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Scott Robert Paulsen v. Jeffrey S. Westerby (In re Westerby), Ch. 7, BK20-41661, A21-4010-BSK (Dec. 22, 2021)

After a trial, the court declined to except the debt at issue from discharge under § 523(a)(2)(A). The plaintiff consigned a boat and trailer for sale with the debtor’s business and turned over a signed title for the boat. The items sold four months later. When the plaintiff received a check from the debtor for less than he had anticipated, even accounting for the debtor’s sales commission, he learned that the debtor had reduced the sales price without authorization. The plaintiff also learned that the price paid by the buyer was more than the plaintiff had been told, because the debtor charged an installation fee for some optional equipment purchased by the buyer. The plaintiff did not deposit the check from the debtor while he investigated the sales price discrepancy. By the time the plaintiff tried to deposit the check, it was returned for insufficient funds. The plaintiff ultimately sued in state court and obtained a confessed judgment from the debtor personally and on behalf of his company.

After the debtor filed a bankruptcy petition, the plaintiff commenced this adversary proceeding to except the debt from discharge based on false pretenses, false representation, or actual fraud. The court found no evidence of the debtor’s intent to induce the creditor to rely on a false representation. Rather, the debtor acted in good faith in selling the consigned property and obtaining the best price he could for it. At most, there was a breach of contract. Even if the plaintiff were able to establish a claim under § 523(a)(2)(A), only a fraction of the amount sought would be excepted from discharge. The plaintiff received a check for $4,000 for the sale of the property. He contends he may have been entitled to $4,600 based on the total sales price of the boat and trailer. Had the plaintiff cashed the check in a timely manner, it would have been honored, so $4,000 of the debt owed to him is a result of his own inaction.

Wednesday, December 22, 2021
Judge Brian S. Kruse