In re: Javier Tovar

FILED AUG 03 2012 1 SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-11-1696-MkDKi ) 6 JAVIER TOVAR, ) Bk. No. LA-10-41664-BR ) 7 Debtor. ) Adv. No. LA-10-03016-BR ______________________________) 8 ) JAVIER TOVAR, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) HERITAGE PACIFIC FINANCIAL, ) 12 LLC, ) ) 13 Appellee. ) ) [14] Argued and Submitted On 15 July 20, 2012 at Pasadena, California [16] Filed – August 3, 2012 [17] Appeal from the United States Bankruptcy Court 18 for the Central District of California [19] Honorable Barry Russell, Bankruptcy Judge, Presiding [20] Appearances: Christopher L. Hoglin of the Law Offices of 21 Christopher L. Hoglin, P.C. for Appellant Javier 22 Tovar; Brad A. Mokri of the Law Offices of Mokri & Associates for Appellee Heritage Pacific 23 Financial, LLC. [24] 25 Before: MARKELL, DUNN, and KIRSCHER, Bankruptcy Judges. [26] * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may 28 have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8013-1. [1] 1 INTRODUCTION 2 Appellant-Debtor Javier Tovar (“Tovar”) appeals the 3 bankruptcy court’s judgment against him with respect to a 4 nondischargeability claim brought by Heritage Pacific Financial, 5 LLC (“HPF”) pursuant to Section 523(a)(2)(B).1 For the reasons 6 set forth below, we AFFIRM. 7 FACTS2 8 Some years prior to filing his bankruptcy petition, on 9 November 15, 2006, Tovar executed a promissory note (“Note”) for 10 a secured, cash-out refinance loan (“Refinance Loan”) in the 11 amount of $120,000. The collateral for the Note was a second 12 deed of trust on real property located in Sylmar, California 13 91342 (“Property”). Both the Note and deed of trust were made in 14 favor of WMC Mortgage Corp. (“WMC”). Tovar signed and submitted 15 a Uniform Residential Loan Application (“Loan Application”) for 16 the Refinance Loan. Tovar subsequently defaulted on some or all [1] 18 Unless otherwise specified, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 ; all 19 “Rule” references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037; all “Civil Rule” references are to [20] the Federal Rules of Civil Procedure; and all “Evidence Rule” 21 references are to the Federal Rules of Evidence. [2] 22 The Excerpts of Record provided by Tovar do not include all the documents listed in his Designation of Record and Statement 23 of Issues to be Presented on Appeal (“Designation of Record”). 24 Accordingly, we exercise our discretion to independently review the docket in Tovar’s above referenced adversary proceeding, and 25 documents electronically filed therein through the court’s CM/ECF system. See O'Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, 26 Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989) (appellate court may 27 take judicial notice of underlying bankruptcy records); Kirton v. Valley Health Sys. (In re Valley Health Sys.), 471 B.R. 555 , 558 28 n.2 (9th Cir. BAP 2012) (same). [2] 1 of the obligations relating to the Property, and the Property was 2 sold at a non-judicial foreclosure sale. 3 Tovar filed a voluntary chapter 7 bankruptcy petition on 4 July 30, 2010. On November 5, 2010, HPF initiated the adversary 5 proceeding giving rise to the instant appeal by filing a 6 nondischargeability complaint against Tovar. In its complaint, 7 HPF contended it now owned the Note; sought judgment in the 8 amount of $120,000; and requested a determination that such 9 judgment was nondischargeable within the meaning of Section 10 523(a)(2)(A) and (a)(2)(B) due to misrepresentations made when 11 the loan was originated. 12 The bankruptcy court scheduled a bench trial for November 9, 13 2011. On July 26, 2011, the bankruptcy court entered an Order of 14 Representation of Evidence by Declaration For Court Trial 15 (“Evidence Order”). This order required both parties to submit 16 witness testimony by declaration; conditioned the admission of 17 such declarations on the declarant’s presence at trial; and set 18 deadlines to submit the declarations, optional trial briefs and 19 evidentiary objections.3 20 The bankruptcy court next entered a Pre-Trial Order on 21 August 3, 2011, which the parties had jointly submitted to the 22 court. The Pre-Trial Order established certain admitted facts, 23 and provided that only certain issues of law remained to be 24 litigated, including the elements of reasonable reliance and 25 intent to deceive under Section 523(a)(2)(B). The parties also [3] 27 The order further provided that no other declarations or briefs were permitted, and that any oral testimony would be 28 limited to rebuttal testimony or cross-examination. [3] 1 included a list of the exhibits they intended to introduce, and a 2 list of witnesses they planned to call at trial. 3 Pursuant to the Evidence Order, Tovar and HPF each submitted 4 declarations; Tovar filed a declaration on his own behalf, and 5 HPF submitted the declaration of Benjamin Ganter (“Ganter”), 6 HPF’s Director of Client Relations and a Managing Partner.4 7 Ganter’s declaration was accompanied by two exhibits: a copy of 8 the Loan Application and a copy of the Note. Both parties filed 9 trial briefs. HPF also filed a supplemental exhibit list on 10 September 7, 2011, then filed an amended exhibit list (“Amended 11 Exhibit List”)5 the next day so as to include a copy of an 12 allonge (“Allonge”) to the Note. 13 In his declaration, Ganter stated that HPF purchased the [4] 15 HPF also submitted the declaration of Mark Schuerman. The admission of that declaration, however, is not presented for 16 review; Schuerman was not present at trial and thus, his declaration was not admitted into evidence. [5] 18 The Amended Exhibit List consisted of 13 exhibits: 19 1. Loan Application; 2. Note; 20 3. Deposition transcript; 21 4. Borrower's Certification & Authorization (“Certification Form”); 22 5. Deed of Trust; 6. Settlement Statement; 23 7. Occupancy Statement; 24 8. Amortization Schedule; 9. Latin Services Letter (“Latin Services Letter”); 25 10. Tovar Landscape Design brochure (“Brochure”); 11. Wells Fargo Bank Statements (“Bank Statements”); 26 12. Letter of Employment: To Support Purpose of Refinance 27 (“Letter in Support of Refinance”); 13. Allonge. [4] 1 Refinance Loan from RP Financial Services, LLC (“RP Financial”), 2 and that HPF was currently in possession of the Note as a result 3 of that purchase. Ganter further declared that through an 4 independent investigation, HPF discovered a number of material 5 misrepresentations on the Loan Application, including 6 misrepresentations related to Tovar’s monthly income, his 7 employment, and his intent to live on the Property. 8 In its trial brief, HPF asserted that it was the current 9 owner and holder of the Note, and accordingly, could enforce the 10 Note and all claims for relief against Tovar. HPF further 11 asserted that the disputed elements under Section 523(a)(2)(A) 12 and (a)(2)(B) were established by the false statements Tovar made 13 in his Loan Application. These included that the Loan 14 Application listed Tovar’s monthly income as $11,000; that he 15 owned Tovar Landscape Design and was self-employed through the 16 company; and that he lived at the Property. 17 In his trial declaration, Tovar stated that he did not read 18 or understand English, and that a loan officer named Jannet 19 Medina translated and filled out the Loan Application on his 20 behalf, directing him where to sign. He also stated that he had 21 no knowledge as to the various documents that HPF asserted were 22 in his mortgage file. 23 Tovar’s trial brief countered HPF’s assertion of standing; 24 he argued that HPF had not shown that it was a “person entitled 25 to enforce” the Note pursuant to various provisions of the 26 California Commercial Code. He further argued that because he 27 was an uneducated man who did not read, write, or speak English, 28 it was impossible for him to ensure the accuracy of the [5] 1 statements made in the Loan Application. Finally, he argued 2 that HPF could not establish the reasonable reliance required by 3 Section 523(a)(2)(B), as only WMC, the original lender, could 4 have relied on Tovar’s Loan Application. 5 Tovar also submitted evidentiary objections to Ganter’s 6 declaration, and HPF’s Amended Exhibit List. He objected to 7 Ganter’s declaration pursuant to Evidence Rules 401, 402, 602 and 8 701. Tovar also objected to HPF’s exhibits pursuant to Evidence 9 Rules 901, 1002, 802, and Civil Rule 37. 10 At the bench trial, the bankruptcy court heard testimony 11 from both Ganter and Tovar. Ganter testified that HPF purchased 12 the Note from RP Financial at the beginning of 2009, as part of a 13 purchase of a pool of mortgage promissory notes. He stated that 14 at the time of the purchase, HPF was a relatively small company, 15 and he was a key employee; thus, he personally oversaw the 16 transaction relating to the Note. Ganter further testified 17 that HPF began investigating the Refinance Loan when it became 18 aware that Tovar had never actually lived on the Property. He 19 also stated that the Allonge was always attached to the Note 20 (both the Note and Allonge were produced at trial). Finally, 21 Ganter testified that HPF’s claim for $120,000 encompassed the 22 amount due under the Note, and did not include attorneys’ fees or 23 other costs and expenses incurred in litigating the 24 nondischargeability claims. 25 On cross examination, Tovar testified that it was his 26 signature that appeared on the Loan Application, the Note, the 27 Certification Form, and the Deed of Trust. He further stated 28 that he never: lived at the Property; earned monthly income in [6] 1 the amount of $11,000; had a bank account at Wells Fargo Bank; or 2 owned his own business. Instead, Tovar testified that he 3 purchased the Property for his brother as his brother could not 4 finance a home on his own. 5 Following cross examination testimony, the bankruptcy court 6 overruled Tovar’s evidentiary objections. In doing so, the 7 bankruptcy court stated: 8 I’m satisfied that these are the proper documents that were in the file. So, I’m going to overrule the 9 objections. The question of discovery I’m not concerned about that. As far as the allonge it’s 10 pretty clear to me. I listened to the testimony. As far as the issue of the transfer that there’s no harm 11 on that. So, I’m going to admit the exhibits. 12 Trial Tr. 48:10-17, Nov. 9, 2011. 13 Following the conclusion of all testimony, the bankruptcy 14 court ruled in favor of HPF. It found that Tovar’s testimony 15 lacked credibility, particularly in light of the other various 16 documents in Tovar’s mortgage file, including the Occupancy 17 Statement and Latin Services Letter.6 The bankruptcy court 18 directed HPF to prepare a proposed judgment, and proposed 19 findings of fact and conclusions of law. After these were filed, 20 the court entered the judgment and findings of fact and 21 conclusions of law on December 21, 2011. 22 On December 7, 2011, Tovar filed the appeal presently before 23 the Panel. [6] The Latin Services Letter is an undated letter signed by a 26 woman (whose printed name is illegible) on behalf of Latin 27 Services, which states that she had prepared Tovar’s individual tax returns since 2004, and that he had been self-employed by 28 Tovar Landscaping Design during the two previous years. [7] 1 JURISDICTION 2 The bankruptcy court had jurisdiction under 28 U.S.C. 3 §§ 1334 and 157(b)(2)(I). If the judgment is a final order, then 4 we have jurisdiction under 28 U.S.C. § 158 (b). 5 The only question we see to the finality of the judgment on 6 appeal is that it only refers to the Section 523(a)(2)(B) claim, 7 notwithstanding that the complaint was brought pursuant to both 8 Section 523(a)(2)(A) and Section 523(a)(2)(B). 9 In response to a clerk’s order from this Panel requesting an 10 explanation as to why the judgment was final, Tovar filed a 11 written response in which he asserted that the elements of 12 Section 523(a)(2)(B) essentially encompassed the elements of 13 Section 523(a)(2)(A); and thus, the judgment was final. This, of 14 course, is wrong, as well as unhelpful. 15 Not relying solely on Tovar, a motions panel considered the 16 matter, and on May 25, 2012, entered an order deeming the 17 judgment to be a final disposition of the adversary proceeding. 18 The motions panel determined that judgment on one of two mutually 19 exclusive claims for relief renders the claim not addressed 20 denied, and that no further action was necessary. See McCrary v. 21 Barrack (In re Barrack), 217 B.R. 598, 605 (9th Cir. BAP 1998) 22 (“It is well established that [Section 523(a)(2)(A) and 23 523(a)(2)(B)] are mutually exclusive.”). Although we are not 24 bound by determinations made by the motions panel, see Couch v. 25 Telescope Inc., 611 F.3d 629, 632 (9th Cir. 2010), here, we agree 26 with them, and hold that the judgment is a final order. 27 Therefore, we have jurisdiction over this appeal. [8] 1 ISSUES7 2 1. Whether HPF established its standing as a real party in 3 interest in relation to pursuing its nondischargeability 4 claims against Tovar? 5 2. Whether the bankruptcy court erred by overruling Tovar's 6 evidentiary objections with respect to the Allonge? 7 3. Whether the bankruptcy court erred by overruling Tovar's 8 evidentiary objections with respect to Ganter’s declaration 9 and testimony? 10 4. Whether the bankruptcy court erred by finding that Tovar 11 obtained the Refinance Loan through fraud, and that the debt 12 was nondischargeable under Section 523(a)(2)(B)? 13 STANDARDS OF REVIEW 14 Standing is a legal issue that the Panel reviews de novo. 15 Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 16 897, 906 (9th Cir. BAP 2011). 17 The bankruptcy court's evidentiary rulings, such as 18 admission of testimony, are reviewed for abuse of discretion. See 19 Int’l Ass’n of Firefighters v. City of Vallejo (In re City of 20 Vallejo), 408 B.R. 280, 291-92 (9th Cir. BAP 2009). Moreover, an 21 erroneous evidentiary ruling will only be reversed if that error 22 was prejudicial. Id. at 292 . [7] 24 In his Designation of Record, Tovar presented 33 enumerated issues for review on appeal. Tovar, however, did not address a 25 majority of these issues in his opening brief. The Panel thus declines to address any issues that Tovar did not fully argue in 26 his brief. See Padgett v. Wright, 587 F.3d 983 , 986 n.2 (9th 27 Cir. 2009)(per curiam)(appellate courts “will not ordinarily consider matters on appeal that are not specifically and 28 distinctly raised and argued in appellant's opening brief.”). [9] 1 Abuse of discretion is determined under a two-prong inquiry. 2 United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009) 3 (en banc). The Panel first determines de novo whether the 4 bankruptcy court applied the correct legal standard. See id. If 5 the bankruptcy court failed to do so, it necessarily abused its 6 discretion. See id. at 1262 . 7 If, however, the bankruptcy court applied the correct legal 8 standard, the inquiry moves to the second prong and the Panel 9 examines whether the bankruptcy court’s factual findings were 10 clearly erroneous. See id. at 1262 . The bankruptcy court's 11 factual findings are clearly erroneous if they are "illogical, 12 implausible, or without support in inferences that may be drawn 13 from the record." See id. at 1263 (internal quotation marks 14 omitted). 15 As indicated above, factual issues, such as credibility and 16 the authenticity of documents, are reviewed under the clearly 17 erroneous standard. Rule 8013(a). Retz v. Samson (In re Retz), [18] 606 F.3d 1189, 1196 (9th Cir. 2010) (citing Hinkson, 585 F.3d at 19 1261-62 & n.21). Under this standard, when there are two 20 permissible views of the evidence, the bankruptcy court’s choice 21 between them cannot be clearly erroneous. Palmdale Hills Prop., 22 LLC v. Lehman Commerical Paper, Inc. (In re Palmdale Hills Prop., 23 LLC), 457 B.R. 29, 40 (9th Cir. BAP 2011) (citing Anderson v. 24 City of Bessemer City, N.C., 470 U.S. 564, 574 (1985)). 25 Many of the issues in this case – including whether a 26 creditor reasonably relied on a debtor’s written statement, and 27 whether a debtor made that statement with intent to deceive – 28 are factual questions that are reviewed for clear error. Smith [10] 1 v. Lachter (In re Smith), 242 B.R. 694 (9th Cir. BAP 1999); see 2 also Candland v. Ins. Co. of N. Am. (In re Candland), 90 F.3d 3 1466, 1469 (9th Cir. 1996). 4 DISCUSSION 5 I. HPF Established its Standing as a Real Party in Interest to Pursue its Nondischargeability Claims Against Tovar. [6] Tovar challenges whether HPF established its standing as a [7] “real party in interest” pursuant to Civil Rule 17(a)(1). He [8] contends that HPF never provided proof that it was the current [9] holder of the Note, and thereby, that it was a “person entitled [10] to enforce” the note under California commercial law. [11] Standing is required in every federal case and determines [12] whether the court may entertain the proceeding. In re Veal, [13] 450 B.R. at 906 . Standing has both constitutional and prudential [14] dimensions. See Edwards v. Wells Fargo Bank, N.A. (In re [15] Edwards), 454 B.R. 100, 103 (9th Cir. BAP 2011). In turn, [16] prudential standing implicates the real party in interest [17] requirement under Civil Rule 17.8 In re Veal, 450 B.R. at 907 . [18] A party requesting relief must establish that it is the real [19] party in interest under applicable substantive law. See id. at [20] 907-08. [21] In mortgage cases involving a negotiable instrument secured [22] by real property, the substantive law is generally supplied by [23] the Uniform Commercial Code (“UCC”), as adopted or implemented by [24] state law. See id. at 908-10 (discussing Article 3 and Article 9 [25] of the UCC). Under this construct, a party may establish its [26] 27 8 Civil Rule 17 applies in bankruptcy proceedings through 28 Rules 7017 and 9014(c). [11] 1 standing by showing it is the “person entitled to enforce” the 2 promissory note as that phrase is defined by UCC Article 3. See 3 id. When a person is not the original payee identified on the 4 note, the person establishes that it is a “person entitled to 5 enforce” the note by showing it is either a holder9 of the note, 6 or a nonholder in possession of the note with the rights of a 7 holder.10 See Cal. Com. Code § 3301.11 8 Negotiation is defined as a “transfer of possession, whether 9 voluntary or involuntary, of an instrument by a person other than 10 the issuer to a person who thereby becomes its holder.” Id. 11 § 3201(a). When the note is payable to an identified person, 12 “negotiation requires transfer of possession of the instrument 13 and its endorsement by the holder.” See id. § 3201(b) (emphasis 14 added). An endorsement is “a signature . . . that alone or 15 accompanied by other words is made on an instrument for the 16 purpose of (1) negotiating the instrument . . . .” Id. 17 § 3204(a). Once a note is negotiated, the subsequent party 18 becomes a holder, and thereby, a person entitled to enforce the 19 note. See id. §§ 3201(a); 1201(b)(21); 3301. 20 It is undisputed here that WMC was the original payee on the [21] 22 9 See Cal. Com. Code § 1201 (b)(21) (defining “holder”). 23 10 A person may also be a person entitled to enforce if they 24 are not in possession of the negotiable instrument but are entitled to enforce pursuant to Cal. Com. Code §§ 3309 or 25 3418(d). 26 11 Application and analysis under the California Commercial 27 Code is appropriate here given that the situs of the Property is California and pursuant to the governing law provision in the 28 Deed of Trust. [12] 1 Note. Because HPF was not the original payee, it had to show it 2 was a person entitled to enforce the Note, either as a “holder” 3 of the Note, or a “nonholder” in possession of the Note who has 4 the rights of a holder. See id. § 3301. 5 The court found that the evidence established that the Note 6 was properly negotiated by WMC to RP Financial. The last page of 7 the Note contains a stamp endorsing the Note to RP Financial. 8 There was no evidence presented that this was made for a purpose 9 other than endorsement. As such, this constituted a proper 10 endorsement to RP Financial. See id. § 3204(a). Ganter 11 testified that HPF took possession of the Note when it purchased 12 the Note from RP Financial, and thus, it is inferred 13 that transfer of possession occurred as RP Financial was not the 14 original holder. Therefore, the Note was properly negotiated to 15 RP Financial. See id. § 3201(b). 16 The inquiry thus moves to whether the Note was properly 17 negotiated or transferred from RP Financial to HPF. This, in 18 turn, requires examination of the validity of the Allonge, since 19 it is the paper that bears the signature of RP Financial 20 indicating a negotiation to HPF. Tovar argues that HPF failed to 21 show that the Allonge was affixed to the Note, as it must be to 22 effectuate a valid negotiation. Cal. Comm. Code § 3204 (a) (“For 23 the purpose of determining whether a signature is made on an 24 instrument, a paper affixed to the instrument is a part of the 25 instrument.”). He also continues to challenge the effect of the 26 Allonge as it was undated and unrecorded. 27 Contrary to Tovar’s argument, there is nothing in the UCC or 28 the California Commercial Code requiring that an allonge be dated [13] 1 or recorded with the county recorder. Tovar advances no 2 substantive argument or case law to support this proposition. 3 Nor, at least since the 1992 amendments to UCC Article 3, is it 4 relevant that there may be space on a promissory note for 5 additional endorsements. See Comment 1 to UCC § 3-204 ("An 6 indorsement on an allonge is valid even though there is 7 sufficient space on the instrument for an indorsement."). 8 Here, the Allonge attached to the Amended Exhibit List is a 9 single exhibit titled “Allonge to Promissory Note.” The document 10 identifies Tovar, the Property and his loan number. There is 11 language stating “Without Recourse, Pay to the Order of: Heritage 12 Pacific Financial, LLC d/b/a/ Heritage Pacific Financial,” 13 followed by the signature of Richard A. Panter, on behalf of RP 14 Financial. If affixed to the Note, this information would be 15 sufficient to constitutes an endorsement from RP Financial to 16 HPF. See Cal. Com. Code § 3204 (a). 17 According to Ganter’s testimony at the trial, the Note and 18 Allonge were in HPF’s possession since its purchase of the Note, 19 and in fact, were both produced at the trial during Ganter’s 20 cross-examination. This infers that transfer of possession 21 occurred as HPF was not the prior holder of the Note. 22 Even so, in order for RP Financial to have properly 23 negotiated the Note to HPF through the Allonge, the Allonge must 24 have been affixed to the Note. See id. § 3204 ("For the purpose 25 of determining whether a signature is made on an instrument, a 26 paper affixed to the instrument is a part of the instrument."). 27 The record before us raises some questions as to this. The Note 28 attached to Ganter’s declaration and HPF’s Amended Exhibit List [14] 1 contains two faint hole punch marks at the top of the document. 2 The Allonge attached to the Amended Exhibit List, however, does 3 not bear any indication of similar punch hole marks. There are 4 no other visible marks that are consistent between the copies of 5 the Note in the record and the Allonge. 6 Even slightly more perplexing, the copy of the Allonge 7 that Tovar included in his Excerpts of Record clearly bears 8 visible hole punch marks at the top of the document. This 9 seemingly appears to be consistent with the facial marks on the 10 copy of the Note. Tovar’s copy of the Allonge, however, does not 11 contain ECF markings at the top of the document, which indicates 12 that it was not filed on the docket. In fact, Tovar’s copy 13 appears to be different than HPF’s copy of the Allonge attached 14 to the Amended Exhibit List. It is unclear where Tovar obtained 15 his copy of the Allonge. 16 While these issues may be debated, it is undisputed that 17 the Allonge was produced and examined by the bankruptcy court at 18 trial. Ganter testified that the Allonge was always affixed to 19 the Note. Tovar’s counsel examined the Allonge, and did not 20 address any issues as to inconsistent facial marks between the 21 Note and Allonge; in fact, Tovar’s counsel only inquired as to a 22 post-it note that was apparently affixed to the Allonge. Based 23 on the testimony and production of the Note and Allonge at trial, 24 it was reasonable to assume that the Allonge was affixed to the 25 Note. And that finding is implicit in the bankruptcy court’s 26 ruling, which is entitled to stand unless clearly erroneous, as 27 it goes to identity or authenticity. See Rule 8013(a). On this 28 record, with various possible inferences, we cannot say the [15] 1 bankruptcy court erred in picking one of the possible scenarios 2 and validating the Allonge. Anderson, 470 U.S. at 574 ; In re 3 Palmdale Hills Prop., LLC, 457 B.R. at 40 . 4 For the reasons stated above, the bankruptcy court’s finding 5 that the Note was properly negotiated from RP Financial to HPF 6 was not clearly erroneous. The bankruptcy court was thereby 7 entitled to treat HPF as the “holder” of the Note, and thus, the 8 “person entitled to enforce” the instrument. See Cal. Com. Code 9 §§ 3201(a); 1201(b)(21); 3301. In turn, this conferred the 10 status of real party in interest on HPF pursuant to In re Veal. 11 Therefore, HPF had standing to pursue its nondischargeability 12 action against Tovar. 13 II. The bankruptcy court did not err in overruling Tovar’s evidentiary rulings. [14] A. The Allonge [15] 16 Tovar focuses a significant portion of his appeal on the 17 admission of the Allonge into evidence at trial. He contends 18 that the bankruptcy court erred by admitting the Allonge when HPF 19 failed to properly authenticate or satisfy the best evidence rule 20 under the Federal Rules of Evidence. Tovar also contends that 21 the bankruptcy court erred by admitting the Allonge when HPF 22 failed to produce the document pursuant to the Evidence Order, or 23 during the discovery period. 24 1. Best Evidence Rule – Evidence Rule 1002 25 Evidence Rule 1002 provides that “[a]n original writing, 26 recording, or photograph is required in order to prove its 27 content unless these rules or a federal statute provides 28 otherwise.” A copy is admissible to the same extent as an [16] 1 original “unless a genuine question is raised about the 2 original's authenticity or the circumstances make it unfair to 3 admit the duplicate.” Fed. R. Evid. 1003. 4 Tovar argues that HPF failed to prove that the Allonge was 5 affixed to the Note, particularly when the Note was originally 6 executed in 2006; thus, without a “certified copy of the 7 original, in its complete form,” the Allonge was inadmissible to 8 show that HPF owned the Note. Appellant’s Opening Brief (“Op. 9 Br.”) at 12. 10 The bankruptcy court admitted the Allonge into evidence 11 following Ganter’s testimony. Contrary to Tovar’s arguments, the 12 Best Evidence Rule does not require that HPF have submitted a 13 certified or dated copy of the Allonge. The Allonge was produced 14 at trial, subject to inspection, and Ganter was available for 15 questioning. Although the bankruptcy court did not explicitly 16 state the basis for doing so, all of the elements were present to 17 allow admission of the Allonge, and Tovar’s misplaced and 18 irrelevant best evidence objection was not a bar to admitting the 19 Allonge. 20 2. Authentication – Evidence Rule 901 21 Evidence Rule 901 provides that a “proponent must produce 22 evidence sufficient to support a finding that the item is what 23 the proponent claims it is.” Fed. R. Evid. 901(a). A witness 24 with knowledge of the item can authenticate it by testifying that 25 the “item is what it is claimed to be.” Fed. R. Evid. 901(b)(1). 26 The proponent of the evidence “need make only a prima facie 27 showing of authenticity.” See United States v. Iribe, 564 F.3d 28 1155, 1159 (9th Cir. 2009) (internal citation and quotation marks [17] 1 omitted). 2 Tovar argues that “unrecorded documents, which are required 3 to be recorded, fail to satisfy the authentication requirements 4 of [Evidence Rule] 901 or the self-authenticating provisions of 5 [Evidence Rule] 902.” Op. Br. at 13. Once again, he argues that 6 without a “certified copy of the original, in its complete form,” 7 the Allonge was inadmissible to show that HPF owned the Note. 8 Id. at 14. 9 This is simply not the law. Indeed, under state substantive 10 law related to negotiable instruments, a note’s “signature[s are] 11 presumed to be authentic and authorized” without the need for 12 certifications of signatures. Cal. Comm. Code § 3308 (a); see 13 also Comment 1 to UCC § 3-308. As previously stated, the 14 bankruptcy court admitted the Allonge into evidence following 15 Ganter’s testimony. Ganter testified that the Allonge had always 16 been affixed to the Note. Moreover, he testified that HPF was a 17 relatively small company at the time that it purchased the Note, 18 and he was a key employee; thus, he personally oversaw the 19 transaction relating to the Note. As such, Ganter sufficiently 20 testified that the document was what HPF claimed it was – an 21 allonge to the Note executed by Tovar. 22 Contrary to Tovar’s arguments, Evidence Rule 901 does not 23 require that HPF have submitted a certified or dated copy of the 24 Allonge. Although the bankruptcy court did not explicitly state 25 the basis for doing so, the record supports that the Allonge was 26 properly admitted pursuant to Evidence Rule 901. [18] 1 3. Untimely Submission 2 Tovar next argues that the bankruptcy court erred by 3 admitting the Allonge into evidence when HPF submitted the 4 exhibit one day after the deadline established by the court. 5 It is unclear from the record whether the bankruptcy court 6 required that the exhibits be filed on the docket, and if so, 7 whether it imposed a deadline to do so. Local Bankruptcy 8 Rule12 7016 states that a joint pre-trial order must include an 9 attached list of exhibits that each party intends to offer at 10 trial. See LBR 7016(b)(2)(D) (C.D. Cal). This rule, however, 11 does not require that the parties file their actual exhibits on 12 the docket.13 13 Tovar and HPF each listed their exhibits in the Pre-Trial 14 Order entered by the bankruptcy court on August 3, 2011. It 15 appears that HPF supplemented its exhibit list on September 7, 16 2011, and then filed its Amended Exhibit List the following day 17 on September 8, 2011. The Evidence Order established deadlines 18 for HPF and Tovar to submit their declarations, optional trial 19 briefs, or optional evidentiary objections to the bankruptcy 20 court in advance of trial. In terms of other evidence, the 21 Evidence Order further provided that “[t]he only additional 22 evidence a party may offer at trial is true rebuttal evidence.” 23 EOR, Ex. 9 ¶ 2(e). [24] 25 12 This is in reference to the Local Bankruptcy Rules for the United States Bankruptcy Court for the Central District of [26] California. 27 13 In fact, we observe that Tovar did not file his exhibits 28 on the docket. [19] 1 Even assuming that the Pre-Trial Order or Evidence Order 2 established some sort of deadline to identify or file exhibits, 3 the bankruptcy court generally has discretion during discovery to 4 admit evidence if there is no prejudice to the other party. 5 Although Tovar argues that the Allonge was submitted past the 6 “deadline,” HPF amended its exhibit list just one day after its 7 declarations were due pursuant to the Evidence Order. Given that 8 Tovar still had over one month to submit evidentiary objections, 9 and that Tovar actually did so, it does not appear that he 10 suffered any prejudice. Accordingly, the record supports that 11 the court properly admitted the Allonge despite Tovar’s objection 12 based on HPF’s purported untimeliness. 13 4. Civil Rule 37 14 In relevant part, Civil Rule 37(d) provides that a court may 15 issue appropriate sanctions where a party fails to serve its 16 answers, objections, or written responses to interrogatories 17 under Civil Rule 33, or to requests for production under Civil 18 Rule 34. Fed. R. Civ. P. 37(d)(A)(ii). 19 Tovar argues that the bankruptcy court erred by admitting 20 the Allonge under Civil Rule 37 when HPF failed to produce the 21 Allonge despite Tovar’s discovery requests. Admittedly, HPF 22 initiated the nondischargeability action in November 2010; yet, 23 the record reflects that the Allonge was first identified as an 24 exhibit in September 2011, just two months prior to trial. It 25 appears that none of HPF’s pleadings or other documents include 26 or refer to the Allonge prior to filing the Amended Exhibit List. 27 Even so, HPF responded to Tovar’s interrogatories and 28 requests for production. This is not a situation where HPF [20] 1 refused to provide any documents prior to trial. See Advisory 2 Committee’s Notes to Fed. R. Civ. P. 37(d)(1970) (Civil Rule 3 37(d) is concerned with “total noncompliance . . . [that] may 4 impose severe inconvenience or hardship on the discovering party 5 and substantially delay the discovery process.”) (emphasis 6 added). Tovar still filed his evidentiary objections within the 7 deadline established in the Evidence Order. 8 Moreover, Tovar initially raised this issue in his 9 evidentiary objections to HPF’s exhibits; he did not 10 independently move for sanctions under Civil Rule 37(d), nor move 11 to exclude the Allonge under Civil Rule 37(c). Although HPF 12 should have identified the Allonge as an exhibit sooner than two 13 months prior to trial, the record supports the bankruptcy court’s 14 ruling. 15 In conclusion, the bankruptcy court did not abuse its 16 discretion on its evidentiary rulings as to the Allonge. 17 B. Ganter’s Declaration and Trial Testimony - Evidence Rule 602 [18] 19 Tovar next argues that the bankruptcy court erred by 20 admitting Ganter’s declaration and testimony at trial when Ganter 21 lacked personal knowledge with respect to the Note and its 22 transfer. He asserts that whether the Note was transferred, and 23 the effect of any such transfer, is a conclusion of law that 24 Ganter lacked knowledge to testify as to. Evidence Rule 602 25 provides that “[a] witness may testify to a matter only if 26 evidence is introduced sufficient to support a finding that the 27 witness has personal knowledge of the matter.” 28 Ganter testified at the trial that the Refinance Loan was [21] 1 purchased by HPF in 2009. At that time, HPF consisted of nine or 2 ten employees, and Ganter was then a key employee who was 3 personally involved with HPF’s transactions and purchases of 4 secondary mortgages such as the Refinance Loan. The bankruptcy 5 court was well within its discretion in finding that this 6 testimony established sufficient personal knowledge as to HPF’s 7 purchase of the Note. 8 C. Relevance of Exhibits – Evidence Rules 401 and 402 9 Tovar finally argues that the bankruptcy court erred by 10 admitting HPF’s 13 exhibits pursuant to Evidence Rules 401 and 11 402. He asserts that extrinsic evidence is inadmissible under 12 the Federal Rules of Evidence to determine an action, that HPF 13 failed to cite to any exhibits in its trial brief, and thus, it 14 failed to demonstrate the probative value of the exhibits. He 15 concludes that the bankruptcy court should have excluded all of 16 HPF’s exhibits based on the lack of probative value or relevancy. 17 Tovar, however, did not make these evidentiary objections 18 before the bankruptcy court. Instead, he perfunctorily attempts 19 to advance these arguments for the first time on appeal. To the 20 extent that he lodged such objections against Tovar’s declaration 21 and testimony before the bankruptcy court, Tovar does not make 22 any substantive arguments on that issue in his brief. Therefore, 23 the Panel declines to address this issue. See Padgett, 587 F.3d 24 at 986 n.2 (appellate courts “will not ordinarily consider 25 matters on appeal that are not specifically and distinctly raised 26 and argued in appellant's opening brief.”). [22] 1 III. The bankruptcy court did not err in determining that the Refinance Loan was Nondischargeable Pursuant to 11 U.S.C. 2 § 523(a)(2)(B). 3 Lastly, Tovar argues that the bankruptcy court erred by 4 finding that he committed fraud when he applied for and obtained 5 the Refinance Loan, and that this fraud gave rise to a 6 nondischargeable debt within the meaning of Section 523(a)(2)(B). 7 In relevant part, Section 523(a)(2)(B) provides that a debt 8 is nondischargeable if the debtor obtained "money, property, 9 services, or an extension, renewal, or refinancing of credit" by 10 using a statement in writing11 (I) that is materially false; (ii) respecting the debtor's or an insider's financial 12 condition; (iii) on which the creditor to whom the debtor is liable 13 for such money, property, services, or credit reasonably relied; and 14 (iv) that the debtor caused to be made or published with intent to deceive . . . . [16] 11 U.S.C. § 523 (a)(2)(B). 17 The first two elements were not contested at trial, and are 18 not contested on appeal. That is, we take as given that the 19 documents at issue were materially false, and were made with 20 respect to Tovar’s financial condition. 21 Tovar maintains that the bankruptcy court erred in finding 22 that HPF satisfied the last two elements of Section 523(a)(2)(B); 23 namely, that Tovar acted with the requisite intent to deceive the 24 original lender, and that HPF satisfied the reasonable reliance 25 requirement. These arguments are addressed in reverse order. 26 A. Reasonable Reliance 27 For the purposes of Section 523(a)(2)(B)(iii), a creditor/ 28 assignee is not required to independently establish its own [23] 1 reasonable reliance. See New Falls Corp. v. Boyajian (In re 2 Boyajian), 367 B.R. 138, 141-44 (9th Cir. BAP 2007), aff'd, [3] 564 F.3d 1088 (9th Cir. 2009). Rather, the creditor need only 4 establish reasonable reliance by the original lender who extended 5 credit to the debtor. See id. at 145-46. Accordingly, the only 6 party’s reliance at issue here is that of WMC, the original 7 lender. 8 Tovar first argues that information as to WMC’s lending 9 practices was necessary to determine whether WMC relied on the 10 Loan Application. He contends that despite his discovery 11 requests for this information, HPF failed to produce any of this 12 information, including whether WMC adhered to those practices on 13 Tovar’s application. HPF counters that the Loan Application is 14 in and of itself sufficient to establish WMC’s reasonable 15 reliance, as it represented Tovar’s financial and employment 16 information when WMC approved and disbursed the Refinance Loan. 17 “Reasonable reliance” is not defined by the Code, but is 18 analyzed under a “prudent person” test, which “courts can apply 19 without additional help.” Cashco Fin. Servs., Inc. v. McGee 20 (In re McGee), 359 B.R. 764, 774 (9th Cir. BAP 2006) (internal 21 citations omitted). While a creditor cannot claim reliance on 22 representations that are obviously false, “minor clues of falsity 23 in financial statements that on the whole have the appearance of 24 being very complete and reliable . . .” do not negate reasonable 25 reliance. Gosney v. Law (In re Gosney), 205 B.R. 418, 421 (9th 26 Cir. BAP 1996); Gertsch v. Johnson & Johnson, Fin. Corp. (In re 27 Gertsch), 237 B.R. 160, 170 (9th Cir. BAP 1999). “[W]hen there 28 is evidence of materially fraudulent statements, little [24] 1 investigation is required for a creditor to have reasonably 2 relied on the representations.” In re Gertsch, 237 B.R. at 170 3 (citing In re Gosney, 205 B.R. at 421 ). This determination is 4 made on a case-by-case basis, based on the totality of the 5 circumstances. In re McGee, 359 B.R. at 774 . 6 Here, in rendering its decision, the bankruptcy court did 7 not explicitly state its findings as to reasonable reliance. 8 During Tovar’s closing argument at trial, however, the bankruptcy 9 court referred to various loan documents with respect to the 10 element of reliance. Specifically, Tovar’s counsel stated: 11 WMC’s standard of reliance would have been to verify the information that was being provided on the stated 12 income loan. There’s been no evidence produced showing that WMC took any of those steps to confirm the 13 information. 14 To which the bankruptcy court responded: 15 What about the additional documents that were done about three weeks later? They’re in the file. That is 16 the statement, the bank statement, the statement as to residency, the -- let’s see there were four of them. 17 There was the occupancy statement. There’s the bank statement. There’s the Latin services statement, and 18 then there’s that landscaping brochure. 19 [Trial Tr. 58:12-23.] 20 We also observe that the record contains a Certification 21 Form, which Tovar signed on November 15, 2006. In this document, 22 Tovar certified that he applied for a mortgage loan from WMC; and 23 that by applying for the loan, he “completed a loan application 24 containing various information on the purpose of the loan, the 25 amount and source of the down payments, employment and income 26 information, and assets and liabilities.” Pl.’s Ex. 11 at 193. 27 Tovar also certified that he understood and agreed that WMC 28 reserved the right to change the mortgage loan review process to [25] 1 a full documentation program,” including “verifying the 2 information provided on the application with the employer and/or 3 financial institution.” Id. 4 Contrary to Tovar’s arguments, a creditor’s actual 5 verification of information is not an explicit requirement as to 6 reasonable reliance. See In re Smith, 242 B.R. at 702 (“[W]hen 7 there is evidence of materially fraudulent statements, little 8 investigation is required for a creditor to have reasonably 9 relied on the representations.”). Nothing in the record suggests 10 that WMC did not adhere to normal business practices, or that 11 Tovar’s misrepresentations were blatantly apparent in the Loan 12 Application. Based on the totality of the circumstances, the 13 record supports the bankruptcy court’s inference of reasonable 14 reliance on the Loan Application and other documents in the 15 record. 16 B. Intent to Deceive 17 Tovar next argues that the bankruptcy court erred in finding 18 that he satisfied the requisite intent to deceive WMC (and 19 subsequently HPF) when he applied for and obtained the Refinance 20 Loan. 21 For the purposes of Section 523(a)(2)(B), intent is 22 “established by showing either actual knowledge of the falsity of 23 a statement, or reckless disregard for its truth . . . .” In re 24 Gertsch, 237 B.R. at 167 . 25 The bankruptcy court did not find Tovar’s testimony 26 credible. It specifically noted that in order to make Tovar’s 27 account plausible, it would have to find that WMC essentially 28 fabricated various documents in Tovar’s mortgage file – including [26] 1 a brochure for a business that Tovar said existed on his Loan 2 Application but which was fictitious: 3 I mean that portion of it weighs heavily in my mind that it would have been an extraordinary event 4 happening at the lender to prepare to go through and prepare a brochure for Tovar Landscape Design, to 5 prepare all that. I just can’t believe that that actually happened. [6] 7 [Trial Tr. 64:12-23.] 8 The court further noted: 9 Mr. Tovar added a dimension here to not only saying he was going to live in there, it was clear this loan 10 would never have been made had they known. That's a pretty basic thing for the very reason if you have no 11 interest in it yourself or not living there, you're less likely to perform. [12] 13 [Trial Tr. 65: 4-9.] 14 The bankruptcy court thus found that Tovar submitted the 15 Loan Application with the requite intent to deceive based on a 16 number of factors: that Tovar Landscape Design never existed; 17 that Tovar’s monthly stated income was never $11,000; and that 18 Tovar never intended to live on the Property. The court further 19 determined that other documents in Tovar’s loan file, such as the 20 Latin Services Letter and Brochure, similarly demonstrated 21 Tovar’s intent to deceive. 22 We are unpersuaded by Tovar’s contention that he was not 23 aware of the misrepresentations stated in the Loan Application, 24 or the other documents submitted or contained in his mortgage 25 file. To the extent that there is any validity to his 26 allegations, Tovar nonetheless executed various legal documents 27 and certified that the information made therein was correct and 28 true. This is no different than signing and submitting a [27] 1 bankruptcy petition under the penalty of perjury, regardless of 2 whether the debtor is an individual with limited English 3 proficiency. Ultimately, the person signing a document bears the 4 legal responsibility as to the statements made therein. 5 Based on this record, the bankruptcy court did not err in 6 finding that Tovar made written statements with the intent to 7 deceive. We therefore conclude that the bankruptcy court did not 8 err in determining that HPF’s claim was nondischargeable under 9 Section 523(a)(2)(B). 10 CONCLUSION 11 For the reasons set forth above, the judgment of the 12 bankruptcy court is AFFIRMED.