Alan D. WILLIAMSON, Appellant, v. Lewis J. BUSCONI, Appellee

United States Court of Appeals for the First Circuit1996-07-03No. No. 95-2311

87 F.3d 602

Summary · law.co

Holding. The bankruptcy court abused its discretion by excluding evidence of post-closing conduct relevant to fraudulent intent, but the error did not substantially affect Williamson's rights because the bankruptcy judge's credibility findings were not undermined by the exclusion. The judgment was affirmed.

Williamson sought to have Busconi's debt declared nondischargeable in bankruptcy based on alleged fraud. At trial, Williamson attempted to introduce evidence of Busconi's conduct after the real estate transaction closed, arguing it demonstrated Busconi never intended to repay the obligation when he initially made the promise. The bankruptcy court rejected this evidence as irrelevant and, after crediting Busconi's testimony, found that Williamson had not proven the necessary fraudulent intent, making the debt dischargeable.

On appeal, the court acknowledged that the bankruptcy judge erred in excluding the post-transaction evidence. Courts typically determine fraudulent intent from all surrounding circumstances, and subsequent conduct can legitimately inform what a party's state of mind was at an earlier time. However, the appellate court found the error harmless because the bankruptcy judge explicitly found Busconi's testimony more credible than Williamson's, and nothing in the record suggested the excluded evidence would have changed that credibility determination.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether post-transaction conduct is admissible to prove fraudulent intent at the time a promise was made
Whether exclusion of relevant evidence constitutes harmless error when credibility findings remain undisturbed
Standards for determining fraudulent intent in bankruptcy discharge litigation

Procedural posture

The bankruptcy court ruled the debt dischargeable; the district court affirmed; Williamson appealed the evidentiary exclusion to the circuit court.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

CYR, Circuit Judge.

Appellant Alan D. Williamson challenges a bankruptcy court ruling excluding evidence probative of the chapter 7 debtor-appellee Lewis J. Busconi’s putative intent to defraud Williamson in a substantial real estate transaction. In due course Williamson commenced an adversary proceeding in the bankruptcy court to except his claim from the chapter 7 discharge on the ground that the debt had been induced by fraud. See Bankruptcy Code § 523(a)(2)(A), 11 U.S.C. § 523(a)(2)(A) (1994). Following careful review of the entire record, we conclude that the bankruptcy court abused its discretion by excluding the proffered evidence, but that the error did not affect substantial rights.

At the bench trial, Williamson unsuccessfully attempted to introduce evidence as to various events, including Buseoni’s conduct, subsequent to the closing of their real estate transaction, from which a factfinder reasonably could have inferred that Buseoni had not intended to pay the note at the time it was executed. The evidence was excluded as irrelevant. Nonetheless, after hearing the testimony of both parties, the bankruptcy judge expressly credited Busconi’s testimony, found that Williamson had failed to establish the requisite fraudulent intent, and ruled the Williamson debt dischargeable. On intermediate appeal, the district court affirmed without elaboration.

As direct evidence is seldom available, fraudulent intent normally is determined from the totality of the circumstances. Charlie Kelton’s Pontiac, Cadillac, Oldsmobile & Isuzu Truck, Inc. v. Roberts (In re Roberts), 82 B.R. 179, 184 (Bankr.D.Mass.1987). And since “subsequent conduct may reflect back to the promisor’s state of mind and thus may be considered in ascertaining whether there was fraudulent intent” at the time the promise was made, proper application of the “totality” test in the instant context often warrants consideration of post-transaction conduct and consequences, as well as pre-transaction conduct and contemporaneous events. See Krenowsky v. Haining (In re Haining), 119 B.R. 460, 464 (Bankr.D.Del.1990); cf. United States v. Rodriguez, 858 F.2d 809, 816 (1st Cir.1988) (“later events often may shed light on earlier motivations”). In sum, the bankruptcy court ruling excluding Busconi’s relevant post-closing conduct constituted an abuse of discretion.

Williamson must also show, however, that the evidentiary ruling adversely affected his “substantial rights.” See Fed. R. Bankr.P. 9005, 9017 (incorporating Fed.R.Civ.P. 61; Fed.R.Evid. 103(a)). At a minimum, Williamson would need to demonstrate clear error in the ultimate assessment that the testimony given by Buseoni was more credible than that given by Williamson. In light of all the evidence in the record, we are not persuaded that the challenged judgment was substantially influenced by the erroneous evidentiary ruling. See Lubanski v. Coleco Indus., Inc., 929 F.2d 42, 46 (1st Cir.1991). As there was no clear error in the bankruptcy court’s findings, the district court judgment is affirmed. The parties shall bear their own costs.

. The district courts conclusions of law are reviewed de novo, Petit v. Fessenden, 80 F.3d 29, 32 (1st Cir.1996); Fed. R. Bankr.P. 8013. The bankruptcy court’s factual findings are reviewed for clear error. Id. Evidentiary rulings by the bankruptcy court are subject to the "abuse of discretion” standard. See United States v. Cotto-Aponte, 30 F.3d 4, 6 (1st Cir.1994).