Cardwell v. Hester (In re Hester)

(Bankr. W.D. Ky. Oct. 11, 2016)

The bankruptcy court holds that the plaintiff’s claim is non-dischargeable under 11 U.S.C. §§ 523(a)(2), (4), and (6). The plaintiff and the debtor started a pawn business together. Shortly after it began operating the debtor was arrested on drug charges. The parties then gave conflicting testimony regarding various claims that arose in favor of the plaintiff against the debtor, including for a loan to post bond and theft from the plaintiff. The court finds that the plaintiff’s testimony was more credible and enters judgment in favor of the plaintiff. Opinion below.

Judge: Stout

Attorney for Debtor: Cooley & Offill, Robert A. Cooley, Jesse E. Offill

Attorney for Plaintiff: Steven L. Boling

2016-10-11-in-re-hester

Author: Matt Lindblom

In re Mustafa

(Bankr. E.D. Ky. September 14, 2016)

Debtor obtained a personal loan from bank to buy a Mercedes at a car auction and represented to the loan officer that the car was for personal and family use. The day debtor received the loan proceeds he leased the car to his used car business, which then sold the car to debtor’s friend, an out of state resident. Debtor failed to satisfy the bank loan with the sales proceeds. Instead, his business used the proceeds to pay its debts. Also, the business never transferred title to the car to debtor’s friend in order to hide the fact that the car had been sold. Debtor continued to make a few loan payments to the bank, but eventually quit and filed Chapter 13, which is when the bank learned that the car had been sold. The bank filed a dischargeability action and the court found that debtor made material misrepresentations to obtain a consumer loan and never intended to use the car for personal use. Thus, the debt, including attorney’s fees, was nondischargeable pursuant to both §523(a)(2) and (a)(6). Also, debtor’s plan, in which he proposed to surrender the vehicle to the bank, was not confirmed and was found lacking in good faith since, among other things, the car was currently located out of state in a repair shop subject to a $10,000 mechanics lien. Opinion below.

Judge: Schaaf

Attorney for Debtor: Tom Bunch

Attorney for Creditor: Greg Pavey and Jessica Middendorf

Author: Robert Imperial

2016-09-14-in-re-mustafa

Akeley v. Hudson (In re Hudson)

(Bankr. W.D. Ky. Aug. 2, 2016)

The bankruptcy court denies the debtor’s motion to dismiss the nondischargeability action and denies the plaintiff’s cross-motion for summary judgment. The plaintiff’s claims under 11 U.S.C. § 523(a)(2)(A), (4), and (6) were based on allegations that the debtor misrepresented his intent with respect to a transaction in which the plaintiff transferred his ownership interest in a business in exchange for a promissory note from the debtor. The court finds that the plaintiff stated claims under the above sections and that there were genuine issues of fact that precluded summary judgment. Opinion below.

Judge: Lloyd

Attorney for Plaintiff: Dinsmore & Shoal, John M. Spires

Attorney for Debtor: Fauver Law Office, PLLC, Shannon Renee Fauver

2016-08-02 – in re hudson

Author: Matt Lindblom

Huskey International Electronics, Inc. v. Ritz

(U.S. Sup. Ct. May 16, 2016)

The Supreme Court resolves a split among the circuits as to whether 11 U.S.C. § 523(a)(2)(A), which in part excepts from discharge debts obtained by actual fraud, requires a false representation to a creditor or is applicable to other forms of fraud that do not require a false representation. The Court holds that a false representation is not required. The debtor caused an entity he controlled to transfer funds to other debtor-controlled entities while the transferor entity owed a significant debt to the creditor. The Court explains that “actual” in “actual fraud” means the fraud must be fraud that is not merely implied fraud or fraud in law. “Fraud” has historically encompassed a broad variety of activities, including the transfer of assets that hinders a creditor’s ability to collect a debt. The debtor argued that a narrower interpretation should be applied because the broader interpretation created overlap with other dischargeability provisions. The debtor also argued that effecting a fraudulent conveyance does not cause the debtor to “obtain” a debt and thus the narrower interpretation is correct. The Court rejects both arguments, based largely on statutory construction, and remands for a determination of whether the debtor here “obtained” a debt because it owned interests in the entities receiving the fraudulent conveyances. The dissent is consistent with the debtor’s argument that a fraudulent conveyance does not cause the transferor to obtain debt by actual fraud. Opinion below.

Majority Opinion: Justice Sotomayor

Dissenting Opinion: Justice Thomas

2016-05-16 – huskey international electronics v ritz

Author: Matt Lindblom

Direct Capital Corporation v. Steele (In re Steele)

(Bankr. S.D. Ind. April 11, 2016)

The bankruptcy court enters judgment in favor of the debtors in this nondischargeability action under 11 U.S.C. § 523(a)(2), (4), and (6). The debtors signed a guaranty on a debt incurred by their business and secured by equipment. The debtors then left the company, and filed their chapter 7 petition. The creditor was unable to locate the collateral and filed this action. Because the debtors signed the guaranty with the appropriate authority, there was no misrepresentation or fraud in the inducement. There was also no evidence to show a fiduciary relationship between the parties, and there were no facts to support a claim of larceny. There was insufficient evidence to show that the debtors’ failure to maintain knowledge of the location of the collateral constituted a willful and malicious injury. Opinion below.

Judge: Lorch

Debtors: Pro Se

Attorney for Creditor: Lohmeyer Law Offices, Steven S. Lohmeyer

2016-04-11 – in re steele

Author: Matt Lindblom

Leonard v. RDLG, LLC (In re Leonard)

(6th Cir. Mar. 28, 2016)

The Sixth Circuit affirms the order granting summary judgment to the creditor, finding a debt nondischargeable under 11 U.S.C. § 523(a)(2)(A). Summary judgment was appropriate because the debtor was collaterally estopped from defending against the fraud claim. The creditor had obtained a default judgment against the debtor, post-petition, in another court as a sanction. The court holds that the entry of the default judgment was not a violation of the automatic stay. Opinion below.

Judge: Boggs

Attorney for Debtor: Jonathan Rudman Bunn

Attorney for Creditor: Rayburn, Cooper & Durham, Ross R. Fulton, David J. Fulton

2016-03-28 – in re leonard

Author: Matt Lindblom

Panther Petroleum, LLC v. Couch (In re Couch)

(Bankr. E.D. Ky. Jan. 7, 2016)

The bankruptcy court grants summary judgment in favor of the plaintiff, finding the plaintiff’s claims are non dischargeable under 11 U.S.C. § 523(a)(2)(A) and (a)(6). The plaintiff obtained a default judgment against the debtor in a Tennessee state court, in which the debtor participated until discovery. Prior to entry of the default judgment, the debtor filed bankruptcy but failed to give notice to the plaintiff. After the bankruptcy case was closed, the plaintiff learned of the bankruptcy for the first time and then filed the adversary proceeding. The court holds that § 523(a)(3) is satisfied because the plaintiff did not have timely notice of the bankruptcy filing. The court then holds that, based on the state court judgment, collateral estoppel prohibits the debtor from defending against the claims. Opinion below.

2016-01-07 – panther petroleum v couch

Author: Matt Lindblom

Indiana Department of Workforce Development v. Burge (In re Burge)

(Bankr. S.D. Ind. Dec. 16, 2015)

The bankruptcy court finds that the Indiana Department of Workforce Development’s claim for overpayment of benefits to the debtor while he was actually employed is dischargeable, but the statutory penalties for the overpayment are not dischargeable. The debtor’s agent defrauded the department without the debtor’s knowledge. Because the debtor was unaware of the fraud, the debt was not excepted from discharge under 11 U.S.C. § 523(a)(2)(A). However, the statutory penalties imposed against the debtor for the fraud were nondischargeable under § 523(a)(7). Opinion below.

2015-12-16 – in dept of workforce dev v burge

Author: Matt Lindblom

Cornerstone Industries Corp. v. Kaufman (In re Kaufman)

(Bankr. W.D. Ky. Aug. 6, 2015)

The bankruptcy court enters summary judgment in favor of the plaintiff, holding a $1.8 million claim arising from a state court judgment non-dischargeable. The state court judgment has preclusive effect, and the jury’s findings establish the requisite elements under § 523(a)(2) and (a)(6). The court discusses the applicability of § 523(a)(4) but because the jury may not have defined the term “fiduciary” the same as the bankruptcy code, the court states it is not convinced the plaintiff is entitled to summary judgment under that particular section. Opinion below.

2015-08-06 – cornerstone industries v kaufman

Author: Matt Lindblom

Richardson v. Caswell (In re Caswell)

(Bankr. W.D. Ky. Mar. 25, 2015)

The bankruptcy court grants the plaintiff’s motion for summary judgment in this nondischargeability action. The plaintiff obtained a jury verdict against the debtor in state court based on a claim of fraud in selling to the plaintiff worthless stock. The bankruptcy court holds that the state court judgment precludes the debtor from defending against the plaintiff’s allegations under § 523(a)(2)(A). Opinion below.

2015-03-25 – richardson v caswell

Author: Matt Lindblom