01-3488 U.S. v. Fearman

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“After the thwarted foreclosure, Fearman’s husband still owed EMC $47,000. Indeed, if the foreclosure sale had been conducted as planned and EMC had walked away with title to the property, Fearman’s husband would have owed EMC only $10,000, the remaining debt after the discharge of the mortgage; because the foreclosure was thwarted, he remained indebted to EMC for the full $47,000. Since EMC probably had little prospect of collecting a deficiency judgment from him and so would have wanted to foreclose as soon as possible, it probably thought it would be worse off if the foreclosure sale was delayed- but how much worse off and, more to the point, how much worse off Fearman thought she was making EMC are questions unrelated to EMC’s $37,000 bid.

“And if Fearman believed the building was worthless on April 27, then it is difficult to see how EMC was hurt by the delay in foreclosing on it. Neither EMC’s estimate of the value on that date, nor the actual value (zero, which the judge thought the actual as distinct from the intended loss caused EMC by Fearman’s fraud), matters; the relevant understanding of values for purposes of determining intended loss under the sentencing guidelines is that of the criminal, not that of the victim… [T]here was no basis for the judge’s finding that she thought the building worth at least $20,000 (let alone $37,000). She knew it was encrusted with violations of the building code and she knew the significance of such violations-the judge credited the statement by a city official that no landlords in South Bend had more building-code violations than Fearman and her husband. True, the demolition hearing had not yet been scheduled on April 27, which is the relevant date for determining the intended loss because it was the date of the fraud. United States v. Nichols, 229 F.3d 975, 979 (10th Cir. 2000); United States v. Janusz, 135 F.3d 1319, 1324 (10th Cir. 1998); United States v. Wells, 127 F.3d 739, 746 (8th Cir. 1997); cf. United States v. Lorefice, supra, 192 F.3d at 655. But it was only a few weeks later that EMC discovered that the property was worthless, and Fearman doubtless had a better idea of its value than EMC did (the record does not disclose what EMC paid for the assignment of the mortgage to it). It is unlikely therefore that she thought the property worth more than a few thousand dollars on April 27, in which event the increase in her sentence was improper regardless of principles of secured-transactions law.

“What benefit Fearman thought she or her husband was obtaining from preventing the sale of the building is obscure, even if the building was worth something, since EMC was owed some $47,000 and would get the building eventually. Maybe there was rental income coming in. In any event an intended loss is not only not an actual loss; it is not a realistically expectable loss either. United States v. Coffman, 94 F.3d 330, 336-37 (7th Cir. 1996). But it must exist at least in the defendant’s mind.”

Vacated and remanded.

Appeal from the United States District Court for the Northern District of Indiana, Miller, J., Posner, J.