CaptureApril 19, 2016

Situation:

  • Plaintiff and Debtor were firearm collectors.
  • Plaintiff placed several firearms with the Debtor for safekeeping.
  • Debtor sold some of the weapons with Plaintiff’s permission.
  • Plaintiff asked for remaining firearms to be returned; Debtor did not return to Plaintiff
  • Plaintiff sued Debtor in State Court.
  • 2 years of litigation; Plaintiff won summary judgment $160,000 plus attorney’s fees and costs since Debtor did not respond.
  • Debtor then filed for Chapter 7 in an attempt to discharge this judgment.
  • Plaintiff filed an adversary proceeding objecting to Debtor’s discharge.
  • Bankruptcy court denied Plaintiff’s summary judgment since State Court case made no finding of facts; some of the counts could not be asserted in Bankruptcy Court.

Outcome:

  • Case went to trial – Bankruptcy court held trial for the specific facts.
  • Plaintiff proved that he had given a 45-caliber pistol M1911 to the Debtor
  • Plaintiff bought this firearm for $12,000 and did, in fact, give it to the Debtor for safekeeping and the Debtor sold the pistol for $37,500 and kept the proceeds.

Final Ruling by Bankruptcy Court:

  • Plaintiff’s claim for $37,500 was non-dischargeable; Debtor lied with fraudulent intent even after the fact; when you lie and conceal information with the purpose to deceive and with fraudulent intent.
  • Intent to deceive makes the damages non-dischargeable.
  • Summary judgment of $160,000 plus attorney fees and costs in State Court was not transferrable since it was not specific and could not be held without a Bankruptcy Court ruling.

Again, I always tell my client to be honest when coming to the Federal government for bankruptcy help.