Official Committee of Unsecured Creditors of Legac v. Bryan et al

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
THE LEGACY ESTATE GROUP, No. 05-14659
Debtor(s).
______________________________________/
OFFICIAL CREDITORS COMMITTEE,
Plaintiff(s),
v. A.P. No. 06-1173
JOHN M. BRYAN, et al.,
Defendant(s).
_______________________________________/
Memorandum on Motion for Summary Judgment of Pacific Defendants
_________________
Defendants Harry Chew, Pacific Paragon Investment fund, Ltd., and AIC Capital Partners, LLC,
who refer to themselves as the “Pacific Defendants,” have moved for summary judgment on the cross-claim of
John Bryan, et al., referred to herein as “Bryan.” While the cross claim against the Pacific Defendants
appears weak, the court finds that it is not subject to summary adjudication.
The cross-claim is based on two notes given to Bryan by Chew in the total amount of $5.3 million
when Bryan sold his majority interest in Legacy Estate Group, LLC, to Connaught Capital Partners. One
Entered on Docket
October 22, 2007
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 06-01173 Doc# 127 Filed: 10/22/07 Entered: 10/22/07 16:18:21 Page 1 of
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note, for $1.5 million, was for a portion of the $8.6 million purchase price. The other, for $3.8 million, was
for numerous loans Bryan had made to Legacy. The obligor on the notes was Connaught. The notes were
signed by Chew, making him potentially liable for any tort relating to the giving of the notes even if he was not
the maker. Manson v. Reed, 186 Cal.App.3d 1493, 1503 (1986). Bryan alleges that at the time Chew
signed the notes he knew that Connaught did not have the ability to pay them and fraudulently concealed
information regarding Connaught’s ability and intent to pay.
There is some temptation to grant summary judgment against Bryan due to the weakness of his
apparent case. There is a huge difference between giving a note with no intent to pay it and giving a note
because of inability to satisfy an obligation with cash. It appears that Bryan, a sophisticated businessman,
knew why he was being given the notes. It also appears that Bryan’s knowledge of all the facts and
circumstances surrounding the notes was superior to Chew’s.
However, weakness of a case is not the test for summary adjudication. Fraud is rarely admitted, and
is usually proven by inferences. In ruling on a motion for summary judgment, the nonmoving party's evidence
is to be believed, and all justifiable inferences are to be drawn in that party's favor. Hunt v. Cromartie, 526
U.S. 541, 552, 119 S.Ct. 1545, 143 L.Ed.2d 731 (1999). Accordingly, the court cannot grant summary
judgment to Chew. Any party may submit an appropriate form of order.
Dated: October 22, 2007
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 06-01173 Doc# 127 Filed: 10/22/07 Entered: 10/22/07 16:18:21 Page 2 of
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