Where a creditor who made loans to assist a debtor in opening a restaurant obtained a default judgment in the amount of $77,851.34 against the defendant in state Superior Court, the judgment debt is not exempt from discharge, as the creditor (1) has failed to meet her burden of proof that she justifiably relied on a false statement made by the debtor with the intent to induce her to loan the debtor funds and (2) has failed to demonstrate, by a preponderance of the evidence, that her claim arose from a willful and malicious injury.
“Before the Court, after trial, is a complaint filed by judgment creditor Susan LeBel (‘LeBel’) against Jason B. Goodin, the debtor in the underlying Chapter 7 bankruptcy case (the ‘Debtor’). In this adversary proceeding, LeBel seeks a denial of the Debtor’s discharge under 11 U.S.C. §§727(a)(2)(A), (a)(3), and (a)(4) and/or a ruling that a judgment previously entered in favor of LeBel against die Debtor is nondischargeable pursuant to 11 U.S.C. §§523(a)(2) and (6) as a debt incurred by fraud and/or on account of a willful and malicious injury. …
“… The Debtor’s mere failure to repay the loan after having promised to do so is insufficient to render a debt nondischargeable under §523(a)(2)(A). And the Court does not find that the Debtor’s subsequent use of the Debtor’s income for personal expenses, vacations, or payments to other creditors, or the Debtor’s failure to sell the Restaurant or secure a business loan demonstrate an intent to defraud at the time the loan was made. In fact, Bevis testified at trial that it was he who asked LeBel to make the initial loan, and the evidence at trial demonstrated that the Debtor did, indeed, use the loans to open and operate the Restaurant.
“… The majority of the allegedly false statements relied upon by LeBel in support of her §523(a)(2)(A) argument were made many months after the loans were extended and after the Debtor opened the Restaurant, and thus could not have been used to ‘obtain’ the loans when made.
“Accordingly, the Court concludes that LeBel has failed to meet her burden of proof that she justifiably relied on a false statement made by the Debtor with the intent to induce her to loan the Debtor funds, and the debt will not be excepted from discharge pursuant to §523(a)(2)(A). …
“Regarding the failure to sell the Restaurant, the Court is persuaded that the Debtor did not intentionally and maliciously decline to sell the Restaurant in an effort to avoid repaying LeBel. …
“As to the failure to pay meals tax, the Court cannot find that the Debtor’s failure to pay was done with the intent to cause harm to LeBel. … In fact, it seems farfetched that the Debtor intentionally and knowingly crippled his business to prevent LeBel from recovering her judgment when that was his livelihood.
“Accordingly, the Court finds that LeBel has failed to demonstrate, by a preponderance of the evidence, that LeBel’s claim arose from a willful and malicious injury within the meaning of §523(a)(6).”
In Re: Goodin, Jason B. (Lawyers Weekly No. 04-013-24) (20 pages) (Katz, J.) (Chapter 7 Case No. 21-40562-EDK Adversary Proceeding No. 21-4030-EDK) (Aug. 22, 2024).
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