In re Hanselman

• Decision Date: 21 April 2011
• Docket Number: Adversary No. 06–AP–57024.,Bankruptcy No. 05–73342–BHL–7.
• Parties: In re Mark G. HANSELMAN, Debtor.Peoples Trust and Savings Bank, Plaintiff,v.Mark G. Hanselman, Defendant.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Southern District of Indiana

454 B.R. 460

In re Mark G. HANSELMAN, Debtor.Peoples Trust and Savings Bank, Plaintiff,
v.
Mark G. Hanselman, Defendant.

Bankruptcy No. 05–73342–BHL–7.

Adversary No. 06–AP–57024.

United States Bankruptcy Court, S.D. Indiana, Evansville Division.

April 21, 2011.

[454 B.R. 462]

Mark E. Miller, Bowers Harrison, LLP, Evansville, IN, for Plaintiff.Marilyn Ratliff, Evansville, IN, for Defendant.JUDGMENT BASIL H. LORCH III, Bankruptcy Judge.

This matter comes before the Court on Plaintiff Peoples Trust and Savings Bank's Complaint to Determine Dischargeability of Debt against Debtor/Defendant Mark G. Hanselman filed on February 9, 2006. Peoples Trust and Savings Bank [“Peoples”] filed two proofs of claim in Hanselman's Chapter 7 case: Claim 1–1 was filed on November 30, 2005 based on Loan No. 204585 filed in the amount of $380,760.87 secured by real estate, inventory and equipment liens, and Hanselman's personal guarantee; and Claim 5–1 was filed on December 21, 2005 for Loan No. 205918 filed in the amount of $47,311.31 secured by a 1997 Mitsubishi catering truck. At trial, Peoples limited the scope of its Complaint to seeking a determination of nondischargeability regarding Claim 1–1 pursuant to 11 U.S.C. § 523(a)(2)(B). Hanselman filed an Answer on March 6, 2006. With permission of the Court, Peoples filed its Amended Complaint on November 21, 2007 ¹. A

[454 B.R. 463]

trial was held on January 18, 2011. The Court took testimony and entered Plaintiff's Exhibits 1–14 and 16–18 and Defendant's Exhibits A–C into evidence. The Court took the matter under advisement and the parties were given ten days to file post trial briefs. Peoples filed Plaintiff's Post–Hearing Brief on January 28, 2011. Having reviewed the foregoing, and being otherwise duly and sufficiently advised, the Court now makes the following Findings of Fact and Conclusions of Law:Background

On March 24, 2004, Mark Hanselman submitted a Personal Financial Statement [“PFS”] to Peoples Trust and Savings Bank for the purpose of procuring credit to complete the financing of a restaurant venture in the name of Frizz, Inc. (Plaintiff's Exh. 1). At the time of the transaction with Peoples, the restaurant “build-out” was substantially completed and Hanselman was in the process of obtaining equipment for the restaurant. Hanselman was actively pursuing a loan with several other banks when he was approached by Mark Fitzgerald [“Fitzgerald”], a loan officer at Peoples, about obtaining financing through Peoples. Fitzgerald encouraged Hanselman to present his loan package to Peoples for consideration, which Hanselman subsequently did. Fitzgerald knew that Hanselman's family owned and operated a successful restaurant in Jasper, Indiana, but was otherwise unfamiliar with Hanselman, both personally and professionally. The President of Peoples Bank, Mark Hendrickson [“Hendrickson”], testified that restaurant loans are considered “high risk” loans.

The PFS prepared and signed by Hanselman lists a net worth of $845,441. Included among $964,041 in assets, Hanselman notes IRAs and mutual funds, stock, real and personal property, as well as accounts receivable. Hanselman also disclosed liabilities of $118,600, which consisted of a modest debt to Freedom Bank and a real estate mortgage. No supporting documentation was presented with the PFS and no further information was requested. No financial statement was requested of the borrower, Frizz, Inc. On April 16, 2004, Peoples loaned $456,783 to Frizz, Inc. d/b/a Fritz's [the “Note”] (Plaintiff's Exh. 2). This Note was secured by a lien on the equipment purchased for the restaurant, inventory, a mortgage on real estate, as well as Hanselman's personal guarantee (Plaintiff's Exh. 3). Hanselman filed Chapter 7 bankruptcy on October 14, 2005.

Peoples now seeks to have Hanselman's guarantee on the Note declared nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(B). It is Peoples' position that Hanselman, by and through his PFS, provided Peoples with materially false information with respect to his financial condition, upon which Peoples reasonably relied in order to advance funds pursuant to the Note, and that Hanselman did so with intent to deceive Peoples.

Analysis

A creditor seeking to except a debt from discharge pursuant to Section 523 bears the burden of proving by a preponderance of the evidence that the exception to discharge applies. In re Sheridan, 57 F.3d 627, 633 (7th Cir.1995). In order to prevail on its § 523(a)(2)(B) claim, Peoples must prove each of the following: (1) Hanselman made statements in writing; (2) that are materially false; (3) the statements concerned Hanselman's financial condition; (4) that Peoples actually and reasonably relied upon Hanselman's misrepresentations; and (5) that Hanselman

[454 B.R. 464]

intended to deceive Peoples when he made the misrepresentations. Id.

There is no...