594 B.R. 396
Bankr. E.D. Ky.2018Background
- Derek and Chelsey Tingle obtained three Farm Credit loans from 2009–2011 secured by equipment, cattle, tobacco, and crop-related collateral; balance sheets provided to Farm Credit showed substantial asset values.
- Farm Credit obtained a state-court judgment after default and the Tingles later filed bankruptcy: a Chapter 13 (dismissed without discharge) and a subsequent Chapter 7 filed in 2017.
- Farm Credit sued in adversary proceeding seeking nondischargeability under § 523(a)(2)(A),(2)(B),(4),(6) and, alternatively, denial of the Chapter 7 discharge under § 727(a)(3),(4),(5),(7).
- Farm Credit moved for summary judgment on all counts; the Tingles opposed and raised testimonial explanations for asset depletion and record deficiencies.
- The court found large, material discrepancies between asset values on the 12/31/2010 balance sheet and later bankruptcy schedules (approximate unexplained losses: equipment ~$64,900; cattle ~$114,950; tobacco ~$17,992).
- The court concluded the Tingles failed to preserve or produce records and failed to satisfactorily explain the loss of assets for purposes of § 727(a)(3) and (a)(5), but credibility/intent issues required trial on the § 523 claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Nondischargeability under § 523(a)(2)(A) (actual fraud) | Farm Credit: Tingles engaged in an asset-transfer scheme and committed actual fraud inducing loans | Tingles: deny fraud; offer explanations for transfers and sales; dispute intent | Denied — genuine issues of intent/credibility require trial |
| Nondischargeability under § 523(a)(2)(B) (false written statements) | Farm Credit: balance sheets were materially false and induced the loans; admissions and discrepancies support falsity/reliance | Tingles: deny ownership of some listed items; contend balance sheets may have been prepared by Farm Credit; dispute materiality/intent | Denied — factual disputes on falsity, reliance, and intent require trial |
| Nondischargeability under § 523(a)(4) (larceny/defalcation/embezzlement) | Farm Credit: use/transfer of collateral and proceeds constituted larceny | Tingles: testified proceeds were paid to or used to protect Farm Credit’s collateral; dispute wrongful use | Denied — material factual disputes on how proceeds were used and intent require trial |
| Nondischargeability under § 523(a)(6) (willful and malicious injury) | Farm Credit: transfers and undervalued dispositions damaged creditor intentionally | Tingles: contest intent; assert sales, deaths, insurance proceeds, and drought explain losses | Denied — intent and credibility issues require trial |
| Denial of discharge under § 727(a)(3) (failure to keep/preserve records) | Farm Credit: Tingles failed to keep or produce records that would explain large asset dissipation | Tingles: offered mainly testimonial assertions, no supporting records or adequate explanations | Granted — summary judgment for Farm Credit on § 727(a)(3) |
| Denial of discharge under § 727(a)(5) (failure to explain loss of assets) | Farm Credit: identified specific asset losses and lack of explanation/records | Tingles: provided partial explanations (deaths, transfers, auction, insurance) but insufficiently documented | Granted — summary judgment for Farm Credit on § 727(a)(5) |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard and materiality)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (inferences for nonmoving party)
- Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133 (credibility determinations and summary judgment)
- FDIC v. Jeff Miller Stables, 573 F.3d 289 (6th Cir.) (intent issues make summary judgment inappropriate)
- Hoover v. Radabaugh, 307 F.3d 460 (6th Cir.) (intent/credibility and summary judgment)
- Grogan v. Garner, 498 U.S. 279 (standard of proof for nondischargeability)
- Kawaauhau v. Geiger, 523 U.S. 57 (definition of willful and malicious injury under § 523(a)(6))
- Markowitz v. Campbell, 190 F.3d 455 (6th Cir.) (application of Kawaauhau in nondischargeability context)