Auction Credit Enterprises, LLC v. Desouza, 659 B.R. 288

The defendant, Valdineia F. Desouza, operated a used car dealership (AutoDallas.com) and entered a floor plan financing agreement with Auction Credit Enterprises, LLC (Plaintiff) in December 2020.
Under this agreement, Plaintiff extended credit, secured by inventory, and proceeds from the sale of financed vehicles were to be remitted to Plaintiff.
Plaintiff alleges Desouza failed to remit the proceeds from the sale of thirteen specifically listed vehicles and declared her in default.
Plaintiff brought an adversary action in bankruptcy, seeking to except the alleged debt from discharge under 11 U.S.C. § 523(a)(2)(A) (fraud) and § 523(a)(4) (embezzlement).
Plaintiff moved for summary judgment; Desouza responded and disputed her involvement and intent, leading the Court to find genuine issues of material fact.
The Court's decision addresses whether the evidence, as a matter of law, precludes discharge of the debt based on fraud or embezzlement.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Nondischargeability under §523(a)(2)(A) – Fraud	Desouza or her partners/agents obtained loans by false pretenses, intentional misrepresentation, or actual fraud.	Desouza lacked intent; did not personally communicate misrepresentations; not involved in daily operations.	Genuine issues of material fact preclude summary judgment; denied.
Vicarious Liability for Partners’/Agents’ Fraud	Desouza liable for actions of agents/partners under Bartenwerfer if agency/partnership exists.	No evidence of agency/partnership; marriage alone insufficient under Texas law.	Disputed facts on existence/scope of agency/partnership; summary judgment denied.
Nondischargeability under §523(a)(4) – Embezzlement	Desouza embezzled by failing to remit car sale proceeds, as in similar cases.	No fraudulent intent; did not personally appropriate proceeds; similar to Staggs case.	Disputed material facts regarding intent/preclusion; summary judgment denied.
Liability for Co-conspirator’s/Agent’s Actions	Partnership/agency/conspiracy suffices for liability for fraud and embezzlement under Texas law.	No sufficient evidence of partnership/agency/conspiracy.	Disputed facts; insufficient basis for summary judgment.

Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
Field v. Mans, 516 U.S. 59 (justifiable reliance standard under § 523(a)(2)(A))
Husky Int’l Electronics, Inc. v. Ritz, 578 U.S. 356 (definition of actual fraud under § 523(a)(2)(A))
Bartenwerfer v. Buckley, 598 U.S. 69 (vicarious liability for partner/agent’s fraud under § 523(a)(2)(A))
Miller v. J.D. Abrams Inc., 156 F.3d 598 (definition of embezzlement under § 523(a)(4))
Deodati v. M.M. Winkler & Assocs., 239 F.3d 746 (partnership fraud nondischargeability)
Cowin v. Countrywide Home Loans, Inc., 864 F.3d 344 (scope of liability under § 523(a)(4))