Kessler v. Longmire (In re Longmire)

In re GERALYNNE MARIE LONGMIRE, Debtor.

JUDD KESSLER, Plaintiff, v. GERALYNNE M. LONGMIRE, Defendant.

Lead Case No. 18-42169 WJL

Adversary Proceeding No. 18-04110

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION

May 3, 2021

The following constitutes the order of the Court.

Chapter 7

HEARING HELD:

DATE: February 17, 2021

TIME: 10:30 a.m.

LOCATION: 220

1300 Clay Street

Oakland, CA 94604

VIA TELECONFERENCE

AMENDED OPINION

William J. Lafferty, III, U.S. Bankruptcy Judge

This matter came for hearing via teleconference on February 17, 2021, on the Motion for Partial Summary Judgment ("MPSJ") filed by Defendant Geralynne M. Longmire ("Defendant"). Alexander J. Kessler of the law firm Grant & Kessler, APC appeared for Judd Kessler, Trustee of Ingodwe Trust, the Plaintiff ("Plaintiff") in this action. Hugo Torbet appeared for the Defendant. At the conclusion of oral argument the Court took the matter under submission. For the reasons set forth below, the Court GRANTS the MPSJ in part, and DENIES it in part, as moot.

I. FACTUAL BACKGROUND

In early 2016, Defendant needed to refinance a maturing loan secured by real property at 215 El Pinto in Danville, California (the "Property") that she owned and served as her residence. She engaged Russell Roesner ("Roesner"), a real estate broker, to assist her in this effort. Roesner reached out to Plaintiff, a very experienced real estate lender of whom Roesner had become aware through mutual acquaintances, to see if he would be willing to make a short-term loan, at a high interest rate, secured by the Property. The loan was, ostensibly, to be a "bridge" loan, to provide Defendant with time to sell or refinance the Property.

As part of the process of documenting the loan transaction, Defendant executed certain documents which were provided for Plaintiff's review by Roesner, and were delivered to Plaintiff at the closing of the loan. These documents included a Business Purpose/Commercial Loan Application (the "Loan Application"), a Borrower's Certification & Authorization ("Borrower's Certification"), a Declaration of Occupancy, an Occupancy Statement, and a Borrower's Purpose Statement. Defendant also provided Plaintiff with a copy of a Final Opinions of Value performed by Associates Appraisal Group in Irvine, California that represented the market value of the Property, as of May 11, 2015, to be $2,520,000 (the "Appraisal"). The Loan Application, the Appraisal, the Borrower's Certification, the Declaration ofOccupancy, the Occupancy Statement, and the Borrower's Purpose Statement will each be described in greater detail infra, and may be referred to, collectively, as the "Loan Documents."

In addition to the Loan Documents, and after a telling exchange of emails between Roesner and Defendant and between Roesner and Plaintiff, Roesner also delivered to Plaintiff a letter from Defendant dated March 8, 2016 (the "March 8 Letter") that described Defendant's intention to vacate the Property and to reside with her mother at 110 Kingswood Circle, Danville, California.

In the course of the pre-funding discussions and negotiations, Roesner also delivered numerous emails to Plaintiff describing Defendant's circumstances, the need for a loan, and the terms requested (amount, duration, interest rate).

After resolving a subordination issue that is of no consequence to this matter, the Plaintiff and the Defendant's transaction (the "Loan") closed on March 25, 2016. The Loan was in the principal amount of $1,850,000, with an annual interest rate of 10.9%, and a term of six months. Regular monthly payments were $16,804.17.

As will also be described in greater detail below, Plaintiff asserts that Defendant made numerous false statements in the Loan Documents, including with respect to her income, the value of the Property, her residence at the Property and her purpose in obtaining the Loan.

Defendant failed to make any payments on the Loan, and did not sell or refinance the Property. As a result, Plaintiff exercised his right under a Deed of Trust to foreclose on the Property inFebruary 2017, and, when Defendant failed to vacate the Property, Plaintiff filed an unlawful detainer action to evict her. Eventually, Plaintiff obtained $1,810,000 at a sale conducted on February 28, 2018, an amount that was considerably less than the amount then due on the Promissory Note that Defendant had provided to Plaintiff.

Plaintiff commenced an action in state court against Defendant and Roesner, based on issues similar to those asserted in this proceeding. Roesner defaulted in that action, and reached a settlement with Plaintiff whereby Roesner sold his home and paid Plaintiff a significant amount to resolve the fraud claims against him.

Defendant filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code on November 13, 2018.

Plaintiff initiated this adversary proceeding by filing a Complaint on November 13, 2018, followed by an Amended Complaint on November 30 (for convenience, the "Complaint"). The Complaint raises five nondischargeability causes of action under 11 U.S.C. § 523(a)(2). Plaintiff's First, Second, and Third Claims for Relief allege that Defendant made false representations regarding her place of residence, the value of the Property, and Defendant's income. The Fourth Claim for Relief alleges that Defendant committed loan fraud, although this Claim for Relief was dismissed without leave to amend by the Court in its Order Granting in Part and Denying in Part Defendant's Motion to Dismiss. Order Granting & Den. Def.'s Mot. Summ. J. 2, ECF No. 54. Finally, the Fifth Claim for Relief asserts that Plaintiff's anti-SLAPP fee awarded instate court is nondischargeable under § 523(a)(6) as arising from Defendant's willful and malicious acts.

As this Opinion disposes of the First, Second, and Third Claims for Relief, only the Fifth Claim for Relief remains for further disposition. Although the Court previously denied Defendant's Motion for Partial Summary Judgment on the Fifth Claim for Relief, Defendant has continued to question the basis for that ruling, albeit without seeking to appeal that ruling or to move the Court for "reconsideration" under Federal Rules of Bankruptcy Procedure 9023 or 9024. Since Defendant's counsel's assertions about the Court's prior ruling reveal a profound and abiding misunderstanding of the relevant legal principles and the case law articulating those principles, as a courtesy to the parties, the Court will shortly hereafter issue a further Memorandum on those issues.

The Court notes that Plaintiff's Complaint suffers from being conclusory and imprecise as to when false statements were made, who made them, and which statements were made orally and which in writing. However, Defendant did not file a motion to dismiss based on such vagaries, or for a more definite statement, and the Complaint remains the operative document for deciding the Defendant's MPSJ. To the extent that issues not raised in the pleadings have been modified by the parties' express or implied consent, as allowed under Rule 15 of the Federal Rules of Civil Procedure, and in a light most favorable to the non-moving party, the Court will treat those issues as raised by the pleadings and determine them accordingly. Fed. R. Civ. P. 15(b)(2); UnitedStates v. Gila Valley Irrigation Dist., 859 F.3d 789, 804 (9th Cir. 2017).

II. PROCEDURAL BACKGROUND

On January 28, 2020, at the request of the Court in order to establish the amount of damages recoverable, if any, in this action under fraud theories, Plaintiff filed a Motion for Summary Judgment Re Damages (the "Plaintiff's Damages Motion") against Defendant, which was set for hearing on February 25. Mot. Summ. J. Re Damages, ECF No. 93. Subsequently, Defendant filed a Motion for Partial Summary Judgment (the "523(a)(6) Motion"), solely addressing Plaintiff's 11 U.S.C. § 523(a)(6) claim, the Fifth Claim for Relief, and a Counter Motion for Summary Judgment (the "Counter Motion"). 523(a)(6) Mot., ECF No. 95; Counter Mot., ECF No. 108. The Court heard all three motions on February 25, denying Defendant's 523(a)(6) Motion and taking the Plaintiff's Damages Motion and Defendant's Counter Motion under submission.

On April 10, 2020, the Court entered an Order on Plaintiff's Damages Motion and Defendant's 523(a)(6) Motion and Counter Motion, in which the Court made a number of findings and conclusions, before directing the parties to provide further briefing as to two discreet issues concerning the measure of damages. Order Pl.'s Damages Mot. & Def.'s 523(a)(6) Mot. & Counter Mot., ECF No. 130. After multiple delays and continuances related to the pandemic, the parties finally submitted their additional briefing between September 30 and October 21. After reviewing the parties' briefing, the Court found that it could not rule as a matter of law due to the briefing not being entirely responsive and remainingfactual disputes, and denied each party's Motion for Summary Judgment Re Damages.¹

In the meantime, on February 26, 2020, Defendant filed her MPSJ, and supporting declarations and pleadings, and set it for hearing on March 25, 2020. Def.'s MPSJ, ECF Nos. 119-24. On March 7, the Court issued an Order Granting Plaintiff's Ex Parte Motion, which removed Defendant's MPSJ from the calendar until Plaintiff's Damages Motion and Defendant's Counter Motion were addressed. Order Granting Ex Parte Mot., ECF No. 127. After denying Plaintiff's Damages Motion and Defendant's Counter Motion, the Court scheduled a Status Conference for January 6, 2021. At the Status Conference, the Court agreed to schedule briefing and oral argument on Defendant's MPSJ. Plaintiff submitted his Opposition ("Plaintiff's Opposition") on January 27, 2021, along with an Objection and Motion to Strike the Declaration of Russell Roesner ("Plaintiff's Objection"), Defendant filed a Reply ("Defendant's Reply") on February 3, and the Court heard oral argument on February 17....