Summary:
McGinnis brought suit in state court against Fantone for two notes that Fantone had guaranteed with MSC. Following court ordered mediation, the parties agreed that Fantone would execute a modification of loan agreement for $200,000.00 with interest at six percent (6%) per year, would substitute himself as the obligor debts owed by executed by MSC, and would sign a Confession of Judgment for $200,000. Less than three weeks later, Pantone filed a voluntary Chapter 13 bankruptcy. McGinnis brought an adversary proceeding seeking a determination that Fantone’s representations, actions and/or conduct in the mediation constituted false pretenses, false representations, or actual fraud and that his Agreement to the settlement terms was a materially false written statement, due to his lack of ability to pay, and should be non-dischargeable pursuant to 11 U.S.C. § 523(a)(2).
The bankruptcy court, however, held that just because Fantone filed a Chapter 13 bankruptcy petition shortly after agreeing to a mediated settlement did not “constitute sufficient facts to give rise to a plausible inference that the Debtor with intent to deceive, entered into the agreements with no intention to pay the debts.” The bankruptcy court further found that the complaint failed to allege sufficient facts to support the allegations that McGinnis reasonably relied on the misrepresentations, actions, and/or conduct by Fantone during the course of the mediation conference. Accordingly, the complaint was dismissed without prejudice. (McGinnis was allowed 21 days to amend his complaint.)
For a copy of the opinion, please see:
McGinnis v. Fantone- Bankruptcy Following Settlement Agreement does not Constitute Fraud or False Written Statement
Blog comments