Euler v. Larios

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UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WASHINGTON AT TACOMA
In re:
JESSICA CAMILLE LARIOS,
Debtor.

Case No. 25-40532-MJH

Adversary No. 25-04044-MJH

MEMORANDUM DECISION
PETER EULER, a single man,
Plaintiff
v.
JESSICA CAMILLE LARIOS,
Defendant

This matter came before the Court for trial on January 13, 2026, on a Complaint to
Determine Nondischargeable Debt (“Complaint”) filed by Peter Euler (“Plaintiff”).
Pursuant to the Complaint, the Plaintiff seeks to except from discharge the amount owed
by the Debtor, Jessica Camille Larios (“Defendant”) pursuant to 11 U.S.C. § 523(a)(2)(A).
1

Based on the evidence, pleadings, and arguments submitted at trial, the Court renders
the following findings of fact and conclusions of law pursuant to Fed. R. Bankr. P. 7052.

1
Unless otherwise indicated, all chapter, section and rule references are to the Federal Bankruptcy
Code, 11 U.S.C. §§ 101–1532, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9038.

_____________________
Mary Jo Heston
U.S. Bankruptcy Judge
Below is a Memorandum Decision of
the Court.
(Dated as of Entered on Docket date above)
__________________________________________________________________
Entered on Docket February 12, 2026
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FINDINGS OF FACT
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The Defendant bought her first home in 1999 and became a real estate agent in 2003.
Def. Trial Brief 4:3-4, ECF No. 12. She started a real estate investment company in 2015.
Id. at 4:7. The Defendant is the sole owner and managing member of World Class Real
Estate Solutions, LLC, a Nevada Limited Liability Company (“WCRE”), incorporated on
May 26, 2020. Pl. Ex. 33. She is also the sole owner and managing member of EGE
Management Group, LLC (“EGE”), a Nevada limited liability company. The Defendant
describes herself as a “real estate investor, developer, builder, and asset manager
specializing in Tacoma, Washington.” Pl. Ex. 31. Further, she “purchase[s] and subdivide[s]
property, rehabilitate[s] existing homes, and build[s] new construction single family homes
on vacant land . . . and manage[s] these processes from start to finish including pulling
permits with local jurisdictions, all site work, construction, and sales of finished inventory.”
Pl. Ex. 31.
The Plaintiff is Defendant’s 74-year-old father who has been retired for 15 years. He
has resided in Texas for approximately seventeen years. His prior occupations include
driving a truck and working with the airlines as a ramp agent. The Plaintiff testified that
he has owned five properties, and of these, he built one house, subdivided one property,
and experienced code enforcement issues. The Plaintiff testified that he regarded the
Defendant as having extensive real estate experience. According to the Defendant, she and
the Plaintiff discussed real estate throughout her career.
The Defendant and the Plaintiff were involved in numerous real estate transactions
from 2017 to 2022. The real estate transactions at issue in this adversary proceeding
primarily concern real property located at 3843 East L Street, Tacoma, WA 98404, Parcel
No. 5670400602 (“East L Property”); 1937 South Durango Street, Tacoma, WA 98405,
Parcel No. 0220121048 (“Durango Property”); and 3834 South 19th Street, Tacoma, WA

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The parties agreed to the admission of all exhibits at trial.
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98405, Parcel No. 0220121111 (“South 19th Property”). The Durango Property and South
19th Property are two of five parcels that comprise what the Defendant referred to in
testimony as the “Durango Assemblage.”
In September or October of 2017, the Defendant approached the Plaintiff about a loan
in the amount of $170,000, that would be secured by the East L Property. The Defendant
described the East L Property as vacant and land-locked. The tax assessed value in 2018
for the East L Property was $17,900. Thus, at the time of the requested loan the Plaintiff
would be significantly undersecured. Def. Ex. 2. The Plaintiff testified that the Defendant
represented she needed the funds to develop the property and that the Plaintiff was the
only person loaning money on the project. He further testified that it was his understanding
that if there were more lenders added later, he would remain in first position. According to
the Plaintiff, he relied on this representation in deciding to loan the Defendant money. The
Defendant disagreed with the Plaintiff’s testimony. While the Plaintiff originally had a first
position lien, he released this later for a security interest on the Durango Property.
The Plaintiff loaned the Defendant $170,000, and a deed of trust dated October 9, 2017
(“October 2017 Deed of Trust”) was entered into between WCRE,
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as grantor, and Plaintiff,
as beneficiary, “in accordance with the terms of a promissory note of even date” and secured
by the East L Property. The October 2017 Deed of Trust was recorded on November 30,
2017, under Pierce County recording number 201711300784. Pl. Ex. 2.
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The referenced
promissory note was not put into the record.
On August 17, 2018, through a Secured Promissory Note, the parties consolidated the
$170,000 loan with another existing loan and new loan from the Defendant, for a total debt

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The October 2017 Deed of Trust states that WCRE is a Washington LLC rather than a Nevada LLC.
4
Through a Modification of Deed of Trust recorded on December 15, 2017, the Defendant granted
Feliciano Mercardo a security interest in the East L Property, for the original note amount of $250,000. Pl.
Ex. 4.
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of $377,320.50.
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Pl. Ex. 35. Before consolidating, the Defendant testified that she gave the
Plaintiff the option of keeping the $170,000 loan on the East L Property and being repaid
after the house was built and sold, or loan additional funds and move the debt over to the
Durango Property. The Defendant testified that the Plaintiff chose the latter option.
The Secured Promissory Note states that it is “FOR VALUE RECEIVED, which shall
include a second mortgage on properties owned by the borrower, which shall change over
time as properties are sold” and that it is ”secured by a Deed of Trust of even date herewith.”
Pl. Ex. 35 (emphasis added). The parties’ exhibits do not include a Deed of Trust dated
August 17, 2018. Based on the Defendant’s testimony, however, the deed of trust dated
November 7, 2018 (“November 2018 Deed of Trust”), is the applicable deed of trust. This
deed of trust was entered into between WCRE, as grantor, and Plaintiff, as beneficiary, to
secure payment of $377,320.50, “in accordance with the terms of a secured promissory note
dated August 17, 2018.” Pl. Ex. 15. The property securing the note is described on attached
Exhibit “A” as:

BEGINNING 792 FEET WEST AND 495 FEET SOUTH OF THE NORTHEAST
CORNER OF SECTION 12, TOWNSHIP 20 NORTH, RANGE 2 EAST OF THE
W.M., IN PIERCECOUNTY [sic], WASHINGTON; THENCE SOUTH 165 FEET;
HENCE WEST 264; THENCE NORTH 165; THENCE EAST 264 FEET TO THE
POINT OF BEGINNING.

SITUATE IN THE COUNTY OF PIERCE, STATE OF WASHINGTON.
Pl. Ex. 15. While the November 2018 Deed of Trust does not provide a common address or
tax parcel number, the Defendant testified that this deed of trust gave the Plaintiff a

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The Secured Promissory Note states that the Defendant holds two promissory notes: (1) note dated
September 26, 2017, in the current outstanding principal amount of $60,000, requiring interest only
payments on the unpaid principal at the rate of six percent per annum, with a balloon payment due
September 26, 2018; and (2) note dated October 10, 2017, in the current outstanding principal amount of
$170,000, accruing interest at a monthly compounded rate of ten percent per annum, requiring no monthly
payments, with a balloon payment due October 10, 2018, which at that time will be $187,801.22. The
Secured Promissory Note states that it is the parties’ intent to terminate the $170,000 loan 10 days early in
order to roll the unpaid balance into a new consolidated loan beginning October 1, 2018, so that $187,274.29
will become part of the combined balance of the new loan at that time. The Secured Promissory Note also
states that Defendant further agrees to advance an additional $130,000 to WCRE. Pl. Ex. 35.
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security interest in the Durango Property. See also Pl. Ex. 16 (contains the same legal
description as set forth in Pl. Ex. 15).
The Plaintiff testified that he never saw the November 2018 Deed of Trust. The
November 2018 Deed of Trust states at the top:

After Recording, Return To:

Peter R. Euler
1018 Caprice Drive
Grand Saline, TX 75140
Pl. Ex. 15. The Plaintiff confirmed that this is his correct address.
The Plaintiff also denies ever receiving a copy of the executed Secured Promissory Note.
The Plaintiff, however, proposed corrections to the draft and prepared a payment
spreadsheet via email sent August 15, 2018, but dated August 14, 2018. Def. Ex. 4.
Beginning November 10, 2018, the payments on the consolidated loan were $2,201.11
per month, and all unpaid principal and interest were fully due and payable on January
10, 2024. The Secured Promissory Note contains a notarized Guaranty by Jessica Larios.
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Pl. Ex. 35. The Guaranty contains a “NOTICE CONCERNING ORAL AGREEMENTS”
stating “Oral agreements or oral commitments to lend money, extend credit, or to
forbear from enforcing repayment of a debt are not enforceable under
Washington law.” Pl. Ex. 35 (emphasis in the original).

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In the Guaranty, Jessica Larios, as
Guarantor hereby unconditionally, absolutely and irrevocably, as a primary Borrower and not merely as
a surety, guarantees to Holder the punctual and complete payment when due, whether at or after
maturity, upon acceleration or otherwise.

Guarantor agrees to remain liable for any Borrower obligation regardless of any change in the time,
manner or place of payment of all or any of the obligations now existing or hereafter coming into existence
and arising from, by reason of, or in any way relating to any of the terms, covenants, conditions or
agreements of the loan evidenced by this Secured Promissory note or any extensions of time for payment,
whether in whole or in part, of the terms of the loan or on the part of Borrower to be paid, performed, or
observed as applicable.

Pl. Ex. 35.

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The Plaintiff admits receiving payments on the consolidated loan. He was unaware of
how many payments he received and the exact date they stopped, but he testified that it
was his understanding that they were interest-only payments. The Defendant testified that
she made approximately 38 payments. A spreadsheet prepared by the Defendant indicates
that 44 payments of $2,201.11 were made each month from March 2019 to June 2023. Def.
Ex. 3.
The Plaintiff testified that he understood the new loan amount, originally secured by
the Durango Property, was needed to develop the property. The Defendant stated that the
funds from the consolidation loan were used to fund entitlements on the Durango Property.
The Plaintiff testified that he did not care about the particulars or the profit the Defendant
made, as long as he got his initial investment back plus interest and that he relied on the
Defendant because she is the expert.
As stated prior, the Durango Property is one of five parcels that make up the Durango
Assemblage. The Defendant testified that she purchased the five parcels that make up the
Durango Assemblage for approximately $2 million. At the time, she expected to put about
$4.5 million into the project and sell the properties as a whole for around $9 million. The
original plan was to develop the property and build 30 plus townhomes prior to sale. Due
to zoning changes and the pandemic, the Defendant testified that she had to pivot from
townhomes to instead developing the property to be sold as a buildable assemblage for a
200 plus apartment complex.
On March 11, 2019, a Full Reconveyance of the October 2017 Deed of Trust on the East
L Property was recorded (“Full Reconveyance”). The Full Reconveyance dated March 6,
2019, provides:

The undersigned as trustee under that certain Deed of Trust, dated 10/9/2017, in
which World Class Real Estate Solutions, LLC, is grantor and Peter R.
Euler, is beneficiary, recorded on 11/30/2017, as Auditor’s File No.
201711300784, records of Pierce County, Washington, having received from the
beneficiary under said Deed of Trust a written request to reconvey, does hereby
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reconvey, without warranty, to the person(s) entitled thereto all of the right, title
and interest now held by said trustee in and to the property described in said
Deed of Trust, situated in Pierce County, Washington, as follows:

AS IN RECORDED DEED OF TRUST
Pl. Ex. 6 (emphasis in original).
The Full Reconveyance states at the top:
AFTER RECORDING MAIL TO:
First American Title Insurance Company
2707 Colby Ave, Ste 601
Everett WA 98201
Pl. Ex. 6. The Defendant also denies receiving a copy of the Full Reconveyance.
On May 7, 2019, a Real Estate Excise Tax Affidavit was recorded in Pierce County for
the East L Property, listing a gross selling price of $383,500. Pl. Ex. 9. The parties testified
that the Plaintiff was not paid from this sale as he no longer had a secured interest in the
East L Property.
In October or November of 2019, the Defendant approached the Plaintiff about loaning
WCRE $25,000. The Plaintiff agreed to loan the funds, and a deed of trust dated and
recorded November 5, 2019, was entered into between Defendant, as grantor, and Plaintiff,
as beneficiary, to secure payment of $25,000, “in accordance with the terms of a promissory
note of even date” and secured by real property in Pierce County, Washington, described
as 1125 N. Prospect Street, Tacoma, Washington 98406, Tax Parcel Number: 2745001180.
Pl. Ex. 18. These funds were paid back in 30 days.
After the funds were paid back, the Defendant approached the Plaintiff about loaning
another $25,000. The Plaintiff agreed, and a deed of trust dated January 9, 2020, and
recorded January 17, 2020 (“January 2020 Deed of Trust”), was entered into between
WCRE, as grantor, and Plaintiff, as beneficiary, to secure payment of $25,000, “in
accordance with the terms of a promissory note of even date” and secured by real property
in Pierce County, Washington, described as XXXX S Durango, Tacoma, Washington, 98405,
Tax Parcel Number(s): 0220121048, which is the Durango Property. Pl. Ex. 16.
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On December 23, 2022, EGE, as grantor, entered into a deed of trust with Colin Macleod
and Ian Macleod securing a promissory note of even date in the amount of $800,000. The
deed of trust is secured by the South 19th Property, as indicated by the tax account number
contained therein. Pl. Ex. 26.
The South 19th Property was also secured by a prior recorded Deed of Trust with Angel
Oak Mortgage Solutions LLC (“Angel Oak” and “Angel Oak Deed of Trust”), to secure a
promissory note dated September 3, 2021, in the original principal amount of $434,000. Pl.
Ex. 23. The Angel Oak Deed of Trust was recorded on September 8, 2021.
A Modification of Deed of Trust dated December 29, 2022, was entered into between the
Plaintiff, as beneficiary, and WCRE and EGE, as grantors, by which the parties modified
the November 2018 Deed of Trust in the original amount of $377,320.50 secured on real
property as therein described and recorded on January 17, 2020, under Pierce County
Auditor’s File No. 202001170051. Pl. Ex. 27. The parties agreed to replace the collateral
property with real property located in Pierce County, Washington at Tax Parcel No.:
0220121111, which is the South 19th Property. Pl. Ex. 27. This was recorded on December
30, 2022.
Another Modification of Deed of Trust also dated December 29, 2022, was entered into
between the Plaintiff, as beneficiary, and WCRE, as grantor, by which the parties modified
the January 2020 Deed of Trust in the original amount of $25,000, secured on real property
as therein described and recorded on January 17, 2020, under Pierce County Auditor’s File
No. 20200117052. Pl. Ex. 28. The parties agreed to replace the collateral property with the
real property located in Pierce County, Washington at Tax Parcel No.: 0220121111, the
South 19th Property. Pl. Ex. 28. This too was recorded on December 30, 2022.
The Plaintiff testified that the Defendant informed him that it was necessary to
substitute his collateral in order to develop the property. The Defendant testified that she
asked Plaintiff to shift his collateral to a different parcel in order to obtain additional
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funding. A lender was willing to loan funds on the Durango Property so long as they were
in first position.
In December 2022, the Defendant listed the Durango Assemblage for sale, with no
success. The listing agreement indicates that the assemblage would support development
of 200-300 apartment units and the listing price was $9,750,000. Def. Ex. 5.
Defendant defaulted under the Angel Oak promissory note. A Notice of Trustee’s Sale
for the South 19th Property was recorded in Pierce County, Washington, on August 2, 2024.
The Notice listed a sale date of December 20, 2024. Pl. Ex. 29.
A Trustee’s Deed for the South 19th Property was recorded in Pierce County,
Washington on December 31, 2024, conveying the property to Wilmington Savings Fund
Society, FSB, not in its individual capacity but solely as trustee of Angel Oak Mortgage
Trust 2023-2, Mortgage-Backed Certificates, series 2023-2, as grantee. Pl. Ex. 30. A Real
Estate Excise Tax Affidavit for the South 19th Property was recorded in Pierce County,
Washington, on December 31, 2024, for “Trustee’s Deed Upon Sale,” listing a gross selling
price of $463,819.95. Pl. Ex. 32. The Plaintiff was not paid anything from these funds.
The Defendant filed a Chapter 7 bankruptcy petition on March 11, 2025. The Plaintiff
timely filed this adversary complaint to determine the dischargeability of debt on June 9,
2025, and the trial was held January 13, 2026.
CONCLUSIONS OF LAW
The Plaintiff seeks to have the debt owed by the Defendant declared nondischargeable
under § 523(a)(2)(A). According to § 523(a)(2)(A), “[a] discharge under section 727, 1141,
1192, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from
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.” Section
523(a)(2)(A).
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The creditor bears the burden of proving the applicability of § 523(a)(2)(A) by a
preponderance of the evidence. In re Sabban, 600 F.3d 1219, 1222 (9th Cir. 2010) (citing In
re Slyman, 234 F.3d 1081, 1085 (9th Cir. 2000)). The 9th Circuit consistently holds that in
order to establish nondischargeability under § 523(a)(2)(A), the creditor must demonstrate
five elements: (1) the debtor made the representations; (2) that at the time the debtor knew
they were false; (3) that the debtor made them with the intention and purpose of deceiving
the creditor; (4) that the creditor justifiably relied on such representations; and (5) that the
creditor sustained the alleged loss and damage as the proximate result of the
misrepresentations having been made. Sabban, 600 F.3d at 1222.
A. Representations
The Plaintiff alleges that the Defendant made false representations in soliciting the
various loans. The burden is on the Plaintiff to establish that a misrepresentation was
made. To be actionable, it must be a “representation of fact.” Field v. Mans, 516 U.S. 59, 70
(1995). The representation must be one of existing or past fact and not merely an expression
of opinion. See In re Rubin, 875 F.2d 755, 759 (9th Cir. 1989); In re Gonzales, No. 05-90521-
B7, 2007 WL 7216267, at *3 (Bankr. S.D. Cal. Mar. 23, 2007). The Court will evaluate
whether Defendant made any actionable representations as to each of the three property
transactions at issue.
1. East L Property
In regards to the East L Property, the Plaintiff alleges in the Complaint that the
following representations were made:
(a) The purpose of the loan was renovating and/or developing the East L Property.
(b) The East L Property was a desirable property because of the location.
(c) The loan would be used for the imminent renovating and/or developing of the East
L Property.
(d) The Plaintiff was the only lender on the East L Property and fully secured.
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(e) Upon completion the East L Property would be sold and Plaintiff would receive his
money back along with interest pursuant to the note.
Complaint 3:17–23, ECF No. 1.
In the Complaint, the Plaintiff fails to specify which, if any, of these representations
were false. The Defendant admits that she represented that the Plaintiff would have
received his original investment of $170,000 plus interest, if he was still secured by the
East L Property when it was sold on May 7, 2019. However, the Plaintiff consolidated the
$170,000 loan with another existing loan and a new loan from the Defendant when they
entered into the Secured Promissory Note on August 17, 2018. This loan was secured by
the Durango Property, and the Plaintiff testified on cross that he transferred his security
interest in the East L Property in order to get a security interest in the Durango Property.
Accordingly, the Defendant was not paid back the $170,000 from the sale of the East L
Property, not because of a misrepresentation by the Defendant, but because he did not have
a security interest in the East L Property when it was sold. Instead, his security interest
was transferred to the Durango Property almost a year prior.
At trial, the Plaintiff also testified that the Defendant misrepresented that he was the
only lender on the property. Even if true, any representations regarding the Plaintiff’s
priority or other encumbrances on the East L Property are irrelevant. The evidence
indicates that the Plaintiff did have a first position interest in the East L Property at the
time the loan was originated, thus the representation was accurate. If property or services
are obtained before the making of any false representation, a representation after the fact
will not affect dischargeabilty. See Bankers Healthcare Group, LLC v. Johnson (In re
Johnson), 638 B.R. 782, 794–95 (Bankr. C.D. Cal. 2022). The Plaintiff has not met his
burden in establishing that the Defendant made any representations regarding the East L
Property that would support a § 523(a)(2)(A) claim.
7

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At trial and in briefings, the Defendant argued that any claim based on misrepresentations regarding
the East L Property was barred by the statute of limitations. At the close of both parties’ examination of the
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2. Durango Property
In regards to the Durango Property, the Plaintiff alleges in the Complaint that the
following representations were made:
(a) The purpose of the loan was to build 3 fourplexes or an apartment complex.
(b) The location of the property was desirable because a hospital was being built close
to the Durango Property.
(c) The projected sale price of the property would result in a full return on Plaintiff’s
investment.
(d) The loan was fully secured with the Durango Property and the Plaintiff was the
only lender on the Durango Property.
Complaint 5:14–18, ECF No. 1.
Again, the Plaintiff fails to specify in the Complaint which of these representations
were false. The Plaintiff also failed to present any evidence that representations regarding
the desirability of the location of the property were made, or that any such representations
were false. As for a representation regarding the value of the property, the Defendant
testified at trial that it was her opinion that the Durango Property was worth
approximately $2 million standing alone, and that the Durango Assemblage had a
combined value of approximately $10 million. The Plaintiff failed to present any evidence
to contradict her valuation. Defendant’s valuation is supported by the fact that she listed
the Durango Assemblage for $9,750,000 in December 2022, and obtained a loan from
independent parties, Colin and Ian Macleod, in the amount of $800,000, secured by a deed
of trust on South 19th Property dated December 23, 2022. See Def. Ex. 5; Pl. Ex. 26.
The Defendant further testified that the Plaintiff was fully secured on the Durango
Property, as the only other encumbrance was a prior security interest of approximately

Plaintiff, the Defendant also moved for dismissal on this basis. The Court denied the motion at that time.
As the Court concludes that no actionable representations were made regarding the East L Property, it is
unnecessary to resolve the statute of limitations defense in this Memorandum Decision.
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$190,000. With a total valuation of $2 million, the Plaintiff was fully secured even in second
position. Therefore, the evidence indicates that this representation was accurate.
The Defendant denies that she ever represented that the Plaintiff was the only lender
on this property and the Secured Promissory Note states that WCRE agrees to pay Plaintiff
the $377,320.50, plus interest, for value received which shall include a “second mortgage”
on properties owned by WCRE. Pl. Ex. 35. She further testified that the Plaintiff never
cared whether he was junior or senior, or which lot his loan was secured by, only that he
be paid back in full when the property was sold. The Plaintiffs’ own statements corroborate
this testimony. The Plaintiff testified that the Defendant allegedly “slipped” at one point
and let him know there was another lender on the property. The Plaintiff testified on direct
that he was fine with that so long as he was in first place. These statements support the
Defendant’s testimony and contradict the Plaintiff’s allegation that any representation
about the existence or nonexistence of other lenders on the Durango Property, even if true,
were material.
In addition, the Plaintiff claims that the Defendant misrepresented that he was the
only lender, not that he was in first position. Any such misrepresentation is irrelevant since
the evidence indicates that he was fully secured on the Durango Property, no matter what
position he was in. The Plaintiff has failed to meet his burden in establishing that the
Defendant made any representations that would support a § 523(a)(2)(A) claim as to the
Durango Property.
3. South 19th Property
In regards to the South 19th Property, the Plaintiff alleges in the Complaint that the
Defendant represented that:
(a) To develop the Durango Property, his security interest needed to be removed.
(b) The location of the South 19th Property was worth more than the Durango Property
because it had a home on it and the Durango Property was bare land.
(c) The Plaintiff’s loans were fully secured and he would be the only secured creditor.
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Complaint 6:22–24 & 7:1–2, ECF No. 1.
The Defendant admits that she in fact did represent to the Plaintiff that it was
necessary to remove his security interest to develop the Durango Property. The Defendant
testified that due to higher interest rates and delays caused by the pandemic and zoning
changes, she needed additional capital to cover the carrying costs—additional capital that
the Plaintiff was unwilling or unable to provide—and that she had found additional
funding, but that the new lender was only willing to loan the funds if in first position. The
Defendant’s explanation is credible and this representation is not actionable because the
Plaintiff has failed to prove that it was false.
The Plaintiff also failed to present any evidence to corroborate his claim in the
Complaint that she represented that the South 19th Property was more valuable than the
Durango Property. Both parties testified at trial that she represented that she needed to
release his lien from the Durango Property and move it to another parcel in the Durango
Assemblage to obtain additional funding. This is precisely what occurred.
The Plaintiff’s claim that she represented he was the only lender on the South 19th
Property suffers from the same deficiencies as with the Durango Property. The number of
lenders is irrelevant. What is relevant is representations regarding priorities and whether
the Plaintiff was fully secured. The Defendant testified that at the time the Plaintiff moved
his security to the South 19th Property, there was about $1.2 million in loans ahead of him.
With a valuation of $2 million on this parcel, he was again fully secured at the time his
deed of trust was transferred to the South 19th Property. This valuation is also supported
by the fact that the Durango Assemblage was listed for sale at a price of $9,750,000, and
Colin Macleod and Ian Macleod agreed to loan $800,000 secured by a deed of trust on the
South 19th Property in December 2022. The Plaintiff has failed to meet his burden to
establish that the Defendant made any representations that would render the debt
nondischargeable under § 523(a)(2)(A).

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B. Intent
Even if the Plaintiff could satisfy the misrepresentation requirement, his § 523(a)(2)(A)
claim fails because he is unable to establish an intent to deceive. The burden is on the
Plaintiff to show that the Defendant made a false representation with the intent to deceive.
Because direct evidence of intent to deceive is rarely available, “the intent to deceive
can be inferred from the totality of the circumstances, including reckless disregard for the
truth.” Gertsch v. Johnson & Johnson, Fin. Corp. (In re Gertsch), 237 B.R. 160, 167–68 (9th
Cir. BAP 1999). A bankruptcy court may find requisite intent “where there has been a
pattern of falsity or from a debtor’s reckless indifference to or disregard of the truth.” Khalil
v. Developers Sur. and Indem. Co. (In re Khalil), 379 B.R. 163, 174–75 (9th Cir. BAP 2007)
(discussing intent to deceive in the context of § 727(a)). Furthermore, recklessness alone
does not equate to fraudulent intent; it is only probative of intent. Khalil, 379 B.R. at 174.
“The essential point is that there must be something about the adduced facts and
circumstances which suggest that the debtor intended to defraud” the creditor. Id. at 175.
The Plaintiff alleges the Defendant represented that she would use his funds to develop
the various properties and that she never intended to use his funds for that purpose.
Further, that she “knew or should have known that the properties could not be developed
as promised.” Pl. Trial Brief 7:17–18, ECF No. 11. The evidence does not support these
allegations.
The Defendant testified that the initial loan on the East L Property was used to fund
the cost of putting in a road. The evidence establishes that the East L Property was land
locked when purchased. No contrary evidence was presented. The Defendant testified that
the consolidated loan was used to fund the cost of entitlements on the Durango Property.
Again, the Plaintiff failed to present any evidence that the funds were not used for this
purpose.
In regards to the Durango Assemblage, the Defendant’s testimony regarding her
intentions in developing these properties was credible. Although the initial plan was to
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develop 30 plus townhomes, zoning changes made this no longer possible. The Defendant
therefore pivoted and instead attempted to develop the properties and sell as a buildable
lot for a 200 plus apartment building. The Defendant listed the Durango Assemblage for
sale in December 2022, at a price of $9,750,000. If the property had sold, the Plaintiff would
have been paid in full. However, a sale did not occur. Due to the inability to sell and delays
caused by the county review process, zoning changes, the pandemic, and rising interest
rates, the Defendant’s plan for the Durango Assemblage did not work out.
A debtor’s statement of future intention is not necessarily a misrepresentation if
intervening events cause the debtor’s future actions to deviate from previously expressed
intentions. 4 Collier on Bankruptcy ¶ 523.08 (16th ed. 2026). This is an unfortunate
situation where the Plaintiff’s intent to sell the Durango Assemblage at a profit and repay
her lenders failed to materialize. The fact that the Defendant successfully completed
multiple prior projects, including projects relying on funds loaned by the Plaintiff that were
paid back, that she paid back a 2019 loan of $25,000 within 30 days as promised, and paid
the Plaintiff approximately 44 payments of $2,201.11 each month from March 2019 to June
2023, indicate that she intended to successfully complete these projects and pay back the
Plaintiff at the time the loans were originated. Unfortunately, the Defendant’s plan
ultimately failed and the property on which the Plaintiff held a security interest (South
19th Property) went into foreclosure. The totality of the circumstances in this case do not
establish deceitful intent by the Defendant that would render the debt nondischargeable
under § 523(a)(2)(A).
C. Justifiable Reliance
The Plaintiff’s claim also fails under the reliance element. Under § 523(a)(2)(A), a
plaintiff does not need to prove that reliance was reasonable but rather that it was
“justifiable”. In re Eashai, 87 F.3d 1082, 1090 (9th Cir. 1996). Subsection (A) employs a
subjective standard and examines whether the reliance was justifiable. Field, 516 U.S. at
73–75. This standard depends upon the knowledge and experience of the person to whom
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the representations were made. In re Storer, 380 B.R. 223, 232 (Bankr. D. Mont. 2007). The
qualities and characteristics of the particular plaintiff, and the circumstances of the
particular case, are considered rather than application of a community standard of conduct
to all cases. Field, 516 U.S. at 71. The Supreme Court further explained the nature of
justifiable reliance as follows:
[A] person is “required to use his senses, and 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 make a cursory examination or investigation. Thus, if
one induces another to buy a horse by representing it to be sound, the purchaser
cannot recover even though the horse has but one eye, if the horse is shown to the
purchaser before he buys it and the slightest inspection would have disclosed the
defect. On the other hand, the rule stated in this Section applies only when the
recipient of the misrepresentation is capable of appreciating its falsity at the time
by the use of his senses. Thus, a defect that any experienced horseman would at
once recognize at first glance may not be patent to a person who has had no
experience with horses.”
Id.
Under the subjective standard of § 523(a)(2)(A) and in looking at the qualities of the
Plaintiff, the Court concludes that it was not justifiable for the Plaintiff to rely on any
alleged misrepresentations regarding his security interest and likelihood that the proposed
projects would be successful. It is undisputed that the Defendant was an experienced
developer and real estate agent. The Plaintiff, however, also has experience in real estate
transactions. Outside of his transactions with the Defendant, the Plaintiff admits that he
has bought, sold, or held five different parcels of real property, both in Washington state
and Texas.
His level of sophistication is exhibited in the August 14, 2018 email he sent to the
Defendant. Not only did he propose corrections to the draft Secured Promissory Note,
including striking certain language, but he also prepared and attached a detailed payment
spreadsheet. Def. Ex. 4. This email exhibits a sophisticated understanding of the terms of
the transaction and payment terms.
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The Court also does not find credible the Plaintiff’s testimony that he never received
copies of several of the executed documents. In regard to the Secured Promissory Note, the
Plaintiff was actively involved in drafting this agreement and admittedly was aware of its
existence. Thus, the onus was on him to request a copy of the final agreement if it was not
received.
The Plaintiff’s allegation that he did not receive a copy of the November 2018 Deed of
Trust or the March 11, 2019 Full Reconveyance is also not credible. The November 2018
Deed of Trust indicates at the top:
After Recording, Return To:
Peter R. Euler
1018 Caprice Drive
Grand Saline, TX 75140
Pl. Ex. 15. This is the Plaintiff’s correct address.
The March 11, 2019 Full Reconveyance provides that it be returned to First American
Title Insurance Company after recording. The Defendant testified that these documents
would have been mailed to the Plaintiff, not by her, but the escrow company or listed
trustee. According to RCW 65.04.090, the recording office is required to “thereafter either
electronically transmit or deliver it to the party leaving the same for record or to the
address on the face of the document.” Similar to a certificate of mailing, the above creates
a rebuttable presumption of its receipt. See, e.g. Cuna Mut. Ins. Group v. Williams (In re
Williams), 185 B.R. 598, 599 (9th Cir. 1995). The law in the Ninth Circuit is that denial
of receipt does not rebut a presumption of receipt. Moody v. Bucknum (In re Bucknum),
951 F.2d 204, 207 (9th Cir. 1991). In order to overcome the presumption, specific objective
evidence showing nonreceipt is required. Williams, 185 B.R. at 600. The Plaintiff has
failed to present any evidence to rebut the presumption that the documents were mailed
to him directly after recording by the assessor’s office or by the trustee handling escrow.
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Considering the Plaintiff’s level of expertise and involvement in multiple real estate
transactions, the Court concludes that he did not justifiably rely on any alleged
misrepresentations by the Defendant regarding the loan of these funds.
For each of the reasons stated above, the Plaintiff has failed to establish that the debt
owed by the Defendant is nondischargeable under § 523(a)(2)(A).
8

/ / / End of Memorandum Decision / / /

8
In the prayer for relief in the Complaint, the Plaintiff alleged that the Defendant’s actions violated
the Washington Consumer Protection Act, RCW 19.86. Complaint 10:1–3, ECF No. 1. The Court need not
address this claim as no argument or evidence was presented in support. As the Court concludes that the
debt is dischargeable, it is also unnecessary to rule on Plaintiff’s claim that the actions of the Defendant’s
entities should be imputed to the Defendant.
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