558 B.R. 164
Bankr. W.D. Ky.2016Background
- Defendant Gregory Woods, Used Car Manager at Toyota of Louisville, admitted converting company checks for personal use from Jan 2003–June 2010 and criminally pled guilty; total conversion admitted was $1,181,000.00.
- Plaintiffs (Toyota of Louisville, Sam Swope Auto, and Federal Insurance as subrogee) paid a $25,000 deductible; assigned remaining claim of $1,156,000 to Federal and sued in state court on June 19, 2015.
- Defendant filed Chapter 7 bankruptcy June 30, 2015; Plaintiffs filed an adversary complaint to determine nondischargeability and moved for summary judgment.
- Plaintiffs produced affidavits (Beswick and Fante) stating the fraud was discovered June 21, 2010; Defendant did not controvert these affidavits with admissible record evidence.
- Court found a confidential relationship existed (managerial control over disbursements), so the fraud statute of limitations began to run at actual discovery (June 21, 2010); the five-year fraud statute was thus timely but the two-year theft statute barred embezzlement claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of embezzlement/theft claim | Embezzlement is actionable; suit filed within limitations | Statute of limitations bars theft/embezzlement | Embezzlement/larceny barred by 2-year theft statute |
| Timeliness of fraud claim | Fraud discovered June 21, 2010; 5-year statute permits suit filed June 19, 2015 | Disputes discovery date; statute of limitations bar | Discovery date deemed undisputed; fraud claim timely under 5-year statute |
| Effect of 10-year statute of repose | Plaintiffs may recover all admitted damages | Defendant argues earlier acts outside repose bar recovery | Acts before June 19, 2005 are barred; plaintiffs must prove portion of damages within 10-year window |
| Nondischargeability under Bankruptcy Code | Debt arises from willful, malicious fraud; nondischargeable under §523(a)(6) or §523(a)(4) | Argues no fiduciary under §523(a)(4); disputes nondischargeability | §523(a)(6) nondischargeability found (willful and malicious); §523(a)(4) not met (no technical fiduciary trust; embezzlement/larceny barred by statute of limitations) |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard)
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (choice of law principle)
- Scott v. Farmers State Bank, 410 S.W.2d 717 (Ky. 1966) (elements and pleading of fraud)
- Grogan v. Garner, 498 U.S. 279 (burden of proof for nondischargeability)
- Kawaauhau v. Geiger, 523 U.S. 57 (meaning of "willful" under §523(a)(6))
- Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (limitations triggered by discrete acts)
- Ricci v. DeStefano, 557 U.S. 557 (no genuine issue standard)
- Dodd v. Dyke Indus., Inc., 518 F. Supp. 2d 970 (W.D. Ky. 2007) (Kentucky fraud limitations discussion)