Hogan v. George (In re George)

Hogan v. George (In re George), Case No. 12-8013 (B.A.P. 6th Cir. Jan. 11, 2013)
Appellants - creditors holding a claim related to a state court judgment for breach of contract, negligent misrepresentation, and fraud - were entitled to an exception from discharge pursuant to 11 U.S.C. § 523(a)(2)(A), but only to the extent of the portion of their state court award allotted to the claim of fraud.
Procedural context:
Appeal from the bankruptcy court for the Eastern District of Kentucky granting partial summary judgment to Appellants on the issue of Appellants' claim under 11 U.S.C § 523(a)(2)(A), excepting from discharge for fraud only a portion of the award granted to Appellants in state court. Judgment affirmed.
This case originates from a real estate transaction in which Debtors were the sellers and Appellants were the buyers. Debtors failed to disclose defects in the property discovered during the executory phase. After closing, Appellants also discovered the defects and filed suit in state court, alleging (among other claims) breach of contract, negligent misrepresentation, and fraud in the inducement. After a trial, the state court awarded Appellants actual damages in the amount of $513,000, broken down into $171,000 for each of the three claims. Soon after, Debtors filed their petition, and Appellants filed an adversary proceeding seeking to have their claim excepted from discharge. Concluding that 11 U.S.C. § 523(a)(2)(A) does not include a cause of action for negligent misrepresentation, the bankruptcy court granted summary judgment to Appellants on the issue of their claim for fraud, excepting from discharge only the portion allocated by the state court jury to that claim. The other claims having been dismissed or waived by Appellants, the bankruptcy court decision was final, and Appellants appealed, arguing they were entitled to an exception to the discharge in an amount equal to their entire claim.
Emerson, McIver, and Preston, Bankruptcy Appellate Panel Judges

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