In re: PETER DAVID KEMPF v. Hitachi Capital America Corp.

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: PETER DAVID KEMPF,
Debtor,
PETER DAVID KEMPF,
Appellant,
v.
HITACHI CAPITAL AMERICA CORP.,
Appellee.
No. 12-60015
BAP No. 11-1317
MEMORANDUM*
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Case, II, Pappas, and Markell, Bankruptcy Judges, Presiding
Argued and Submitted November 8, 2013
Pasadena, California
Before: GOULD and BYBEE, Circuit Judges, and CHEN, District Judge.**
FILED
DEC 11 2013
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
** The Honorable Edward M. Chen, District Judge for the U.S. District
Court for the Northern District of California, sitting by designation.

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Peter David Kempf appeals from the Bankruptcy Appellate Panel’s (“BAP”)
judgment affirming the bankruptcy court’s finding that Kempf’s obligation to
Hitachi Capital America Corp. (“Hitachi”) was not dischargeable under 11 U.S.C.
§ 523(a)(2)(B). We have jurisdiction under 28 U.S.C. § 158(d). We review de
novo BAP decisions, and apply the same standard of review that the BAP applied
to the bankruptcy court’s ruling. Anastas v. Am. Sav. Bank (In re Anastas), 94 F.3d
1280, 1283 (9th Cir. 1996). We review for clear error findings of fact, including a
finding that a creditor reasonably relied on a materially false representation.
Lansford v. La Trattoria (In re Lansford), 822 F.2d 902, 904 (9th Cir. 1987).
Whether an amended pleading relates back to an original pleading is reviewed de
novo. Guerrero v. RJM Acquisitions LLC, 499 F.3d 926, 932 (9th Cir 2007). We
affirm.
The bankruptcy court did not clearly err in finding that Hitachi reasonably
relied on the materially false representations contained in Kempf’s personal
financial statement. Hitachi conducted a transaction analysis, contacted references,
obtained a background report on Kempf, and requested Kempf’s tax returns to
confirm Kempf’s earning potential. The record supports the bankruptcy court’s
determination that Hitachi reliance was reasonable. See Candland v. Ins. Co. of N.
Am. (In re Candland), 90 F.3d 1466, 1471 (9th Cir. 1996) (recognizing that this
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Court requires “little investigation” where a personal financial statement contains
misrepresentations); In re Lansford, 822 F.2d at 904 (“Having intentionally misled
the [creditors] in an area he knew was important to them, it is unseemly for
[debtor] now to argue that he should be excused from section 523 because the
[creditors] believed him.”); see also Gertsch v. Johnson & Johnson (In re Gertsch),
237 B.R. 160, 170 (B.A.P. 9th Cir. 1999) (“[W]hen there is evidence of materially
fraudulent statements, little investigation is required for a creditor to have
reasonably relied on the representations.”).
Contrary to Kempf’s assertion, the bankruptcy court did not clearly err in
finding that Kempf’s tax returns (and Form 3520s) did not render Hitachi’s
reliance unreasonable. The information in the Form 3520 was located towards the
back of each year’s tax returns and was not particularly conspicuous. Moreover,
the Form 3520 lists Julie Kempf as the U.S. owner and beneficiary of the Angel
Trust, but the form does not expressly call for the listing of every U.S. owner or
beneficiary. In addition, income from the Angel Trust was included in Kempf’s
joint tax return, and the Kempfs reside in a community property state. While the
tax returns and the fact that a trust was listed as an asset might have suggested
further investigation was warranted, in the context of all the documents presented
and reviewed, the tax return represented at best a “minor clue” that Kempf’s
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personal financial statement may have contained a misrepresentation. Gosney v.
Law (In re Gosney), 205 B.R. 418, 421 (B.A.P. 9th Cir.1996) (“The debtors cannot
simply rely on minor clues of falsity in financial statements that on the whole have
the appearance of being very complete and reliable and where [the creditor] took
reasonable steps to inquire as to the creditworthiness of the debtors.”). The returns
were not obviously inconsistent with the personal financial statement. See In re
Gertsch, 237 B.R. at 170 (“[A]lthough a creditor is not entitled to rely upon an
obviously false representation of the debtor, this does not require him or her to
view each representation with incredulity requiring verification.” (citation and
internal quotation marks omitted)).
The bankruptcy court correctly determined that Hitachi’s first amended
complaint related back to its original complaint. Both the original and first
amended complaint alleged that Kempf engaged in fraudulent misrepresentations
made to secure the lease with Hitachi, and specifically in connection with Kempf’s
personal guaranty. Accordingly, the original complaint gave Kempf “fair notice of
the transaction, occurrence, or conduct” called into question by the first amended
complaint. See Union Pac. R.R. Co. v. Nev. Power Co., 950 F.2d 1429, 1432 (9th
Cir. 1991) (citation and internal quotation marks omitted); see also Williams v.
Boeing Co., 517 F.3d 1120, 1133 (9th Cir. 2008) (recognizing, for purposes of
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Rule 15(c), that “[c]laims arise out of the same conduct, transaction, or occurrence
if they ‘share a common core of operative facts’ such that the plaintiff will rely on
the same evidence to prove each claim” (citation omitted)).
AFFIRMED.
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