In the Matter of Darren Scott Matloff
- Case Type:
- Consumer
- Case Status:
- Affirmed in part and Reversed in part
- Citation:
- 24-10439 (5th Circuit, Oct 08,2025) Not Published
- Tag(s):
-
- Ruling:
- In addition to providing an excellent summary of the legal standards for dischargeability and discharge under 11 U.S.C. §§ 523 and 727, the Court of Appeals reversed the bankruptcy court's decision to grant the debtor a discharge notwithstanding 11 U.S.C. § 523(a)(6) and the debtor's actions causing the transfer from charged accounts and use of otherwise encumbered funds to keep the debtor's company afloat. In the divided opinion, the majority ruled that the bankruptcy court had to consider whether the secured lender had consented to the company's use of funds to pay operating expenses.
- Procedural context:
- Following a trial, the bankruptcy court entered a 139-page decision holding that a secured lender had failed to meet its burdens to prevent the debtor from receiving a discharge under 11 U.S.C. §§ 523 and 727(a).
The lender appealed, and the district court affirmed.
The lender appealed to the Fifth Circuit Court of Appeals, which reversed the district court's decision and remanded. On remand, the district court again affirmed the bankruptcy court.
The secured lender again appealed to the Fifth Circuit.
- Facts:
- The debtor, Darren Scott Matloff, formed a series of companies (collectively, "Rooftop") to purchase, import, and sell drones. Rooftop Singapore, one of the Rooftop companies, obtained financing from Triumphant Gold Limited ("TGL") pursuant to a 2016 loan agreement and a 2017 loan agreement. Matloff guaranteed Rooftop Singapore's obligations to TGL. As security for the loans, Rooftop Singapore granted TGL a security interest in its accounts receivable and proceeds, cash deposited in Asian Express bank accounts (the "Charged Accounts"), and stock. Rooftop USA (another Rooftop company) collected proceeds in its U.S. based Chase bank account and then transferred funds subject to TGL's security interest to the Charged Accounts.
In October 2017, TGL allowed Rooftop Singapore to enter into an accounts receivable factoring agreement with Star Funding. TGL also subordinated its liens on factored receivables to those of Star Funding.
On the maturity date of the 2017 Loan Agreement, Rooftop Singapore notified TGL that it would not be paying off the loan. On January 3, 2018, Rooftop Singapore owed TGL $3,903,895.65.
On January 16, 2018, TGL and Rooftop Singapore entered into a final side letter, pursuant to which TGL agreed to defer from declaring a default and extended an additional $500,000 to Rooftop Singapore as an emergency loan. Rooftop Singapore reaffirmed its obligations under the loan agreements.
At a meeting on February 12, 2018, following Rooftop Signature's continued failure to pay the loan, TGL delivered a default letter, stating that February 15, 2018, would be the effective date of default.
On March 1, 2018, Matloff caused Rooftop Singapore to transfer $846,919.82 from the Charged Accounts to Rooftop USA's Chase bank accounts. Matloff explained this action to TGL by stating that Rooftop would fail if TGL seized the funds in the Charged Accounts.
TGL objected in writing to Rooftop's actions, but Rooftop kept using the proceeds of TGL's collateral to pay Rooftop Singapore's operating costs and other expenses.
Notwithstanding Matloff's efforts, Rooftop was unable to refinance its obligations to TGL.
TGL sued Matloff in Singapore, and a $4.4 million judgment was entered against Matloff in December 2018. Matloff filed a voluntary Chapter 7 bankruptcy petition in June 2019.
- Judge(s):
- Graves, Engelhardt, and Oldham, Circuit Judges
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