Pazdzierz v. First American Title Insurance (In Re Pazdzierz)
718 F.3d 582
6th Cir.2013Background
- Pazdzierz obtained four car-wash loans totaling $1,018,350 in 2007; Patriot Title Agency, underwriting by First American, arranged closings and CPLs.
- Bayview Financial later assigned the notes; Bayview sued Pazdzierz for fraud and First American settled, obtaining 75% of Bayview’s interest in the notes.
- First American asserted its title-insurance-related claims and sought to have Pazdzierz’s debt declared non-dischargeable under § 523(a)(2)(B).
- Pazdzierz argued that Michigan law bars assignment of fraud claims and that First American cannot rely on misrepresentations to Pazdzierz’s lenders.
- Bankruptcy court ruled for Pazdzierz on assignability; district court reversed and held assignee may pursue non-dischargeability; remanded for proceedings consistent with the opinion.
- First American cross-appealed on subrogation rights; the court found it unnecessary to reach this issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May an assignee pursue non-dischargeability under § 523(a)(2)(B)? | First American may seek non-dischargeability as assignee. | Michigan law bars assignment of fraud claims; cannot pursue. | Yes; assignee may pursue non-dischargeability; remand for 523(a)(2)(B) proceedings. |
| Is the underlying fraud claim assignable under Michigan law where the claim arises from notes? | Notes are tangible property; assignment allowed. | Fraud claims cannot be assigned. | Notes are tangible; not a naked fraud claim; assignable. |
| Can First American prove reliance for § 523(a)(2)(B)(iii)? | Relies on assignor’s misrepresentations at loan origination. | Reliance must be shown by the plaintiff in the bankruptcy, not by the assignor. | Remand to determine sufficiency of evidence on reliance. |
Key Cases Cited
- Boyajian v. New Falls Corp., 564 F.3d 1088 (9th Cir. 2009) (assignee may stand in shoes of assignor for § 523(a)(2)(B))
- In re Meyer, 120 F.3d 66 (7th Cir. 1997) (assignment of loan rights not bar to non-dischargeability)
- In re Florida, 164 B.R. 636 (9th Cir. B.A.P. 1994) (policy supporting assignee pursuing non-dischargeability)
- Dickinson v. Seaver, 7 N.W. 182 (Mich. 1880) (fraud claims are not assignable)