IN RE: HEYL

Case Type:
Consumer
Case Status:
Affirmed
Citation:
No. 18-6001 (8th Circuit, Oct 18,2018) Published
Tag(s):
Ruling:
The bankruptcy court did not err when dismissing the appellants' second nondischargeability complaint and denying appellants' subsequent motion for reconsideration. The bankruptcy court correctly decided that the appellants' debt could not result from a Consent Order entered several years after the debtors filed their bankruptcy petition.
Procedural context:
The bankruptcy court ruled against the appellants on two separate lawsuits seeking to have certain debt deemed nondischargeable. The bankruptcy court also denied the appellants' motions to reconsider.
Facts:
Debtor Richard Michael Heyl, promoted two businesses, Heyl Partners Station Plaza ("Heyl Partners") and Johns Folly Ocean Villas, LLC ("Johns Folly"), to Steve Conway. Conway, through his company LorCon LLC #1 ("LorCon") invested in Heyl Partners and Johns Folly. Heyl Partners encountered financial difficulties. LorCon converted its interest in Heyl Partners into an additional interest in Johns Folly. The value of the transferred investment was negotiated in large part based on Heyl's representations regarding an asserted recent investment in Johns Folly. After the transfer of the additional investment interest into Johns Folly, LorCon made two capital calls for Johns Folly. Johns Folly ultimately failed, Heyl and his spouse filed a chapter 7 petition in 2009, asserting that it was a "no asset" case. The Heyls also scheduled a zero-dollar debt owed to Conway for an investment in "JFOV, LLC." Approximately one year later, Conway, LorCon and an affiliate sued the Heyls seeking a determination that the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A) for false representations, false pretenses and fraud. The bankruptcy court ruled in favor of the Heyls, finding that the debt was not the product of Heyl's misrepresentations. Conway and LorCon failed to appeal the judgment, but did file a motion for relief from the judgment based on "newly discovered evidence." The bankruptcy court denied the motion. Conway, LorCon and LorCon, LLC # 4 filed a new adversary proceeding against the debtors, seeking a determination that the debt was nondischargeable under 11 U.S.C. § 523(a)(19). The bankruptcy court dismissed the second complaint, and denied Conway's motion for reconsideration.
Judge(s):
SALADINO, Chief Judge, DOW and SANBERG, Bankruptcy Judges

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