Triumphant Gold v. Matloff
- Summarized by Caleb Chaplain , U.S. Bankruptcy Court, Western District of Virginia
- 1 year 11 months ago
- Case Type:
- Business
- Case Status:
- Reversed and Remanded
- Citation:
- 23-10698 (5th Circuit, Mar 20,2024) Not Published
- Tag(s):
-
- Ruling:
- The Fifth Circuit found that the questions on appeal to the district court (from a bankruptcy court’s order denying a complaint filed under both section 523 and section 727) contained questions of both law and fact. Because the decision to discharge debts represents a conclusion regarding the legal effect of the bankruptcy court’s factual findings as to the debtor’s circumstances, the Fifth Circuit held the district court erred in applying a “blanket clear-error standard” instead of performing a de novo review of the bankruptcy court's order. The Fifth Circuit thus vacated and remanded.
- Procedural context:
- Triumphant Gold Limited ("TGL") filed a complaint seeking to have its debt excepted from discharge under section 523 and objecting to the debtor’s discharge under section 727. In a 139-page opinion, the bankruptcy court ruled against TGL. TGL appealed asserting that the bankruptcy court erred in its application of the provisions of section 523 and 727. In a two-page opinion, the district court affirmed, “citing only the high level of deference owed to bankruptcy courts’ factual determinations” and holding that all issues on appeal were “factual inquiries.” TGL appealed to the Fifth Circuit.
- Facts:
- As part of the financing for his company, Darren Matloff entered into loan agreements and various “side letters” with Triumphant Gold Limited (“TGL”). Matloff, in exchange for an extension of credit, agreed (1) to reclassify as a loan from TGL a “CEO Bonus” from 2016, and (2) to collect purchase-order proceeds or accounts receivable and deposit those funds into bank accounts pledged as collateral to TGL.
Both Matloff and his company declared bankruptcy. Matloff had never repaid the “bonus” and ceased depositing funds into the TGL-pledged accounts. TGL sought to except its debt from discharge under section 523 (for alleged false representations and willful and malicious injury through breach of contract) and opposed Matloff’s discharge under section 727 (based on a failure to properly preserve financial records and based on certain transfers of property with the alleged intent to hinder, delay, or defraud TGL). The bankruptcy court ruled against TGL. On appeal, the district court affirmed.
- Judge(s):
- Stewart, Clement, Ho
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