                United States Court of Appeals
                           For the Eighth Circuit
                       ___________________________

                               No. 13-2054
                       ___________________________

 In re: David L. Juve, doing business as Juve Buying Services, doing business as
                         Imports Plus, Inc.; Mona L. Juve

                             lllllllllllllllllllllDebtors

                            ------------------------------

                                 David H. Heide

                            lllllllllllllllllllllAppellant

                         Leah T. Heide; Kaia E. Heide

                                         v.

David L. Juve, doing business as Juve Buying Services, doing business as Imports
                                    Plus, Inc.

                            lllllllllllllllllllllAppellee

                                  Mona L. Juve
                                 ____________

                   Appeal from the United States Bankruptcy
                     Appellate Panel for the Eighth Circuit
                                ____________

                          Submitted: February 12, 2014
                              Filed: July 31, 2014
                                ____________
Before SMITH, BEAM, and BENTON, Circuit Judges.
                           ____________

SMITH, Circuit Judge.

        David Juve filed for Chapter 7 bankruptcy in August 2009. In December 2009,
Juve's former business associate, David Heide, challenged certain debts Juve owed
to Heide as nondischargeable. The debts arose from a decade-long agreement between
Heide and Juve. Heide periodically loaned Juve money to purchase inventory for the
used car dealership that Juve partially owned in Minnesota. Heide asserted that Juve
obtained—and lost—more than $300,000 in loans by false representation and that the
debt was therefore nondischargeble. After a bench trial, the bankruptcy court agreed
and found that the debt was nondischargeable under 11 U.S.C § 523(a)(2)(A). The
Bankruptcy Appellate Panel (BAP) found that the bankruptcy court clearly erred in
its factual findings and reversed. We reverse the BAP and direct reinstatement of the
bankruptcy court's judgment.

                                   I. Background
       During the 1990s and 2000s, Juve sold used cars. During the time relevant to
this appeal, Juve worked at the Imports Plus used car dealership. In 1996, Heide
began working for Juve at Imports Plus. The two had previously worked together as
salesmen at a different dealership and had developed a good friendship.

       Because of a prior bankruptcy, Juve lacked a sufficient credit rating to obtain
traditional financing for car purchases. In 1998, Juve asked Heide to help fund the
purchase of vehicles for resale on the Imports Plus lot. Heide agreed and began
lending Juve just enough money to purchase one vehicle for resale at a time. Juve
paid Heide regular interest payments until the car was sold; additionally, he received
a 10 percent return on his investment upon sale.


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       In 2001, Juve became 75 percent owner of Imports Plus. In need of capital, he
asked Heide to modify their agreement. Under the modified agreement, Heide would
fund the purchase of multiple cars at a time, receive monthly interest payments, and
receive a commission when each car was sold. The proceeds of the sale would be
rolled into the purchase of the next car rather than being used to pay down the
principal of the loan, which amounted to $200,000. Heide disbursed two $50,000
loans to Juve in 2003 and 2004, bringing the loan balance to $300,000. The checks
were written to Imports Plus, Inc. It is undisputed that Juve repeatedly reassured
Heide that Juve owned the cars on the lot and that the inventory was sufficient to
secure the loan.

      In 2005, Heide asked Juve to keep vehicle titles at Imports Plus so that
customers could obtain title to their purchases more quickly. Juve claimed that he
wanted to keep them at his home in case of a fire at Imports Plus. During that time,
Heide recommended that Juve take out a life insurance policy naming Heide as
beneficiary; Juve told Heide that he had done so. In 2006, Imports Plus began to fail.
By 2007, Juve encumbered the titles of several vehicles on the lot, without telling
Heide. At length, Imports Plus lost all of Heide's investment. Juve could not explain
how exactly the funds were lost.

        In 2008, Juve approached Heide about purchasing specific vehicles at an
auction in Las Vegas. Heide agreed and wrote two checks for a total of $50,490; the
checks identified the vehicles to be purchased. Juve traveled to Las Vegas, returned,
then told Heide he had purchased the vehicles. In fact, Juve did not purchase the cars.
By the end of 2008, the business further deteriorated: the Las Vegas vehicles had not
arrived at the Imports Plus lot, Imports Plus customers were not receiving vehicle
titles, and Juve had cleaned out his office. Heide then requested repayment of part of
the loan; Juve declined claiming the timing was not good.




                                         -3-
       Concerned about Imports Plus viability, Heide traveled to Florida to meet with
Juve's business co-owner, Dennis Borgen. Borgen was the prior owner of Imports
Plus and retained 25 percent ownership. At that meeting, Heide for the first time
revealed to Borgen the decade-long course of dealing between Juve and Heide.
Borgen called Juve to discuss the situation, whereupon Juve admitted that he had lost
all of Heide's money and had lied about it for some time.

       In January 2009, Heide met with Juve and accused Juve of stealing his life
savings. Juve insisted that it had not been intentional and maintained that he intended
to repay the debt. Heide asked about the life insurance policy; Juve then revealed that
he never purchased the policy. At Heide's insistence, Juve signed a document stating
that he had borrowed $300,000 from Heide and paid interest without interruption
during the life of the loan. The document also acknowledged the Las Vegas
transaction and Juve's failure to follow through with the purchase of the vehicles.
Finally, the document acknowledged that Juve was personally liable for the loans.

       Juve and his wife filed for Chapter 7 bankruptcy in August 2009. Heide and his
wife commenced an adversary proceeding against the Juves, seeking a declaration
that the debts were nondischargeable under 11 U.S.C §§ 523(a)(2), (4), or (6). The
Heides moved for summary judgment, which the bankruptcy court granted. The court
found that Juve owed Heide $400,000, which included the debts described above and
a $50,000 loan to the Juves from Heide's daughter. The court also found that the debt
was nondischargeable under 11 U.S.C § 523(a)(2)(A).

       Juve appealed to the BAP, which reversed and remanded to the bankruptcy
court. On remand, the case proceeded to a bench trial, whereupon the court entered
judgment for the Heides for $359,490—the value of the loan acknowledged in the
2009 document plus the Las Vegas transaction. The court found that Juve had
engaged in fraud through his repeated representations that Heide's investment was
safe. The court also found that following the 2001 restructuring of the loan

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agreement, each new purchase of a car with the loan constituted a re-extension of
credit.

       Juve again appealed to the BAP, which again reversed the bankruptcy court.
The BAP held that the bankruptcy court clearly erred in its factual findings. The BAP
held that the reuse of loan funds for the purchase of new cars did not constitute a re-
extension of credit. The BAP further held that the record did not support finding that
Heide made fraudulent representations with respect to security of the loans at the time
the loans originated in 2004 (when Heide disbursed the last of the loan funds). The
BAP therefore reversed the judgment as to the $300,000 loan. The BAP considered
the Las Vegas car-purchase loan a separate transaction and affirmed judgment against
Juve as to that $50,490 loan. This appeal followed.

                                       II. Discussion
       "In an appeal from the BAP, this court independently reviews the bankruptcy
court's decision . . . Fact findings by the bankruptcy court are reviewed for clear error;
its conclusions of law are reviewed de novo." Terry v. Standard Ins. Co. (In re Terry),
687 F.3d 961, 963 (8th Cir. 2012) (internal citation omitted). The Supreme Court
described the "clear error" standard as follows:

      A finding is "clearly erroneous" when although there is evidence to
      support it, the reviewing court on the entire evidence is left with a
      definite and firm conviction that a mistake has been committed. If the
      district court's account of the evidence is plausible in light of the record
      viewed in its entirety, the court of appeals may not reverse it even
      though convinced that had it been sitting as the trier of fact, it would
      have weighed the evidence differently. Where there are two permissible
      views of the evidence, the factfinder's choice between them cannot be
      clearly erroneous.




                                           -5-
Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573–74 (1985) (citations,
quotations, and alterations omitted).1

       The bankruptcy code designates some debts as nondischargeable in bankruptcy.
One class of nondischargeable debt is any debt "for money, property, services, or an
extension, renewal, or refinancing of credit, to the extent obtained by false pretenses,
a false representation, or actual fraud, other than a statement respecting the debtor’s
or an insider's financial condition." 11 U.S.C. § 523(a)(2)(A).

       The creditor bears the burden of proving, by a preponderance of the evidence,
that a debt should be nondischargeable under § 523. See Grogan v. Garner, 498 U.S.
279, 286–87 (1991); Treadwell v. Glenstone Lodge, Inc. (In re Treadwell), 637 F.3d
855, 860 (8th Cir. 2011). The creditor must show that "(1) the debtor made a
representation, (2) with knowledge of its falsity, (3) deliberately for the purpose of
deceiving the creditor, (4) who justifiably relied on the representation, which (5)
proximately caused the creditor damage." Treadwell, 657 F.3d at 860. A debtor's
silence as to a material fact can constitute a false representation under § 523(a)(2)(A).
Caspers v. Van Horne (Matter of Van Horne), 823 F.2d 1285, 1288 (8th Cir. 1987),
abrogated on other grounds by Grogan, 498 U.S. 279. Juve does not challenge the
bankruptcy court's calculation of Heide's damages.

      Justifiable reliance is an intermediate standard between actual reliance
      and reasonable reliance. See Field [v. Mann], 516 U.S. [59,] 70–73.
      Reliance can be justifiable even though an investigation would have
      revealed the falsity of a representation. Id. at 74–75. However, a creditor
      "cannot recover if he blindly relies upon a misrepresentation the falsity
      of which would be patent to him if he had utilized his opportunity to


      1
       We have applied the Anderson standard to review of bankruptcy court
factfinding. See R & R Ready Mix v. Freier (In re Freier), 604 F.3d 583, 587 (8th Cir.
2010).

                                          -6-
      make a cursory examination or investigation." Id. at 71 (quoting
      Restatement (Second) of Torts § 541 cmt. a (1976)).

In re Freier, 604 F.3d at 588.2

       The primary question before us is whether the bankruptcy court clearly erred
in finding that Juve's reuse of loan funds after 2004 constituted an "extension [or]
renewal . . . of credit" under §523(a)(2)(A). If the reuse of funds after 2004
constituted such an extension or renewal, then the entire debt is rendered
nondischargeable upon proof that the extension was obtained by fraud and
satisfaction of the Treadwell elements. The bankruptcy court characterized the loan
arrangement as follows:

      In 2003 and 2004, Heide disbursed two more $50,000 loans to Juve, in
      addition to the revolving ongoing extension of credit based on
      previously loaned amounts, bringing the total amount of outstanding
      debt owed by Juve to Heide to $300,000. Juve continued to use that
      money through 2008. In other words, as Heide vehicles were sold,
      instead of being repaid the principal as was his right at any time, Heide
      re-extended the credit and use of the proceeds to Juve, and Juve
      repeatedly borrowed those funds anew, all based upon Juve's ongoing
      assertions of the equity and liquidity of the Heide inventory sufficient
      to satisfy the entire balance of funds owning to Heide.




      2
        Juve contends that "justifiable reliance" requires proof that there were no "red
flags" that would alert an "ordinary prudent investor" that the representations were
inaccurate, and that "minimal investigation" would have revealed the falsity of the
representation. Helena Chem. Co. v. Richmond (In re Richmond), 429 B.R. 263, 293
(Bkrtcy. E.D. Ark. 2010). Richmond is inapposite, as the Richmond court was
construing "reasonable reliance" found in 11 U.S.C. § 523(a)(2)(B). As we held in
Freier, "justifiable reliance" is a lower standard than "reasonable reliance."


                                          -7-
       The BAP concluded that "[t]he record does not support [the bankruptcy court's]
finding" because "Heide himself never testified that under the terms of the modified
oral agreement each use of the loan proceeds constituted a renewal of credit." We
disagree. Both Heide and Juve testified that the loan proceeds constituted a
"revolving account" for the purchase of new vehicles.3 The parties agree that Heide
loaned a substantial sum to Juve. Between 2004 and 2009, Juve used and reused the
funds while Heide did not demand repayment. Failure to use the magic words
"renewal of credit" to describe the agreement is not dispositive. In light of the record
evidence, we hold that the bankruptcy court's factual determination is plausible and
a "permissible view[ ] of the evidence;" therefore, it did not clearly err. See Anderson,
470 U.S. at 473–74.

      The court did not clearly err in its Treadwell elements factual findings.4 First,
Juve made representations. Juve told Heide that his investment was "safe" and that
he had secured a life insurance policy with Heide as beneficiary to protect the
investment. Juve told Heide that all of the cars on the lot belonged to Heide, but he
did not disclose that he was encumbering the vehicles. Silence as to a material fact
can constitute a false representation. See Van Horne, 823 F.2d at 1288.

       Second, Juve knew that some of his representations were false and that the
representations were made with the purpose to deceive Heide. Juve admitted at trial
that he knew that selling vehicles would be the only way for Heide to get his money
back. He encumbered the vehicles anyway and admitted that by 2007 and 2008,
"there wasn't $300,000 of unencumbered inventory on the Imports Plus lot." Juve was
      3
       Heide testified at trial that "the money was—it was in his revolving account
to pay for new purchases." App. at 131. Juve testified that Heide "gave another
$13,000 to just turn it all over into a revolving account for $200,000 so he'd get a
monthly check." Id. at 224.
      4
          The damage element is not disputed here.


                                          -8-
obviously aware that he had not secured a life insurance policy naming Heide as
beneficiary. He nevertheless continued to represent to Heide that Heide owned all the
vehicles on the lot and that Heide's investment was safe.

       Third, Heide "justifiably relied" on Juve's representations. Juve took advantage
of his friendship with Heide. Juve was not a stranger but a friend who misused the
trust associated with their relationship. Juve concealed his misrepresentation of the
security of Heide's investment by making periodic interest payments while fully
aware that he was squandering Heide's property. When Heide began to have
misgivings about the security of the loan and suggested that Juve secure a life
insurance policy, Juve falsely assured him that he had done so. Juve even concealed
from his joint owner, Borgen, Heide's loans and Juve's encumbering of the vehicles.
On this record, we hold that the bankruptcy court did not clearly err in finding that
Heide justifiably relied on Juve's representations.

      The bankruptcy court's factual findings were not clearly erroneous in light of
the record evidence produced by a full trial on the merits. Nor did the court
erroneously apply the law to the facts presented. The bankruptcy court's judgment
should be reinstated.

                                  III. Conclusion
      Accordingly, we reverse the judgment of the BAP and remand to the BAP
with instructions to remand to the bankruptcy court for entry of judgment in favor
of Heide.
                       ______________________________




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