The court granted summary judgment to the plaintiffs in their action to except a debt from discharge under § 523(a)(2)(A). The plaintiffs purchased a house from the debtor and later discovered the basement suffered water damage, which the debtor had failed to disclose. The matter was arbitrated, with an award being entered in the plaintiffs' favor based on the debtor's knowing failure to disclose. The debtor then filed for bankruptcy protection before the arbitration award could be confirmed.
Collateral estoppel principles allowed the plaintiffs to rely on the arbitration findings to prove the fraudulent nature of the debtor's representations. The arbitration award established that the debtor knowingly made a false statement to the plaintiffs concerning water intrusion in the basement, the plaintiffs justifiably relied on the debtor's representations, and they suffered damage as a result. Therefore, the plaintiffs were entitled to judgment as a matter of law excepting this debt from discharge.