Higgins v. Nunnelee (In re Nunnelee), 560 B.R. 277

Lisa Higgins (plaintiff) is the sole beneficiary under her father Floyd Mason Nunnelee’s will; Floyd Nunnelee (defendant) was not bequeathed anything. The will was fully probated and the estate closed.
Between April 2010 and February 2012 Higgins loaned the Nunnelees about $200,000; the parties and evidence show these transfers were loans, not inheritance advances.
Higgins asserts Nunnelee induced the loans by (1) representing he had a pending lawsuit against his former employer that would net him millions, and (2) representing ownership (and allegedly that it was unencumbered) of a commercial building worth about $200,000.
The promissory note evidencing the loans was claimed lost and not admitted; Nunnelee denies the note’s existence. Nunnelee later listed Higgins as an undisputed $200,000 creditor in amended bankruptcy schedules.
Higgins sued in adversary proceeding seeking nondischargeability under 11 U.S.C. § 523(a)(2)(A) for false representations and actual fraud. Trial held; court found Higgins failed to meet burden and held the debts dischargeable.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Were the transfers loans or advances on inheritance?	Transfers were loans to be repaid.	Funds were not inheritance; defendant had no right to estate proceeds.	Loans — both parties treated transfers as loans.
Were representations about the building fraudulent?	Nunnelee told Higgins he owned the building (implied free of liens) to induce loans.	Nunnelee did not claim the building was unencumbered; Higgins knew payments were made and at best assumed it was lien-free.	Higgins failed to prove a knowing falsehood or intent to deceive; claim fails.
Were representations about the lawsuit fraudulent?	Nunnelee represented a meritorious lawsuit would yield substantial recovery, inducing loans.	Nunnelee genuinely believed in the lawsuit’s legitimacy; not a knowingly false statement.	Higgins failed to prove the statements were knowingly false or made with intent to deceive; claim fails.
Do the facts satisfy § 523(a)(2)(A) for nondischargeability (false pretenses, false representation, or actual fraud)?	Alleged false representations and actual fraud as to building and lawsuit justify nondischargeability.	No knowing fraud or intent; thus § 523(a)(2)(A) not met.	Court: Plaintiff did not meet preponderance burden; debts are dischargeable.

Grogan v. Garner, 498 U.S. 279 (1991) (creditor bears burden of proof by preponderance to except debt from discharge)
Field v. Mans, 516 U.S. 59 (1995) (justifiable — not necessarily reasonable — reliance standard for fraud claims)
Husky Int’l Elecs., Inc. v. Ritz, 136 S. Ct. 1581 (2016) (actual fraud under § 523(a)(2)(A) can include schemes not involving a misrepresentation)
RecoverEdge L.P. v. Pentecost, 44 F.3d 1284 (5th Cir. 1995) (elements of actual fraud prior to Ritz)
AT & T Card Servs. v. Mercer, 246 F.3d 391 (5th Cir. 2001) (standard for knowing and fraudulent misrepresentation)
Bandi v. Becnel (In re Bandi), 683 F.3d 671 (5th Cir. 2012) (narrow construction of "financial condition" exception in § 523(a)(2)(A))
Hudson v. Raggio & Raggio, Inc. (In re Hudson), 107 F.3d 355 (5th Cir. 1997) (exceptions to discharge construed narrowly in favor of debtor)