In Re Stuart M. Hanson, Bankruptcy No. 09 B 04820.

• Decision Date: 05 October 2010
• Docket Number: Adversary No. 09 A 00447.,Bankruptcy No. 09 B 04820.
• Parties: In re Stuart M. HANSON, d/b/a Hanson & White, LLC, Debtor. 6050 Grant, LLC, Plaintiff, v. Stuart M. Hanson, Defendant.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois

437 B.R. 322

In re Stuart M. HANSON, d/b/a Hanson & White, LLC, Debtor.6050 Grant, LLC, Plaintiff,

v.Stuart M. Hanson, Defendant.

Bankruptcy No. 09 B 04820.

Adversary No. 09 A 00447.

United States Bankruptcy Court,N.D. Illinois,Eastern Division.

Oct. 5, 2010.

COPYRIGHT MATERIAL OMITTED.

John M. Brom, Esq., Chicago, IL, Attorney for Debtor.

Martin J. O'Hara, Esq., Chicago, IL, Attorney for Creditor.

MEMORANDUM OPINION

JOHN H. SQUIRES, Bankruptcy Judge.

This matter comes before the Court on the motion of Stuart M. Hanson (the “Debtor”) to alter or amend this Court's Memorandum Opinion entered on May 10, 2010. For the reasons set forth herein, the Court denies the motion.

I. JURISDICTION AND PROCEDURE

The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. It is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (I), and (O).

II. FACTS AND BACKGROUND

All of the relevant facts and background are contained in the Court's Memorandum Opinion dated May 10, 2010 (the “Opinion”).

6050 Grant, LLC v. Hanson (In re Hanson), 428 B.R. 475 (Bankr.N.D.Ill.2010). Therein, the Court found that a debt in the sum of $93,461.29 owed by the Debtor to 6050 Grant, LLC (“6050 Grant”) was nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). On May 24, 2010, two weeks after entry of the Opinion, the Debtor filed the instant motion to alter or amend. 6050 Grant opposes the motion.

III. APPLICABLE STANDARD

Rule 59(e) of the Federal Rules of Civil Procedure, as adopted by Bankruptcy Rule 9023, permits a party to move the court to alter or amend a judgment. Fed.R.Civ.P. 59(e). Rule 59(e) motions serve a narrow purpose and must clearly establish a manifest error of law or fact, newly discovered evidence, Obriecht v. Raemisch, 517 F.3d 489, 494 (7th Cir.2008); Sigsworth v. City of Aurora, Ill., 487 F.3d 506, 512 (7th Cir.2007), or an intervening change in the controlling law. Cosgrove v. Bartolotta, 150 F.3d 729, 732 (7th Cir.1998). The decision to grant or deny a Rule 59(e) motion is within the court's discretion. In re Prince, 85 F.3d 314, 324 (7th Cir.1996); LB Credit Corp. v. Resolution Trust Corp., 49 F.3d 1263, 1267 (7th Cir.1995).

“The rule essentially enables a ... court to correct its own errors, sparing the parties and the appellate courts the burden of unnecessary appellate proceedings.” Russell v. Delco Remy Div. of Gen. Motors Corp., 51 F.3d 746, 749 (7th Cir.1995). Indeed, the Rule permits a party to bring to the attention of the court “factual and legal errors that may change the outcome so they can be corrected. It does not allow a party to introduce new evidence earlier available, or advance arguments that could and should have been presented prior to the judgment.” Herbstein v. Bruetman (In re Bruetman), 259 B.R. 672, 673-74 (Bankr.N.D.Ill.), aff'd, 266 B.R. 676 (N.D.Ill.2001), aff'd, 32 Fed.Appx. 158 (7th Cir.2002). “A ‘manifest error’ is not demonstrated by the disappointment of the losing party. It is the wholesale disregard, misapplication, or failure to recognize controlling precedent.” Oto v. Metro. Life Ins. Co., 224 F.3d 601, 606 (7th Cir.2000) (internal quotation omitted).

The function of a motion to alter or amend a judgment is not to relitigate old matters or present the case under a new legal theory. Moro v. Shell Oil Co., 91 F.3d 872, 876 (7th Cir.1996). Moreover, the purpose of such a motion “is not to give the moving party another ‘bite of the apple’ by permitting the arguing of issues and procedures that could and should have been raised prior to judgment.” Yorke v. Citibank, N.A. (In re BNT Terminals, Inc.), 125 B.R. 963, 977 (Bankr.N.D.Ill.1990). The rulings of a bankruptcy court “are not intended as mere first drafts, subject to revision and reconsideration at a litigant's pleasure.” See Quaker Alloy Casting Co. v. Gulfco Indus., Inc., 123 F.R.D. 282, 288 (N.D.Ill.1988). “A motion brought under Rule 59(e) is not a procedural folly to be filed by a losing party who simply disagrees with the decision; otherwise, the Court would be inundated with motions from dissatisfied litigants.” BNT Terminals, 125 B.R. at 977.

IV. DISCUSSION

The Debtor does not contend that there is any newly discovered evidence or an intervening change in the controlling law. Rather, he argues that the Court's Opinion contains manifest errors of law and fact, which, when rectified, require the entry of judgment in his favor. Specifically, the Debtor claims that the Court erred by basing its Opinion on events that occurred after July 2008, the time at which the debt at issue was incurred. According to the Debtor, those events cannot serve as a basis for nondischargeability under § 523(a)(2)(A). If the Court disregards all events after July 2008, as well as any testimony relating thereto, the Debtor says, there is no evidence to establish that he did not fully intend to use the money tendered by 6050 Grant to pay for the architectural work and other soft costs related to the building of the custom home.

The Court rejects the Debtor's argument and finds that he has failed to demonstrate a manifest error of law or fact. As the Court painstakingly explained in the Opinion, a false representation for purposes of § 523(a)(2)(A) is an express misrepresentation that can be demonstrated either by a spoken or written statement or through conduct. New Austin Roosevelt Currency Exch., Inc. v. Sanchez (In re Sanchez), 277 B.R. 904, 908 (Bankr.N.D.Ill.2002); Bletnitsky v. Jairath (In re Jairath), 259 B.R. 308, 314 (Bankr.N.D.Ill.2001). In contrast, false pretenses include “implied misrepresentations or conduct intended to create and foster a false impression.” Mem'l Hosp. v. Sarama (In re Sarama), 192 B.R. 922, 927 (Bankr.N.D.Ill.1996) (internal quotation omitted). “The key character of false pretenses” is “a series of events or communications which collectively create [s] a false or misleading set of circumstances [by] which the creditor is wrongfully induced by the debtor to transfer property; it is multiple events done willfully, knowingly, and by design.” Kadlecek v. Ferguson (In re Ferguson), 222 B.R. 576, 586 (Bankr.N.D.Ill.1998); see also Sterna v. Paneras (In re Paneras), 195 B.R. 395, 406 (Bankr.N.D.Ill.1996). Finally, “actual fraud” under the statutory exception encompasses a wide spectrum of circumstances and consists of “any deceit, artifice, trick, or design involving direct and active operation of the mind, used to circumvent and cheat another [.]” McClellan v. Cantrell, 217 F.3d 890, 893 (7th Cir.2000) (internal quotation omitted) (also noting that “ ‘[n]o definite and invariable rule can be laid down as a general proposition defining fraud, and it includes all surprise, trick, cunning, dissembling, and any unfair way by which another is cheated’ ”).

At the heart of the exception to discharge under any of the prongs of § 523(a)(2)(A) is the element of intent. As the Debtor argues, intent to deceive is generally determined by the debtor's subjective intention at the inception of the debt. CFC Wireforms, Inc. v. Monroe (In re Monroe), 304 B.R. 349, 356 (Bankr.N.D.Ill.2004); Sears, Roebuck & Co. v. Green (In re Green), 296 B.R. 173, 179 (Bankr.C.D.Ill.2003).

It is well established, however, that courts can consider subsequent conduct as long as that conduct provides an indication of the debtor's state of mind at the time of the actionable representations. Williamson v. Busconi, 87 F.3d 602, 603 (1st Cir.1996) (explaining that “subsequent conduct may reflect back to the promisor's state of mind and thus may be considered in ascertaining whether there was fraudulent intent at the time the promise was made”) (internal quotation omitted); Strominger v. Giquinto (In re Giquinto), 388 B.R. 152, 167 (Bankr.E.D.Pa.2008) (stating that “[a]n often employed indicia, especially with respect to fraudulent actions under § 523(a)(2)(A), centers on a debtor's subsequent conduct”) (internal quotation omitted); Siebanoller v. Rahrig (In re Rahrig), 373 B.R. 829, 834 (Bankr.N.D.Ohio 2007) (same); Stein v. Tripp (In re Tripp), 357 B.R. 544, 548 (Bankr.D.Ariz.2006) (noting that a court “may consider subsequent conduct to the extent that it provides an insight into the debtor's state of mind at the time of the representations” ); Mack v. Mills (In re Mills), 345 B.R. 598, 604-05 (Bankr.N.D.Ohio 2006) (finding that “a debtor's subsequent conduct will often help to shed light on the debtor's state of mind at the time of the transaction”); Lucas v. Lyle (In re Lyle), 334 B.R. 324, 334 (Bankr.D.Mass.2005) (explaining that “subsequent conduct can reflect a debtor's state of mind at the time the representation is made”); Green, 296 B.R. at 179 (noting that subsequent inconsistent conduct is “admissible as circumstantial evidence of prior intent”); Ferguson, 222 B.R. at 586 (finding that “misrepresentations and [false] pretenses after construction proved to be material in attempting to hide the reasons for defects in [the plaintiff's] home”) (emphasis added); Visotsky v. Woolley (In re Woolley), 145 B.R. 830, 836 (Bankr.E.D.Va.1991) (stating that “[s]ubsequent conduct may reflect back to the promisor's state of mind and thus may be considered in ascertaining whether there was fraudulent intent”); Miller v. Krause (In re Krause), 114 B.R. 582, 606 (Bankr.N.D.Ind.1988) (explaining that a debtor's “ subsequent conduct may reflect his state of mind at the time he made the promise and thus be considered in determining whether he possessed the requisite fraudulent intent”) (emphasis in original).

Determining whether a debtor had the requisite intent under § 523(a)(2)(A) is, therefore, a factual, subjective inquiry decided by examining all of the relevant circumstances, including those that took place after the debt was incurred. See Pearson v. Howard (In re Howard), 339 B.R. 913, 919 (Bankr.N.D.Ill.2006); Gre...