Opinion
NOT FOR PUBLICATION
Argued and Submitted at Seattle, Washington: January 21, 2011
Appeal From The United States Bankruptcy Court for the Western District of Washington. Bk. No. 08-46701. Adv. No. 09-04048. Honorable Paul B. Snyder, Chief Bankruptcy Judge, Presiding.
John Mills arugued on behalf of Appellant Fred Wagner.
Rebecca Larson of Davies Pearson, P.C., argued on behalf of Appellees Joseph and Dana Malich.
Before: MARKELL, HOLLOWELL and JURY, Bankruptcy Judges.
MEMORANDUM
INTRODUCTION
Fred Wagner (" Wagner") appeals a judgment in favor of Joseph Malich (" Malich") and his wife, debtors in this case, on Wagner's complaint to determine dischargeability of debt under § 523(a)(2)(A). Wagner also appeals the order denying his post-trial motion to alter or amend the judgment. We AFFIRM.
Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. § § 101-1532, and all Rule references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. All Civil Rule references are to the Federal Rules of Civil Procedure.
FACTS
1. Malich's Business and Wagner's Financing Transactions
Malich owned and operated a business known as PowerBoats N.W. (" PBNW"). PBNW sold new and used power boats and yachts. Beginning in 2002, Wagner began lending money to PBNW to enable it to purchase boats for resale. Over the course of several years, Wagner financed PBNW's purchase of between 25 and 50 boats.
2. The General Course of Dealing Between the Parties
In each financing transaction, Malich would sign and deliver to Wagner a promissory note on behalf of PBNW, as well as his personal guaranty of the note. Wagner's counsel drafted these documents. Malich also would normally deliver to Wagner an original title document for the boat to be financed: a Manufacturer's Statement of Origin (" MSO") for a new boat, or a certificate of title for a used boat.
Occasionally, Malich failed to deliver an original title document to Wagner. In these cases, Wagner lent the funds requested anyway and did not condition future loans to PBNW on delivery of the missing title documents.
Generally, when Malich sold a boat financed by Wagner, he would repay the loan Wagner made to finance PBNW's acquisition of that boat. Occasionally, however, Malich would delay in repaying Wagner. In particular, as winter was PBNW's slow season, Malich sometimes kept the proceeds from the winter sale of a boat financed by Wagner and paid PBNW's operating expenses. He then repaid Wagner later, after business picked up the next spring.
According to Malich, he did not perceive these infrequent delays as material to his lending relationship with Wagner. Malich testified that, even when he delayed payment, it was always his intention to repay Wagner as soon as business picked up, and that the occasional delay simply reflected the highly cyclical nature of PBNW's business. Malich also testified that, when PBNW entered into each loan with Wagner, he generally intended to repay Wagner when each boat financed sold.
The notes that Malich signed on behalf of PBNW specified that the loans had a term of one year, but both Wagner and Malich testified that the one-year term did not actually reflect the parties' understanding or course of dealing.
3. The Four Key Loan Transactions
Of their 25 to 50 loan transactions, all but four had been paid off at the time of Malich's bankruptcy. It is from these four transactions that the dispute between Wagner and Malich arises. Each of these transactions is described in detail below.
Malich closed PBNW in October, 2008, and filed his personal bankruptcy in December, 2008.
Most of the facts regarding these four transactions are undisputed and are drawn from Wagner's complaint and Malich's answer.
a. The Activator Transaction
On September 26, 2006, Wagner financed PBNW's purchase of a 2007 30-foot Activator boat. Consistent with their normal course of dealing, Malich executed on behalf of PBNW a note in the original principal amount of $45,000, and Malich executed a personal guaranty. Malich also delivered to Wagner the original title document for the 2007 Activator.
At the time PBNW ceased operations in October 2008, the 2007 Activator still had not been sold, so Wagner took possession of it. As of the time of trial, Wagner had been unable to sell the 2007 Activator and still had it in his possession.
b. The Skater Transaction
On February 1, 2007, Wagner financed PBNW's purchase of a 2007 28-foot Skater boat and trailer. Again, consistent with their course of dealing, Malich executed on behalf of PBNW a note in the original principal amount of $150,000, and Malich executed a personal guaranty. At the time of the financing, however, Malich did not deliver to Wagner the original title document for the 2007 Skater. Instead, Malich gave Wagner a copy of the title document and promised to deliver the original as soon as Malich obtained it from the manufacturer. However, Malich never gave Wagner the original title document for the 2007 Skater.
According to Malich, he did not have the original title document at the time of the financing, and when he later received the original title document, it was filed away inadvertently rather than delivered to Wagner.
In or around January 2008, PBNW sold the 2007 Skater to a third party. Malich never repaid the amounts due on account of the Skater Transaction.
c. The Daytona Transaction
On August 26, 2007, Wagner financed PBNW's purchase of a 2005 30-foot Daytona boat. Consistent with their course of dealing, Malich executed on behalf of PBNW a note in the original principal amount of $125,000, and Malich executed a personal guaranty. At the time of the financing, Malich did not deliver to Wagner the original title document for the 2005 Daytona. Instead, Malich gave Wagner a copy of the title document and promised to deliver the original as soon as Malich obtained the original. However, Malich never gave Wagner the original title document for the 2005 Daytona. According to Malich, he did not have the original title document at the time of the financing. As with the 2007 Skater, when Malich later received the original title document, it was filed away inadvertently rather than delivered to Wagner.
In or around December 2007 or January 2008, PBNW sold the 2005 Daytona to a third party. Malich never repaid the amounts due on account of the Daytona Transaction.
d. The Calabria Transaction
After PBNW's sale of the 2005 Daytona and the 2007 Skater, on April 7, 2008, Wagner financed PBNW's purchase of a 2007 Calabria V2 boat. Consistent with their course of dealing, Malich executed on behalf of PBNW a note in the original principal amount of $38,607, and Malich executed a personal guaranty. Malich delivered to Wagner the original title document for the 2007 Calabria. At the time PBNW ceased operations in October 2008, the 2007 Calabria still had not been sold, so Wagner took possession of it. Thereafter, Wagner sold the 2007 Calabria at auction, but it sold for less than the amount financed, and PBNW never repaid the balance plus interest.
The record indicates that PBNW purchased a total of 20 Calabrias in 2008, and after PBNW sold 14 of them, Wagner financed PBNW's purchase of an additional six. Of those six that Wagner financed, four sold and Wagner was repaid in full. The fifth Malich sold at a loss, and the sixth, referred to above in the Calabria Transaction, was repossessed by Wagner and sold at a loss.
4. Malich's Bankruptcy and Wagner's Adversary Proceeding
After Malich and his wife filed their chapter 7 bankruptcy, Wagner filed a complaint in March 2009 seeking to have the debt owed by Malich and his wife declared nondischargeable under § 523(a)(2).
Wagner also sought the debt to be declared nondischargeable under § 523(a)(4) and § 523(a)(6), but later voluntarily dismissed these claims.
After a half-day bench trial, the bankruptcy court took the matter under submission, and on May 3, 2010, the court announced its findings of fact and conclusions of law orally on the record. In relevant part, the bankruptcy court made the following findings:
Unless the recited finding is enclosed in quotation marks, our recitation paraphrases the bankruptcy court's language.
o " The financing documents prepared by [Wagner's counsel] do not support [Wagner's] case." o " The documents do not provide for a security interest, and it is questionable whether [Wagner] was in fact properly secured on the financed boats." o Malich's testimony, that he always intended to repay Wagner as soon as he could after sale of a boat he financed, was credible. o " . . . [Malich] had every intention of paying [Wagner] when the transactions were entered into, but an unforeseen drop in the economy substantially affecting the sale of new and used power boats led to [Wagner] not being paid by [Malich]." o Wagner's testimony, that he believed his loans were secured by the boats financed and that he expected to be repaid when the boats financed sold, also was credible. o " At trial, [Wagner] was unable to articulate one false oral or written representation made by [Malich]." o Wagner primarily based his claim of misrepresentation on Malich's allegedly false promise that PBNW would repay Wagner on each loan when PBNW sold each boat financed. o Wagner further based his claim of misrepresentation on Malich's failure to disclose, at the time of the Calabria Transaction, that PBNW had sold the 2007 Skater and the 2005 Daytona without having repaid Wagner's loans. o There is no evidence that Malich knowingly made a false representation with the intent to deceive Wagner. o Wagner's trial testimony established a lack of justifiable reliance: (1) Wagner made no inquiry into the financial status of Malich/PBNW; (2) Wagner utilized loan documents that did not reflect the parties' agreement or course of dealing; (3) Wagner's loan documents also arguably failed to create a security interest in the boats financed; (4) Wagner never performed title searches on the boats financed; and (5), Wagner seldom inquired regarding potential delinquent loan payments.
See 5/3/10 Transcript at 9:10-12:10.
Based on these findings, the bankruptcy court entered judgment on May 3, 2010 in favor of Malich and his wife, declaring the Malichs' debts to Wagner to be dischargeable. On May 17, 2010, Wagner filed a motion under Civil Rule 59(e), applicable under Rule 9023, seeking to alter or amend the court's judgment. Wagner asserted that the court's ruling placed undue weight on the fact that Wagner's loan documents did not accurately reflect the parties' dealings. Wagner also asserted that there was no evidence in the record from which the court could rationally infer that Malich really intended, when the transactions were entered into, to repay Wagner when the boats financed sold. The motion for reconsideration further suggested that Malich falsely represented that Wagner would hold a security interest in each boat financed.
After holding a hearing on the motion to alter or amend the judgment, the bankruptcy court denied the motion. Wagner timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. § § 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158(a)(1).
Wagner has not challenged on appeal the court's ruling in favor of Malich's wife, Dana Malich. Wagner's appellate brief contains no legal or factual argument in any way asserting that any debt owed by Dana Malich should have been declared nondischargeable. Consequently, Wagner has waived any such arguments. See Golden v. Chicago Title Ins. Co. (In re Choo), 273 B.R. 608, 613 (9th Cir. BAP 2002).
1. Whether the bankruptcy court committed reversible error in rendering its findings of fact.
2. Whether the bankruptcy court committed reversible error in denying Wagner's motion to alter or amend the judgment.
STANDARDS OF REVIEW
Whether a debt is dischargeable generally presents mixed issues of law and fact, which we review de novo. Peklar v. Ikerd (In re Peklar), 260 F.3d 1035, 1037 (9th Cir. 2001). But the bankruptcy court's findings made as part of its dischargeability ruling are reviewed under the clearly erroneous standard. Candland v. Ins. Co. of N. Am. (In re Candland), 90 F.3d 1466, 1469 (9th Cir. 1996); Advanta Nat'l Bank v. Kong (In re Kong), 239 B.R. 815 (9th Cir. BAP 1999). Thus, whether a creditor has proven an essential element of a cause of action under § 523(a)(2)(A) is a factual determination reviewed for clear error. Anastas v. Am. Sav. Bank (In re Anastas), 94 F.3d 1280, 1283 (9th Cir. 1996); Am. Express Travel Related Servs. Co., Inc. v. Vee Vinhnee (In re Vee Vinhnee), 336 B.R. 437, 443 (9th Cir. BAP 2005).
" A court's factual determination is clearly erroneous if it is illogical, implausible, or without support in the record." Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010) (citing United States v. Hinkson, 585 F.3d 1247, 1261-62 & n.21 (9th Cir. 2009) (en banc)). " 'Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.'" Donald v. Curry (In re Donald), 328 B.R. 192, 203 (9th Cir. BAP 2005) (quoting Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 574, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985)); Rifino v. U.S. (In re Rifino), 245 F.3d 1083, 1086-87 (9th Cir. 2001).
Moreover, when factual findings are based on determinations of witness credibility, we give great deference to the bankruptcy court's findings, because the bankruptcy court, as the trier of fact, had the opportunity to note " variations in demeanor and tone of voice that bear so heavily on the listener's understanding of and belief in what is said." Anderson, 470 U.S. at 575. Accord, Oney v. Weinberg (In re Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009), aff'd, 407 Fed.Appx. 176, 2010 WL 5395646 (9th Cir., Dec. 27, 2010); Rule 8013.
Additionally, a clearly erroneous finding of fact does not always justify reversal; we must ignore harmless error. See Litton Loan Serv'g, LP v. Garvida (In re Garvida), 347 B.R. 697, 704 (9th Cir. BAP 2006) (citing 28 U.S.C. § 2111, Rule 9005, Civil Rule 61, and Donald, 328 B.R. at 203-04).
We review the bankruptcy court's denial of a motion to alter or amend judgment under Rule 9023 for abuse of discretion. See Ta Chong Bank Ltd. v. Hitachi High Techs. Am., Inc., 610 F.3d 1063, 1066 (9th Cir. 2010). Under the abuse of discretion standard, we first " determine de novo whether the [bankruptcy] court identified the correct legal rule to apply to the relief requested." Hinkson, 585 F.3d at 1262. And if the bankruptcy court identified the correct legal rule, we then determine under the clearly erroneous standard whether its factual findings and its application of the facts to the relevant law were: " (1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts in the record." Id . (internal quotation marks omitted).
DISCUSSION
Section 523(a)(2)(A) excepts from discharge debts incurred through " false pretenses, a false representation, or actual fraud." To fall within this exception to discharge, a creditor must prove by a preponderance of the evidence each of the following elements: " '(1) misrepresentation, fraudulent omission or deceptive conduct by the debtor; (2) knowledge of the falsity or deceptiveness of his statement or conduct; (3) an intent to deceive; (4) justifiable reliance by the creditor on the debtor's statement or conduct; and (5) damage to the creditor proximately caused by its reliance on the debtor's statement or conduct.'" Weinberg, 410 B.R. at 35 (quoting Turtle Rock Meadows Homeowners Ass'n v. Slyman (In re Slyman), 234 F.3d 1081, 1085 (9th Cir. 2000)).
A. False Promise
Wagner argues on appeal the bankruptcy court clearly erred when it found that Malich intended to honor his promises at the time he made them. Wagner concedes that a debt arising from a false promise is nondischargeable under § 523(a)(2)(A) only if the intention not to perform existed at the time the promise was made. See generally Eashai v. Citibank, South Dakota, N.A., (In re Eashai), 167 B.R. 181, 185 (9th Cir. BAP 1994), aff'd, 87 F.3d 1082 (9th Cir. 1996) (holding that bankruptcy court could infer debtor fraudulently lacked intent to perform under credit card contract at the time he incurred charges because debtor had no reasonable prospect of repaying charges at the time they were incurred); see also Restatement (Second) of Torts § 530 (1976).
Initially, we note a significant problem with Wagner's argument both before the bankruptcy court and on appeal: a pervasive lack of precision as to what Malich promised. For instance, the evidence supported, and the bankruptcy court found, that Malich generally promised to repay Wagner's loans as soon as he could after each boat financed sold; his guaranties are evidence of that intent. We acknowledge that the evidence was disputed as to when repayment was due. Wagner testified that he expected to be paid immediately upon sale, but Wagner's expectation of immediate repayment appeared to be based solely on his unverified perception of the ongoing course of dealing, and the fact that he usually held the original title documents. On the other hand, Malich testified that he occasionally delayed repaying Wagner for up to three months, particularly when the sale occurred during the slow winter months.
A fair reading of the bankruptcy court's findings indicates the court determined that Malich's practice of occasionally delaying payment was part of the parties' course of dealing. Wagner advocated that the bankruptcy court should infer a promise to repay based on the parties' course of dealing (overriding the documents indicating that PBNW had a year to repay), but then also insisted that the bankruptcy court should ignore part of that course of dealing in making its inferences regarding what was promised. We cannot conclude that the court's determination regarding the promised specific timing of repayment was, within the meaning of Hinkson, " implausible, " " illogical" or " without support in inferences that may be drawn from the facts in the record."
The alleged promise regarding title/security is also far from precise. According to Wagner's argument, Malich promised that Wagner would have a valid, perfected security interest in each boat financed, and that each boat would be sufficient security for the amount loaned. However, the loan documents and the trial testimony are devoid of such promises, representations or warranties. Rather, the trial testimony reflects that Wagner generally would fund PBNW's purchase of a boat upon receipt from Malich of the original title document for that boat, without any promise, representation or warranty as to the legal effect of Wagner's possession of the original title document or as to the sufficiency of the boat as security.
Wagner's argument also ignores the fact that Article 9 of the Uniform Commercial Code, as drafted originally and as adopted in Washington, requires that the debtor " authenticate a security agreement that provides a description of the collateral" for nonpossessory financing. See Wash Rev. Code § 62A.9A-203(b)(3)(A).
More importantly, the undisputed trial testimony of both Wagner and Malich establishes that Wagner and Malich knowingly and voluntarily deviated from the parties' general course of dealing when the parties entered into the Skater Transaction and the Daytona Transaction. Instead of financing based on receipt of the original title documents, Wagner funded these two loan transactions based on Malich's promise to deliver to Wagner the original title documents in the future, when Malich obtained them. This is the only promise related to title/security that is apparent from the record.
Having articulated what Malich promised, we can now review the sufficiency of the bankruptcy court's findings that Malich intended to honor his promises at the time he made them. As shown below, even a cursory review of the evidence before the bankruptcy court is sufficient to support the bankruptcy court's findings as to Malich's intent with respect to the promises he made.
In most cases, the intent or state of mind of a party largely hinges on their credibility. See, e.g., Hernandez v. New York, 500 U.S. 352, 364, 111 S.Ct. 1859, 114 L.Ed.2d 395 (1991); Batson v. Kentucky, 476 U.S. 79, 98, 106 S.Ct. 1712, 90 L.Ed.2d 69 & n.21 (1986). Here, the bankruptcy court found credible Malich's testimony that he intended to honor his promises at the time he made them. Nothing in the record is sufficient to cause us to conclude that the court's credibility findings were clearly erroneous or to deprive those findings of the particular deference to which they are entitled. See Anderson, 470 U.S. at 573.
Wagner argues on appeal that the bankruptcy court's intent finding is illogical. Wagner cites the following language from the bankruptcy court's findings in support of this argument:
. . . [Malich] had every intention of paying [Wagner] when the transactions were entered into, but an unforeseen drop in the economy substantially affecting the sale of new and used power boats led to [Wagner] not being paid by [Malich].
5/3/10 Trans. at 11:19-23.
According to Wagner, as a matter of logic, the unforeseen drop in the economy could not have caused Malich to form a different intent regarding his promise to repay Wagner when the boat financed sold because the drop in the economy did not affect Malich's ability to repay Wagner when the boat sold.
But Wagner's logic argument only would make sense if Malich had promised to immediately repay Wagner from the sale proceeds. As set forth above, the bankruptcy court found no such promise, and the bankruptcy court's finding regarding Malich's actual promise -- that Malich would repay Wagner as soon as he could after sale of the boat financed -- was not clearly erroneous. Thus, Wagner's logic argument fails.
Wagner also attempts to tie the above-referenced finding regarding unforeseen economic conditions to the promise to deliver the original title documents for the 2005 Daytona and the 2007 Skater, but the bankruptcy court never said nor implied that changing economic conditions caused Malich to form a different intent regarding his promise to deliver title. Malich testified that he initially intended to deliver to Wagner the two original title documents as promised but that he failed to take them to Wagner out of neglect or inadvertence. The bankruptcy court apparently credited this testimony as credible when it credited Malich's other testimony. We have found nothing in the record, nor has Wagner pointed us to anything, that would cause us to conclude that this credibility finding of the court's was clearly erroneous.
Wagner also argues on appeal that the evidence in the record is contrary to the bankruptcy court's findings regarding Malich's intent to honor his promises. In making this argument, Wagner exclusively relies on: (1) Malich's failure to immediately repay Wagner as soon as PBNW sold the 2005 Daytona and the 2007 Skater, (2) Malich's failure to partially repay Wagner for these two transactions, (3) Malich's failure to notify Wagner of the delay in repayment, and (4) Malich's failure to notify Wagner that Malich had delivered the original title documents for these two boats to the third party purchasers, instead of delivering them to Wagner as promised.
According to Wagner, the bankruptcy court clearly erred by not concluding on this evidence that Malich never intended to honor any of his promises to repay or any of his promises to deliver title with respect to any of his loan transactions with Wagner. We disagree. The bankruptcy court chose to credit over this evidence Malich's testimony regarding his intent. Further, Malich's testimony regarding his intent is consistent with his performance as promised in the 25 to 50 other transactions with Wagner. In the face of conflicting evidence, we cannot say that the bankruptcy court's decision to infer that Malich intended to honor his promises when he made them was " implausible, " " illogical" or " without support in inferences that may be drawn from the facts in the record."
In sum, the bankruptcy court did not clearly err when it found that Malich intended to honor his promises when he made them.
B. Fraudulent Nondisclosure
Alternately, Wagner argues that Malich fraudulently failed to disclose to Wagner, after he had sold the 2005 Daytona and the 2007 Skater, his failure to repay these loans as promised and his failure to deliver the two title documents to Wagner as promised. We look to the Restatement (Second) of Torts for guidance in determining what constitutes a fraudulent nondisclosure for purposes of § 523(a)(2)(A). See Apte v. Romesh Japra, M.D., F.A.C.C., Inc. (In re Apte), 96 F.3d 1319, 1324 (9th Cir. 1996); Tallant v. Kaufman (In re Tallant), 218 B.R. 58, 64-64 (9th Cir. BAP 1998) (citing Field v. Mans, 516 U.S. 59, 68-70, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995)).
Restatement (Second) of Torts § 551(1) makes clear that fraudulent nondisclosure can only occur when the party with knowledge has a duty to disclose:
One who fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.
Restatement (Second) of Torts § 551 (Emphasis Added.)
Restatement (Second) of Torts § 551(2) specifies that a party to a business transaction is under a duty to disclose to the other party, before the transaction is entered into:
(a) matters known to him that the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them; and
(b) matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading; and
(c) subsequently acquired information that he knows will make untrue or misleading a previous representation that when made was true or believed to be so; and
(d) the falsity of a representation not made with the expectation that it would be acted upon, if he subsequently learns that the other is about to act in reliance upon it in a transaction with him; and
(e) facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.
Id.
Wagner argues on appeal that the factors referenced in clause (c) are present here. According to Wagner, Malich should have disclosed the broken promises before the parties entered into the Calabria Transaction. We disagree.
Wagner perhaps could have argued that some of the other clauses under Restatement (Second) of Torts § 551(2) apply, but he waived these arguments by not raising them. See In re Choo, 273 B.R. at 613.
Even if we were to agree with Wagner and hold that Malich had a duty to disclose his broken promises before entering into the Calabria Transaction, the bankruptcy court's error in not finding such a duty would have been harmless because the bankruptcy court correctly found that the loss that Wagner sustained in the Calabria Transaction flowed from a simple breach of contract rather than any fraud by Malich. See our discussion, infra, regarding § 523(a)(2)(A)'s other elements.
The Comments accompanying Restatement (Second) of Torts § 551 explain and clarify the requirements of clause (c):
One who, having made a representation which when made was true or believed to be so, remains silent after he has learned that it is untrue and that the person to whom it is made is relying upon it in a transaction with him, is morally and legally in the same position as if he knew that his statement was false when made.
According to the Restatement (Second) of Torts, a contractual promise also qualifies as a representation that the promisor intends to perform as promised. See Comment c to Restatement (Second) of Torts § 530 (1977).
Comment h to Restatement (Second) of Torts § 551 (emphasis added).
Thus, Malich's duty to disclose hinged on whether (or when) he knew that he had broken his promises with respect to the Skater Transaction and the Daytona Transaction, and whether (or when) he knew that Wagner was relying on these promises in entering into the Calabria Transaction. With respect to his promise to repay Wagner for the 2005 Daytona and the 2007 Skater, Malich testified that he still intended and expected to repay Wagner for these two transactions as late as April 2008, when the Calabria Transaction was entered into. As discussed previously, the bankruptcy court found this testimony credible, and we have identified no clear error in this finding. Accordingly, Malich had no duty to disclose with respect to his promise to repay.
Meanwhile, with respect to Malich's promise to deliver to Wagner the title documents for the 2005 Daytona and the 2007 Skater, the bankruptcy court did not expressly focus on this promise, and it seems likely on this record that Malich realized sometime before the Calabria Transaction that he no longer intended to honor this promise. However, there is no evidence in the record that would support an inference that Malich knew Wagner was relying on any promise relating to the Skater Transaction and the Daytona Transaction when he financed the Calabria Transaction.
To the contrary, many of the facts in the record indicate that the promise to deliver the Skater and Daytona title documents had no relevance to the parties in entering into the Calabria Transaction. First of all, as set forth above, Malich at that time still intended and expected to repay Wagner for the 2005 Daytona and the 2007 Skater, and Wagner testified that he did not really care about delivery of title -- what he really cared about was getting paid. See 4/29/10 Trial Trans. at 38:13-38:23. In addition, the original title document for the 2007 Calabria was delivered to Wagner at the time he funded the Calabria Transaction, so there was no promise made in the Calabria Transaction similar to the promise regarding title made in the Daytona and Skater Transactions. Finally, Wagner's testimony indicates that the parties treated each loan as a separate transaction. See 4/29/10 Trial Trans. at 11:5-11:11, 34:12-34:16. All of these facts would have tended to lead Malich to believe that Wagner was not relying on the promise to deliver the Daytona and Skater title documents in entering into the Calabria Transaction. As a result, Malich had no duty to disclose with respect to his promise to deliver the Daytona and Skater title documents.
We are mindful that Apte held that there is a presumption of reliance when the subject nondisclosure is determined to be material. See Apte, 96 F.3d at 1323-24. However, the Ninth Circuit has limited this presumption to cases in which the plaintiff primarily alleges nondisclosure; where the plaintiff instead primarily alleges misrepresentation, the presumption does not apply. See Poulos v. Caesars World, Inc., 379 F.3d 654, 666-67 (9th Cir. 2004); Binder v. Gillespie, 184 F.3d 1059, 1063-64 (9th Cir. 1999). Here, Wagner predominantly complains of false promise, a form of misrepresentation. See Comment c to Restatement (Second) of Torts § 530. Thus, the Apte presumption does not apply. Furthermore, the Apte presumption also does not apply because the broken promise regarding delivery of title was not material or relevant to the Calabria Transaction, for the reasons stated above.
Wagner also suggests on appeal that, if Malich had immediately disclosed his broken promises, Wagner could have " exercised remedies to protect himself from what happened" in the transactions that he already had entered into -- the Activator, Daytona and Skater Transactions. Wagner in essence is arguing that, when a party breaches a contract, that party must immediately notify the non-breaching party of the breach or face nondischargeable liability for any losses that occur after the breach. We know of no authority that supports this novel and broad proposition nor has Wagner cited us to any. Moreover, this proposition would threaten to turn virtually all breach of contract liability into nondischargeable debt. In short, this proposition is fundamentally inconsistent with the principle that exceptions to discharge are to be interpreted narrowly in favor of discharge. See Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1222 (9th Cir. 2010). Thus, we reject this argument.
In sum, on the record before us, we cannot conclude that the bankruptcy court clearly erred by not finding any fraudulent nondisclosure.
C. Other § 523(a)(2)(A) Elements
Above, we hold that the bankruptcy court did not clearly err when it found no false promise and no fraudulent nondisclosure. Because Malich did not commit any actionable misrepresentation or omission, we need not dwell at length on the other elements for nondischargeability under § 523(a)(2)(A).
We do note, however, that the bankruptcy court found that Wagner had not established justifiable reliance, which is one of the five elements that a plaintiff must prove to have a debt declared nondischargeable. See Weinberg, 410 B.R. at 35. Wagner did not challenge on appeal this finding, and thus the issue is deemed waived. See Choo, 273 B.R. at 613. Consequently, even if Wagner were to prevail on all of his other arguments on appeal, affirmance of the bankruptcy court's judgment in favor of Malich still would be appropriate given Wagner's lack of justifiable reliance. We further note that the record fully supports the bankruptcy court's finding regarding the absence of justifiable reliance. As the bankruptcy court pointed out, Wagner made no effort: (1) to verify Malich's or PBNW's financial condition, (2) to use transaction documents that actually reflected the parties' understanding and course of dealing, or (3) to verify whether boats he had financed had been sold.
One specific finding and Wagner's objection to it does merit a bit of discussion. Wagner particularly objected to the court's finding that " [Wagner] received what he was bargaining for when he took back both the Activator and Calabria boats." 5/3/10 Trans. at 10:21-23. According to Wagner, the bankruptcy court clearly erred in making this finding because it is undisputed that Wagner lost money on the Activator and Calabria Transactions.
But the bankruptcy court obviously did not intend what it said in this finding to be taken literally. Taking into account the fraud/nondischargeability context and the entirety of the record, a fair construction of this finding would be that any loss that Wagner suffered on the Activator and Calabria Transactions was the result of a simple breach of contract and not the result of fraud. By this finding, the bankruptcy court was attempting to emphasize that, in the Activator and Calabria Transactions, Malich duly delivered the title documents and Wagner successfully repossessed the Activator and the Calabria. Consequently, any loss arising in these transactions flowed from the insufficiency of the collateral, and Malich made no misrepresentations or omissions concerning the sufficiency of the collateral. Simply put, this finding reflects that Wagner did not satisfy the fifth element under § 523(a)(2)(A): that his damages were proximately caused by his reliance on a misrepresentation or omission by Malich.
As construed above, the record fully supports this finding, and the bankruptcy court did not clearly err in making this finding.
D. Motion to Alter or Amend Judgment
Wagner filed his motion to alter or amend under Civil Rule 59(e), made applicable to this case by Rule 9023. A trial court generally should deny a motion under Civil Rule 59(e) unless the movant: (1) presents newly discovered evidence, (2) shows clear error, or (3) shows an intervening change in controlling law. See Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 880 (9th Cir. 2009) (citing 389 Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999)).
Wagner's Civil Rule 59(e) motion argued clear error. Wagner claimed the bankruptcy court clearly erred when it found that " [t]he financing documents prepared by [Wagner] do not support his case." 5/3/10 Trans. at 9:10-11. According to Wagner, the bankruptcy court's determination that no fraud occurred " centered on" this finding. This assertion is simply wrong. As the bankruptcy court explained to Wagner at the hearing on his motion, the court's determination hinged on the testimony of the parties and their credibility. Further, we note that the record fully supports the bankruptcy court's finding that the loan documents did not support Wagner's case.
In the remainder of Wagner's motion, he simply rehashed his argument made at trial that the court should draw from the evidence the inference that Malich never intended to honor his promises. Even if this argument had merit (which it does not -- see supra), it would not satisfy the requirements for bringing a motion to alter or amend judgment.
The bankruptcy court applied the correct standard in evaluating Wagner's motion, and we see no error in the bankruptcy court's application of that standard. Accordingly, the bankruptcy court did not abuse its discretion when it denied Wagner's motion to alter or amend judgment.
CONCLUSION
For all of the reasons set forth above, the judgment of the bankruptcy court, and its denial of Wagner's Civil Rule 59(e) motion, are AFFIRMED.
Questions of justifiable reliance are also raised by Wagner's laxness in neglecting to comply with Article 9 of the Uniform Commercial Code to ensure that he had a security interest in the boats financed.