                                                           FILED
                                                            JUN 30 2014
 1                         NO FO PUBL A IO
                             T R     IC T N
                                                        SUSAN M. SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
 2                                                        OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.    EC-13-1346-KuJuTa
                                   )
 6   SYED S. CHOWDAURY,            )      Bk. No.    11-38996
                                   )
 7                  Debtor.        )      Adv. No.   11-02724
     ______________________________)
 8                                 )
     NITIN SHAH,                   )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      MEMORANDUM*
11                                 )
     SYED S. CHOWDAURY,            )
12                                 )
                    Appellee.      )
13   ______________________________)
14                    Argued and Submitted on May 15, 2014
                            at Sacramento, California
15
                             Filed – June 30, 2014
16
              Appeal from the United States Bankruptcy Court
17                for the Eastern District of California
18       Honorable Robert S. Bardwil, Bankruptcy Judge, Presiding
19
     Appearances:     William Steven Shumway argued for appellant Nitin
20                    Shah; Aaron Christopher Koenig argued for appellee
                      Syed S. Chowdaury.
21
22   Before: KURTZ, JURY and TAYLOR, Bankruptcy Judges.
23
24
25
26        *
           This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8013-1.
 1                                  INTRODUCTION
 2           Pursuant to 11 U.S.C. § 523(a)(2)(A),1 Creditor Nitin Shah
 3   commenced nondischargeability litigation against debtor Syed S.
 4   Chowdaury alleging that Chowdaury fraudulently induced Shah to
 5   enter into an extension, renewal or refinancing of credit.
 6           After trial, the bankruptcy court ruled against Shah.    The
 7   court found that Chowdaury did not make any misrepresentation or
 8   false promise at or before the time Shah lent money to Chowdaury,
 9   nor did Chowdaury intend to deceive Shah at the time Shah lent
10   the money.       The bankruptcy court also ruled against Shah on the
11   alternate basis that Shah had failed to demonstrate justifiable
12   reliance.
13           Because Shah presented no evidence that Chowdaury’s conduct
14   proximately caused Shah to incur any damages, We AFFIRM.
15                                      FACTS
16           Chowdaury owned and operated two hotel properties in Lake
17   Tahoe, California, known as the Monaco Hotel and the Lone Pine
18   Inn.2       In 2003, Chowdaury was experiencing financial difficulties
19   and needed funds to pay back taxes and to make repairs to his
20   Lake Tahoe properties.       Chowdaury approached his local bank,
21   which declined to lend him the money, but his banker put him in
22   touch with Shah, who agreed to loan money to Chowdaury.       Between
23   roughly March and October of 2003, Shah made a series of advances
24   to Chowdaury, which totaled somewhere between $219,000 and
25
             1
26         Unless specified otherwise, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
27
             2
           Chowdaury also is known by the name of Syed Ali. For ease
28   of reference, he is always referred to herein as Chowdaury.

                                          2
 1   $257,000.   Shah made these 2003 advances without any formal loan
 2   documentation, nor was there any clear agreement or understanding
 3   on how or when Chowdaury would repay the loan.
 4        In April 2004, Chowdaury still needed additional money.
 5   According to Shah, he refused to lend Chowdaury any additional
 6   money unless Chowdaury signed a promissory note covering the 2003
 7   advances.   The note Chowdaury signed, dated April 8, 2004,
 8   provided for 10% interest and a principal amount of $205,000.
 9   However, the note also provided that the principal amount would
10   be “substantiated by cancelled check copies & other papers.”
11   Straight Note (April 8, 2004) at p. 1.
12        The note also contained three potentially-conflicting
13   provisions regarding repayment.   The printed form of the note
14   stated that the note was payable on demand.    But an
15   interlineation on the face of the note stated: “Note will be paid
16   on Refinance of Monaco Hotel & Lone Pine Inn Refinance (Lake
17   Tahoe, Ca),” and a second intelineation stated: “Monaco Hotel
18   will fund the Note upon Refinance.” Id.
19        Apparently, Shah never loaned any additional money to
20   Chowdaury after Chowdaury signed the note.    As for Chowdaury,
21   before signing the note, he made payments on account of the 2003
22   advances totaling $14,000.   However, after signing the note,
23   Chowdaury never made any further payments to Shah.
24        Chowdaury subsequently refinanced his Lake Tahoe properties,
25   but he did not repay Shah.   In 2009, after Shah learned of the
26   refinancing transactions, he filed a lawsuit against Chowdaury in
27   the Alameda County Superior Court.    In 2011, while the state
28   court lawsuit was pending, Chowdaury commenced his chapter 7

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 1   bankruptcy case, and Shah commenced an adversary proceeding
 2   seeking to except Chowdaury’s indebtedness from discharge under
 3   § 523(a)(2)(A).3
 4        Shah’s operative pleading, his second amended complaint,
 5   focused on the 2003 advances.   Shah alleged that, with the intent
 6   to fraudulently induce Shah to make the 2003 advances, Chowdaury
 7   falsely represented his intent regarding the use of the loan
 8   proceeds and regarding repayment of the loan.     Shah’s statement
 9   of facts in his unilateral pretrial statement was consistent with
10   the allegations set forth in his second amended complaint.
11   However, during trial, Shah’s focus shifted from the 2003
12   advances to the 2004 note.   According to Shah, at the time
13   Chowdaury executed the 2004 note, Chowdaury falsely represented
14   that he would repay the 2003 advances when he refinanced his Lake
15   Tahoe properties.
16        By the end of the trial, Shah’s legal theory of recovery had
17   fully evolved to focus exclusively on the repayment
18   misrepresentation allegedly made at the time the 2004 note was
19   signed, as reflected in counsel’s closing argument.     Indeed,
20   Shah’s counsel explicitly confirmed that the actionable
21   misrepresentation occurred at the time the 2004 note was signed
22   and not at the time of the 2003 advances:
23        THE COURT: Does your client     assert that Mr. Chowdaury
          made the representation that    your client would be
24        repaid upon the refinance of    the Tahoe properties at
          any time before the note was    signed, and that was April
25
26        3
           The complaint ambiguously alleged that the debt was
27   nondischargeable under § 523(a), but Shah clarified at the time
     of trial that his nondischargeability claim was based on
28   § 523(a)(2)(A).

                                      4
 1        of 2004?
 2        MR. SHUMWAY: No. This is the transaction. This is
          the event. That the renegotiation of the debt, the
 3        obligation of 13 the debt –
 4        THE COURT: At this point in time.
 5        MR. SHUMWAY: -- created this situation at this point in
          time and this was how we were going to get repaid.
 6
 7   Tr. Trans. (May 13, 2013) at 93:7-16.
 8        Shah’s trial testimony and Chowdaury’s trial testimony
 9   differed considerably regarding the nature and purpose of the
10   2004 note.   Whereas Shah attempted to characterize the 2004 note
11   as a refinancing of the 2003 advances, Chowdaury claimed that the
12   2004 note was meant to address new advances that Shah had agreed
13   to make but never made.
14        The bankruptcy court orally announced its findings of fact
15   and conclusions of law at the conclusion of the trial.    The court
16   stated that it found both Shah and Chowdaury generally credible.
17   The court acknowledged inconsistencies in their respective
18   accounts of their business transactions, but it attributed these
19   inconsistencies to the very loose and informal manner in which
20   they transacted business.   With respect to the purpose and nature
21   of the 2004 note, the court nonetheless concluded that Shah’s
22   explanation of the note was more credible than Chowdaury’s.
23        At the same time, the court rejected Shah’s characterization
24   of the 2004 note as a refinancing of the 2003 advances.    Instead,
25   the court determined that the 2004 note was merely a written
26   memorialization of Chowdaury’s indebtedness for the 2003
27
28

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 1   advances.4
 2        In addition, the bankruptcy court found that, prior to the
 3   execution of the 2004 note, Chowdaury never made any
 4   representation or promise, false or otherwise, regarding how the
 5   2003 advances would be repaid.    The court further found that
 6   Chowdaury did not intend to deceive Shah at the time Shah made
 7   the 2003 advances.
 8        According to the bankruptcy court, Shah also failed to
 9   demonstrate justifiable reliance.     The court based this finding
10   on the following facts: (1) the loose and informal manner in
11   which Shah advanced funds to Chowdaury; (2) Shah’s awareness of
12   Chowdaury’s financial problems in general and more specifically
13   Chowdaury’s problems operating the Lake Tahoe properties;
14   (3) Shah’s knowledge that Chowdaury was unable to obtain a loan
15   from a conventional lender or other third parties; and (4) Shah’s
16   failure to require Chowdaury to produce any financial information
17   before Shah made the 2003 advances.
18        On June 6, 2013, the bankruptcy court entered judgment
19   against Shah and in favor of Chowdaury on Shah’s
20   nondischargeability claim.    Shah timely filed his notice of
21   appeal on June 19, 2013.
22                                JURISDICTION
23        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
24   §§ 1334 and 157(b)(2)(I).    We have jurisdiction under 28 U.S.C.
25
          4
26         Shah’s complaint allegations and his trial testimony
     generally are consistent with the bankruptcy court’s
27   determination that the note was a mere memorialization and not a
     refinancing. In any event, this determination is not critical to
28   our analysis and resolution of this appeal.

                                       6
 1   § 158.
 2                                 ISSUE
 3        Did the bankruptcy court commit reversible error when it
 4   ruled against Shah on his § 523(a)(2)(A) claim?
 5                          STANDARDS OF REVIEW
 6        In appeals from exception to discharge actions, we review
 7   the bankruptcy court's findings of fact under the clearly
 8   erroneous standard and its conclusions of law de novo.   Oney v.
 9   Weinberg (In re Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009),
10   aff'd, 407 Fed.Appx. 176 (9th Cir. 2010).
11        A fact finding is not clearly erroneous unless it is
12   “illogical, implausible, or without support in the record.”    Retz
13   v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010).
14        We may affirm on any ground supported by the record.    Shanks
15   v. Dressel, 540 F.3d 1082, 1086 (9th Cir. 2008).
16                              DISCUSSION
17        In order to prove that its claim should be excepted from
18   discharge under § 523(a)(2)(A), a creditor must establish that it
19   was induced to provide “money, property or services” or to enter
20   into “an extension, renewal or refinancing of credit” by means of
21   “false pretenses, a false representation, or actual fraud.”
22   § 523(a)(2)(A); see also Ghomeshi v. Sabban (In re Sabban),
23   600 F.3d 1219, 1222 (9th Cir. 2010).    In turn, the creditor can
24   establish fraud by demonstrating: (1) that the debtor made
25   misrepresentations, (2) that the debtor knew the
26   misrepresentations were false at the time they were made,
27   (3) that the debtor made them with the intent to deceive the
28   creditor, (4) that the creditor justifiably relied on the

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 1   misrepresentations, and (5) that, as a proximate cause of the
 2   creditor’s reliance, the creditor was harmed.     Id.;
 3   In re Weinberg, 410 B.R. at 35.
 4        Shah has not argued, either during trial or on appeal, that
 5   Chowdaury made any actionable misrepresentations at the time Shah
 6   made the 2003 advances.    Instead, Shah argues that the debt
 7   should be excepted from discharge because Chowdaury made a false
 8   promise – that he would repay the 2003 advances upon refinance of
 9   the Lake Tahoe properties – at the time he executed the 2004
10   note.5
11        Shah’s argument is fatally flawed.    The record establishes
12   (and the bankruptcy court in essence found) that Chowdaury did
13   not induce Shah to do anything to his detriment on account of the
14   2004 promise to repay.    Shah claims that, because Chowdaury
15   executed the note and promised therein to repay the debt upon the
16   refinance of the Lake Tahoe properties, Shah agreed to forbear
17   from attempting to collect on the debt until Chowdaury refinanced
18   the Lake Tahoe properties.    There are three problems with this
19   claim.   First, the record does not support it.    On its face, the
20   note Chowdaury executed states that it is payable “on demand.”
21   While the note also states that it will be repaid upon refinance
22   of the Lake Tahoe properties, it is far from clear that the note
23   prohibited Shah from immediately demanding repayment or from
24   initiating a collection action if the debt was not repaid upon
25
          5
26         A false promise is a type of misrepresentation that can
     support an exception to discharge under § 523(a)(2)(A), provided
27   that all of the § 523(a)(2)(A) elements are established. See
     McCrary v. Barrack (In re Barrack), 217 B.R. 598, 606-07 (9th
28   Cir. BAP 1998).

                                       8
 1   demand.    Nor is there anything else in the record indicating
 2   that, until the Lake Tahoe properties were refinanced, Shah was
 3   prohibited from demanding payment of the debt or from initiating
 4   collection activities.
 5        Second, even if Shah did affirmatively agree to forbear from
 6   collecting on the debt pending the refinance of the Lake Tahoe
 7   properties, the record indicates that Chowdaury neither induced
 8   nor solicited this agreement to forbear.    Rather, based on the
 9   evidence adduced at trial, Shah unilaterally decided to forbear.
10   Presumably, he agreed to forbear because he realized that this
11   was his only realistic hope of collecting on the debt.    A
12   creditor’s unilateral decision to forbear is not actionable under
13   § 523(a)(2)(A) unless the debtor induced that forbearance by
14   making a false representation.    See FO–Farmer's Outlet, Inc. V.
15   Daniell (In re Daniell), 2013 WL 5933657, at **9-10 (9th Cir. BAP
16   2013).
17        And third, even if Chowdaury did induce Shah to forbear from
18   collecting on the debt, Shah presented no evidence that
19   Chowdaury’s promise to repay proximately caused Shah to incur
20   damages.    In order to prevail on a § 523(a)(2)(A) claim based on
21   the creditor’s forbearance, the creditor must prove, among other
22   things, that at the time of the forbearance, “it had valuable
23   collection remedies.”    Cho–Hung Bank v. Kim (In re Kim), 163 B.R.
24   157, 161 (9th Cir. BAP 1994), aff'd and adopted, 62 F.3d 1511
25   (9th Cir. 1995); see also Stevens v. Nw. Nat'l Ins. Co.
26   (In re Siriani), 967 F.2d 302, 305 (9th Cir. 1992)(same holding
27   in the context of § 523(a)(2)(B)).    The creditor also must prove
28   that “those remedies lost value” during the time of forebearance.

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 1   In re Kim, 163 B.R. at 161.    In short, the creditor proves
 2   proximate causation and damages only to the extent it shows that
 3   its remedies lost value during the forbearance period.    Id.
 4        Simply put, even if we were to accept Shah’s claim that he
 5   was induced to forbear from collecting on Chowdaury’s debt based
 6   on Chowdaury’s allegedly false promise to repay the debt upon the
 7   refinancing of the Lake Tahoe properties, Shah still would lose
 8   this appeal because Shah presented no evidence at trial
 9   indicating that he had valuable collection remedies that he lost
10   as a result of his forbearance.
11        Shah also cannot prevail on appeal because he did not
12   adequately address in his opening appeal brief the bankruptcy
13   court’s alternate grounds for its judgment – its finding that
14   Shah did not justifiably rely on Chowdaury’s promise to repay.
15   Shah’s appeal brief devotes only one paragraph to the bankruptcy
16   court’s justifiable reliance finding.    In that single paragraph,
17   Shah marshals a handful of facts, some of which are not even in
18   the record, which might have permitted the bankruptcy court to
19   find justifiable reliance.    But Shah has not demonstrated on
20   appeal that no reasonable factfinder could have found an absence
21   of justifiable reliance on the record presented.    “Where there
22   are two permissible views of the evidence, the factfinder's
23   choice between them cannot be clearly erroneous.”    Anderson v.
24   City of Bessemer City, N.C., 470 U.S. 564, 574 (1985).
25        Put another way, Shah has failed to demonstrate that the
26   bankruptcy court’s finding regarding justifiable reliance was
27   “illogical, implausible, or without support in the record.”
28   In re Retz, 606 F.3d at 1196.    Accordingly, we cannot say that

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 1   the court’s finding of no justifiable reliance was clearly
 2   erroneous.
 3                              CONCLUSION
 4        For the reasons set forth above, we AFFIRM the bankruptcy
 5   court’s judgment.
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