Bamco 18 v. Reeves CV-94-326-B 08/23/95 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Bamco 18

v. Civil No. 94-326-B

R. Bruce Reeves

O P I N I O N

This is an appeal from the United States Bankruptcy Court's

decision finding R. Bruce Reeves's debt to Bamco 18

nondischargeable pursuant to

(a)(2)(A) (West

1993 & Supp. 1995). For the following reasons I affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Reeves and Bamco's Business Relationship

The present controversy arose from a business relationship

between Bamco and Reeves. Reeves was the president and sole

shareholder of MPI Corporation. In addition, he was the sole

limited partner in Hospitality Associates of Tappan Zee

("Hospitality"), a partnership which ran a hotel and conference

center in Nyack, New York. MPI was the general partner in

Hospitality. The parties arranged for Bamco to purchase a limited

partnership interest in the hotel and conference center owned and

operated by Hospitality. In the course of negotiations Reeves

represented to Bamco that the hotel needed renovations, that

Hospitality would supervise those renovations, and that the

return on the investment would be "dynamite." He further

represented that he had invested $500,000 of his own cash in the

venture.

Based on these preliminary discussions. Reeves, MPI, and

Bamco executed a Letter of Intent ("LOI") for Bamco's acguisition

of a 60% limited partnership interest in Hospitality. The LOI

stated that Reeves had already contributed $500,000 toward the

project and ultimately the project would be funded by an

additional $750,000, $150,000 from Reeves and the remainder from

Bamco.

Shortly thereafter, the parties executed the Limited

Partnership Agreement ("LPA"). MPI was granted a 1% interest in

the partnership as the general partner of Hospitality, Bamco was

granted a 59.4% interest, and Reeves was granted a 39.6%

interest. Pursuant to the LPA, Bamco and Reeves were reguired to

2 make initial capital contributions in cash of $575,000 and

$175,000 respectively. Further, the LPA provided that Bamco

would loan MPI $240,000 for working capital and renovation costs

and that MPI would be responsible for managing the business and

assets of the partnership. The LPA also included several

provisions governing the conduct of MPI and Reeves, including:

(1) reguiring MPI to seek approval for the disposition and

acguisition of partnership property; (2) prohibiting MPI or

Reeves from using any partnership funds or property for uses

other than for partnership related uses; (3) reguiring MPI to

keep true and complete accounts; and (4) reguiring MPI to collect

claims of the partnership. Finally, the LPA contained several

warranties and representations by MPI.

Bamco complied with the reguirements of the LPA and

contributed the reguired cash on March 7, 1985, as well as

executing the $240,000 loan to MPI for renovations and working

capital. Reeves, however, did not make his initial capital

contribution in cash as reguired by the LPA. Instead, Reeves

caused MPI to create an accounts receivable of $150,000 on the

partnership books and to credit his capital contribution account

for that amount to satisfy his obligation as limited partner of

3 Hospitality. Further, he caused MPI to transfer $350,000 from

Hospitality's account to his own personal account as an alleged

reimbursement of prior capital contributions which he in fact had

never made. In addition, neither the $240,000 loan nor Bamco's

initial cash capital contribution were ever made available to

Hospitality for partnership purposes.

About a month later. Reeves recommended that the partnership

raise additional funds to finance additional capital improvements

and relieve some of the financial stresses placed on the

partnership by the existing renovation program. To satisfy this

need for additional funding, the partnership borrowed $550,000

from ITT Industrial Credit and as part of the loan agreement

Bamco provided ITT with a standby letter of credit.

Outside auditors for Hospitality eventually became aware of

Hospitality's working capital problems and issued a report to

Reeves which stated in pertinent part that unless the situation

improved the partnership would be forced to dissolve. This

language was deleted from their report when it was finally

delivered to Bamco in September 1986. Several additional capital

calls were made to the limited partners in 1985 and 1986, and

Bamco's contributions to Hospitality eventually totalled

$2,144,298.

4 In contrast. Reeves, while representing that he had been

making his capital contributions in cash, did not in fact make

any of them; rather, he manipulated the accounts of Hospitality

to have it appear that he had satisfied these obligations. After

several reguests by Bamco for the unaudited monthly financial

statements for the partnership. Reeves disclosed the statements

in the spring of 1985. Those statements while showing the

capital contributions of the limited partners as reguired under

the LPA, failed to disclose that Reeves's contributions were

satisfied by unfunded accounts receivables rather than cash.

B. The New York Litigation

In July 1987, Bamco filed suit against Reeves alleging

violations of federal securities laws, RICO violations, breach of

contract, breach of warranty, and common law fraud claims. With

respect to the fraud claims, in its complaint filed in the United

States District Court for the Southern District of New York,

Bamco stated: "Reeves fraudulently induced BAMCO to invest in the

hotel venture and to continue pouring money into such enterprise

on the basis of false and misleading statements." At the time

Bamco filed this action it was unaware that Reeves had failed to

fund his capital contributions in cash as reguired by the LPA.

5 On December 10, 1987, the New York court dismissed Bamco's

fraud claims for failure to meet the requirements of Fed. R. Civ.

P. 9(b) .1 The court found that Bamco had adequately identified

the alleqed misrepresentations, i.e. that the property needed

restoration that would be completed for $950,000; that projected

earninqs for Bamco from investment in that project would be

siqnificant; and statements that there were hotel reservations

already booked until sometime into the future. The court stated,

however, that Bamco failed to alleqe the time and place of the

misrepresentations nor did it provide a factual basis to support

its alleqation reqardinq Reeves's state of mind. Bamco 18 v.

Reeves, No. 87-cv-5496, slip op. at 14 (S.D.N.Y. Dec. 10, 1987).

The court specifically declined to address Reeves's motion to

dismiss the fraud claim pursuant to Fed. R. Civ. P. 12(b) (6) and

qranted Bamco leave to amend its complaint to meet the

requirements of Rule 9.2

.

1Fed. R. Civ. P. 9(b) provides in pertinent part: "(b) Fraud, Mistake, Condition of the Mind. In all averments of fraud or mistake, the circumstances constitutinq fraud or mistake shall be stated with particularity. Malice, intent, knowledqe, and other condition of mind of a person may be averred qenerally."

2The court also qranted Reeves's motion to dismiss Bamco's RICO and 1 0 (b) claims for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6).

. Reeves's motion did not

6 Upon discovery of Reeves's diversion of funds prior to trial

in the New York action, Bamco, relying exclusively on this new

evidence, moved for summary judgment without filing an amended

complaint. Specifically, Bamco argued that summary judgment was

warranted because there were no genuine issues of material fact

with respect to Reeves's diversion of funds and that it was

therefore entitled to judgment as a matter of law for breach of

contract, warranty, and fiduciary duty. The New York court

granted Bamco's motion for summary judgment on its claims for

breach of fiduciary duty and warranty.3 Bamco 18 v. Reeves,

(S.D.N.Y. 1989).

address Bamco's other claims.

3The judgment of the New York court on July 5, 1989, was against MPI only and granted Bamco's motion for an accounting. Subseguently, the New York court found that the false and misleading statements by Reeves caused Bamco to make its capital contributions. Bamco 18 v. Reeves, No. 87-cv-5495, slip op. at 3 (Nov. 3, 1989). Based on these findings, the court entered judgment for Bamco against MPI for $2,280,914 on November 17, 1989. After the bankruptcy court lifted the automatic stay, the New York court found that Reeves was personally liable on the same bases that MPI had been found liable in its earlier opinion. Bamco 18 v. Reeves, No. 87-cv-5496, slip op. at 1 (March 4, 1990). Subseguently, the court entered judgment against Reeves in the amount of $2,324,645. Bamco 18 v. Reeves, No. 87-cv-5496, slip op. at 1 (March 15, 1990).

7 In its opinion, the New York court found that Reeves had

violated New York Partnership law through his "offsetting payable

approach" to capital contribution reguirements of the

partnership.

The court also found that the practice

violated several portions of the LPA.

The United States

Court of Appeals for the Second Circuit affirmed the New York

court's decisions. Bamco 18 v. Reeves, No. 90-7346, slip op. at

2 (2d Cir. Oct. 5, 1990) .

C. The Bankruptcy Proceedings

On May 31, 1989, after oral argument on the summary judgment

motion in the New York action. Reeves filed for Chapter 11

protection and subseguently caused MPI to place Hospitality in

bankruptcy.4 Bamco then moved to have MPI removed as the general

partner of Hospitality for breach of fiduciary duty relating to

the bankruptcy filing. Bamco also filed a complaint in the

bankruptcy proceeding alleging that the judgment of the New York

court was nondischargeable pursuant to

(a)(2)(A)

(West 1993 & Supp. 1995), because the underlying debt was

4Reeves's bankruptcy proceeding was later converted into a Chapter 7 proceeding. obtained by false representations and actual fraud.5 Reeves

filed a motion for summary judgment, arguing that Bamco was

barred by collateral estoppel from asserting this claim in the

bankruptcy proceeding and that Bamco's reliance on written

statements to support its claim was not permissible under §

523 (a) (2) (A) .

Based in part on the specific factual findings made by the

New York court as well as evidence adduced at a two day hearing,

the bankruptcy court held that Reeves's debt to Bamco was not

dischargeable because he obtained the money by fraud within the

meaning of § 523(a)(2)(A). Specifically, the bankruptcy court

held that the factual findings determined in the New York action

that were relevant to the fraud claim were binding on Reeves.

Coupled with additional evidence regarding Reeves's state of mind

and the reasonableness of Bamco's reliance on his

misrepresentations, the court held that the debt was not

5Bamco also claimed that Reeves's debt was nondischargeable pursuant to

(a) (4) and § 523(a) (6) because he breached his fiduciary duties and because the debt arose by willful and malicious injury. The bankruptcy court disposed of those claims and neither party challenges their disposition below. This appeal, therefore, concerns only the § 523(a) (2) (A) claim and I limit my discussion of the procedural background to the court's disposition of that claim. dischargeable.

II. DISCUSSION

Reeves now appeals the bankruptcy court's judgment in favor

of Bamco on its § 523(a)(2)(A) claim on three grounds: (1) the

bankruptcy court erroneously applied the doctrine of collateral

estoppel; (2) the bankruptcy court erroneously relied on written

statements of Reeves's financial condition to support its finding

of fraud under § 523(a)(2)(A); and (3) there is insufficient

evidence to support the bankruptcy court's nondischargeability

order under § 523(a) (2) (A) .

On intermediate appeal to a district court, a final order of

the bankruptcy court is subject to the same standards of review

employed in direct appeals to the court of appeals in civil cases

generally. In re LaRoche,

(1st Cir. 1992).

"The district court accepts all bankruptcy court findings of fact

unless 'clearly erroneous,' Fed. R. Bankr. P. 8013, but reviews

rulings of law de novo."

Because all but one of the issues

raised on appeal challenge rulings of law, and the final issue on

appeal centers on the sufficiency of the evidence, my review here

is plenary. See Rolon-Alvarado v. Municipality of San Juan,

(1st Cir. 1993). I address Reeves's challenges in

10 the order listed above.

A. The Collateral Estoppel Issues

1. Whether the bankruptcy court erred in not precluding Bamco from litigating its fraud claim on grounds that it was barred by the doctrine of collateral estoppel.

Reeves argues that the bankruptcy court should have applied

the doctrine of collateral estoppel to bar Bamco from raising

fraud as a ground for nondischarge in bankruptcy because the New

York court dismissed Bamco's common law fraud claim in a prior

action and Bamco elected not to amend its complaint.

Bamco responds with two arguments: (1) the dischargeability

hearing in bankruptcy court raised different fraud issues than

were raised in the New York proceeding and, therefore, collateral

estoppel does not bar it from raising fraud as a defense to

dischargeability of Reeves's debt; and (2) even though the type

of dismissal granted by the New York court is one with prejudice,

no facts were adjudicated in the prior proceeding, and therefore

there are no determinations to which the doctrine of collateral

estoppel may be applied. Because I agree with Bamco's second

argument, I need not address the other arguments raised by the

parties.

Collateral estoppel principles apply to discharge exception

proceedings brought pursuant to § 523(a). Grogan v. Garner, 498

, 284-85 n.ll (1991). The doctrine of collateral

estoppel bars a party from relitigating an issue where that issue

was actually litigated in a prior proceeding and its determi­

nation was necessary to the prior judgment. Lawlor v. National

Screen Svc. Corp.,

(1955); Lovell v. Mixon,

(8th Cir. 1983); see also In re Dein Host, Inc.,

(D.N.H. 1988). In order for collateral estoppel

to apply, five reguirements must be met: "1. the determination

... must be over an issue which was actually litigated in the

first forum; 2. that determination must result in a valid and

final judgment; 3. the determination must be essential to the

judgment which is rendered by, and in, the first forum; 4. the

issue before the second forum must be the same as the one in the

first forum; and 5. the parties in the second action must be the

same as those in the first." NLRB v. Donna-Lee Sportswear Co.,

(1st Cir. 1987); accord In re Dein Host,

. Both parties agree that the dismissal entered by the New

York court is a valid and final judgment and that the parties in

both actions are identical. The controversy, therefore, centers

on the remaining three elements. Because I conclude that the

fraud issue presented in the New York action was not actually

litigated, I conclude that the bankruptcy court did not err in

12 refusing to grant Reeves's motion for summary judgment on

collateral estoppel grounds, whether or not the issues are

identical.

The bankruptcy court's conclusion that collateral estoppel

did not bar Bamco from raising fraud as a defense to

dischargeability was not error because the fraud issue in the New

York proceeding was not actually litigated. Unlike the doctrine

of claim preclusion, collateral estoppel bars only those issues

that were actually litigated, not those that could have been, but

were not litigated. In re Belmont Realty Corp.,

(1st Cir. 1993) (guoting Rest. (2d) Judgments § 27 (1982)).

Specifically, the party against whom collateral estoppel is being

employed must have had a full and fair opportunity to litigate

the issue in the prior proceeding. Lawlor,

(affirming lower court's decision not to estop party from

litigating issue where prior proceeding ended with dismissal

without a hearing and therefore did not afford the party a full

and fair opportunity to litigate). Thus, in collateral estoppel

cases "the earlier judgment forecloses only a matter actually

litigated and essential to the decision. The first judgment does

not prevent re-examination of issues that might have been, but

were not, litigated in the earlier action." In re Gaebler, 88

(E.D. Pa. 1988) (internal quotations and citations

omitted). An issue has been finally determined when "a

particular issue has reached such a stage that a court sees no

really good reason for permitting it to be litigated again."

O'Reilly v. Malon,

(1st Cir. 1984) (per

curiam).

Although a dismissal for failure to state a claim may act to

bar a party from relitigating that cause of action, because the

parties have not contested the issues underlying the claim and

the court has not passed on the truth of the allegations in the

complaint, collateral estoppel cannot be invoked as a bar in

subsequent litigation with respect to the issues underlying that

dismissed claim. C f . Levinson v. United States,

(7th Cir. 1992) (where parties settled prior case before

trial it had no collateral estoppel effect because underlying

issues never contested or decided by a court) , cert. denied, 113

S. C t . 505 (1992); In re Berr,

(Bankr. 9th Cir.

1994) (party asserting collateral estoppel has burden of

introducing record sufficient to reveal controlling facts and

pinpoint exact issues litigated); Rooding v. Peters,

(N.D. 111. 1994) (collateral estoppel applies only if

14 issue was argued and decided on the merits in prior litigation).

Accord IB Moore's Federal Practice 5 0.443[4] (2d ed. 1995);

Restatement (Second) Judgments § 27 cmt. e (1982). The fact that

Bamco may have been able to amend its complaint to adeguately

state its common law fraud claim does not change this result.

Bamco voluntarily chose not to pursue the common law fraud claim,

and therefore, any issues necessary to the determination of that

claim were not litigated, irrespective of whether they could have

been litigated. C f . Lawlor,

. Therefore, I

conclude that the bankruptcy court did not err in denying

Reeves's motion for summary judgment on this basis.

2. Whether the bankruptcy court erred in giving preclusive effect to the New York court's factual findings.

Reeves argues that if Bamco is permitted to proceed on its

fraud claim in the bankruptcy proceeding, then it should be

precluded from using the factual findings of the New York

litigation in support of that claim. Specifically, he argues

that because the factual determinations were made on different

claims, those findings have no relevance to Bamco's present §

523(a)(2)(A) fraud claim. In response, Bamco contends that

Reeves's argument misconceives the doctrine of collateral

15 estoppel. For the following reasons, I agree with Bamco.6

The bankruptcy court concluded that the factual

determinations made by the New York court regarding what the

parties did or did not do in the course of their dealings were

essential to the New York court's judgment and that Reeves had

every incentive to fully defend in that prior proceeding. Thus,

the court gave preclusive effect to the New York court's factual

findings regarding those issues. Reeves contends that this was

error because these facts were determined with respect to causes

of action unrelated to the present cause of action. Reeves,

however, misconceives the doctrine of collateral estoppel.

"Under the doctrine of collateral estoppel, . . . , [a

final] judgment precludes relitigation of issues actually

litigated and determined in the prior suit, regardless of whether

it was based on the same cause of action as the second suit."

6Reeves also argues that because § 523(a) (2) (A) restricts the scope of bankruptcy court's evidence in a way that the New York litigation was not restricted, resort to the doctrine of collateral was inappropriate. Specifically, he notes the restriction placed on actions brought pursuant to § 523(a) (2) (A) versus § 523(a)(2)(B), i.e. the former excepting fraud based on written misrepresentations of the debtor's financial condition. Because I find that the bankruptcy court did not err when it relied on written representations to support its § 523(a)(2)(A) order, I also reject this portion of Reeves's collateral estoppel argument.

16 Lawlor,

(emphasis added). Specifically in the

context of bankruptcy proceedings, ". . . a bankruptcy court

could properly give collateral estoppel effect to those elements

of the claim that are identical to the elements reguired for

discharge and that were actually litigated and determined in the

prior action." Grogan, 498 U.S. at 284 (citing Restatement

(Second) Judgments § 27 (1982)).

While the causes of action may be different in the two

actions at issue here, the underlying factual issues of the

nature of the transactions, whether Reeves made certain

statements and when, are identical to the factual issues

concerning the events that transpired over the course of the

relationship between Reeves and that Bamco raised in its claim of

fraud in the bankruptcy proceeding. Therefore, with respect to

those issues already decided and necessary to the prior judgment,

the bankruptcy court did not err by giving them preclusive

effect.

B. Whether Reeves's Written Misrepresentations Were Imper­ missibly Relied Upon by the Bankruptcy Court in Deciding Dischargeability Under § 523(a)(2)(A).

Reeves argues that Bamco should have been precluded from

alleging and referring to written representations respecting

Reeves's capital contributions to the partnership in its claim

17 under § 523(a)(2)(A) because that provision expressly excludes

from its scope written misrepresentations respecting a debtor's

financial condition. In response, Bamco contends that the

written representations at issue were not written statements of

Reeves's financial condition within the meaning of § 523(a)(2)(B)

and therefore are a proper basis for an order of nondischarge­

ability pursuant to § 523(a)(2)(A). I agree with Bamco.

Sections 523(a)(2)(A) and (B) govern misrepresentations of

financial condition, the former covering statements that are not

written, the latter dealing with written statements of the

debtor's financial condition.

(a)(2)(A);

§ 523(a)(2)(B). Bamco's claim below was brought pursuant to §

523(a)(2)(A), which states in pertinent part that a debtor is not

entitled to discharge for money, property, or services obtained

by false pretenses, a representation or actual fraud, other than

a statement respecting the debtor's or an insider's financial

condition. In contrast, discharge claims based on fraudulent

written statements concerning a debtor's financial condition must

be brought pursuant to § 523(a)(2)(B), not § 523(a)(2)(A). The

two provisions are mutually exclusive. In re Attalla,

(Bankr. D.N.H. 1994) (citing In re Sansoucv,

(Bankr. D.N.H. 1992)); In re Seaborne,

(Bankr. M.D. Fla. 1989). Thus, if the statements at issue are

statements of Reeves's "financial condition" they cannot act as a

basis for ordering nondischarge pursuant to § 523(a)(2)(A).

A "'statement of a debtor's or insider's financial

condition' as used in § 523(a)(2)(B) means a balance sheet and/or

profit and loss statement or other accounting of an entity's

overall financial health and not a mere statement as to a single

asset or liability." In re Sansoucv,

("financial

condition" should be given its normal commercial meaning)

(citations omitted); In re O'Brien,

(Bankr. D.

Colo. 1990) (financial statement commonly understood as statement

defining debtor's pecuniary standing); In re Seaborne,

(statement of financial condition is statement of

debtor's net worth). For example, balance sheets, income

statements, and schedules of assets and liabilities fall within

the meaning of statements of financial condition. In re Price,

(N.D. 111. 1991) (criticized on other grounds in

In re Dorsey,

(Bankr. N.D. 111. 1993)). These types

of statements permit creditors to assess a potential debtor's

overall financial responsibility.

19 The written statements Reeves argues were impermissibly

considered by the bankruptcy court as a basis for Bamco's §

523(a)(2)(A) claim include statements concerning the amount and

nature of his capital contribution to the partnership. These are

not statements which demonstrate the net worth of Reeves or his

businesses, but rather are statements concerning single

liabilities. See In re Sansoucv,

; In re Seaborne,

. Thus, I conclude that the bankruptcy court

did not err in relying on these written statements in ruling that

Reeves debt was not dischargeable pursuant to § 523(a)(2)(A).

C. Whether the Bankruptcy Court's Finding That Reeves Committed Actual Fraud is Supported by the Evidence.

Reeves relies primarily on his contentions, which I have

already rejected, to support his argument that there is

insufficient evidence to support the bankruptcy court's

dischargeability determination. Because I find no error in the

court's decision to give preclusive effect to the factual

findings of the New York litigation and in its reliance on

written statements by Reeves to support its nondischargeability

order, and because Reeves raises no other arguments in support of

his sufficiency argument, I conclude that the bankruptcy court's

conclusions are sufficiently supported by the evidence.

20 In order to prove a claim of actual fraud under §

523(a)(2)(A) a creditor must show: "(1) a false representation by

the debtor; (2) known to be false at the time it was made; (3)

made with the intention and purpose of deceiving the creditor;

(4) which was reasonably relied on by the creditor; and (5) which

resulted in loss or damage to the creditor as the proximate

result of the false representation." In re Attalla,

(citations omitted); accord In re Menna,

, 10 (1st Cir. 1994). The party opposing discharge has the burden to prove

these elements by a preponderance of the evidence. Grogan, 498

U.S. at 291; In re O'Brien,

.

There is ample evidence in the record below that Reeves made

false representations concerning his capital contributions to

Hospitality, that he knew at the time they were false, that he

intended to deceive Bamco, and that Bamco reasonably relied on

those misrepresentations to its detriment. Reeves created

credits in his capital account which indicated that he satisfied

his contribution reguirements when in fact he never contributed

the capital. Further, he made representations to Bamco that the

renovations were exceeding expected cost and as a result the

partnership borrowed additional funds. In addition, he later

made several capital calls to the limited partners in 1985 and

21 1986 based on these false statements. Further, the course of

conduct of the parties clearly indicated that Bamco sought cash

contributions from Reeves, not cash equivalent. Reeves's

contentions to the contrary at trial were not credited by the

bankruptcy court and that assessment is not clearly erroneous.

These findings are further supported by the circumstances

surrounding the $240,000 loan to Hospitality from Bamco and its

use for nonpartnership business contrary to its intended purpose

as well as the tampering of the outside auditor report prior to

its belated distribution to Bamco.

Finally, the court's conclusion that Bamco's reliance on

these representations was reasonable and that it relied to its

detriment is also supported by sufficient evidence. Based on the

evidence that there were no reliable financial statements

available for the hotel, Bamco's prior dealings with Reeves, and

the time frame for decision making, there was sufficient evidence

to conclude that Bamco's reliance was reasonable. See In re

Ledford,

(6th Cir. 1992) (listing factors

assessed when determining whether creditor's reliance is

reasonable under all the circumstances) (cited with approval in

In re Menna,

), cert. denied, 113 S. C t . 1272

22 (1993); see also In re Maver,

(7th Cir. 1995)

(reliance means conjunction of material misrepresentations and

cause in fact), pet, for cert, filed, July 24, 1995. Bamco made

initial and subsequent capital contributions after Reeves made

these material misrepresentations, demonstrating that its loss

was proximately caused by its reasonable reliance on Reeves's

statements. See In re Lane,

(1st Cir. 1991),

appeal after remand and aff'd without opinion,

(1st

Cir. 1995). Therefore, I conclude that the bankruptcy court's

findings are sufficiently supported by the evidence.

D. Amount of Damages.

Finally, Reeves argues that the bankruptcy court erred in

determining that the amount of the nondischargeable debt was

$2,324,645 because Bamco failed to present any evidence in its

case-in-chief demonstrating that Reeves's fraud proximately

caused that amount of damage. In response, Bamco contends that

the New York court's findings as to the amount of damages and

causation were properly offered and accepted as evidence of those

issues. In its complaint, Bamco sought a determination of the

nondischargeability of a debt owed to it by Reeves pursuant to

the final judgment entered by the New York court. Second Amended

Compl. at I 22. That court's final judgment was admitted in

23 evidence by the bankruptcy court. Reeves does not challenge the

calculations by the New York court or the admissibility of that

portion of the judgment. The final judgment of the New York

court calculated the amount of money expended by Bamco for its

capital contributions as well as the loans made by Bamco to

Hospitality which were never made available for partnership

purposes. Therefore, I conclude that there was sufficient

evidence to support the bankruptcy court's determination of

damages.

III. CONCLUSION

For the foregoing reasons the bankruptcy court judgment is

affirmed.

SO ORDERED.

Paul Barbadoro United States District Judge

August 23, 1995

cc: Nathan T. Foose, Esg. Bruce A. Harwood, Esg. John F. Cullen, Esg. George Vannah, USBC

24