Daly v. Daly, 655 B.R. 255

Daren Daly incorporated All Paving, Inc. in Florida on Sept. 19, 2013 but did not complete corporate organization (no directors elected, no shares issued) until a July 3, 2019 organizational action by written consent.
Plaintiffs (Patrick and Elizabeth Daly and All Paving and Sealcoating, LLC) asserted they owned 87.5% of All Paving, Inc. based on intra-family agreements and representations to third parties; they sued in state court and later filed a $4,051,277.41 proof of claim in Daren’s Chapter 11 (Subchapter V) case.
The core contested questions tried over nine days were: (1) who owned All Paving, Inc. stock (what is estate property); (2) whether the $4,051,277.41 claim should be allowed; and (3) whether any debt to plaintiffs is nondischargeable under 11 U.S.C. § 523(a)(2)(A), (a)(4), or (a)(6).
All Paving, Inc.’s official corporate records (stock ledger and certificates presented by Daren) showed 100 issued and outstanding shares owned by Daren as of the petition date; plaintiffs’ competing records were found not to rebut those corporate records.
The court concluded plaintiffs lacked standing to assert claims on behalf of All Paving, Inc., failed to prove any debt or damages against Daren, and thus the proof of claim was disallowed and nondischargeability claims failed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Who owns All Paving, Inc. stock / what is estate property?	Plaintiffs: family agreements and third‑party representations establish they owned 87.5% of stock.	Daren: corporate records (ledger/certs) and valid retroactive board ratification show he owned 100% of issued stock.	Daren owned all 100 issued shares as of petition date; corporate records prima facie; plaintiffs failed to rebut.
Allowance of $4,051,277.41 proof of claim	Claim based on alleged conversion of company value and disgorgement tied to plaintiffs’ asserted 87.5% interest.	No standing to claim company value; plaintiffs did not prove damages or substantiate disgorgement transactions.	Claim disallowed in full under § 502(b).
Nondischargeability under § 523(a)(2)(A) (fraud/false pretenses)	Daren induced transfers by false pretenses/representations.	Plaintiffs failed to prove a debt owed by Daren or any damages resulting from fraud.	Plaintiffs failed to meet burden; no nondischargeable debt established.
Nondischargeability under § 523(a)(4) and (a)(6) (embezzlement; willful & malicious injury)	Plaintiffs alleged embezzlement and willful malicious acts (domain control, transfers, etc.).	Lack of ownership/standing, and plaintiffs did not prove fraudulent appropriation or actual injury/damages.	Claims fail: no embezzlement established; no willful and malicious injury proven; debts not excepted from discharge.

Sackett v. Shahid, 722 So. 2d 273 (Fla. 1st DCA 1998) (corporate records are prima facie evidence of stock ownership)
Butner v. United States, 440 U.S. 48 (1979) (bankruptcy estate property determined under federal law but rights in property are defined by state law)
In re Kalter, 292 F.3d 1350 (11th Cir. 2002) (estate property question requires applying federal law to state‑defined property interests)
Husky Int’l Elec., Inc. v. Ritz, 578 U.S. 356 (2016) (scope of actual fraud for nondischargeability)
Grogan v. Garner, 498 U.S. 279 (1991) (burden of proof for nondischargeability is preponderance of the evidence)
Kawaauhau v. Geiger, 523 U.S. 57 (1998) (willful and malicious standard under § 523(a)(6))
Gentry‑Futch Co. v. Gentry, 106 So. 473 (Fla. 1925) (corporation may ratify past acts that it had the power to authorize)
Cook v. Tullis, 85 U.S. 332 (1873) (ratification operates retroactively absent intervening third‑party rights)