Summary:
Plaintiffs First Recovery and Dylan Brooks sued the debtor Keith Douglas Sanders seeking to have a $1.3 million debt declared nondischargeable under 11 U.S.C. § 523(a)(2)(A) and (B). Sanders had sold his automobile repossession business, Unlimited Recovery Repossession Division (URRD), to the plaintiffs in 2015. The plaintiffs alleged Sanders made numerous false representations about the business, including misrepresenting the assignability of customer contracts, leases, and a required bond, the reasons a prior sale of URRD had failed, the condition of URRD's vehicles, and URRD's revenues.
After a trial, the bankruptcy court found the plaintiffs had proven the debt was nondischargeable under § 523(a)(2)(A), which requires showing false representation, knowledge of falsity, intent, justifiable reliance, and proximate cause. The court found the plaintiffs justifiably relied on Sanders' misrepresentations about assignability of contracts and other aspects of the business. However, the court held the plaintiffs failed to prove reasonable reliance as required under § 523(a)(2)(B) for written statements about financial condition. Thus, the $1.3 million debt was held nondischargeable under § 523(a)(2)(A) based on the oral misrepresentations.
Commentary:
Although nothing seems to have been filed in more than a year, there appears to still be related matters pending with the North Carolina Court of Appeals in First Recovery, LLC v. Unlimited Rec-Rep, LLC.
Also attached is the previous decision by Judge Flanagan of the E.D.N.C. district court.
(Thanks to Koury Hicks for the Summary of this opinion.)
For a copy of the opinion, please see:
Part 1:
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