455 B.R. 890
8th Cir. BAP2011Background
- Creditor Heide financed imports for the Debtor's used-car business; loans totaled about $300,000 by 2004 with later $50,000 additions.
- Loans were made by checks payable to Imports Plus, Inc., though Creditor contends the Debtor personally entered into the transactions.
- No written loan documents existed; Debtor was the majority shareholder of Imports Plus during much of the period.
- Creditor continued to receive regular interest through 2008; in 2008 a $50,000 loan was tied to a profit-sharing plan from Las Vegas auctions that never materialized.
- Debtors filed Chapter 7; Creditor sought nondischargeability under § 523(a)(2)(A); bankruptcy court granted summary judgment only on Creditor's claim against the Debtor.
- On appeal, the panel reversed and remanded for further proceedings consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the financing was with the Debtor personally or with Imports Plus | Juve personally liable; checks showed Debtor as borrower. | Financing was with Imports Plus, not Juve personally; veil-piercing may apply. | Summary judgment improper; issue must be tried |
| Whether the alleged misrepresentations supported nondischargeability under § 523(a)(2)(A) | Debtor misrepresented inventory equity to secure funds. | No proven misrepresentation that caused the funds to be obtained concurrently with fraud. | Not proven as a matter of law; remand for trial |
| Whether there were genuine material facts regarding the fraud theory | There were ongoing misrepresentations during the loan period. | No evidence that misrepresentations induced the initial loans or that funds were obtained by fraud. | Genuine issues of material fact exist; trial required |
Key Cases Cited
- In re Patch, 526 F.3d 1176 (8th Cir. 2008) (standard for reviewing summary judgment; favorable view to non-movant)
- In re Glen, 639 F.3d 530 (8th Cir. 2011) (fraudulent misrepresentation element requires funds obtained by fraud concurrent with misrepresentation)
- Victoria Elevator Co. of Minn. v. Meriden Grain Co., 283 N.W.2d 509 (Minn. 1979) (two-prong alter ego/veil-piercing test for corporate veil)
- Barton v. Moore, 558 N.W.2d 746 (Minn. 1997) (factors for piercing corporate veil; disregard requires injustice or unfairness)
- Scherping v. United States, 187 F.3d 796 (8th Cir. 1999) (alter ego considerations in piercing veil (two-prong framework))