In re Krizan
| Decision Date | 15 July 2021 |
| Docket Number | 20-10233-7,Adversary 20-17 |
| Parties | In re: SCOTT A. KRIZAN, Debtor. v. KRIZAN, Plaintiffs, TRAVIS P. KRIZAN and RONALD v. SCOTT A. KRIZAN, Defendant. |
| Court | U.S. Bankruptcy Court — Western District of Wisconsin |
DECISION
Plaintiffs Travis Krizan and Ronald Krizan filed a complaint seeking a determination that debts owed by Scott Krizan and others[1] are non-dischargeable pursuant to 11 U.S.C. § 523(a)(2) as having been incurred by false pretenses, misrepresentation, or actual fraud.
After hearing the arguments of counsel, considering all the documentary and testimonial evidence and weighing the credibility of the witnesses, the Court issues this decision constituting the Court's findings of fact and conclusion of law.[2] For the reasons more fully described below, the Court finds that Travis and Ronald have met their burden of proof that debts owed to each of them by Scott are nondischargeable as set forth below. A separate judgment will be entered pursuant to Rule 9021.
The Court has jurisdiction over this matter under 28 U.S.C §§1334(a) and (b) and 157(a) and (b). This is a core proceeding under 28 U.S.C. §157(b)(2)(I) as it concerns a determination about the dischargeability of a particular debt. Venue is proper under 28 U.S.C. §§ 1408 and 1409.
Scott and his parents, Beverly and Daniel, were dairy farmers. Scott, Beverly, and Daniel defaulted on their note to Farm Credit Services ("FCS"). The note was secured by a mortgage on land owned by Beverly and Daniel. Scott lived at the property with his parents.
A foreclosure was filed. With the aid of his brother Dale Scott, Beverly, and Daniel engaged in many acts to delay the foreclosure. They:
Dale discovered the delay tactics of quit claim deeds and life estates from the internet and seminars. He shared the ideas with Scott and his parents. Together they used the tactics against FCS. The efforts slowed but did not stop the foreclosure. A sheriffs sale of the property was scheduled for April 1, 2014.
It was Scott who first discussed a possible sale to Ronald and Travis. This led to a meeting on March 27, 2014, among Travis, Ronald, Scott, Daniel, and Beverly. The meeting occurred at the home of Scott, Beverly, and Daniel. The location of the meeting is described as a kitchen and dining room separated by an island. Daniel and Ronald were seated at the dining table, Scott and Travis were at the island, and Beverly was in the kitchen.
The terms for the sale to Travis and Ronald were discussed and agreed upon. Travis, Ronald, Beverly, Daniel, and Scott all signed a handwritten offer. Two days later, that offer was replaced with an offer on the more detailed Wisconsin Realtor form. Again, it was signed by Beverly, Daniel, and Scott. The offer said a down payment in the amount of $430, 000 would be made. The down payment was the amount needed to pay off the FCS mortgage. The possibility this was a secondary offer to a prior accepted offer, such as the Webster offer, was marked "n/a."
Travis Ronald, Beverly, Daniel, and Scott went to FCS on March 28, 2014. Travis and Ronald each paid $215, 000 to FCS. The half of the payment from Travis was funds he borrowed. FCS then released and satisfied its mortgage.
Ronald and Travis credibly testified they did not know about the Webster offer when they paid FCS. They very sincerely testified if they had been told about the Webster offer they would not have made the payment without other steps and protections, including taking an assignment of the note and mortgage from FCS. The reasons for this position were explained and are credible. Travis's experience in real estate transactions further supports the credibility of this testimony.
Scott's contradictory testimony that he did tell Travis about the Webster offer before the offer from Travis and Ronald and before the payment to FCS was incredible. Once confronted with information about the existence of the Webster offer, Scott said he thought the Webster offer was invalid.
Scott's claim that Travis was aware of the Webster offer is contradicted by Scott himself. Scott was served with a lis pendens on April 6. Scott admitted that he talked to his parents about the Webster lawsuit and that they responded they wanted to proceed with a sale to Travis. This discussion could not have occurred until the day before the closing. Yet Travis and Ronald testified believably that they did not know of it, and Scott agreed he did not mention the lis pendens until the title agent raised it.
The title work for a closing was prepared. Ronald, Travis, Beverly, Daniel, and Scott attended the closing. Scott, Daniel, and Beverly all signed the documents and acted as if there was no Webster offer. It was only after the documents were signed and the title agent conducted a quick update of the title search that the Webster lis pendens was disclosed. It had been served on Scott the day before. Consistent with the testimony of Ronald and Travis, the reaction of Scott, Daniel, and Beverly was to maintain the Webster offer was not enforceable.
Ronald and Travis testified they were told the Webster lis pendens was a mistake and that the Webster offer had never been delivered. They say this was the first time they were told anything about another offer. This view was reinforced by the uncontradicted statements made at closing by either Scott or Daniel that the Webster offer was not valid. Scott further conceded that he spoke with Chad Webster near the time of the offer from Ronald and Travis. He claims he assumed that because there was another offer drafted by Chad it somehow meant the prior offer was no longer valid or being pursued. Yet he didn't tell Chad of the interest of Ronald and Travis or mention his discussions with Chad to them.
Scott and his parents submitted an answer in a declaratory judgment action the Websters brought to enforce their offer. The answer said:
. . . deny that they have entered into a written Offer to Purchase with the Plaintiff's [Webster] which was identified in Exhibit A dated May 2, 2013, upon information and belief of the Defendants, the Offer to Purchase may have been signed but was never delivered and was in the house of the Krizan's . . . and was never delivered to the Plaintiffs but the Plaintiff came upon the premises, entered the premises and upon deceit and misrepresentation obtained a copy of the Offer to Purchase. The Defendants never intended to release that signed Offer to Purchase to the Plaintiffs and is unknown other than upon information and belief as to how the Plaintiff's obtained the original document from the household of the Defendants.
Adv. No. 20-15, ECF No. 37, Exh. 39 at 1.
A few days later, an amended answer was filed by Scott and his parents. The only change to the above portion of the answer was the addition of the phrase "upon information and belief" to the claim the Websters "came upon the premises." Both the answer and the amended answer filed shortly after were filled with claims that the Webster offer was not valid, that the Websters purloined the offer, there was no closing date, and that no action was taken by Scott or his parents to close with the Websters.
In an about-face, the position of Scott and his parents changed about ten months later. After being deposed in February 2015, they admitted that the Webster offer had been delivered to the Websters by Scott. No explanation was provided for this change of position other than the claim by Scott that (1) the Websters hadn't scheduled a closing, (2) the Websters prepared a new offer, and (3) the Websters said if the new offer was not accepted they would simply bid at the sheriff sale.
Scott claimed this led him to believe the accepted Webster offer was no longer good. He also asserted, unconvincingly and incredibly, that he had told Ronald and Travis about the Webster offer before Ronald and Travis made their offer. This testimony was not believable. None of this explained the failure of Scott to disclose the Webster offer to Plaintiffs before the offers were signed or any payment was made to FCS.
Ronald and Travis intervened in the state court action. Their testimony that they believed the Webster offer was invalid was credible and supports their action of intervening.
A state court decision was issued finding the Websters had the primary offer. Appeals ensued. Ultimately there was a sale to the Websters. The circuit court and state court of appeals found Travis and Ronald were entitled to repayment from the Webster closing of the amount they paid to FCS. The appeals court declined to award interest but remanded the matter to the circuit court for further proceedings on the claims of Ronald and Travis against Beverly, Daniel, Scott, and Dale.
On August 28, 2017, Ronald and Travis finally received $430, 000.
Between 1994 and 1999, Ronald loaned money to Daniel for the farm. The loan included cash and an account receivable for hay Daniel bought from Ronald. There was also a loan to Dale....
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