Chriswell v. Alomari (In re Alomari), 486 B.R. 904

Debtors Hesham Alomari and Nadia Alomari are married and residents of Orland Park, Illinois.
Hesham owned and operated Jenin Food Plaza until 2008, when it was sold.
Erica Chriswell sued to determine non-dischargeability of a debt under 11 U.S.C. §§ 523(a)(2)(A) and (a)(4) in an adversary proceeding arising from the Narragansett Avenue property transaction.
In 2007, Hesham offered a lease with an option to buy the Narragansett Property; the security deposit of $53,000 was paid by Chriswell and treated under the Lease Contract.
The Lease Contract provided the security deposit would be applied to purchase if exercised, or returned less up to $5,000 for repairs if not exercised, and the contract was governed by Illinois law.
Hesham later spent the deposit on construction and personal expenses, and the parties faced foreclosure and bankruptcy proceedings; the court ultimately entered separate judgments, ruling in favor of Chriswell on one count and in favor of Alomari on another.

Issue	Plaintiff's Argument	Defendant's Argument	Held
523(a)(2)(A): whether the Lease Contract’s security-deposit promise was a false representation	Chriswell argues Hesham knew deposit would be returned but planned to spend it.	Alomari contends he intended to repay and had a basis to believe repayment was possible.	Nadia: judgment for plaintiff; Hesham: judgment for defendant.
523(a)(4): whether the Security Deposit was embezzled or held in fiduciary capacity	Chriswell asserts fiduciary relationship or embezzlement by misappropriating the deposit.	Alomari contends no fiduciary relationship and no embezzlement; funds were used for construction.	Nadia: judgment for defendant on this count; Hesham: judgment for plaintiff on this count.

Grogan v. Garner, 498 U.S. 279 (1991) (preponderance standard to dischargeability actions)
In re Harasymiw, 895 F.2d 1170 (7th Cir. 1990) (burden of proof for exceptions to discharge is preponderance)
In re Martin, 698 F.2d 883 (7th Cir. 1983) (elements for dischargeability under § 523(a)(2)(A))
In re Grossman, 174 B.R. 972 (Bankr. N.D. Ill. 1994) (false representations must concern present or past facts, not future promises absent intent to perform)
In re Amari, 483 B.R. 836 (Bankr. N.D. Ill. 2012) (statements about financial condition must be in writing under § 523(a)(2)(A))
Citibank (S.Dakota), N.A. v. Michel, 220 B.R. 603 (N.D. Ill. 1998) (transfer of funds and intent to repay considered for § 523(a)(2)(A))
In re McGee, 353 F.3d 537 (7th Cir. 2003) (fiduciary capacity scope under § 523(a)(4) varies with power imbalance)
Matter of Woldman, 92 F.3d 546 (7th Cir. 1996) (§ 523(a)(4) reaches only certain fiduciary obligations)