In re The Clock Tower by West Element, Ltd v. Scott, 25-03037

MEMORANDUM OPINION AND ORDER CONDITIONALLY GRANTING MOTION OF DEFENDANT ANTHONY M. SCOTT TO DISMISS FIRST AMENDED COMPLAINT TO DETERMINE DISCHARGEABILITY OF DEBT (DOC. 7), GRANTING LEAVE TO AMEND, AND SETTING DEADLINE FOR PLAINTIFF TO FURTHER AMEND THE COMPLAINT

This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.

IT IS SO ORDERED.

Tyson A. Crist

United States Bankruptcy Judge

I. Introduction

This adversary proceeding is before the Court on Debtor and Defendant Anthony Scott’s (“Mr. Scott,” “Debtor,” and “Defendant”) Motion of Defendant Anthony M. Scott to Dismiss First Amended Complaint to Determine Dischargeability of Debt (Doc. 7) (the “Second Motion to Dismiss”)¹ on December 3, 2025, pursuant to Federal Rule of Civil Procedure (“Civil Rule”) 12(b)(6) (made applicable by Federal Rule of Bankruptcy Procedure (“Bankruptcy Rule”) 7012(b)) for failure to state a claim, and under Civil Rule 9(b) (made applicable by Bankruptcy Rule 7009) for failure to allege fraud with sufficient particularity. Although belied by the title of the First Amended Complaint to Determine Dischargeability of Debt (Doc. 6) (the “First Amended Complaint”), there are two categories of claims asserted by Plaintiff The Clock Tower by West Element, Ltd (“Plaintiff” and “West Element”).² The first two counts concern the dischargeability of debt under 11 U.S.C. § 523(a)(2) and (a)(6). The second set of counts concern the denial of Mr. Scott’s discharge under 11 U.S.C. § 727(a)(2), (a)(4), and (a)(6).

As it concerns the counts for dischargeability of debt, similar to a recent decision by Chief Judge Buchanan, the threshold issue is whether Plaintiff has adequately pled a debt under state law. See Rich Triple Eight, LLC v. Dawson (In re Dawson), No. 25-11904, 2026 Bankr. LEXIS 1415, 2026 WL 1678093 (Bankr. S.D. Ohio June 8, 2026). When it filed the First Amended Complaint, Plaintiff added assertions regarding veil piercing and alter ego as the basis to hold Mr. Scott personally liable for a debt; however, Plaintiff did not set up the underlying claim for the debt as it apparently had done in its complaint in the Miami County Action.³ Moreover, even though Plaintiff filed a proof of claim to which it attached what must be the agreement underlying the breach of contract claim referenced, Plaintiff did not specifically plead a breach of contract claim. Nor did Plaintiff plead a tort claim under state law. This brings to mind the analysis that “ ‘judges and adverse parties need not try to fish a gold coin from a bucket of mud,’ ” Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 943 (7th Cir. 2013) (quoting United States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374, 378 (7th Cir. 2003) and cited in Lee v. Ohio Educ. Ass’n, 951 F.3d 386, 392-93 (6th Cir. 2020) (holding that when “all seven of [plaintiff’s] state-law causes of action are contained within a single sentence” it violates Civil Rules 8(a)(2) and failure to “separate each of her causes of action or claims for relief into separate counts” violates Civil Rule 10(b))). At the same time, there are a fair amount of factual allegations from which Plaintiff might be able to fish it, and which leads this Court to believe that it is possible (not futile) Plaintiff could rectify these issues and state a valid claim. Accordingly, although Plaintiff is not yet there, and in order to avoid ambiguities, misunderstandings, and potentially later having to amend the pleadings to conform to the evidence, Plaintiff will be given another shot to set up its claims to allege a debt owed personally by Mr. Scott, and then to allege claims to hold that debt non-dischargeable.

As it concerns the remaining counts asserted in the First Amended Complaint, which concern a denial of Mr. Scott’s discharge under 11 U.S.C. § 727(a)(2), (4), and (5), the facts alleged by Plaintiff, if taken as true, do not support those claims such that those counts will be conditionally dismissed. As currently pled, none of those counts actually assert that Mr. Scott violated those provisions, which would concern Mr. Scott’s assets and inappropriate conduct in relation to his bankruptcy case, not his prepetition conduct concerning the Clock Tower Project in which he was handling other entities’ money. That conclusion cannot be drawn from the facts alleged which concern the property of entities, including West Element, that are not the debtor in this bankruptcy case, rather than Mr. Scott’s property that could have been used to pay creditors in this case. It is unclear whether Plaintiff could assert any viable claim under a subsection of § 727(a)⁴ based on the facts alleged. But because this is the first dismissal the Court will also grant Plaintiff leave to amend its First Amended Complaint to attempt to set up a viable claim under § 727(a), if possible.

II. Jurisdiction

This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334(b) and Amended General Order No. 05-02 (Amended Standing Order of Reference) entered by the United States District Court for the Southern District of Ohio pursuant to 28 U.S.C. § 157(a) and (e). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I) and (J), and this Court has constitutional authority to enter a final judgment. See Fabian v. Goss (In re Goss), 605 B.R. 189, 193 (Bankr. S.D. Ohio 2019).

III. Background

A. Joint Chapter 7 Bankruptcy Case

Debtor Anthony Scott, together with his wife, Katy Scott, who is not named as a defendant in this adversary proceeding, filed a joint petition for bankruptcy relief on March 21, 2025 (the “Petition Date”), under chapter 7 of title 11 of the United States Code (the “Bankruptcy Code”). See Case No. 25-30494 (Doc. 1). As relevant to the analysis herein, Mr. Scott is the sole member of Scott Investments of Troy, LLC (“Scott Investments” and sometimes “Investments”),⁵ for which Mr. Scott, by and through the same counsel who is representing him in his joint individual chapter 7 case and in this adversary proceeding, previously filed a chapter 7 case on February 18, 2025. See Case No. 25-30253 (Doc. 1). Mr. Scott is also the majority member of A.M. Scott Distillery, LLC (“A.M. Scott Distillery” and sometimes “Distillery”),⁶ which filed for subchapter V, chapter 11 bankruptcy protection on December 22, 2025 (Case No. 25-32562).⁷

B. Complaint (Doc. 1)

This adversary proceeding objecting to the dischargeability of debt and, although not stated in the title, to Mr. Scott’s discharge, was initiated on September 8, 2025, by West Element when its members, Rayce T. Robinson (“Mr. Robinson”) and Andrew T. Warnock (“Mr. Warnock”), by and through counsel, caused Plaintiff to file the Complaint to Determine Discharg[e]ability of Debt (Doc. 1) (the “Complaint”). The original Complaint was sixteen pages, contained seventy-nine numbered paragraphs (exclusive of the prayer for relief), and contained six counts for relief as summarized in the prayer for relief:

1. On Count One, for an Order determining the debt owed Plaintiff as set forth in Count One to be nondischargeable pursuant to § 523(a)(2)(A) and (B), and for such other relief as is just;
2. On Count Two, for an Order determining the debt owed Plaintiff as set forth in Count Two to be nondischargeable pursuant to § 523(a)(6), and for such other relief as is just;
3. On Count Three, for an Order dismissing the case or converting it to Chapter 13 under § 707(b);
4. On Count Four, for an Order denying discharge under § 727(a)(2);
5. On Count Five, for an Order denying discharge under § 727(a)(4); [and]
6. On Count Six, for an Order denying discharge under § 727(a)(5)[.]

Compl. at 15-16. Counts One and Two, however, did not state claims under applicable nonbankruptcy law—state law—for a debt allegedly owed by Mr. Scott to West Element. Instead, Plaintiff merely asserted, in Count One, that “Defendant is indebted to Plaintiff in the amount of $712,000.00 for damages from the Clock Tower Project,” and in Count Two, that “Defendant is indebted to Plaintiff in the amount of $712,000.00 on a debt based upon the willful and malicious injury by the Defendant to Plaintiff.” Compl. at 13-14, ¶¶ 65, 70. Further, the original Complaint did not mention veil piercing or alter ego liability.

C. First Motion to Dismiss (Doc. 5)

On October 8, 2025, Mr. Scott, as Defendant, timely⁸ filed his Motion of Defendant Anthony M. Scott to Dismiss Complaint to Determine Dischargeability of Debt (Doc. 5) (the “First Motion to Dismiss”). Mr. Scott sought to dismiss the initial Complaint for failure to state a claim and lack of particularity of the fraud allegations, pursuant to Civil Rules 12(b)(6), 8(a), and 9(b), asserting that “[t]he facts alleged in the Complaint are insufficient to establish Plaintiff’s claims to deny Scott’s discharge under 11 U.S.C. §§ 523 and 727[]are plausible based on the facts alleged, and not just a mere possibility.” First Mot. to Dismiss at 2.

D. First Amended Complaint (Doc. 6)

Plaintiff, as a matter of course under Civil Rule 15(a)(1)(B) in response to the First Motion to Dismiss filed its First Amended Complaint to Determine Dischargeability of Debt (Doc. 6) (the “First Amended Complaint”) on October 29, 2025.⁹ Therein, Plaintiff alleged five counts related to Mr. Scott’s business dealings with West Element, the first two of which concern dischargeability of debt under two subsections (a)(2) and (6) of § 523(a), and the remainder of which concern Mr. Scott’s general discharge (ability to discharge any debt) under subsections (a)(2), (4), and (5) of § 727(a), as follows:

1. Cause of Action #1: False Pretenses and Fraud—11 U.S.C. § 523(a)(2)(A) and (B);¹⁰
2. Cause of Action #2: Willful and Malicious—11 U.S.C. § 523(a)(6);
3. Cause of Action #3: Objection to Discharge – Transfer or Concealment of Property – 11 U.S.C. § 727(A);¹¹
4. Cause of Action #4: Objection to Discharge – False Oath and Account – 11 U.S.C. § 727(A)(4); and
5. Cause of Action #5: Objection to Discharge – Failure to Explain Loss of Assets – 11 U.S.C. § 727(A)(5).

First Am. Compl. at 22-40, ¶¶ 98-161.

In comparison to the original Complaint, the First Amended Complaint is forty-one pages (adding about 25 pages), contаins 161 numbered paragraphs (adding 82 paragraphs), and contains five (as opposed to six) counts for relief (essentially, just removing the prior Count Three for an order dismissing or converting Mr. Scott’s chapter 7 case under § 707(b), and not adding any new counts). First Am. Compl. (Doc. 6). In addition, the First Amended Complaint uses the term “alter ego” approximately fifteen times and Plaintiff added the following prayer for relief – demand for judgment against Defendant – as if a new sixth count had been asserted, although it was not:

For a determination that Defendant is individually liable for the obligations of Scott Investments of Troy, LLC to Plaintiff based on: (a) Alter ego liability and piercing the corporate veil under Ohio law; (b) Defendant’s use of Scott Investments as a mere instrumentality to perpetrate fraud on Plaintiff; (c) Defendant’s operation of Scott Investments with such unity of interest and ownership that the separate personalities of Defendant and Scott Investments ceased to exist; (d) The fact that adherence to the fiction of separate existence of Scott Investments would sanction fraud and promote injustice; (e) Defendant’s individual fraudulent conduct and tortious acts committed against Plaintiff; (f) Defendant’s breach of fiduciary duties owed to Plaintiff as a member of West Element; (g) Defendant’s personal participation in and direction of the fraudulent conduct and diversion of funds.

First Am. Compl. at 40, ¶ F. Otherwise, apart from Counts Four, Five, and Six becoming Counts Three, Four, and Five, the prayer for relief was the same as in the original Complaint. In short, although quantity does not equate to quality, in its First Amended Complaint Plaintiff added a significant amount of allegations in an effort to bolster its original Complaint.

E. Second Motion to Dismiss (Doc. 7) and Response (Doc. 8)

Mr. Scott, as Defendant, subsequently filed his Motion of Defendant Anthony M. Scott to Dismiss First Amended Complaint to Determine Dischargeability of Debt (Doc. 7) (the “Second Motion to Dismiss”)¹² on December 3, 2025,¹³ pursuant to Civil Rule 12(b)(6) (made applicable by Bankruptcy Rule 7012(b)) for failure to state a claim, and under Civil Rule 9(b) (made applicable by Bankruptcy Rule 7009) for failure to allege fraud with sufficient particularity. The Second Motion to Dismiss repeated the First Motion to Dismiss and added certain passages to address the additional allegations in the First Amended Complaint.¹⁴ See, e.g., Second Mot. to Dismiss at 2, 3-4, 6, 10-11 (additional arguments focused on the First Amended Complaint).

On December 24, 2025, Plaintiff filed its Memorandum in Opposition to Defendant’s Motion to Dismiss First Amended Complaint to Determine Dischargeability of Debt (Doc. 8) (“Response”). Defendant did not file a reply to the Response and there have been no other filings in this adversary proceeding. The Second Motion to Dismiss and the Response are addressed below in the context оf analysis of the causes of action alleged in the First Amended Complaint.

F. Allegations of the First Amended Complaint

According to the allegations of Plaintiff’s First Amended Complaint the current dispute stems from an involved business deal negotiated between Plaintiff West Element, by and through its founding members, Rayce T. Robinson and Andrew T. Warnock, Mr. Scott, and the business entities in which Mr. Scott was a managing member and owner—The Clock Tower LLC (“Clock Tower”),¹⁵ Scott Investments, and A.M. Scott Distillery, the latter two of which have also filed bankruptcies in this Court. First Am. Compl. at 4-6. The terms of the deal, allegedly reached on November 8, 2022, would have allowed A.M. Scott Distillery to lease the property at 101 and 105 S. Chillicothe Street as a satellite location¹⁶ and Clock Tower to lease the property at 135 East Main Street in Plain City, Ohio (together, the “Property”). First Am. Compl. at 4-5, ¶ 20. In addition, a deal was allegedly reached by which the founding members of West Element, Messrs. Robinson and Warnock, would transfer certain membership units in West Element to Mr. Scott in exchange for him “transferring certain membership units in Clock Tower” to Messrs. Warnock and Robinson. Id. at 5, ¶ 21. Ultimately, it is alleged that Messrs. Warnock, Robinson, and Scott “later executed a restated and amended operating agreement for West Element on October 11, 2023” by which Mr. Scott obtained a twenty percent (20%) interest in West Element and Messrs. Warnock and Robinson each retained forty percent (40%) – a total of eighty percent (80%). Id. at 5, ¶ 24.¹⁷ In addition, Messrs. Warnock and Robinson both received twenty-four and one-half percent (24.5%) of Clock Tower’s membership units, Mr. Scott received twenty-six percent (26%), and Jess Nielsen received twenty-four percent (24%). Id. at 5, ¶ 23. It appears that Mr. Scott remained as the managing member of The Clock Tower LLC. Id. at 13, ¶ 64.

The First Amended Complaint further alleges that Scott Investments, through an agreement entered into by Mr. Scott as its managing member, was to “serve as general contractor” to renovate the Property to be leased for these purposes, “for use by The Clock Tower LLC and A.M. Scott Distillery, LLC” (the “Clock Tower Project”). Id. at 6, ¶ 25. This is consistent with a signed copy of an Agreement of Sale concerning the purchase of construction services entered into by and between Scott Investments, as the “Builder,” signed by Mr. Scott on October 2, 2023, and “Andrew T. Warnock – Authorized Member” as the “Purchaser” on October 9, 2023, concerning “101 & 105 S. Chillicothe and 135 East Main Street[, ] Plain City[, ] Ohio [] 43064, (The ‘Clock Tower’)[,]” which is attached to West Element’s Proof of Claim, No. 9-1, timely filed on the Clerk’s Claims Register on October 31, 2025 for an unseсured, non-priority amount of $712,000, for “[m]oney owed to Creditor for construction agreement, via current civil litigation seeking to pierce corporate veil[.]” Claim No. 9-1.¹⁸ However, although Plaintiff attached the Agreement of Sale, along with an Estimate dated June 22, 2023 for the total amount of $1,500,000, to its Proof of Claim filed in Mr. Scott’s case,¹⁹ it did not allege any of this in the First Amended Complaint, it did not specify which agreement governs (or if that agreement is written or oral), or attach a copy of the relevant agreement (if written) to the First Amended Complaint. At most, Plaintiff made a number passing references to a “construction agreement with Scott Investments” without explaining the terms of that agreement or, again, attaching a copy. See, e.g., First Am. Compl. at 6, ¶¶ 25, 27; 11, ¶ 54; 20, ¶ 92; 21, ¶ 95; 23, ¶ 105; 25, ¶ 111; 27, ¶¶ 114, 115; 32, ¶ 134.

Plaintiff alleges, upon information and belief, that “in furtherance of the Clock Tower Project and in reliance upon the promises of Anthony Scott and Scott Investments, West Element applied for and obtained a construction loan from The Savings Bank of Circleville, Ohio, in the original amount of $1,188,000[,]” referred to within the First Amended Complaint as the “Loan.”²⁰ First Am. Compl. at 6, ¶ 28. And the Loan allegedly closed on October 23, 2023. Id. at 6, ¶ 29. Although there is, as noted by Debtor, a lack of specifics of how the misrepresentation was made (and there is no indication that there was a writing concerning financial condition that Plaintiff relied upon), Plaintiff asserts that Mr. Scott “misrepresented the financial condition of A.M. Scott Distillery, LLC and The Clock Tower LLC, by co-mingling assets with Scott Investments of Troy, LLC, to induce Plaintiff into these agreements.” Id. at 6, ¶ 27. It is unclear what this means.

Plaintiff next alleges a series of transactions by which it paid various amounts to Scott Investments on the same day the Loan closed (October 23, 2023), and that Mr. Scott, on behalf of Scott Investments, made “multiple requests for draws on the Loan (either directly to The Savings Bank or to Warnock).” See First Am. Compl. at 6-7, ¶¶ 30-32 (on or about October 23, 2023, it advanced $120,000 to Scott Investments, prior to closing the Loan, as a down payment,²¹ $151,800 as a first draw on the loan, and $69,432.34 for Scott Investments’ “general contracting fees”). As to draws on the Loan, Plaintiff alleges that Mr. Scott, on behalf of Scott Investments, made a total of seven (7) draws, the most recent of which (and the last of which) “was processed on or about October 23, 2024, in the amount of $108,330[.]” Id. at 6-7, ¶ 31. Allegedly, an Application and Certification for Payment (AIA Document G702) was submitted by Scott Investments, presumably in order to obtain the most recent draw on the Loan, which “set[] forth that the rеmaining balance to finish the Clock Tower Project [wa]s $139,564.68.” Id. at 7, ¶ 31. Although this document is not attached to the First Amended Complaint, Plaintiffs later allege that this document contained false information about the distributions made by Scott Investments towards the Clock Tower Project and Scott Investments’ overall progress on the Clock Tower Project, and that as of November 22, 2024 there was allegedly $305,706.12 “due and payable to various third-party subcontractors and vendors, which was substantially more than the amount left upon which West Element or Scott Investments could draw on the Loan to pay invoices.” Id. at 12, ¶ 59. Plaintiff also alleged that “on November 14, 2024, the balance of the Loan was $1,063,435.32 with an amount of $124,564.68 left to draw upon.” Id. at 8, ¶ 38.

In short, the allegations in Plaintiff’s First Amended Complaint suggest that in October 2024, presumably following the last draw request on the Loan, it began to realize that some subcontractors on the Clock Tower Project had not been paid, contrary to representations in the AIA Document. Id. at 24, ¶ 106; at 29-30, ¶ 121. In this regard, Plaintiff alleges a number of facts supportive of the conclusion that Mr. Scott, acting as the sole member of Scott Investments, mismanaged or misappropriated West Element’s funds or the proceeds of the Loan for purposes other than building out the Property, such as paying payroll for A.M. Scott Distillery, thereby leaving the Clock Tower Project unfinished and leaving West Element without sufficient Loan proceeds to finish the Clock Tower Project. See, e.g., First Am. Compl. at 7-8, ¶¶ 32-36.²² These allegations include a number of emails traded between Mr. Warnock and Mr. Scott²³ concerning unpaid invoices of subcontractors, that Mr. Scott needed to “ ‘get some money in from the distillery’ ” in order “ ‘to clear all items[,]’ ” that Mr. Scott had been “ ‘clearing as many bills with personal money[,]’ ” that Mr. Scott admitted to Mr. Warnock that he was “ ‘behind’ ” and he “ ‘need[ed] help’ ” and ultimately that Mr. Scott admitted to Mr. Warnock by email that “ ‘by looking at it I need to put 150k in it.’ ” Id. at 8-10, ¶¶ 36-37, 39-49, 59. Thus, by November 2024, West Element allegedly “first began to discover the true nature of Defendant’s operation of Scott Investments as a mere shell and instrumentality[.]” Id. at 15, ¶ 74.

Plaintiff further alleges that on or about November 22, 2024, Mr. Scott emailed an Excel spreadsheet to Messrs. Warnock and Robinson that “appeared to itemize each of the Clock Tower Project’s line items by estimate, actual cost, projected remaining bills, and a calculation of the deficiency in funding thе Clock Tower Project[,]” but that the amounts reflected therein overstated amounts actually paid to subcontractors, such as EnviroControl Systems, and underreported the costs remaining to complete the Clock Tower Project. Id. at 10-12, 15, 25, 29, ¶¶ 50, 53, 58, 61, 74, 109, 120. For example, on the spreadsheet, actual costs paid to an HVAC subcontractor, EnviroControl Systems, were listed as $178,828.78. Id. at 11, ¶ 53. However, EnviroControl Systems allegedly informed Mr. Warnock that Scott Investments had only paid them $76,000 for their work on the Clock Tower Project. Id. And a separate $148,944.28 payment by Scott Investments was allegedly sent to EnviroControl Systems on October 4, 2024, but was returned for insufficient funds. Id. EnviroControl Systems placed a mechanic’s lien on the Property after they were underpaid for their work. Id. at 11, ¶ 54.

Based on Mr. Warnock’s calculations of money advanced to Scott Investments and draws from the Loan, Plaintiff alleges there should have been documentation detailing the distribution of $1,335,235.32 to subcontractors and vendors; however, the spreadsheet only listed payments of $1,224,369.98, leaving $110,865.34 unaccounted for and “not documented on the Excel spreadsheet.” Id. at 12, ¶¶ 57-58. Mr. Warnock also has allegedly discovered that Mr. Scott’s Excel spreadsheet listed the amount paid to the electrical subcontractor (R&T Yoder Electric) as $147,058.25, while the same subcontractor had more recently informed Mr. Warnock “that only $58,964.10 had been paid to date.” Id. at 12-13, ¶ 61. Messrs. Warnock and Robinson, on behalf of West Element, are alleged to have “continue[d] through the end of 2024 to identify subcontractors who were owed money by Defendant and Scott Investments for the Clock Tower Project.” Id. at 13, ¶ 63. As result of its discoveries, Plaintiff alleges that Mr. Scott “engaged in a number of unlawful and inappropriate transactions where he was co-mingling assets of multiple companies, failing to accurately report financial statements, and misleading investors and other owners of the state of affairs of Scott Investments.” Id. at 13, ¶ 64.

As a result of the foregoing, on December 10, 2024, Plaintiff alleges that it filed a lawsuit in the Miami County, Ohio Court of Common Pleas, Case No. 2024 CV 00662²⁴ (the “Miami County Action”) allegedly against: (a) Mr. Scott, individually; (b) Scott Investments; (c) A.M. Scott Distillery; (d) Clock Tower; and (e) Jessica Nielsen, another member of Clock Tower. Id. at 13, ¶¶ 65-66. In the Miami County Action, Plaintiff allegedly asserted claims for ‍​​​‌‌‌‌‌​‌‌‌‌​‌‌‌​‌‌‌‌​‌​​‌‌‌‌‌‌‌​‌‌​‌‌​​‌‌​‌​​‌‍breach of contract, unjust enrichment, fraud, and breach of fiduciary duties. Id. at 14, ¶ 67. Plaintiff also purports to have sought inspection of records and expulsion of Mr. Scott as a member of West Element and Clock Tower. Id. And Plaintiff alleges that before the Miami County Action was stayed as to Scott Investments due to its chapter 7 bankruptcy filed on February 18, 2025, and prior to Mr. and Ms. Scott’s underlying chapter 7 bankruptcy, it was “preparing to seek leave of court to amend the Miami County Complaint to add claims against Anthony Scott individually for piercing the corporate veil and alter ego liability with respect to Scott Investments based on the facts discovered during its own investigation.” Id. at 14, ¶ 68. Plaintiff acknowledges that the underlying chapter 7 bankruptcy was filed on March 21, 2025, which “thereby stay[ed] the Miami County Action pursuant to 11 U.S.C. § 362(a)” and Plaintiff laments that this occurred “before Plaintiff could obtain leave to amend the complaint to assert the alter ego claims.” Id. at 14, ¶ 69. However, there is no allegation of whether Plaintiff attempted to conduct an examination of Mr. Scott pursuant to Bankruptcy Rule 2004 before filing the Complaint initiating this adversary proceeding. And the only filing on the docket in the joint chapter 7 case involving West Element is a Stipulation and Agreed Order Granting Clock Tower by West Element, Ltd. an Extension of Time to File a Motion Under 11 U.S.C. § 707 or Complaint Under § 727 or § 523 (Case No. 25-30494, Doc. 25, July 3, 2025), which extended West Element’s deadline to file the Complaint from July 7, 2025 to September 8, 2025.

Plaintiff asserts that “the claims in this adversary proceeding are based on the same operative facts as the Miami County Action and represent a continuation of Plaintiff’s efforts to hold Defendant individually liable for the fraudulent conduct and misappropriation of funds that occurred through Scott Investments.” Id. at 14-15, ¶ 72. Plaintiff also states that Debtor “filed his Chapter 7 bankruptcy petition on March 21, 2025” which was “just three months after the Miami County Action was filed and one month after his Answer being filed and occurred at a time when discovery in that action would have revealed the full extent of Defendant’s use of Scott Investments as his alter ego and the systematic diversion of funds from the Clock Tower Project.” Id. at 14, ¶¶ 69-70. However, Plaintiff did not attach the complaint filed in the Miami County Action to either its original Complaint or the First Amended Complaint filed in this adversary proceeding, and Plaintiff did not set up in its First Amended Complaint the state law-based claims against Scott Investments that underlie the veil piercing and alter ego theory of Mr. Scott’s liability to Plaintiff. Nor did West Element set up any claims under statе law directly against Mr. Scott for his conduct.

Plaintiff alleges that between November 2024 and February 2025, it “conducted a thorough investigation” into the actual payments made to the major subcontractors, to review “bank records and draw requests[,]” to analyze discrepancies between the two, and to request “detailed accounting from Defendant, which was never satisfactorily provided.” First Am. Compl. at 15, ¶ 75. Based on this alleged investigation, West Element has set forth allegations that Mr. Scott is personally liable to West Element under the theory of piercing the corporate veil of Scott Investments and alter ego, as referred to in several parts of the First Amended Complaint. For example, West Element alleges to have discovered that:

(a) Scott Investments was operated with complete disregard for corporate formalities; (b) Defendant commingled funds among Scott Investments, Distillery, Clock Tower, and other entities he controlled; (c) Defendant used Scott Investments’ bank accounts to pay obligations of his other entities, particularly payroll for Distillery; (d) Scott Investments was undercapitalized and used as a mere instrumentality to obtain Loan proceeds; [and] (e) Defendant exercised such complete control over Scott Investments that it had no separate existence apart from Defendant himself.

See, e.g., id. at 15-16, ¶ 76. In addition, West Element alleges that Mr. Scott “was the sole member, sole manager, owner, and controlling person of Scott Investments of Troy, LLC, holding 100% of the membership interests and exercising complete and exclusive control over all business decisions, financial transactions, and operations.” Id. at 16, ¶ 79.

But rather than set up a separate count to establish a personal debt owed by Mr. Scott to West Element, Plaintiff added allegations within the Facts Common to All Claims section of the First Amended Complaint and within the previously alleged First and Second Causes of Action, along with an added paragraph F to the prayer for relief, to set up veil piercing. See id. at 16-20, ¶¶ 79-90. Amongst other facts asserted in the foregoing paragraphs of the First Amended Complaint, Plaintiff alleges that Scott Investments, under Mr. Scott’s direction, transferred money meant to be used on the Clock Tower Project to his other business entities without business justification or arms’-length terms. Id. at 17-18, ¶ 83. Further, Plaintiff alleges that both Distillery and Scott Investments, during the relevant period, shared a businеss address and did not have physical or corporate separation. Id. at 18-19, ¶¶ 84, 85. Thus, the veil piercing “claim” is based on Mr. Scott having “used the same employees interchangeably across Scott Investments, Distillery, Clock Tower, and his other entities without maintaining proper corporate separation, proper allocation of compensation, or proper documentation of which entity employed them,” giving several examples and further alleging that the several shared employees all “took direction exclusively from Defendant personally, not from any separate management structure of Scott Investments.” Id. at 18, ¶ 84. Plaintiff further alleges that Mr. Scott’s dominion and control over the entities and their finances, undercapitalization, failure to abide by corporate formalities, and commingling of finances between Clock Tower, the Distillery, and Scott Investments, as well as the commission of alleged fraud and misappropriation of funds, mean that Mr. Scott can be held personally liable for the debts of Scott Investments; thus, for the debt owed by Scott Investments to West Element. Id. at 15-20, ¶¶ 76-90. But Plaintiff does not allege, clearly or in a separate count, the basis or bases for Scott Investment’s alleged debt to Plaintiff, or the amount of such debt, for which Plaintiff now seeks to hold Mr. Scott personally liable.

Plaintiff alleges that Mr. Scott made a number of misrepresentations to Messrs. Robinson and Warnock “regarding the financial condition of Scott Investments, Distillery, and Clock Tower[,]” that Mr. Scott “intentionally underquoted the costs associated with the Clock Tower Project” and “misrepresented the financial condition of Scott Investments, Distillery, and Clock Tower by commingling assets and presenting a false picture of financial viability to conceal the precarious financial state of these entities.” Id. at 20, ¶¶ 91-93. Plaintiff further alleges that Mr. Scott “falsely represented to West Element that he had the financial resources and stability to complete the Clock Tower Project when he knew that Scott Investments was undercapitalized and that he intended to use Loan proceeds to prop up Distillery’s failing operations.” Id. at 21, ¶ 94. As a result, Plaintiff alleges, albeit within the factual background to the First Amended Complaint, that:

Defendant is individually liable to Plaintiff for the debts arising from the Clock Tower Project because: (a) Defendant personally committed frаud and made fraudulent misrepresentations to induce West Element into the business relationship and construction agreement; (b) Defendant used Scott Investments as his alter ego and mere instrumentality to perpetrate fraud on West Element; (c) Defendant operated Scott Investments with such unity of interest and ownership that the separate personalities of Defendant and Scott Investments ceased to exist; (d) Adherence to the fiction of the separate existence of Scott Investments would sanction fraud and promote injustice; (e) Defendant personally diverted and misappropriated Loan proceeds for his own benefit and the benefit of his other entities; (f) Defendant breached his fiduciary duties as a member of West Element, causing direct injury to Plaintiff; (g) Defendant personally made false representations about the use of Loan funds and the payment of subcontractors.

Id. at 21, ¶ 95. Plaintiff also adds, albeit in a conclusory fashion, that the alleged debt owed by Mr. Scott to West Element “arises from Defendant’s individual fraudulent conduct and tortious acts, as well as from his operation of Scott Investments as his alter ego and therefore constitutes a personal debt of Defendant that is nondischargeable in bankruptcy.” Id. at 21, ¶ 96.

Ultimately, Plaintiff alleges that Mr. Scott’s misrepresentations to Plaintiff’s members, Messrs. Warnock and Mr. Robinson, about the financial legitimacy of Scott Investments, as well as Mr. Scott’s actions in using proceeds from the Loan for purposes other than intended (building out the Property for the Clock Tower Project) caused Plaintiff to suffer damages exceeding $712,000. Id. at 20, ¶ 90. But no further explanation or calculation of this amount is provided.

Finally, although not specifically described in the First Amended Complaint, Plaintiff did allege that it “is a creditor holding a claim against Defendant’s [c]hapter 7 bankruptcy estate arising from the Clock Tower Project (defined [t]herein).” First Am. Compl. at 3, ¶ 11. And, as noted above, on October 31, 2025, West Element timely filed a Proof of Claim, No. 9-1, on the Clerk’s Claims Register by and through its attorney for an unsecured, non-priority amount of $712,000, for “[m]oney owed to Creditor for construction agreement, via current civil litigation seeking to pierce corporate veil[.]” Attached to Claim 9-1 was an Agreement of Sale entered into by and between Scott Investments, as the “Builder,” signed by Mr. Scott on October 2, 2023, and an unspecified “Purchaser,” signed by Andrew T. Warnock – Authorized Mеmber on October 9, 2023, presumably for West Element, through which it was agreed that Purchaser would “buy construction services by the Builder” at the Property, in the sum of $1,500,000, to be completed on or before July 31, 2024. See Agmt. of Sale (Ex. 5), Claim 9-1, Part 2, Oct. 31, 2025. Moreover, this is the same amount for which Plaintiff has alleged it is entitled to judgment against Defendant Mr. Scott in both counts of the First Amended Complaint pled under § 523(a). See First Am. Compl. at ¶¶ 90 (common facts), 99 and 116 (Count One), 126 and 141 (Count Two). But all we know for now is that Plaintiff believes it is owed $712,000 based on a construction agreement.

IV. Analysis

A. Pleading Standards Under Civil Rules 8(a) and 9(b) and the Civil Rule 12(b)(6) Defense of Failure to State a Claim

In his Second Motion to Dismiss, Defendant argues that the First Amended Complaint should be dismissed under Civil Rule 12(b)(6), which is made applicable by Bankruptcy Rule 7012(b). (Doc. 7 at 3.) A claim may be dismissed for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In deciding a Civil Rule 12(b)(6) motion, a reviewing court “must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the complaint ‘contains enough facts to state a claim to relief that is plausible on its face.’ ” Sutton v. Berkley (In re Berkley), No. 24-1072, 2025 Bankr. LEXIS 227, at *6, 2025 WL 426476, at *2 (Bankr. N.D. Ohio Feb. 5, 2025) (citing U.S. v. Ford Motor Co., 532 F.3d 496, 502 (6th Cir. 2008) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 569 (2007))). The plausibility standard requires that there be “more than a sheer possibility that a defendant has acted unlawfully” and that “the plaintiff pleads factual content that allows the court to draw reasonable inference that the defendant is liable for the misconduct alleged.” Ashcraft v. Iqbal, 556 U.S. 662, 678 (2007). Analyzing plausibility is a context-specific task. See Berkley, 2025 Bankr. LEXIS 227, at *7, 2025 WL 426476, at *3 (citing Iqbal, 556 U.S. at 663). And courts may “draw upon [their] ‘judicial experience and common sense’ to decide whether the claims are ‘plausible.’ ” Crawford v. Tilley, 15 F.4th 752, 762 (6th Cir. 2021) (quoting Iqbal, 556 U.S. at 679).

The general threshold for a complaint to survive a Civil Rule 12(b)(6) defense is “a short and plain statement of the claim showing that the pleader is entitled to relief[,]” which allows the defendant fair notice of the claim and its grounds. Fed. R. Civ. P. 8(a)(2);²⁵ Twombly, 550 U.S. at 555. A complaint must contain more than mere conclusory or speculative allegations and must provide enough information for the defendant to admit or deny the claims. Lorentz v. Dick (In re Dick), No. 24-1015, 2025 Bankr. LEXIS 1405, at *6, 2025 WL 1635507, at *2 (Bankr. S.D. Ohio Feb. 12, 2025) (Buchanan, J.) (citing Twombly, 550 U.S. at 555). Under Civil Rule 8, a “complaint must contain either direct or inferential allegations respecting all material elements to sustain a recovery under some viable legal theory.” Berkley, 2025 Bankr. LEXIS 227, at *8, 2025 WL 426476, at *3 (citing Bishop v. Lucent Tech., Inc., 520 F.3d 516, 519 (6th Cir. 2008)). Although factual allegations by the non-moving party must be taken as true and all inferences drawn in favor of the non-moving party, “a legal conclusion couched as a factual allegation” need not be taken as true. Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d at 946 (quoting Iqbal, 556 U.S. at 678)). And overall, pursuant to Civil Rule 8(e), “[p]leadings must be construed so as to do justice.”

When a claim contains allegations of fraud, a heightened pleading standard applies, requiring the plaintiff to plead “with particularity the circumstances constituting fraud[.]” Fed. R. Civ. P. 9(b). However, mental conditions such as “malice, intent, [and] knowledge . . . may be alleged generally.” Id. This heightened standard is meant to narrow discovery and provide fair notice to a defendant accused of fraud. Dick, 2025 Bankr. LEXIS 1405, at *7, 2025 WL 1635507, at *3 (citing Chesbrough v. VPA, P.C., 655 F.3d 461, 466-67 (6th Cir. 2011)). Under Civil Rule 9(b), a plaintiff is required “(1) to specify the allegedly fraudulent statements; (2) to identify the speaker; (3) to plead when and where the statements were made; and (4) to explain what made the statements fraudulent.” Dick, 2025 Bankr. LEXIS 1405, at *7 (quoting Republic Bank & Trust Co. v. Bear Stearns & Co., Inc., 683 F.3d 239, 247 (6th Cir. 2012)); see also New London Tobacco Mkt., Inc. v. Ky. Fuel Corp., 44 F.4th 393, 411 (6th Cir. 2022) (quoting Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008) (quoting Gupta v. Terra Nitrogen Corp., 10 F. Supp. 2d 879, 883 (N.D. Ohio 1998))). In other words, a plaintiff should specify the “ ‘who, what, when, where, and how’ of the alleged fraud.” Sanderson v. HCA—The Healthcare Co., 447 F.3d 873, 877 (6th Cir. 2006) (quoting U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997)).

In the event that dismissal is found appropriate under Civil Rule 12(b)(6), it “generally is not with prejudice—meaning, not immediately final or on the merits—because the [] court normally will give the plaintiff leave to file an amended complaint to see if the shortcomings of the original document can be corrected.” 5B Wright & Miller’s Federal Practice & Procedure – Federal Rules of Civil Procedure § 1357 & n.129 (4th ed. 2026) (numerous citations omitted). Because of “[t]he federal policy of deciding cases on the basis of the substantive rights involved rather than on technicalities[,]” granting leave to amend is appropriate “even when the [] judge doubts that the plaintiff will be able to overcome the shortcomings in the initial pleading.” Id. & n.130 (citations omitted). Further, it is potentially an abuse of discretion to dismiss a complaint without giving a plaintiff another chance to plead its claims. See Kensu v. Corizon, Inc., 5 F.4th 646, 652 (6th Cir. 2021) (stating “if a complaint violates Rule 8, the appropriate remedy is rarely immediate dismissal” and “[o]ur sister circuits agree”).

B. A Claim for Determination that a Debt is Excepted from Discharge Starts with Sufficiently Pleading the Debt Under Nonbankruptcy Law.

As evidence that Plaintiff has more work to do, it took some “detective” work by the Court just to figure out what “agreement” Plaintiff is referring to in the First Amended Complaint. But even after reviewing West Element’s Claim (No. 9-1), to which the Agreement was attached, and despite all the numbers contained in the First Amended Complaint, the Court still cannot divine how Plaintiff comes up with a “debt” of $712,000 to be held non-dischargeable, or for exactly what amount of “debt” Mr. Scott may be personally liable through veil piercing or other state law claims and that allegedly meets the criteria of § 523(a)(2)(A) or (B), or (a)(6).

In this type of situation in which the creditor did not obtain a judgment on its state law claims prior to the debtor filing bankruptcy a non-dischargеability action under § 523(a)(2) and (a)(6) (as well as (a)(4), although that subsection is not at issue in this adversary proceeding) typically must include a claim to establish the debt. “The dischargeability of a debt is ‘a matter separate from the merits of the debt itself.’ ” Est. of Mingus v. Lombardo (In re Lombardo), No. 04-8060, 2005 Bankr. LEXIS 692, at *10 (B.A.P. 6th Cir. Apr. 28, 2005) (quoting Sill v. Sweeney (In re Sweeney), 276 B.R. 186, 195 (B.A.P. 6th Cir. 2002)). Accordingly, without a debt established by judgment or a debt pled under applicable nonbankruptcy (state) law, the Court was left to dig through that proverbial bucket of mud.

“A dischargeability action under 11 U.S.C. § 523(a)(6) encompasses ‘two distinct claims: (1) whether the debtor owes a debt to the plaintiff and (2) whether the debt owed by the debtor to the plaintiff is nondischargeable.’ ” Lombardo, 2005 Bankr. LEXIS 692, at *10 (quoting Sweeney, 276 B.R. at 195-96 (quoting Jorge v. Mannie (In re Mannie), 258 B.R. 440, 444-45 (Bankr. N.D. Cal. 2001))); see also Matter of Sheridan, 105 F.3d 1164, 1167 (7th Cir. 1997) (“The alleged non-dischargeability of [a] debt presents an issue ‘of federal law independent of the issue of the validity of the underlying claim.’ ”) (quoting Grogan v. Garner, 498 U.S. 279, 289 (1991)). Chief Judge Buchanan recently examined this very issue and wrote that “if a plaintiff does not already have a prepetition judgment, then the plaintiff must include non-bankruptcy law claim(s) in the adversary complaint to establish a debtor’s liability and to quantify damages in order for this Court to determine the debt’s dischargeability.” In re Dawson, 2026 Bankr. LEXIS 1415, at *7 (citing Lorentz, 2025 Bankr. LEXIS 1405, at *9-11).

Before showing “that a debt is nondischargeable under one of the § 523(a) exceptions[,]” this Court “must determine the existence of a debt[.]” Lucas v. Miller (In re Miller), No. 22-3009, 2024 Bankr. LEXIS 1521, at *15, 2024 WL 5711046 (Bankr. S.D. Ohio June 25, 2024) (Humphrey, J.); see also Dick, 2025 Bankr. LEXIS 1405, at *10; Go-Mart, Inc. v. Bazell (In re Bazell), No. 25-2024, 2026 Bankr. LEXIS 487, at *7, 2026 WL 570467 (Bankr. S.D. Ohio Feb. 27, 2026) (collecting cases). Given that Mr. and Ms. Scott filed their joint chapter 7 case before the Miami County Action went to judgment (or even before Plaintiff could amend its complaint), this Court will have to examine and determine “ ‘the merits of the debt itself[,]’ ” which “ ‘is a matter separate from’ ” whether the “ ‘debt is nondischargeable under [] § 523(a).’ ” Miller, 2024 Bankr. LEXIS 1521, at *15 (quoting Long v. Piercy (In re Piercy), 21 F.4th 909, 918 (6th Cir. 2021) (citing Sweeney, 276 B.R. at 195-96)).

The term “ ‘debt’ ” is defined in the Bankruptcy Code as “ ‘liability on a claim’ ” and, in turn, the term “ ‘claim’ ” is defined expansively to mean a “ ‘right to payment’ ” or a “right to an equitable remedy for breach of performance if such breach gives rise to a right to payment,” which “ ‘is nothing more nor less than an enforceable obligation.’ ” Miller, 2024 Bankr. LEXIS 1521, at *15 (quoting Feldman v. Pearl (In re Pearl), 577 B.R. 513, 523 (Bankr. E.D. Ky. 2017) (quoting Cohen v. de la Cruz, 523 U.S. 213, 218 (1998))); 11 U.S.C. § 101(12) and (5). It matters not whether either such right comprising a “claim” “is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or

unsecured[.]” 11 U.S.C. § 101(5)(A).²⁶ However, in the absence of a prepetition judgment, ” ‘[t]he validity of a creditor‘s claim is determined by rules of state law’ ” and “the bankruptcy court will normally determine the existence of and liquidate any such debt under the aрplicable state law.” In re Miller, 2024 Bankr. LEXIS 1521, at *16 (quoting Grogan, 498 U.S. at 283; citing Conley v. Conley (In re Conley), 482 B.R. 191, 207 (Bankr. S.D. Ohio 2012); Hart v. S. Heritage Bank (In re Hart), 564 F. App‘x 773, 776 (6th Cir. 2014) (Bankruptcy Court has statutory and constitutional authority to liquidate debts based upon state law in determining the dischargeability of a debt.)).²⁷ ” ‘If the plaintiff fails to establish the existence of a valid debt under non-bankruptcy law, the analysis ends without consideration of § 523(a) and the defendant is entitled to judgment.’ ” Id. (quoting Kyle-Wolfe v. McClure (In re McClure), 625 B.R. 733, 738 (Bankr. C.D. Ill. 2021)).

C. The “Debt” Referred to in the First Amended Complaint, Which Underlies the Viability of Both Dischargeability Claims – Counts One and Two – is Not Yet Adequately Pled.

The foundational question currently before the Court in this adversary proceeding is whether Plaintiff has adequately pled the existence of a debt owed by Mr. Scott to West Element. But because it appears the alleged main agreement was between Scott Investments and West Element, this would likely involve its own two-step analysis. First, if not alleging a debt owed directly by Mr. Scott (which is, as of yet, unclear and not pled in a separate count), West Element would need to plead an underlying state law claim for a debt owed to it by Scott Investments. And then Plaintiff must plead the basis to hold Mr. Scott personally liable for the debt of Scott Investments owed to West Element, presumably through its alter ego theory to pierce the veil of Scott Investments.

The problem with the First Amended Complaint, as currently pled, is that even if we accept there may be a basis to hold Mr. Scott personally liable for the debts of Scott Investments, through piercing the corporate veil, we are still left to guess at exactly what the basis is for the underlying debt allegedly owed by Scott Investments to Plaintiff. While Plaintiff expressly discusses veil piercing and includes a prayer for relief, even though there is no separate count alleged, there is barely any mention and certainly no prayer for relief to establish the underlying debt. This is also important because “[u]nder Ohio law, piercing the corporate veil is not an independent cause of action.” Ball v. Octopus Constr., LLC, 2023-Ohio-2596, ¶ 19 (10th Dist.) (citing RCO Int‘l Corp. v. Clevenger, 180 Ohio App.3d 211, 2008-Ohio-6823, ¶ 11, 904 N.E.2d 941 (10th Dist.)). “Rather, ‘it is a remedy encompassed within a claim.’ ” Id. ” ‘It is a doctrine wherein liability for an underlying tort may be imposed upon a particular individual.’ ” Id. There is similarly barely any mention of and no details provided with respect to the basis for the proof of claim that Plaintiff filed in Mr. Scott‘s chapter 7 case. And while an “allowed” claim provides a basis for a creditor to share in any distribution within a bankruptcy case, it does not provide a basis to collect that alleged debt outside of bankruptcy, which is the ultimate objective of a non-dischargeability action. Even if Plaintiff were planning to obtain its judgment оutside of bankruptcy court, it would still need to show that it holds a viable claim for a debt, and that once that debt is established, it will meet all the legal requirements to be determined non-dischargeable.

West Element filed this adversary proceeding against Mr. Scott in his individual capacity; therefore, Mr. Scott himself must in some way be liable for the debts alleged. While a corporate form is a separate entity from an individual shareholder, there are circumstances where a court “will disregard the corporate form and hold an individual shareholder liable for corporate misdeeds, known as piercing the corporate veil.” Berkley, 2025 Bankr. LEXIS 227, at *10-11. Under Ohio law, courts may pierce the corporate veil and hold an individual shareholder liable when:

(1) control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will, or existence of its own, (2) control over the corporation by those to be held liable was exercised in such a manner as to commit fraud or an illegal act against the person seeking to disregard the corporate entity, and (3) injury or unjust loss resulted to the plaintiff from such control and wrong.

Belvedere Condo. Unit Owners’ Ass‘n v. R.E. Roark Cos., 617 N.E.2d 1075, 1085 (Ohio 1993).

Based on the factual allegations set forth in the First Amended Complaint, it seems plausible that Plaintiff could ultimately plead a claim to hold Mr. Scott personally liable to West Element for a debt of Scott Investments, to the extent that Scott Investments was used in a “manner as to commit fraud or an illegal act” against West Element. Id. First, Plaintiff alleges that Scott Investments had no “separate mind, will, or existence.” First Am. Compl. at 19, ¶ 89. Plaintiff supports this by alleging that Mr. Scott was the “sole member, sole manager, owner, and controlling person” of Scott Investments; that he held “100% of the membership interests and exercise[ed] complete and exclusive control over all business decisions, financial transactions, and operations[;]” that Mr. Scott “exercised complete dominion and control over Scott Investments’ business operations, financial affairs, decision-making, and bank account[;]” that Scott Investments shared a physical address and employees with Mr. Scott‘s other businesses, Distillery and The Clock Tower LLC; and that Mr. Scott had ultimate control over the actions and bank accounts of all of his related entities. Id. at 16, ¶¶ 79-80; 17-18. Second, Plaintiff asserts that Defendant‘s control over Scott Investments was used to commit wrongful acts against them, such as diverting Loan proceeds. Id. at 18, ¶ 83. And the First Amended Complaint contains allegations that Mr. Scott‘s failure to adequately capitalize Scott Investments and commingling of the assets of Scott Investments with his other business concerns meant that he had no money left over to pay for Clock Tower Project after using the Loan proceeds to support his other businesses. Id. at 18-19, ¶¶ 84-89. This caused injury to the Plaintiff because unpaid subcontractor EnviroControl Systems filed a mechanic‘s lien against the Property ‍​​​‌‌‌‌‌​‌‌‌‌​‌‌‌​‌‌‌‌​‌​​‌‌‌‌‌‌‌​‌‌​‌‌​​‌‌​‌​​‌‍after going unpaid, other subcontractors were not sufficiently paid, and the Clock Tower Project funds were misdirected to other ventures. Id. at 28, ¶ 116. However, there is no specific “debt” pled by West Element for the amounts owed by Scott Investments under state law for which Plaintiff will seek to hold Mr. Scott responsible.

Debtor acknowledges that in the First Amended Complaint Plaintiff added a prayer for relief to hold him personally responsible for the debts of Scott Investments. And it appears that may at least be a plausible remedy under Ohio law. However, as noted above, Plaintiff did not adequately plead claims to establish the underlying debt. Consistent with the discussion above, ” ‘[c]reditors seeking a nondischargeability determination must first establish an enforceable claim under state law (whether or not the claim has been filed in the bankruptcy proceeding).’ ” Clark v. Farris-Ellison (In re Farris-Ellison), No. 12-01830 and 14-01088, 2022 Bankr. LEXIS 2681, at *91-92 (Bankr. C.D. Cal. Sept. 28, 2022) (quoting March, Ahart and Shapiro, Rutter Group California Practice Guide: Bankruptcy, ¶ 22-1641 (online edition, December 2021 update) (emphasis in original) (citing In re Dobos, 603 B.R. 31, 38-39 (9th Cir. BAP 2019) (“the existence of a valid claim is a precondition to any action under § 523,” dismissing nondischargeability complaint where creditors’ state-court judgment had expired and was thus no longer enforceable))). It seems possible, however, that Plaintiff could do so—could plead the existence of a debt under state law—as it apparently had done so in state court, at least with respect to the alleged misappropriated or diverted Loan proceeds, if not for other amounts.²⁸

Although the Court does not currently view the First Amended Complaint as quite clearing the hurdles of Civil Rules 8 and 10, with respect to pleading the “debt” that it seeks to be determined non-dischargeable, given that there are serious allegations of misappropriation or diversion of Loan proceeds, which must be taken as true, the Court will permit Plaintiff another shot at setting fоrth its claims based on the same “conduct, transaction, or occurrence set out—or attempted to be set out—” in the First Amended Complaint. Fed. R. Civ. P. 15(c)(1)(B); see also State Bank & Tr. Co. v. Spaeth (In re Motorwerks, Inc.), 371 B.R. 281, 294 & n.9 (Bankr. S.D. Ohio 2007) (Walter, J.) (concluding that “the outright dismissal of claims for lack of specificity, without providing an opportunity for amendment, is generally inappropriate” (citing Coffey v. Foamex L.P., 2 F.3d 157, 162 (6th Cir. 1993); Giuliano v. U.S. Nursing Corp. (In re Lexington Healthcare Grp., Inc.), 339 B.R. 570, 575 (Bankr. D. Del. 2006))) and noting that “[a]s long as the Trustee‘s amended counterclaims add only factual detail” they would relate back pursuant to Civil Rule 15(c) (citing Slone-Stiver v. Security Nat‘l Bank and Trust Co. (In re Tower Metal Alloy Co.), 193 B.R. 266, 272 n.6 (Bankr. S.D. Ohio 1996))).

Based on the First Amended Complaint, and as is acknowledged by Mr. Scott, West Element alleges that Mr. Scott is personally liable for the debt of Scott Investments under the main theory of piercing the corporate veil of Scott Investments and his use of Scott Investments as his alter ego. See First Am. Compl. at 40, ¶ F. The “debt,” however, for which Plaintiff apparently will seek to hold Mr. Scott personally liable is not plead within a separate cause of action.²⁹ Further, notwithstanding that Plaintiff alleges to have previously asserted additional claims for breach of contract, unjust enrichment, fraud, and breach of fiduciary duties in the Miami County Action, Plaintiff did not attach that pleading from the Miami County Action to the First Amended Complaint and has not separately set up those claims under state law in the First Amended Complaint. And although there is just enough to glean a potential debt, there is not much more than threadbare conclusory statements that Mr. Scott may be personally liable to West Element under a claim for tort or for breach of fiduciary duty, which is couched in terms of holding Mr. Scott “liable for the obligations of Scott Investments of Troy, LLC to Plaintiff[,]” and not directly to Plaintiff. First Am. Compl. at 40, ¶ F. In fact, the passages in which these theories of liability are mentioned within the First Amended Complaint are as follows:

95. Defendant is individually liable to Plaintiff for the debts arising from the Clock Tower Project because: . . . (f) Defendant breached his fiduciary duties as a member of West Element, causing direct injury to Plaintiff . . . .

96. The debt owed by Defendant to Plaintiff arises from Defendant‘s individual fraudulent conduct and tortious acts, as well as his operation of Scott Investments as his alter ego and therefore constitutes a personal debt of Defendant that is nondischargeable in bankruptcy.

* * *

WHEREFORE, Plaintiff demands judgment against Defendant for:

F. For a determination that Defendant is individually liable for the obligations of Scott Investments of Troy, LLC to Plaintiff based on: . . . (e) Defendant‘s individual frаudulent conduct and tortious acts committed against Plaintiff; (f) Defendant‘s breach of fiduciary duties owed to Plaintiff as a member of West Element . . . .

First. Am. Compl. at 21, ¶¶ 95, 96; at 40, ¶ F(e), (f) (emphasis added). And it is unclear whether these are simply additional reasons why Plaintiff asserts that Mr. Scott is liable to West Element under a theory of alter ego and veil piercing for the obligations of Scott Investments, or whether Plaintiff is attempting to assert any state law tort claim to establish that Mr. Scott owes a debt directly to West Element for the misappropriated or diverted Loan proceeds. While the facts alleged could conceptually give rise to some type of state law tort claim by West Element against Mr. Scott in his individual capacity, such that there would be a debt he personally owes, at this stage West Element has not adequately spelled this out. And it is not the Court‘s job to analyze the facts alleged and attempt to come up with Plaintiff‘s legal theories.

Separate and apart from any liability through piercing the corporate veil, Mr. Scott, as an individual, could potentially be held responsible under Ohio tort law for any wrongful conduct in which he personally participated. Stoner v. Keirns (In re Keirns), 628 B.R. 911, 917 (Bankr. S.D. Ohio 2021) (collecting cases). In other words, as explained by Judge Hopkins:

The existence of a contract is not a prerequisite to maintaining a cause of action under § 523(a)(2), (4), or (6). Nor will the fact that the Defendant operated through a limited liability company necessarily shield him from liability on a debt and a potential judgment of nondischargeability. Ohio law makes clear that an individual “can be held personally liable for a tort committed while acting within the scope of his employment.”

Id. (citations omitted). Plaintiff also alleges that Mr. Scott should be held individually liable to West Element for “the debts arising from the Clock Tower Project because” he “personally committed fraud and made fraudulent misrepresentations to induce West Element into the business relationship and construction agreement;” he “personally diverted and misappropriated Loan proceeds for his own benefit and the benefit of his other entities;” he “breached his fiduciary duties as a member of West Element, causing direct injury to Plaintiff;” and he “personally made false representations about the use of Loan funds and the payment of subcontractors.” See First Am. Compl. at 21, ¶ 95. In sum, Plaintiff asserts that the alleged debt owed by Mr. Scott to West Element “arises from Defendant‘s individual fraudulent conduct and tortious acts, as well as from his operation of Scott Investments as his altеr ego and therefore constitutes a personal debt of Defendant that is nondischargeable in bankruptcy.” First Am. Compl. at 21, ¶ 96. However, there is no separate count setting up a claim under state law based on this alleged conduct – for this type of debt – such that the Court and Mr. Scott seemingly have to guess at the legal basis for the damages alleged.

Plaintiff states that it sued Mr. Scott, A.M. Scott Distillery, Clock Tower, and Scott Investments, amongst other defendants, for, amongst other claims, “breach of contract, unjust enrichment, fraud, [and] breach of fiduciary duties.” First Am. Compl. at 13-14, ¶¶ 66-67. However, Plaintiff did not attach the complaint filed in the Miami County Action to the First Amended Complaint and Plaintiff does not separately set out those counts in the First Amended Complaint to allege such causes of action under Ohio law. Given that the Miami County Action did not reach judgment, the duty rests on Plaintiff to plead an underlying state law cause of action within its complaint before this Court to hold a debt nondischargeable. Plaintiff‘s First Amended Complaint does not include a separate count pleading a debt, which has made it more difficult to determine which underlying state law cause of action, if any, the Plaintiff is pursuing in this Court, apart from and underlying the veil piercing claim, and the exact basis upon which Plaintiff will seek to hold Mr. Scott personally liable. There might be enough to glean a breach of contract claim under Ohio law, as well as the veil piercing claim; however, as noted before the breach of contract claim is not set up with any detail or in a separate count. In fact, the only place in the First Amended Complaint where the term “breach of contract” is used is the above-cited paragraph (¶ 67) referring to a breach of contract claim being asserted in the Miami County Action.

Under Ohio law, “[a] cause of action for breach of contract requires the claimant to establish the existence of a contract, the failure without legal excuse of the other party to perform when performance is due, and damages or loss resulting from the breach.” Lucarell v. Nationwide Mut. Ins. Co., 2018-Ohio-15, 97 N.E.3d 458, 462 (2018) (collecting cases). Plaintiff pleads the existence of “an agreement for Scott Investments [] to serve as general contractor on a project to finish building out the Property for use by The Clock Tower LLC and A.M. Scott Distillery, LLC.” First Am. Compl. at 6, ¶ 25. In particular, Plaintiff alleges that “Defendant, the managing member of Scott Investmеnts of Troy, LLC, entered into the agreement[.]” First Am. Compl. at 6, ¶ 25. Further, Plaintiff pleads that Defendant failed to perform under the contract. Plaintiff alleges that “Defendant made representations in the construction agreement . . . that Scott Investments would manage the Clock Tower Project in a professional manner, would pay all subcontractors promptly, and would use all Loan proceeds exclusively for the Clock Tower Project.” Id. 24, ¶ 105. Plaintiff further alleges that Scott Investments did not pay all subcontractors and diverted loan proceeds to other projects. Id. at 24, ¶ 106. Finally, Plaintiff alleges that “as a result of Scott Investments[‘] failure to make payments as directed by the Construction Agreement and West Element, EnviroControl Systems filed a mechanic‘s lien on the” Clock Tower Property. Id. at 11, ¶ 54.

According to various paragraphs in the First Amended Complaint, as well as the prayers for relief (¶¶ A, B and F), and as corroborated by Claim No. 9-1 also filed by West Element, it appears that Plaintiff is attempting to hold Mr. Scott “individually liable to Plaintiff for the debts arising from the Clock Tower Project.” First Am. Compl. at 21, ¶ 95; at 40, ¶¶ A, B and F). In Cause of Action #1 Plaintiff alleges that “Defendant is indebted to Plaintiff in the amount of $712,000[] for damages from the Clock Tower Project[.]” Id. at 21, ¶ 99. And Plaintiff has asserted in Cause of Action #2 that “Defendant is indebted to Plaintiff in the amount of $712,000[] on a debt based upon the willful and malicious injury by the Defendant to Plaintiff.” Id. at 31, ¶ 126. But it is unclear at this point how West Element arrives at this figure and on exactly what basis it is asserting Mr. Scott owes this debt, as there is no separate claim asserted for this Court to adjudicate any nonbankruptcy law claim for the alleged debt. Plaintiff‘s conclusory statements about the debt amount and conflicting allegations about the basis do not allow the Defendant or the Court to examine whether Plaintiff has adequately stated the bases for the debt under state law.

Where there is no judgment and no claims asserted in a complaint to support a state law debt, the Court cannot determine whether a debt exists for purposes of a § 523(a) dischargeability determination and, relatedly, whether there is a viable claim to hold a debt non-dischargeable and, if so, in what amount. It is possible that not all of the debt would qualify as non-dischargeable under either § 523(a)(2) or (a)(6). It appears that Plaintiff wants this Court to enter a judgment holding Mr. Scott personally liable for the debts of Scott Investment Company of Troy, LLC, on a contractual basis, or maybe to hold him directly liable under one or more tort theories under Ohio law, but Plaintiff did not sufficiently plead those claims, nor did Plaintiff include separate counts to set up those claims. But examining the First Amended Complaint, in context, as the Court must on a motion to dismiss under Civil Rule 12(b)(6), leads it to conclude, as further discussed below, that dismissing these claims at this stage without first granting Plaintiff leave to further amend its complaint would contradict “the ‘fundamental tenor of the [Civil] Rules,’ which ‘is one of liberality rather than technicality.’ ” In re Goss, 605 B.R. at 196 (quoting Hall v. Spencer Cnty., Ky., 583 F.3d 930, 934 (6th Cir. 2009) (quoting Miller v. Am. Heavy Lift Shipping, 231 F.3d 242, 248 (6th Cir. 2000))).

If Plaintiff does want this debt liquidated by this Court, it needs to adequately plead all claims and damages. Plaintiff alleges in several places that it is owed $712,000, but the Court is unable to discern from the current allegations in the First Amended Complaint, either expressly or gleaning from the facts and alleged, what this number is supposed to represent. See First Am. Compl. at 20, ¶ 90; 22, ¶ 99; 28, ¶ 116; 31, ¶ 126 (stating “Defendant is indebted to Plaintiff in the amount of $712,000[] on a debt based on the willful and malicious injury by the Defendant to Plaintiff“); 34, ¶ 141 (the allegations simply refer to damages relating to the Clock Tower Project or arising from fraudulent conduct exceeding or in the amount of $712,000, without further explanation). Plaintiff mentions a lot of numbers in its filings, but it is difficult to determine which ones actually correlate to claims that Plaintiff can assert under state law against Mr. Scott. There are, amongst other figures, $69,432.34 for Scott Investments’ general contracting fees, $271,800 paid towards the Clock Tower Project by West Element outside the Loan, $1,063,435.32 in total Loan withdraws, $148,944.28 sent to EnviroControl Systems and returned for insufficient funds, a $110,865.78 difference between advanced funds and funds paid to subcontractors according to the spreadsheet, $102,828.78 owed to an HVAC subcontractor, $88,094.15 owing to an electrical contractor, and, perhaps most relevant to Count Two, the claim alleged under § 523(a)(6), the $150,000 mentioned in the November 14 emails. It is unclear based on the pleadings which combination of these numbers allowed the Plaintiff to reach $712,000. Additionally, it is unclear whether the $150,000 mentioned in the emails is included in the deficiencies in the payments to subcontractors.

In summary, at present the First Amended Complaint runs afoul of the Sixth Circuit‘s case law on what it takes to set up a claim for the “debt” in that Plaintiff has only made superficial references to any state law bases of liability. See Lee v. City of Delaware, 951 F.3d 392, 392-93 (6th Cir. 2020) (holding that when “all seven of [plaintiff‘s] state-law causes of action are contained within a single sentence” it violates Civil Rules 8(a)(2), and failure to “separate each of her causes of actiоn or claims for relief into separate counts” violates Civil Rule 10(b)). It is incumbent upon Plaintiff to “connect specific facts or events with the various causes of action [] asserted[;]” “to separate each of [its] causes of action or claims for relief into separate counts[;]” and to employ a “shotgun” or “kitchen sink” approach toward pleading the “debt” allegedly owed by Mr. Scott – whether directly or as the alter ego of Scott Investments. Id. (quoting Beyrer v. City of North Miami Beach, 722 F.3d 947, 947 (11th Cir. 2013); Weiland v. Palm Beach Cty. Sheriff‘s Office, 792 F.3d 1313, 1323 n.13 (11th Cir. 2015)). It appears that Plaintiff may intend to assert such claims, but the Court has not been able to do more than guess at exactly what those claims might be, consistent with the First Amended Complaint, or analyze their plausibility, given that they were not set up as separate counts notwithstanding that Plaintiff had apparently previously pled separate counts under state law in the Miami County Action. And absent properly setting up those claims, Mr. Scott does not have a full and fair opportunity to set up any defenses. Again, ” ‘to survive a motion to dismiss, the complaint must contain either direct or inferential allegations respecting all material elements to sustain a recovery under some viable legal theory.’ ” Landis v. Baker (In re Baker), No. 11-03271, 2015 Bankr. LEXIS 1038, at *18 (Bankr. N.D. Ohio Apr. 1, 2015) (quoting Bishop v. Lucent Techs., Inc., 520 F.3d 516, 519 (6th Cir. 2008)).

In summary, as it concerns the “debt,” Plaintiff must explain and plead the state law claims, with any applicable statutory or case law basis for those claims, in accordance with the cited Sixth Circuit case law, such that the Court can examine the factual allegations in comparison to the claims under which it is seeking a judgment on the debt. That has not yet been done, but it appears that it could be. Accordingly, as noted below, the Court will give Plaintiff a limited additional period of time to further amend its First Amended Complaint to set up any such additional claims to establish the “debt” for which it wishes to pursue a judgment of non-dischargeability.

D. First Cause of Action – § 523(a)(2)(A) and (B)

1. § 523(a)(2)(A)

Under § 523(a)(2)(A), a debt “for money, property, services, or an extension, renewal, or refinancing of credit” is nondischargeable in bankruptcy to the extent it was obtained by “false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor‘s or an insider‘s financial condition[.]” Specifically, Plaintiff alleges that Mr. Scott made material misrepresentations, and Plaintiff‘s pleadings follow the elements of a false representation claim. But, as with the claim under § 523(a)(6), as discussed below, the first problem with this claim is that Plaintiff has not alleged a claim for a specific debt under state law that Mr. Scott allegedly owes to Plaintiff that would fit within the parameters of either § 523(a)(2)(A) or (B).

A quick review of Cause of Action #1 (Count One) confirms that Plaintiff‘s only reference to a monetary amount is to $712,000, but this is alleged to be for “damages from the Clock Tower Project.” First Am. Compl. at 22, ¶ 99. Damages are not what § 523(a)(2) contemplates a debtor would obtain through false representations. Rather, it is only a “debt” for “money, property, services, or an extension, renewal, or refinancing of credit” that can fit within § 523(a)(2).

The elements of a § 523(a)(2)(A) claim for false representations, which a creditor must prove “by the preponderance of the evidence,”³⁰ are:

(1) the debtor obtained money, property, services or credit through a material misrepresentation, either express or implied, that, at the time, the debtor knew was false or made with gross recklessness as to its truth; (2) the debtor intended to deceive the creditor; (3) the creditor justifiably relied on the false representation; and (4) the creditor‘s reliance was the proximate cause of loss.

Berkley, 2025 Bankr. LEXIS 227, at *13 (citing Rembert v. AT&T Universal Card Servs. (In re Rembert), 141 F.3d 277, 280-81 (6th Cir. 1998)). Moreover, as to the first element, Plaintiff “must demonstrate ‘that the debtor obtained money through a material misrepresentation[.]’ ” Brady v. McAllister (In re Brady), 101 F.3d 1165, 1172 (6th Cir. 1996) (quoting Atassi v. McLaren (In re McLaren), 990 F.2d 850, 852 (6th Cir. 1993) (quoting Coman v. Phillips (In re Phillips), 804 F.2d 930, 932 (6th Cir. 1986))); but see CM P‘ship v. Groover (In re Groover), No. 03-6103W, 2004 Bankr. LEXIS 2646, at *14 (Bankr. M.D.N.C. Jan. 16, 2004) (noting that “[w]hile many courts have held that the language of section 523(a)(2) does require a showing of some benefit, those cases do not require the plaintiff to show that the debtor actually received the money or property himself, but merely benefitted in some way from the fraud.” (citing Brady, 101 F.3d 1165 as applying § 523(a)(2)(A) to a situation in which “money was infused into a corporation which the debtor controlled“)).

Thus, before jumping into the discussion of misrepresentations, we first have to know what “money, property, services or credit” Mr. Scott is alleged to have obtained, or was obtained for his benefit, by virtue of the alleged misrepresentations, for which he owes a debt to Plaintiff. This is because the language of § 523(a)(2) has been interpreted to require that a plaintiff “demonstrate that there is a causal nexus between the fraud and the debt.” Brij Gujral v. Kalinowski (In re Kalinowski), Nos. 11-49990, 11-06030, 2012 Bankr. LEXIS 4629, at *18, 2012 WL 4736798 (Bankr. E.D. Mich. Oct. 2, 2012) (citing Cohen v. de la Cruz, 523 U.S. 213, 218 (1998)). More specifically, within the language of § 523(a)(2), ” ‘[t]o the extent obtained by’ modifies ‘money, property, services, or . . . credit,’ – not ‘any debt’ – so that the exception encompasses ‘any debt . . . for money, property, services, or . . . credit, to the extent [that the money, property, services, or . . . credit is] obtained by’ fraud.” Kalinowski, 2012 Bankr. LEXIS 4629 at *18 (citing Cohen, 523 U.S. at 218). The First Amended Complaint is very vague as to exactly what money, property, services, or credit Mr. Scott obtained for which he owes a debt to Plaintiff. The bald allegation by Plaintiff that there are $712,000 in damages from the Clock Tower Project, which does not explain or allege what money, property, service or credit Mr. Scott obtained, does not, by itself, appear to establish the causal nexus needed to meet the first element. For example, if $712,000 is the total amount that Plaintiff had to pay to complete the Clock Tower Project after it presumably kicked Scott Investments off the project, then that amount may well not qualify in the entirety as a debt that could be held non-dischargeable under § 523(a)(2). Moreover, unless and until Plaintiff sufficiently alleges a claim for a debt owed by Mr. Scott to Plaintiff and the state law bases for that debt, it will not be possible to establish any claim under § 523(a)(2).

Defendant and the Court need to know exactly whether, and in what amount, any alleged debt is owed by Mr. Scott for “money, property, services or credit” that he allegedly obtained through one or more allegedly false representations. Even if that is not the ceiling of the amount that could ultimately be held non-dischargeable under § 523(a)(2), that basic nexus has to first be established. Perhaps it would be the $150,000 in Loan proceeds mentioned in Count Two of the First Amended Complaint and “Scott Investments’ general contracting fees of $69,432.34,” but Platiniff has yet to adequately state a claim under state law to allege that Mr. Scott owes a debt to Plaintiff for those amounts. See First Am. Compl. at 27, ¶ 114(f). Accordingly, as of yet, on this basis alone Count One fails to state a claim. However, because the Court is going to give Plaintiff another shot at amending its complaint, as required under Sixth Circuit law cited elsewhere herein, for purposes of completeness the Court will examine the misrepresentation element.

A false representation is an “express representation” meant to falsely depict certain facts. Berkley, 2025 Bankr. LEXIS 227, at *12. The heightened pleading standard for fraud allegations under Civil Rule 9(b) “has been applied to complaints under § 523(a)(2)(A).” In re Keirns, 628 B.R. at 918 (citing Bennett v. Lindsey (In re Lindsey), 733 F. App‘x 190, 192 (5th Cir. 2018); Fabian v. Goss (In re Goss), 605 B.R. 189, 198 (Bankr. S.D. Ohio 2019) (”Civil Rule 9(b) indeed applies to § 523(a)(2)(A) complaints.“)). While Civil Rule 9(b) requires Plaintiff to ” ‘(1) specify the time, place, and content of the alleged misrepresentation; (2) identify the fraudulent scheme and the fraudulent intent of the defendant; and (3) describe the injury resulting from the fraud[,]’ ”³¹ the allegations of the ” ‘dates, times and places need not be pleaded with absolute precision, so long as the allegations sufficiently put the defendant on notice as to the circumstances of the сharged misrepresentations.’ ” In re Goss, 605 B.R. at 199 (quoting Harris v. Wells, 757 F. Supp. 171, 173-74 (D. Conn. 1991)). In other words, Civil Rule 9(b) “ensure[s] that the defendant is given enough information to defend in a meaningful and informed manner.” In re Keirns, 628 B.R. at 919 (citing U.S. ex rel. Sheldon v. Kettering Health Network, 816 F.3d 399, 408 (6th Cir. 2016) (“[P]roviding the defendant with sufficient information to respond is Rule 9‘s ‘overarching purpose.’ “) (quoting U.S. ex rel. SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496, 504 (6th Cir. 2008))). Moreover, Civil Rule 9(b) provides that while the “circumstances constituting fraud” must be stated with particularity, “intent, knowledge, and other conditions of a person‘s mind may be alleged generally.”

Plaintiff alleges specific misrepresentations made by Defendant in a November 14, 2024 email chain about diversion of funds and a subsequent November 22, 2024 spreadsheet tracking payments to subcontractors. While these actions may be evidence of possible wrongdoing, § 523(a)(2) has a causation requirement; Defendant‘s misrepresentations must lead to the monetary loss. As alleged in the First Amended Complaint, Defendant‘s last draw of money from Plaintiff was on October 23, 2024, so Plaintiff must plead specific misrepresentations made by Defendant prior to that date that caused Plaintiff to give Defendant access to the money. See First Am. Compl. at 6, ¶ 31 (stating “[t]he most recent draw (which was the seventh to occur) was processed on or about October 23, 2024, in the amount of $108,330[]“); 27, ¶ 114(h).

Plaintiff alleges that Defendant made numerous misrepresentations. First Am. Compl. at 22-25. Specifically, Plaintiff alleges that Mr. Scott made misrepresentations about the financial conditions³² of Scott Investments, A.M. Scott Distillery, and Clock Tower; that loan proceeds would be used exclusively for the Clock Tower Project; that subcontractors would be timely and fully paid; and that Scott Investments had paid money to subcontractors that had actually been diverted to other entities. Id. at 22-23, ¶ 101. Prior to the execution of the construction contract, Plaintiff claims that Mr. Scott “represented that Scott Investments had successfully completed similar projects and had the financial resources and expertise to complete the Clock Tower Project within budget.” Id. 23, ¶ 103. In connection with the lease contract for the Property on September 14 and September 20, 2023, Mr. Scott “represented that Scott Investments would use Loan proceeds exclusively to pay for work performed on the Clock Tower Project and to pay subcontractors and vendors.” Id. at 23, ¶ 104. Plaintiff alleges that this was false because Mr. Scott did not have the financial resources to complete the Clock Tower Project and intended all along to use the money for other purposеs, specifically to support his other business.

Plaintiff further pleads that Mr. Scott, on October 23, 2023, in relation to the closing of the bank Loan, represented “in the construction agreement and in conversations with Warnock and Robinson, on behalf of West Element, that Scott Investments would manage the Clock Tower Project in a professional manner, would pay all subcontractors promptly, and would use all Loan proceeds exclusively for the Clock Tower Project.” Id. at 23-24, ¶ 105. Plaintiff references emails sent in 2024 where Mr. Scott represented “Scott Investments was financially stable, adequately capitalized, and capable of serving as general contractor for the Clock Tower Project[,]” even though there were unpaid invoices from subcontractors as early as March 2024. Id. at 23-24, ¶ 102, ¶ 110. Between October 23, 2023, and October 23, 2024, Defendant submitted seven written Loan draw requests. Id.Id. Plaintiff alleges this was false because further investigation showed that not all of the subcontractors had been paid from those funds. Id. at 25, ¶ 110. Plaintiff claims that Mr. Scott repeatedly represented that the subcontractors were being paid in a timely manner to ensure his continued access to Loan funds, even though Plaintiff‘s further investigations revealed that this was not accurate. Id.

Throughout the life of the Loan between October 23, 2023, and October 23, 2024, Mr. Scott “repeatedly represented to West Element, both orally and in writing, that subcontractors were being paid in a timely manner and that the Clock Tower Project was progressing according to schedule.” Id. Plaintiff alleges that these misrepresentations were false based on their own investigations and conversations with unpaid subcontractors. Specifically, Plaintiff discovered subcontractors EnviroControl Systems and R&T Yoder Electrical had not been fully paid and had outstanding invoices dating back months. Id. Plaintiff further asserts that the statements were made with intent to deceive because Mr. Scott always intended to misuse the funds and did misuse the funds by funneling them to his other businesses. Plaintiff alleges that they reasonably relied on Mr. Scott‘s assertions because he presented himself as a successful businessman who was experienced in renovations and was willing to become a member in West Element and Clock Tower, thereby investing his own money in the success of the Clock Tower Project. Id. at 27, ¶ 115. Finally, they assert that Mr. Scott‘s false representations during negotiations and the lifе of the Clock Tower Project induced them to pay an advance of $271,800 and allow Loan draws of $1,063,435.32. Id. at 28, ¶ 116.

Although it appears that Plaintiff has adequately alleged, with specifics, that Mr. Scott made false representations to Plaintiff‘s members in order to obtain or at least to continue to obtain the Loan proceeds, which he then used for purposes other than the Clock Tower Project, the allegations with respect to any oral representations regarding the “financial condition” of Scott Investments do not work for purposes of § 523(a)(2)(A) because the fraud referred to therein does not include “a statement respecting the debtor‘s or an insider‘s financial condition[.]” “Subsections (A) and (B) are mutually exclusive” and “[a]ll statements regarding a debtor‘s [or an insider‘s] financial condition, whether written or oral, are expressly excluded from subsection (A).” Prim Capital Corp v. May (In re May), No. 06-8044, 2007 Bankr. LEXIS 2335, ‍​​​‌‌‌‌‌​‌‌‌‌​‌‌‌​‌‌‌‌​‌​​‌‌‌‌‌‌‌​‌‌​‌‌​​‌‌​‌​​‌‍*14-15 (B.A.P. 6th Cir. 2007) (citing Armbrustmacher v. Redburn (In re Redburn), 202 B.R. 917, 924 (Bankr. W.D. Mich. 1996) (citing, inter alia, Eugene Parks Law Corp. Defined Benefit Pension Plan v. Kirsh (In re Kirsh), 973 F.2d 1454, 1457 (9th Cir. 1992))). That is what § 523(a)(2)(B) is for, but as discussed below Plaintiff has, as of yet, failed to identify a “statement in writing” that Mr. Scott provided to Plaintiff concerning his or Scott Investment‘s “financial condition” that they relied upon. Accordingly, also as further discussed below, because oral misrepresentations about “financial condition” are expressly excluded from § 523(a)(2)(B)(ii), Plaintiff has failed to state a claim under this subsection – § 523(a)(2)(B). May, 2007 Bankr. LEXIS 2335, at *15 (observing that “[a] debt based upon an oral misrepresentation of financial condition is not actionable and will be dischargeable.“).

The case law on application of Civil Rule 9(b) can sometimes give the appearance of an exercise in hair-splitting. See, e.g., Ram Int‘l, Inc. v. ADT Sec. Servs., 555 Fed. App‘x. 493, 499 (6th Cir. 2014) (holding that certain general allegations of material misrepresentations were too vague to comply with Rule 9(b), but then finding that a slightly more specific allegation of a misrepresentation “arguably fulfills Rule 9‘s requirement that the plaintiff identify the time, place, and content of the misrepresentations“) (cited in Goss, 605 B.R. at 199). However, construing all the allegations of the First Amended Complaint and considering that the purpose of Rule 9(b) is ultimately to ensure that Defendant has enough information upon which to respond, setting aside the threshold issue of what “money, property or services” Mr. Scott is alleged to have obtained from Plaintiff for which he owes a debt to Plaintiff, on balance there would be enough here to state a claim under § 523(a)(2)(A), at least based on Mr. Scott‘s representations, other than his statements respecting his or Scott Investment‘s finanсial condition. Were it not for the failure of Plaintiff to allege the debt for “money, property, services or credit” obtained by Mr. Scott, as discussed above, the Court would not dismiss this claim at this time. See Goss, 605 B.R. at 196 (stating ” ‘the fundamental tenor of the [Civil] Rules,’ . . . ‘is one of liberality rather than technicality.’ ” (quoting Hall v. Spencer Cnty., Ky., 583 F.3d 930, 934 (6th Cir. 2009) (quoting Miller v. Am. Heavy Lift Shipping, 231 F.3d 242, 248 (6th Cir. 2000)))).

Here, the “material misrepresentation” is not necessarily one specific statement; rather, it appears to be a confluence of representations—a scheme to give the appearance that Scott Investments was up to the task of taking on the Clock Tower Project, could sufficiently perform the job, and was performing the job (as represented in the various draw requests on the Loan). This was a business relationship between the parties that spanned a couple of years, not an isolated transaction in which there was only one specific representation or event. Viewing the relationship as a whole, Plaintiff‘s assertions that Mr. Scott, as sole member of Scott Investments, represented that Scott Investments could handle the Clock Tower Project, that this was false, that it was never the intention of Mr. Scott to only use the Loan proceeds for the Clock Tower Project given the financial distress that he was experiencing with his other business (A.M. Scott Distillery, also in bankruptcy), and that West Element relied upon Mr. Scott‘s representations to its detriment which caused economic damage, is understandable. Although the allegations could be more precise, the circumstances paint a picture that leads to the conclusion that West Element has pled a plausible claim for relief to hold the amount of debt that it may be able to prove is owed personally by Mr. Scott as nondischargeable under § 523(a)(2)(A). But we do first need a claim alleged for the debt.

As noted above, Plaintiff has yet to plead what the basis is for the debt allegedly owed by Mr. Scott to Plaintiff and the causal nexus with the “money, property, services or credit” obtained by Mr. Scott, for himself or his benefit. Accordingly, Plaintiff has not yet sufficiently plead a claim under § 523(a)(2)(A); however, the Court will grant Plaintiff leave to further amend its First Amended Complaint in order to do so. In this regard, Plaintiff will need to allege, to the extent it can do so within the bounds of Bankruptcy Rule 9011, how much it believes the debt is that it will seek to be held non-dischargeable, what “money, property, services or credit” Mr. Scott obtained for himself or his business, and if he obtained those through misrеpresentations that were justifiably relied upon by Plaintiff and were the proximate cause of Plaintiff‘s loss.

2. § 523(a)(2)(B)

Within Cause of Action #1, Plaintiff includes an allegation that:

118. In addition to or in the alternative to the claims under § 523(a)(2)(A), the debt owed by Defendant to West Element is nondischargeable under § 523(a)(2)(B) because Defendant used written statements that were materially false representing Defendant‘s (or his insider Scott Investments‘) financial condition, on which West Element reasonably relied, and which Defendant caused to be made with intent to deceive.

First Am. Compl. at 28-29, ¶ 118. Under § 523(a)(2)(B), a debt is nondischargeable if the “money, property, services, or an extension, renewal, or refinancing of credit” was obtained by:

(B) use of a statement in writing—

(i) that is materially false;

(ii) respecting the debtor‘s or an insider‘s financial condition;

(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and

(iv) that the debtor caused to be made or published with intent to deceive[.]

11 U.S.C. § 523(a)(2)(B) (emphasis added). Thus, under § 523(a)(2)(B), a debt can only be held nondischargeable due to a debtor‘s misrepresentation about their financial condition when that misrepresentation is in writing and not merely when it is oral. Webb v. Struhar (In re Struhar), No. 20-1057, 2021 Bankr. LEXIS 1758, at *14, 2021 WL 2772819 (Bankr. N.D. Ohio July 1, 2021).

Setting aside, once again, that it is unclear what the “debt” is, in support of the foregoing recitation of the elements of a § 523(a)(2)(B) claim Plaintiff asserts that “Defendant caused numerous following written statements respecting financial condition to be made, such as the Application and Certification for Payment (AIA Document G702) dated October 23, 2024 . . . , which represented the financial status of the Clock Tower Project and specifically misrepresented that the remaining balance to finish was only $139,564.68.” First Am. Compl. at 29, ¶ 119 (emphasis added). Apart from the fact that the Clock Tower Project‘s financial condition is not the one that matters, this alleged representation was apparently made the same day that the seventh and final draw on the Loan was made, October 23, 2024, in the amount of $108,330. See First Am. Compl. at 6, ¶ 31 (stating “[t]he most recent draw (which was the seventh to occur) was processed on or about October 23, 2024, in the amount of $108,330[]“); 27, ¶ 114(h). Perhaps this could state a plausible claim as to this one Loan draw; however, the explanation by Plaintiff that this document, which is not attached to the Complaint, demonstrated Scott Investments’ “financial condition because it represented that Scott Investments had sufficient funds to complete the project with only $139,564.68 in additional draws” is a stretch. The AIA document would nоt appear to fit the criteria for a document concerning Mr. Scott‘s or Scott Investment‘s financial condition, as required by § 523(a)(2)(B)(ii), as further discussed below.

Plaintiff also alleges that Mr. Scott “provided a written statement in the Excel spreadsheet on or about November 23, 2024.” First Am. Compl. at 29, ¶ 120. However, the November 2024 spreadsheet was provided to West Element after the final distribution of the Loan proceeds to Scott Investments, such that the reliance element under § 523(a)(2)(B)(iii) could not be met.

As for the Loan draw requests, Plaintiff alleges that “each draw request submitted to West Element and The Savings Bank between October 2023 and 2024 . . . impliedly represented that Scott Investments was financially capable of completing the project[.]” First Am. Compl. at 29-30, ¶ 121. But Plaintiff has not pled that the draw requests contained information with respect to Mr. Scott‘s or Scott Investment‘s “financial condition” as that term is construed in the case law. Although “[t]he phrase ‘respecting the debtor‘s . . . financial condition’ is not defined in the [Bankruptcy] Code and is thus subject to interpretation[,]” it is established “that exceptions to discharge are to be narrowly construed in favor of a debtor, and a strict interpretation of the statute is more consistent with that approach.” Lawrence Bank v. Brent (In re Brent), 539 B.R. 788, 796-97 (Bankr. S.D. Ohio 2015) (Preston, J.) (quoting May, 2007 Bankr. LEXIS 2335, at *15-16). The opinion in Brent further explains:

“The strict interpretation, limiting statements concerning the debtor‘s financial condition only to those that actually claim to state the debtor‘s overall financial health, net worth or assets and liabilities, is most consistent with the text and structure of the Bankruptcy Code.” May, 2007 Bankr. LEXIS 2335, *17 (citation omitted). In contrast, “[a] broad interpretation simply brings too many statements under the rubric ‘concerning the debtor‘s financial condition,’ rendering the limitation meaningless.” May, 2007 Bankr. LEXIS 2335 at *18 (citation omitted).

Brent, 539 B.R. at 796-97. The Loan draw requests, as described, and presuming they are focused on the use of funds for the Clock Tower Project, payment of subcontractors, and completion of construction, would not qualify as containing representations about the “financial condition” of Mr. Scott or Scott Investments, as construed in case law. A loan application would be more in the nature of a document that would commonly contain representations about “financial condition.” So, while the Loan draw requests potentially could be part of Plaintiff‘s claim under § 523(a)(2)(A), they do not work for purposes of § 523(a)(2)(B).

As of yet, Plaintiff has not stated a plausible claim under § 523(a)(2)(B). The only information in the pleadings is that the Loan draw requests “represented the financial status of the Clock Tower Project and impliedly represented that Scott Investments was finanсially capable of completing the project[.]” First Am. Compl. at 29-30, ¶ 121. This does not meet the threshold of a representation concerning the “financial condition” of Mr. Scott or Scott Investments. Thus, the claim under § 523(a)(2)(B) may ultimately be dismissed, subject however to Plaintiff first having an opportunity to further amend its First Amended Complaint in the event there are representations of “financial condition” in these particular loan draw requests, although it does not appear likely that Plaintiff will be able to state such a claim.

E. Second Cause of Action – Willful and Malicious Injury – § 523(a)(6)

Debts falling within the scope of § 523(a)(6) are nondischargeable when created by “willful and malicious injury by the debtor[.]” The Sixth Circuit has held that the analysis of whether conduct is “willful and malicious” is a two-pronged one; willfulness and maliciousness are separate inquiries, and both elements must be present. MarketGraphics Rsch. Grp., Inc. v. Berge (In re Berge), 953 F.3d 907, 914 (6th Cir. 2020).

Willfulness requires “actual intent to cause injury” and “not merely a deliberate or intentional act that leads to injury.” Id. at 915 (quoting Kawaauhau v. Geiger, 523 U.S. 57, 61 (1998); see also Doe v. Boland (In re Boland), 946 F.3d 335, 338 (6th Cir. 2020)) (emphasis in original)). Intent is measured by a subjective standard, which considers whether the Debtor either intended to cause harm or knew that harm was a substantially certain result of their actions. Berge, 953 F.3d at 915 (citing Markowitz v. Campbell (In re Markowitz), 190 F.3d 455, 464 (6th Cir. 1999)). Intent can be inferred from the circumstances surrounding the Debtor‘s actions. Berge, 953 F.3d at 915 (citing O‘Brien v. Sintobin (In re Sintobin), 253 B.R. 826, 831 (Bankr. N.D. Ohio 2000)).

Malicious actions are those that are “wrongful and without just cause or excuse[.]” Berge, 953 F.3d at 915 (quoting Sells v. Porter (In re Porter), 539 F.3d 889, 894 (8th Cir. 2008)). Maliciousness typically does not require direct proof of specific intent to cause harm. Berge, 953 F.3d at 915 (citing Maxfield v. Jennings (In re Jennings), 670 F.3d 1329, 1334 (11th Cir. 2012); see also Yeager v. Wilmers, 553 B.R. 102, 107 (S.D. Ohio 2015)). This claim does not concern an allegation of fraud so the pleading requirements in Civil Rule 8, not Civil Rule 9, apply. Burton Food Servs. v. Aseireh (In re Aseireh), 526 B.R. 246, 251 (Bankr. N.D. Ohio 2015).

Plaintiff alleges in Cause of Action #2 (Count Two) that Defendant acted willfully because he intentionally misappropriated and diverted Clock Tower Loan proceeds to “pay obligations of Distillery and other entities controlled by Defendant” to cure shortfalls in his other businesses. First Am. Compl. at 31, ¶ 128. In particular, Plaintiff asserts that Mr. Scott “[s]ystematically diverted over $150,000[] in Loan proceeds from Scott Investments to Distillery and other entities” and “[f]ailed to pay subcontractors while extracting funds for his own use and the use of his other entities.” Id. at 31, ¶ 129. Plaintiff also alleges that Defendant knew that this would cause harm to Plaintiff because the diversion of funds meant subcontractors on the Clock Tower Project would not be paid, “would cause mechanic‘s liens to be filed against West Element‘s Property, and would leave West Element unable to complete the Clock Tower Project without incurring substantial additional costs.” Id. at 32, ¶ 133. Count Two is somewhat repetitive, but Plaintiff also asserts that Defendant‘s intent to injure can be inferred from him answering ” ‘Yes’ to Warnock‘s November 14, 2024 question about whether all draw funds went to Clock Tower expenses, knowing the answer was false, with the intent to deceive West Element about the diversion of funds[.]” Id. at 32, ¶ 134. Plaintiff additionally alleges that Mr. Scott “deliberately caused his employee Kellie Ritchey to submit a false AIA Document G702 on October 23, 2024, representing that only $139,564.68 remained to complete the project, knowing this representation was false[.]” Id. at 33, ¶ 136. Plaintiff also alleges the conduct was malicious because Defendant “knew with substantial certainty” that all of the aforementioned negative consequences would result. Id. at 34, ¶ 140.

While there do appear to be sufficient factual allegations in the First Amended Complaint to maintain a claim under § 523(a)(6) based on the second component of dischargeability, it

remains unclear what debt Plaintiff actually seeks to have held non-dischargeable because Plaintiff has not set up a claim for the debt. There is also a disconnect between the multiple references in Count Two to Defendant’s alleged diversion of $150,000 in Loan proceeds (see ¶¶ 129, 130, 133, 140) and the bare allegation that there is a “debt in the amount of $712,000” owed by Defendant to Plaintiff. First Am. Compl. at 31, ¶ 126; 34, ¶ 141. The Court cannot discern where this much larger number comes from and why the alleged “debt” with regard to this claim under § 523(a)(6) is more than the amount of Loan proceeds that Plaintiff alleges Mr. Scott misappropriated or diverted. Nonetheless, because there are two components to a claim under § 523(a)(6), this claim is subject to dismissal, unless and until Plaintiff sets up a claim for the underlying debt allegedly owed by Mr. Scott, for which the Court will grant Plaintiff leave to assert within a further amended complaint. In the event that Plaintiff can allege a claim for a debt owed by Defendant to Plaintiff, it appears that Plaintiff will be able to plead a claim under § 523(a)(6). However, in the event that Plaintiff is unable to allege such a debt, then this claim would be dismissed, effective as of the expiration of the deadline for Plaintiff to further amend its First Amended Complaint. It is worth keeping in mind, however, that at this stage the Court is only reviewing the plausibility of claims, not the probability of success on those claims. Iqbal, 556 U.S. at 678.

F. Third Cause of Action – Objection to Discharge – Transfer or Concealment of Property – § 727(a)(2)

Under § 727(a)(2), a debtor may be denied a discharge of all debts if they “with intent to hinder, delay, or defraud a creditor . . . has transferred . . . or concealed . . . (A) property of the debtor, within one year bеfore the date of the filing of the petition” or if the debtor has done so with respect to “(B) property of the estate, after the date of the filing of the petition.” 11 U.S.C. § 727(a)(1), (2)(A) and (B) (emphasis added). Cause of Action #3, also referred to in the prayer for relief as Count Three, alleges that Mr. Scott, “transferred or concealed property” either within one year before or after he filed his joint chapter 7 bankruptcy with “intent to hinder, delay, or defraud creditors.” First Am. Compl. at 35, ¶ 143. However, Plaintiff specifically references payments, or failures to make payments, by and through Scott Investments, which obviously filed its own bankruptcy case. See First Am. Compl. at 35, ¶ 144 (alleging that “Defendant caused Scott Investments to make a payment of $48,000[] to EnviroControl Systems” and that he subsequently issued a check for $148,944.28 that was “returned for insufficient funds”); 36, ¶ 145 (alleging that “throughout 2024, Defendant systematically failed to pay subcontractors from designated Loan draws . . . , effectively transferring West Element’s property (the Loan proceeds) to Defendant’s other business ventures for Defendant’s benefit.”).

An initial problem with the Third Cause of Action is that it does not specify under which subsection it is alleged—(A) or (B) of § 727(a)(2). Although Plaintiff makes reference to Defendant, Mr. Scott, continuing to operate A.M. Scott Distillery, LLC after he filed his joint chapter 7 case on March 21, 2025, there is no mention of any postpetition transfers of property of the estate (whether Mr. Scott’s chapter 7 estate or A.M. Scott Distillery, LLC’s estate); rather, all the transfers mentioned in the First Amended Complaint occurred in 2024, prior to Mr. Scott filing his joint chapter 7 case on March 21, 2025. See, e.g., First Am. Compl. at 35-37, ¶¶ 143-45 (alleging that “[s]pecifically, on or about November 5, 2024, Defendant caused Scott Investments to make a payment of $48,000.00 to EnviroControl Systems, and on or about October 4, 2024, Defendant caused Scott Investments to issue a check to EnviroControl Systems for $148,944.28 which was returned for insufficient funds[.]”). Thus, as Count Three is currently alleged, subsection (B) cannot apply based on the allegations. Therefore, only subsection (A) could apply.

Based on the statutory language of § 727(a)(2)(A), the elements of this claim are “ ‘(1) the disposition of property, such as a transfer or concealment, (2) a subjective intent on the debtor’s part to hinder, delay, or defraud a creditor through the act disposing of the property, (3) the property at issue must be property of the debtor, and (4) the disposition occurred within one year оf filing for bankruptcy.’ ” U.S. Tr. v. Varner (In re Varner), No. 14-6021, 2015 Bankr. LEXIS 2144, at *41-42 (Bankr. N.D. Ohio June 30, 2015) (quoting McDermott v. Recupero (In re Recupero), No. 13-6089, 2014 Bankr. LEXIS 2115, at *16, 2014 WL 1884331, at *6; see also Keeney v. Smith (In re Keeney), 227 F.3d 679, 683 (6th Cir. 2000)); see also Hughes v. Lawson (In re Lawson), 122 F.3d 1237, 1240 (9th Cir. 1997). “ ‘The purposes of § 727(a)(2)(A) is to prevent the discharge of a debtor who attempts to avert collection of his debts by concealing or otherwise disposing of assets.’ ” Id., at *41-42 (quoting Recupero, 2014 Bankr. LEXIS 2115). Intent may be inferred by the circumstances. Keeney, 227 F.3d at 684 (citing In re Snyder, 152 F.3d 596, 601 (7th Cir. 1998)). An objection to discharge under § 727(a)(2)(A) requires the plaintiff to prove all elements of each claim by a preponderance of the evidence. Vara v. Motil (In re Motil), No. 22-1084, 2023 Bankr. LEXIS 102, at *9, 2023 WL 187156 (Bankr. N.D. Ohio Jan. 13, 2023).

In this situation, and given that the allegations of Count Three only implicate subsection (A) of § 727(a)(2), the “gating” issue is whether the First Amended Complaint sufficiently alleges that “property of the debtor” was transferred or concealed within the year prior to Mr. Scott filing his chapter 7 case. Generally, property of a limited liability company is not considered to be the “debtor’s property” for purposes of § 727(a)(2). Id. at *10-11. However, courts in this district have recognized that, in certain circumstances, property of a debtor’s solely-owned limited liability company can be considered property of the debtor under an alter ego theory for purposes of § 727(a) claim. United States Trs. v. Zhang (In re Zhang), 463 B.R. 66, 80 (Bankr. S.D. Ohio 2012); see also In re Rowland, 441 B.R. 281 (Bankr. S.D. Ohio 2010) (finding a valid claim under § 727(a) when the Debtor transferred money and property from a wholly-owned business to a newly-formed LLC owned by the Debtor’s wife two weeks before filing for bankruptcy relief.). The application of the alter ego doctrine to § 727(a) claims by bankruptcy courts follows “the age-old maxim of law that ‘equity regards substance rather than form.’ ” Zhang, 463 B.R. at 82. Bankruptcy courts are courts of equity and thus “may look through the form to the substance.” Id. (citing Wiler v. C.H. Rider & Family (In re United Energy Corp.), 944 F.2d 589, 596 (9th Cir. 1991); In re Koliba, 338 B.R. 39, 42 (Bankr. N.D. Ohio 2006) (both relying on Madeline Marie Nursing Homes v. Collins, 694 F.2d 433, 436 (6th Cir. 1982))). However, the Sixth Circuit Court of Appeals “has held that bankruptcy courts ‘cannot use equitable principles to disregard unambiguous statutory language.’ ” Childress v. Middleton Arms, L.P., 934 F.2d 723, 725 (quoting In re C - L Cartage Co., Inc., 899 F.2d 1490, 1494 (6th Cir. 1990)). Those cases appear to stand for the proposition that a debtor cannot use his, her, or their wholly-owned limited liability company to hide their personal assets and then transfer away those assets to hinder, delay, or defraud their creditors. Viewing the First Amended Complaint as a whole, that is not what Plaintiff is alleging.

Again, apart from the general allegation of “[d]iverting over $150,000.00 in Loan proceeds from Scott Investments to Distillery,” which is not alleged to be a transfer of Mr. Scott’s asset to hinder, delay, or defraud his creditors, the only specific transfer alleged that was completed was a $48,000 payment by Scott Investments to EnviroControl Systems.³³ First Am. Compl. at 35, ¶¶ 143-44.

The other alleged attempted transfer of $148,944.28, also alleged to be drawn on a Scott Investments’ account, did not clear. And Mr. Scott’s failures to pay subcontractors from designated Loan draws concerned property of West Element, the Loan proceeds, as alleged by Plaintiff. See First. Am. Compl. at 36, ¶ 145.

Even if the property transferred would qualify as “property of the debtor” for purposes of § 727(a)(2)(A), which would require West Element to prove an alter ego or veil piercing claim, as it concerns any property of Scott Investments that was transferred (as opposed to property of West Element, which would not appear to qualify), it does not appear that West Element has alleged circumstances from which the Court could plausibly reach the conclusion that the transfers of Loan proceeds were done to “hinder, delay, or defraud a creditor” of Mr. Scott as required by § 727(a)(2)(A). Instead, the allegations indicate that Mr. Scott misappropriated West Element’s Loan proceeds for purposes of funding his other businesses, not because he was attempting to hide or conceal the Loan proceeds from creditors (even if those proceeds were his, which they are not alleged to be), but because he was trying to keep his other businesses afloat. This is a significant distinction as the purpose of § 727(a)(2)(A) is to prevent discharge to a debtor who has attempted to avoid debt collection by concealing or disposing of assets. In re Varner, 2015 Bankr. LEXIS 2144, at *44 (observing that debtor had “made the transfers in order to avoid IRS garnishment, which is an activity designed, at the very least, to hinder creditors.”). That is not what West Element has pled. Rather, West Element has alleged that Mr. Scott inappropriately took, misappropriated, or perhaps even converted or stole proceeds of the Loan made to West Element to fund his other business operations.

It appears that West Element has attempted to fit a square peg in a round hole in alleging rote incantations of the language of § 727(a)(2) in support of its alleged Count Three. There is no factual allegation that there were any creditors of Mr. Scott from whom or which he acted to hide or conceal his assets, even if West Element’s Loan proceeds could be considered his assets, which is not at all clear and would require West Element to first succeed on an alter ego claim. Moreover, until he allegedly used some (but certainly not all) of the Loan proceeds for inappropriate рurposes, those funds belonged to West Element and could not possibly have been reached by Mr. Scott’s creditors. Thus, the First Amended Complaint does not allege a fact pattern in which Mr. Scott was attempting to hide his or even his businesses’ assets from his creditors. Rather, he was allegedly taking assets to prop up his businesses. Accordingly, even taking all the allegations as true, while this alleged conduct may give rise to other claims, West Element has thus far not stated a plausible claim to deny Mr. Scott a discharge in this case, at least not under § 727(a)(2)(A).³⁴

In summary, as of yet Plaintiff has not stated a valid claim under § 727(a)(2)(A) to deny Mr. Scott his discharge, and there is no basis asserted for a claim under § 727(a)(2)(B). Accordingly, as with Counts One and Two concerning non-dischargeability of a debt, the Court will give Plaintiff an opportunity to further amend its complaint to state a claim; however, if Plaintiff either does not further amend Count Three in its First Amended Complaint or is unable to assert a plausible claim under § 727(a)(2)(A), Count Three will be dismissed effective as of expiration of the time for Plaintiff to file a further amended complaint.

G. Fourth Cause of Action – Objection to Discharge – False Oath or Account – § 727(a)(4)

A debtor may be denied a discharge of all debts under § 727(a)(4) if “the debtor knowingly and fraudulently, in or in connection with the case—(A) made a false oath or account; [or] (B) presented or used a false claim[.]”³⁵ The elements of this claim are: “1) the debtor made a statement under oath; 2) the statement was false; 3) the debtor knew the statement was false; 4) the debtor made the statement with fraudulent intent; and 5) the statement related materially to the bankruptcy case.” Motil, 2023 Bankr. LEXIS 102, at *28 (quoting Keeney, 227 F.3d at 685). A debtor’s recklessness related to the truth of a statement can be sufficient to prove intent, and intent may also be inferred based on the circumstances. Motil, 2023 Bankr. LEXIS 102, at *29. A material statement is one that relates to the debtor’s “business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and disposition of property.” Id. at *28-29 (quoting Keeney, 227 F.3d at 686). Isolated mistakes or omissions may be insufficient to infer intent to deceive. Motil, 2023 Bankr. LEXIS 102, *29-30.

Because this type of claim includes an allegation of actual fraud, the pleading standards under Civil Rule 9 apply. Dick, 2025 Bankr. LEXIS 1405, at *11-12. The fraud allegations must “(1) specify the allegedly fraudulent statements; (2) identify the speaker; (3) plead when and where the statements were made; and (4) explain what made the statements fraudulent.” Id. (citing Republic Bank & Trust Co. v. Bear Stearns & Co., Inc., 683 F.3d 239, 247 (6th Cir. 2012); Aseireh, 526 B.R. at 250-51). Schedules and the Statement of Financial Affairs signed under penalty of perjury and filed ‍​​​‌‌‌‌‌​‌‌‌‌​‌‌‌​‌‌‌‌​‌​​‌‌‌‌‌‌‌​‌‌​‌‌​​‌‌​‌​​‌‍in a bankruрtcy case are considered statements made under oath for the purposes of § 727(a)(4). Dick, 2025 Bankr. LEXIS 1405, at *11 (citing New Century Bank, N.A. v. Carmell (In re Carmell), 424 B.R. 401, 418 (Bankr. N.D. Ill. 2010)).

In Cause of Action #4 in the First Amended Complaint, which is referred to as Count Four in the prayer for relief, Plaintiff alleges that Mr. Scott “knowingly and fraudulently made a false oath by omitting or undervaluing assets (e.g., LLC interests) in his schedules, warranting denial of discharge under § 727(a)(4).” First Am. Compl. at 37, ¶ 151. It is unclear, however, exactly which statements Plaintiff is referring to, in what portions of Mr. Scott’s schedules those statements were made, and exactly what made the statements fraudulent, such that it does not appear Plaintiff has plausibly alleged any of the elements of a claim under § 727(a)(4). As noted above, Mr. Scott disclosed his interests in the various businesses – the “LLC interests” – in his Schedule A/B. See Schedule A/B at 5, Part 4, item 19, Case No. 25-30494 (Doc. 1 at 14) (listing Mr. Scott’s ownership interests in Scott Investments (100%), A.M. Scott Distillery, LLC (36%), A.M. Scott Management, LLC (100%), Keystone Real Estate Group, Ltd. (65%), The Academy Sports Training, LLC (100%), Keystone Renew, LLC (50%), The Clock Tower by West Element, Ltd. (20%), and Clock Tower, LLC (26%)); see also SOFA at 7-8, Part 11, item 27 (Doc. 1 at 51-52); see also Am. Schedule A/B at 6, Part 4, 30 (Doc. 18 at 6) (listing significant amounts owed by the businesses in which Mr. Scott disclosed interests to him for “Money Loaned”). Moreover, Mr. Scott caused both Scott Investments and A.M. Scott Distillery, LLC to file their own separate bankruptcy cases.

This “kitchen sink” approach taken by Plaintiff to attempt to plead a claim under § 727(a)(4) is evidenced by the very generalized allegations, which do not meet the requirements of Civil Rule 9, contained in a single lengthy paragraph. See First Am. Complaint at 37, ¶ 152. Taking the allegations one-by-one, Plaintiff again alleges that Mr. Scott omitted or undervalued assets, “including LLC interests in Scott Investments (prior to liquidation), The Clock Tower LLC, West Element, Distillery, and other business entities[.]” First Am. Compl. at 37, ¶ 152(a). But Plaintiff does not allege any facts to support this conclusory assertion, which is belied by the fact that Mr. Scott disclosed his interests. Plaintiff does not identify which interest Mr. Scott failed to disclose, and Plaintiff does not explain how the interests identified were undervalued.

The remaining allegations in the one lengthy paragraph in Count Four are no more enlightening, at least as it concerns Plaintiff’s attempt to allege a claim under § 727(a)(4), which concern:

(b) Failing to disclose the full extent of his control over and commingling of funds among multiple business entities; (c) Failing to disclose his operation of Scott Investments as his alter ego and mere instrumentality; (d) Failing to disclose transfers of property made within one year of filing bankruptcy, including the systematic diversion of over $150,000.00 in Loan proceeds from Scott Investments to Distillery; (e) Failing to accurately disclose income received from the various business entities he controlled; (f) Providing false or misleading information in his schedules regarding his financial condition and business interests; (g) Failing to disclose the pending Miami County Action and the claims asserted against him therein.

First Am. Compl. at 37, ¶ 152(b)-(g). Because Mr. Scott does appear to have identified his interests in and control over his business entities, in the manner required by his Schedules and Statement of Financial Affairs, there does not appear to be any support for the assertion that he “failed to disclose the full extent of his control over . . . multiple business entities.” Id. at 37, ¶ 152(b). And as it regards the “commingling of funds,” funds that were presumably his businesses’, Plaintiff fails to identify in which place within his schedules in his joint chapter 7 case, or elsewhere, where this would be disclosed and that he failed to disclose it there, under oath. The same analysis goes for the allegation that Mr. Scott “[f]ail[ed] to disclose his operation of Scott Investments as his alter ego and mere instrumentality[.]” Id. at 37, ¶ 152(c).

In regard to allegedly “failing to disclose transfers of property made within one year of filing bankruptcy, including the systematic diversion of over $150,000[] in Loan proceeds from Scott Investments to Distillery,” again, as also alleged by Plaintiff, the Loan proceeds belonged to West Element and although the draw requests were apparently orchestrated by Mr. Scott, at least up through October 23, 2024, the Loan proceeds were transferred by Scott Investments, such that Plaintiff has not explained where or why Mr. Scott would be required to disclose those transfers within the schedules in his joint chapter 7 case. Id. at 37, ¶ 152(d). With respect to allegedly “failing to accurately disclose income received from the various business entities he controlled[,]” Plaintiff does not provide any details of what Mr. Scott allegedly should have listed. Id. at 37, ¶ 152(e). The next allegation is even more generalized; namely, “[p]roviding false or misleading information in his schedules regarding his financial condition and business interests[.]” Id. at 37, ¶ 152(f). Plaintiff does not specifically explain which information in his schedules is false or misleading. And finally, Plaintiff alleges that Mr. Scott “[f]ail[ed] to disclose the pending Miami County Action and the claims asserted against him therein.” Id. at 37, ¶ 152(g). But Mr. Scott did disclose the pending Miami County Action against him for monetary damages in his SOFA. See SOFA at 4, Part 4, item 9 (Doc. 1 at 48). He did not, however, schedule a claim for West Element.

One of the prerequisites to a debtor obtaining a discharge is “ ‘[c]omplete financial disclosure[.]’ ” LaRocco v. Smithers (In re Smithers), No. 05-8037, 2006 Bankr. LEXIS 265, at *7 (B.A.P. 6th Cir. Mar. 2, 2006) (quoting Keeney, 227 F.3d at 685-86 (citations omitted); accord, e.g., Hamo v. Wilson (In re Hamo), 233 B.R. 718, 725 (B.A.P. 6th Cir. 1999)). However, in this situation in which Plaintiff has only specifically alleged that Mr. Scott failed to disclose the claims against him in the pending Miami County Action, in which he actually did disclose that pending litigation in his SOFA, and as of the date that Mr. Scott filed his bankruptcy case, it does not appear that Plaintiff had yet alleged a claim to hold Mr. Scott personally liable for the debts of Scott Investments. Thus, this final alleged basis for a claim under § 727(a)(4) does not suffice either. See First Am. Compl. at 14, ¶ 68 (alleging that prior to Mr. Scott filing his bankruptcy on March 21, 2025, “Plaintiff was preparing to seek leave of court to amend the Miami County Complaint to add claims against Anthony Scott individually for piercing the corporate veil and alter ego liability with respect to Scott Investments bases on the facts discovered during its own investigation.”); see, e.g., Zhang, 463 B.R. at 89 (holding that a debtor’s failure to schedule prepetition debts owed to family members was not a false oath for purposes of § 727(a)(4)). Moreover, Plaintiff filed the Miami County Action, is keenly aware of the claims asserted therein, and did not include a claim to hold Mr. Scott personally liable for claims against Scott Investments.

In conclusion, Plaintiff’s allegations in Count Four presently do not suffice to state a claim under § 727(a)(4) for the denial of Mr. Scott’s discharge. However, as with the other Counts of the First Amended Complaint, Plaintiff will have an opportunity to further amend the First Amended Complaint to address the deficiencies identified in this Memorandum and Opinion. But if Plaintiff is unable to do so, Count Four will be dismissed effective as of the expiration of the deadline for Plaintiff to further amend its complaint.

H. Fifth Cause of Action – Objection to Discharge – Failure to Explain Loss of Assets – § 727(a)(5)

Under § 727(a)(5), a court may deny a discharge of all debts if “the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor’s liabilities[.]” The party seeking to deny discharge under § 727(a)(5) “must ‘identify assets that the debtor owned at one time and subsequently claims to no longer possess.’ ” Motil, 2023 Bankr. LEXIS 102, at *32 (quoting McDonald v. McDonald, 29 F.4th 817, 822 (6th Cir. 2022) (citing Strzesynski v. Devaul (In re Devaul), 318 B.R. 824, 840 (Bankr. N.D. Ohio 2004))). Moreover, “[t]he assets should be ‘substantial and identifiable.’ ” Id. (quoting McDonald, 29 F.4th at 822 (quoting Devaul, 318 at 839)). The burden then shifts to the debtor to reasonably and satisfactorily explain the loss of the assets based on the circumstаnces. Motil, 2023 Bankr. LEXIS 102, at *32-33 (citing Zhang, 463 B.R. at 90). There is no intent requirement under § 727(a)(5). Motil, 2023 Bankr. LEXIS 102, at *33. Civil Rule 8 governs the pleading requirements for this claim. Aseireh, 526 B.R. at 250.

Plaintiff generally alleges in Cause of Action #5 in the First Amended Complaint, which is referred to as Count Five in the prayer for relief, that “Defendant failed to explain the loss of assets or deficiency (e.g., financial collapse of A.M. Scott Distillery, LLC and The Clock Tower, LLC), warranting denial of discharge under § 727(a)(5).” First Am. Compl. at 38, ¶ 157. But Plaintiff missed step one, which is to first identify the assets that Mr. Scott “owned at one time.” Accordingly, in alleging Count Five it appears that Plaintiff is attempting to find yet another home for its complaints about the Clock Tower Project, this time attempting to shoehorn its facts into a claim to deny Mr. Scott’s discharge, which does not fit. Under § 727(a)(5), as stated above, the assets that are relevant are ones previously owned by the Debtor. See McDonald, 29 F.4th at 822 (citing Devaul, 318 B.R. at 840; see also PNC Bank v. Buzzelli (In re Buzzelli), 246 B.R. 75, 116 (Bankr. W.D. Pa. 2000)); see also Krieger Craftsmen, Inc. v. Ostosh (In re Ostosh), 589 B.R. 319, 345 (Bankr. W.D. Mich. 2018) (stating that “[f]irst, the Plaintiff must establish that the debtor had a cognizable ownership interest in a specific asset” (citing Kovacs v. McVay (In re McVay), 363 B.R. 824, 831 (Bankr. N.D. Ohio 2006))). In other words, as just the first step to alleging a claim under § 727(a)(5), the Plaintiff would need to show that Mr. Scott owned “substantial and identifiable assets . . . at a time not too far removed from the bankruptcy that are no longer available for creditors.” In re Devaul, 318 B.R. at 839 (citing Caterpillar, Inc. v. Gonzalez (In re Gonzalez), 302 B.R. 745, 754-55 (Bankr. S.D. Fla. 2003); McGowan v. Beausoleil (In re Beausoleil), 142 B.R. 31, 37 (Bankr. D.R.I. 1992); Clean Cut Tree Serv., Inc. v. Costello (In re Costello), 299 B.R. 882, 902 (Bankr. N.D. Ill. 2003)).

The specific allegations of Count Five reveal that Plaintiff is actually focused on, and has alleged, another kitchen sink of improprieties with respect to the Clock Tower Project, concerning:

(a) The financial collapse and liquidation of Scott Investments and the disappearance of over $1.3 million in Loan proceeds that were paid to Scott Investments; (b) The failure to account for the difference between $1,335,235.32 in funds advanced to Scott Investments and only $1,224,369.98 documented as paid to subcontractors – a difference of $110,865.34; (c) The discrepancy between $178,828.78 listed as paid for HVAC work and only $76,000.00 actually paid to the HVAC subcontractor – a difference of $102,828.78; (d) The discrepancy between $147,058.25 listed as paid for electrical work and only $58,964.10 actually paid to the electrical subcontractor - a difference of $88,094.15; (e) The diversion and misappropriation of over $150,000.00 in Loan proceeds from the Clock Tower Project to pay obligations of Distillery and other entities, particularly payroll; (f) The financial collapse of A.M. Scott Distillery, LLC despite receiving diverted funds from the Clock Tower Project; (g) The failure of The Clock Tower LLC to open for business despite receiving substantial сapital investment; (h) The use of Loan proceeds to make payroll for Distillery rather than to pay subcontractors for the Clock Tower Project.

First Am. Compl. at 38-39, ¶ 158. The foregoing allegations, however, concern mismanagement of the Clock Tower Project and the financial collapse of Mr. Scott’s businesses, Scott Investments and A.M. Scott Distillery, LLC, which also resulted in bankruptcies, and do not concern assets in which Mr. Scott, personally, had a cognizable ownership interest – assets that he could have used to pay his creditors. And therefore Plaintiff has likewise failed to state a claim under § 727(a)(5).

Although the allegations contained within Count Five, which concern complaints about management of the Clock Tower Project, suggest it is doubtful Plaintiff could state a claim to deny Mr. Scott a discharge under § 727(a)(5) given that all the funds specifically mentioned appear to have been the property of other entities, as with the other Counts of the First Amended Complaint Plaintiff will have an opportunity to further amend the complaint to address the deficiencies identified in this Memorandum and Opinion. But if Plaintiff is unable to do so, Count Five will be dismissed effective as of expiration of the deadline for Plaintiff to further amend its complaint.

V. Conclusion

For all the foregoing reasons, the Second Motion to Dismiss is conditionally granted with respect to all Causes of Action (Counts) asserted in the First Amended Complaint; however, Plaintiff is granted leave pursuant to Civil Rule 15(a)(2), made applicable to this adversary proceeding by Bankruptcy Rule 7015, until and including twenty-one (21) days after the entry of this Memorandum Opinion and Order to further amend its First Amended Complaint to address the deficiencies discussed herein, to the extent that Plaintiff can do so within the bounds of Bankruptcy Rule 9011, and to the extent that Plaintiff can do so based upon the same “conduct, transaction, or occurrence” set forth in the First Amended Complaint.³⁶ To the extent that Plaintiff does not (or is not able to) further amend any Cause of Action (Count) of the First Amended Complaint or sufficiently address the issues raised herein with respect to any Causes of Action (Count) of the First Amended Complaint, then, as to any such Cause of Action (Count) of the First Amended Complaint not so amended,³⁷ effective as of expiration of the above-stated twenty-one (21) day period, each such Cause of Action (Count) will be dismissed.

IT IS SO ORDERED.

Copies to:

Counsel for the Plaintiff

Counsel for the Defendant

Notes

1

Although the titles of the First Amended Complaint and the Second Motion to Dismiss only refer to the First Amended Complaint as seeking to determine the dischargeability of debt, Plaintiff also alleged, and Mr. Scott has also sought dismissal of those counts of the First Amended Complaint – Causes of Action #3, #4 and #5 – concerning objection to Mr. Scott’s entire discharge, pursuant to 11 U.S.C. § 727(a)(2), (a)(4), and (a)(5), respectively.

2

Because there is an entity named The Clock Tower LLC that is referenced in the First Amended Complaint, in an effort to avoid confusion the Court will refer to Plaintiff The Clock Tower by West Element, Ltd. herein as “West Element” instead of as “Clock Tower.”

3

This capitalized term is hereinafter defined.

4

For brevity, hereinafter all sections referred to, unless otherwise noted, are sections of the Bankruptcy Code (title 11 of the U.S. Code).

5

Amended Schedule A/B Property (Doc. 18) filed in Mr. and Ms. Scott’s joint chapter 7 case lists a 100% ownership interest in Scott Investments. See Am. Sched. A/B at 5, item 19 (Doc. 18). In the Scott Investments chapter 7 case, item 28, Part 13, on page 7 of the Statement of Financial Affairs (Doc. 1 at 32) lists Anthony Scott with an address of 520 Baywood Court, Troy, Ohio, as the person “in control of the debtor at the time of filing” that case, owning 100% of the interest in Scott Investments.

6

In the Declaration of Anthony M. Scott in Support of First-Day Motions and Applications (Case No. 25-32562, Doc. 5) (the “Declaration”), Mr. Scott declared under penalty of perjury that he is “the managing majority member of A.M. Scott Distillery, LLC[,]” that he manages the business, and that he owns a “combined voting percentage of approximately 60.5%” of the stock of A.M. Scott Distillery. Decl. at 1, 2 and 7, ¶¶ 1, 5 and 19. In addition to being an owner and the Managing Member, Mr. Scott is also identified as a “codebtor” with A.M. Scott Distillery on a debt to The Clock Tower by West Element Ltd. listed in item 3.9[2] of Schedule E/F filed in the A.M. Scott Distillery case for “unjust enrichment” in the contingent, unliquidated and disputed amount of $250,000. See Am. Sched. H at 1, item 2.4 (Case No. 25-32562, Doc. 45); Am. Sched. E/F at 17, item 3.92 (Case No. 25-32562, Doc. 48).

7

On May 9, 2026, A.M. Scott Distillery filed a Motion of Debtors/Debtors-In-Possession to Dismiss Chapter 11 Bankruptcy Case Pursuant to 11 U.S.C. § 1112(B)(1) (Case No. 25-32562, Doc. 116), as reviewed and approved by Mr. Scott, as Managing Member, because A.M. Scott Distillery has been unable “to obtain or transfer a liquor permit necessary to operate” such that it “is unable to propose a feasible Plan of Reorganization.”

8

The first Summons on the docket (Doc. 2) was not signed by the Clerk. The second Summons (Doc. 3) was issued by the Clerk on September 9, 2025, but no certificate of service was ever filed. Had the second Summons been properly issued and served, Dеfendant’s answer or motion would have been due under Bankruptcy Rule 7012(a)(1) by October 9, 2025; however, the Summons was not properly prepared and issued until October 3, 2025 (Doc. 4), at which time the Summons and Complaint appear to have been properly served such that Defendant had until Monday, November 3, 2025 to answer or move in response. Nonetheless, Defendant filed the First Motion to Dismiss (Doc. 5) on October 8, 2025, as if the second Summons (Doc. 3) had been properly served.

9

The First Amended Complaint was filed within “21 days after service of a motion under Rule 12(b)” in compliance with Civil Rule 15(a)(1)(B), made applicable to this adversary proceeding by Bankruptcy Rule 7015.

10

Although titled as a claim based on false pretenses, the allegations center on alleged misrepresentations, an alleged “statement in writing,” and material false representations.

11

This is how the citation appears in the title to Count Three. The allegations in Count Three and the prayer for relief for Count Three mention “§ 727(a)(2).” Compl. at 37, ¶ 149; 40, ¶ C.

12

Although the titles of the First Amended Complaint and the Second Motion to Dismiss only refer to the First Amended Complaint as seeking to determine the dischargeability of debt, Plaintiff also alleged, and Mr. Scott has also sought dismissal of those counts of the First Amended Complaint – Causes of Action #3, #4, and #5 – concerning objection to Mr. Scott’s entire discharge, pursuant to 11 U.S.C. § 727(a)(2), (a)(4), and (a)(5), respectively.

13

Defendant’s Second Motion to Dismiss was not filed within the 14-day period after service of the First Amended Complaint under Civil Rule 15(a)(3), but Plaintiff did not object in its Response and perhaps the parties had an informal agreement for an extension of time.

14

Notably, Defendant did not argue that the First Amended Complaint was untimely because it was filed after the deadline for Plaintiff to object to the dischargeability of debt and to Mr. Scott’s discharge under the Stipulation and Agreed Order Granting Clock Tower by West Element, Ltd. an Extension of Time to File a Motion Under 11 U.S.C. § 707 or Complaint Under § 723 or § 523 (Case No. 25-30494, Doc. 25), which extended the deadlines under Bankruptcy Rules 4004 and 4007 from July 7, 2025, to and including September 8, 2025, the date on which Plaintiff filed its original Complaint under §§ 523 and 727. This would entail an analysis of whether the First Amended Complaint relates back to the timely original Complaint; however, because Defendant did not raise this issue the Court will not engage in this analysis in this context. See, e.g., In re Goss, 605 B.R. at 196 (observing that “[b]ecause the Amended Complaint was filed after the deadline [under Bankruptcy Rule 4007(c)], its new allegations are time-barred unless they relate back to the date of the Original Complaint under Civil Rule 15(c)” made applicable to adversary proceedings by Bankruptcy Rule 7015 (citing Durand v. Hanover Ins. Grp., Inc., 806 F.3d 367, 374-75 (6th Cir. 2015) (quoting Krupski v. Costa Crociere S.p.A., 560 U.S. 538, 541 (2010)))).

15

Paragraph 17 of the First Amended Complaint identifies the Clock Tower as a defendant, but none of the counts are against Clock Tower, Clock Tower is not identified as a defendant in the caption (nor has a summons been issued to or served upon Clock Tower), and none of the other portions of the First Amended Complaint indicate that Plaintiff intended to name Clock Tower as a defendant to this adversary proceeding, such that the Court construes this as most likely holdover language that was in Plaintiff’s complaint filed in the Miami County Action, according to paragraph 66(d) of the First Amended Complaint.

16

Originally, this was alleged to have been intended to be a satellite location for Moeller Brew Barn, but allegedly that changed when Mr. Scott parted ways with the Moeller Companies on or about November 1, 2022. See First Am. Compl. at 4, ¶¶ 16, 18. A.M. Scott Distillery is alleged to have had its primary location at 250 S. Mulberry Street, Troy, Ohio, although it “was in the process of remodeling a building in downtown Troy, Ohio to open a restaurant, bar, and performance venue (the ‘Mayflower[,]’ which opened on or about April 15, 2024).” Id. at 5, ¶ 22. This allegation is similar to the statements by Mr. Scott in his Declaration filed in the A.M. Scott Distillery case. See Decl. at 8, ¶ 24 (Case No. 25-32562, Doc. 5).

17

This is consistent with the ownership percentage of West Element listed by Mr. Scott in his Amended Schedule A/B (Doc. 18) filed in his chapter 7 case on May 23, 2025.

18

West Element did not provide any other detail or explanation in support of Proof of Claim No. 9-1 and did not attach any calculation of the claim amount asserted.

19

West Element also filed a proof of claim in the chapter 11 bankruptcy filed by Mr. Scott’s other business entity, A.M. Scott Distillery, LLC, on March 6, 2026, for the amount of $250,000, on the stated basis of “[u]njust enrichment based on diversion of West Element loan proceeds to debtor.” Claim No. 23-1, In re A.M. Scott Distillery, LLC, No. 25-32562 (Bankr. S.D. Ohio Mar. 6, 2026). No proofs of claim, however, have been filed in the Scott Investments’ chapter 7 bankruptcy, No. 25-30253.

20

This defined term is used in the remainder of this Memorandum Opinion and Order.

21

It is unclear why Plaintiff has alleged numerous matters that would appear to be within the first-hand knowledge of at least one of Plaintiff’s members “[u]pon information and belief[.]” See, e.g., First Am. Compl. at 6, ¶¶ 28-30.

22

For example, on October 2, 2024, Plaintiff discovered an outstanding plumbing invoice of $6,950, and on October 7, 2024, Plaintiff became aware of an outstanding concrete invoice of $29,382.28. First Am. Compl. at 7, ¶ 33. On November 13, 2024, Plaintiff became aware of outstanding electrical invoices of $24,490 from June 20, 2024, $40,740.50 from August 30, 2024, and $21,986 from September 20, 2024. Id. at 8, ¶ 35. These invoices were supposed to have been paid from Scott Investments’ prior loan draws on July 8, 2024, August 29, 2024, and October 23, 2024. Id. at 8, ¶ 36.

23

None of the emails (or any other documents, for that matter) are attached to the Complaint.

24

Interestingly, Case No. 2024 CV 00662 does not appear to exist and the action filed by The Clock Tower by West Element Ltd. against Mr. Scott, Scott Investments, A.M. Scott Distillery, LLC, and other defendants, is Case No. 2024 CV 00590, filed on December 10, 2024, according to both the online docket of the Miami County, Ohio Court of Common Pleas and the Statement of Financial Affairs (“SOFA”) filed by A.M. Scott Distillery, LLC. SOFA at 2, Part 3, item 7.1, In re A.M. Scott Distillery, LLC, Case No. 25-32562 (Bankr. S.D. Ohio Dec. 22, 2025).

25

Civil Rule 8(a) is made applicable to this adversary proceeding by Bankruptcy Rule 7008, with certain additional requirements for alleging jurisdiction and stating whether the pleader consents to the entry of final orders by the bankruptcy court, neither of which are presently at issue.

26

Subsection (B) of § 101(5), concerning the “right to an equitable remedy for breach of performance if such breach gives rise to a right to payment” does not use the terms “liquidated” or “unliquidated,” but is otherwise the same.

27

This is not always the situation as bankruptcy courts are not necessarily required to liquidate a claim under state law in order to reach a determination that a debt is or is not dischargeable in bankruptcy, depending on the context and the type of claim asserted, although the claim must still be set up. See, e.g., De Los Rios v. Egeth (In re Egeth), 676 B.R. 69, 74-75 (Bankr. S.D.N.Y. 2026) (Glenn, C.J.) (noting, in the context of granting a default judgment, that “[w]hile the text of section 523(a)(6) is silent on the issue, courts throughout the country have noted that Congress in drafting the Bankruptcy Code could not have intended to allow a debt‘s dischargeability to depend on whether an ongoing civil action has concluded by the time of a bankruptcy filing.“). However, in those situations, “the total debt, whatever amount it may be, is determined to be nondischargeable and the bankruptcy court leaves the amount to be determined by another court, such as a domestic relations court[.]” In re Miller, 2024 Bankr. LEXIS 1521, at *16, n.4 (citing Cowan v. Ladosenszky (In re Ladosensky), 617 B.R. 275, 278 (Bankr. E.D. Mich. 2020)).

28

To the extent that Plaintiff is seeking to allege a debt owed by Mr. Scott for the cost of completion of the Clock Tower Project due to Scott Investment‘s inability to do so, it may be tougher to prove that the entirety of such a claim should be held non-dischargeable under § 523(a)(6); whereas, there is a more direct causal link between the amount of allegedly misappropriatеd or diverted Loan proceeds and at least the assertion of a claim under § 523(a)(6).

29

The fact that a potential breach of contract claim and claim to hold Mr. Scott personally liable under a theory of piercing the corporate veil can only be gleaned through closely examining various parts of the First Amended Complaint, none of which are plead as a separate count, and are only summarized in an additional prayer for relief, has made review of this matter more involved.

30

In re Keirns, 628 B.R. at 918.

31

In re Keirns, 628 B.R. at 918 (quoting SFS Check, LLC v. First Bank of Del., 774 F.3d 351, 358 (6th Cir. 2014)).

32

As further discussed below, however, oral representations of a debtor‘s or insider‘s financial condition do not work for purposes of § 523(a)(2)(A), and do not meet the criteria of a “written statement” required under § 523(a)(2)(B).

33

There is also an assertion that Mr. Scott concealed his “membership units in The Clock Tower, LLC, West Element, and other business entities[;]” however, he disclosed those interests in his Schedule A/B (Case No. 25-30494, Doc. 1 at 14, Part 4, item 19) and there is no allegation regarding from whom Mr. Scott allegedly concealed those interests prior to bankruptcy or how that served to hinder, delay, or defraud his creditors. See First Am. Compl. at 35, ¶ 143.

34

Notably, Plaintiff has not alleged a cause of action under § 727(a)(7), under which a bankruptcy court may deny discharge when:

the debtor has committed any act specified in paragraph (2), (3), (4), (5), or (6) of this subsection, on or within one year before the date of the filing of the petition, or during the case, in connection with another case, under this title . . . , concerning an insider.

See Barclays/Am. Bus. Credit v. Adams (In re Adams), 31 F.3d 389, 394 n.2 (6th Cir. 1994); Cadlerock Joint Venture II L.P. v. Robbins, No. 3:08CV-365-S, 2009 U.S. Dist. LEXIS 4038, at *4-5, 2009 WL 151695 (W.D. Ky. Jan. 21, 2009); Motil, 2023 Bankr. Lexis 102, at *11-12. Scott Investments is directed by Mr. Scott as the sole member of the LLC, so Scott Investments would be an insider in relation to Mr. Scott as defined in § 101(31).

35

There are also sub-paragraphs (C) and (D) to § 727(a)(4), but Plaintiff did not assert in its First Amended Complaint that those alternative bases apply to this circumstance.

36

Civil Rule 15(c)(1)(B) provides that “[a]n amendment to a pleading relates back to the date of the original pleading when . . . the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out—or attempted to be set out—in the original pleading[.]”

37

For clarification, as it concerns Counts One and Two, to the extent that Plaintiff is unable to adequately plead one or more claims under state law to either establish a debt owing by Scott Investments for which Mr. Scott would be personally liable to Plaintiff under a veil piercing or alter ego liability theory, or claims to hold Mr. Scott directly liable to Plaintiff, that Plaintiff seeks to have held non-dischargeable under § 523(a)(2) and (a)(6), then such claim(s) would be dismissed as those claims cannot stand ‍​​​‌‌‌‌‌​‌‌‌‌​‌‌‌​‌‌‌‌​‌​​‌‌‌‌‌‌‌​‌‌​‌‌​​‌‌​‌​​‌‍on their own without a valid debt under non-bankruptcy law.

Case Details

Case Name: In re The Clock Tower by West Element, Ltd v. Scott

Court Name: United States Bankruptcy Court, S.D. Ohio

Date Published: Jun 23, 2026

Citation: 25-03037

Docket Number: 25-03037

Court Abbreviation: Bankr. S.D. Ohio