Jacobs v. Versa Corp. (In Re Jacobs)
460 B.R. 149
| Bankr. E.D. Mich. | 2011Background
- Versa Corp. loaned $55,000 to Paramount Wine & Liquor; Yury Jacobs and Marina Jacobs guaranteed the loan.
- Versa obtained a state-court judgment against Paramount and the Jacobses for approximately $63,892, later $73,850.79 with interest.
- Jacobs filed a Chapter 7 bankruptcy; discharge entered August 26, 2009.
- This adversary proceeding seeks to avoid Versa’s garnishment lien as a preferential transfer; Versa countersued for § 523(a)(2)(A) nondischargeability.
- The court previously avoided Versa’s lien under § 522(f), rendering the related avoidance issue moot; remaining issue is Versa’s § 523(a)(2)(A) claim.
- The court later granted partial summary judgment for Jacobs on § 523(a)(2)(A) and trial addressed the remaining elements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether misrepresentations were statements about debtor's/insider's financial condition | Jacobs made misrepresentations not about his own finances | Misrepresentations concerned Paramount, an insider | Yes; statements pertain to debtor/insider financial condition |
| Scope of § 523(a)(2)(A) vs § 523(a)(2)(B) interpretation | Broad interpretation governs (A) with broader reach | Strict interpretation favoring (B) for insider statements | Court adopts broad reading for § 523(a)(2)(A) per Burkett reasoning |
| Elements of nondischargeability under § 523(a)(2)(A) | Jacobs intended to deceive; reliance justified; loss proximately caused | No proved false representations by Jacobs not meeting elements | Versa failed to prove elements under § 523(a)(2)(A) as applied to insider misrepresentations |
Key Cases Cited
- Rembert v. AT&T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277 (6th Cir.1998) (strict construction against creditor for discharge exceptions)
- Grogan v. Garner, 498 U.S. 279 (1991) (preponderance standard for nondischargeability)
- Manufacturer's Hanover Trust v. Ward (In re Ward), 857 F.2d 1082 (6th Cir.1988) (strict construction against creditor)
- Willens v. Bones (In re Bones), 395 B.R. 407 (E.D. Mich. 2008) (reliance standards under (A) vs (B) discussed)
- Prim Capital Corp. v. May (In re May), 368 B.R. 85 (6th Cir. BAP 2007) (discusses broad vs strict interpretation of financial condition phrase)