640 B.R. 665
Bankr. E.D. La.2022Background
- Playa Shirley, LLC and John Pearson invested in multiple Texas development projects in 2016–2017 based on representations by debtor Brandon A. Badeaux (and his company Acadian Properties) that he owned or controlled the subject parcels.
- Many properties were not owned or lawfully developable by Badeaux; investments were lost, replacement personal checks totaling $665,063.02 bounced, and promissory notes/money judgments were later entered by a Louisiana state court totaling roughly $2.7 million (including fees and interest).
- Plaintiffs sued in a bankruptcy adversary proceeding seeking (a) nondischargeability of those state-court judgments under 11 U.S.C. § 523(a)(2)(A), (a)(2)(B), (a)(4), and (a)(6), and (b) denial of Badeaux’s chapter 7 discharge under § 727(a)(2).
- Badeaux failed to timely oppose the summary-judgment motion; the court found he received proper notice and deemed plaintiffs’ statement of undisputed facts admitted under the local rule.
- After plaintiffs’ judgments, Badeaux’s wife purchased 302 Abita Place in January 2021; the cash deed recited separate ownership, but Badeaux later listed an interest in the property as community property on his bankruptcy schedules and claimed a homestead exemption.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| §523(a)(2)(A) — fraud/false representation | Badeaux knowingly misrepresented ownership to induce investments; debts flow from that fraud | (implicitly) no timely opposing evidence to rebut intent/reliance | Granted — debts nondischargeable under §523(a)(2)(A) |
| §523(a)(2)(B) — written statement re financial condition | Contracts were written misstatements about assets/returns supporting §523(a)(2)(B) | Contracts did not represent ownership, investment amounts unclear, no specific false financial statement | Denied — plaintiffs failed to show materially false written statement respecting financial condition |
| §523(a)(4) — embezzlement | Plaintiffs entrusted funds; debtor fraudulently appropriated them | Evidence does not show how funds were used after transfer | Denied — genuine issue of material fact as to embezzlement |
| §523(a)(6) — willful & malicious injury | Intentional misrepresentations were substantially certain to cause economic harm | Characterizes claims as contractual, not intentional injury | Granted — debts nondischargeable under §523(a)(6) |
| §727(a)(2) — denial of discharge for concealment | Deed and judgment-exam testimony show concealment of interest in Abita Place to hinder creditors | Debtor says belief property was wife's separate property was mistaken; later scheduled interest out of caution | Denied — genuine issue of material fact as to actual intent; summary judgment refused |
Key Cases Cited
- Little v. Liquid Air Corp., 37 F.3d 1069 (5th Cir. 1994) (summary-judgment standard under Rule 56)
- Grogan v. Garner, 498 U.S. 279 (1991) (creditor bears preponderance burden in nondischargeability actions)
- Lamar, Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752 (2018) (single-asset statement can be a statement respecting financial condition under §523(a)(2)(B))
- Miller v. J.D. Abrams, Inc., 156 F.3d 598 (5th Cir. 1998) (definition of embezzlement for §523(a)(4))
- Williams v. Int’l Bhd. of Elec. Workers Local 520, 337 F.3d 504 (5th Cir. 2003) (§523(a)(6) requires intentional or substantially certain injury)
- Pavy v. Chastant, 873 F.2d 89 (5th Cir. 1989) (badges-of-fraud factors to infer intent under §727(a)(2))
- Inglett & Co. v. Everglades Fertilizer Co., 255 F.2d 342 (5th Cir. 1958) (critique of counsel affidavits as primary proof on summary judgment)