United States District Court, D. Colorado
IN RE TERRY KENNETH VICKERY, Debtor.
DANNING, GILL, DIAMOND & KOLLITZ, LLP, Appellee. TERRY KENNETH VICKERY, Appellant,
OPINION AND ORDER ON APPEAL
CHRISTINE M. ARGUELLO, JUDGE
matter is before the Court on Debtor Terry Kenneth
Vickery's (“Debtor”) appeal of the Bankruptcy
Court's November 2, 2017 Opinion and Order on Remand
Granting in Part Judgment on Nondischargeability Claim Under
11 U.S.C. § 523(a)(2)(A) for Actual Fraud in Adversary
Proceeding No. 11-1164-TBM, Bankruptcy Case No. 10-41118-TBM.
Chapter 7 Trustee Danning, Gill, Diamond & Kollitz, LLP
(“Trustee”) opposes Debtor's appeal. In
determining this matter, the Court has considered the
designated record (Doc. ## 9-1-9-4), and the written
arguments of parties, including Debtor's Opening Brief
(Doc. # 13), Trustee's Answer Brief (Doc. # 14), and
Debtor's Reply Brief (Doc. # 18), as well as relevant
authorities. Exercising jurisdiction pursuant to 28 U.S.C.
§ 158, the Court affirms the Bankruptcy Court's
November 2, 2017 Opinion and Order.
the past 24 years, Trustee has been on a quest rivaling
Odysseus's formidable journey to Ithaca to recover assets
of the estate of IVDS Interactive Acquisition Partners
(“IIAP”). The Court has little interest in
writing its own Homeric epic and thus looks to previous
orders related to Debtor's instant appeal, from which the
Court now quotes at length. The following facts are
In the early 1990s, investment in interactive television
systems became a potentially lucrative source of income, and
by the mid-1990s certain bandwidths became eligible for
licensing by the Federal Communications Commission for
Interactive Video and Data Services (“IVDS”).
IIAP was created in 1994 by [Debtor] Mr. Vickery and others
for the purported purpose of purchasing IVDS licenses in
large geographic areas, setting up IVDS systems, and
profiting from the endeavor. Mr. Vickery did not have an
ownership interest in IIAP, but was one of its promoters. Mr.
Vickery was, however, the president and sole stockholder of
Digital Interactive Associates, Inc. (“DIA”),
which was set up at approximately the same time. The
purported purpose of DIA was to raise $6 million from
potential IIAP investors to be used by IIAP to obtain IVDS
In re Vickery, 488 B.R. 680, 682 (10th Cir. BAP
In 1995, [IIAP], a Florida general partnership, filed for
bankruptcy protection in the Central District of California
under Chapter 11. The case was converted to Chapter 7 and . .
. Mr. Richard K. Diamond, was appointed Chapter 7
that case, [Trustee] initiated an adversary proceeding
(hereinafter, the “IIAP Adversary Proceeding”)
against the Debtor, Mr. Terry Vickery, and others [in a
California federal district court].
In re Vickery, 526 B.R. 872, 875 (D. Colo. 2015).
THE IIAP ADVERSARY PROCEEDING IN CALIFORNIA FEDERAL DISTRICT
In the IIAP Adversary Proceeding, [Trustee] sought to avoid
and recover $3.6 million in transfers to the Debtor and other
defendants under 11 U.S.C. § 544. He argued that the
transfers were fraudulent and therefore voidable under
Florida law. . . . [Trustee] asserted three claims that the
transfers were fraudulent under the Florida Uniform
Fraudulent Transfer Act (FUFTA): (1) under FUFTA §
726.105(1)(a), based on evidence that the transfers were made
with the actual intent to hinder, delay, or defraud IIAP; (2)
under FUFTA § 726.105(1)(b)(i), based on evidence that
IIAP's assets were unreasonably small in relation to what
was required to satisfy its obligations; and (3) under FUFTA
§ 726.105(1)(b)(ii) based on evidence that at the time
of the transfers, IIAP intended to incur, or should have
believed that it would incur, debts beyond its ability to
. . . Further, [Trustee] claimed that [it] was entitled to
punitive damages because the Debtor and other defendants had
allegedly conspired to cause IIAP to transfer the funds and
that they acted willfully and with actual malice or wanton
disregard of IIAP's creditors.
Id. at 878-79. Relevant to the instant appeal is
Trustee's first claim for relief:
In the First Claim for Relief, [Trustee] sought recovery of
the Subject Transfers under section 726.105 of the Florida
Uniform Fraudulent Transfer Act (“FUFTA”). This
claim required him to prove that the Subject Transfers were
made to the Defendants by [IIAP], with actual intent
to hinder, delay, or defraud creditors of [IIAP]. In
the Pretrial Order, the Trustee asserted that actual intent
to defraud would be shown through a number of badges of
fraud; he made no mention of how actual intent to hinder or
delay would be shown.
In re Vickery, No. 10-04118 ABC, Adv. No. 11-01164,
2011 WL 4963136, *2 (Bankr. D. Colo. Oct. 17, 2011) (emphasis
nearly two-week jury trial in the California federal district
court, the jury returned a verdict in favor of Trustee on all
three claims for relief. It “found that $3.6 million
was fraudulently transferred by IIAP and that the defendants
conspired to cause IIAP to make the transfers to them or for
their benefit.” In re Vickery, 526 B.R. at
878- 79. As to Trustee's first claim:
For the first claim for relief, that “[IIAP] made a
transfer or incurred an obligation with the actual intent to
hinder, delay, or defraud any creditor of [IIAP], ” in
response to the question, “Do you the jury ...
unanimously find in favor of the [Trustee] as Chapter 7
trustee for the bankruptcy estate of [IIAP] and against
defendants?, ” the jurors answered, “Yes”
as to [Debtor] Terry Vickery. Further, the jury answered,
“Yes” as to Terry Vickery in response to
“We the jury unanimously find that the defendants'
action in this case were part of a conspiracy to have [IIAP]
make fraudulent transfers to them or for their
benefit.” The jury assessed actual and
compensatory damages on this claim against Vickery and in
favor of Diamond in the amount of $400, 000. The
jury also assessed a total of $1, 040, 000 in actual
and compensatory damages against other defendants.
(Pl.'s Mem. Ex. E, Apr. 13, 2007 Tr. at 5:16-24.)
In re Vickery, 2011 WL 4963136 at *4 (emphasis
added). After finding for Trustee and assessing actual and
compensatory damages against Debtor also on the second and
The jury also answered “yes” in response to three
interrogatories as to whether the Debtor had acted
maliciously, oppressively, and in reckless disregard of IIAP
creditors' rights. As a result, the jury awarded $1
million in punitive damages against the Debtor individually
and additional amounts against the other defendants.
In re Vickery, 526 B.R. at 878-79.
end, the IIAP Adversary Proceeding culminated in 2007 with a
judgment in favor of Trustee and against Debtor and other
defendants in the amount of $4.6 million plus interest.
Id. at 875. Trustee subsequently domesticated in
Colorado the judgment from in the IIAP Adversary Proceeding.
THIS ADVERSARY PROCEEDING IN THE COLORADO BANKRUPTCY
December 2010, Debtor filed for bankruptcy protection under
Chapter 7 in the District of Colorado (the “Colorado
Bankruptcy Court”). In re Vickery, Bankruptcy
No. 10-41118 (Bankr. D. Colo.).
2011, Trustee commenced this adversary proceeding against
Debtor by filing a Complaint to Determine Dischargeability of
Debt in the Colorado Bankruptcy Court. Trustee seeks a
determination that the judgment against Debtor entered in the
IIAP Adversary Proceeding in California (the “judgment
debt”) is nondischargeable debt Debtor owes IIAP's
bankruptcy estate pursuant to 11 U.S.C. §§
523(a)(2), (4), and/or (6). See In re Vickery, No.
10-04118 ABC, Adv. No. 11-01164, 2012 WL 2022502 (Bankr. D.
Colo. June 5, 2012), aff'd in part, rev'd in
part, 488 B.R. 680 (10th Cir. BAP (Colo.) 2013), and
aff'd, 526 B.R. 872 (D. Colo. 2015). Specifically,
[Trustee] argued that the judgment debt is nondischargeable
because it was (1) a debt for funds obtained
“under false pretenses, false representations or actual
fraud” under § 523(a)(2); (2) a debt for
“fraud and defalcation, while acting in a fiduciary
capacity to [IIAP]” under § 523(a)(4); and/or (3)
a debt for “willful and malicious injury to [IIAP] and
its property” under § 523(6).
In re Vickery, 526 B.R. at 875 (emphasis added).
appeal presently before this Court concerns Debtor's
first argument, alleging actual fraud under Section
523(a)(2)(A). Section 523(a)(2)(A) of the Bankruptcy Code
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or
1328(b) of this title does not discharge an individual debtor
from any debt--. . .
(2) for money, property, services, or an extension, renewal,
or refinancing of credit, to the extent obtained by--
(A) false pretenses, a false representation, or
actual fraud, other than a statement
respecting the debtor's or an insider's financial
condition; . . .
11 U.S.C. § 523(a)(2)(A) (emphasis added).
moved for summary judgment “entirely on the law of
preclusion, in that [Trustee] assert[ed] that the facts
established in the [IIAP] Adversary Proceeding . . .
establish the nondischargeability of the judgment
debt.” In re Vickery, 2011 WL 4963136 at *1.
denying Trustee's Motion for Summary Judgment on October
17, 2011, the Colorado Bankruptcy Court began with a
comprehensive review of the IIAP Adversary Proceeding, noting
that Debtor did not dispute any of the underlying facts of
the case, id. at *1-5, and with an explanation of
the Court of Appeals for the Ninth Circuit's doctrine of
issue preclusion, id. at *6-7. Because it was
undisputed that the IIAP Adversary Proceeding ended with a
final judgment on the merits and that Debtor was a party to
that proceeding, the question for the Colorado Bankruptcy
Court, in its view, was “whether the issues determined
by in [sic] the [IIAP] Adversary Proceeding were (a)
necessarily decided and (b) identical to the elements that
[Trustee] must establish in order to prove his claims under
§§ 523(a)(2), (4), and (6).” Id. at
*7. With respect to Trustee's first nondischargeability
claim pursuant to Section 523(a)(2)(A), the Colorado
Bankruptcy Court explained:
With respect to a nondischargeability claim predicated on
false representation or actual fraud, a plaintiff
must establish the following elements: (1) the defendant made
a false representation; (2) the defendant made the
representation with the intent to deceive the plaintiff; (3)
the plaintiff relied on that representation; (4) the
plaintiff's reliance as reasonable; (5) the debtor's
representation caused the creditor to sustain a loss.
Fowler Bros. v. Young (In re Young), 91 F.3d 1367,
1373 (10th Cir.1996). The creditor bears the burden of
proving all elements of a claim under § 523(a)(2)(A).
Id. at *8 (emphasis added). For reasons irrelevant
to the instant appeal, the Colorado Bankruptcy Court denied
Trustee's Motion for Summary Judgment as to Trustee's
first nondischargeability claim pursuant to Section
523(a)(2)(A) and as to Trustee's two other
nondischargeability claims pursuant to Sections 523(a)(4)
(fraud or defalcation while acting in fiduciary capacity) and
523(a)(6) (willful and malicious injury). Id. at
Colorado Bankruptcy Court conducted a three-day trial on this
adversary proceeding in March 2012. In re Vickery,
2012 WL 2022502 at *1.
5, 2012, the Colorado Bankruptcy Court issued its Findings of
Fact, Conclusions of Law, and Ruling. Id. As to
Trustee's Section 523(a)(2)(A) claim that the judgment
debt is a debt for false representations or actual fraud, the
Colorado Bankruptcy Court held:
In its prior rulings in this case, the Court has rejected
[Trustee]'s claim that the IIAP Judgment for funds
transferred “with the intent to hinder, delay, or
defraud” creditors of IIAP is a debt for “false
representations, or actual fraud, ” under 11 U .S.C.
§ 523(a)(2)(A) without proof of the following
elements: (1) the debtor made a false
representation; (2) with the intent to deceive
plaintiff; (3) plaintiff relied on that representation; (4)
the reliance was reasonable; and (5) that the
misrepresentation caused the creditor to sustain a loss. See,
Fowler Bros v. Young (In re Young), 91 F.3d 1367,
1373 (10th Cir. 1996). . . .
[Trustee] endeavored to fit the evidence he presented at
trial into the Young elements by arguing that
Vickery misled IIAP by failing to disclose that only $2.4
million of the $6 million raised would be available to IIAP
for the acquisition of FCC licenses and the build out of the
technology necessary to operate an interactive television
system. The evidence was to the contrary. The evidence showed
that the principals involved in IIAP, including Dambro and
Anneke, IIAP's initial general partner, were well aware
of, in fact created, the fund-raising and expense parameters.
There was nothing in this regard that was concealed from
IIAP, and there were no misrepresentations on which
IIAP reasonably relied. Accordingly, [Trustee]'s §
523(a)(2)(A) claim fails, and the Court will enter judgment
in favor of Vickery on this claim.
Id. at *5 (emphasis added). In short, the Colorado
Bankruptcy Court rejected Trustee's Section 523(a)(2)(A)
argument because Trustee had not proven that Debtor made a
false representation. See generally id. The Colorado
Bankruptcy Court also rejected Trustee's second claim for
nondischargeability, asserted under Section 523(a)(4).
Id. at *6. However, the Colorado Bankruptcy Court
ruled in favor of Trustee on its third claim for
nondischargeability under Section 523(a)(6). Id. at
*6. It therefore ordered:
[T]he IIAP Judgment is a debt for willful and malicious
injury by [Debtor] Vickery to IIAP, and judgment will enter
in favor of [Trustee] and against Vickery, declaring the IIAP
Judgment, in the amount of $4.6 million in actual and
punitive damages, plus pre-petition interest of $865, 272.48,
for a total amount of $5, 465, 272.48, is non-dischargeable
in Vickery's bankruptcy case, pursuant to 11 U.S.C.
Id. at *7.
DEBTOR'S APPEAL TO THIS COURT
appealed the Colorado Bankruptcy Court's judgment
concerning Section 523(a)(6), in which the Colorado
Bankruptcy Court ruled against him, to this Court. See In
re Vickery, 526 B.R. at 875. The substance of
Debtor's appeal, and the rulings thereon, are irrelevant
to the questions presently before this Court. It addresses
Debtor's appeal only to provide a comprehensive
procedural background of this action.
Court, with Chief Judge Marcia S. Krieger presiding, affirmed
on January 26, 2015, the Colorado Bankruptcy Court's
determination that the $4.6 million judgment debt held by
Trustee is nondischargeable under Section 523(a)(6).
Id. at 881. Debtor appealed the Court's Opinion
to the Court of Appeals for the Tenth Circuit, but after
appellate briefing, the Tenth Circuit determined it lacked
jurisdiction because the Court's Opinion “isn't
a final, appealable order.” In re Vickery, 658
Fed.Appx. 398, 401 (10th Cir. 2016). The Tenth Circuit
dismissed Debtor's appeal. Id.
PANEL TRUSTEE'S APPEAL TO THE TENTH CIRCUIT BANKRUPTCY
also appealed the Colorado Bankruptcy Court's June 5,
2012 Order, arguing that the Colorado Bankruptcy Court erred
in determining that Trustee had not proven its claims against
Debtor under Section 523(a)(2)(A) (false pretenses, false
representation or actual fraud) and Section 523(a)(4) (fraud
or defalcation while acting in a fiduciary capacity). See
In re Vickery, 488 B.R. at 682. Trustee's appeal was
heard by the Bankruptcy Appellate Panel of the Tenth Circuit
(“Tenth Circuit BAP”). Id.
respect to Section 523(a)(2)(A), the Tenth Circuit BAP ruled
on March 13, 2013, that the Colorado Bankruptcy Court erred
in holding that false representations by the debtor was an
element of “actual fraud” under Section
523(a)(2)(A). Id. at 687; see In re
Vickery, 2012 WL 2025202 at *5 (stating that “the
debtor made a false representation” is an element of a
“false representations or actual fraud” claim
under Section 523(a)(2)(A)). The Tenth Circuit BAP held:
In order to give full effect to the plain meaning of the
disjunctive “or” in § 523(a)(2)(A), we
conclude that “actual fraud” is an independent
basis for nondischargeability under that subsection. As a
result, we reverse the bankruptcy court's pretrial legal
conclusion in this regard. The [McClellan v.
Cantrell, 217 F.3d 890 (7th Cir. 2000)] court's
reasoning is persuasive, and we adopt its position that
“actual fraud” under § 523(a)(2)(A)
is not limited to misrepresentations or misleading
omissions. As in McClellan, we are careful to
clarify that only “actual fraud” is covered by
§ 523(a)(2)(A), not constructive, or implied fraud. As
this Court has previously stated, “[t]he term
‘fraud' as used in § 523(a)(2)(A) means actual
or positive fraud rather than fraud implied by law.”
Accordingly, the Trustee may prevail under §
523(a)(2)(A) if he shows that the debt Mr. Vickery owes to
IIAP is for money obtained by actual fraud. It is the
creditor's (i.e., the Trustee's, standing in
the shoes of IIAP) duty to show that those damages
(i.e., the debt owed by Mr. Vickery to IIAP) were
incurred by actual fraud. Because the bankruptcy court held
before trial that proof of actual fraud was not a sufficient
showing under § 523(a)(2)(A), and that a
misrepresentation had to be shown, it did not have an
opportunity to determine whether the Trustee could carry his
burden. Thus, the bankruptcy court erred in denying the
Trustee an opportunity to prove actual fraud through Mr.
Vickery's transfer of assets from IIAP to DIA.
To give the Trustee an opportunity to prove actual fraud, we
remand the § 523(a)(2)(A) claim to the
bankruptcy court to apply the correct definition of actual
fraud to the facts of this case. On remand, the
Trustee must prove by a preponderance of the evidence that
the debt Mr. Vickery owes IIAP was for money obtained by
actual fraud. Moreover, because § 523(a)(2)(A) requires
actual fraud, and not merely constructive fraud, the
Trustee must prove the amount of his damages attributable to
actual fraud. The bankruptcy court is
tasked, therefore, with not only determining whether the debt
is for money obtained by actual fraud, but if so, what is the
correct measure of damages.
In re Vickery, 488 B.R. at 691-92 (emphasis added).
The Tenth Circuit BAP rejected Trustee's other arguments
on appeal, id. at 692-95, none of which are relevant
to the appeal presently before this Court.
appealed the Tenth Circuit BAP's ruling regarding the
elements of actual fraud under Section 523(a)(2)(A) to the
Court of Appeals for the Tenth Circuit, but the Tenth Circuit
dismissed Debtor's appeal for lack of jurisdiction
because the Tenth Circuit BAP had remanded the issue back to
the Colorado Bankruptcy Court. See (Doc. # 9-1 at
ON REMAND TO THE ...