Samuel J. Temperato Revocable Trust v. Unterreiner (In re Unterreiner)

• Decision Date: 08 November 2012
• Docket Number: No. 12–1138.,12–1138.
• Citation: 699 F.3d 1022
• Parties: In re Jeffrey Scott UNTERREINER; Lisa Marie Unterreiner, Debtors. The Samuel J. Temperato Revocable Trust, Appellant v. Jeffrey Scott Unterreiner; Lisa Marie Unterreiner, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

699 F.3d 1022

In re Jeffrey Scott UNTERREINER; Lisa Marie Unterreiner, Debtors.

The Samuel J. Temperato Revocable Trust, Appellant

v.Jeffrey Scott Unterreiner; Lisa Marie Unterreiner, Appellees.

No. 12–1138.

United States Court of Appeals,

Eighth Circuit.

Submitted: Sept. 19, 2012.

Filed: Nov. 8, 2012.

Robert Emil Eggmann, argued, Thomas H. Riske, on the brief, St. Louis, MO, for appellant.

J. Michael Payne, Cape Girardeau, MO, for appellees.

Before MELLOY and BENTON, Circuit Judges, and BAKER,¹ District Judge.

MELLOY, Circuit Judge.

Jeffrey and Lisa Unterreiner (together, “the Unterreiners”) filed for bankruptcy on October 30, 2006. The Samuel J. Temperato Revocable Trust (“the Trust”) filed an Adversary Complaint against the Unterreiners, claiming the Unterreiners owed a nondischargeable debt to the Trust under 11 U.S.C. § 523. The Bankruptcy Court granted summary judgment to the Trust. The Bankruptcy Appellate Panel (“BAP”) reversed, holding that the Trust was not entitled to judgment as a matter of law because the Trust could not meet the statutory requirements of 11 U.S.C. § 523. The Trust appealed. We affirm.

I.

Mr. Unterreiner and Ed Radetic ² were sole shareholders of King William Management Company (“King William”). King William operated three Dairy Queen stores in Missouri. Dairy Queen of Greater St. Louis (“DQSTL”) was the franchisor of King William's stores. The Trust owns DQSTL. Crest Oelke (“Oelke”) was a trustee of the Trust. Oelke was also affiliated with DQSTL.

In December 2005, King William was in such poor financial shape that it could not continue to operate without a loan. Oelke arranged for Cass Bank (“Cass”) to make a loan of $235,000 (“the loan”) to King William. To secure the loan, the Unterreiners signed personal guarantees as well as a Commercial Security Agreement (“Security Agreement”). DQSTL also guaranteed the loan. The Unterreiners did not speak with Oelke, with anyone from the Trust, with anyone from Cass, or with anyone from DQSTL before signing the loan documents. Indeed, until the Trust filed its Complaint, the Unterreiners did not know the Trust owned DQSTL and did not even know the Trust existed.

The Security Agreement listed King William as borrower. The Security Agreement listed the Unterreiners and Ed Radetic and his wife as the guarantors. Finally, the Security Agreement listed “all business assets located at 1036 N. Sprigg Street, Cape Girardeau, MO 63701 and 31 S. Kingshighway, Cape Girardeau, MO 63703” as collateral.³ Some four years before Cass made the loan to King William, the Trust had signed a separate agreement with Cass under which the Trust guaranteed all of DQSTL's obligations to Cass. However, the Trust was not mentioned in the Security Agreement and was not a guarantor of the King William loan, except in its capacity as a blanket guarantor of DQSTL.

Cass distributed the loan directly to DQSTL. DQSTL retained a portion of the loan as partial repayment of King William's outstanding debt to DQSTL under the franchise agreement and distributed the remainder of the loan to King William. Approximately a year after Cass distributed the loan, Mr. Unterreiner informed Cass that, contrary to statements in the Security Agreement, King William did not actually own most of the collateral. Thus, the Security Agreement contained a misrepresentation. The Unterreiners claimed they did not read the loan documents, including the Security Agreement, before signing.

King William defaulted on the loan in December 2007, and Cass pursued the Unterreiners on their guaranty. On June 20, 2008, Cass released the Unterreiners from any further liability on the loan in exchange for a payment of $20,000. Cass then made a demand on the Trust for payment of the outstanding balance of the loan.

On October 31, 2008, the Trust filed an Adversary Complaint against the Unterreiners. The Trust claimed the Unterreiners,as co-guarantors of the loan, owed a debt to the Trust that was nondischargeable under 11 U.S.C. § 523.⁴ The Trust claimed it had reasonably relied on the misrepresentation in the Security Agreement when it guaranteed DQSTL's obligations and when it allowed DQSTL to guaranty the loan. The Trust also alleged the Unterreiners knew the Security Agreement contained a misrepresentation at the time the Unterreiners signed the Security Agreement.

The Trust moved for summary judgment. The Bankruptcy Court found that DQSTL had reasonably relied on the Unterreiners' misrepresentation when DQSTL guaranteed the loan. The Bankruptcy Court held that the Unterreiners' obligation to the Trust was nondischargeable and granted summary judgment to the Trust.

The Unterreiners appealed, and the BAP reversed. The BAP held that the Trust could not fulfill the statutory requirements under § 523(a)(2)(B) to render a debt nondischargeable. The BAP concluded (1) the Unterreiners did not receive anything from the Trust when the Unterreiners made the misrepresentation; (2) the Trust could not have relied on the Security Agreement when it guaranteed DQSTL's obligations, because the Trust agreed to guaranty DQSTL's obligations years before Cass made the loan; and (3) any representations in the Security Agreement were made to Cass, not to the Trust. Finally, the BAP questioned, but did not decide, whether the Security Agreement qualified as a “writing respecting the debtor's financial condition.”

II.

“Summary judgment is appropriate when, viewing the record in the light most favorable to the nonmoving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.” Henning v. Mainstreet Bank, 538 F.3d 975, 978 (8th Cir.2008). “In an appeal from the BAP, this court independently reviews the bankruptcy court's decision, applying the same standard of review as the BAP. Fact findings by the bankruptcy court are reviewed for clear error; its conclusions of law are reviewed de novo.” Terry v. Standard Ins. Co., 687 F.3d 961, 963 (8th Cir.2012) (citations omitted).

11 U.S.C. § 523(a)(2)(B) excepts from discharge a debt

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—

... (B) use of a statement in writing—

(i) that is materially false;

(ii) respecting the debtor's or an insider's financial condition;

(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and

(iv) that the debtor caused to be made or published with intent to deceive....

“To prevail under § 523(a)(2)(B), the Plaintiff has to establish by a preponderance of the evidence” all elements of the statute. Jacobus v. Binns, 328 B.R. 126, 130 (8th Cir. BAP 2005). We agree with the BAP that the Trust cannot establish all the elements. Specifically, the Trust cannot establish that the Unterreiners obtained money, property, services, or credit from the Trust, nor can the Trust establish that it relied on the Unterreiners' misrepresentation.

First, the Unterreiners did not receive “money, property, services, or an extension, renewal, or refinancing of credit” from the Trust when the Unterreiners made the...