483 B.R. 836
Bankr. N.D. Ill.2012Background
- Debtor Carl Amari filed Chapter 7 bankruptcy; discharge granted March 2, 2012.
- Media House Productions (Plaintiff) filed original complaint June 13, 2012 and amended Sept 20, 2012.
- Plaintiff seeks nondischargeability under 523(a)(2)(A) (Count I), 523(a)(4) (Count II), and 523(a)(6) (Count III); and revocation under 727(d) (Count IV).
- Defendant argues lack of jurisdiction due to late filing and that Amended Complaint fails to state claims; also seeks to strike constructive trust remedy.
- Defendant was manager/75% member of Falcon Picture Group, LLC; plaintiff contributed cash and services to a project called Truth & Life Dramatized Audio Bible based on an LLC contract.
- Alleged misrepresentations include cash contributions, group representations, investor document, repayment promises, borrowing and distribution fraud, and salary payments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness and jurisdiction for dischargeability claims | Rule 4007 late filing may be excused for lack of notice. | Dischargeability challenges filed after deadline lack jurisdiction. | Not dispositive; timeliness may be cured by equitable defenses; Counts I, II, IV survive. |
| Whether § 523(a)(2)(A) claims are stated against Defendant personally | Corporate officer may be personally liable for fraud; misrepresentations by Defendant sufficient. | Plaintiff merged Defendant with Falcon Group; no personal promise alleged. | Amended Complaint plausibly alleges personal participation; not dismissed. |
| Whether § 523(a)(4) claim of embezzlement is viable | Embezzlement claim tied to misappropriation of Plaintiff's property. | Embezzlement claim lacks pleaded property ownership by Plaintiff; may require derivative action. | Standing concerns; evidence may be relevant; not dismissed at this stage. |
| Whether § 523(a)(6) claim for willful/malicious injury survives | Alleged willful/malicious scheme to harm Plaintiff through distribution failures. | No plausible intent to harm Plaintiff; fraud already covered under § 523(a)(2). | Count III dismissed as to 523(a)(6). |
| Whether to grant constructive trust over Audio Bible profits | Constructive trust warranted to prevent unjust enrichment. | Post-bankruptcy constructive trust lacks authority; strike requested. | Constructive trust stricken; relief not available post-bankruptcy. |
Key Cases Cited
- In re Kontrick, 295 F.3d 724 (7th Cir.2002) (Rule 4007 time limits are not jurisdictional, subject to equitable defenses)
- In re Jairath, 259 B.R. 308 (Bankr.N.D.Ill.2001) (creditor notice affects timeliness; equitable defense applicability)
- In re Diepholz, 2012 WL 4747238 (Bankr.B.A.P. 9th Cir.) (timeliness of 523(a)(3)(B) actions when creditor learns of case)
- In re Dewalt, 961 F.2d 848 (9th Cir.1992) (requires consideration of notice and time to decide to file nondischargeability)
- Kawaauhau v. Geiger, 523 U.S. 57 (1998) (willful injury requires intentional, not merely intentional act causing injury)
- Jendusa-Nicolai v. Larsen, 677 F.3d 320 (7th Cir.2012) (defining willful and malicious injury as one concept for § 523(a)(6))