United States Bankruptcy Appellate Panel

For the Eighth Circuit

___________________________

No. 20-6020

___________________________

In re: Jay Douglas Buchanan, also known as Jay Buchanan, 

also known as Jay D. Buchanan; Lori Ann Buchanan, also known

as Lori A. Buchanan, also known as Lori Buchanan

 Debtors

------------------------------

Lund-Ross Constructors, Inc.

 Plaintiff - Appellant

v.

Jay Douglas Buchanan; Lori Ann Buchanan

 Defendants - Appellees

____________

Appeal from United States Bankruptcy Court

for the District of Nebraska - Omaha

____________

Submitted: February 18, 2021

Filed: April 2, 2021

____________

Before NAIL, Chief Judge, SCHERMER and SHODEEN, Bankruptcy Judges.

____________
NAIL, Chief Judge.

Lund-Ross Constructors, Inc. appeals the bankruptcy court's summary

judgment in favor of Debtors Jay Douglas Buchanan and Lori Ann Buchanan

regardingLund-Ross's complaint to determine the dischargeability of a debt it alleges

Debtors owe.1 We have jurisdiction over this appeal pursuant to 28 U.S.C. § 158(b). 

We affirm.

BACKGROUND

Debtorsfiled a chapter 7 petition. Debtorsincluded "Lund RossConstructors"

on their schedule of creditors holding unsecured claims and described the claim as

contingent, unliquidated, disputed, and a "Corporate Debt; Notice Purpose Only. 

Lawsuit - CI 19-9270 (Douglas County District Court, NE)[.]" Debtors also

referenced Lund-Ross on their schedule of codebtors, indicating Signature Electric,

LLC ("Signature Electric") was a codebtor on the claim held by "Lund Ross

Constructors[.]" In their statement of financial affairs, Debtors disclosed Lund-Ross

had a pending state court lawsuit against Debtors and Signature Electric regarding

"Contract Disputes[.]"

Lund-Ross timely commenced a nondischargeability action against Debtors

under 11 U.S.C. § 523(a)(2)(A). Lund-Ross stated Debtors were the sole owners of

Signature Electric, it had hired Signature Electric to do work on various projects for

which Lund-Ross was the general contractor, and Signature Electric had employed

or subcontracted some of the work or supplies to other entities. Lund-Ross alleged

Signature Electric and Debtors had, when requesting payment from Lund-Ross,

untruthfully stated, via lien waivers, that all subcontractors engaged by Signature

Electric had been "fully satisfied" for materials and labor they had provided, which

1Hon. Thomas L. Saladino, Chief Judge, United States Bankruptcy Court for

the District of Nebraska.

-2-
resulted in substantial liens being placed on Lund-Ross's various projects. It wanted

the value of those liens, which Lund-Ross had to clear, plus related costs, declared

nondischargeable. Lund-Ross did not reference in its complaint any applicable

nonbankruptcy statute or case law that would make Debtors, under the facts

presented, personally liable to Lund-Ross. Debtors timely answered the complaint.

After commencing the nondischargeability adversary proceeding against

Debtors, Lund-Ross filed an unsecured proof of claim for $600,043.64 in Debtors'

bankruptcy case. On the claim form, Lund-Ross stated the basis for its claim was:

"Claims/liens asserted for amounts unpaid to electrical suppliers[.]" Lund-Ross

attached to its proof of claim an accounting of the claim that was headed "D & J

Electric," a business name used by Signature Electric. Lund-Ross also attached to its

proof of claim several lien statements. All listed either Signature Electric or D & J

Electric as the contracting party; none listed Debtors.

2

 All the invoices attached to

the lien statements listed either Signature Electric or D & J Electric as the billed

party; none listed Debtors. 

The chapter 7 trustee objected to Lund-Ross's and several other similarly

situated creditors' claims. He alleged: 

[E]ach of the said Claims is listed in Debtors' Schedules

against a corporate or non-consumer debt against Signature

Electric, LLC d/b/a D & J Electric and each of the said

Claims is property [sic] a claim against Signature Electric,

LLC d/b/a D & J Electric. None of the listed claims

includes any evidence of a personal guarantee by Debtors. 

2

In Echo Group, Inc.'s attached mechanic'slien for $31,064.22, Lund-Ross was

identified as the general contractor. We did not see in the lien statement itself a

reference to either Signature Electric or D & J Electric. However, an "Exhibit C" to

Echo Group, Inc.'s mechanic's lien identified Signature Electric, dba D & J Electric,

as the entity receiving the materials or labor.

-3-
The bankruptcy court held a hearing after one of the affected creditors responded to

the trustee's objection.3 The bankruptcy court sustained the trustee's objection to the

responding creditor's claim and entered an oral decision. The bankruptcy court also

sustained the trustee's objection to the other claims, including Lund-Ross's, but did

not discuss each individually. No appeal was taken.

In the pending adversary proceeding, Lund-Ross and Debtors filed a joint

preliminary pre-trialstatement. Itsummarily stated Debtors' "defenses or objections"

included Debtors' assertions that: all actions and representations were between LundRoss and Signature Electric, not Debtors; the debt alleged by Lund-Ross was owed

by Signature Electric, not Debtors; and there was insufficient evidence to support

lifting the corporate veil. In their "summary of the uncontroverted facts," the parties

stated Lund-Ross had obtained a judgment in state court against Signature Electric

for $600,043.64. There is no dispute the state court judgment against Signature

Electric was by default. 

3The bankruptcy court received argument, affidavits, and certain documents

already in the case file regarding the responding creditor's claim. The responding

creditor acknowledged it did not hold a personal guaranty by Debtors, but it

contended Debtors became personally responsible for Signature Electric's debt

because Debtors failed to abide by certain state laws regarding the operation of a

limited liability company. The responding creditor acknowledged a state court action

would be needed to establish Debtors' personal liability. The trustee argued, in part,

the responding creditor had not timely taken any steps to establish it had a claim

against Debtors. The bankruptcy court acknowledged the responding creditor's

argument that it may have a claim against Debtors under state law, but sustained the

trustee's objection. The bankruptcy court noted Debtors had scheduled the

responding creditor's claim as disputed and the responding creditor's proof of claim

wassupported by invoices directed only to D & J Electric and did not refer to Debtors

personally.

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Debtors moved for summary judgment in the adversary proceeding. In their

supporting brief, Debtors argued the undisputed record shows the debt to Lund-Ross

was owed by Signature Electric only and Lund-Ross's representatives were aware of

Signature Electric's "financial shortcomings and need for timely payments in order

to pay past obligations to suppliers," so there was no intent to deceive Lund-Ross "as

to the true state of supplier payments at any time." Debtors also argued there was no

reliance by Lund-Ross on the lien waivers because progress payments were made by

Lund-Ross prior to itsreceiving completed lien waivers. Asto piercing the corporate

veil, Debtors argued they did not divert for personal use the funds Signature Electric

received for its work from Lund-Ross and there was no evidence Debtors used

Signature Electric as an alter ego to conduct personal business or that the limited

liability company was a "mere shell." Debtors referenced the bankruptcy court's

earlier order disallowingLund-Ross's claim, but in their summary judgment argument

Debtors did notrely on any preclusive effect the order disallowing Lund-Ross's claim

might impose or impart.

Lund-Ross resisted Debtors' summary judgment motion. In its supporting

brief, Lund-Ross said it was aware Signature Electric had reached the limits of its

bonding capacity, but it said it had no other communications with Signature Electric

or Debtors concerning Signature Electric's financial condition prior to Signature

Electric's ceasing business. Lund-Rossstated to receive progress payments,Signature

Electric had to apply for payment using a particular form, supply supporting

documentation, and provide a completed lien waiver for the previous month's

progress payment. Lund-Ross admitted it did not hold personal guaranties from

Debtors, but alluded to personal "warranties." It argued Signature Electric had,

contrary to the lien waivers provided, failed to pay its creditorsfor six months before

Debtors advised Lund-Ross Signature Electric was going out of business. With

limited discussion, Lund-Ross argued it did not need to pierce the corporate veil to

assert a claim against Debtors but was instead relying on Debtors' alleged false

statements in Signature Electric's lien waivers to create Debtors' personal liability. 

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Lund-Ross cited GT Contracting Corp. v. Ogden (In re Ogden), Bankr. No. 14-

00286-5-DMW, Adv. No. 14-00005-5-DMW, 2015 WL 9412746 (Bankr. E.D.N.C.

Dec. 21, 2015), and RWS Building Co. v. Freeman, No. 04CA40, 2005 WL 3446320

(Ohio Ct. App. Nov. 23, 2005), for the proposition that a corporation's principal may

be personally liable for fraudulent acts. In the nondischargeability action under

11 U.S.C. § 523(a)(4) in Ogden, at issue was the preclusive effect of a state court

judgment the creditor had obtained earlier against the debtor–a corporation's chief

executive officer–regarding the debtor's violation of provisions of the Maryland

Construction Trust Statute. In Freeman, the Ohio appellate court affirmed the trial

court's summary judgment for the plaintiff-general contractor, holding the trial court

had correctly held certain defenses of estoppel and waiver raised by the defendantsubcontractor were not applicable. The subcontractor's principal had been held

personally liable, along with his company, under Ohio's R.C. § 1701.93. Lund-Ross,

just as in its complaint, however, did not identify in its summary judgment brief any

nonbankruptcy law applicable to Debtors that would, under the facts presented,

render them personally liable to Lund-Ross. 

After taking Debtors' summary judgment motion under advisement, the

bankruptcy court entered docket text that stated Lund-Ross "has not shown that the

debtors owe a debt to Lund-Ross, so the debtors' motion for summary judgment will

be granted and the complaintseeking to except the alleged debt from discharge under

§ 523(a)(2)(A) will be dismissed." In an attendant written order, the bankruptcy court

determined the first analysis it needed to perform was whether Debtors owed a valid

debt to Lund-Ross. The bankruptcy court stated Lund-Ross had not pled the

corporate veil should be pierced and had not otherwise established under applicable

nonbankruptcy law how Debtors are personally liable to Lund-Ross.

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Lund-Rosstimely appealed the bankruptcy court'ssummary judgment in favor

of Debtors and identified five issues,

4 which may be condensed to one: In granting

summary judgment for Debtors, did the bankruptcy court err in finding Lund-Ross

failed to establish on the record Debtors were personally liable for the debt owed by

Signature Electric. 

In its opening brief, Lund-Rossstatesit was asking the bankruptcy court in the

adversary proceeding to determine it held a claim against Debtors personally and that

4The five issues listed by Lund-Ross were:

1. Did the Bankruptcy Court err in granting summary

judgment to Defendants Jay D. Buchanan and Lori

A. Buchanan?

2. Did the Bankruptcy Court err in determining that

Plaintiff's claim was a company [debt] of Signature

Electric's and not a personal debt of Defendants?

3. Did the Bankruptcy Court err in determining that

Plaintiff cannot establish on the record presented

that Defendants are liable for the debt owed by

Signature Electric?

4. Did the Bankruptcy Court err in determining that

Plaintiff has not established that Defendants are

liable on an enforceable obligation under applicable

law?

5. Did the Bankruptcy Court err in determining that

Plaintiff has not demonstrated how Defendants can

be held personally liable for Signature Electric's

debts?

-7-
the claim was excepted from discharge pursuant to 11 U.S.C. § 523(a)(2)(A).

5

It

indicates it made this forum choice after Debtors' bankruptcy halted its state court

action against Debtors personally.

6

It argues the bankruptcy court erroneously

ignored state law, Eighth Circuit precedent, and one of the bankruptcy court's prior

decisions in which a corporate officer was held personally liable for fraudulent acts

and statements made in furtherance of corporate business. Lund-Ross further argues

the fact that it holds a claim against Signature Electric is not a barrier to its

establishing Debtors also owe it a debt. Lund-Ross states it need not pierce the

corporate veil to reach Debtors and cites, for the first time, an earlier decision by the

bankruptcy court in AGP Grain Coop v. White (In re White), 315 B.R. 741 (Bankr.

D. Neb. 2004) (Mahoney, C.J.), and an opinion by the Nebraska Court of Appeals in

Huffman v. Poore, 569 N.W.2d 549, 556-57 (Neb. Ct. App. 1997), for authority that

a tort action may be brought in Nebraska directly against a corporate officer or

director if the elements of the tort are satisfied.

In their appeal brief, Debtorsforemost propound resjudicata and argue LundRoss should have contested the trustee's objection to its claim on the grounds it did

not hold a personal claim against Debtors.

In its reply brief, Lund-Ross challenges Debtors' reliance on res judicata

because its adversary proceeding was commenced before Lund-Ross filed its proof

of claim and before the trustee objected to the claim, because 11 U.S.C. § 502(j)

allows a claim to be reconsidered at any time, and because Debtors did not raise res

judicata as an affirmative defense before the bankruptcy court. Lund-Ross also

5While Fed. R. Bankr. P. 3007(b) provides an objection to a claim may be

included in an adversary proceeding, we note the federal rules of bankruptcy

procedure do not contemplate a claim may be filed through an adversary proceeding. 

See Fed. Rs. Bankr. P. 3001(a), 3002, and 5005(a).

6Lund-Ross did not seek relief from the automatic stay from the bankruptcy

court to continue its state court action against Debtors.

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argues the claims objection process did not preclude its nondischargeability action

because the claims process only determined Debtors had not personally guaranteed

the debt to Lund-Ross and it was not relying on a personal guaranty to establish

Debtors' liability. 

STANDARD OF REVIEW

A bankruptcy court's grant of summary judgment is reviewed de novo.

Mwesigwa v. DAP, Inc., 637 F.3d 884, 887 (8th Cir. 2011) (citing Anderson v.

Durham D & M, L.L.C., 606 F.3d 513, 518 (8th Cir. 2010)). We will affirm if "there

is no genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law." Fed. R. Civ. P. 56(a). The nonmoving party "is entitled to all

reasonable inferences–those that can be drawn from the evidence without resort to

speculation." Sprenger v. Fed. Home Loan Bank of Des Moines, 253 F.3d 1106, 1110

(8th Cir. 2001) (internal citation and quotation marks omitted); Ball v. City of

Lincoln, Nebraska, 870 F.3d 722, 727 (8th Cir. 2017) (the plaintiff must substantiate

its allegations with sufficient probative evidence that would permit the bankruptcy

court to find in its favor without resorting to speculation or conjecture).

DISCUSSION

Section 523(a) provides certain "debts" are excepted from an individual

debtor's discharge. A "debt" is a "liability on a claim." 11 U.S.C. § 101(12). A

"claim" is a:

(A) right to payment, whether or not such right is reduced

to judgment, liquidated, unliquidated, fixed, contingent,

matured, unmatured, disputed, undisputed, legal, equitable,

secured, or unsecured; or

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(B) right to an equitable remedy for breach of performance

if such breach gives rise to a right to payment, whether or

not such right to an equitable remedy is reduced to

judgment, fixed, contingent,matured, unmatured, disputed,

undisputed, secured, or unsecured.

11 U.S.C. § 101(5). Stated another way, a debt is a liability on an obligation to pay

money. County of San Mateo, California v. Peabody Energy Corp. (In re Peabody

Energy Corp.), 958 F.3d 717, 724 (8th Cir. 2020) (internal quotation omitted).

Among the debts that may be excepted from discharge in a chapter 7 case are

debts "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, other than a statement respecting the debtor's or an insider's financial

condition[.]" 11 U.S.C. § 523(a)(2)(A) and § 727(b). While federal bankruptcy law

governs whether a particular debt should be excepted from discharge, the existence

of the debt itself is determined under nonbankruptcy law. Grogan v. Garner, 498

U.S. 279, 283-84 (1991) ("The validity of a creditor's claim is determined by rules of

state law.") (cites therein omitted); Midland Funding, LLC v. Johnson, 137 S.Ct.

1407, 1411 (2017) (state law usually determines whether a person has a right to

payment)

7

; Kap's Construction v. Cruz-Brewer (In re Cruz-Brewer), 609 B.R. 1, 7

(Bankr. M.D. Pa. 2019) (a nondischargeability action presentstwo questions: hasthe

creditor pled an enforceable obligation against the debtor under state law and, if so,

is that debt nondischargeable). 

In this adversary proceeding, the bankruptcy court did not find any material

facts in dispute regarding the first question before it–whether Lund-Ross is owed a

debt by Debtors. Having determined Lund-Ross did not establish a legal basis for a

7This case differs from Midland Funding, in that the issue in this case is not

whether a debt owed by Debtors to Lund-Ross is time-barred or otherwise

unenforceable. The issue here is whether such a debt exists at all. 

-10-
recovery against Debtors personally, the bankruptcy court held Debtors were entitled

to summary judgment as a matter of law. Affording Lund-Ross all reasonable

inferences, we see no error in the bankruptcy court's decision.

While the bankruptcy court acknowledged it had earlier sustained the chapter 7

trustee's objection to Lund-Ross's claim, it did not rely on that prior ruling in its

summary judgment decision in Lund-Ross's nondischargeability action.

8

Instead, the

bankruptcy court noted Lund-Ross had not pled the corporate veilshould be pierced. 

The bankruptcy court cited a Nebraska decision that states, in a discussion regarding

piercing the corporate veil, a member or manager of a limited liability company may

be held personally responsible for an obligation of the company "only where the

company has been used to commit fraud, violate a legal duty, or perpetrate a

dishonest or unjust act in contravention of the rights of another." Thomas & Thomas

Court Reporters, L.L.C. v. Switzer, 810 N.W.2d 677, 685 (Neb. 2012). The

bankruptcy court distinguished the Ogden decision and the Freeman opinion that

Lund-Ross had cited, noting each "involved state laws [in other jurisdictions]

explicitly holding officers and agents of contractors liable for making false statements

or violating fiduciary responsibilities." The bankruptcy court then held:

There is no evidence before this court that [Debtors] have

been accused of or held responsible for violating a similar

law. . . . 

. . . .

. . . While [Lund-Ross] claims [Debtor Jay

Buchanan] knowingly and intentionally made fraudulent

8The dissent disagrees. To the extent the bankruptcy court may have relied on

its earlier decision disallowing Lund-Ross's claim in Debtors' attendant bankruptcy

case, we see no abuse in the court's discretion. Allison v. Centris Fed. Credit Union

(In re Tri-State Financial, LLC), 885 F.3d 528, 533 (8th Cir. 2018) (law of the case

is a doctrine of discretion; a bankruptcy court's decision whether to apply it is

reviewed for an abuse of discretion).

-11-
representations that proximately caused it damage, [LundRoss] has not demonstrated how [Debtors] can be held

personally liable for their business's debts.

Lund-Ross Constructors, Inc. v. Buchanan (In re Buchanan), Bankr. No. 19-81793-

TLS, Adv. No. A20-8002-TLS, slip op. at 7-8 (Bankr. D. Neb. Nov. 12, 2020). 

Like the bankruptcy court, we cannot see where in the record Lund-Ross

identified for the bankruptcy court the nonbankruptcy law that would make Debtors

personally liable to Lund-Ross.

9 There is no dispute Lund-Ross did not plead the

corporate veil should be pierced, and it did not argue the corporate veil should be

pierced when contesting Debtors' motion for summary judgment. Moreover, it did

not allege specific facts that demonstrate Debtors used Signature Electric or D & J

Electric to commit fraud, violate a legal duty, or perpetrate a dishonest or unjust act

in contravention of the rights of another. See Thomas & Thomas Court Reporters,

L.L.C., 810 N.W.2d at 685. Further, a close reading of Lund-Ross's adversary

complaint and summary judgment brief does notshow Lund-Rossidentified any state

statute or other nonbankruptcy law that would govern Debtors' actions as principals

of Signature Electric and create a personal debt to Lund-Ross. Finally, Lund-Ross

offered its reliance on White and Huffman only on appeal.

10

9While disagreeing with our assessment, the dissent does not point to anything

in the record that would lead us to believe otherwise.

10An appellate court will ordinarily not consider an argumentraised for the first

time on appeal. Orion Financial Corp. of South Dakota v. American Foods Group,

Inc., 281 F.3d 733, 740 (8th Cir. 2002). It does so only if the new argument is purely

legal and requires no additional factual development or if a manifest injustice would

otherwise result. Id. Lund-Ross has not argued either exception applies, and we

cannotsay a manifest injustice would result if we do not consider the newly cited case

law, where Lund-Ross had the opportunity to raise itslegal theory not only during the

summary judgment proceeding but also earlier when the trustee objected to its claim.

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In short, Lund-Ross's legal theory for the recovery of a debt from Debtors

personally and the probative evidence Lund-Ross would offer in support of that

theory were absent from the summary judgment record before the bankruptcy court. 

Accordingly, we agreewith the bankruptcy court that Debtors are entitled to summary

judgment as a matter of law.

Because Lund-Ross did not first demonstrate for the bankruptcy court how it

could establish a personal debt owed by Debtors under nonbankruptcy law, we, like

the bankruptcy court, do not reach the issue of whether such a debt would be

nondischargeable under § 523(a)(2)(A). 

CONCLUSION

Having reviewed the record de novo, we agree with the bankruptcy court that

Lund-Ross did not allege specific facts and law showing it holds a debt against

Debtors personally under nonbankruptcy law. Consequently, we affirm the

bankruptcy court's summary judgment in favor of Debtors on Lund-Ross's

nondischargeability action. 

SHODEEN, Bankruptcy Judge, dissenting.

The majority opinion, affirming the bankruptcy court's order, is premised upon

the conclusion that no debt is personally owed by Jay and Lori Buchanan (hereinafter

"Buchanans") and that the record does not support any claim that could be enforced

against them, warranting judgment as a matter of law in their favor. Under the

applicable law, definitions and the record in this appeal I disagree with that

conclusion, and respectfully dissent.

The Buchanans' request for summary judgement alleges that the undisputed

material evidence establishes that the debt owed to Lund-Ross is a corporate

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obligation of Signature Electric, LLC d/b/a D & J Electric (hereinafter "Signature")

and that there is no evidence to establish that they are personally liable for Signature's

obligations.

11 Relying upon its order sustaining the Chapter 7 Trustee's omnibus

objection to Lund-Ross's Proof of Claim No. 9, the bankruptcy court concludes that

the requisite debt for purposes of 11 U.S.C. 523(a)(2)(A) does not exist. In its appeal

Lund-Ross raises the issue of whether the order entered on the objection to Proof of

Claim No. 9 claim is dispositive of the actual fraud claim raised in the adversary

proceeding. 

On January 16, 2020, Lund-Ross filed an adversary proceeding alleging that

the amount of $600,043.64 is non-dischargeable pursuant to 11 U.S.C. 523(a)(2)(A)

for actual fraud related to the submission of pay applications. Later, creditors listed

in the Buchanans' bankruptcy filing were notified to submit Proofs of Claim by May

11, 2020. That invitation was accepted by Lund-Ross by filing Proof of Claim No.

9 in the amount of $600,043.64. That filing included documentation of the amounts

owed to, and liens filed by, Signature's unpaid suppliers, which Lund-Ross

indemnified. In an Omnibus Objection to Claims the Chapter 7 Trustee stated that

Proof of Claim No. 9 did not "include any evidence of a personal guarantee." LundRoss and the Buchanans agree that no personal guarantee exists. Lund-Ross did not

file a response to the Trustee's allegation and the bankruptcy court sustained the

objection on the stated grounds. In its order granting summary judgment and

dismissing the complaint the bankruptcy court concludes that Lund-Ross cannot

establish the existence of a debt which is a pre-requisite to its adversary proceeding

11

In its ruling, the bankruptcy court also addresses the theory of piercing the

corporate veil as suggested by Buchanan as the only theory under which Lund-Ross

could bring an action against them. Why Lund-Ross would be limited to this single

legal theory on its contingent claim is not fully explained.

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under 11 U.S.C. §523(a)(2)(A) and has not established any facts which could lead to

personal liability for Buchanan.

12

"Claim allowance and debt liability are different concepts." Bell v. Educ.

Credit Mgmt. Corp (In re Bell), 236 B.R. 426, 430 (N.D. Ala. 1999). The ruling

involving Proof of Claim No. 9 is unrelated to whether a debt exists and does not

resolve the question of whether Lund-Ross has an enforceable claim against

Buchanan for actual fraud. See Allied Dev. of Ala. LLC v. Forever 21, Inc. (In re

Forever 21, Inc),623 B.R. 53, 61 (Bankr. D. Del. 2020); Stuart Mills Davenport v.

Djourabchi, 316 F. Supp. 3d 58, 66-7 (D.D.C. 2018). 

A timely filed proof of claimthat containsthe requisite information constitutes

"prima facie evidence of the validity and amount of [a creditor’s] claim" and is

deemed allowed unless a party in interest objects. Fed. R. Bank. P. 3001(f); 11

U.S.C. 502. Thislanguage contains no reference to debt. "The objective of the claims

allowance process is to identify those claims which are enforceable against the

bankruptcy estate." In re Dow Corning Corp., 270 B.R. 393, 399 (Bankr. E.D. Mich.

2001);see In re De La Salle, 2012 Bankr. LEXIS 6124, *9 (Bankr. E.D. Cal.June 15,

2012) ("The Chapter 7 Trustee is the legal representative of the estate and 'only a

trustee can pursue a cause of action belonging to the bankruptcy estate,' including the

allowance and disallowance of claims."). The lack of a personal guarantee from the

Buchanans for Signature's obligation simply means that Proof of Claim No. 9 failed

to establish an enforceable claim for the purpose of receiving a pro-rata distribution

payment from the bankruptcy estate – nothing more, nothing less. 

12A party is entitled to Summary Judgment where its opponent has failed "to

establish the existence of an element essential to [its] case, and on which [it] will bear

the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct.

2548, 2552 (1986). In such a case, no genuine issue of material fact will be found to

exist because "a complete failure of proof concerning an essential element of [that

party’s] case necessarily renders all other facts immaterial." Id. at 323. 

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Whether personal liability can be imposed on Buchanan under a theory of

actual fraud is a separate claim that exists only on behalf of Lund-Ross and must be

resolved by adversary proceeding.

13

Courts may employ a two step analysis to determine the whether a complaint

objecting to dischargeability is proper. 

"Debt" is defined in the Code as "liability on a claim," and

"claim" is defined in turn as a "right to payment." For

purposes of § 523(a)(2)(A), "debt" means liability on "an

enforceable obligation." Whether a debt exists is

13Dischargeability of an underlying debt is a completely separate issue from

allowance or disallowance of the claim. Fla. Dep’t of Revenue v. Diaz (In re Diaz),

647 F.3d 1073, 1090 (11th Cir. 2011); Zich v. Wheeler Wolf Attys. (In re Zich), 291

B.R. 883, 886 (Bankr. M.D. Ga. 2003). The two questions are procedurally distinct

as well. “A proceeding on objection to proof of claim under 11 U.S.C. § 502 is a

contested matter under Rule 9014 of the Federal Rules of Bankruptcy Procedure; a

determination of dischargeability under § 523 is an adversary proceeding under Rule

7001(6), although an objection to claim may be included, too, under Rule 3007(b).” 

Holland v. McCartney (In re Holland), No. 14-20990, 2015 Bankr. LEXIS 2530, at

*5-6 (Bankr. S.D. Ga. July 30, 2015). “The objective of the claims-allowance process

isto identify those claims which are enforceable against the bankruptcy estate.” In re

Dow Corning Corp., 270 at, 399. “Although a creditor whose claim is disallowed

may not collect from the bankruptcy estate, ‘disallowance of a claim does not

necessarily discharge [the underlying] debt’ and eliminate the debtor’s personal

liability outside of bankruptcy.” In re Diaz, 647 F.3d at 1090; See also In re Cruz,

277 B.R. 793, 795 (Bankr. M.D. Ga. 2000); In re Shelbayah, 165 B.R. 332, 335

(Bankr. N.D. Ga. 1994) (holding that “the allowance or disallowance of claims is

unrelated to the dischargeability of those claims under section 523.”); MMM

Healthcare Inc. v. Quesada (In re Quesada), Nos. 13-02057 BKT, 13-00174 BKT,

2014 Bankr. LEXIS 1346, at *12 (Bankr. D.P.R. Apr. 1, 2014) (holding that even

though Plaintiff did not have a right to payment from the bankruptcy estate with

regards to a disallowed claim, it’s claim may still qualify as a “debt” that can be

excepted from discharge under 11 USC § 523.).

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determined by looking to applicable law, frequently state

law. Section 523(a)(2)(A)’s use of the term "any debt"

(emphasis added) indicates that "debt" as used in §

523(a)(2)(A) is not restricted to a debt established under

any particular theory of recovery. To establish the validity

of the debt under § 523(a)(2)(A), the claimant must

establish that the debtor is liable on an enforceable

obligation under applicable law, nothing more nor less.

Lund-RossConstructors, Inc. v. Buchanan (In reBuchanan),Nos.BK19-81793-TLS,

A20-8002-TLS, 2020 Bankr. LEXIS 3178, at *10 (Bankr. D. Neb. Nov. 12, 2020)

citing Hatfield v. Thompson (In Re Thompson), 555 B.R. 1, 9 (B.A.P. 10th Cir. 2016). 

Lund-Ross bears the burden to prove by a preponderance of evidence the

following five elements: 

(1) the debtor made a false representation; (2) at the time

the representation was made, the debtor knew it was false;

(3) the debtor made the representation deliberately and

intentionally with the intention and purpose of deceiving

the creditor; (4) the creditor justifiably relied on the

representation; and (5) the creditor sustained loss and

damage as a proximate result of the misrepresentation.

Islamov v. Ungar (In re Ungar), 429 B.R. 668,672 (B.A.P. 8th Cir. 2010). Elements

one through four relate to the enforceability of Lund-Ross's claim under state law. 

Element five represents the debt resulting from an enforceable claim of actual fraud. 

The statutory language at 11 U.S.C. 523(a)(2)(A) has been satisfied in this case

under the two-step analysis. A debt exists.

14 Lund-Ross alleges that the Buchanans

14The bankruptcy schedules identify Lund-Ross as an unsecured creditor that

is owed $0.00. Additional details characterize this obligation as "Corporate Debt;

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committed actual fraud to obtain progress payments on behalf of Signature or for

Signature's benefit and argues that state law permits personal liability to be imposed

under such circumstances.

15

Under de novo review and for the reasons stated, I would reverse the

bankruptcy court's order granting summary judgment and dismissing the adversary

proceeding. 

Notice Purpose Only. Lawsuit - CI 19-9270 (Douglas County District Court, NE)"

that is contingent, unliquidated and disputed. Thislisting, at a minimum, reflectsthat

Buchanans, at least tacitly, acknowledge that a both a debt and claim may exist, and

that personal responsibility for payment is denied. 

15

"[Section]101(5)(A) says that a 'claim' is a 'right to payment' 'whether or not

such right is . . . fixed, contingent, . . . [or] 'disputed'. Midland Funding, LLC v.

Johnson, 137 S. Ct. 1407, 1412 (2017).

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