Order granting Plaintiff’s motion for summary judgment and concluding that Debtor committed defalcation in her fiduciary role as owner of a lottery retailer when she failed to account for funds arising from sale of lottery tickets, rendering debt nondischargeble pursuant to section 523(a)(4).
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Honorable Paul W. Bonapfel
Honorable Barbara Ellis-Monro, Chief Judge
Movants were the principal of Debtor and his wife. Movants were evicted from their home. During the eviction Movants’ personal items were damaged or stolen. Movants sought to reopen the bankruptcy case to seek sanctions against the former landlord for violation of the automatic stay. The Court found Movants had no standing to prosecute an action for violation of the stay because as non-debtors and non-creditors, they were not within the scope of interests protected by the stay. Furthermore, they did not show that their damages were caused by a violation of the stay. Therefore, the Court denied the motion to reopen due to futility.
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Plaintiffs are a Company majority owned by Debtor-Defendant and the company’s principal Investor. The Company sought a determination of dischargeability based on embezzlement and willful and malicious injury; the Investor sought a determination of dischargeability based on fraud. The Court found the Investor failed to prove fraud because she could not show she reasonably relied on fraudulent representations by Debtor-Defendant when deciding to invest in the company. The Court found the Company failed to prove willful and malicious injury where the conduct at issue was not in the nature of an intentional tort but rather consisted of poor business judgment.
The Court found the Company did prove embezzlement when Debtor-Defendant had lawful possession and control over Company funds, when the Company funds were transferred directly to Debtor-Defendant or a separate business that he controlled, and when he began paying himself and his other business substantial sums of money from the Company in contravention of the operating agreement immediately after a large infusion of funds from the Investor.
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Plaintiff filed a Complaint to determine dischargeability pursuant to 11 U.S.C. §§ 523(a)(2)(A), (a)(2)(B), (a)(2)(C) and (a)(6). The indebtedness arose from a pre-petition credit card application submitted by Defendant which indicated that Defendant had been steadily employed for five years and earned more than Defendant disclosed in his petition. The charges on the credit card were made during the ninety days prior to filing his bankruptcy and were mainly comprised of consumer debts for luxury goods or services. The Court adopted the strict interpretation of the statement of a financial condition under § 523(a)(2)(B), and concluded that the credit card application did not contain sufficient information to show Debtor’s financial condition. In analyzing Creditor’s § 523(a)(2)(A) claim, the Court determined that the § 523(a)(2)(C) presumption applied to a portion of the debt, but that the totality of the circumstances established fraudulent intent as to the entire debt and it was therefore excepted from discharge. The Court has also concluded that § 523(a)(6) is not applicable to a fraud claim.
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Plaintiff sought default judgment on a complaint to determine dischargeability of a debt due to fraud. The Court found Plaintiff was entitled to default judgment where the complaint alleged Debtor received an overpayment of food stamp benefits after failing to provide accurate information regarding her income, and the complaint alleged Debtor signed a waiver admitting to receipt of excess food stamp benefit based on her failure to report all wages earned.
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Defendants (the Chapter 7 Trustee, the Gwinnett County Department of Water Resources, Gwinnett County, several Gwinnett County employees and members of the Board of Commissioners) filed Motions to Dismiss in an action brought under § 362(k) and for the chapter 7 Trustee’s alleged failure to fully investigate Debtor’s asserted claims. As to the Non-Trustee Defendants, the Court found that because this was Plaintiff’s second case pending within one year, the automatic stay in the current case expired 30 days after the petition date pursuant to 11 U.S.C. § 362(c)(3). Therefore, any action taken after that time could not violate the automatic stay. Plaintiff’s conversion of the case from chapter 13 to chapter 7 did not revive or extend the stay. In addition, because Plaintiff did not provide adequate assurance, the water department could terminate debtor’s service 20 days after the petition date pursuant to § 366(a) without violating § 362(a). Plaintiff’s claim that a mailing sent to him violated the automatic stay was factually sufficient and the complaint was not a shotgun pleading. Therefore the Motion to Dismiss was granted in part and denied in part regarding the mailing of an invoice while the automatic stay was in place. Further, claims against individual defendants were dismissed because no facts were alleged that would show individual involvement in any of the actions alleged.
With respect to the chapter 7 Trustee’s Motion to Dismiss, Plaintiff failed to state a claim against the Trustee for failure to fully discharge his duties because the Court previously determined that Trustee’s abandonment of all claims was appropriate. Finally, based upon the information disclosed by Debtor in his schedules funds used to make a payment were not property of the estate and could not be recovered.
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Order granting third-party's Assertion of Superior Claim.
The Debtor and her non-debtor husband, Sylvester, owned a joint bank account. Sylvester asserted that the funds in the account at the time the Debtor filed her petition belonged to him. He based his argument on the Georgia statute that provides the funds in a joint account belong to the parties to that account "in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent." O.C.G.A. § 7-1-812(a). The Chapter 7 Trustee did not contest that Sylvester's net contributions to the account were greater than the amount left in the account, but nevertheless argued that Sylvester had intended his deposits as gifts to his wife, constituting a "different intent." The Court held an evidentiary hearing on the question, and concluded that the Trustee had failed to show the different intent by clear and convincing evidence.
Order denying Plaintiff’s motion for summary judgment. Plaintiff initiated an adversary proceeding seeking exception to discharge of the debt owed to Plaintiff based on fraud under § 523(a)(2)(A) of the Bankruptcy Code. Plaintiff filed a motion for summary judgment on the grounds that a state court default judgment entered against Debtor had collateral estoppel effect for the issues underlying fraud and entitled Plaintiff to summary judgment. The Court found that the state court default judgment was not entitled to collateral estoppel effect on the issues underlying fraud because Plaintiff failed to show that a finding of fraud was essential to the state court judgment. The Court also found that Plaintiff failed to show that Debtor had adequate notice of the state court action. The Court concluded that Plaintiff failed to meet its burden for summary judgment.
Order granting the Plaintiff’s Motion for Default Judgement. In a Chapter 7 case, the Plaintiff initiated an adversary proceeding seeking the avoidance of a property transfer pursuant to 548(a)(1)(A) and 548(B) of the Bankruptcy Code. The Plaintiff, a Chapter 7 Trustee, alleged the non-lawyer Debtor fraudulently conveyed the property to the non-debtor Defendant. The non-lawyer Debtor prepared the non-debtor Defendant’s Answer, which was stricken from the record pursuant to Rule 9011(a) because the non-debtor Defendant did not sign the Answer. Subsequently, the Court held the Plaintiff alleged sufficient facts to avoid the Debtor’s transfer of the property to the Defendant pursuant to 548(a)(1)(B) of the Bankruptcy Code.
Honorable James R. Sacca
The Court denied cross-motions for summary judgment on the Plaintiff’s § 523(a)(2)(B) claim concluding that questions of fact still existed as to whether the Plaintiff reasonably relied on the false financial statement and whether the Debtor had the intent to deceive when he provided the false financial statement. The suit was not barred by the Georgia statute of limitations for fraud since the Plaintiff previously obtained a judgment in state court for breach of contract which established the debt and made the only relevant time limit that contained in FRBP 4007. In addition, any staleness of the five month old financial statement was cured when the debtor reaffirmed it by signing a guaranty that stated no material adverse changes had occurred in his financial condition since he previously provided a financial statement to the Plaintiff. Finally, the Court agreed with the majority of other courts and concluded that the Plaintiff did not need to prove a separate element of damages to prevail on his § 523(a)(2)(B) claim. It distinguished this case which dealt with the renewal of an already existing loan from a previous Eleventh Circuit case discussing the proximate causation requirement in § 523(a)(2)(B) claims.
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