FILED MAR 21 2017 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT 4 5 In re: ) BAP No. NV-16-1211-LJuKu ) 6 MARK J. ESCOTO, ) Bk. No. 2:13-bk-10096-mkn ) 7 Debtor. ) Adv. No. 2:13-ap-01058-mkn ______________________________) 8 ) ROBERT G. HILLSMAN, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) MARK J. ESCOTO, ) 12 ) Appellee. ) 13 ______________________________) 14 Argued and Submitted on February 24, 2017 at Las Vegas, Nevada 15 Filed - March 21, 2017 16 Appeal from the United States Bankruptcy Court 17 for the District of Nevada 18 Honorable Mike K. Nakagawa, Bankruptcy Judge, Presiding _________________________ 19 Appearances: Candace Carlyon of Morris Polich & Purdy LLP 20 argued for Appellant Robert G. Hillsman; Samuel A. Schwartz of The Schwartz Law Firm argued for 21 Appellee Mark J. Escoto. _________________________ 22 Before: LAFFERTY, JURY, and KURTZ, Bankruptcy Judges. 23 24 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8024-1. 1 INTRODUCTION 2 This is the second appeal arising from this adversary 3 proceeding to determine whether Debtor Mark J. Escoto’s debt to 4 Appellant Robert G. Hillsman is dischargeable. 5 Hillsman loaned $200,000 to Escoto to fund Escoto’s 6 litigation against the contractor and others who built Escoto’s 7 home; the loan was due on demand, in three years, or upon 8 settlement of the litigation, whichever came first. Escoto 9 failed to notify Hillsman of settlements that occurred within the 10 three-year loan term; when the initial term expired Escoto 11 requested, and Hillsman granted, a one-year extension of the loan 12 term. 13 After Escoto filed his chapter 71 case, Hillsman sought a 14 declaration of nondischargeability under § 523(a)(2)(A) of the 15 amounts due under the note based on Escoto’s alleged fraud in 16 procuring an extension of the loan term. After trial, the 17 bankruptcy court found that Hillsman had proven all the elements 18 of a nondischargeability claim under § 523(a)(2)(A) except 19 proximate cause because Hillsman had not shown that he had 20 valuable collection remedies available when he consented to the 21 extension and that those remedies had lost value. Hillsman 22 appealed to this Panel, which concluded that Escoto’s fraudulent 23 nondisclosure of the settlements resulted in an extension of 24 credit for purposes of § 523(a)(2); thus, the Panel found that 25 the bankruptcy court erred in focusing its proximate cause 26 1 27 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 28 “NRS” references are to the Nevada Revised Statutes.
-2- 1 analysis on the period from and after the date Hillsman granted 2 the extension. The Panel remanded for the bankruptcy court to 3 make additional or amended findings, focusing on the period from 4 and after the settlements. 5 Upon remand, after further briefing and a hearing, the 6 bankruptcy court issued a supplemental memorandum decision 7 finding that, upon reexamining the evidence, Hillsman had still 8 failed to meet his burden of proof to show proximate cause 9 because he failed to establish the amount by which any available 10 remedies lost value. We AFFIRM. 11 FACTS2 12 In July 2005, Escoto and his non-debtor spouse, Shirley A. 13 Escoto,3 filed suit in state court against a contractor, 14 Christopher Homes, and certain subcontractors for claims arising 15 out of construction defects in building their home. While the 16 lawsuit was pending, Escoto asked Hillsman, a friend and dental 17 patient, for a loan to fund the litigation. 18 In March 2008, Hillsman lent Escoto $200,000. The debt is 19 evidenced by a demand promissory note bearing interest at seven 20 percent per annum and providing for interest-only payments during 21 the term of the note. The note was due on demand, in three years 22 (March 11, 2011), or upon settlement of the lawsuit “by and 23 between [the Escotos] and the entity known as CHRISTOPHER HOMES 24 et al.” The note referenced Escoto granting security interests 25 26 2 In this factual recitation, we borrow heavily from the 27 prior Panel’s statement of facts in BAP No. NV-14-1358-KuDJu. 28 3 The Escotos are now divorced.
-3- 1 in his dental practice, office building, and other personal 2 property, but Hillsman never took steps to perfect those security 3 interests. The note granted Hillsman “the right to remove any 4 and all possessions of Escoto et al[.] to be sold as necessary to 5 recover debt in full and to effect garnishment of any paycheck, 6 settlement monies, or other assets without the need of a court 7 order regarding same.” 8 In July 2008, Escoto settled with all defendants in the 9 construction defect litigation except for the plumbing 10 subcontractor. This $350,000 settlement was approved by the 11 state court; Escoto received net proceeds of $118,000. In 12 October 2009, Escoto settled with the remaining defendant for an 13 additional $350,000. The state court approved that settlement in 14 November 2009, and in February 2010 Escoto received net proceeds 15 of $142,000. Despite numerous and extended interactions between 16 the friends, Escoto did not tell Hillsman about either 17 settlement. 18 Escoto failed to make several interest payments required by 19 the note. In March 2011, when the note came due, Escoto 20 requested an extension of the loan term. Unaware of the 21 settlements, Hillsman agreed to the request, and the parties 22 executed an agreement extending the repayment period for one year 23 but otherwise leaving the terms of the demand promissory note 24 unchanged. Escoto’s delinquency under the terms of the note 25 continued. In August 2012 the two friends met, and Escoto 26 reaffirmed his commitment to repay the note but once again did 27 not disclose the settlements. 28 Approximately five months later, on January 4, 2013, Escoto
-4- 1 filed a chapter 7 petition. After receiving notice of the 2 petition, Hillsman contacted an attorney and finally learned that 3 Escoto had settled the construction defect litigation four years 4 earlier. 5 After trial, the bankruptcy court found that Hillsman had 6 proved all elements necessary to establish the debt as 7 nondischargeable with the exception of proximate cause. 8 Specifically, the bankruptcy court ruled that Hillsman failed to 9 demonstrate that he possessed valuable collection remedies on the 10 date of the extension and that those remedies lost value during 11 the renewal period. 12 In coming to this conclusion, the bankruptcy court examined 13 the value of the potential remedies available to Hillsman at the 14 time he agreed to the extension. Noting that there was no equity 15 in the pledged business properties even if Hillsman had perfected 16 his liens, the bankruptcy court discounted Hillsman’s remedies as 17 a secured creditor. As an unsecured creditor, Hillsman could 18 pursue informal collection remedies such as telephone calls and 19 correspondence, but the bankruptcy court found little value in 20 these activities. The court then considered Hillsman’s ability 21 to obtain a judgment and found that he failed (1) to identify 22 assets available to satisfy a judgment that Escoto could not 23 exempt under state law; and (2) to demonstrate how the value of 24 his status as a judgment creditor declined over the extension 25 period. 26 Finally, the bankruptcy court considered Hillsman’s 27 equitable remedies in the form of a constructive trust created to 28 recognize Hillsman’s interest in the settlement proceeds. The
-5- 1 court found such equitable remedies unavailable as the record 2 indicated that Escoto had disposed of the proceeds prior to the 3 extension date. 4 The bankruptcy court entered judgment in favor of Escoto on 5 July 3, 2014, and Hillsman appealed to this Panel (BAP No. 6 NV-14-1358-KuDJu). In its memorandum decision issued May 15, 7 2015, the Panel held that the bankruptcy court had applied the 8 correct legal standard for determining proximate cause and that 9 the bankruptcy court’s finding that Hillsman failed to establish 10 proximate cause was not clearly erroneous. However, the Panel 11 found that the bankruptcy court erred by limiting its proximate 12 cause analysis to the date of the extension agreement in March 13 2011. Instead, the Panel held that Escoto’s concealment of the 14 settlements resulted in an extension of credit for purposes of 15 § 523(a)(2). Thus, the Panel vacated the judgment and remanded 16 for additional findings. The Panel instructed: 17 In light of our holding that Escoto effectively obtained an extension of credit when he failed to 18 disclose the settlement and thereby prevented Hillsman from immediately demanding repayment in accordance with 19 the terms of the note, on remand, the bankruptcy court will need to focus on this earlier time period and make 20 additional or amended findings in order to determine whether all of the § 523(a)(2)(A) elements were 21 satisfied.4 22 In response to the Panel’s mandate, Hillsman moved for entry 23 of findings, conclusions and judgment on the record or to reopen 24 discovery and set a new trial date. Escoto opposed reopening the 25 record. On July 1, 2016, the bankruptcy court granted the motion 26 4 27 The previous Panel did not specify whether the relevant time period was the first settlement in July 2008 or the second 28 settlement in October 2009, or both.
-6- 1 for entry of additional or amended findings and denied the 2 alternative request to reopen discovery and set a new trial date. 3 The bankruptcy court concurrently issued a Supplemental 4 Memorandum Decision After Trial (“Supplemental Memorandum”) 5 finding that, upon reexamining the evidence in light of the BAP’s 6 memorandum decision, Hillsman had still failed to meet his burden 7 of proof to show proximate cause because he failed to establish 8 the amount by which any remedies lost value. The bankruptcy 9 court also entered judgment in favor of Escoto. 10 Hillsman timely appealed. 11 JURISDICTION 12 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 13 §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. 14 § 158. 15 ISSUE 16 Did the bankruptcy court err in concluding that Hillsman 17 failed to meet his burden of proof regarding proximate cause? 18 STANDARDS OF REVIEW 19 We review the bankruptcy court’s findings of fact for clear 20 error and its conclusions of law de novo. Oney v. Weinberg 21 (In re Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009), aff’d, 22 407 F. Appx. 176 (9th Cir. 2010). 23 A bankruptcy court’s interpretation of a contract is a 24 question of law that we review de novo. Estate of Short v. Payne 25 (In re Payne), 323 B.R. 723, 727 (9th Cir. BAP 2005). 26 A bankruptcy court’s findings regarding proximate cause 27 under § 523(a)(2)(A) may be reversed only if clearly erroneous. 28 Britton v. Price (In re Britton), 950 F.2d 602, 604 (9th Cir.
-7- 1 1991). We do not consider a finding of fact clearly erroneous 2 unless the finding is “illogical, implausible, or without support 3 in the record.” Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 4 (9th Cir. 2010). 5 DISCUSSION 6 To prove causation on a § 523(a)(2)(A) claim based on an 7 extension, a renewal, or a refinance, a creditor must show “that 8 it had valuable collection remedies at the time it agreed to 9 renew, and that such remedies lost value during the renewal 10 period.” Siriani v. Nw. Nat’l Ins. Co. of Milwaukee, Wis. 11 (In re Siriani), 967 F.2d 302, 306 (9th Cir. 1992). See also 12 Cho Hung Bank v. Kim (In re Kim), 163 B.R. 157, 161 (9th Cir. BAP 13 1994), aff’d, 62 F.3d 1511 (9th Cir. 1995). 14 To comply with Siriani and demonstrate that the extension 15 proximately caused his loss, Hillsman needed to show: (1) that he 16 possessed valuable collection remedies at the time the loan term 17 was extended (here, at the time of settlement(s)); and (2) a 18 depreciation in the value of those remedies during the extended 19 repayment period. See In re Kim, 163 B.R. at 161.5 On remand, 20 the bankruptcy court found that although Hillsman had remedies 21 available to him at the time of the settlements, he had not 22 established the value of those remedies or the amount by which 23 they diminished in value during the relevant time period. 24 25 5 26 Hillsman argues that Siriani and Kim erroneously impose an additional burden on a plaintiff which is not part of the plain 27 language of § 523(a)(2) and urges, if this matter goes before the Ninth Circuit Court of Appeals, that those cases should be 28 overruled.
-8- 1 1. The Promissory Note 2 The bankruptcy court first examined the language of the 3 promissory note: 4 FOR VALUE RECEIVED, the undersigned, Mark J. Escoto and Shirley A. Escoto attaching by ownership the Pledged 5 Building and all attachmnets [sic] owned by the Nevada-listed LLC known as JAEMSS, LLC (a Nevada 6 Limited-Liability Company (the “Borrower”), hereby acknowledges itself indebted to Robert G. Hillsman a 7 single man (the “Lender”) and promises to pay ON DEMAND to or to the order of the Lender at the end of a three 8 year period from the date of signatures affixed (otherwise known as a BALLOON PAYMENT for the SUM IN 9 TOTAL of $200,00.00 [sic] or upon settlement of the lawsuit filed by and between the above-listed 10 Borrowers, the “Escoto’s” joint and severably- [sic] and the entity known as CHRISTOPHER HOMES et al. . . . 11 . . . . 12 . . . . Parties do hereby further agree that Mark 13 Escoto states as Owner and Manager of JAEMSS, LLC-Nevada, Escoto states and by this note pledges all 14 equity in the LLC including his Dental Practice and the Building housing same . . . as collateral and security 15 for this note, and furthermore that he will produce documents indicating that said assets are attached only 16 by his lending institution as the first holder of lien and that at no time shall Escoto et al place any 17 indivual [sic] or entity ahead of Hillsman who by this note assumes second position towards the listed assets. 18 . . . 19 . . . Escoto et al further pledge any and all personal 20 possessions holdings and items of value as security and collateral for payment of this note and by this note 21 grant Lender-Hillsman the right to remove any and all possessions of Escoto et al to be sold as necessary to 22 recover debt in full and to effect garnishment of any paycheck, settlement monies, or other assets without 23 the need of a court order regarding the same. . . . 24 The bankruptcy court found ambiguities in the note, which it 25 construed against Hillsman as the drafter. See Dickenson v. 26 State Dept. of Wildlife, 110 Nev. 934, 937, 877 P.2d 1059, 1061 27 (Nev. 1994) (ambiguous contract construed against the drafter). 28 Hillsman argues that the bankruptcy court erred in construing the
-9- 1 note against him, citing Ninth Circuit case law holding that 2 ambiguous contracts need not be construed against the drafter 3 when the parties to the contract are of equal strength and 4 bargaining at arms’ length. Eley v. Boeing Co., 945 F.2d 276, 5 280 (9th Cir. 1991); Turner v. United States, 875 F. Supp. 1430, 6 1435 (D. Nev. 1995), aff’d sub nom. Turner v. U.S. Through U.S. 7 Dept of Agric., Farmers Home Admin., 91 F.3d 1274 (9th Cir. 8 1996). However, both of these cases applied federal law, not 9 Nevada state law, in construing the contracts at issue (an ERISA 10 contract resulting from a collective bargaining agreement and a 11 settlement agreement where the United States was a party); 12 Hillsman has cited no Nevada Supreme Court cases subsequent to 13 Dickenson holding that contracts need not be construed against 14 the drafter when the parties are of equal bargaining power. 15 Therefore, the bankruptcy court did not err in construing the 16 note against Hillsman. 17 2. The bankruptcy court did not err in concluding that the 18 relevant time for its analysis was the time of the 19 second settlement in late 2009. 20 One ambiguity involved the provision that the note was due 21 in three years or “upon settlement of the lawsuit . . . between . 22 . . the [Escotos] . . . and the entity known as CHRISTOPHER HOMES 23 et al.” No witness had testified at trial as to whether this 24 language referred to the settlement with Christopher Homes or 25 with all defendants in the lawsuit; thus the bankruptcy court 26 construed the language against Hillsman in concluding that the 27 language referred to the second settlement date in 2009. 28 Hillsman argues that the bankruptcy court’s interpretation
-10- 1 of these provisions was erroneous. He contends that the note 2 matured at the time of the first settlement with Christopher 3 Homes because the note specifically refers to Christopher Homes 4 and because the litigation timeline the Escotos provided to 5 Hillsman before he agreed to loan the money referenced only 6 Christopher Homes. Hillsman also argues that the initial draft 7 of the note provided that it would be due either on March 1, 2011 8 or at the time of a final judgment in the litigation. The 9 parties replaced this language with reference to a settlement, 10 which Hillsman argues indicates an agreement that no final 11 judgment needed to be entered to trigger maturity. As noted, 12 however, the bankruptcy court did not err in construing the note 13 against Hillsman. 14 Importantly, the bankruptcy court also concluded that even 15 if it had examined remedies available at the time of the first 16 settlement with Christopher Homes in 2008, the type and value of 17 the collection remedies available at that time were never proven 18 at trial either. As will be discussed, the evidence supports 19 this conclusion. 20 3. The bankruptcy court did not err in finding that 21 Hillsman did not show that he had valuable collection 22 remedies as a secured creditor. 23 The bankruptcy court found that the promissory note 24 contained a pledge of the equity in Escoto’s dental practice and 25 building as well as a pledge of Escoto’s personal property but 26 that the pledge of the business assets was at best a second 27 position lien because the language of the note indicated Hillsman 28 was in second position. But because no evidence was provided as
-11- 1 to the amount of any senior liens on that collateral, the 2 bankruptcy court also found that it was impossible to determine 3 the value of any collection remedy against those assets. We find 4 no error in this analysis. 5 As to the pledge of “any and all personal possessions 6 holdings and items of value,” the bankruptcy court concluded that 7 this pledge encompassed only tangible items and not intangible 8 interests such as legal claims and proceeds thereof (i.e., the 9 settlement proceeds). The bankruptcy court noted that the 10 language granting Hillsman the “right to remove any and all 11 possessions of Escoto et al to be sold as necessary to recover 12 the debt” was consistent with a pledge of tangible assets. The 13 note also granted Hillsman the right to removal of any and all 14 possessions “to effect garnishment of any paycheck, settlement 15 monies, or other assets without the need of a court order 16 regarding the same.” The bankruptcy court noted that this latter 17 provision was consistent with a pledge of tangible assets and a 18 self-help remedy with respect to those assets, but that it was 19 inconsistent with a garnishment remedy against interests held by 20 third parties. 21 Importantly, the bankruptcy court found that the note did 22 not contain a pledge of the settlement proceeds to Hillsman. 23 Hillsman argues that this finding was clearly erroneous because 24 in the parties’ Joint Pretrial Memorandum, they stipulated that 25 the note “contained a pledge of the proceeds of the settlement of 26 the State Court Action” and that “Escoto represented that he 27 would repay the Hillsman Loan with the proceeds of the State 28 Court Action.” And both Hillsman and Escoto testified at trial
-12- 1 that the settlement proceeds were pledged to Hillsman. The 2 bankruptcy court did not reference these stipulated facts or 3 testimony in its Supplemental Memorandum. However, we see no 4 error in the bankruptcy court’s interpretation of the evidence, 5 the stipulation and testimony notwithstanding, or in its 6 conclusion, which was based on the plain language of the note. 7 Hillsman’s argument that the bankruptcy court was 8 essentially bound by the assertions of the stipulation (and the 9 admissions in the testimony) that the note included a pledge of 10 the settlement proceeds is misguided in two respects. First, it 11 ignores the mandate from this Panel after the first appeal; 12 second, it would effectively require the bankruptcy court to 13 inappropriately cede both the “fact finding” and the “law 14 concluding” judicial functions to the parties. 15 In the first appeal, the Panel determined that there was no 16 error assignable to the bankruptcy court’s findings of fact or 17 generally to the legal standard the court applied with respect to 18 a showing of proximate cause for Hillsman’s loss. However, the 19 Panel determined that there was error in the timing of the 20 bankruptcy court’s application of the standard in these 21 circumstances and thus remanded for the bankruptcy court to 22 resolve one question: did Hillsman have valuable collection 23 rights as of the settlement date that decreased in value? 24 The question posed to the bankruptcy court on remand was not 25 an abstract hypothetical; neither should the answer, nor the 26 means used to arrive at the answer, be abstract. Whether a party 27 possessed valuable collection rights as of a particular point in 28 time is a highly specific, “real world” question that requires
-13- 1 the finder of fact to review the evidence and determine, in the 2 consensual lien context, (a) whether a security interest was 3 granted, (b) whether it was enforceable, and (c) whether in light 4 of all of the pertinent circumstances, enforcement of the 5 interest would have yielded a material recovery. 6 Measured against these inquiries, the stipulation falls 7 woefully short. In the first place, it purports to answer only 8 the first of the relevant questions: was a security interest 9 actually granted? And the stipulation “answers” it in the most 10 non-specific, non-factual, entirely conclusory manner imaginable: 11 “The Note contained a pledge of the proceeds of the settlement of 12 the State Court Action.” The stipulation does not identify a 13 provision or particular language in the note that granted such an 14 interest or provide any specific factual support for its 15 conclusion. Indeed, what it really appears to say is “we think 16 that the note had the following effect, or we intended that it 17 would have that effect.” So viewed, the statement that the note 18 contained a pledge of the settlement proceeds is not an agreed 19 finding of fact at all; rather, it is a stipulated conclusion of 20 law which, if permitted, would remove the adjudicative function 21 from the court on the only material question posed on remand. 22 This is a completely inappropriate result. 23 The stipulated fact does not address, let alone resolve 24 favorably, whether the security interest was enforceable--which 25 would require at a minimum a showing that a judicial officer 26 would have agreed that the note contained a pledge of the 27 settlement proceeds--and whether material recoveries might have 28 been available. And clearly, once the bankruptcy court here
-14- 1 posed those questions, it made factual findings appropriate to 2 the evidence presented. The bankruptcy court found, for example, 3 that the note’s only reference to the settlement proceeds is the 4 grant to Hillsman of what appears to be a self-help remedy to 5 “effect garnishment of any paycheck, settlement monies, or other 6 assets without the need of a court order.” 7 As counsel for Hillsman conceded at oral argument on this 8 appeal, the language of the note concerning a pledge of 9 settlement proceeds was at best “ambiguous.” Frankly, we believe 10 it not particularly ambiguous at all, for the many reasons cited 11 by the bankruptcy court in its disposition of this matter--and 12 that is the point: once the bankruptcy court moved past the 13 barriers imposed by the stipulated facts, as we believe it did 14 appropriately, and reviewed the evidentiary basis for the claim 15 that the note provided a valuable collection right, i.e., an 16 enforceable consensual lien in the settlement proceeds, it is 17 impossible to conclude, on these facts, that its interpretation 18 of the note was erroneous. 19 Hillsman nonetheless contends that the “pledge” of 20 settlement proceeds was enforceable under Nevada law, citing May 21 v. G.M.B., Inc., 105 Nev. 446, 451-52, 778 P.2d 424, 427-28 22 (1989) (holding that a party’s failure to perfect its security 23 interest in a motor vehicle did not impact the enforceability of 24 the security agreement as between the parties). However, because 25 the note contained no language granting Hillsman a security 26 interest in the proceeds, May does not help Hillsman. Under 27 Nevada law, attachment occurs when the debtor has signed a 28 security agreement that contains a description of the collateral,
-15- 1 value has been given, and debtor has rights in the collateral. 2 Id. at 452, 778 P.2d at 427-28 (citing NRS § 104.9203). In the 3 absence of language granting a security interest in the proceeds, 4 no attachment occurred, and thus no enforceable security 5 agreement was formed. 6 Even if one could cobble together in the language of the 7 note a grant of a security interest, such interest was admittedly 8 unperfected. Even if such interest were enforceable between the 9 parties, it would have been subordinate to any properly perfected 10 security interest or potential lien creditors. Neither the 11 stipulated “fact” that the note contained a pledge of the 12 settlement proceeds nor any evidence presented by Hillsman 13 addressed, let alone resolved favorably for Hillsman, these 14 difficult and material factual issues. 15 Accordingly, the parties’ 2014 stipulation in this 16 litigation is immaterial to whether the note actually granted 17 Hillsman a security interest that he could have enforced in 2008 18 or 2009. We find no error in the bankruptcy court’s findings and 19 conclusions on these points. 20 4. The bankruptcy court did not err in finding that 21 Hillsman failed to show that he had valuable remedies 22 available as a judgment creditor. 23 The bankruptcy court found that at the time of the 24 settlements, Hillsman could have sued on the note and obtained a 25 judgment for the full amount, and that if he established that his 26 legal remedies were inadequate, he could have asked the court to 27 impose equitable remedies such as a constructive trust or 28 equitable lien. Additionally, the bankruptcy court agreed with
-16- 1 Hillsman that he could have asked for prejudgment remedies such 2 as a writ of possession, a temporary restraining order, or a 3 prejudgment writ of attachment. 4 However, the bankruptcy court found that regardless of what 5 remedies may have been theoretically available to Hillsman, he 6 had not established the facts necessary to determine that those 7 remedies might have been imposed; to obtain a writ of possession 8 or a temporary restraining order, Hillsman would have been 9 required to show that he was entitled to possession. NRS 10 §§ 31.859, 31.853, 31.850. To obtain a writ of attachment after 11 notice, Hillsman would have had to show that the note was not 12 secured by a pledge of real or personal property, or if it was, 13 that the collateral was insufficient to secure the sum due; to 14 obtain such a writ without notice, Hillsman would have had to 15 show that Escoto was disposing of or concealing assets, and his 16 remaining assets were insufficient to satisfy Hillsman’s claim. 17 NRS §§ 31.013(1)(a) and 31.017(5). Hillsman did not demonstrate 18 that he could have made the required showings. 19 The bankruptcy court also found that Hillsman had failed to 20 establish the value of any of those remedies at the relevant 21 times or the amount by which they lost value. At trial, the only 22 documentary evidence of Escoto’s finances was Escoto’s Financial 23 Disclosure Form filed in his marital dissolution proceeding on 24 December 27, 2012, and Escoto’s schedules and statements filed in 25 the chapter 7 case on January 4, 2013. However, Escoto testified 26 that the information on the Financial Disclosure Form was not 27 correct. More importantly, no documentary evidence was presented 28 that established the Escotos’ income, expenses, and liabilities
-17- 1 at the time of the settlements in 2008 and 2009. The Escotos 2 also testified regarding their financial condition, but no 3 documentary evidence was presented to corroborate that testimony 4 and, again, the oral testimony did not establish the Escotos’ 5 financial condition during the relevant time period. 6 As for the settlement proceeds, Escoto testified that he 7 received $118,000 from the first settlement at the end of 2008, 8 and that those funds were used to pay for legal fees and experts 9 to continue the litigation against the plumbing contractor; the 10 evidence also showed that Escoto received net proceeds of 11 $142,000 sometime after the state court entered a distribution 12 order in February 2010. However, no documentary evidence was 13 produced pinpointing when the funds came into Escoto’s possession 14 or what happened to those funds. 15 Ms. Escoto testified that before the couple’s first divorce 16 in 2009,6 there was $370,000 in their joint checking account; 17 after the couple separated, Ms. Escoto attempted to make a 18 withdrawal from that account and was informed that Escoto had 19 withdrawn all but $19.70. Ms. Escoto’s testimony was vague as to 20 the timing of the withdrawal; she testified only that it occurred 21 sometime after September 2009. Again, no documentary evidence 22 was presented to clarify the time period when the joint account 23 had contained $370,000 or when those funds were withdrawn. 24 Hillsman also points out that Escoto’s bankruptcy schedules 25 show that Escoto received wages of $160,000 in 2011, and that as 26 6 27 The couple’s first divorce in 2009 was set aside as having been fraudulently obtained; thereafter, the couple divorced a 28 second time.
-18- 1 of the petition date Escoto was earning over $19,000 per month. 2 Hillsman also points to the reported income of Escoto’s 3 businesses in 2012 and 2013. Theoretically, had Hillsman 4 obtained a judgment, he may have been able to garnish that 5 income, but Hillsman provided no evidence of how much of those 6 funds would have been available. More importantly, this 7 information alone does not demonstrate that Hillsman had valuable 8 collection remedies available at the time of either settlement. 9 In its prior decision, this Panel stated: 10 Identifying funds to which Escoto may have had access is insufficient. Siriani requires a creditor to 11 demonstrate the existence of valuable collection remedies at a specific point in time. By simply 12 pointing to evidence of certain funds, Hillsman did not necessarily place these funds in Escoto’s possession at 13 the time the extension agreement was entered into or during the extension period. For instance, Ms. Escoto 14 testified that Escoto withdrew $370,000 from the couple’s joint bank account on an unidentified date. 15 Even if the Panel assumes her testimony is true, Hillsman provided no evidence that Escoto possessed 16 these funds at any time relevant to the extension agreement. 17 18 Finally, Hillsman argues that the mere fact that the “assets 19 listed above” were gone as of the petition date establishes loss, 20 citing Ojeda v. Goldberg, 599 F.3d 712 (7th Cir. 2010). It is 21 not clear exactly what assets Hillsman refers to; presumably it 22 is the wage and business income alluded to above. Again, this 23 argument was rejected by the prior Panel: 24 A second defect with Hillsman’s argument is that placing assets or funds in Escoto’s possession at the 25 relevant time does not end the proximate cause analysis. In addition to identifying the existence of 26 remedies, Siriani requires a creditor to show a reduction in the value of such remedies during a 27 specific period of time. Assuming Escoto possessed funds or available assets at the requisite point in 28 time, Hillsman did not present any evidence that these
-19- 1 funds or assets were dissipated during the extension period. 2 3 CONCLUSION 4 For all of these reasons, we find no error in the bankruptcy 5 court’s finding that Hillsman failed to meet his burden of 6 showing that he had valuable collection remedies available at the 7 time of settlement and that those remedies lost value. 8 Accordingly, we AFFIRM. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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