In re Wright (01-55623, Adv. No. 02-05055)

After debtor sold creditor’s collateral out of trust, creditor sought determination of nondischargeability under § 523(a)(2)(A), (a)(2)(B), and (a)(6). Under § 523(a)(2)(A) the creditor could not prove a false representation by imputing the fraud of one corporate principal to another, nor could the creditor prove justifiable reliance when it failed to follow its procedures for monitoring collateral. Similarly, under § 523(a)(6), the creditor could not show willful and malicious injury when the debtor was current on loan payments and creditor failed to monitor its collateral. However, creditor proved elements of § 523(a)(2)(B), and debtor could not escape liability under that section by choosing to remain willfully ignorant of his company’s financial situation.

Friday, March 28, 2003