|In re: Case No. A90-00985-DMD||)|| |
|EUGENE A. BROOKS, JR. and||)|| |
|PATRICIA N. BROOKS,||)|| |
| ||)|| |
|G. OTTO HOLTA,||)||Bancap No. 96-3105|
|)||Adversary No. A90-00985-002-DMD|
|Plaintiff and||)|| |
|WILLIAM BARSTOW, TRUSTEE,||)|| |
|Defendant and||)|| |
|WARREN G. KELLICUT,||)|| |
|Defendant and||)|| |
1) that there was a misrepresentation; 2) which was fraudulent or material; 3) which induced the party to enter the contract and 4) upon which the party was justified in relying.
Restatement (Second) of Contracts, § 159 Comment b (1979).b. Half-truths. A statement may be true with respect to the facts stated, but may fail to include qualifying matter necessary to prevent the implication of an assertion that is false with respect to other facts. For example, a true statement that an event has recently occurred may carry the false implication that the situation has not changed since its occurrence. Such a half-truth may be as misleading as an assertion that is wholly false.
Holta clearly implies that there is nothing in the pertinent bankruptcy files that would reveal any source of value for execution. He neglects to point out that the Brooks bankruptcy file had recently been re-opened and that he was a defendant, along with the Municipality of Anchorage, in a pending lawsuit over $33,925.57 in sales proceeds brought by the Chapter 7 trustee William Barstow in bankruptcy court. He also failed to point out that at a recent hearing, just six days prior to his letter, this court and the parties discussed the need for payment of proceeds to GDI creditors prior to creditors of the Brooks' estate.It has come to my attention that you are a holder of a Judgment against Brooks and General Development Inc. I have had an opportunity to review the file on film at the courthouse and am fully aware of Brooks' and General Development, Inc.'s prior bankruptcies. Nevertheless, I am interested in purchasing your rights, good or bad, on the Judgment on Confession . . .
Holta's statement "Well I would like to try and execute on it" is truthful but Holta omitted material information significant to Kellicut by this answer. The true reason Holta wanted the judgment was because he had just attended a hearing where the court and counsel discussed the disposition of nearly $34,000.00 in sales proceeds. Holta was attempting to secure those proceeds because his prior quit-claim deed from Gene Brooks might not entitle him to the funds. When asked why he thought he could execute on the judgment, Holta stated, "Oh, nothing in particular. . . ." There was something in particular: nearly $34,000.00 in surplus proceeds waiting for payment to a GDI creditor. Holta had engineered the purchase of real estate rights, was intimately familiar with the tax sale of lots, and had been chasing these proceeds for months in litigation. His "nothing in particular" statement was a fraudulent misrepresentation. Similarly, his statement of "I just- I know where there's at least four hundred dollars, so- and I would hope to execute on the rest of it," is fraudulent. While the statement is literally true, Holta knew where there was a lot more than four hundred dollars. His response was misleading and designed to give Kellicut a false impression.Kellicut: I haven't read it (Assignment of Judgment package), but I don't think I'm interested.
5 ABR 498
Holta: Oh, You don't?
Kellicut: No. Why do you want it?
Holta: Well, I would like to try to execute on it.
Kellicut: What makes you think you can?
Holta: Oh, nothing in particular. I just-- I know where there's at least four hundred dollars, so- and I would hope to execute on the rest of it.
Holta's response is evasive and misleading. Holta knew precisely how he would realize funds on the judgment: he would assert Kellicut's GDI judgment against the proceeds impounded by the Municipality and eventually held by the trustee. He was a party to the litigation pending in bankruptcy court and the pending motions for summary judgment. Later Kellicut asked:Kellicut: How do you - how do you intend to do that (execute on the judgment) if those - if -if you know, based - based upon what you know about Gene Brooks, General Development and so on having filed bankruptcy?
Holta: Well, I'll do what I can with it. I mean, I'm not asking you to - to warrant, you know, anything on it whatsoever, I mean, If I can collect on it, I'll try; if I can't, then I can't.
Again, Holta speaks in half-truths. Certainly, he had some dealings with Brooks regarding real estate but there was much more to it than that. He purchased the GDI quit-claim from Brooks in the hope of recovering surplus proceeds at a tax sale. He defended a state court action for fraud by Brooks based upon his purchase of the deed. He was also the defendant in a pending adversary in bankruptcy court in the Brooks' bankruptcy. Brooks' actions had re-opened the bankruptcy estate. Holta deliberately mislead Kellicut regarding his prior dealings with Brooks, leaving the 5 ABR 500   impression Holta's real estate dealings with Brooks were unrelated to Holta's purchase offer to Kellicut.Kellicut: Do you know Gene Brooks?
Holta: I have met him before, yes.
Kellicut: Uh-huh (affirmative).
Holta: I've had some dealings with him in regards to some real estate.
Holta wasn't concerned with wasting Kellicut's time because the judgment wasn't worth a lot. Holta's concern was in acquiring a right to the $34,000.00 through Kellicut's judgment. The judgment was worth a lot, but Holta deliberately kept any details which would shed light on its value from Kellicut.Kellicut: Not because I'm old, it's just that I've learned that when I move fast, something usually goes wrong.
Holta: Okay. The reason I had - I did it that way is because I didn't want to waste a bunch of your time. I know its not worth a lot to you and I didn't want to waste a lot of your time with it, that's why I sent a letter and sent the check and figured if you wanted it, fine; if you didn't, you'd return my check.
Restatement (Second) of Contracts, § 161 (1979). Holta's non-disclo- 5 ABR 501   sures are equivalent to assertions that there was not $34,000.00 in surplus proceeds available for execution and that no bankruptcy litigation regarding the proceeds was pending.A person's non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only:
(a) where he knew that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material . . .
|DATED: August 10, 1998.|
|BY THE COURT|
|Donald MacDonald IV|
|United States Bankruptcy Judge|