246 F. Supp. 3d 489
D. Mass.2017Background
- Fiorillo sued Oasis, Fisher, and Sousa in Worcester Superior Court (1999), claiming an ownership interest in Oasis; trial bifurcated to decide whether Fiorillo signed a release.
- At the 2007 trial, appellants introduced an unconditional release (Exhibit 2); Fiorillo’s side produced Exhibit 5 framing the release as escrowed until a sale closed.
- A jury found an unfulfilled condition precedent; after a new trial was granted and discovery reopened, the Superior Court found Exhibit 5 was a fabricated counterfeit and dismissed Fiorillo’s complaint with prejudice, awarding appellants costs and fees (~$36,728.27).
- Fiorillo filed bankruptcy (Ch. 11 converted to Ch. 7); appellants commenced an adversary proceeding seeking a nondischargeability determination under 11 U.S.C. § 523(a)(2)(A).
- Bankruptcy court denied appellants’ summary judgment motion, concluding appellants did not show Fiorillo “obtained” money, property, or services by fraud within § 523(a)(2)(A); court also declined to allow a late amendment to plead §§ 523(a)(6) or (7).
- District court affirmed: § 523(a)(2)(A) inapplicable because Fiorillo did not obtain the sanction money by fraud, and appellants cannot rely on §§ 523(a)(6) or (7) because they were not pleaded and amendment was properly denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Superior Court sanction is nondischargeable under 11 U.S.C. § 523(a)(2)(A) | The execution arises from Fiorillo’s fraud (fabricated Exhibit 5) so the money/fees were "obtained by" false pretenses/representations | Fiorillo did not obtain money, property, or services by fraud; the sanction benefitted appellants but was not property obtained by Fiorillo | Held for defendant: § 523(a)(2)(A) inapplicable because Fiorillo did not "obtain" the money by fraud |
| Whether debt is nondischargeable under 11 U.S.C. § 523(a)(6) (willful and malicious injury) | Appellants asserted willful/malicious injury supporting nondischargeability | Fiorillo argued these grounds were not pleaded in the adversary complaint and were untimely | Held for defendant: §§ 523(a)(6) and (7) not considered because not pleaded and amendment was properly denied |
Key Cases Cited
- In re Watman, 301 F.3d 3 (1st Cir.) (standard: bankruptcy factual findings reviewed for clear error; legal conclusions reviewed de novo)
- In re Spigel, 260 F.3d 27 (1st Cir.) (summary judgment standards apply to § 523(a)(2)(A) adversary proceedings; burden on claimant to show debt fits exception)
- Cohen v. de la Cruz, 523 U.S. 213 (1998) ("to the extent obtained by" limits § 523(a)(2)(A) to money/property/services actually obtained by fraud)
- In re Menna, 16 F.3d 7 (1st Cir.) (exceptions to discharge are narrowly construed; claimant bears burden to fit within § 523(a) exception)