In re: David Austin Tolliver
- Case Type:
- Consumer
- Case Status:
- Affirmed in part and Reversed in part
- Citation:
- No. 20-8021 (6th Circuit, Dec 20,2021) Not Published
- Tag(s):
-
- Ruling:
- A judgment entered by a Utah state court as a sanction for producing fraudulent documents in discovery may have preclusive effect on the issue of fraud in subsequent 11 U.S.C. § 523(a)(2)(A) and (a)(6) litigation if the state court's findings meet the criteria of 11 U.S.C. § 523(a)(2)(A) and (a)(6). In this case, the state court awarded the creditor attorney's fees and costs as a sanction for the debtor's fraudulent conduct, and that amount is nondischargeable under § 523(a)(6).
- Procedural context:
- The debtor filed a notice of appeal of the bankruptcy court's decision granting summary judgment to creditors on their action to have certain debt declared nondischargeable.
- Facts:
- Debtor David Austin Tolliver was a member/manager of Ashtin Transport, LLC (AT). Commencing in late November 2016, AT entered into a financing agreement with WLP Capital, Inc. and its affiliates (collectively, WLP). WLP timely and properly perfected its security interest in certain of AT's assets.
AT reconstituted itself as a Tennessee limited liability company. WLP filed new UCC financing statements. Tolliver then filed false and unauthorized UCC financing statement amendments, purporting to terminate WLP's security interests.
WLP then filed new UCC financing statements and Tolliver agains filed fraudulent UCC financing statement amendments that purported to terminate WLP's security interests.
WLP then sued AT in state court in Utah. In addition to the fraudulent UCC financing statement amendments, WLP alleged that AT and Tolliver represented that certain invoices from AT to C.H. Robinson, totaling approximately $260,000, were valid and obtained funding from WLP on these invoices. The invoices, however, fraudulent. C.H. Robinson stated that AT never performed because C.H. Robinson had either removed AT from the load or the load was cancelled.
WLP filed a sanctions motion against Tolliver and AT for producing forged bank documents and correspondence during discovery. Tolliver and AT responded and alleged that WLP was responsible for "suspicious activity" such as tampering with Tolliver's computer.
Following a hearing on the sanctions motion, the Utah state court found that Tolliver produced forged bank records that falsely showed tight WLP reversed certain wire transfers to AT and a forged defamatory letter. The court found that the documents were forged and that Tolliver's conduct was intentional and merited case-ending sanctions. In Utah, that requires striking the defendant's answer and counterclaim and then entering default judgment.
The state court held an evidentiary hearing on WLP's damages resulting from the fraudulent invoices. Following the hearing, the state court awarded WLP damages of $945,417.21, with the defendants being jointly and severally liable. The state court also entered an order holding the defendants liable for an additional $367,594.54: $295,490.76 for WLP's attorney's fees and $72,103.78 for costs.
The state court then entered a Final Judgment against Tolliver and the other defendants for $1,313,011.75.
Tolliver then filed a Chapter 7 petition.
- Judge(s):
- CROOM, GUSTAFSON, and PRICE SMITH, Bankruptcy Appellate Panel Judges
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