Abramov v. Movshovich (In re Movshovich)
521 B.R. 42
Bankr. D. Mass.2014Background
- Abramov sues Movshovich in bankruptcy adversary to except a state-court $225,000 judgment from discharge under 11 U.S.C. § 523(a)(2)(A), (a)(2)(B), and (a)(4).
- Parties had a five-year business negotiation (2002–2007) to buy half the furniture store Europe Today, Inc.
- Abramov paid a $150,000 deposit and later $25,000 plus a $50,000 loan; Movshovich failed to transfer ownership or repay.
- Abramov discovered inconsistent financials (handwritten summaries vs. IRS filings) and Movshovich used the company account for personal expenses.
- Abramov opted out of the deal in 2003 after uncovering possible underreporting of sales tax and cash withdrawals; Movshovich refunded $175,000 but failed to repay the remaining amounts.
- Judgment awarded in state court in favor of Abramov for $225,000 plus interest; bankruptcy court now determines non-dischargeability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 523(a)(2)(A) applies | Abramov argues Movshovich falsified value and promised to disclose documents. | Movshovich contends no dischargeability due to lack of intent or misrepresentation scope. | Partially granted; $175,000 (initial and subsequent deposits) non-dischargeable under § 523(a)(2)(A) based on misrepresentations and intent to deceive. |
| Whether § 523(a)(2)(B) applies to written financials | Abramov asserts reliance on written summaries (2001) as a basis for credit. | Movshovich argues any reliance was misplaced or pre-dated the documents. | Partially granted; 2001 Financial Summary deemed materially false and relied upon; $175,000 non-dischargeable under § 523(a)(2)(B); $50,000 loan not proven under § 523(a)(2)(B). |
| Whether § 523(a)(4) applies | Abramov contends Movshovich acted in fiduciary capacity with misappropriation. | Movshovich contends no fiduciary relationship under applicable law. | Denied; no fiduciary relationship established under § 523(a)(4). |
Key Cases Cited
- Palmacci v. Umpierrez, 121 F.3d 786 (1st Cir. 1997) (fraud defaults and elements for § 523(a)(2)(A))
- McCrory v. Spigel (In re Spigel), 260 F.3d 27 (1st Cir. 2001) (elements of nondischargeability under § 523(a)(2)(A))
- Field v. Mans, 516 U.S. 59 (U.S. 1995) (justifiable reliance standard under § 523(a)(2)(A))
- Denenberg (In re Denenberg), 37 B.R. 267 (Bankr.D.Mass. 1983) (materiality standard for statements in writing under § 523(a)(2)(B))
- Kosinski (In re Kosinski), 424 B.R. 599 (1st Cir. BAP 2010) (scope of 'statement respecting financial condition' under § 523(a)(2)(B))