85 F.4th 1324
11th Cir.2023Background
- Cole partnered with PRN (owned by Rossman) on real-estate projects; PRN lent millions and Cole personally guaranteed loans; Cole defaulted and a 2012 amendment imposed reporting and payment obligations.
- In late 2011 Cole transferred about $4 million from Cole of Orlando LP (COLP) into a tenancy-by-the-entireties (TBE) account; Trustee later avoided those transfers as fraudulent and settled for $350,000.
- Shortly before filing Chapter 7 in July 2015 Cole had (1) split his lakefront homestead into two recorded parcels, (2) retained and later moved money through Coledev LLC (claims about whether advances were loans or equity), and (3) omitted COLP from some schedules (later disclosed). Trustee investigated each.
- PRN sued in an adversary proceeding alleging multiple counts to deny discharge under 11 U.S.C. § 727 and to except debts from discharge under § 523; bankruptcy court ruled for Cole on all counts; district court affirmed most rulings but addressed Counts 3–4 further.
- On appeal the Eleventh Circuit affirmed the bankruptcy court on all § 727 claims (homestead split, Coledev advances, COLP omission) but reversed summary judgment dismissing PRN’s Count 3 (§ 523(a)(2)(A) Husky claim) and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument (PRN) | Defendant's Argument (Cole) | Held |
|---|---|---|---|
| Whether homestead split and related testimony concealed property or constituted a false oath under § 727(a)(2) / § 727(a)(4) | Split was a sham to hide value; testimony about submerged land false | Deeds were publicly recorded, both parcels listed in schedules, Trustee was told; testimony reasonable | Affirmed for Cole: no concealment (deeds recorded, Trustee informed); false-oath homestead claim not pleaded with Rule 9(b) particularity and alternatively not proven |
| Whether Coledev advances were postpetition concealment or false oaths under § 727 | Advances were shareholder loans labeled elsewhere and should have been disclosed as estate property | Advances were equitable capital contributions; Cole disclosed Coledev and cooperated with Trustee | Affirmed for Cole: Bankruptcy court credibility findings supported; no concealment or fraudulent intent; no false oath |
| Whether omission of COLP and the COLP→TBE transfers support § 727 claims | Omission concealed a source of transferred funds and was fraudulent; transfers intended to hinder PRN | Omission was inadvertent; Cole disclosed COLP elsewhere and provided records; Trustee obtained information and settled avoidance claim | Affirmed as to § 727: court credited Cole’s testimony; omission found inadvertent; Trustee’s avoidance succeeded separately (settlement) |
| Whether PRN stated a viable § 523(a)(2)(A) (Husky) claim based on COLP transfers and whether Trustee’s action preempts PRN | Cole (as COLP’s alter ego under Nevada law) fraudulently obtained COLP’s money and thereby obtained COLP’s debt to PRN; thus debt is nondischargeable; Trustee’s avoidance does not preempt creditor’s § 523 claim | Count 3 fails as a Husky claim (transferor vs recipient problem); Trustee has exclusive standing/authority so creditor claim is preempted | Reversed dismissal of Count 3: PRN pleaded a viable Husky claim under Nevada alter-ego law and creditor’s § 523(a)(2)(A) claim is not preempted by Trustee’s § 544/§ 550 action; remanded for merits/summary judgment consideration |
Key Cases Cited
- Husky Int'l Elecs., Inc. v. Ritz, 578 U.S. 355 (2016) (actual fraud can occur without a false representation; recipient of fraudulent transfers may "obtain" debts traceable to the fraud under § 523(a)(2)(A))
- In re Gaddy, 977 F.3d 1051 (11th Cir. 2020) (distinguishes Husky where alleged debt preexisted fraudulent transfers and thus was not "obtained by" fraud for § 523(a)(2)(A))
- Bartenwerfer v. Buckley, 598 U.S. 69 (2023) (§ 523(a)(2)(A) focuses on how the money was obtained)
- Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) (Article III standing requirements)
- In re Jennings, 533 F.3d 1333 (11th Cir. 2008) (elements required to prove concealment under § 727(a)(2))