Cocoma v. Nigam

Case Type:
Case Status:
CO-17-044 and CO-17-045 (10th Circuit, Aug 09,2018) Not Published
Tenth Circuit affirmed the judgment of bankruptcy court denying claims for nondischargeability of debt under 11 U.S.C. 523(a)(2)(A) and (a)(6), which excepts from discharge any debt obtained “for false representation and fraud” and “for willful and malicious injury by the debtor to another entity,” respectively. Debtor was not vicariously liable under § (a)(6) for the actions of company she was a member because section requires a “direct participation” in the wrongful act.
Procedural context:
Appeal to the Tenth Circuit Bankruptcy Appellate Panel from judgment of bankruptcy court dismissing claims for nondischargeability of debt under § 523(a)(2)(A) and (a)(6).
Debtor, her father, and bother were members of Summit, LLC, which developed and leased commercial property. Summit and plaintiff executed a lease in 2006 that provided Summit would reimburse the costs for building a store up-front. When Summit failed to reimburse costs, plaintiff withheld rent and rejected any settlements. Plaintiff decided to close the store in 2008 and began liquidating its inventory. Without the debtor’s participation, father and brother obtained a distress for rent warrant and seized the inventory. Father then passed away and Summit was placed in a receivership. On August 21, 2014, debtor sought relief under Chapter 7 and about three months later, plaintiff filed adversary proceeding arguing that debt owed for failure to reimburse costs and conversion of inventory was nondischargeable under § 523(a)(2)(A) and (a)(6). Bankruptcy court ruled for the debtor and found that plaintiff failed to prove the debtor made a false representation, had an intent to deceive, or had any part in the alleged wrongful acts.

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