457 B.R. 854
Bankr. M.D. Fla.2011Background
- Vermiio, in the construction business, owned a residential property encumbered by a Bayview Mortgage;
- At closing, Vermilio and QuickClose executed documents including a Warranty Deed that allegedly conveyed marketable title free of encumbrances;
- The HUD-1 showed a Bayview payoff of $126,921, which Vermilio directed to be paid to him rather than Bayview;
- Vermiio deposited the $126,921 payoff into his personal account and did not remit it to Bayview, leaving the mortgage unsatisfied;
- Purchaser and plaintiff insured title; plaintiff paid off Bayview and released the mortgage, incurring a loss of $139,462.43;
- Vermiio filed Chapter 7, and plaintiff sought nondischargeability under 523(a)(2)(A), (a)(4), and (a)(6) based on misrepresentation, embezzlement, and willful/malicious injury
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Vermilio's conduct supports nondischargeability under 523(a)(2)(A) | Vermilio made false representations intending to deceive; reliance and loss proven | Vermiio disputes intent and reliance | Yes; elements proven by preponderance |
| Whether Vermilio's acts constitute embezzlement under 523(a)(4) | Vermilio entrusted with funds; misappropriated payoff | No fiduciary relationship or embezzlement proved | Yes; embezzlement established by preponderance |
| Whether Vermilio's conduct supports nondischargeability under 523(a)(6) | Willful and malicious injury to plaintiff’s and purchaser’s interests | No willful/malicious intent shown | Yes; willful and malicious injury proven by preponderance |
| Whether the damages amount is nondischargeable and properly awarded | Damages totaling $139,462.43 undisputedly nondischargeable | Disallowance of damages or improper award of interest | Nondischargeable amount confirmed; interest not awarded due to pleading limitations |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (1991) (establishes preponderance standard for dischargeability)
- In re Bilzerian, 153 F.3d 1278 (11th Cir. 1998) (elements of §523(a)(2)(A) fraud require intent to deceive)
- In re Vann, 67 F.3d 277 (11th Cir. 1995) (reliance must be justified; intent and totality of circumstances considered)
- In re Miller, 39 F.3d 301 (11th Cir. 1994) (credibility/intent as to debtor's false representations)
- Field v. Mans, 516 U.S. 59 (1995) (causal link and justifiable reliance in fraud cases)
- In re Pupello, 281 B.R. 763 (Bankr. M.D. Fla. 2002) (promissory fraud standard in nondischargeability context)
- In re Nofziger, 361 B.R. 236 (Bankr. M.D. Fla. 2006) (requires intentional tort findings for §523(a)(6))
- In re Kelley, 84 B.R. 225 (Bankr. M.D. Fla. 1988) (emphasizes embezzlement definition for dischargeability)
- McDowell v. Stein, 415 B.R. 584 (Bankr. S.D. Fla. 2009) (emphasizes distinction between fiduciary and embezzlement remedies)