FILED
NOT FOR PUBLICATION
OCT 04 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
FIRST CITIZENS BANK AND TRUST No. 15-35526
COMPANY,
D.C. No. 2:14-cv-01842-JCC
Appellant,
v. MEMORANDUM*
DEBRA LEA WILSON,
Appellee.
Appeal from the United States District Court
for the Western District of Washington
John C. Coughenour, District Judge, Presiding
Argued and Submitted September 1, 2017
Seattle, Washington
Before: HAWKINS and McKEOWN, Circuit Judges, and FOOTE,** District
Judge.
First Citizens Bank and Trust Company appeals the district court’s reversal of
the bankruptcy court’s partial grant of summary judgment in its favor in its action to
deny debtor Debra Wilson (“Wilson”) a discharge for failing to disclose two property
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Elizabeth E. Foote, United States District Judge for the
Western District of Louisiana, sitting by designation.
transfers on her bankruptcy petition. The district court held that Wilson had
established a material issue of fact as to whether these transfers were “in the ordinary
course of the business or financial affairs” of debtor’s real estate investment business
and thus not required to be disclosed. We affirm and remand with instructions to
remand to the bankruptcy court for further proceedings.
Question 10 of the Statement of Financial Affairs instructs debtors to list all
property “other than property transferred in the ordinary course of the business or
financial affairs of the debtor” within two years preceding the commencement of the
bankruptcy case. “Ordinary course of business” is not defined in the Bankruptcy
Code, but we have adopted two tests for determining if a transaction is within the
ordinary course. The “vertical dimension test” views the transaction from the vantage
point of a hypothetical creditor and asks “whether the transaction subjects a creditor
to economic risks of a nature different from those he accepted when he decided to
extend credit.” In re Straightline Investments, Inc., 525 F.3d 870, 879 (9th Cir. 2008).
The “horizontal dimension test” asks whether the transaction is “of a type that other
similar businesses would engage in as ordinary business.” Id. at 880-81.
We have further indicated that “ordinary” refers to the conduct of similarly
situated businesses facing the same or similar problems. “If the terms in question are
ordinary for industry participants under financial distress, then that is ordinary for the
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industry.” In re Jan Weilert R.V., Inc., 315 F.3d 1192, 1197 (9th Cir. 2003).
Additionally, we have also recognized that even a first-time transaction may be in the
ordinary course: “Obviously every borrower who does something in the ordinary
course of her affairs must, at some point, have done it for the first time.” In re Ahaza
Systems, Inc., 482 F.3d 1118, 1125 (9th Cir. 2007).
Applying these precedents, and viewing the evidence in the light most favorable
to the nonmoving party, as we must, we agree with the district court that Wilson has
raised a genuine issue of material fact as to whether the disputed transactions were in
the ordinary course of her real estate investment business. Even though Wilson did
not receive cash in exchange for the properties at issue, she was able to unload heavily
encumbered and underperforming properties, thereby actually improving her overall
net worth. She also produced an expert opinion that in the real estate market that
existed at that time, and in a time of financial distress (as Wilson’s business was due
to the failed Renton project), this was a sound business decision, as “increasing net
worth and liquidity are goals experienced real estate investors pursue as an ordinary
course of their business.” Wilson’s overall balance sheet improved, and thus the
creditor was not exposed to economic risks of a nature different from those accepted
when it decided to extend credit.
AFFIRMED AND REMANDED FOR FURTHER PROCEEDINGS.
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