570 B.R. 300
Bankr. D. Alaska2017Background
- Deloycheet seeks nondischargeability of a $400,000 debt arising from Beach’s alleged fraud under § 523(a)(2)(A) and willful/malicious injury under § 523(a)(6), plus UTPA treble damages and attorney fees; Beach and Sobocienski had secretly aligned with SAI and ANED prior to resignation; HCO loan to SAI and ANED venture plans show self‑dealing and conflicts of interest; Beach pressured approval of the loan while facing imminent departure from Deloycheet; a May 2012 $400,000 transfer from Deloycheet to SAI funded payroll but caused Deloycheet’s accounts to go overdrawn; a spray foam venture involving Beach’s son was misrepresented and later collapsed; SAI filed bankruptcy and Deloycheet sued in state court and bankruptcy adversary proceeding; the court held for Deloycheet on § 523(a)(2)(A) and UTPA damages, dismissed § 523(a)(6), and declined punitive damages; the court allocated fault 50/50 between Beach and Sobocienski.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Beach’s representations violated § 523(a)(2)(A). | Deloycheet alleges Beach knowingly misrepresented and omitted material facts. | Beach contends his statements were opinions based on due diligence. | Yes; § 523(a)(2)(A) satisfied. |
| Whether Beach’s conduct constitutes willful and malicious injury under § 523(a)(6). | Deloycheet asserts willful/malicious injury from fraud and self‑dealing. | Beach argues no intent to harm Deloycheet; only financial risk. | Not proven; § 523(a)(6) dismissed. |
| Whether treble damages and attorney fees under Alaska UTPA are nondischargeable under § 523(a)(2)(A). | UTPA recovery is due to fraud; treble damages/fees are nondischargeable. | Argues relative to UTPA remedies; no nondischargeability issue raised. | Yes; treble damages and fees nondischargeable under Cohen. |
| How to allocate fault for the $400,000 loan between Beach and Sobocienski. | Beach and Sobocienski acted in concert; equal fault warranted. | Argues against apportionment or equal fault due to roles. | 50/50 allocation between Beach and Sobocienski. |
Key Cases Cited
- In re Sabban, 600 F.3d 1219 (9th Cir. 2010) (fraud standards and nondischargeability guidance under § 523(a)(2))
- In re Deitz, 760 F.3d 1038 (9th Cir. 2014) (preponderance standard; Restatement guidance for fraud)
- In re Diamond, 285 F.3d 822 (9th Cir. 2002) (restatement of fraud elements and reliance principles)
- Cohen v. de la Cruz, 523 U.S. 213 (U.S. 1998) (nondischargeability of treble damages/fees when fraud established)