Little v. Deweese, 23-01007

Mark R. Little, Chapter 7 Trustee for Charles Deweese Construction, Inc. (CDCI), filed a complaint against Charles and Penny Deweese to declare certain debts nondischargeable in bankruptcy.
The Trustee's claims include fraud, breach of fiduciary duty, embezzlement, larceny, and willful and malicious injury pursuant to 11 U.S.C. § 523(a)(4) and (a)(6).
Defendants moved to dismiss Count 7 of the First Amended Complaint, which seeks a ruling that the debts are nondischargeable on the above grounds.
The Deweeses argue primarily that the Trustee lacks standing and that any judgment would be worthless after their estate’s assets are exhausted.
The Court considered arguments and pleadings, focusing on whether the complaint states a valid claim under the relevant bankruptcy code sections at this stage.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Trustee's standing to bring nondischargeability	Trustee may seek nondischargeability for future assets or to sell the judgment; collectability is not controlling	Trustee’s claim won’t yield assets; outcome speculative	Trustee's standing upheld; collectability is not determinative
Whether prior judgment is needed for complaint	Not required to have judgment before seeking nondischargeability	Must first win on liability before dischargeability applies	Not required; claims may proceed simultaneously
Sufficiency of § 523(a)(4) (fiduciary fraud, etc) claim	Sufficient facts pled showing fiduciary breach and loss	Facts insufficiently pled	Sufficient facts pled; claim survives
Sufficiency of § 523(a)(6) (willful/malicious injury) claim	Sufficient facts pled of intentional and injurious conduct	Facts insufficiently pled	Sufficient facts pled; claim survives

In re Blaszak, 397 F.3d 386 (6th Cir. 2005) (setting out elements for nondischargeability under 11 U.S.C. § 523(a)(4))
Kawaauhau v. Geiger, 523 U.S. 57 (1998) (defining willful and malicious injury under § 523(a)(6))