the PSA Contract; the joint 16 pretrial stipulation; and a “line of credit” letter (the “AKM 17 Letter”). 18 First, we turn to the PSA Contract. Yim and Debtor signed 19 a California form residential real estate purchase agreement. 20 They agreed, among other things, that Debtor would buy a 21 property for $2,475,000. PSA Contract ¶ 1.B and 1.C. Under the 22 finance terms section, they provided for no deposit and agreed 23 that the contract was not contingent on an appraisal. PSA 24 Contract ¶ 3.A and 3.I. They checked the “ALL CASH OFFER” box, 25 which also provides: “Buyer shall, within 7 . . . Days After 26 Acceptance, Deliver to Seller written verification of sufficient 27 funds to close this transaction.” PSA Contract ¶ 3.J. The very 28 next line states:

9 1 BUYER STATED FINANCING: Seller has relied on Buyer’s representation of the type of financing specified 2 (including but not limited to, as applicable, amount of down payment, contingent or non contingent loan, or 3 all cash). If Buyer seeks alternate financing, (i) Seller has no obligation to cooperate with Buyer’s 4 efforts to obtain such financing, and (ii) Buyer shall also pursue the financing method specified in this 5 Agreement. Buyer’s failure to secure alternate financing does not excuse buyer from the obligation to 6 purchase the Property and close escrow as specified in this Agreement. 7 8 PSA Contract ¶ 3.K. The PSA Contract does not require or 9 represent that the buyer has sufficient cash on hand to purchase 10 the property on the day of execution. As the bankruptcy court 11 explained, the Agreement “contemplates that even a buyer with an 12 ‘all cash’ offer may seek alternate financing, so long as the 13 buyer also pursues the ‘all cash’ method of financing.” Mem. 14 Dec. at 9. Indeed, the Agreement’s default terms (which Yim and 15 Debtor agreed to) give Debtor seven days to provide proof of 16 funds. 17 Second, the pretrial order’s stipulated facts do not 18 contradict this. They rightly reflect that the transaction was 19 “All Cash” and “without loan or financing contingencies”. They 20 also state that, under ¶ 3.K, Debtor agreed that his failure to 21 obtain alternate financing would not excuse his obligation to 22 purchase the property. But the pretrial order does not 23 establish that Debtor represented that he had $2,745,000 in cash 24 or other liquid assets on June 10, 2013. 25 Last, the AKM Letter does not represent that Debtor had 26 27 28

10 1 $2,745,000 cash on hand. Yim does not argue otherwise.3 2 What, then, did Debtor represent? He represented that he 3 would purchase the property from Yim on July 10, 2013. As it 4 turns out, Debtor was unable to purchase the property on 5 July 10. But, as Yim concedes in the stipulated facts, Debtor 6 “intended to perform by making financing arrangements for 7 payment funding from some other third party lending or financing 8 source.” Thus, at the time Debtor made the representation, he 9 did not know it would be false. Indeed, the facts reflect the 10 opposite: Debtor intended to perform. 11 Yim’s insistence that Debtor made a misrepresentation 12 derives from his misinterpretation of what “all cash” and 13 “without loan or financing contingencies” mean.4 From Debtor’s 14 perspective, if there are loan or financing contingencies, 15 Debtor’s inability to satisfy the contingency (i.e., to timely 16 obtain a loan) would excuse him from having to pay the full 17 $2,745,000 on July 10 (in a typical scenario, he might forfeit a 18 deposit). Absent these contingencies, Debtor’s failure to 19 procure a loan or other financing does not excuse his payment; 20 he is obligated for the full amount. From Yim’s perspective: 21 with contingencies, Yim does not have a claim for breach of 22 3 At oral argument, Yim pointed to paragraph 7 of his 23 trial declaration. But this, also, does not contain a 24 representation from Debtor that he had sufficient cash on June 10, 2013. 25 4 Yim is clearest in paragraph 6 of his trial declaration: 26 “This ‘all cash’ term meant to me that . . . [Debtor] had 27 sufficient liquid assets or cash to pay the purchase price without qualifying for or obtaining a loan or outside financing 28 from any third party source.” (Emphasis added.)

11 1 contract because the contract is not breached; without 2 contingencies, Yim has a claim for breach of contract. 3 The stipulated facts do not even establish that Debtor 4 intended to condition his liability under the contract on his 5 obtaining a loan; rather, they show that he intended to 6 “condition” his performing on his obtaining third-party 7 financing. As it turns out, this was naive on Debtor’s part: 8 Yim held Debtor to the contract and obtained a judgment. 9 In short, by checking the “all cash” box, Debtor 10 represented that he would pay Yim $2,745,000 on July 10 and that 11 an inability to obtain funding would not excuse this. Under the 12 stipulated facts, Debtor intended to pay Yim $2,745,000 on 13 July 10. Accordingly, the bankruptcy court did not err when it 14 concluded that Yim failed to prove, by a preponderance of the 15 evidence, that at the time Debtor made the representation he 16 knew it was false. 17 A Fraudulent Omission. The bankruptcy court concluded that 18 Yim failed to prove that Debtor made a fraudulent omission: 19 “Here, [Yim] has not established that [Debtor] had a duty to 20 disclose his intention to pursue financing or that such fact was 21 basic to the transaction.” Mem. Dec. at 11. The bankruptcy 22 court went even further: “Even if [Debtor] was under a duty to 23 disclose, [Yim] cannot claim that he was ignorant of [Debtor’s] 24 intention to pursue financing . . . .” Id. 25 On appeal, Yim seems to argue that Debtor made a fraudulent 26 omission: 27 Debtor admitted that he did not have sufficient cash to perform, and had no ability to get the cash from a 28 third party lending source. The Debtor also admitted

12 1 that he failed to disclose to Yim (concealed) his intent not to perform under the PSA terms, and he 2 failed to disclose his true intentions to condition his performance upon obtaining third-party financing 3 in blatant contradiction of the agreed contract terms. 4 Aplt’s Opening Br. at 15 (record citations omitted). But Yim 5 does not argue that Debtor was under a duty to disclose. This 6 is fatal. “A debtor’s failure to disclose material facts 7 constitutes a fraudulent omission under § 523(a)(2)(A) if the 8 debtor was under a duty to disclose and the debtor’s omission 9 was motivated by an intent to deceive.” Harmon v. Kobrin 10 (In re Harmon), 250 F.3d 1240, 1246 n.4 (9th Cir. 2001) (citing 11 Citibank (South Dakota), N.A. v. Eashai (In re Eashai), 87 F.3d 12 1082, 1089–90 (9th Cir. 1996)). Nor does Yim challenge the 13 bankruptcy court’s further finding that, even if Debtor were 14 under a duty to disclose, Yim was not ignorant of Debtor’s 15 “true” intent. 16 In sum, we agree with the bankruptcy court that Yim failed 17 to prove the first and second elements of § 523(a)(2)(A). 18 Having determined that the bankruptcy court did not err when it 19 concluded that Yim failed to establish a knowingly false 20 representation by a preponderance of the evidence, we could stop 21 here. Yim’s case fails without a misrepresentation. That said, 22 we briefly consider another element — one where Yim disagrees 23 with the bankruptcy court’s application of the underlying legal 24 standard. He is wrong there, as well. 25 B. The bankruptcy court properly concluded that Yim failed to establish justifiable reliance by a preponderance of the 26 evidence. 27 On the fourth element, the bankruptcy court found that Yim 28 “is a sophisticated and experienced business attorney who has

13 1 conducted many trials in state and federal court, including real 2 estate trials.” Mem. Dec. at 14. And it “h[e]ld Plaintiff to 3 that level of capacity, knowledge, and sophistication.” Id. 4 Next, the bankruptcy court found that “there were numerous, 5 obvious ‘red flags’ which should have compelled [Yim] to 6 investigate further.” Id. at 14–17. For example, Debtor and 7 Yim did not have a prior relationship. Id. at 14–15. Yim did 8 not perform any due diligence or investigate Debtor’s 9 creditworthiness. Id. at 15. Yim did not seek a deposit. Id. 10 Instead, Yim relied on a letter that, by its very terms, should 11 have raised red flags. Id. 12 On appeal, Yim contends that the bankruptcy court imposed 13 on him a heightened standard of reliance, when under relevant 14 case law “only a relaxed ‘justifiable reliance’ standard need be 15 shown . . .” Aplt’s Opening Br. 32. Yim correctly observes 16 that justifiable reliance is not an objective standard; it is a 17 subjective standard. But he perhaps misunderstands what a 18 subjective standard is: he suggests that a subjective standard 19 is always more relaxed than an objective, reasonable person 20 standard. Not always so. 21 “[A] creditor’s reliance on a debtor’s misrepresentation 22 need be only justifiable, not reasonable,” for § 523(a)(2)(A) 23 purposes. In re Eashai, 87 F.3d at 1090. Justifiable reliance 24 “turns on a person’s knowledge under the particular 25 circumstances.” Id. The bankruptcy court “must look to all of 26 the circumstances surrounding the particular transaction, and 27 must particularly consider the subjective effect of those 28 circumstances upon the creditor.” In re Kirsh, 973 F.2d

14 1 at 1460. It “is a matter of the qualities and characteristics 2 of the particular plaintiff, and the circumstances of the 3 particular case, rather than of the application of a community 4 standard of conduct to all cases.” In re Eashai, 87 F.3d at 5 1090 (internal quotation marks and citations omitted). In some 6 cases, justifiable reliance requires the creditor to investigate 7 somewhat. Field v. Mans, 516 U.S. 59, 76 (1995) (“[These 8 particular creditors] may recover, at common law and in 9 bankruptcy, but lots of creditors are not at all naive. The 10 subjectiveness of justifiability cuts both ways . . . .”).5 11 Here, the bankruptcy court properly identified justifiable 12 reliance as a subjective standard and then properly applied the 13 facts. First, Yim does not dispute that he is an attorney with 14 substantial litigation and real estate experience.6 Second, Yim 15 does not challenge the bankruptcy court’s numerous findings of 16 obvious red flags in this particular case that should have 17 compelled him, an experienced real estate attorney,7 to 18 19 5 In others, a “person is justified in relying on a 20 representation of fact although he might have ascertained the falsity of the representation had he made an investigation.” 21 In re Eashai, 87 F.3d at 1090 (internal quotation marks and citations omitted). 22 6 To the extent the bankruptcy court based its factual 23 finding on the argumentative colloquy at the hearing, this was 24 harmless because Yim had earlier provided the bankruptcy court a declaration: “I have over 35 years of litigation experience, and 25 have actual trial and arbitration experience, in commercial, contract, real estate, and Professional Liability cases.” 26 7 27 See, e.g., In re Kirsh,973 F.2d at 1460 (“Parks was no ordinary person. In fact, he was not even an ordinary attorney. 28 (continued...)

15 1 investigate further. Mem. Dec. at 14. Third, Yim argues that 2 the bankruptcy court inappropriately rejected his undisputed 3 testimony that he was fully justified in relying on the AKM 4 Letter. We do not agree with Yim’s implicit argument that his 5 conclusory8 testimony prevents the bankruptcy court from 6 evaluating justifiable reliance; in any event, he fails to 7 challenge the bankruptcy court’s identification of the 8 transaction’s other red flags, such as the lack of a deposit,9 9 which should have compelled him to investigate further. Fourth, 10 Yim’s reliance on Barnes v. Roberts (In re Roberts), 538 B.R. 1 11 (Bankr. C.D. Cal. 2015), is misplaced. It does not stand for 12 the legal proposition that justifiable reliance will never 13 require a creditor to investigate further. Instead, 14 In re Roberts rightly states that justifiable reliance depends 15 on the particular circumstances of each case. Id. at 10–11. 16 What’s more, its facts show a creditor who, unlike Yim, 17 18 19 7 20 (...continued) He had been practicing for twenty years and concentrated on 21 business law. He was well aware of the fact that standard practice in California was for lenders to obtain title reports. 22 Lenders do not merely rely upon the representations of 23 borrowers. . . . A person with Parks’ knowledge, experience and competence should have ordered [a title report].”). 24 8 Yim’s conception of justifiable reliance is suspect; 25 accordingly, his “testimony” about it is equally suspect. 26 9 Mem. Dec. at 15; id. at 15 n.2 (“A debtor’s ability to 27 fund a deposit is relevant to the justifiable reliance analysis.” (citing In re McClendon, 415 B.R. 170 (Bankr. D. Md. 28 2009)).

16 1 investigated extensively.10 2 In short, Yim believes that justifiable reliance means no 3 creditor will ever have to investigate a debtor’s 4 representations — put differently, he believes a subjective 5 standard should be applied uniformly across all cases. But a 6 subjective standard does not apply categorically. And Yim 7 otherwise fails to dispute the bankruptcy court’s particular 8 application of the subjective standard to him. 9 Yim alternatively argues that he did not need to establish 10 justifiable reliance because Debtor failed to disclose a 11 material fact. Aplt’s Opening at 25. But Yim must show that 12 Debtor was under a duty to disclose. Apte v. Japra 13 (In re Apte), 96 F.3d 1319, 1323 (9th Cir. 1996) (“Indeed, the 14 nondisclosure of a material fact in the face of a duty to 15 disclose has been held to establish the requisite reliance and 16 causation for actual fraud under the Bankruptcy Code.” (emphasis 17 added)). And Yim concedes the bankruptcy court’s conclusion 18 that he failed to establish: (1) that Debtor was under a duty to 19 disclose; and (2) even if Debtor were under a duty to disclose, 20 that Yim was ignorant of Debtor’s intent to seek alternate 21 22 10 See id. at 13 (“Barnes investigated all the disclosed 23 parties and because he found no red flags initially, he invested 24 in the Venture.”); id. at 18 (“Barnes is a sophisticated investor but he had no previous experience with investing in 25 this type of venture. . . . Barnes did his due diligence in investigating the key partners in the Venture and looked at 26 Manjar and CFI prior to investing. Barnes was thorough in his 27 investigation and follow-up questioning into the Venture prior to investing and did not act in an unusual or unreasonable 28 manner.”).

17 1 financing. Thus, Debtor’s alleged non-disclosure does not 2 establish justifiable reliance. 3 In sum, the bankruptcy court properly found that Yim failed 4 to prove the fourth element of a § 523(a)(2)(A) claim. 5 C. Husky does not alter our conclusion. 6 Yim also argues that the bankruptcy court misapplied the 7 Supreme Court’s then-recent decision in Husky International 8 Electronics, Inc. v. Ritz, 136 S. Ct. 1581 (2016). His analysis 9 is not clear, and he completely misreads the case in part. 10 Compare Aplt’s Opening Br. at 19 (“The Court further held that 11 ‘actual fraud’ . . . also covers ‘acts of deception that ‘may 12 exist without the imputation of bad faith or immorality.’”), 13 with Husky, 136 S. Ct. at 1586 (“‘Actual’ fraud stands in 14 contrast to ‘implied’ fraud or fraud ‘in law,’ which describe 15 acts of deception that ‘may exist without the imputation of bad 16 faith or immorality.’”). That aside, he argues the bankruptcy 17 court erred in two respects: first, “by refusing to accept the 18 admitted terms of the parties’ contract itself (all cash, no 19 loan contingency) as evidence of the fraud and of Debtor’s 20 intent to deceive”; and second, by refusing “to accept Debtor’s 21 own admission of his actual fraud in the Joint Stipulation.” 22 We disagree. First, as a general matter, Husky holds that 23 the “term ‘actual fraud’ in § 523(a)(2)(A) encompasses forms of 24 fraud, like fraudulent conveyance schemes, that can be effected 25 without a false representation.” Husky, 136 S. Ct. at 1586. 26 This does not alter the Ninth Circuit’s elemental recitation for 27 misrepresentation or false pretenses. Second, we have already 28 addressed how Yim misunderstands the PSA Contract’s terms and

18 1 the pretrial stipulation’s facts. The bankruptcy court did not 2 misapply Husky. 3 CONCLUSION 4 Based on the foregoing, we AFFIRM. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28