You are here

Dischargeability of Debt

Prado v. Erickson, Adv. No. 16-01062 (Sept. 29, 2017)
In this adversary proceeding, the Defendants asked for a summary judgment against the Plaintiff regarding her assertion that the Defendants committed actual fraud through a fraudulent transfer scheme. The Defendants argued that the Supreme Court’s recent Husky v. Ritz opinion prevents Plaintiff’s recovery on this theory because the alleged transfers have no connection to the debt owed to the Plaintiff. The Court agreed and granted summary judgment in favor of the Defendants on this ground.
WL Cite: 2017 WL 4404286
 
Higgs v. Colliau (In re Colliau) (May 24, 2017)
Higgs and Colliau entered into a poorly documented business partnership. Disputes arose over distributions and expenses Colliau paid on behalf of the business, which led to Higgs filing a lawsuit in California state court. After the Colliaus moved to Texas and filed bankruptcy, Higgs filed an adversary proceeding and asked the bankruptcy court to deny Colliau’s discharge under 11 USC § 727 and determine that debt to Higgs was nondischargeable under 11 USC § 523(a)(2), (4), and (6). The Court determined that Higgs’ testimony was not reliable, and that Colliau’s testimony fit better with the evidence presented.  However, the Court found that Higgs should be awarded a nondischargeable judgment of $7,800 in damages based on Colliau’s failure to notify Higgs that the company’s primary asset was being sold. All other claims were denied. Higgs also asked for reconsideration of the Court’s prior denial of his motion for summary judgment. In his motion, Higgs had argued that a default judgment entered in state court against several corporate entities owned by Colliau should be applied to Colliau, individually, through the doctrine of collateral estoppel. The Court declined to reconsider its prior decision because Colliau and the corporate entities lacked privity and because applying collateral estoppel in this case would not further the public policies underlying the doctrine.
Higgs v. Colliau (In re Colliau), Adv No. 15-01118, 2017 WL 2274949, at *1 (Bankr. W.D. Tex. May 24, 2017)
 
Schwertner v. Kirk (In re Kirk) (Jan. 28, 2015)
An unpaid subcontractor brought an adversary proceeding against the Debtor, a contractor, to except debt from discharge. The contractor stipulated to its liability on the debt and its nondischargeability but the subcontractor sought attorney’s fees for prosecuting the nondischargeability action.  The Court held that attorney’s fees in prosecuting a dischargeability action can be recovered and declared nondischargeable if the fees are (1) allowed by statute or contract and (2) arise from or are on account of the conduct that resulted in a nondischargeable debt. 
WL Cite: Schwertner Backhoe Services, Inc. v. Kirk (In re Kirk), 525 B.R. 325 (Bankr. W.D. Tex. 2015).
 
Fine Lumber & Plywood, Inc. v. Higgs (In re Higgs) (July 19, 2013)
The Debtor’s company, RH Consultants (d/b/a RH Construction), contracted to purchase goods from Fine Lumber on credit. Years later, RH Consultants forfeited its rights to do business in Texas, but the Debtor, using the name RH Construction, continued to purchase goods from Fine Lumber on credit.  Fine Lumber filed an adversary complaint against the Debtor alleging that the Debtor made false representations by requesting credit on behalf of an entity that does not have the legal right to do business in Texas, making its debt to Fine Lumber nondischargeable under section 523(a)(2)(A). The Court held that the debts were dischargeable because Fine Lumber failed to show by a preponderance of the evidence three of the five elements under section 523(a)(2)(A) that Debtor made a false representation, that the Debtor intent to deceive or that Fine Lumber justifiably relied on a representation made by the Debtor.
WL Cite: Fine Lumber & Plywood, Inc. v. Higgs (In re Higgs), Adv. No. 12-01134, 2013 WL 3791501, at *1 (Bankr. W.D. Tex. July 19, 2013). 
 
Plitt International, LLC v. Heckler (In re Heckler) (Apr. 15, 2014)
The plaintiffs formed a company called West End Lighting, LLC with the Debtor and claimed that the Debtor’s discharge should be denied or that the plaintiffs’ debt should be deemed nondischargeable. The Court denied the Debtor’s discharge under section 727(a)(2). The Court did not decide the dischargability of the plaintiffs’ claim under section 523, relying on precedent that once a bankruptcy court has determined that discharge must be denied for one reason, it does not need to decide the propriety of any of the other grounds for denying discharge.
WL Cite: Plitt International, LLC v. Heckler (In re Heckler), Adv No. 13-01077, 2014 WL 1491325, at *1 (Bankr. W.D. Tex. Apr. 15, 2014).
 
Light v. Whittington (In re Whittington) (Aug. 20, 2014)
The Debtor failed to disclose side profits made on land deals in which he served as a fiduciary for the plaintiffs who had invested in the land deals as limited partners. The Court found that the Debtor was under a duty to disclose the side deals to the limited partners and that the failure to do so constituted a misrepresentation. The Court also found that the debtor intended to deceive the limited partners, that the limited partners justifiably relied on the Debtor to make complete disclosures, and that the failure to disclose damaged the limited partners and so held that the debt was nondischargeable under section 523(a)(2). Additionally, the Court found that the Debtor’s actions constituted defalcation while acting in a fiduciary capacity and held that the debt was also nondischargeable under section 523(a)(4).
Light v. Whittington (In re Whittington), 530 B.R. 360 (Bankr. W.D. Tex. 2014).