United States District Court, Southern District of Indiana, Terre Haute Division
ENTRY ON JUDICIAL REVIEW
Hon. William T. Lawrence, Judge United States District Court Southern District of Indiana
Appellant Christopher Michael Yeley seeks the reversal of the decision of the bankruptcy court finding $3, 000, 000 of a debt Yeley owed to Appellee Gerald R. Forsythe to be non-dischargeable. For the reasons set forth below, the bankruptcy court’s judgment is AFFRIMED.
Under 28 U.S.C. § 158(a), the district courts of the United States have jurisdiction to hear appeals from final judgments, orders, and decrees of the bankruptcy courts. On appeal from the bankruptcy court, the district court may affirm, modify, or reverse a bankruptcy judge’s judgment, order, or decree, or remand the case for further proceedings. Fed.R.Bankr.P. 8013. The district court conducts a de novo review of questions of law, e.g., Mungo v. Taylor, 355 F.3d 969, 974 (7th Cir. 2004), but findings of fact are not set aside unless clearly erroneous and “due regard [must] be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.” Fed.R.Bankr.P. 8013. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. E.g., Kovacs v. United States, 614 F.3d 666, 672 (7th Cir. 2010).
Forsythe is a businessman from Chicago, Illinois who knew Yeley, an agricultural salesman, through purchasing seed and chemicals for his farming property. On or about July 6, 2004, Forsythe and Yeley entered into an oral agreement to purchase stock for Cabela’s Inc., a sporting goods company that was getting ready to complete its initial public offering. Forsythe agreed to provide the funds to purchase the stock, and Yeley purchased it through his brokerage account at Pershing, L.L.C. They agreed that at some time later the stock would be sold and they would share equally in the profits. They also agreed that Forsythe could demand the return of his funds at any time and that the funds would not be used for any purpose other than to purchase the stock.
Thereafter, Forsythe borrowed the funds from his company, Indeck Energy Services (“Indeck”), and sent a check payable to Pershing for three million dollars. On or about July 9, 2004, the check was deposited by Yeley into his account at Pershing. Shortly after he deposited the check, Yeley began transferring the funds to his own personal bank accounts, using, as the bankruptcy court described, Forsythe’s “money as [if] it was [Yeley’s] own piggy bank.” Tr. at 211. In all, from September 14, 2004, through December 18, 2006, Yeley withdrew a total of $2, 365, 939.00 from the Pershing account. Yeley also used part of the money to buy stock in a different company and sold numerous shares of Cabela’s stock at a loss.
Toward the end of 2006, Forsythe notified Yeley that he needed to repay his loan by the end of the year. On or about November 1, 2006, Forsythe requested that Yeley sell enough of the stock to repay him his original investment of three million dollars. Yeley tendered a check payable to Forsythe drawn on an Old National Bank account in the amount of three million. He asked Forsythe to hold the check until sufficient funds were available; however, the funds never became available and the check was never honored.
In February 2007, Forsythe filed suit against Yeley, his former spouse, and Pershing in Illinois state court alleging breach of contract and conversion. On January 19, 2012, Yeley filed for Chapter 7 bankruptcy protection. The bankruptcy court conducted a trial on March 13, 2013, and entered its judgment in favor of Forsythe and against Yeley in the amount of $1, 500, 000 on May 8, 2013, finding this amount to be non-dischargeable pursuant to 11 U.S.C. §§ 523(a)(2), (4), and (6). Both parties timely appealed-Forsythe appealed the bankruptcy court’s order discharging $1, 500, 000 of Yeley’s debt, and Yeley appealed the bankruptcy court’s findings of fact and conclusions of law and its failure to consider his affirmative defenses.
On appeal, this Court reversed the bankruptcy court’s judgment and remanded the case as follows:
[T]he bankruptcy judge only discharged $1, 500, 000, and there is no explanation as to how he reached that figure or if this figure corresponds to the amount that he believes Yeley obtained by his fraudulent conduct. . . . On remand, the bankruptcy judge should make a specific finding of fact as to what amount of money Yeley obtained by his fraudulent conduct. Once this finding is made, that specific amount should be found to be non-dischargeable. See [Cohen v. de la Cruz, 523 U.S. 213, 218 (1998)] (“Pursuant to section 523(a)(2)(A), “the share of money, property, etc., that is obtained by fraud gives rise to a nondischargeable debt.”). Judgment should then be entered in favor of Forsythe and against Yeley for that specific amount.
Cause No. 2:13-cv-222-WTL-WGH (S.D. Ind. filed June 19, 2013), Dkt. No. 18. Thereafter, on June 3, 2014, the bankruptcy court made the following findings of fact and conclusions of law:
The Court finds that the Defendant did engaged in fraudulent conduct when he took the money from the Pershing account and used it for personal expenses. The Court further finds that the Defendant engaged in fraudulent conduct as to the entire sum of $3, 000, 000 which the Plaintiff gave him in that the Defendant was unable to or refused to give an accounting as to what happened to the Plaintiff’s investment. He alone was in control of the funds and had the knowledge as to what he did with said funds-and the loss of these funds is as a direct result of the Defendant’s mishandling and fraudulent conduct in misappropriating the funds for his own benefit and his refusal to explain what he did with the money.
The Court finds that the Plaintiff met the burden of proof in showing that the sum of $3, 000, 000 was obtained by fraud giving rise to a non-dischargeable ...