                                                                 FILED
                                                                  FEB 13 2019
 1                          NOT FOR PUBLICATION
                                                              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 Nos.     CC-17-1266-STaF
                                    )                   CC-17-1269-STaF
 6   JOEL WERNER and CATHLEEN       )
     WERNER,                        )      Bk. No.      8:08-bk-11153-CB
 7                                  )
                    Debtors.        )      Adv. No.     8:10-ap-01104-CB
 8   _______________________________)
                                    )
 9   JASON SCOTT WICKAM,            )
                                    )
10                  Appellant,      )
                                    )
11   v.                             )      MEMORANDUM*
                                    )
12   ALAN IVAR; DEBORAH IVAR; DAVID )
     ROCHE,                         )
13                                  )
                    Appellees.      )
14   _______________________________)
15                  Argued and Submitted on February 22, 2018
                             at Pasadena, California
16
                            Filed – February 13, 2019
17
              Appeal from the United States Bankruptcy Court
18                for the Central District of California
19       Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding
20
     Appearances:      Robert R. Anderson argued for appellant Jason
21                     Scott Wickam; Michael J. Carras of Conforti &
                       Carras argued for appellees Alan Ivar, Deborah
22                     Ivar, and David Roche.
23
     Before: SPRAKER, TAYLOR, and FARIS, Bankruptcy Judges.
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 8024-1.
 1   Memorandum by Judge Faris
 2   Concurrence in Part and Dissent in Part by Judge Spraker
 3
 4                                INTRODUCTION
 5            Chapter 111 debtor Jason Scott Wickam appeals from a
 6   nondischargeability judgment under § 523(a)(2)(A) in favor of
 7   plaintiffs Alan Ivar, Deborah Ivar, and David Roche.      This is the
 8   second nondischargeability judgment that the bankruptcy court has
 9   entered in the underlying adversary proceeding.      In a prior
10   appeal from the first nondischargeability judgment, we vacated
11   and remanded for further findings.
12        On remand, the bankruptcy court made additional findings
13   that adequately supported the nondischargeability judgment
14   against Mr. Wickam.     We discern no clear error.
15        Mr. Wickam also appeals from the denial of his postjudgment
16   motion under Civil Rule 59(e).     The bankruptcy court did not
17   abuse its discretion in denying this motion.     Therefore, we
18   AFFIRM.
19                                    FACTS
20   A.   Prebankruptcy events
21        1.      The formation of Mr. Wickam’s real estate development
                  business and commencement of the Coral Blue project
22
23        In November 2005, Mr. Wickam and Joel Werner formed
24   Connexian Investments, Inc. (“Connexian”) to develop real estate.
25
          1
26          Unless specified otherwise, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27   all “Rule” references are to the Federal Rules of Bankruptcy
     Procedure, Rules 1001-9037. All “Civil Rule” references are to
28   the Federal Rules of Civil Procedure.

                                        2
 1   Each held a fifty percent interest in Connexian, and they planned
 2   to use Connexian to purchase vacant land and build luxury homes
 3   on that land.   At the time they created Connexian, neither had
 4   any direct experience in real estate development.    Mr. Wickam had
 5   worked as a general building contractor and Mr. Werner owned a
 6   business marketing products.   Neither had previously worked with
 7   the other, as they had met for the first time shortly before they
 8   went into business together.
 9        Connexian’s first development project involved the
10   construction of four multi-million dollar homes on four lots on
11   Coral Blue Street in Ladera Ranch, California (the “Coral Blue
12   Project”).   Connexian, through Mr. Wickam and Mr. Werner,
13   contracted to purchase these four vacant lots for just under
14   $1 million per lot. Mr. Wickam estimated a total development cost
15   for the Coral Blue Project of $13 million.
16        Originally, the purchase contract required Connexian to
17   close by May 1, 2006.   Connexian, through Mr. Werner and
18   Mr. Wickam, deposited $80,000 into escrow pursuant to the
19   purchase contract.   Connexian, however, was unable to procure
20   financing from conventional lenders to purchase the lots.
21   Connexian negotiated several extensions for the purchase based on
22   additional deposits of funds into escrow.    Connexian deposited a
23   total of $220,000.
24        While negotiating the extensions of time to purchase the
25   lots, Connexian retained RSD Group, Inc. (“RSD”) to assist it in
26   raising the money needed for the project.    RSD agreed to invest
27   $400,000 in the Coral Blue Project and referred Connexian to
28   Point Center Financial for additional financing.    Point Center

                                      3
 1   Financial was a “hard money lender.”
 2        2.   Connexian’s financing and the plaintiffs’ initial
               investments
 3
 4        In June 2006, Point Center Financial and Connexian entered
 5   into a loan placement and fee agreement to fund the purchase of
 6   all four Coral Blue Project lots and to pay the development and
 7   construction costs for two of the homes (Lots 23 and 28). Point
 8   Center Financial agreed to lend Connexian $6,587,100 but only if
 9   Connexian raised an additional $1,615,085.   Connexian informed
10   Point Center Financial that it had the money necessary to close
11   on the financing.   On August 3, 2006, however, Point Center
12   Financial told Mr. Wickam and Mr. Werner that it was unable to
13   fund $2,148,800 of the $6,587,100 loan amount.   Point Center
14   Financial advised Mr. Wickam and Mr. Werner that it would use its
15   best efforts to obtain the additional funding.
16        This was not the only funding shortfall Mr. Wickam and
17   Mr. Werner faced.   Several months earlier, RSD informed
18   Mr. Wickam and Mr. Werner that it was not able to fund the
19   $400,000 it had promised.   Consequently, with RSD’s assistance,
20   Mr. Wickam and Mr. Werner began searching for other investors.
21        Around the same time, Mr. Wickam and Mr. Werner formed Coral
22   Blue, LLC, a California limited liability company, for the stated
23   purpose of purchasing, developing, selling, and managing the four
24   lots at the Coral Blue Project.
25             a.   The Ivars’ first investment ($216,000)
26        RSD introduced Alan and Deborah Ivar to the Coral Blue
27   Project investment opportunity sometime in early August 2006.
28   During a period of roughly two or three weeks, the Ivars had

                                       4
 1   multiple meetings and discussions with Mr. Wickam and Mr. Werner
 2   regarding the project.   The Ivars also toured the Coral Blue
 3   Project lots with Mr. Wickam.   The Ivars maintained that the
 4   issue of project loan financing came up several times during
 5   these meetings.   They testified that they were told (presumably
 6   during these meetings) that the project loan financing was “in
 7   place” and that Mr. Wickam and Mr. Werner were using a
 8   “conventional lender.”   The Ivars said they understood this to
 9   mean a traditional bank was financing the project and not a hard
10   money lender.   The Ivars described their understanding of hard
11   money lending as loans to borrowers who are not creditworthy.
12   They further testified that they did not want to invest in
13   projects funded with hard money loans.
14        The Ivars also reviewed documents provided to them by
15   Mr. Werner and Mr. Wickam, including a subscription agreement and
16   operating agreement for Coral Blue, LLC dated as of August 18,
17   2006.   The operating agreement was signed by Mr. Wickam and
18   Mr. Werner and had signature lines for the Ivars.   The operating
19   agreement reflects that the Ivars made a $216,000 capital
20   contribution to Coral Blue, LLC and held 216,000 governance units
21   and economic units for the limited liability company.    Schedule 1
22   also listed Mr. Werner and his wife as having made a capital
23   contribution, as well as five other investors, including RSD.
24   (Mr. Roche, the other plaintiff and appellee, was not listed as
25   an investor; as we explain below, he invested in Coral Blue, LLC
26   roughly one month later, in September 2006.)
27        The Ivars made their first investment in Coral Blue, LLC on
28   or about August 28, 2016.   The Ivars gave Mr. Wickam and

                                      5
 1   Mr. Werner a check in the amount of $216,000 made payable to
 2   Coral Blue, LLC.2   In exchange for their investment, the Ivars
 3   received not only membership units in Coral Blue, LLC but also an
 4   “Unsecured Promissory Note” made in their favor by Connexian for
 5   $216,000. Mr. Wickam and Mr. Werner signed the promissory note on
 6   behalf of Connexian.   The note provided for repayment within a
 7   year and for interest to accrue at an annual rate of twenty-five
 8   percent.   Notwithstanding the note, the Ivars saw themselves as
 9   equity investors in Coral Blue, LLC, which they understood would
10   purchase and develop the Coral Blue Project lots.   The Ivars
11   testified that they did not consider the promissory note from
12   Connexian to be significant.
13              b.   Mr. Roche’s investment ($200,000)
14        Unlike the Ivars, Mr. Roche previously knew Mr. Wickam from
15   working with him on other projects in the construction industry.
16   During the summer of 2006, Mr. Wickam approached Mr. Roche about
17   investing in the Coral Blue Project.   Over the course of a month
18   or so, Mr. Wickam contacted Mr. Roche on numerous occasions to
19   discuss the project.   By early September 2006, Mr. Wickam began
20   to pressure Mr. Roche to invest in the Coral Blue Project.   On
21   September 9, 2006, Mr. Roche made a check payable to Connexian
22
23
          2
            The Ivars’ $216,000 check was not included in the parties’
24   excerpts of record. However, a copy of this check, and many
     other trial exhibits, are attached to the plaintiffs’ post-remand
25   motion for a post-appeal judgment. We have exercised our
26   discretion to take judicial notice of these and other bankruptcy
     court documents not included in the parties’ excerpts. See
27   Rivera v. Curry (In re Rivera), 517 B.R. 140, 143 n.2 (9th Cir.
     BAP 2014), aff’d in part, dismissed in part, 675 F. App’x 781
28   (9th Cir. 2017).

                                      6
 1   for $125,000, and on September 12, 2006, he made another check
 2   payable to Connexian in the amount of $75,000, for an aggregrate
 3   total investment of $200,000.
 4        Mr. Roche’s testimony regarding his pre-investment
 5   understanding of the project’s loan financing was very similar to
 6   the Ivars’: “conventional financing” through a “traditional
 7   bank.”   According to Mr. Roche, Mr. Werner made the specific
 8   representation to him that the project had conventional
 9   financing, and Mr. Wickam contemporaneously validated
10   Mr. Werner’s representation by immediately telling him that
11   everything was taken care of.
12        Like the Ivars, Mr. Roche also believed that Coral Blue, LLC
13   was going to purchase the four lots and hold title to them.
14   Specifically, during his pre-investment meetings with Mr. Wickam
15   and Mr. Werner, Mr. Roche testified that he was told that Coral
16   Blue, LLC “was the vehicle to purchase four lots, build and sell
17   four homes for profit on Coral Blue [S]treet.”   He also testified
18   that someone expressly told him that the four lots would be
19   purchased in the name of Coral Blue, LLC.
20        Like the Ivars, Mr. Roche received and signed a subscription
21   agreement for Coral Blue, LLC.   The subscription agreement signed
22   by Mr. Roche is dated September 13, 2006.   The record does not
23   include an operating agreement signed by Mr. Roche; only an
24   operating agreement dated June 6, 2006, signed by Mr. Wickam and
25   Mr. Werner with a space for Mr. Roche’s signature.   That
26   operating agreement does not disclose any other members in Coral
27   Blue, LLC other than Mr. Werner, Mr. Wickam, and Mr. Roche,
28   despite the fact that the Ivars had become members about a month

                                      7
 1   earlier.
 2        3.      The purchase of the Coral Blue Project lots
 3        On September 15, 2006, both the Point Center Financial loan
 4   and Connexian’s purchase of the lots closed.     The parties
 5   stipulated that monies were transferred from Coral Blue, LLC’s
 6   accounts to Connexian to fund the closing.     Specifically, Coral
 7   Blue, LLC had less than $14,000 in its bank accounts on August
 8   30, 2006, just prior to the depositing of the Ivars’ first
 9   investment check.     The parties agreed that the Ivars’ $216,000
10   check was deposited into Coral Blue, LLC’s bank account on either
11   August 30 or 31, 2006.     The parties further agreed that, prior to
12   the closing of Connexian’s purchase of the lots, “all but $41.33
13   of the money in the Coral Blue, LLC checking account and $215.53
14   of the Coral Blue, LLC savings account had been transferred into
15   the Connexian checking account.     The balance in those two
16   accounts remained at about that level until the accounts were
17   closed in 2008.”
18        As a result of the sale, Connexian became the owner of
19   record of the four Coral Blue Project lots, subject to a recorded
20   deed of trust in favor of Point Center Financial.      Both the note
21   and deed of trust prohibited Connexian from selling or further
22   encumbering the lots without Point Center Financial’s prior
23   written consent.
24        4.      The Ivars’ second investment ($600,000)
25        By November 2016, construction had begun on the first two
26   lots.     Around this time, Mr. Wickam and Mr. Werner approached the
27   Ivars to make an additional investment in the Coral Blue Project.
28   Mr. Wickam and Mr. Werner explained that they wanted to get an

                                        8
 1   early start on construction for the second pair of lots and
 2   needed additional funding for “bricks and sticks,” which Mr. Ivar
 3   understood to mean actual construction costs.
 4          As a result, the Ivars invested another $600,000 in two
 5   installments.    The Ivars paid the first installment by check
 6   dated December 29, 2006 to Connexian in the amount of $200,000.
 7   Connexian deposited the funds into its bank account that same
 8   day.    Also on December 29, 2006, the parties signed escrow
 9   instructions for the $200,000 loan.    According to the escrow
10   instructions, the Ivars were to receive a $200,000 note from
11   Connexian payable in thirty days, bearing seven percent interest,
12   secured by a second priority deed of trust against Lots 26 and 27
13   of the Coral Blue Project.    Consistent with these instructions,
14   Mr. Werner, on behalf of Connexian, executed a promissory note
15   and a deed of trust against Lots 26 and 27, also dated that same
16   day.    The Ivars claimed that neither of them noticed the thirty-
17   day term of the note.    The Ivars also testified that Mr. Wickam
18   and Mr. Werner instructed them not to record the trust deed
19   because it (and the note) were “simply another layer of
20   protection for [the Ivars’] investment in Coral Blue II LLC.”
21          The Ivars paid the remaining $400,000 to Connexian by check
22   dated April 18, 2007.    While the two installments were paid
23   several months apart, the Ivars apparently viewed both of them as
24   part of their second investment because in exchange for these
25   funds they received 600,000 membership units in a new company:
26   Coral Blue II, LLC.     According to the Ivars, Mr. Wickam and
27   Mr. Werner represented that their $600,000 investment would be
28   repaid with a twenty-five percent share of the net proceeds from

                                        9
 1   the future sale of Lots 26 and 27.      There was no promissory note
 2   or deed of trust for the $400,000 investment.
 3        Mr. Wickam and Mr. Werner, on behalf of Coral Blue II, LLC,
 4   and Mr. Ivar signed a Limited Liability Company Operating
 5   Agreement of Coral Blue II, LLC.      That document is dated March
 6   27, 2007, roughly two months after the $200,000 promissory note
 7   came due, and several weeks before the Ivars paid the $400,000
 8   installment.   Paragraph 2.6 of the Coral Blue II, LLC operating
 9   agreement described the company’s business purpose similar to
10   Coral Blue, LLC’s, including “purchasing, developing, selling and
11   managing residential properties.”      Whereas paragraph 2.6 of the
12   Coral Blue, LLC operating agreement specifically identified the
13   four Coral Blue Project lots as the object of the company’s
14   business purpose, the Coral Blue II, LLC operating agreement did
15   not refer to any specific property.
16        Consistent with the Ivars’ understanding of their $600,000
17   investment, the operating agreement for Coral Blue II, LLC shows
18   the Ivars as owning 600,000 governance and economic units for the
19   entity.   Connexian is listed as owning the remaining 1,800,000
20   units in Coral Blue II, LLC.    Mr. Wickam and Mr. Werner also gave
21   the Ivars a document that the Ivars refer to as an “Investment
22   Breakdown,” executed on April 18, 2007, the same day the Ivars
23   paid their $400,000 to Connexian.      The Investment Breakdown
24   projected that the Ivars would receive $702,062.50 from the sale
25   of the houses to be built on Lots 26 and 27, attributable to a
26   twenty-five percent interest.
27        5.    Refinancing negotiations, default and foreclosure
28        Connexian obtained a second loan from Point Center Financial

                                      10
 1   for $6 million in August 2007 to fund construction on Lots 26 and
 2   27.   Although the record is not entirely clear, it appears that,
 3   by this point, a substantial amount of construction work had been
 4   completed on Lots 23 and 28, and work had begun on Lots 26 and
 5   27.   While the parties were still working on closing this second
 6   loan, they began working on refinancing the first Point Center
 7   Financial loan.   The first loan matured on October 1, 2007
 8   without an agreement for refinancing.   Even so, the parties
 9   continued to negotiate refinancing through most of October 2007.
10         During the post-maturity refinancing negotiations, Point
11   Center Financial learned that Connexian had encumbered all four
12   Coral Blue Project lots with junior liens, in violation of the
13   terms of both Point Center Financial loans.   Point Center
14   Financial also was concerned that the construction of the houses
15   on Lots 23 and 28 had suffered from significant cost overruns and
16   had not been timely completed.   As of October 2007, the houses on
17   those lots still were not sufficiently completed to be marketed
18   for sale.   Ultimately, Point Center Financial declined to
19   refinance the first loan, accelerated the second loan, and
20   foreclosed on all four lots.   Neither the Ivars nor Mr. Roche
21   ever received any payments on their investments.
22   B.    Mr. Wickam’s bankruptcy filing and the plaintiffs’
           nondischargeability action
23
24         The Ivars and Mr. Roche jointly sued Mr. Wickam first in
25   California state court and later, after Mr. Wickam filed his
26
27
28

                                      11
 1   bankruptcy case, in the bankruptcy court.3
 2        The plaintiffs brought to trial claims under § 523(a)(2)(A)
 3   and § 523(a)(4).   At trial, the bankruptcy court only decided the
 4   former claim.   The bankruptcy court entered judgment holding
 5   Mr. Wickam liable for the Ivars’ and Mr. Roche’s investments and
 6   finding the debt to be nondischargeable under § 523(a)(2)(A).
 7   The bankruptcy court subsequently amended its judgment to include
 8   a certification pursuant to Civil Rule 54(b).
 9   C.   Appeal of the bankruptcy court’s decision
10        Mr. Wickam appealed the bankruptcy court’s judgment.    We
11   vacated and remanded, noting that the bankruptcy court’s amended
12   statement of decision did not contain sufficient findings.    We
13   expressed particular concern that the bankruptcy court’s ruling
14   lumped together all three investments made by the Ivars and
15   Mr. Roche, even though the bankruptcy court’s one clear finding
16   of misrepresentation arguably only applied to the Ivars’ first
17   investment.   To the extent the fraud committed against the Ivars
18   was based on a misrepresentation regarding ownership of the four
19   lots, we also expressed a concern that the two notes and one deed
20   of trust the Ivars received from Connexian raised serious
21   questions regarding proximate cause and reliance.   Finally, we
22
          3
23          Mr. Wickam filed his bankruptcy case in Colorado, so the
     plaintiffs commenced their nondischargeability action against him
24   in the Colorado bankruptcy court. The Colorado bankruptcy court
     later granted the plaintiffs’ motion to transfer venue of the
25   adversary proceeding to United States Bankruptcy Court for the
26   Central District of California, where it was consolidated with
     four related adversary proceedings in Mr. Werner’s pending
27   bankruptcy case. The parties to the other adversary proceedings
     later settled, leaving only the nondischargeability action
28   against Mr. Wickam for trial.

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 1   identified as problematic the absence of any specific findings on
 2   intent to deceive, knowledge of falsity and justifiable reliance.
 3   D.   Post-remand proceedings
 4        On remand, the plaintiffs filed a motion requesting post-
 5   remand entry of judgment.   In support of this motion, the
 6   plaintiffs relied on all of their trial testimony and exhibits,
 7   and presented to the court detailed proposed findings of fact,
 8   which separately covered each investment.   Mr. Wickam filed
 9   detailed and specific objections to most of the plaintiffs’
10   proposed findings.    In large part, he contended that the record
11   did not support the plaintiffs’ proposed findings.
12        Ultimately, the bankruptcy court adopted virtually all of
13   the plaintiffs’ findings as originally proposed, with only
14   limited revisions.    The bankruptcy court then re-entered judgment
15   on the § 523(a)(2)(A) claim in favor of the plaintiffs.
16   E.   Motion to reopen evidence or alter or amend the judgment
17        Mr. Wickam timely moved to reopen the record and to alter or
18   amend the judgment. He sought to have the court consider “new
19   evidence” regarding Mr. Ivar’s criminal fraud conviction arising
20   out of his practice as a chiropractor. He also sought to ensure
21   that the court had given due consideration to the declaration
22   testimony of Mr. Werner, which Mr. Wickam had filed in advance of
23   trial.    The bankruptcy court entered an order denying the motion
24   on August 31, 2017.   Mr. Wickam timely appealed from the
25   nondischargeability judgment and the denial of the post-judgment
26   motion.
27                               JURISDICTION
28        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

                                      13
 1   §§ 1334 and 157(b)(2)(I), and we have jurisdiction under
 2   28 U.S.C. § 158.
 3                                    ISSUES
 4   1.   Whether the bankruptcy court erred when it determined that
 5        the plaintiffs had established all of the elements for
 6        nondischargeable fraud under § 523(a)(2)(A)?
 7   2.   Whether the bankruptcy court erred when it denied
 8        Mr. Wickam’s motion to reopen the record and to alter or
 9        amend the judgment?
10                              STANDARDS OF REVIEW
11        In appeals from judgments under § 523(a), we review the
12   bankruptcy court’s findings under the clearly erroneous standard
13   and its legal conclusions de novo.        Oney v. Weinberg (In re
14   Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009), aff’d, 407 F.
15   App’x 176 (2010).
16        The bankruptcy court’s credibility findings are entitled to
17   particular deference and only will be disturbed if clearly
18   erroneous.    Id.   Findings of fact are clearly erroneous only if
19   they are illogical, implausible, or without support in the
20   record.   Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th
21   Cir. 2010).
22        We review the bankruptcy court’s denial of a motion under
23   Civil Rule 59(e) for an abuse of discretion.        Ybarra v. McDaniel,
24   656 F.3d 984, 998 (9th Cir. 2011).        The bankruptcy court abused
25   its discretion if it applied the wrong legal standard or its
26   findings of fact were illogical, implausible, or without support
27   in the record.      TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d
28   820, 832 (9th Cir. 2011).

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 1                                DISCUSSION
 2   A.     The bankruptcy court did not err in determining that the
            debt owed to the Ivars and Mr. Roche was nondischargeable
 3          under § 523(a)(2)(A).
 4          1.   Elements of nondischargeable fraud
 5          The parties do not dispute that the bankruptcy court
 6   identified the correct elements for determining whether
 7   Mr. Wickam’s liability arose from a fraudulent, nondischargeable
 8   act.    Those well-established elements are:
 9          (1) misrepresentation, fraudulent omission or deceptive
            conduct by the debtor; (2) knowledge of the falsity or
10          deceptiveness of his statement or conduct; (3) an
            intent to deceive; (4) justifiable reliance by the
11          creditor on the debtor’s statement or conduct; and
            (5) damage to the creditor proximately caused by its
12          reliance on the debtor’s statement or conduct.
13   In re Weinberg, 410 B.R. at 35 (quoting Turtle Rock Meadows
14   Homeowners Ass’n v. Slyman (In re Slyman), 234 F.3d 1081, 1085
15   (9th Cir. 2000)).
16          The plaintiffs have asserted a mixture of affirmative
17   misrepresentations and omissions.     While the elements are largely
18   the same for a claim for fraudulent misrepresentation by
19   omission, in such situations there is no representation upon
20   which one could justifiably rely.     Titan Grp., Inc. v. Faggen,
21   513 F.2d 234, 239 (2d Cir. 1975), cited with approval in Apte v.
22   Romesh Japra, M.D., F.A.C.C., Inc. (In re Apte), 96 F.3d 1319,
23   1323 (9th Cir. 1996).    For this reason, “All that is necessary is
24   that the facts withheld be material in the sense that a
25   reasonable investor might have considered them important in the
26   making of this decision.    This obligation to disclose and this
27   withholding of a material fact establish the requisite element of
28   causation in fact.”    In re Apte, 96 F.3d at 1323 (quoting

                                      15
 1   Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128,
 2   153-54 (1972)).
 3        We consider these elements and the extent to which they
 4   apply to each of the plaintiffs’ discrete investments.
 5        2.     The Ivars’ $216,000 investment
 6               a.    The fraudulent misrepresentations and omissions
 7        The Ivars insisted at trial that Mr. Wickam misrepresented
 8   the Coral Blue Project’s financing and the ownership of the lots
 9   to induce them to invest.    The bankruptcy court found that
10   Mr. Wickam fraudulently misrepresented these matters by failing
11   to disclose that (1) the project’s loan financing was subject to
12   a one-year term; (2) the lender had advised Mr. Wickam and
13   Mr. Werner that it could not fund $2.1 million of the $6.6
14   million loan; (3) the lender was a hard money lender as opposed
15   to a conventional lender; and (4) Connexian, instead of Coral
16   Blue, LLC, was the entity arranging to purchase the four lots.
17        The bankruptcy court sometimes referred to Mr. Wickam’s
18   conduct as affirmative fraudulent misrepresentation.    At other
19   times, however, the court identified the conduct as fraudulent
20   omission.    The confusion appears to derive from the Ivars’
21   testimony regarding their understanding of the financing and
22   ownership of the lots.    They stated on several occasion that
23   these matters were discussed in the presence of both Mr. Wickam
24   and Mr. Werner but do not attribute any specific representations
25   to Mr. Wickam individually.    The parties’ post-remand briefs and
26   their appeal briefs treat Mr. Wickam’s conduct as a species of
27   fraudulent omission.    In light of the parties’ agreement
28   regarding the nature of Mr. Wickam’s fraud, we treat his conduct

                                       16
 1   as a case of fraudulent omission as well.
 2        Our principal concern regarding the omissions as the basis
 3   for fraudulent misrepresentation lies with whether Mr. Wickam had
 4   a duty to disclose.   As he correctly argues, an omission is not
 5   actionable fraud absent a duty to disclose.   In re Apte, 96 F.3d
 6   at 1323–24.   We may look to the Restatement (Second) of Torts
 7   (“Restatement”) for guidance on what constitutes nondischargeable
 8   fraud in general, and whether Mr. Wickam was under a duty to
 9   disclose in particular.   Id. (citing Field v. Mans, 516 U.S. 59,
10   70 (1995)).   In relevant part, the Restatement specifies that a
11   party to a business transaction must disclose to the other party,
12   before the transaction is consummated:
13        (b) matters known to him that he knows to be necessary
          to prevent his partial or ambiguous statement of the
14        facts from being misleading; and
15                                   . . .
16        (e) facts basic to the transaction, if he knows that
          the other is about to enter into it under a mistake as
17        to them, and that the other, because of the
          relationship between them, the customs of the trade or
18        other objective circumstances, would reasonably expect
          a disclosure of those facts.
19
20   Restatement § 551(2)(b), (e).
21        The bankruptcy court did not make any express finding
22   concerning Mr. Wickam’s duty to disclose.   Under other
23   circumstances, the absence of specific findings on this issue
24   could be a severe or even fatal impediment to our review in light
25   of the bankruptcy court’s duty to provide sufficient findings to
26   support its ruling.   See Civil Rule 52(a)(1) (made applicable to
27   adversary proceeding by Rule 7052); see also Simeonoff v. Hiner,
28   249 F.3d 883, 891 (9th Cir. 2001); First Yorkshire Holdings, Inc.

                                      17
 1   v. Pacifica L 22, LLC (In re First Yorkshire Holdings, Inc.), 470
 2   B.R. 864, 871 (9th Cir. BAP 2012).     On the other hand, when the
 3   record is fully developed and is sufficient to support the
 4   bankruptcy court’s ultimate conclusion, we need not remand for
 5   further findings.   Simeonoff, 249 F.3d at 891.    Nor is remand
 6   necessary when, as here, the appellate court reasonably can infer
 7   from the bankruptcy court’s findings other facts that would
 8   suffice to support the bankruptcy court’s decision.     Brock v. Big
 9   Bear Mkt. No. 3, 825 F.2d 1381, 1384 (9th Cir. 1987); see also
10   Wells Benz, Inc. v. United States ex rel. Mercury Elec. Co., 333
11   F.2d 89, 92 (9th Cir. 1964) (stating that appellate court must
12   construe the trial court’s findings favorably, such that any
13   doubt as to what the trial court meant is resolved in favor of
14   upholding rather than invalidating the bankruptcy court’s
15   judgment).
16        Here, remand is unnecessary.     The elements of fraudulent
17   omission were correctly set forth in the parties’ post-remand
18   briefs, and the court had that information available to it when
19   it found that Mr. Wickam’s conduct amounted to fraudulent
20   omission.    Therefore, we reasonably can infer that the bankruptcy
21   court found that Mr. Wickam owed a duty to disclose fully and
22   completely the ownership and financing of the Coral Blue Project.
23        The record sufficiently supports this implicit finding.
24   Mr. Wickam and Mr. Werner misled the Ivars during their in-person
25   meetings by stating that conventional project loan financing was
26   “in place.”   In reality, Connexian had procured financing from a
27   hard money lender that was at least $2.1 million short of what it
28   needed and was for a term of only one year.     While the evidence

                                      18
 1   presented at trial is ambiguous as to whether Mr. Wickam actually
 2   made these representations, he was at least present when they
 3   were made.    Similarly, Mr. Wickam either made representations, or
 4   was present when Mr. Werner made representations, while
 5   Mr. Wickam and Mr. Werner were urging the Ivars to invest in
 6   Coral Blue, LLC and share in the profits from its development of
 7   the four lots it was to purchase.     Moreover, Mr. Wickam signed
 8   the subscription agreement and operating agreement for the Ivars’
 9   investment in Coral Blue, LLC, reinforcing the representation
10   that Coral Blue, LLC would own, develop and sell these
11   properties.    These statements misled the Ivars to believe that
12   they were investing in a company that would own and develop the
13   four lots using financing that had been procured from a
14   conventional lender.    Both Mr. Wickam and Mr. Werner had a duty
15   to disclose the omitted financing and ownership information in
16   order to avoid misleading the Ivars.     See Restatement § 551(2)(b)
17   & cmt. g.
18        Second, the financing of the project and ownership of the
19   lots were fundamental to the project and the Ivars’ investment.
20   A party to a business transaction has a duty to disclose when:
21   (1) the omitted information is “basic” to the transaction;
22   (2) the nondisclosing party knew that the adverse party, in
23   entering into the transaction, was operating under a mistaken
24   belief concerning the omitted information; and (3) it was
25   reasonable under the circumstances for the adverse party to
26   expect disclosure of the omitted information.     See Restatement
27   § 551(2)(e).
28        As the Ivars explained, based on their discussions with

                                      19
 1   Mr. Wickam and Mr. Werner and the documents Mr. Wickam and
 2   Mr. Werner signed and gave them, they expected to obtain a return
 3   on their investment from Coral Blue, LLC’s development and sale
 4   of the lots.   Yet, Coral Blue, LLC never acquired the lots and
 5   had no rights in the lots or to participate in their sales.
 6   Moreover, when the Ivars invested, Coral Blue, LLC had no
 7   capitalization apart from their $216,000 investment, and even
 8   those funds were promptly transferred to Connexian.   Even with
 9   the Ivars’ investment, Connexian had a $2.1 million shortfall in
10   its construction financing and was required to repay the Point
11   Center Financial loan within a year.   Each of these facts strikes
12   at the heart of the Ivars’ investment.   Mr. Wickam was under a
13   duty to accurately and fully disclose the ownership of the lots
14   and the nature of the project financing.
15             b.    Knowledge of falsity
16        The bankruptcy court found that, before the Ivars’ first
17   investment, Mr. Wickam knew that the first Point Center Financial
18   loan was underfunded, that the term of this loan was for one year
19   and that Point Center Financial was a hard money lender.
20   Mr. Wickam admitted these facts.
21        As for the omission regarding ownership of the lots,
22   Mr. Wickam claims that the the bankruptcy court’s finding
23   regarding his knowledge of falsity was clearly erroneous.
24   According to Mr. Wickam, there was a last-minute decision
25   dictated by Point Center Financial, or by the escrow company
26   handling the closing, to switch from Coral Blue, LLC as the
27   purchaser/owner to Connexian.
28        Mr. Wickam relies on his declaration testimony to support

                                     20
 1   this position.   But the bankruptcy court found Mr. Wickam not
 2   credible generally, and nothing he has said on appeal persuades
 3   us that the bankruptcy court’s credibility finding was clearly
 4   erroneous.   More to the point, there were numerous admitted facts
 5   and exhibits demonstrating that, from the inception of the
 6   project, Connexian was slated to be the owner of the four lots.
 7   It was Connexian, not Coral Blue, LLC, that contracted to
 8   purchase the lots.    Connexian negotiated the extensions of time
 9   to purchase the lots and made the deposits necessary to obtain
10   those extensions.    It was also Connexian that applied for the
11   construction loan from Point Center Financial to finance the
12   purchase of the lots.    The record is devoid of any references
13   that identified Coral Blue, LLC as a party to these transactions
14   (apart from Mr. Wickam’s and Mr. Werner’s representations to the
15   Ivars and Mr. Roche).
16        The record amply demonstrates that Mr. Wickam knew the true
17   nature of the project financing, and that Connexian rather than
18   Coral Blue, LLC owned the four lots, at the time the Ivars made
19   their investment in Coral Blue, LLC.    In short, the bankruptcy
20   court’s findings that Mr. Wickam knew that his nondisclosure of
21   the project’s financing and ownership was false and deceptive
22   were not clearly erroneous.
23             c.     Intent to deceive
24        The bankruptcy court found that Mr. Wickam failed to
25   disclose the above-referenced information regarding the project
26   loan financing and Connexian’s bid to obtain ownership of the
27   lots for the sole purpose of inducing the Ivars to make their
28   $216,000 investment.    This is a finding of intent to deceive.

                                      21
 1        Seldom do fraud defendants provide direct evidence of their
 2   intent to deceive.   See Tustin Thrift & Loan Ass’n v. Maldonado
 3   (In re Maldonado), 228 B.R. 735, 738 (9th Cir. BAP 1999).
 4   Instead, bankruptcy courts typically must infer intent (or the
 5   absence of intent) from circumstantial evidence.   Id.
 6        Nothing Mr. Wickam has argued on appeal persuades us that
 7   the bankruptcy court’s intent finding was clearly erroneous.
 8   Essentially, he argues that he was just in charge of the
 9   construction.   He maintains that he relied on Mr. Werner to
10   properly and truthfully present the investment opportunity to the
11   Ivars, so he could not have formed an intent to deceive them.
12   But the bankruptcy court did not believe Mr. Wickam’s version of
13   events.
14        The record again supports the bankruptcy court’s inference
15   that Mr. Wickam played an active and purposeful role in the
16   solicitation of the Ivars’ investment in Coral Blue, LLC.   The
17   Ivars testified that Mr. Wickam was a party to their discussions
18   concerning Coral Blue, LLC’s purchase and development of the four
19   lots and the financing of that project.   Mr. Wickam also was
20   involved in Connexian’s purchase of the lots from the beginning,
21   including its funding.   Given Mr. Wickam’s active participation
22   in the financing and purchase of the lots, his solicitation of
23   the Ivars’ investment is difficult to explain as anything other
24   than fraudulent.   The record supports the bankruptcy court’s
25   finding that Mr. Wickam omitted information with the intent to
26   deceive the Ivars for the purpose of obtaining their investment.
27             d.    Materiality
28        As indicated above, in cases of fraudulent omission,

                                     22
 1   bankruptcy courts are required to make a finding of materiality
 2   in lieu of finding justifiable reliance.    In re Apte, 96 F.3d at
 3   1323.   An omission is material if a reasonable investor would
 4   have wanted to know the information before investing.   Id.    Thus,
 5   the materiality issue focuses on what a reasonable investor would
 6   want to know.   See id.   In essence, the plaintiffs are presumed
 7   to have relied on the omission if it was material.   See id.
 8        Here, the bankruptcy court found that the information
 9   regarding the project loan financing and Connexian’s bid to
10   obtain ownership of the lots was material and that any reasonable
11   investor would have wanted to know this information before
12   investing.   More specifically, the bankruptcy court found that a
13   reasonable investor would have wanted to know that the first
14   Point Center Financial loan was for a one-year term, that the
15   loan was underfunded by $2.1 million, and that Point Center
16   Financial was a hard money lender.    The bankruptcy court further
17   found that a reasonable investor would have wanted to know that
18   Connexian, instead of Coral Blue, LLC, was the entity with the
19   contractual right to purchase the four lots.
20        As previously discussed, the financing of the Coral Blue
21   Project and ownership of the lots were fundamental to any
22   reasonable investor’s decision to invest in Coral Blue, LLC.     The
23   findings that the omissions were material were not illogical,
24   implausible or unsupported by the record.   Accordingly, they were
25   not clearly erroneous.
26              e.   Causation and damages
27        The bankruptcy court found that Mr. Wickam’s omissions
28   caused the Ivars to lose their $216,000 investment. He has not

                                      23
 1   challenged on appeal the amount of damages the plaintiffs
 2   suffered, but he disputes that his conduct caused the plaintiffs
 3   to suffer those damages.
 4        Again, we turn to the Restatement for guidance.    Under the
 5   Restatement, the causation inquiry is twofold. A finding of
 6   causation requires the bankruptcy court to determine the
 7   existence of: (1) causation in fact, and (2) legal causation.     A
 8   misrepresentation or omission is a cause in fact if it was “a
 9   substantial factor” in determining the course of conduct leading
10   to the loss.    Restatement §§ 546, 548A; see also Sharfarz v.
11   Goguen (In re Goguen), 691 F.3d 62, 70 (1st Cir. 2012).    The
12   misrepresentation or omission is the legal cause of damages if
13   the creditor’s loss reasonably could be expected to result from
14   the reliance.    Restatement § 548A.
15        In most cases of fraudulent inducement, like here, the loss
16   necessarily flows from the acts induced.    See Restatement
17   § 549(1) (stating that fraud damages include: (a) the difference
18   between the value of what plaintiff actually received and its
19   purchase price; and (b) all other pecuniary loss suffered as a
20   result of the plaintiff’s reliance upon the misrepresentation).
21   This has been the correct measure for determining the loss
22   flowing from fraudulently induced conduct for well over a
23   century.   See Sigafus v. Porter, 179 U.S. 116, 122-23 (1900).
24        As to all of the omissions, the bankruptcy court found that,
25   if the Ivars had known the true facts, they would not have made
26   their $216,000 investment.    This finding is not challenged on
27   appeal.    “If the misrepresentation has in fact induced the
28   recipient to enter into the transaction, there is causation in

                                      24
 1   fact of the loss suffered in the transaction.”    Gem Ravioli, Inc.
 2   v. Creta (In re Creta), 271 B.R. 214, 219 (1st Cir. BAP 2002)
 3   (quoting Restatement § 546).    The Ivars invested their $216,000
 4   into Coral Blue, LLC because Mr. Wickam and Mr. Werner led them
 5   to believe that Coral Blue, LLC would own four lots and had the
 6   financing to develop them.   These misrepresentations were the
 7   cause in fact of their investment, and, as a result, their loss.
 8        We acknowledge that this Panel expressed concern in its
 9   prior decision regarding the existence of the unsecured
10   promissory note made by Connexian in favor of the Ivars covering
11   the same $216,000 investment.   The Ivars explained, however, that
12   they understood that they were purchasing equity in Coral Blue,
13   LLC, and would be paid through the sale of the developed lots.
14   The Ivars testified that they paid little or no attention to the
15   promissory note from Connexian.    The Ivars invested in Coral
16   Blue, LLC.   They expected to recover their investment and share
17   in profits from Coral Blue, LLC after it developed the lots it
18   was supposed to purchase using the conventional financing
19   Mr. Werner and Mr. Wickam said it had.    In truth, Coral Blue, LLC
20   had no assets, no conventional financing, and no ability to
21   return the Ivars’ investment, much less make any profit.    The
22   Ivars’ only prospect of payment was tied to an unsecured promise
23   to repay their investment with interest from an otherwise unknown
24   corporation.   The record supports the bankruptcy court’s finding
25   that these misrepresentations about Coral Blue, LLC were a
26   substantial factor in their loss, satisfying the causation in
27   fact requirement.
28        Mr. Wickam’s challenge as to causation goes more directly to

                                       25
 1   legal causation.   He asserts that the Ivars’ loss actually was
 2   caused by Point Center Financial’s decision to foreclose and by
 3   the 2008 crash of the residential real estate market.    This
 4   argument, however, does not negate the foreseeability of the
 5   Ivars’ loss, given Mr. Wickam’s misrepresentations that Coral
 6   Blue, LLC had conventional financing to purchase and develop real
 7   property that it never owned.   Rather, Mr. Wickam effectively
 8   contends that the market crash and the foreclosure were
 9   intervening causes of the loss that absolve him of liability.
10   But the Restatement reflects a much more limited role for
11   intervening causes in relationship to legal causation:
12        In determining what is foreseeable as a result of the
          misrepresentation, the possibility of intervening
13        events is not to be excluded altogether. Thus, when
          the financial condition of a corporation is
14        misrepresented and it is subsequently driven into
          insolvency by reason of the depressed condition of an
15        entire industry, which has no connection with the facts
          misrepresented, it may still be found that the
16        misrepresentation was a legal cause of the recipient's
          loss, since it may appear that if the company had been
17        in sound condition it would have survived the
          depression, and hence that a loss of this kind might
18        reasonably have been expected to follow.
19   Restatement § 548A, cmt. b.
20        Here, Mr. Wickam’s position ignores the reality of the
21   transaction and the facts presented at trial.   Point Financial
22   Center’s financing came due in one year, a fact that Mr. Wickam
23   and Mr. Werner knowingly concealed from the Ivars.   Connexian
24   also failed to complete the construction on the first two lots
25   within that year, causing the default that led Point Financial
26   Center to foreclose on Connexian’s lots.   The loss from a
27   speculative, underfunded, and misrepresented construction project
28   was wholly foreseeable, if not inevitable.

                                     26
 1        The bankruptcy court’s findings adequately addressed
 2   causation and damages.     They are supported by the record, and
 3   they are not clearly erroneous.
 4        3.      Mr. Roche’s $200,000 investment
 5        Mr. Roche testified to his understanding of hard money
 6   lending as lending to a borrower who is not creditworthy and who
 7   is a bad risk to the lender. He maintained that, had he known
 8   that the Coral Blue Project was relying on a hard money lender
 9   for its loan financing, he would not have invested in the
10   project.
11        Mr. Roche additionally insisted that, had he known about the
12   one-year term for the Point Center Financial loan, and the fact
13   that more than $2 million of the Point Center Financial loan was
14   unfunded, he would not have invested his $200,000 in the Coral
15   Blue Project.
16        As Mr. Roche explains, he only learned after he made his
17   $200,000 investment that the four lots were purchased in
18   Connexian’s name rather than in the name of Coral Blue, LLC.       He
19   maintains that, had he known Coral Blue, LLC was not going to
20   hold title to the properties, he would not have invested his
21   $200,000.4
22        The bankruptcy court’s findings regarding Mr. Roche’s
23   $200,000 investment were very similar to its findings regarding
24   the Ivars’ $216,000 investment.     The bankruptcy court found the
25
          4
26          According to Mr. Roche, he had no involvement with or
     knowledge of Connexian at the time of his investment. This was
27   not strictly true, as both of his investment checks were made
     payable to Connexian. The record is not clear why Mr. Roche paid
28   money to Connexian for an investment in Coral Blue, LLC.

                                       27
 1   same four omissions regarding ownership of the lots and the
 2   project’s loan financing.5
 3        The evidence supporting the bankruptcy court’s fraud
 4   findings with respect to Mr. Roche’s $200,000 investment does not
 5   materially differ from the evidence adduced concerning the Ivars’
 6   $216,000 investment.   We similarly uphold the bankruptcy court’s
 7   fraud findings in favor of Mr. Roche on his $200,000 investment.
 8        4.   The Ivars’ $600,000 investment
 9        The bankruptcy court grouped the Ivars’ second and third
10   payments into a unitary second investment.   The court’s findings
11   as to the combined $600,000 investment focused on two different
12   misrepresentations: a misrepresentation that Mr. Wickam and
13   Mr. Werner needed the additional funding for “bricks and sticks”
14   and a misrepresentation regarding the organizational status of
15   Coral Blue II, LLC.
16        The bankruptcy court also found that, but for the
17   misrepresentations that induced the Ivars to make their first
18   $216,000 investment, they would not have made the second $600,000
19
          5
20          There was one additional fraudulent omission the
     bankruptcy found with respect to Mr. Roche’s investment: that
21   Mr. Wickam and Mr. Werner failed to disclose to Mr. Roche the
     existence of other investors in Coral Blue, LLC. Mr. Roche
22
     complained that the copy of the Coral Blue, LLC operating
23   agreement he was given only listed himself, Mr. Wickam and
     Mr. Werner as members. It did not list the Ivars or several
24   other Coral Blue, LLC investors (presumably solicited by
     Mr. Wickam and Mr. Werner). Nonetheless, Mr. Roche admitted that
25   he did not receive his copy of the Coral Blue, LLC operating
26   agreement or his subscription agreement until after he invested.
     Consequently, the omission of some of the Coral Blue, LLC
27   investors from the membership list in his copy of the operating
     agreement does not support Mr. Roche’s claim that he was
28   defrauded into investing in the Coral Blue Project.

                                     28
 1   investment.   The bankruptcy court reasoned that the loss of the
 2   second investment flowed from the initial misrepresentations.
 3        We conclude that the bankruptcy court’s findings concerning
 4   the “bricks and sticks” misrepresentation were not clearly
 5   erroneous and were sufficient to support its judgment as to the
 6   second investment.
 7        The bankruptcy court found that Mr. Wickam told the Ivars
 8   that their second investment funds would be used for “bricks and
 9   sticks,” meaning direct development expenses for Lots 26 and 27.
10   This finding is supported by the Ivars’ testimony and is not
11   clearly erroneous.
12        The bankruptcy court next found that this representation was
13   false because Mr. Wickam and Mr. Werner used a substantial
14   portion of those funds for other purposes, including payments to
15   themselves.   Mr. Wickam argues that this finding was wrong
16   because Mr. Werner testified that all of the Ivars’ $600,000
17   actually was used for the development of the two lots.   But this
18   argument ignores the parties’ stipulation of admitted facts.
19   Mr. Wickam agreed that there was little or no money in
20   Connexian’s account when the Ivars’ funds were deposited and that
21   immediately after the deposit, Connexian made substantial
22   payments not related to the development of the lots.   These
23   included payments to Mr. Wickam and Mr. Werner.   These admitted
24   facts support the bankruptcy court’s finding that Mr. Wickam
25   misrepresented the need for and purpose of the additional
26   $600,000 investment from the Ivars.
27        Mr. Wickam challenges the bankruptcy court’s finding that he
28   knew that the “bricks and sticks” misrepresentation was false and

                                     29
 1   that he made the misrepresentation with the intent to deceive the
 2   Ivars.   He argues that no evidence supports these findings. But,
 3   as we have observed above, direct evidence of fraudulent
 4   knowledge and intent to deceive is rarely available because
 5   people rarely confess to fraud.    Therefore, courts may and
 6   usually must rely on inferences from other evidence.    In this
 7   case, the bankruptcy court did not commit clear error when it
 8   inferred Mr. Wickam’s mental state from the admitted facts that
 9   he was in charge of construction budgets and Mr. Wickam and
10   Mr. Werner immediately used most of the Ivars’ second investment
11   for other purposes, including a payment to Mr. Wickam himself.
12        Mr. Wickam also challenges the bankruptcy court’s finding
13   that the Ivars justifiably relied on the “bricks and sticks”
14   misrepresentation when they made their second investment.
15        In Field v. Mans, the United States Supreme Court held that
16   fraud under § 523(a)(2)(A) requires only a showing of justifiable
17   reliance rather than the higher standard for reasonable reliance.
18   The Court clarified that a creditor’s reliance was to be
19   evaluated using a subjective standard: “a person is justified in
20   relying on a representation of fact ‘although he might have
21   ascertained the falsity of the representation had he made an
22   investigation.’”   516 U.S. at 71 (citing Restatement § 540).     In
23   contrast to reasonable reliance, the Supreme Court explained that
24   “[j]ustification is a matter of the qualities and characteristics
25   of the particular plaintiff, and the circumstances of the
26   particular case, rather than of the application of a community
27   standard of conduct to all cases.” Id.; see also Citibank (S.
28   Dakota), N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1090 (9th

                                       30
 1   Cir. 1996).
 2        While justifiable reliance is broader than reasonable
 3   reliance, it is not without limits.    Again citing to the
 4   Restatement, the Court in Field acknowledged that one is still
 5   “required to use his senses, and cannot recover if he blindly
 6   relies upon a misrepresentation the falsity of which would be
 7   patent to him if he had utilized his opportunity to make a
 8   cursory examination or investigation.”    Field, 516 U.S. at 71
 9   (quoting Restatement § 541, cmt. a).    The Supreme Court further
10   elaborated:
11        justifiable reliance is the standard applicable to a
          victim’s conduct in cases of alleged misrepresentation
12        and that “[i]t is only where, under the circumstances,
          the facts should be apparent to one of his knowledge
13        and intelligence from a cursory glance, or he has
          discovered something which should serve as a warning
14        that he is being deceived, that he is required to make
          an investigation of his own.”
15
16   Id. at 71-72 (citing W. Prosser, Law of Torts § 108, p. 718 (4th
17   ed. 1971)) (emphasis added).
18        Accordingly, while a plaintiff’s negligence, by itself, is
19   insufficient to defeat a finding of justifiable reliance, the
20   plaintiff “cannot close his eyes and blindly rely” on whatever
21   the debtor says.   In re Apte, 96 F.3d at 1322-23 (citing In re
22   Eashai, 87 F.3d at 1090-91).   In other words, the justifiable
23   reliance standard does not permit the plaintiff to ignore red
24   flags that obviously call into question the truth of the debtor’s
25   representations regarding the transaction.    See, e.g., Yim v.
26   Chaffee (In re Chaffee), BAP No. CC-16-1241-TaFC, 2017 WL
27   1046057, at *6-7 (9th Cir. BAP Mar. 17, 2017), aff’d, 713 F.
28   App’x 641 (9th Cir. Feb. 23, 2018); Edgewater Place, Inc. v. Real

                                     31
 1   Estate Collateral Mgmt. Co. (In re Edgewater Place, Inc.), No. ED
 2   CV 98-281 RT, 1999 WL 35136576, at *7 (C.D. Cal. May 18, 1999);
 3   Mandalay Resort Grp. v. Miller (In re Miller), 310 B.R. 185, 198-
 4   99 (Bankr. C.D. Cal. 2004).
 5        In this case, there was no reason for the Ivars to doubt
 6   Mr. Wickam’s representation that he and Mr. Werner would use the
 7   Ivars’ second investment for “bricks and sticks,” meaning direct
 8   development costs for the second pair of Coral Blue Project
 9   lots.6
10        Finally, Mr. Wickam contends that the misrepresentations
11   were not the proximate cause of the Ivars’ loss of their second
12   investment.   He relies on the same arguments that he advances in
13   connection with the Ivars’ first investment.   Those arguments
14   have no more merit when applied to the second investment than
15   they have with respect to the first.
16   B.   The bankruptcy court did not err in denying Mr. Wickam’s
          motion to reopen the record and to alter or amend the
17        judgment.
18        By way of his post-judgment motion, Mr. Wickam sought two
19   things: (1) to ensure that the bankruptcy court had duly
20   considered Mr. Werner’s declaration testimony; and (2) to have
21
          6
            The dissent concludes that there were too many “red flags”
22
     of deception to sustain a finding of justifiable reliance. We
23   appreciate the dissent’s careful and thorough dissection of the
     evidence. We acknowledge that the presentation of the Ivars’
24   case leaves much to be desired and that the question is a close
     one. We note, however, that the Ivars faced a low bar at trial –
25   they only had to show that a “casual glance” would not have
26   revealed the fraud – and that Mr. Wickam faces a high bar on
     appeal: the clearly erroneous standard of review. We think that
27   Mr. Wickam has not carried his heavy burden of showing that the
     bankruptcy court committed clear error when it decided that the
28   Ivars had carried their light burden.

                                     32
 1   the court reopen the record to consider Mr. Ivar’s conviction
 2   arising from referral kickback activities he engaged in as a
 3   chiropractor.    On appeal, Mr. Wickam only challenges the
 4   bankruptcy court’s denial of relief with respect to the evidence
 5   of Mr. Ivar’s conviction.    In addition, Mr. Wickam concedes that
 6   Mr. Ivar’s conviction is not directly relevant to his investor
 7   activities that are the subject of the underlying adversary
 8   proceeding.    Instead, Mr. Wickam claims that the conviction
 9   undermines Mr. Ivar’s credibility as a witness. He urges that,
10   based on the conviction, the bankruptcy court should have, at a
11   minimum, reassessed the credibility of Mr. Ivar’s story regarding
12   his investments or, alternately, stricken his testimony in its
13   entirety.
14           To support his motion, Mr. Wickam relied on Civil Rule
15   59(e), which is made applicable in adversary proceedings by Rule
16   9023.    Relief under Civil Rule 59(e) requires the movant to
17   demonstrate either newly discovered evidence, clear error,
18   manifest injustice, or an intervening change in the law.
19   Zimmerman v. City of Oakland, 255 F.3d 734, 740 (9th Cir. 2001).
20   On appeal, Mr. Wickam solely relies on the newly discovered
21   evidence prong of Civil Rule 59(e).    To support his entitlement
22   to relief under this prong, Mr. Wickam needed to establish:
23        (1) the evidence was discovered after trial, (2) the
          exercise of due diligence would not have resulted in
24        the evidence being discovered at an earlier stage and
          (3) the newly discovered evidence is of such magnitude
25        that production of it earlier would likely have changed
          the outcome of the case.
26
27   Defenders of Wildlife v. Bernal, 204 F.3d 920, 929 (9th Cir.
28   2000).

                                      33
 1        The transcript from the hearing on the motion reflects that
 2   the bankruptcy court considered these factors and found that
 3   Mr. Wickam had not met his burden to establish all of them.    Most
 4   importantly, the bankruptcy court was not persuaded regarding the
 5   third element: that the newly discovered evidence was of such a
 6   magnitude that production of it earlier likely would have changed
 7   the outcome of the case.   Id.
 8        On this record, we cannot say that the bankruptcy court’s
 9   finding on this third element was clearly erroneous.   This is
10   especially true here, given that Mr. Wickam’s newly discovered
11   evidence was not directly connected to the conduct and events
12   that were at issue in the underlying adversary proceeding.
13        Accordingly, the bankruptcy court did not commit reversible
14   error when it denied Mr. Wickam’s postjudgment motion.
15                               CONCLUSION
16        For the reasons set forth above, we AFFIRM the bankruptcy
17   court’s nondischargeability judgment and its denial of
18   Mr. Wickam’s postjudgment motion under Civil Rule 59(e).
19
20
21
22     Concurrence in Part and Dissent in Part begins on next page.
23
24
25
26
27
28

                                      34
 1   SPRAKER, Bankruptcy Judge, concurring in part and dissenting in
     part.
 2
 3        I concur with the reasoning and conclusions reached in
 4   subsections A.2. and A.3. of the Discussion section of the
 5   majority decision.    Those sections affirm the bankruptcy court’s
 6   ruling that Mr. Wickam fraudulently induced the Ivars’ first
 7   investment, and Mr. Roche’s sole investment, in Coral Blue, LLC.
 8   In subsection A.4., the majority similarly affirms the bankruptcy
 9   court’s ruling that Mr. Wickam fraudulently induced the Ivars’
10   second investment.    I disagree.   In my view, the bankruptcy
11   court’s justifiable reliance finding concerning the Ivars’ second
12   investment irreconcilably conflicts with its findings regarding
13   the Ivars’ first investment.    Based on this, I believe that the
14   bankruptcy court’s conclusion that the Ivars justifiably relied
15   on the misrepresentation relating to the second investment is
16   illogical, and, therefore, clearly erroneous.     I would reverse
17   the judgment as to the Ivars’ second investment, and I dissent to
18   that limited extent.
19   A.   The Clearly Erroneous Standard.
20        This appeal demonstrates the inherent tension in the clearly
21   erroneous standard.    As the Supreme Court aptly has explained,
22        If the [factfinder’s] account of the evidence is
          plausible in light of the record viewed in its
23        entirety, [the appellate court] may not reverse it even
          though convinced that had it been sitting as the trier
24        of fact, it would have weighed the evidence
          differently. Where there are two permissible views of
25        the evidence, the factfinder’s choice between them
          cannot be clearly erroneous.
26
27   Anderson v. City of Bessemer City, 470 U.S. 564, 573–74 (1985).
28   Anderson held that appellate courts overstep the bounds of their

                                         1
 1   duty if they merely substitute their judgment of the facts in
 2   place of the factfinder’s.    As Anderson put it, the appellate
 3   court must not decide factual issues de novo.    Id. at 573.
 4        On the other hand, the clearly erroneous standard is not a
 5   “blank check” that permits a trial court, sitting without a jury,
 6   to make any findings it deems necessary to reach its desired
 7   result.    At bottom, the standard sets forth a rule of reason.
 8   The factfinder’s view of the evidence is not “permissible” – and
 9   is clearly erroneous – when it is “‘illogical or implausible’ or
10   lacks ‘support in [reasonable] inferences that may be drawn from
11   facts in the record.’”    United States v. Hinkson, 585 F.3d 1247,
12   1261 (9th Cir. 2009) (en banc) (quoting Anderson, 470 U.S. at
13   577).    When factual issues are controlling, the deferential
14   nature of the clearly erroneous standard does not permit
15   appellate courts to shy away from “meticulous” and
16   “comprehensive” review of the record to ensure that the findings
17   are logical, plausible and supported by the record.    See
18   Anderson, 470 U.S. at 581 (Powell, J., concurring).    With the
19   standard in mind, I turn my attention to my concerns with the
20   bankruptcy court’s determination of fraud as to the Ivars’ second
21   investment.1
22
          1
23          I focus my discussion upon the element of justifiable
     reliance. But the court’s findings as to knowledge of falsity
24   and intent also merit a brief mention. The court based its
     findings on these elements upon statements in the Ivars’
25   declarations that “Mr. Werner and Mr. Wickam indicated it was a
26   perfect time to get an early start on lots 26 and 27 and needed
     additional funds for ‘bricks and sticks’ on the project which I
27   understood to mean actual construction costs.” Alan Ivar Decl.
     (Sept. 20, 2013) at ¶ 67; Deborah Ivar Decl. (Sept. 20, 2013) at
28                                                      (continued...)

                                       2
 1   B.   The Justifiable Reliance Finding.
 2        Mr. Wickam argues that the court erred in finding that the
 3   Ivars justifiably relied on the “bricks and sticks”
 4   misrepresentation in making their second investment of $600,000.
 5   While there was nothing suspicious concerning the statement that
 6   the Ivars’ funds would be used for “bricks and sticks,” the Ivars
 7   were aware of numerous other red flags concerning their second
 8   investment.   In my opinion, the Ivars failed to prove that they
 9   justifiably relied on the bricks and sticks misrepresentation
10   when they ignored those red flags.
11        To briefly recap, the Ivars’ second investment consisted of
12   a $200,000 installment paid in December 2006, and a $400,000
13   installment paid in April 2007.   As Mr. Wickam points out, the
14   Ivars contend that they were investing this time in Coral Blue
15   II, LLC to develop lots 26 and 27, but they paid their investment
16   funds to Connexian rather than Coral Blue II, LLC.    In exchange
17   for their $200,000 installment, the Ivars received a 30-day
18
19        1
           (...continued)
20   ¶ 67. While these statements establish that Mr. Wickam made, or
     was aware of, these representations they fall short of
21   establishing that Mr. Wickam knew the falsity of the statement or
     intended to deceive the Ivars at that time. There is simply
22
     nothing in the statements cited by the bankruptcy court that goes
23   to knowledge of falsity or intent. However, the court made two
     other findings that arguably support its knowledge and intent
24   determinations. First it found that, at the time Connexian
     received the Ivars’ two payments comprising the second
25   investment, the business accounts “were at or near a zero
26   balance.” And second, it found that Mr. Wickam received payments
     shortly after each investment. Mindful of the deference given to
27   the bankruptcy court’s factual findings, I cannot say that its
     findings of knowledge and intent are clearly erroneous based on
28   the totality of the evidence.

                                       3
 1   promissory note from Connexian bearing 7% interest.       They also
 2   received a deed of trust from Connexian against lots 26 and 27 to
 3   secure repayment of the promissory note.       The record reflects
 4   that, at the time the Ivars made their $200,000 installment, they
 5   did not receive a single document from, or about, Coral Blue II,
 6   LLC.
 7          Four months later, the Ivars paid an additional $400,000 to
 8   Connexian for an additional investment in Coral Blue II, LLC.
 9   This time, the Ivars did receive and sign an operating agreement
10   for Coral Blue II, LLC at the time they made this second payment.
11   Like the first installment payment, this second installment was
12   paid to Connexian rather than Coral Blue II, LLC.       The Ivars did
13   not receive a promissory note in exchange for their $400,000
14   payment, though by this time Connexian’s 30-day note for the
15   prior $200,000 “loan” already was in default.       They testified
16   that they understood they would receive 25% of the net proceeds
17   from the sales of lots 26 and 27.       The Ivars failed to address
18   Mr. Wickam’s justifiable reliance argument in their appeal brief.
19          The majority decision thoroughly sets forth the metes and
20   bounds of the justifiable reliance standard and there is no need
21   to reiterate those points here.    However, it bears repeating that
22   the subjective nature of the standard cuts both ways.       See Field
23   v. Mans, 516 U.S. 59, 76 (1995).       Because justifiable reliance
24   focuses on the circumstances of the individual case and
25   particularly on the fraud plaintiffs’ state of mind, the
26   plaintiffs must be charged with all knowledge (and beliefs) they
27   admit to having.    See generally Id. at 71-72 (holding that
28   justifiable reliance focuses on the knowledge, intelligence, and

                                        4
 1   other “qualities and characteristics of the particular plaintiff,
 2   and the circumstances of the particular case, rather than [on]
 3   the application of a community standard of conduct to all
 4   cases.”).
 5        Although creditors are not generally required to investigate
 6   their debtors, this does not mean that they are never required to
 7   investigate.   Yim v. Chaffee (In re Chaffee), BAP No.
 8   CC-16-1241-TaFC, 2017 WL 1046057, at *6-7 (9th Cir. BAP 2017),
 9   aff’d, 713 F. App'x 641 (9th Cir. Feb. 23, 2018), at *7 (quoting
10   Eugene Parks Law Corp. Defined Benefit Plan v. Kirsh (In re
11   Kirsh), 973 F.2d 1454, 1460 (9th Cir. 1992)).   Rather,
12   justifiable reliance “turns on a person’s knowledge under the
13   particular circumstances.”   Citibank (S. Dakota), N.A. v. Eashai
14   (In re Eashai), 87 F.3d 1082, 1090 (9th Cir. 1996).   The court
15   “must look to all of the circumstances surrounding the particular
16   transaction, and must particularly consider the subjective effect
17   of those circumstances upon the creditor.”   In re Chaffee, 2017
18   WL 1046057 at *7 (emphasis added).   When fraud plaintiffs receive
19   information that, given the circumstances and their level of
20   knowledge and intelligence, should warn them that the defendant
21   might be deceiving them, they cannot blindly rely on the
22   defendant’s representations.   Field, 516 U.S. at 71-72(citing W.
23   Prosser, Law of Torts § 108, p. 718 (4th ed. 1971)); see, e.g.,
24   In re Eashai, 87 F.3d at 1091 (“We will not allow a creditor, who
25   has been put on notice of the debtor’s intent not to repay, to
26   extend credit and then later claim nondischargeability on the
27   basis of fraud”); McClammer v. Holmes (In re Holmes), 570 B.R.
28   610, 621 (Bankr. W.D. Mo. 2017) (holding that at some point

                                      5
 1   multiple misrepresentations precluded a finding of justifiable
 2   reliance); Cooper v. Lemke (In re Lemke), 423 B.R. 917, 924 (10th
 3   Cir. BAP 2010) (no justifiable reliance where plaintiff continued
 4   to lend money after red flags arose).    “Reliance falls below the
 5   justifiable standard when ‘red flags’ are ignored.”    Hopper v.
 6   Lewis (In re Lewis), 551 B.R. 41, 49 (Bankr. E.D. Cal. 2016).
 7        The Ivars’ $600,000 investment was not their first
 8   transaction with Mr. Wickam and Mr. Werner, and they are charged
 9   with that history.    Importantly, they carry with them the
10   representations on which they relied to enter into their first
11   investment on this project.    The Ivars testified that when they
12   made their first investment they believed Coral Blue, LLC owned
13   the four Coral Blue lots.    They also understood that Coral Blue,
14   LLC would develop the four lots, and they would be paid from the
15   sale of those lots.    Based on this understanding, the Ivars
16   further testified that Coral Blue, LLC’s role in the transaction
17   was critical to them.    As the Ivars put it, had they known that
18   Coral Blue, LLC was not going to own the four lots, they would
19   not have made their first investment.    The bankruptcy court
20   credited this testimony in its findings, and the majority
21   decision relies upon these findings in affirming the Ivars’
22   claims for fraudulent misrepresentation as to the first
23   investment.   I concur in this conclusion.
24        And yet, only a few months later, in the midst of making
25   their decision to invest an additional $200,000 in December 2006,
26   the Ivars were asked to invest in a new entity but on the same
27   project in which they had previously invested.    As they explained
28   it, the Ivars were to be paid from two of the same lots that

                                       6
 1   Coral Blue, LLC previously committed to sell to fund payment on
 2   the Ivars’ first investment.   Moreover, in making their $200,000
 3   payment to Connexian, the Ivars were confronted with proof,
 4   provided to them by Mr. Wickam and Mr. Werner, that Coral Blue,
 5   LLC did not own two of the four lots.   Connexian did.   And the
 6   Ivars paid the $200,000 to Connexian.   Instead of receiving any
 7   interest in Coral Blue II, LLC at the time they first paid
 8   Connexian, the Ivars received a 30-day promissory note from
 9   Connexian secured by two of the lots Coral Blue, LLC supposedly
10   owned.   At that time, they were instructed not to record that
11   deed of trust.   Even overlooking the instruction not to record
12   the deed of trust, Connexian’s deed of trust goes to the
13   ownership of the lots.   This directly conflicts with the Ivars’
14   fundamental understanding of their first investment made only a
15   couple of months earlier: that Coral Blue, LLC owned and was
16   developing all four Coral Blue lots, including lots 26 and 27.
17         The Ivars are charged with the knowledge gained in their
18   first transaction, and the two transactions are inherently
19   inconsistent.    The Ivars testified that ownership and development
20   of the Coral Blue lots was critically important to them, and they
21   would not have made their first investment had they known that
22   Coral Blue, LLC did not own all four lots.   Given that, it was
23   neither logical, nor plausible, that the Ivars justifiably relied
24   on any further solicitation statements when they knew three
25   different entities controlled by Mr. Werner and Mr. Wickam had
26   made conflicting claims of ownership and the right to develop the
27   Coral Blue lots.   The Ivars were not entitled to turn a blind eye
28   to the competing claims of ownership, multiple entities,

                                       7
 1   secretive collateral, and the breach of the $200,000 promissory
 2   note in making their second investment.   There were simply too
 3   many red flags for the Ivars to ignore before making their second
 4   investment.
 5        It was the Ivars’ burden of proof to establish all of the
 6   elements necessary to establish nondischargeability under
 7   § 523(a)(2)(A), including justifiable reliance.   See Field, 516
 8   U.S. at 66; Grogan v. Garner, 498 U.S. 279, 284–85 (1991); see
 9   also Sachan v. Huh (In re Huh), 506 B.R. 257, 262 (9th Cir. BAP
10   2014) (en banc).   Yet the Ivars did not even attempt to address
11   the red flags that existed at the time they made their second
12   investment.   There is nothing in the record remotely explaining
13   what they were thinking about the introduction of Coral Blue II,
14   LLC and Connexian into the project.2   The record is totally
15   devoid of any explanation as to how they thought they would be
16   paid by the two Coral Blue entities from the sale of the same two
17   lots that Connexian owned.
18        In sum, I conclude that the bankruptcy court committed clear
19   error when it found that the Ivars justifiably relied on the
20
21
22        2
            There was some discussion at trial regarding the Ivars’
23   separate investment in another Wickam and Werner project in
     Colorado in which Connexian was involved. That matter, and any
24   relationship with Connexian’s ownership of the Coral Blue lots,
     was not developed. More importantly, it does not alter the
25   Ivars’ testimony that they would not have made their first
26   investment in Coral Blue, LLC if they had known that the four
     lots would not be owned by the entity in which they were
27   investing. Yet they invested in Coral Blue II, LLC with
     knowledge that Coral Blue, LLC should have owned the lots and
28   that Connexian claimed to own the lots.

                                      8
 1   “bricks and sticks” misrepresentation.3   The finding is
 2   illogical, implausible, and not supported by the record.   Because
 3   the Ivars failed to prove an element of their § 523(a)(2)(A)
 4   claim as to their second investment, I would reverse the judgment
 5   excepting that debt from discharge.
 6
 7
          3
 8          The bankruptcy court alternately found that Mr. Wickam and
     Mr. Werner fraudulently induced the Ivars’ second investment by
 9   misrepresenting the organizational status of Coral Blue II, LLC.
     According to the Ivars, they were falsely led to believe that
10   Coral Blue II, LLC filed its Articles of Organization with the
     California Secretary of State in March 2007, when in fact the
11
     Articles of Organization were not filed until several months
12   later. Neither the parties nor the majority decision focus on
     this alternate fraud ground. This fraud finding is problematic
13   for several reasons. For instance, the representation occurred
     after the Ivars paid the first $200,000 of their second
14   investment. Second, in light of the transactional irregularities
15   noted above, the Ivars could not have justifiably relied on the
     organizational status misrepresentation any more than they relied
16   on the “bricks and sticks” misrepresentation. Most importantly,
     there is a lack of proximate cause in relation to this
17   misrepresentation. See Ghomeshi v. Sabban (In re Sabban), 384
     B.R. 1, 6-7 (9th Cir. BAP 2008) (noting similar causal disconnect
18   between statutory disgorgement debt and plaintiff’s alleged fraud
19   loss).

20        The bankruptcy court further held that the fraud pertaining
     to the Ivars’ first investment supported the nondischargeability
21   of the debt arising from their second investment. The Ivars
     press this point on appeal: “Had Wickam not engaged in fraud in
22
     the first place, the Ivars would not have invested their initial
23   $216,000 and thereafter not been in a position to have invested
     an additional $600,000.” The majority decision does not address
24   this holding because it relies on the fraud holding pertaining to
     the “bricks and sticks” representation. Suffice it to say that
25   there is no logical way Mr. Wickam’s misrepresentations that
26   induced the Ivars’ first investment also could have induced the
     Ivars’ second investment in a different entity. See generally
27   Cohen v. De La Cruz, 523 U.S. 213, 220-23 (1998) (indicating that
     debt must flow from the fraud to be nondischargeable); In re
28   Sabban, 384 B.R. at 6-7 (same).

                                     9
