DUNKIN DONUTS JUDGMENT NOT CONCLUSIVE ON INTENT TO DECEIVE FOR BK DISCHARGE

The situation for discussion is a debtor with a state court judgment against him for a transfer of stock that the judgment says was made to place the stock beyond the reach of creditors. After the state court judgment occurs, debtor thereafter files for chapter 7 relief. Creditor then files an adversarial complaint to object to the discharge of the State court judgment. This certainly sounds like a slam dunk case for creditor who will present the state court judgment as conclusive evidence of fraud excepting the claim from discharge. For instance, if there is a state court judgment for rent for failure to surrender the premises to landlord, and debtor files for bankruptcy relief, landlord might object to the discharge of the judgment on the ground that the judgment clearly shows that debtor intended to cause him harm by failing to surrender the leased premises immediately. Was there intent to cause damage excepting the claim from discharge? In the back rent case, the bankruptcy court ruled in favor of my client discharging $76,000 of commercial back rent saying that the state court judgment did not find that the failure to surrender leased premises was not intentional.

But what about the stock transfer judgment? In Re Kuncman, debtor’s husband bought a boat from the plaintiff. In 1998, debtor’s husband became the sole shareholder of a corporation that owned two Dunkin Donuts franchises. In 1999, he transferred the shares to the debtor, who worked as a school teacher. He also transferred ownership of the family home to the debtor. The debtor’s husband continued to manage the corporation and was paid by it. In 2004, the plaintiff sued debtor’s husband for nonpayment of a note used to finance the boat’s purchase. Debtor offered to pay plaintiff with a lifetime supply of Dunkin Donuts. Debtor refused the payment offer claiming that he only ate Starbucks donuts. Plaintiff obtained a judgment against debtor’s husband for $96,042. Then, in October 2007, plaintiff sued the debtor alleging that the stock was transferred to debtor in order to place it beyond the reach of the husband’s creditors. The state court entered summary judgment against the debtor in the amount of $96,042. After the debtor filed for Chapter 7 relief, plaintiff filed an adversarial complaint asserting that its claim was excepted from discharge pursuant to Section 523(a)(2). That provision of the bankruptcy code says that a claim for “money… obtained by false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition” is EXCEPTED from discharge.

《楊清泉律師專欄》DUNKIN DONUTS JUDGMENT NOT CONCLUSIVE ON INTENT TO DECEIVE FOR BK DISCHARGE (PART II)