Bishop v. Bishop

Judgment.²After reviewing the record and applicable legal authorities, the Court finds Defendant is entitled to summary judgment against Plaintiffs. The following findings of fact and conclusions of law are made pursuant to Federal Rule of Civil Procedure 52, made applicable to this bankruptcy proceeding by Federal Rule of Bankruptcy Procedure 7052.

Jurisdiction

The Court has jurisdiction over this bankruptcy case pursuant to 28 U.S.C. § 1334(b), and venue is proper pursuant to 28 U.S.C. § 1409.³Reference to the Court of this matter is proper pursuant to 28 U.S.C. § 157(a). The is a core proceeding as defined by 28 U.S.C. § 157(b)(2)(I).

Summary Judgment Standard

Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."⁴"An issue is 'genuine' if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way."⁵"An issue of fact is 'material' if under the substantive law it is essential to the proper disposition of the claim."⁶Any inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion.⁷ This Court's Local Rule 7056-1 requires that a motion for summary judgment contain a concise statement of material facts as to which the movant contends no genuine issue exists. Each

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fact shall be stated in a separately numbered paragraph and shall refer with particularity to those portions of the affidavits, discovery materials, pleadings, or other parts of the record before the Court upon which the movant relies. Defendant's Motion for Summary Judgment complies with this Court's Local Rule 7056-1 as it includes a numbered list of material facts to which she alleges there is no genuine issue, with references to the record and exhibits supporting those facts. Plaintiffs failed to respond to Defendant's Motion for Summary Judgment. A court may accept non-rebutted evidence as undisputed and true for summary judgment purposes.⁸Properly supported material facts set forth in a motion for summary judgment are deemed admitted unless specifically controverted by the non-movant.⁹Accordingly, the Court accepts as true the statement of facts and evidence offered in support of Defendant's Motion for Summary Judgment, as set forth below. Nevertheless, the Court must "examin[e] the moving party's submission to determine if it has met its initial burden of demonstrating that no material issues of fact remain for trial and the moving party is entitled to judgment as a matter of law."¹⁰

Findings of Fact

There is no genuine dispute as to the following facts:

1. On September 4, 2024, Defendant filed a Chapter 7 Voluntary Petition in this Court, Case Number 24-80684-PRT.¹¹

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2. On December 20, 2024, Plaintiffs filed this adversary proceeding seeking a determination that the debt allegedly owed by Defendant to Plaintiffs is excepted from discharge in Defendant's bankruptcy case pursuant to § 523(a)(2)(A), (a)(4), and (a)(6).¹²

3. Plaintiffs' Complaint alleges Defendant, through fraud, misrepresentation, and false pretenses, obtained money and property for her own benefit after selling Plaintiffs' property at auction.¹³

4. Defendant served Plaintiffs' counsel with Interrogatories, Requests for Admission, and Requests for Production of Documents via email on March 4, 2026.¹⁴Plaintiffs' counsel acknowledged receipt of said discovery.¹⁵

5. To date, Plaintiffs have not responded to any of Defendant's discovery requests, nor have they responded to Defendant's Motion for Summary Judgment.¹⁶Therefore, the following facts are deemed admitted:¹⁷

6. Roy Bishop, Jr., Defendant's deceased husband, and his brother, Plaintiff Gary Bishop, were 50-50 members of Plaintiff B&B Gas Well Services, LLC.¹⁸

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7. During the summer of 2020, Defendant and her husband decided to sell their personal property via auction and contacted Plaintiff Gary Bishop to inquire as to whether he would agree to include company property in the auction.¹⁹Plaintiff Gary Bishop did not respond and never agreed to participate in an auction with Defendant and her husband.²⁰

8. On or about December 3, 2020, Plaintiff Gary Bishop personally transported, or caused to be transported, equipment, trailers, or other physical assets belonging to Plaintiff B&B Gas Well Services, LLC (the "LLC Assets") to the physical location of the auction site.²¹

9. Without the permission of Defendant or her husband, Plaintiff Gary Bishop voluntarily entered the LLC Assets into the auction inventory to be sold.²²

10. Plaintiff Gary Bishop personally attended the auction on the dates of sale.²³

11. Plaintiff Gary Bishop, or agents acting on his behalf, placed winning bids on one or more items of the LLC Assets during the auction.²⁴

12. Plaintiff Gary Bishop cannot identify any written resolution, member vote, or manager authorization approving an auction of the LLC Assets.²⁵

13. Plaintiff Gary Bishop did not obtain an independent appraisal of the LLC Assets that he took or caused to be taken to the physical location of the auction prior to any bids being placed on those LLC Assets.²⁶

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14. The funds retained by Defendant from the auction proceeds are less than or equal to the amount of unpaid distributions and rental income owed by Plaintiff B&B Gas Well Services, LLC to Roy Bishop and/or his Estate for the period January 1, 2019, through the present date.²⁷

15. Defendant did not make any false statement or misrepresentation to Plaintiff Gary Bishop concerning the auction, the property sold, the proceeds from the auction, or any other matter involving Plaintiff B&B Gas Well Services, LLC.²⁸

16. The proceeds attributable to company property were retained as an offset against amounts Roy Bishop believed were owed to him as a member of Plaintiff B&B Gas Well Services, LLC.²⁹The Operating Agreement for Plaintiff B&B Gas Well Services, LLC does not prohibit a member from retaining proceeds as an offset for unpaid distributions.³⁰ To the extent the Conclusions of Law contain any items that should more appropriately be considered Findings of Fact, they are incorporated herein by this reference.

Conclusions of Law

Before a court may grant summary judgment where there is a failure to respond, it must determine whether the party seeking summary judgment is entitled to judgment as a matter of law.³¹The issues of law before the Court are whether a debt should be excepted from discharge

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pursuant to § 523(a)(2)(A), (a)(4), and (a)(6). Under § 523, a creditor seeking to except its claim from discharge must prove the claim is nondischargeable by a preponderance of the evidence.³²

A. Section 523(a)(2)(A): False Pretenses, False Representation, or Actual Fraud

Section 523(a)(2)(A) excepts from discharge a debt "for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—false pretenses, a false representation, or actual fraud[.]" A claim pursuant to § 523(a)(2)(A) may rest on any of the three aforementioned types of fraud, each of which must be analyzed separately depending on the facts of the specific case.³³However, each type of fraud must involve "moral turpitude or intentional wrong, and does not extend to fraud implied in law which may arise in the absence of bad faith or immorality."³⁴In other words, the debtor must have acted with subjective intent to deceive, which may be inferred from the totality of the circumstances.³⁵

A false representation for purposes of § 523(a)(2)(A) is an explicit, definable statement resulting in a misrepresentation.³⁶A false pretense, on the other hand, is an implied misrepresentation, which includes a material omission or conduct intended to create and foster a false impression.³⁷To establish a claim under § 523(a)(2)(A) for false pretenses or false representation, a plaintiff must prove the following: "1) the debtor made a false representation; 2)

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the debtor made the representation with the intent to deceive the creditor; 3) the creditor relied on the representation; 4) the creditor's reliance was justifiable; and 5) the debtor's representation caused the creditor to sustain a loss."³⁸Actual fraud entails "any deceit, artifice, trick, or design involving direct or indirect operation of the mind, used to circumvent or cheat another."³⁹To establish a claim for actual fraud, "a creditor must establish that (1) a fraud occurred, (2) the debtor intended to defraud, and (3) the fraud created the debt that is the subject of the dispute."⁴⁰ The Court concludes that Defendant is entitled to judgment as a matter of law on Plaintiffs' § 523(a)(2)(A) claim. Plaintiffs have not shown, or even alleged with particularity, that Defendant made any false representation; Defendant made a false representation with intent to deceive Plaintiffs; Plaintiffs justifiably relied on a false representation; or the alleged representation caused Plaintiffs to sustain a loss. Moreover, Plaintiffs have failed to provide any support to suggest that a factual dispute exists as to their claim for actual fraud. Therefore, because Plaintiffs have failed to set forth any evidence, no rational trier of fact could find in Plaintiffs' favor. Therefore, the Court finds the grant of summary judgment in Defendant's favor as to Plaintiffs' § 523(a)(2)(A) claim to be appropriate.⁴¹

B. Section 523(a)(4): Fraud or Defalcation While Acting in a Fiduciary Capacity, Embezzlement, or Larceny

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Section 523(a)(4) excepts from discharge debts "for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny." To prove a claim for fraud or defalcation while acting in a fiduciary capacity, "'a plaintiff must [show] that: (1) a fiduciary relationship existed between the debtor and the creditor, and (2) the debt owed to the creditor is attributable to a fraud or defalcation committed by the debtor in the course of the fiduciary relationship.'"⁴²The fiduciary relationship necessary to satisfy the first element is one that arises from an express or technical trust established or imposed prior to the allegedly tortious conduct creating the debt.⁴³As to the second element, fraud is defined as "positive fraud, or fraud in fact, involving moral turpitude or intentional wrong . . . and not implied fraud, or fraud in law, which may exist without the imputation of bad faith or immorality."⁴⁴Defalcation, on the other hand, does not require a showing of bad faith, moral turpitude, or immoral conduct; instead, it requires a finding "that the debtor acted with wrongful intent, or, at a minimum, with a conscious disregard of his or her fiduciary duties."⁴⁵

Embezzlement is defined as "the fraudulent appropriation of property by a person to whom such property has been entrusted, or into whose hands it has lawfully come, and it requires fraud

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in fact, involving moral turpitude or intentional wrong, rather than implied or constructive fraud."⁴⁶ Larceny, on the other hand, is "the fraudulent and wrongful taking and carrying away of the property of another with intent to convert [such property] to the taker's use and with intent to permanently deprive the owner of such property."⁴⁷The critical difference between the two "is that with embezzlement, the debtor initially acquires the property lawfully, whereas larceny requires that the funds originally come into the debtor's hands unlawfully."⁴⁸Additionally, the fraudulent intent required to prove embezzlement or larceny differs from that required under § 523(a)(2) in that "the property must generally be appropriated or converted with the intent permanently to deprive."⁴⁹

The Court concludes that Defendant is also entitled to judgment as a matter of law on Plaintiffs' § 523(a)(4) claim. There is nothing evidencing an issue of disputed material facts as to the existence of a fiduciary relationship between Plaintiffs and Defendant or that Defendant committed fraud or defalcation. Furthermore, there is no evidence supporting a determination that Defendant's actions constituted embezzlement or larceny. Thus, the Court finds the grant of summary judgment in Defendant's favor as to Plaintiffs' § 523(a)(4) claim to be appropriate.

C. Section 523(a)(6): Fraud or Defalcation While Acting in a Fiduciary Capacity

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Section 523(a)(6) excepts from discharge a debt "for willful and malicious injury by the debtor to another entity or to the property of another entity." In this context, willfulness "is more akin to intentional torts than negligent or reckless torts or a 'knowing breach of contract.'"⁵⁰There must have been "a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury."⁵¹To fulfill the malicious injury element of § 523(a)(6), "the debtor must have 'acted with a culpable state of mind vis-à-vis the actual injury caused the creditor.'"⁵²In other words, the action must have been committed wrongfully and without just cause or excuse.⁵³ However, maliciousness does not require a showing of personal animus. The Court finds that Defendant is likewise entitled to judgment as a matter of law on Plaintiffs' § 523(a)(6) claim. There is no issue of disputed material facts as to whether Defendant willfully and maliciously caused injury to Plaintiffs or their property. Plaintiffs have not provided any specific facts or evidence to the contrary. As such, the Court finds the grant of summary judgment in Defendant's favor as to Plaintiffs' § 523(a)(6) claim to be appropriate.

Conclusion

For the above and foregoing reasons, Defendant Karen Lee Bishop's Motion for Summary Judgment and Brief in Support (ECF No. 64) is granted, and the debt to Plaintiffs is discharged. A separate judgment will be entered.

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