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Hatfield v. Thompson (In re Thompson)

Hatfield v. Thompson, (In re Thompson), Case No. WO-15-027 (B.A.P. 10th Cir. August 19, 2016). Published
A debt proven under state law on grounds other than fraud can be excepted from discharge under the actual fraud provision of § 523(a)(2)(A) and to establish that a debt is excepted from discharge based on actual fraud, the creditor must show: (a) the debtor committed actual fraud; (b) the debtor obtained money, property, services, or credit by the actual fraud; and (c) the debt arises from the actual fraud. There is no requirement that a creditor rely on the actual fraud or part with assets or receive credit at the inception of, or concurrently with, the actual fraud and there is no requirement that the debtor’s actual fraud induced the creditor to part with property or extend credit.
Procedural context:
The bankruptcy court granted summary judgment in favor of Thompson and Hatfield appealed. The Tenth Circuit BAP reversed and remanded because genuine issues of material fact existed regarding all three elements of § 523(a)(2)(A) precluding summary judgment. Reviewed de novo.
Thompson owned Promise McLoud, LLC which operated a nursing home in Oklahoma. To operate the nursing home, Thompson submitted an application to the Oklahoma Department of Health in which he made several representations many of which never came to fruition and were not intended to come to fruition. Hatfield’s mother died at the nursing home and Hatfield alleged that her death was the result of substandard care. Hatfield sued Thompson and Promise McLoud and on the morning of the trial, Thompson filed chapter 7. Hatfield obtained a default judgment against Promise McCloud in the amount of $1.0 million in actual and punitive damages. Hatfield brought the adversary proceeding asserting that Thompson was personally liable for the debt under the theory of piercing the corporate veil and that such liability was non-dischargeable under § 523(a)(2)(A). The bankruptcy court granted summary judgment in favor of Thompson holding that: (1) the debt at issue was not “the type of debt that can be excepted from discharge under Section 523(a)(2)(A);” and (2) Thompson could not satisfy the elements for fraud under Oklahoma state law.
Romero, Jacobvitz, Mosier (Jacobvitz)

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