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IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

FORT WORTH DIVISION 

IN RE:

Bankruptcy Case No. 23-42207-MXM

KERI DENETTE BLALOCK and (Chapter 7) 

 KENNETH CHARLES BLALOCK 

Debtors. 

 

Adversary No. ____________ 

KAPITUS SERVICING, INC., AS

SERVICING AGENT FOR KAPITUS LLC 

Plaintiff, 

vs. 

 

KERI DENETTE BLALOCK, 

individually, and BSMG 

CONSTRUCTION 

 

 CONSTRUCTION MANAGEMENT, LLC 

 

Defendants.

 

COMPLAINT TO DETERMINE NON-DISCHARGEABILITY OF DEBT AND FOR

DENIAL OF DISCHARGABILITY OF DEBT OWED TO

KAPITUS SERVICING, INC., FOR CONVERSION, 

UNJUST ENRICHMENT, AND OTHER RELIEF

Kapitus Servicing, Inc., as servicing agent for Kapitus LLC (“Kapitus” or the “Plaintiff”), 

by and through its undersigned attorneys, files this Complaint under Section 523 of Title 11 of 

the United States Code, 11 U.S.C. §§ 101 – 1532 (as amended, the “Bankruptcy Code”) objecting 

to the dischargeability of a pre-petition debt owed to Kapitus by Defendant, Keri Denette Blalock, 

individually, and also seeking judgment for conversion, unjust enrichment, fraudulent transfer, 

and replevin against Keri Denette Blalock, individually and BSMG Construction Management, 

LLC under Virginia State law. In support hereof, Kapitus alleges as follows: 

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JURISDICTION AND VENUE 

1. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) and is brought pursuant 

to 11 U.S.C. §§ 523(a) and Rule 4007 of the Federal Rules of Bankruptcy Procedure. 

2. This Court has jurisdiction as to the claims for relief sought herein under 28 

U.S.C. §§ 157 and 1334. 

3. Venue is proper pursuant to 28 U.S.C. § 1409(a). 

4. If the Court should find that this is not a core proceeding, Kapitus consents to 

entry of final judgment by the Court pursuant to Fed. R. Bankr. P. 7008.1 

5. This Adversary Proceeding is brought in connection with the Chapter 7 case 

filed by the Debtor as Case Number 23-42207-MXM, now pending in this Court. 

PARTIES 

6. Plaintiff, Kapitus, is a Virginia Corporation and at all relevant times maintained 

its offices at 2500 Wilson Boulevard, Suite 350, Arlington, VA 22201 and 120 West 45th Street, 

Fourth Floor, New York NY 10036. 

7. Upon information and belief, Defendant, Keri Denette Blalock (“Blalock” or the 

“Debtor/Defendant”) is a natural person and is a resident of the State of Texas residing at 8132 

Joella Court, Grandview, Texas 76050. (Case No. 23-42207, ECF 1, p. 2). 

8. Upon information and belief, Debtor/Defendant was/is formerly known as Keri 

Anderson. 

1

 Notwithstanding any of the allegations and claims herein, the institution of this Adversary Proceeding, the 

filing of this complaint and any other appearance in this Adversary Proceeding and in the above-referenced 

bankruptcy case (the “Bankruptcy Case”), including the submission of motions, opposition papers, and entry of 

orders, is without waiver, and express reservation, of any and all of Kapitus’ rights, defenses, and remedies 

available at law and in equity, including, without limitation, under the Agreement (as defined below), Uniform 

Commercial Code, any other applicable federal or state law and/or commercial code, and the Federal Arbitration 

Act, 9 U.S.C. § 1 et seq. Kapitus expressly incorporates any reservation of rights that is incorporated in any Proof 

of Claim that it files in this matter (the “Proof of Claim”).

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9. MYO Investments Inc., d/b/a My Own Power (“Merchant”) is or was a business 

entity duly organized in the State of Texas with a business address of 420 Throckmorton Street, 

Suite 200, Fort Worth, TX 76102 as well as 1751 River Run, Suite 200, Fort Worth, TX 76107 and 

P.O. Box 1016, Grandview, Texas 76050. (Case No. 23-42207, ECF 1, p. 66). See also, MYO 

Investments TX SOS Search Dated November 2023, p. 1, Exhibit 1; In Re MYO Investments,

Voluntary Petition, ECF 1, p. 1, Exhibit 2. 

10. Upon information and belief, Merchant’s registered agent is Incorp Services, Inc., 

with a registered office address of 815 Brazos Street, Suite 500, Austin, TX 78701. MYO 

Investments TX SOS Search Dated November 2023, p. 1, Exhibit 1. 

11. BSMG Construction Management, LLC (“BSMG”) is a limited liability company 

duly organized in the State of Texas with a principal office at 700 Lavaca Street, Suite 1401, 

Austin, TX 78701. See BSMG TX SOS Search Dated November 2023, Exhibit 3. 

12. Upon information and belief, BSMG also has a business address of 600 West 

6

th Street, Fort Worth, TX 76102. (Case No. 23-42207, ECF 1, p. 48). 

13. BSMG’s registered agent is Incorp Services, Inc., with a registered office 

address of 815 Brazos Street, Suite 500, Austin, TX 78701. See BSMG TX SOS Search Dated 

November 2023, Exhibit 3. 

14. As more fully detailed below, Kapitus is a secured creditor of Merchant and an 

unsecured creditor of Debtor/Defendant. 

GENERAL ALLEGATIONS

15. On July 30, 2023, Debtor/Defendant filed a Voluntary Petition for bankruptcy 

under Chapter 7 of the Bankruptcy Code. (Case No. 23-42207, ECF 1). 

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16. On October 31, 2023, Merchant filed a Voluntary Petition for bankruptcy under 

Chapter 7 of the Bankruptcy Code. See In Re MYO Investments, Voluntary Petition, ECF 1, Exhibit 

2. 

17. Upon information and belief, at all times relevant hereto, the Debtor/Defendant 

controlled Merchant and made all decisions and statements to Kapitus relevant to the issues 

herein. 

18. Upon information and belief, Debtor/Defendant is or was, at all relevant times, a 

director of the Merchant. MYO Investments TX SOS Search Dated November 2023, p. 2, Exhibit 

1. 

19. Upon information and belief, Debtor/Defendant is or was, at all relevant times, an 

owner of Merchant. (Case No. 23-42207, ECF 1, p. 18). See In Re MYO Investments, Voluntary 

Petition, ECF 1, p. 46, Exhibit 2; MYO Investments August 2022 Application (Redacted), Exhibit 

11. 

20. Upon information and belief, at all relevant times, Merchant was the employer of 

Debtor/Defendant. (Case No. 23-42207, ECF 1, p. 50). See also, In Re MYO Investments, Voluntary 

Petition, ECF 1, p. 46, Exhibit 2. 

21. Upon information and belief, at all relevant times, Debtor/Defendant was the CEO 

of the Merchant. (Case No. 23-42207, ECF 1, p. 50). See also, In Re MYO Investments, Voluntary 

Petition, ECF 1, p. 4 Exhibit 1. 

22. Upon information and belief, at all relevant times, Debtor/Defendant was also the 

President of the Merchant. See In Re MYO Investments, Voluntary Petition, ECF 1, p. 46, Exhibit 

2. 

23. Debtor/Defendant is an insider of Merchant pursuant to 11 U.S.C. § 101(31). 

24. Upon information and belief, Debtor/Defendant owns at least 49% of BSMG. 

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25. Upon information and belief, Debtor/Defendant is or was, at all relevant times, a 

director of BSMG. See BSMG TX SOS Search Dated November 2023, p. 2, Exhibit 3. 

26. Upon information and belief, at all relevant times, BSMG was also the employer 

of Debtor/Defendant. (Case No. 23-42207, ECF 1, p. 48). 

27. Kapitus is a secured creditor of Merchant and an unsecured creditor of 

Debtor/Defendant with a claim against both in the amount of $191,023.12 2 (along with additional 

costs, fees, expenses, and interest), as of July 30, 2023 (the “Petition Date”) pursuant to a Forward 

Purchase Agreement (Fixed ACH Delivery), Sale Terms and Conditions, Security Agreement, and 

Personal Guaranty executed by Debtor/Defendant. 

28. Pursuant to Fed. R. Bankr. P. 4007(c) and the Notice of Meeting of Creditors (Case 

No. 23-42207, ECF 6), November 13, 2023, is the deadline for the filing of complaints objecting 

to discharge and for determination of dischargeability of debts. 

29. This Complaint is timely filed. 

SPECIFIC FACTUAL ALLEGATIONS

A. Debtor/Defendant’s Agreement with Kapitus 

30. On August 25, 2022, Kapitus and Debtor/Defendant, both on behalf of 

Merchant and as Guarantor, entered into a Forward Purchase Agreement (Fixed ACH Delivery), 

Sale Terms and Conditions, Security Agreement, Personal Guaranty, Agreement to Arbitrate3, 

and Representations and Acknowledgements (collectively, the “Agreement”) with Merchant, 

all of which are attached hereto and incorporated herein as Exhibits 4 – 9, respectively. 

2

 The claim itemization is as follows:

Agreement/Contractual Balance: $177,538.00 

Interest @ 10% (Contracted Interest Rate) (From 02/23/2023 to Petition Date): $ 7,685.12 (plus per diem) 

Default Fees: $2,500.00 

ACH Fees: $ 3,300.00 

Total Claim: $191,023.12 

3

 The Agreement to Arbitrate is voluntary. See Agreement to Arbitrate, Exhibit 8. 

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31. The Agreement is governed under Virginia law. See Sale Terms and Conditions, 

¶ 4.5, p. 6, Exhibit 5. 

32. Debtor/Defendant signed the Agreement both on behalf of Merchant and as 

Guarantor. See Forward Purchase Agreement, p. 3, Exhibit 4; Sale Terms and Conditions, p. 

8, Exhibit 5; Security Agreement, p. 3, Exhibit 6; Personal Guaranty, p. 2, Exhibit 7; 

Representations and Acknowledgements, p. 2, Exhibit 9. 

33. The Debtor/Defendant personally guaranteed Merchant’s full performance of 

all representations, warranties, and covenants under the Agreement. Personal Guaranty, 

Exhibit 7. 

34. Under the Agreement, Kapitus purchased all of Merchant’s accounts, receipts, 

contract rights, and other rights to payment arising from or relating to the payment to 

Merchant through cash, checks, electronic transfers, ACH transfers, credit cards, charge 

cards, debit cards, prepaid cards, mobile payments (including Apple Pay and other ACH 

payments) and other similar payment methods that may accrue to Merchant in the 

ordinary course of Merchant’s business (collectively, the “Receipts”) until the time 

Merchant paid $228,000.00 (the “Receipts Purchased Amount”) in full. See Forward Purchase 

Agreement, p. 1, Exhibit 4. 

35. On August 26, 2022, Kapitus funded the Receipts Purchased Amount for the 

purchase price of $150,000.00 (less origination fees) (the “Purchase Price”). See Forward 

Purchase Agreement, p. 1, Exhibit 4; Merchant Statement of Activity (Redacted), Exhibit 10. 

B. Debtor/Defendant’s Misrepresentations to Kapitus Prior to 

Entering into and Funding the Agreement 

36. On or around August 17, 2022, Debtor/Defendant, on behalf of Merchant, applied 

for financing via an application with Yarrow Financial, a third-party broker procuring financing 

for Merchant and working with Kapitus. See MYO Investments August 2022 Application

(Redacted), Exhibit 11. 

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37. Debtor/Defendant, on behalf of Merchant, certified in the August 2022 Application 

for financing that: (i) she was authorized to apply for financing on behalf of Merchant; and (ii) all 

information provided with the application and supporting documents were true and complete and 

Debtor/Defendant would notify of any material changes to such information. See MYO Investments 

August 2022 Application (Redacted), Exhibit 11. 

38. Debtor/Defendant further understood and agreed that Yarrow Financial may 

provide credit and other information from the August 2022 Application regarding the 

Debtor/Defendant and Merchant to third parties who may use the information for any lawful 

purpose, including to offer credit, and/or other products and services to the Debtor/Defendant 

and/or Merchant. See MYO Investments August 2022 Application (Redacted), Exhibit 11. 

39. The August 2022 Application provides that the annual income of Debtor/Defendant 

was $355,000. See MYO Investments August 2022 Application (Redacted), Exhibit 11. 

40. The August 2022 Application provides Debtor/Defendant was the 100% owner of 

Merchant. See MYO Investments August 2022 Application (Redacted), Exhibit 11. 

41. After receiving the August 2022 Application, Debtor/Defendant, on behalf of 

Merchant, provided Kapitus, either directly or via Yarrow Financial, a third-party broker procuring 

financing with for Merchant and working with Kapitus, with various financial information 

supporting the application process including, but not limited to, recent monthly bank statements 

for the Merchant. 

42. After receiving the August 2022 Application, Kapitus provided Debtor/Defendant 

the Forward Purchase Agreement (Fixed ACH Delivery), Sale Terms and Conditions, Security 

Agreement, Personal Guaranty, Agreement to Arbitrate, and Representations and 

Acknowledgements outlining the purchase terms and including several representations and 

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acknowledgments Debtor/Defendant, both on behalf of Merchant and as Guarantor, was required 

to make. 

43. As a threshold step in Kapitus’s consideration of whether to purchase a potential 

merchant’s receipts, Kapitus reviews the Agreement signed by Debtor/Defendant, both on behalf 

of Merchant and as Guarantor, that contains certain written representations about both the Merchant 

and Debtor/Defendant’s financial situation, operational plans, and intentions. Because Kapitus’s 

funding process is truncated from that of a standard financing institution as is typical for the 

alternative financing industry, Kapitus relies heavily upon a Debtor/Defendant’s representations 

and warranties made both on behalf of Merchant and as Guarantor in the Agreement as a whole, 

including, but not limited to, those with the stand-alone Representations and Acknowledgements. 

In fact, Kapitus’s countersignature to the Agreement and funding are the last steps in the process. 

44. Prior to funding under the Agreement, the Debtor/Defendant executed a 

Representations and Acknowledgments form (“R&A”) pursuant to which the Debtor/Defendant 

acknowledged and represented to Kapitus, in part, that: 

a. Debtor/Defendant was the authorized representative of the business / Merchant; 

b. Debtor/Defendant was the authorized signatory on the business / Merchant’s bank 

account; 

c. Debtor/Defendant did not anticipate closing or selling the Merchant for any reason over 

the next 12 months; 

d. Debtor/Defendant did not plan to file for bankruptcy protection in the next 12 months 

for either the Merchant or herself, personally; 

e. The business / Merchant did not have a current financing product that obligated the 

business to make payments on a less than monthly basis that had not been disclosed to 

Kapitus in writing in connection with [the] application for funding, nor had the business 

/ Merchant taken on such an obligation since [submitting the] application for funding 

to Kapitus nor did the business/Merchant intend to do so, without Kapitus’ written 

consent. 

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f. Neither the business / Merchant or Debtor/Defendant was in arrears on any business or 

personal loans or other financial obligations, except as previously disclosed to Kapitus 

in writing; 

g. No taxing or other authorities had filed any liens as to Merchant or Debtor/Defendant, 

nor did Merchant or Debtor/Defendant have any unpaid tax obligations, except as 

previously disclosed to Kapitus in writing; 

h. All information that the Debtor/Defendant provided to Kapitus to obtain financing 

accurately reflected the current ownership of the Merchant, Merchant’s status and/or 

financial condition of the Merchant. 

See Representations and Acknowledgments, Exhibit 9.

45. Pursuant to the R&A, the Debtor/Defendant also acknowledged she: “[s]ubmitted 

the statements herein with the intent to obtain financing, Kapitus is relying on such statements to 

determine whether to approve the financing and that any false statements or misrepresentations 

made to obtain funding constitute fraud and will subject me and my business to legal action.” See 

Representations and Acknowledgments, Exhibit 9. 

46. The Debtor/Defendant, both on behalf of Merchant and as Guarantor, made 

representations to Kapitus in the August 2022 Application, in the various financial and other 

documents she submitted in support of the August 2022 Application, and in the R&A. 

47. Kapitus relied upon the Debtor/Defendant’s representations, both on behalf of 

Merchant and as Guarantor, made to Kapitus in the August 2022 Application, in the various 

financial and other documents she submitted in support of the August 2022 Application, and in 

the R&A, when Kapitus decided to enter into the Agreement with Merchant and fund the 

Agreement.

48. Upon information and belief, Debtor/Defendant knew her representations to 

Kapitus in the August 2022 Application, in the various financial and other documents she 

submitted in support of the August 2022 Application, and in the R&A, were false when she made 

them both on behalf of the Merchant and as Guarantor.

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49. The August 2022 Application provides Debtor/Defendant was the 100% owner of 

Merchant. See MYO Investments August 2022 Application (Redacted), Exhibit 11. 

50. On March 17, 2023, Debtor/Defendant disclosed to Kapitus that there was, or had 

been, another co-owner of the Merchant.

51. Upon information and belief, March 17, 2023, was the first time Debtor/Defendant 

disclosed to Kapitus that there was, or had been, another co-owner of the Merchant.

52. Pursuant to the information available via the Texas Secretary of State’s Office, 

Merchant is listed as having two “directors,” the Debtor/Defendant and Cynthia K. Smith. See 

MYO Investments TX SOS Search Dated November 2023, p. 1, Exhibit 1. 

53. Upon information and belief, contrary to the Debtor/Defendant’s representations, 

made both on behalf of Merchant and as Guarantor, made to Kapitus in the August 2022 

Application, in the various financial and other documents she submitted in support of the August 

2022 Application, and in the R&A, the Merchant as well as Debtor/Defendant had been in a 

precarious financial position for some time.

54. On December 13, 2022—a mere three and one half months after funding—

Debtor/Defendant authorized a request she had made on behalf of Merchant to Kapitus to 

temporarily modify the ACH debits to Merchant’s Account so that the payments would be reduced 

by fifty (50)% for four weeks and then revert to the initial payment amount thereby extending the 

payment period. See December 13, 2022 Blalock Email Correspondence (Redacted), Exhibit 19. 

55. Upon information and belief, contrary to the Debtor/Defendant’s representations, 

both on behalf of Merchant and as Guarantor, made to Kapitus in the August 2022 Application, 

in the various financial and other documents she submitted in support of the August 2022 

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Application, and in the R&A, Debtor/Defendant and/or the Merchant’s financial condition was 

not accurately or adequately disclosed to Kapitus. 

56. Alternatively, upon information and belief, contrary to the Debtor/Defendant’s 

representations, both on behalf of Merchant and as Guarantor, to Kapitus in the August 2022 

Application, in the various financial and other documents she submitted in support of the August 

2022 Application, and in the R&A, Debtor/Defendant and/or the Merchant intended to use the 

funding from Kapitus for improper, non-business purposes.

57. In reliance on the representations made to Kapitus by Debtor/Defendant, both on 

behalf of Merchant and as Guarantor, in the August 2022 Application, in the various financial and 

other documents she submitted in support of the August 2022 Application, and in the R&A, 

Kapitus agreed to purchase certain of Merchants’ Receipts, as outlined above.

58. Kapitus relied on Debtor/Defendant’s representations, both on behalf of Merchant 

and as Guarantor, to Kapitus in the August 2022 Application, in the various financial and other 

documents she submitted in support of the August 2022 Application, and in the R&A provided 

by Debtor/Defendant to Kapitus.

59. Kapitus would not have funded the Agreement but for Debtor/Defendant’s 

representations, both as Guarantor and on behalf Merchant, made to Kapitus in the August 2022 

Application.

60. Kapitus would not have funded the Agreement but for Debtor/Defendant’s 

representations, both as Guarantor and on behalf Merchant, made to Kapitus in the various 

financial and other financial documents submitted in support of the August 2022 Application.

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61. Kapitus would not have funded the Agreement but for Debtor/Defendant’s 

representations, both as Guarantor and on behalf Merchant, made to Kapitus as in the R&As and 

outlined above.

C. Debtor/Defendant’s Misrepresentations to Kapitus in the Agreement 

62. To allow Kapitus to collect its purchased Receipts, the Agreement required 

Merchant to use only one account to deposit all Receipts collected by Merchant, which was 

designated by the parties in the Agreement and fully accessible to Kapitus (the “Account”). See 

Forward Purchase Agreement, ¶¶ 7, 8, pp. 1-2, Exhibit 4; Sale Terms and Conditions, §§ 1.3 

(Authorization to Debit), 2.6, pp. 1 & 3, Exhibit 5. 

63. The Agreement entitled Kapitus to collect a weekly amount of $2,194.00 (the 

“Specified Weekly Amount”) or in a variable amount equal to 2.4% (the “Specified Percentage”) 

from the Account until such time as Kapitus received payment in full of the Receipts Purchased 

Amount. See Forward Purchase Agreement, ¶¶ 7, 8, pp. 1-2, Exhibit 4; Sale Terms and 

Conditions, § 1.3 (Authorization to Debit), p. 1, Exhibit 5. 

64. The authorization for Kapitus to use the Account to make such transfers is 

irrevocable by Merchant without Kapitus’s consent. Sale Terms and Conditions, § 1.3 

(Authorization to Debit), p. 1, Exhibit 5. 

65. To avoid disruption, the Agreement prohibited changes to the Account or the 

designation of Account except with Kapitus’s express written consent. Id.

66. By entering into the Agreement, Debtor/Defendant, both on behalf of Merchant and 

as Guarantor, made the following representations, warranties, and covenants to Kapitus4, among 

others: 

4

 Within the terms of the Sale Terms and Conditions: the terms “Seller” or “Merchant” refers to MYO 

Investments, Inc.; the term “Purchaser” refers to Plaintiff, Kapitus; the term Guarantor refers to Debtor/Defendant, 

Keri Blalock. 

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II. REPRESENTATIONS, WARRANTIES AND COVENANTS. 

Seller and Guarantor represents, warrants and covenants that as of this date 

and during the term of the Agreement:

2.1 Financial Condition and Financial Information. The information 

and financial statements which have been furnished to Purchaser by Seller 

and Guarantor, and such future statements which will be furnished hereafter 

at the request of Purchaser, fairly represent the ownership and operations of 

the Seller’s business and the financial condition of Seller and Guarantor at 

such dates, and since those dates, there has been no material adverse change, 

financial or otherwise, in such condition, operation or ownership of Seller 

or Guarantor (as applicable). Seller and Guarantor are current on any and 

all lease, rent or mortgage payments due. Seller and Guarantor are currently 

in compliance with all loans, financing agreements, promissory notes, 

and/or other obligations of indebtedness, except as disclosed to Purchaser. 

No material changes, financial or otherwise, in the condition, operation or 

ownership of Seller and Guarantor (as applicable) are in any way expected 

or anticipated and Seller and Guarantor do not anticipate closing or selling 

Seller’s business. Neither the Seller nor the Guarantor are party to any 

pending litigation that is expected to have a material impact on the Seller or

Guarantor. Seller has a continuing, affirmative obligation to advise 

Purchaser of any material change in its financial condition, operation or 

ownership. Purchaser may request statements at any time during the 

performance of this Agreement and the Seller shall provide them to 

Purchaser within five (5) business days. Seller’s failure to do so is a material 

breach of this Agreement.

**** 

2.3 Authorization. Seller, and the person(s) signing the Transaction 

Documents on behalf of Seller, have full power and authority to incur and 

perform the obligations under the Transaction Documents, all of which have 

been duly authorized. 

  

2.5 Tax Obligations. Seller is currently in compliance with all federal 

state and local tax laws, has filed all returns, and has paid all taxes due, 

except as disclosed to Purchaser. No federal, state, or local taxing authority 

has filed any lien against the assets of the Seller and/or Guarantor. Seller or 

Guarantor shall pay all taxes owed to federal, state, or local governments 

when due. 

2.6 Deposit Arrangements and Delivery of Receipts. Without 

Purchaser’s prior written consent, Seller will not (i) change the account 

designated for the delivery of Receipts; (ii) set up multiple accounts into 

which any of the Seller’s receipts are deposited or otherwise transferred; (iii) 

block or stop payment on Purchaser’s debit; (iv) permit any event to occur 

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that could cause diversion of any of Seller’s receipts; (v) or take any other 

action that could have any adverse effect upon Seller’s obligations under 

the Transaction Documents. Seller will batch out receipts with all payment 

processors on a daily basis. 

2.7 Change of Name or Location. Seller will not conduct Seller’s 

business(es) under any name other than as disclosed to the Purchaser or 

change any of its places of business, or change its jurisdiction or 

incorporation or organization without ten (10) days prior written notice to 

Purchaser. 

** ** 

2.9 No Bankruptcy or Insolvency. Seller is solvent, no transfer of 

property is being made by Seller, and no obligation is being incurred by 

Seller in connection with the sale of Receipts with the intent to hinder, 

delay, or defraud either present or future creditors of Seller. Seller 

represents that it is not insolvent and does not contemplate and has not filed 

any petition for bankruptcy protection under Title 11 of the United States 

Code or any state-law analogue, and there has been no involuntary petition 

under such laws brought or pending against Seller. Seller further warrants 

that it does not anticipate filing any such receivership or bankruptcy 

petition and it does not anticipate that an involuntary petition will be filed 

against it. 

2.10 Other Financing. Seller shall not enter into any arrangement, 

agreement or commitment for any additional financing, whether in the 

form of a purchase and sale of receivables, the sale of accounts 

receivable, or a loan (whether secured or unsecured) with any party 

other than Purchaser without Purchaser’s written consent.

2.11 Unencumbered Receipts. Seller has good, complete and 

marketable title to all Receipts, free and clear of any and all liabilities,

liens, claims, changes, restrictions, conditions, options, rights, mortgages, 

security interests, equities, pledges and encumbrances of any kind or nature 

whatsoever or any other rights or interests that may be inconsistent with the 

transactions contemplated with, or adverse to the interests of Purchaser. 

  

2.13 Business Purpose. Seller is a valid business in good standing under 

the laws of the jurisdictions in which it is organized and/or operates, and 

Seller is entering into this Agreement for business purposes and not as a 

consumer for personal, family or household purposes. 

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2.14 Default Under Other Contracts. Seller’s execution of and/or 

performance under this Agreement will not cause or create an event of 

default by Seller under any contract with another person or entity. 

2.15. Sale or Dissolution of Seller. Seller shall not: (a) sell, dispose, 

transfer or otherwise convey its business, assets and/or any equity interest 

in Seller; or (b) effectuate the suspension, dissolution, or termination or 

Seller’s business without the express prior written consent of Purchaser, or 

the written agreement of any purchaser, assignee, or transferee assuming all 

of Seller’s and Guarantor’s obligations under the Transaction Documents 

pursuant to documentation satisfactory to Purchaser (as applicable). 

** ** 

2.16 Accuracy of Information. All information provided by Seller and 

Guarantor to Purchaser in the Transaction Documents, in any application, in 

all other Seller forms and in response to any request by Purchaser for 

information whether oral or in writing, is true, accurate and complete in all 

respects. 

  

USE OF CERTIFICATION OF PROCEEDS 

This Use of Proceeds Certification is part of (and incorporated by reference 

into) the Purchase Agreement. 

Each signatory below, on behalf of each Seller or Guarantor, hereby certifies 

the following to the Purchaser: 

1. The entirety of the Purchase Price will be used in the ordinary course 

of business. 

2. The entirety of the Purchase Price will be used exclusively for a 

Business Purpose and no other. A Business Purpose as applied to use of 

proceeds obtained under this Purchase Agreement refers solely to the 

purchase and acquisition of specific products or services used for the 

following purposes only: (i) working capital, (ii) business insurance (but not 

self-insurance programs), (iii) franchise fees, (iv) employee training, (v) the 

purchase of equipment, (vi) inventory, (vii) business supplies and raw 

materials, and (viii) the construction, renovation or improvement of 

facilities (but not the purchase of real estate). Business Purpose does not 

include: (a) payment for, or purchase of, any items, goods, materials real 

property, personal property or services for personal, individual or household 

use; or (b) use of funds for any proceeding under the United States 

Bankruptcy Code or any similar law (whether arising under Federal or State 

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law) and/or any other legal proceeding or alternative dispute resolution 

proceeding. 

See Sale Terms and Conditions, pp.3-4, 8, Exhibit 5. (Emphasis in original). 

67. In executing the Agreement, Debtor/Defendant, both on behalf of Merchant and as 

Guarantor, further represented and warranted, in part: “If any information provided is false or 

misleading, Seller shall be held liable for fraud in the inducement and fraud and 

Guarantor(s) shall be personally liable for the Seller’s obligations.” See Forward Purchase 

Agreement, p. 2, Exhibit 4. (Emphasis in original). 

68. Upon information and belief, the Debtor/Defendant made numerous 

misrepresentations to Kapitus in the Agreement, both on behalf of Merchant and as Guarantor, to 

induce Kapitus to fund the Purchase Price to the Merchant, including, but not limited to, the 

following: 

a. Misrepresentations regarding the financial condition of Seller/Merchant 

and Guarantor, and/or omitted material adverse changes in the condition, 

operation and ownership of the Seller/Merchant (Sale Terms and 

Conditions, p. 3, § 2.1, Exhibit 5); 

b. Misrepresentations regarding the Seller/Merchant’s current and future 

compliance with all federal state and local tax laws and obligations (Id., p. 

3, § 2.5); 

c. Misrepresented Seller/Merchant would not prevent payment of Kapitus’s 

debits, permit diversion of the Seller/Merchant’s receipts, or engaged in 

actions that had an adverse effect upon Seller/Merchant’s obligations 

under the Agreement (Id., p. 3, § 2.6); 

d. Misrepresented Seller/Merchant would use one account for the Receipts 

and prohibited Kapitus from access to its purchased Receipts (Id.); 

e. Misrepresented Seller/Merchant would not conduct business(es) under 

any name other than as disclosed to the Purchaser or change any of its 

places of business, or change its jurisdiction or incorporation or 

organization without ten (10) days prior written notice to Purchaser. (Id., 

p. 3, § 2.7); 

f. Misrepresented Seller/Merchant was solvent and did not intend to file 

bankruptcy (Sale Terms and Conditions, p. 3, § 2.9, Exhibit 5); 

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g. Misrepresented Seller/Merchant would not enter into any arrangement, 

agreement or commitment for any additional financing, whether in 

the form of a purchase and sale of receivables, the sale of accounts 

receivable, or a loan (whether secured or unsecured) with any party 

other than Purchaser without Purchaser’s written consent. (Id., p. 3, 

§ 2.10); 

h. Misrepresented Seller/Merchant had good, complete and marketable title 

to all Receipts, free and clear of any and all liabilities, liens, claims, 

changes, restrictions, conditions, options, rights, mortgages, security 

interests, equities, pledges and encumbrances of any kind or nature 

whatsoever or any other rights or interests that may be inconsistent with 

the transactions contemplated with, or adverse to the interests of 

Purchaser. (Id., p. 4, § 2.11); 

i. Misrepresented Seller/Merchant would use the Purchase Price under the 

Agreement for business purposes and not as a consumer for personal, 

family or household purposes. (Id. p. 3, § 2.13; Use of Proceeds 

Certification); and 

j. Misrepresented Seller/Merchant would not (a) sell, dispose, transfer or 

otherwise convey its business, assets and/or any equity interest in 

Seller/Merchant; or (b) effectuate the suspension, dissolution, or 

termination or Seller’s business without the express prior written consent 

of Purchaser (Id. p. 4, § 2.15). 

69. The Debtor/Defendant as Guarantor further represented to Kapitus her personal 

guaranty of performance of the representations, warranties, and covenants made in Agreement and 

outlined, in part above: “PERSONAL GUARANTY OF PERFORMANCE. Each undersigned 

Guarantor hereby unconditionally guarantees to Purchaser the Merchant’s performance of all of the 

representations, warranties, covenants made by Seller in the Purchase Agreement, the Sale Terms 

and Conditions, the Security Agreement, Guaranty, and Agreement to Arbitrate...”. See Personal 

Guaranty, ¶ 1, p. 1, Exhibit 7. 

70. On August 26, 2022, in reliance on the representations, warranties, and covenants 

made in Agreement by the Debtor/Defendant on behalf of both Merchant and as Guarantor, Kapitus 

agreed to purchase certain of Merchant’s Receipts and funded the Purchase Price to Merchant 

pursuant to the terms and conditions set forth in the Agreement. 

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71. Kapitus reasonably and justifiably relied on Debtor/Defendant’s representations, 

both as Guarantor and on behalf Merchant, made to Kapitus in the Agreement. 

72. Kapitus would not have funded the Agreement but for Debtor/Defendant’s 

representations, both as Guarantor and on behalf Merchant, made to Kapitus as in the Agreement 

and outlined above. 

73. Upon information and belief, Debtor/Defendant knew her representations as both 

the representative of the Merchant and as Guarantor made to Kapitus, including, but not limited to, 

those outlined above, were false when she made them. 

74. Upon information and belief, Debtor/Defendant as both the representative of the 

Merchant and as Guarantor never intended to honor the Agreement. 

75. The Agreement also granted Kapitus a blanket lien on Merchant’s assets, including 

but not limited to: all accounts, accounts receivable, contracts, real property leases, notes, bills, 

acceptances, chose in action, chattel paper, instruments, inventory, goods, equipment, supplies, 

furniture, cash, and general intangibles (collectively, the “Collateral”). See Security Agreement and 

Guaranty, p. 1, Exhibit 6. 

76. On August 27, 2022, Kapitus perfected its lien by filing a Uniform Commercial 

Code (“UCC”) financing statement with the Secretary of State for the State of Texas (the “Kapitus 

UCC-1”). See UCC Financing Statement, Exhibit 12. 

D. Debtor/Defendant’s Misrepresentations Regarding Obligations to Financial 

Institutions and Creditors Other Than Plaintiff 

77. Upon information and belief, at the time the Agreement with Plaintiff was being 

negotiated, Merchant may have had undisclosed balance(s) with another financial source(s) that 

took payments on less than a monthly basis. 

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78. Prior to funding under the Agreement, Debtor/Defendant, as Guarantor and on 

behalf of Merchant, made the following written representations, warranties, and covenants to 

Kapitus via the Agreement: 

a. Seller/Merchant would not enter into any arrangement, agreement or 

commitment for any additional financing, whether in the form of a 

purchase and sale of receivables, the sale of accounts receivable, or 

a loan (whether secured or unsecured) with any party other than 

Purchaser without Purchaser’s written consent. 

b. Seller/Merchant had good, complete and marketable title to all Receipts, 

free and clear of any and all liabilities, liens, claims, changes, 

restrictions, conditions, options, rights, mortgages, security interests, 

equities, pledges and encumbrances of any kind or nature whatsoever or 

any other rights or interests that may be inconsistent with the 

transactions contemplated with, or adverse to the interests of Purchaser. 

Sales Terms and Conditions p. 3-4, §§ 2.10 – 2.11, Exhibit 5. (Emphasis in original). 

79. Prior to funding under the Agreement, Debtor/Defendant, as Guarantor and on 

behalf of Merchant, made the following written representations, warranties, and covenants to 

Kapitus via the R&As: 

a. The business / Merchant did not have a current financing product that obligated 

the business to make payments on a less than monthly basis that had not been 

disclosed to Kapitus in writing in connection with [the] application for funding, 

nor had the business / Merchant taken on such an obligation since [submitting 

the] application for funding to Kapitus nor did the business/Merchant intend to 

do so, without Kapitus’ written consent. 

b. Neither the business / Merchant or Debtor/Defendant was in arrears on any 

business or personal loans or other financial obligations, except as previously 

disclosed to Kapitus in writing; 

c. All information that the Debtor/Defendant provided to Kapitus to obtain 

financing accurately reflected the current ownership of the Merchant, 

Merchant’s status and/or financial condition of the Merchant. 

See Representations and Acknowledgments, Exhibit 9. 

80. On August 25, 2022, Debtor/Defendant, as Guarantor and on behalf of Merchant, 

signed the Agreement with Kapitus. See generally, Agreement, Exhibits 4-9. 

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81. On August 26, 2022, Kapitus funded the Agreement with the Merchant and 

Debtor/Defendant. See MYO Investments, Merchant Statement of Activity (Redacted), Exhibit 

10. 

82. As a condition of Kapitus’ funding of the Agreement with Merchant, Merchant 

was required to provide a payoff statement as to its outstanding balance with FORA Financing, 

the outstanding balance owed to FORA Financing was paid off as part of Kapitus’ funding of 

Merchant, and Kapitus agreed to take a “second” position behind OnDeck Capital based on its 

review of the August 2022 Application, the financial and other documents submitted by 

Debtor/Defendant in support of the August 2022 Application, and the R&As. 

83. Debtor/Defendant, as Guarantor and on behalf of Merchant was aware of the 

requirements and limitation, outlined above, in both the R&A and the Agreement regarding 

additional financing and Kapitus’ written consent as to the same. 

84. According to the Merchant’s Schedule E/F, the Merchant has business debts to 

NewCo. Capital Group VI LLC (“NewCo Capital”). See In Re MYO Investments, Voluntary 

Petition, ECF 1, p. 26, Exhibit 2. 

85. Merchant’s Schedule E/F does not show when Merchant’s business debt to 

NewCo. Capital was incurred. Id. 

86. On or around September 19, 2022, less than one (1) month after entering into the 

Agreement with Kapitus, Merchant (as Borrower) and Debtor/Defendant (as Guarantor) entered 

into an agreement pursuant to which NewCo Capital purchased Merchant’s future receivables. 

See NewCo Capital Complaint, Exhibit 13; NewCo Capital Agreement dated September 24, 

2019 (Redacted), Exhibit 14. 

87. On or around September 19, 2022, less than one (1) month after entering into the 

Agreement with Kapitus, Merchant (as Borrower) and Debtor/Defendant (as Guarantor) sold / 

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further encumbered Merchant’s future receivables to NewCo Capital without Kapitus’s prior 

written consent as required under the Agreement. See Sales Terms and Conditions, p. 3-4, §§ 

2.10 – 2.11, Exhibit 5; NewCo Capital Complaint, Exhibit 13; NewCo Capital Agreement dated 

September 24, 2019 (Redacted), Exhibit 14. 

88. Debtor/Defendant did not disclose the NewCo Capital Agreement to Kapitus as 

required under the Agreement. See Sales Terms and Conditions, pp. 3-4, §§ 2.10 – 2.11, Exhibit 

5. 

89. On or around September 19, 2022, Merchant (as Borrower) and 

Debtor/Defendant (as Guarantor) sold / further encumbered Merchant’s future receivables to 

NewCo Capital without Kapitus’s prior written consent as required under the R&As. See 

Representations and Acknowledgments, Exhibit 9; NewCo Capital Agreement dated September 

24, 2019 (Redacted), Exhibit 14. 

90. The NewCo Capital Agreement required Merchant to make daily batch out 

payments i.e. payments on less than monthly basis without Kapitus’s prior written consent as 

required under the R&As. See Representations and Acknowledgments, Exhibit 9; NewCo Capital 

Agreement dated September 24, 2019 (Redacted), Exhibit 14. 

91. Debtor/Defendant did not disclose the NewCo Capital Agreement to Kapitus as 

required under the R&As. Id. 

92. According to the Merchant’s Schedule E/F, the Merchant has business debts to 

Everest Business Funding / EBF Holding, LLC (“EBF”). See In Re MYO Investments, Voluntary 

Petition, ECF 1, p. 22, Exhibit 2. 

93. Merchant’s Schedule E/F does not show when Merchant’s business debt to EBF 

was incurred. Id. 

94. Upon information and belief, on or around October 6, 2022, less than two (2) 

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months after entering into the Agreement with Kapitus, Merchant (as Borrower) and 

Debtor/Defendant (as Guarantor) incurred a debt to EBF. See Merchant Statement Dated 

October 31, 2022 (Redacted), p. 2, Exhibit 15. 

95. Debtor/Defendant did not disclose the EBF debt to Kapitus as required under the 

Agreement. See Sales Terms and Conditions, pp. 3-4, §§ 2.10 – 2.11, Exhibit 5. 

96. EBF required Merchant to make daily batch out payments i.e. payments on less 

than monthly basis without Kapitus’s prior written consent as required under the R&As. See 

Representations and Acknowledgments, Exhibit 9; Merchant Statement Dated October 31, 2022 

(Redacted), pp. 3-11, Exhibit 15

97. Debtor/Defendant did not disclose the EBF debt to Kapitus as required under the 

R&As. Id. 

98. According to the Merchant’s Schedule E/F, the Merchant has business debts to 

Forward Financing. See In Re MYO Investments, Voluntary Petition, ECF 1, p. 23, Exhibit 2. 

99. Merchant’s Schedule E/F does not show when Merchant’s business debt to 

Forward Financing was incurred. Id. 

100. Upon information and belief, in November 2022, approximately three (3) months 

after entering into the Agreement with Kapitus, Merchant (as Borrower) and Debtor/Defendant 

(as Guarantor) incurred a debt to Forward Financing. See Merchant Statement Dated November 

30, 2022 (Redacted), p. 9, Exhibit 16. 

101. Debtor/Defendant did not disclose the Forward Financing debt to Kapitus as 

required under the Agreement. See Sales Terms and Conditions, pp. 3-4, §§ 2.10 – 2.11, Exhibit 

5. 

102. Forward Financing required Merchant to make daily batch out payments i.e. 

payments on less than monthly basis without Kapitus’s prior written consent as required under 

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the R&As. See Representations and Acknowledgments, Exhibit 9; Merchant Statement Dated 

November 30, 2022 (Redacted), pp. 9-12, Exhibit 16. 

103. Debtor/Defendant did not disclose the Forward Financing debt to Kapitus as 

required under the R&As. Id. 

104. According to the Merchant’s Schedule E/F, the Merchant has business debts to 

Swift Funding Source (“Swift”). See In Re MYO Investments, Voluntary Petition, ECF 1, p. 31, 

Exhibit 2. 

105. Merchant’s Schedule E/F does not show when Merchant’s business debt to Swift 

was incurred. Id. 

106. Upon information and belief, the agreement for Merchant’s business debt to Swift 

existed at least as of December 6, 2022, just over three (3) months after entering into the 

Agreement with Kapitus, Merchant (as Borrower) and Debtor/Defendant (as Guarantor). See 

Merchant Statement Dated December 31, 2021 (Redacted), p. 2, Exhibit 17. 

107. Debtor/Defendant did not disclose the Swift debt to Kapitus as required under the 

Agreement. See Sales Terms and Conditions, p. 3-4, §§ 2.10 – 2.11, Exhibit 5. 

108. Upon information and belief, Swift required Merchant to weekly batch out 

payments i.e. payments on less than monthly basis without Kapitus' prior written consent as 

required under the R&As. See Representations and Acknowledgments, Exhibit 9; See Merchant 

Statement Dated December 31, 2022 (Redacted), pp. 3-10, Exhibit 17. 

109. Debtor/Defendant did not disclose the Swift debt to Kapitus as required under the 

R&As. Id. 

110. According to the Merchant’s Schedule E/F, the Merchant has business debts to 

GFE NY, LLC d/b/a Global Funding Experts (“GFE”). See In Re MYO Investments, Voluntary 

Petition, ECF 1, p. 23, Exhibit 2. 

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111. Merchant’s Schedule E/F does not show when Merchant’s business debt to GFE 

was incurred. Id. 

112. Upon information and belief, the agreement for Merchant’s business debt to GFE 

existed at least as of December 9, 2022, just over three (3) months after entering into the 

Agreement with Kapitus, Merchant (as Borrower) and Debtor/Defendant (as Guarantor). See 

Merchant Statement Dated December 31, 2022 (Redacted), p. 4, Exhibit 17. 

113. Debtor/Defendant did not disclose the GFE debt to Kapitus as required under the 

Agreement. See Sale Terms and Conditions, pp. 3-4, §§ 2.10 – 2.11, Exhibit 5. 

114. Upon information and belief, GFE required Merchant to weekly batch out 

payments i.e. payments on less than monthly basis without Kapitus’s prior written consent as 

required under the R&As. See Representations and Acknowledgments, Exhibit 9; See Merchant 

Statement Dated December 31, 2022 (Redacted), pp. 4-10, Exhibit 17. 

115. Debtor/Defendant did not disclose the GFE debt to Kapitus as required under the 

R&As. Id. 

116. Debtor/Defendant and Merchant incurred some or all of the business debt owed 

to NewCo Capital, EBF, Forward Financing, Swift, GFE, and potentially others, after 

Debtor/Defendant entered into the Agreement with Kapitus on August 25, 2022. 

117. Debtor/Defendant and Merchant incurred some or all of the business debt owed 

to NewCo Capital, EBF, Forward Financing, Swift, GFE, and potentially others, after 

Debtor/Defendant represented to Kapitus that Merchant would “not enter into any 

arrangement, agreement or commitment for any additional financing, whether in the form 

of a purchase of receivables or a loan to the business with any party other than [Kapitus] 

without [Kapitus]’s written permission.” See Sale Terms and Conditions p. 3, § 2.10, Exhibit 

5. (Emphasis in original). 

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118. Debtor/Defendant and Merchant incurred some or all of the business/financial 

obligations owed to NewCo Capital, EBF, Forward Financing, Swift, GFE, and potentially 

others, after Debtor/Defendant represented to Kapitus that Merchant did not have and would not 

take out a financing product that obligated the business / Merchant to make payments on a less 

than monthly basis without Kapitus’s written consent. See Representations and 

Acknowledgments, Exhibit 9. 

119. Upon information and belief, despite representing otherwise, Debtor/Defendant 

and Merchant entered into alternative financing agreements with NewCo Capital, EBF, Forward 

Financing, Swift, GFE, and potentially others, shortly after entering the Agreement with Kapitus, 

and potentially further encumbered Merchant’s Receipts without Kapitus’s written consent. 

120. Upon information and belief, Debtor/Defendant and Merchant entered into 

alternative financing agreements with NewCo Capital, EBF, Forward Financing, Swift, GFE, 

and potentially others, shortly after entering the Agreement with Kapitus, because Merchant was 

not as profitable or as solvent as represented to Kapitus in in the August 2022 Application, during 

the August 2022 Application process via in the various financial and other documents she 

submitted in support of the August 2022 Application, in the R&A, and in the Agreement. 

E. Debtor/Defendant’s Undisclosed First Home Bank (SBA) Loan and COVID19 Economic Injury Disaster Loan for Merchant 

121. Prior to funding under the Agreement, Debtor/Defendant, as Guarantor and on 

behalf of Merchant, made the following written representations, warranties, and covenants to 

Kapitus via the Agreement: 

II. REPRESENTATIONS, WARRANTIES AND COVENANTS. 

Seller and Guarantor represents, warrants and covenants that as of this date 

and during the term of the Agreement: 

** ** 

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2.1 Financial Condition and Financial Information. The information 

and financial statements which have been furnished to Purchaser by Seller 

and Guarantor, and such future statements which will be furnished hereafter 

at the request of Purchaser, fairly represent the ownership and operations of 

the Seller’s business and the financial condition of Seller and Guarantor at 

such dates, and since those dates, there has been no material adverse change, 

financial or otherwise, in such condition, operation or ownership of Seller 

or Guarantor (as applicable). Seller and Guarantor are current on any and 

all lease, rent or mortgage payments due. Seller and Guarantor are currently 

in compliance with all loans, financing agreements, promissory notes, 

and/or other obligations of indebtedness, except as disclosed to Purchaser. 

No material changes, financial or otherwise, in the condition, operation or 

ownership of Seller and Guarantor (as applicable) are in any way expected 

or anticipated and Seller and Guarantor do not anticipate closing or selling 

Seller’s business. Neither the Seller nor the Guarantor are party to any 

pending litigation that is expected to have a material impact on the Seller or

Guarantor. Seller has a continuing, affirmative obligation to advise 

Purchaser of any material change in its financial condition, operation or 

ownership. Purchaser may request statements at any time during the 

performance of this Agreement and the Seller shall provide them to 

Purchaser within five (5) business days. Seller’s failure to do so is a material 

breach of this Agreement.

  

2.10 Other Financing. Seller shall not enter into any arrangement, 

agreement or commitment for any additional financing, whether in the 

form of a purchase and sale of receivables, the sale of accounts 

receivable, or a loan (whether secured or unsecured) with any party 

other than Purchaser without Purchaser’s written consent.

See Sale Terms and Conditions, p. 3, §§ 2.1, 2.10, Exhibit 5. (Emphasis in original). 

122. Prior to funding under the Agreement, the Debtor/Defendant, as Guarantor and on 

behalf of Merchant, also made the following representations and acknowledgments to Kapitus: 

¶ 11. All information that I provided to Kapitus to obtain financing for my 

business accurately reflects the ... financial condition of my 

business. 

See Representations and Acknowledgments, ¶ 11, p. 1, Exhibit 9; see also Sale Terms and 

Conditions, ¶ 2.1, Exhibit 5. In addition, the Debtor/Defendant, as Guarantor and on behalf of 

Merchant, also made the following representations and acknowledgments to Kapitus: 

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Each signatory represents and warrants that: (1) he or she is authorized to enter into 

this sale, legally binding the Seller to deliver the Receipts as agreed, and (2) all 

information provided herein, in the application, in any documents submitted, and 

in any interviews conducted during the underwriting of the sale, including without 

limitation any financial information, are true, accurate and complete in all respects. 

Seller and Guarantor(s) expressly acknowledge and agree that Purchaser and 

Servicer are relying on such representations and warranties when determining to 

purchase the Receipts and that the accuracy thereof is a material condition of the 

Transaction Documents. If any information provided is false or misleading, Seller 

shall be held liable for fraud in the inducement and fraud and Guarantor(s) shall be 

personally liable for the Seller’s obligations. 

See Forward Purchase Agreement, p. 2, Exhibit 4. 

123. On August 26, 2022, in reliance on the representations, warranties, and covenants 

made by the Debtor/Defendant, as Guarantor and on behalf of Merchant, in the Agreement and the 

R&As, Kapitus funded the Purchase Price to Merchant pursuant to the terms and conditions set 

forth in the Agreement. See Merchant Statement of Activity (Redacted), Exhibit 10. 

124. Upon information and belief, on or around October 7, 2022, less than two (2) 

months after entering into the Agreement with Kapitus, Merchant (as Borrower) and 

Debtor/Defendant (as Guarantor) incurred a debt to First Home Bank. See Merchant Statement 

Dated October 31, 2022 (Redacted), p. 3, Exhibit 15. 

125. Debtor/Defendant did not disclose the First Home Bank debt to Kapitus as required 

under the Agreement. See Sale Terms and Conditions, pp. 3-4, §§ 2.10 – 2.11, Exhibit 5. 

126. Debtor/Defendant did not disclose the First Home Bank debt to Kapitus as required 

under the R&As. Id. 

127. Upon information and belief, Debtor/Defendant, on behalf of Merchant, applied for 

and received a COVID-19 Economic Injury Disaster Loan (“EIDL”). See In Re MYO Investments,

Voluntary Petition, ECF 1, p. 29, Exhibit 2. 

128. Merchant’s Schedule E/F does not show when Merchant’s EIDL debt was incurred. 

Id. 

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129. Upon information and belief, the agreement Merchant’s EIDL debt was incurred 

after Debtor/Defendant, as Guarantor and on behalf of Merchant, entered into the Agreement with 

Kapitus on August 25, 2022. 

130. Upon information and belief, Debtor/Defendant did not disclose the EIDL debt to 

Kapitus as required under the Agreement. See Sale Terms and Conditions, pp. 3-4, §§ 2.10 – 2.11, 

Exhibit 5. 

131. Upon information and belief, Debtor/Defendant did not disclose the EIDL debt to 

Kapitus as required under the R&As. Id. 

132. Upon information and belief, Merchant incurred EIDL debt because Merchant was 

not as profitable or as solvent as represented to Kapitus in in the August 2022 Application, during 

the August 2022 Application process via in the various financial and other documents she 

submitted in support of the August 2022 Application, in the R&A, and in the Agreement. 

133. Kapitus would not have funded the Agreement but for Debtor/Defendant’s 

representations, both as Guarantor and on behalf Merchant, made to Kapitus as in the R&As and 

outlined above. 

134. Kapitus would not have funded the Agreement but for Debtor/Defendant’s 

representations, both as Guarantor and on behalf Merchant, made to Kapitus as in the Agreement 

and outlined above. 

F. Debtor/Defendant’s Undisclosed Tax Obligations 

135. Prior to funding under the Agreement, Debtor/Defendant, as Guarantor and on 

behalf of Merchant, made the following written representations, warranties, and covenants to 

Kapitus via the Agreement: 

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II. REPRESENTATIONS, WARRANTIES AND COVENANTS. 

Seller and Guarantor represents, warrants and covenants that as of this date 

and during the term of the Agreement: 

** ** 

2.5 Tax Obligations. Seller is currently in compliance with all federal 

state and local tax laws, has filed all returns, and has paid all taxes due, 

except as disclosed to Purchaser...Seller or Guarantor shall pay all taxes 

owed to federal, state, or local governments when due. 

See Sale Terms and Conditions, p. 3, § 2.5, Exhibit 5. 

136. Prior to funding under the Agreement, the Debtor/Defendant, as Guarantor and on 

behalf of Merchant, made the following representations and acknowledgments to Kapitus: 

 ¶ 10. NO taxing or other authorities have filed any liens, nor do I have 

any unpaid taxing obligations, expect as previously disclosed to Kapitus in 

writing. 

See Representations and Acknowledgments, ¶ 10 p. 1, Exhibit 9. (Emphasis in original). 

137. According to the Merchant’s Schedule E/F, the Merchant has unpaid business sales 

tax obligations to the State of Texas. See In Re MYO Investments, Voluntary Petition, ECF 1, p. 

31, Exhibit 2. 

138. Merchant’s Schedule E/F does not show when Merchant’s sales tax obligations to 

the State of Texas were incurred. Id. 

139. Upon information and belief, Debtor/Defendant did not disclose the sales tax 

obligations owed to the State of Texas to Kapitus as required under the Agreement. See Sale Terms 

and Conditions, p. 3, § 2.5, Exhibit 5. 

140. Upon information and belief, Merchant failed to pay all taxes owed to federal, state, 

or local governments when due. See Sale Terms and Conditions, p. 3, § 2.5, Exhibit 5; but cf., In 

Re MYO Investments, Voluntary Petition, ECF 1, p. 31, Exhibit 2. 

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141. Upon information and belief, Debtor/Defendant did not disclose the unpaid sales 

tax obligations owed to the State of Texas to Kapitus as required under the R&As. See 

Representations and Acknowledgments, ¶ 10 p. 1, Exhibit 9. 

142. According to the Debtor/Defendant’s Schedule E/F, the Debtor/Defendant has 

unpaid tax obligations owed to the Internal Revenue Service incurred in 2022. (Case No. 23-42207, 

ECF 1, p. 32). 

143. Upon information and belief, Debtor/Defendant, as Guarantor, did not disclose the 

unpaid tax obligations owed to the Internal Revenue Service to Kapitus as required under the 

Agreement. See Sale Terms and Conditions, p. 3, § 2.5, Exhibit 5. 

144. Upon information and belief, Debtor/Defendant, as Guarantor, failed to pay all taxes 

owed to federal, state, or local governments when due. See Sale Terms and Conditions, p. 3, § 2.5, 

Exhibit 5; but cf., Case No. 23-42207, ECF 1, p. 32. 

145. Upon information and belief, Debtor/Defendant did not disclose the unpaid tax 

obligations owed to the Internal Revenue Service to Kapitus as required under the R&As. See 

Representations and Acknowledgments, ¶ 10 p. 1, Exhibit 9. 

146. Kapitus reasonably and justifiably relied on Debtor/Defendant’s representations, 

both as Guarantor and on behalf Merchant, made to Kapitus in the Agreement and the R&As. 

147. Kapitus would not have funded the Agreement but for Debtor/Defendant’s 

representations, both as Guarantor and on behalf Merchant, made to Kapitus as in the Agreement 

and outlined above. 

148. Kapitus would not have funded the Agreement but for Debtor/Defendant’s 

representations, both as Guarantor and on behalf Merchant, made to Kapitus as in the R&As and 

outlined above. 

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G. Debtor/Defendant’s Insufficient Funds In Specified Account 

149. Pursuant to the Agreement, Merchant was required to use only a single, specified 

depositing account to deposit all Receipts collected by Merchant, which was designated by the 

parties in the Agreement and fully accessible to Kapitus a/k/a the Account. See Forward Purchase 

Agreement, ¶¶ 7, 8, pp. 1-2, Exhibit 4; Sale Terms and Conditions, §§ 1.3, 2.6, pp.1 & 3, Exhibit 

5. 

150. The Agreement entitled Kapitus to collect the Specified Percentage of the batch 

amount of Merchants’ Receipts via ACH or the Specified Weekly Amount from the Account 

through debits from the Account until such time as Kapitus received payment in full of the 

Receipts Purchased Amount. See Forward Purchase Agreement, ¶¶ 7, 8, pp. 1-2, Exhibit 4; Sale 

Terms and Conditions, § 1.3, p. 1, Exhibit 5. 

151. The authorization for Kapitus to use the Account to make such transfers is 

irrevocable by Merchant without Kapitus’s consent. See Sale Terms and Conditions, §§ 1.3, p. 1, 

Exhibit 5. 

152. To avoid disruption, the Agreement prohibited changes to the Account or the 

designation of Account except with Kapitus’s express written consent. See Sale Terms and 

Conditions, § 1.3, p. 1, Exhibit 5. 

153. Merchant, via the Debtor/Defendant, was to maintain the Account with sufficient 

funds to cover the payments due under the Agreement to Kapitus and failure to do so was a default 

of the Agreement. See Sale Terms and Conditions, § 3.1, p. 4, Exhibit 5. 

154. On February 23, 2023, Debtor/Defendant, on behalf of the Merchant and as 

Guarantor, defaulted on the obligations under the Agreement when the ACH payment, as provided 

for in the Agreement, did not clear and was returned to Kapitus, on or around February 28, 2023, 

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due to insufficient funds, which prohibited Kapitus from collecting on the amounts rightly owed 

to it under the Agreement. See Merchant Statement of Activity (Redacted), Exhibit 10. 

155. The last payment received by Kapitus from the Merchant, as provided for in the 

Agreement, was the ACH payment made on February 16, 2023, which cleared on February 17, 

2023. See Merchant Statement of Activity (Redacted), Exhibit 10. 

156. Debtor/Defendant, as Guarantor, failed to make payments to Kapitus as provided in 

the Agreement. See Merchant Statement of Activity (Redacted), Exhibit 10. 

157. Kapitus reasonably and justifiably relied on Debtor/Defendant’s representations, 

both as Guarantor and on behalf Merchant, made to Kapitus in the Agreement. 

158. Kapitus would not have funded the Agreement but for Debtor/Defendant’s 

representations, both as Guarantor and on behalf Merchant, made to Kapitus as in the Agreement 

and outlined above. 

H. Debtor/Defendant’s Closing of Merchant’s Business 

159. Debtor/Defendant, on behalf of Merchant and as Guarantor, made the following 

written representations, warranties, and covenants to Kapitus via the Agreement: 

II. REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller 

and Guarantor represents, warrants and covenants that as of this date and 

during the term of the Agreement:

  

2.1. Financial Condition and Financial Information. ... No material 

changes, financial or otherwise, in the condition, operation or ownership of 

Seller and Guarantor (as applicable) are in any way expected or anticipated 

and Seller and Guarantor do not anticipate closing or selling Seller’s 

business...Seller has a continuing, affirmative obligation to advise 

Purchaser of any material change in its financial condition, operation or 

ownership...

** ** 

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2.15. Sale or Dissolution of Seller. Seller shall not: (a) sell, dispose, 

transfer or otherwise convey its business, assets and/or any equity interest 

in Seller; or (b) effectuate the suspension, dissolution, or termination or 

Seller’s business without the express prior written consent of Purchaser, or 

the written agreement of any purchaser, assignee, or transferee assuming all 

of Seller’s and Guarantor’s obligations under the Transaction Documents 

pursuant to documentation satisfactory to Purchaser (as applicable). 

See Sale Terms and Conditions, pp. 3-4, Exhibit 5. (Emphasis in original).

160. On August 26, 2022, in reliance on the representations, warranties, and covenants 

made by the Debtor/Defendant, on behalf of Merchant and as Guarantor, Kapitus funded the 

Purchase Price to Merchant pursuant to the terms and conditions set forth in the Agreement. See 

Merchant Statement of Activity (Redacted), Exhibit 10.

161. On July 30, 2023, Debtor/Defendant filed a Voluntary Petition under Chapter 7 with 

this Court (Case No. 23-42207, ECF 1). 

162. According to Debtor/Defendant’s Petition/Statement of Financial Affairs, Merchant 

has not ceased operations in that no date of closure for the Merchant’s business is listed. (Case No. 

23-42207, ECF 1, p. 50). 

163. On October 31, 2023, Merchant filed a Voluntary Petition for bankruptcy under 

Chapter 7 of the Bankruptcy Code. See In Re MYO Investments, Voluntary Petition, ECF 1, Exhibit 

2. 

164. According to Merchant’s Petition/Statement of Financial Affairs, Merchant has not 

ceased operations in that no date of closure for the Merchant’s business is listed and revenue for 

calendar year 2023 is listed at $275,000.00. In Re MYO Investments, Voluntary Petition, ECF 1, 

p. 38, Exhibit 2. 

165. However, pursuant to the information available via the Texas Secretary of State’s 

Office, Merchant has forfeited its existence/dissolved. See MYO Investments TX SOS Search Dated 

November 2023, p. 1, Exhibit 1. 

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166. Despite the aforementioned representations, warranties, and covenants made by the 

Debtor/Defendant, on behalf of Merchant and as Guarantor, Debtor/Defendant did not inform 

Kapitus of the change in Merchant’s financial condition or that Merchant was ceasing operations. 

See Sale Terms and Conditions, §§ 2.1, 2.15, pp. 3-4, Exhibit 5. 

167. Upon information and belief, Debtor/Defendant, on behalf of Merchant and as 

Guarantor, may have sold or caused to be sold all or substantially all of the Merchant’s assets 

without notice to Kapitus pursuant to the Agreement. See Sale Terms and Conditions, § 2.15, p. 4, 

Exhibit 5. 

I. Debtor/Defendant’s Use and/or Transfer of Kapitus’s Collateral 

168. Debtor/Defendant, on behalf of Merchant and as Guarantor, made the following 

written representations, warranties, and covenants to Kapitus via the Agreement: 

II. REPRESENTATIONS, WARRANTIES AND COVENANTS. 

Seller and Guarantor represents, warrants and covenants that as of 

this date and during the term of the Agreement: 

  

2.7 Change of Name or Location. Seller will not conduct Seller’s 

business(es) under any name other than as disclosed to the Purchaser or 

change any of its places of business, or change its jurisdiction or 

incorporation or organization without ten (10) days prior written notice to 

Purchaser. 

** ** 

2.15. Sale or Dissolution of Seller. Seller shall not: (a) sell, dispose, 

transfer or otherwise convey its business, assets and/or any equity interest 

in Seller; or (b) effectuate the suspension, dissolution, or termination or 

Seller’s business without the express prior written consent of Purchaser, or 

the written agreement of any purchaser, assignee, or transferee assuming all 

of Seller’s and Guarantor’s obligations under the Transaction Documents 

pursuant to documentation satisfactory to Purchaser (as applicable). 

See Sale Terms and Conditions, §§ 2.7, 2.15, pp. 3-4, Exhibit 5. (Emphasis in original). 

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169. BSMG Construction Management, LLC (“BSMG”) is a limited liability company 

duly organized in the State of Texas with a principal office at 700 Lavaca Street, Suite 1401, 

Austin, TX 78701. See BSMG TX SOS Search Dated November 2023, Exhibit 3. 

170. Upon information and belief, BSMG also has a business address of 600 West 6th

Street, Fort Worth, TX 76102. (Case No. 23-42207, ECF 1, p. 48). 

171. Upon information and belief, Debtor/Defendant owns at least 49% of BSMG. 

172. Upon information and belief, Debtor/Defendant is or was, at all relevant times, a 

director of BSMG. See BSMG TX SOS Search Dated November 2023, p. 2, Exhibit 3. 

173. Upon information and belief, at all relevant times, BSMG was also the employer 

of Debtor/Defendant. (Case No. 23-42207, ECF 1, p. 48). 

174. Upon information and belief, BSMG via Debtor/Defendant received fraudulent 

transfers from Debtor/Defendant by way of the use of Merchant’s personal property subject to 

the valid lien filed by Kapitus. See generally Merchant Statement Dated October 31, 2022 

(Redacted), Exhibit 15; Merchant Statement Dated November 30, 2022 (Redacted), Exhibit 16;

Merchant Statement Dated December 31, 2022 (Redacted), Exhibit 17. 

175. Upon information and belief, Kapitus has superior rights and interests in the 

property transferred to BSMG via Debtor/Defendant. 

176. Upon information and belief, BSMG via Debtor/Defendant used Merchant’s 

property subject to the valid lien filed by Kapitus. 

177. Upon information and belief, Kapitus has superior rights and interests in the 

property used by BSMG. 

178. Upon information and belief, BSMG is also in possession of assets that were 

transferred to it by Debtor/Defendant to avoid the payment of the Purchased Receivables 

purchased by Kapitus and which rightfully belong to Kapitus. 

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179. BSMG’s possession of the property belonging to Kapitus, pursuant to its valid 

lien and/or its ownership interest in the Purchased Receivables, subjects it owner/managing 

member, Debtor/Defendant to claims for conversion, embezzlement, larceny, unjust enrichment 

and receipt of fraudulent transfers and remedies including constructive trust. 

COUNT I 

Non-Dischargeability Of Debt Pursuant To 11 U.S.C. § 523(a)(2)(A) 

False Pretenses, False Representations, Actual Fraud as to Debtor/Defendant, Individually 

180. Kapitus repeats and realleges paragraphs 1 through 179 above and incorporates the 

same as though set forth herein. 

181. The Debtor/Defendant’s liability to Kapitus, as alleged herein, is a debt for money 

owed and services provided within the meaning of 11 U.S.C. § 523(a)(2). 

182. Debtor/Defendant obtained money and services by false pretenses, false 

representations, and/or actual fraud within the meaning of 11 U.S.C. § 523(a)(2)(A). 

183. Pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, a debt by which a debtor 

obtains money by false pretenses, false statements, or actual fraud shall not be dischargeable. 

184. Kapitus believes and alleges that the Debtor/Defendant, on behalf of Merchant and 

as Guarantor, entered into the Agreement with the specific intent not to pay the Receipts Purchased 

Amount to Kapitus. 

185. Kapitus believes and alleges that the Debtor/Defendant, on behalf of Merchant and 

as Guarantor, made false statements and misrepresentations to Kapitus with the intent to induce 

Kapitus to purchase Merchant’s Receipts. 

186. As more fully detailed herein, upon information and belief, the Debtor/Defendant 

made misrepresentations and/or material omissions of fact including, but not limited to, representing 

that: (1) Merchant would not close without prior written notice to Kapitus; (2) Merchant would not 

transfer or sell all or substantially all of the Merchant’s assets or equity interests without prior written 

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notice to Kapitus; (3) Merchant intended to use the funding amount for business purposes rather than 

personal, family, or household purposes; (4) Merchant would use one Account for payment under the 

Agreement and provide Kapitus with irrevocable access to that Account for payment; (5) Merchant 

would ensure that funds adequate to remit payment to Kapitus were kept in the Account; (6) 

Merchant would not enter into any arrangement, agreement or commitment for any additional 

financing, whether in the form of a purchase of receivables or a loan to the business with any party 

other than Kapitus without Kapitus’s written permission; (7) Merchant would not conduct its 

business(es) under any name other than as disclosed to Kapitus or change any of its places of 

business without prior written notice to Kapitus; and (8) Merchant is not insolvent and does not 

contemplate and has not filed any petition for bankruptcy protection under Title 11 of the United 

States Code. 

187. Kapitus justifiably relied on the Debtor/Defendant’s representations, on behalf of 

Merchant and as Guarantor, when it entered into the Agreement and funded the Purchase Price to 

Merchant. 

188. Despite having made the above representations, among others, on behalf of 

Merchant and as Guarantor, to Kapitus in order to induce Kapitus to enter into the Agreement and 

purchase Merchant’s Receipts, Debtor/Defendant, at a minimum: 

a. Took out and failed to disclose additional financing to Kapitus; 

b. Failed to maintain the Account with sufficient funds to cover the payments 

due under the Agreement to Kapitus; 

c. Failed to provide Kapitus with irrevocable access to the Account for payment; 

d. Prohibited Kapitus from collecting on the amounts rightly owed to it under 

the Agreement5; 

e. Closed the Merchant’s operations; and 

f. Transferred or sold the Merchant’s assets. 

5

 Exhibit 2 shows Merchant/Debtor having an account with Citizens National Bank of Texas ending in #9331 and that 

the account listed in Exhibits 15 -17, Citizens National Bank of Texas ending in #9231 is no longer open. However, 

Exhibit 2’s listing of the account ending #9331 may be in error with the correct, open account for Merchant/Debtor 

ending in #9231. 

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189. Upon information and belief, at the time the false, untrue, and/or misleading 

representations were made, the Debtor/Defendant knew Debtor/Defendant’s representations made 

on behalf of Merchant and as Guarantor were false, untrue, and/or misleading. 

190. Upon information and belief, Debtor/Defendant intended to induce Kapitus to act 

or refrain from acting upon the Debtor/Defendant’s false, untrue, and/or misleading representations 

and/or material omissions made on behalf of Merchant and as Guarantor. 

191. Kapitus justifiably relied upon Debtor/Defendant’s false, untrue, and/or misleading 

representations and/or material omissions made on behalf of Merchant and as Guarantor. 

192. As a result of Debtor/Defendant’s false, untrue, and/or misleading representations 

and/or material omissions made on behalf of Merchant and as Guarantor, the Merchant obtained 

the Purchase Price from Kapitus, which purchase would not have been authorized by Kapitus if 

the Debtor/Defendant’s false, untrue, misleading representations had not been made, or if material 

facts that were omitted and concealed, were actually disclosed. 

193. Kapitus suffered damages as a direct and proximate consequence of false, untrue, 

and/or misleading representations and/or material omissions made by the Debtor/Defendant on 

behalf of Merchant and as Guarantor. 

194. Kapitus is entitled to an Order from this Court declaring that, pursuant to 11 U.S.C. 

§ 523(a)(2)(A), Debtor/Defendant’s debt to Kapitus is non-dischargeable and a judgment for 

money damages pursuant to the request herein and proof. 

195. Kapitus is also entitled to its attorneys’ fees and costs of suit incurred in 

prosecuting this Complaint and interest under the contractual interest rate. 

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COUNT II 

Non-Dischargeability Of Debt Pursuant To 11 U.S.C. § 523(a)(2)(B) 

Use Of A Statement In Writing That Is Materially False Respecting The Debtor’s Or An 

Insider’s Financial Condition as to Debtor/Defendant, Individually 

196. Kapitus repeats and realleges paragraphs 1 through 179 above and incorporates the 

same as though set forth herein. 

197. Pursuant to 11 U.S.C. § 523(a)(2)(B), a debt in which a debtor obtains money by a 

statement in writing that is materially false respecting the debtor or an insider’s financial 

condition, on which the creditor reasonably relied, and which the debtor caused to be published 

with intent to deceive is non-dischargeable. 

198. Debtor/Defendant’s liability to Kapitus, as alleged herein, is a debt for money owed 

and services provided within the meaning of 11 U.S.C. § 523(a)(2). 

199. The Debtor/Defendant is an insider of the Merchant pursuant to 11 U.S.C. § 

101(31). 

200. Debtor/Defendant, on behalf of Merchant and as a Guarantor, did obtain money 

from Kapitus by the following written, materially false statements in the R&A and the Agreement, 

among others, respecting Merchant’s financial condition upon which Kapitus reasonably relied in 

funding the Purchase Prince to Merchant, including, but not limited to: (1) Neither 

Debtor/Defendant nor Merchant planned to file for bankruptcy protection within the next 12 

months; (2) Neither Debtor/Defendant nor Merchant were insolvent; (3) There were no material 

adverse changes, in the financial condition, operation, or ownership of Merchant; (4) Merchant’s 

financial condition was accurately reflected to Kapitus; (5) Merchant would not close without 

prior written notice to Kapitus; (6) Merchant would not sell all or substantially all of the 

Merchant’s assets or equity interests without prior written notice to Kapitus; (7) Merchant 

intended to use the funding amount for business purposes rather than personal, family, or 

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household purposes; (8) Neither Debtor/Defendant nor Merchant were in arrears with any of their 

creditors; (9) Merchant would use one Account for payment under the Agreement and provide 

Kapitus with irrevocable access to that Account for payment; (10) Merchant would ensure that 

funds adequate to remit payment to Kapitus were kept in the Account; and (11) Merchant would 

not enter into any arrangement, agreement or commitment for any additional financing, whether 

in the form of a purchase of receivables or a loan to the business with any party other than Kapitus 

without Kapitus’s written permission. 

201. Despite having made the above representations, among others to Kapitus in order 

induce Kapitus to purchase Merchant’s Receipts, Debtor/Defendant, both on behalf of Merchant 

and as Guarantor, at a minimum: 

a. Failed to disclose Merchant’s true financial condition to Kapitus; 

b. Failed to disclose Debtor/Defendant’s true financial condition to Kapitus; 

c. Took out and failed to disclose additional financing to Kapitus; 

d. Filed for bankruptcy within 12 months of funding under chapter 7 of the 

Bankruptcy Code on July 30, 2023 (Case No. 23-42207); 

e. Failed to maintain the Account with sufficient funds to cover the payments 

due under the Agreement to Kapitus; 

f. Failed to provide Kapitus with irrevocable access to the Account for 

payment; 

g. Prohibited Kapitus from collecting on the amounts rightly owed to it under 

the Agreement6; 

h. Closed the Merchant’s operations; and 

i. Transferred or sold the Merchant’s assets. 

202. Upon information and belief, as fully detailed above, at the same time these 

representations, among others, were made by Debtor/Defendant, both on behalf of Merchant and 

as Guarantor, Debtor/Defendant knew these representations were materially false. 

6

 Exhibit 2 shows Merchant/Debtor having an account with Citizens National Bank of Texas ending in #9331 and that 

the account listed in Exhibits 15 -17, Citizens National Bank of Texas ending in #9231 is no longer open. However, 

Exhibit 2’s listing of the account ending #9331 may be in error with the correct, open account for Merchant/Debtor 

ending in #9231. 

 

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203. Debtor/Defendant, both on behalf of Merchant and as Guarantor, caused these 

materially false statements to be made in writing, including, but not limited to publishing such 

statements in the August 2022 Application, the financial documents submitted to Kapitus in 

support of the application process, the R&A, and the Agreement. 

204. Kapitus reasonably relied on Debtor/Defendant’s materially false written 

statements made by the Debtor/Defendant, both on behalf of Merchant and as Guarantor, in 

deciding to enter into the Agreement and fund the Purchase Price to Merchant. 

205. Kapitus suffered damages as a direct and proximate consequence of the materially 

false statements made by the Debtor/Defendant, both on behalf of Merchant and as Guarantor. 

206. As a result of these materially false written statements made by the 

Debtor/Defendant, both on behalf of Merchant and as Guarantor, the Merchant obtained from 

Kapitus, inter alia, the Purchase Price, which would not have been authorized by Kapitus if the 

materially false written statements had not been made by Debtor/Defendant. 

207. The Debtor/Defendant’s activities described above constitute obtaining money by 

materially false written statements regarding an insider’s financial condition, on which Kapitus 

reasonably relied, and which the Debtor/Defendant made with the intent to deceive. 

208. Kapitus is entitled to an Order from this Court declaring that, pursuant to 11 U.S.C. 

§ 523(a)(2)(B), Debtor/Defendant’s debt to Kapitus is non-dischargeable. 

209. Kapitus is also entitled to its attorneys’ fees and costs of suit incurred in 

prosecuting this Complaint and the contractual rate of interest. 

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COUNT III 

Non-Dischargeability Of Debt Pursuant To 11 U.S.C. § 523(a)(4) 

Fraud Or Defalcation While Acting In A Fiduciary Capacity, Embezzlement, Or Larceny 

as to Debtor/Defendant, Individually 

210. Kapitus repeats and realleges paragraphs 1 through 179 above and incorporates the 

same as though set forth herein. 

211. The Debtor/Defendant’s liability to Kapitus, as alleged herein, is a debt “for fraud 

or defalcation while acting in a fiduciary capacity, embezzlement, or larceny” within the meaning 

of section 523(a)(4) of the Bankruptcy Code. 

212. Kapitus believes and alleges, Debtor/Defendant entered into the Agreement, both 

on behalf of Merchant and as Guarantor, with the specific intent to take funds from Kapitus 

without any intent to repay these funds. 

213. Pursuant to the R&A and the Agreement, Debtor/Defendant represented: (1) Neither 

Debtor/Defendant nor Merchant planned to file for bankruptcy protection within the next 12 months; 

(2) Neither Debtor/Defendant nor Merchant were insolvent; (3) There were no material adverse 

changes, in the financial condition, operation, or ownership of Merchant; (4) Merchant’s financial 

condition was accurately reflected to Kapitus; (5) Merchant would not close without prior written 

notice to Kapitus; (6) Merchant would not sell all or substantially all of the Merchant’s assets or 

equity interests without prior written notice to Kapitus; (7) Merchant intended to use the funding 

amount for business purposes rather than personal, family, or household purposes; (8) Neither 

Debtor/Defendant nor Merchant were in arrears with any of their creditors; (9) Merchant would 

use one Account for payment under the Agreement and provide Kapitus with irrevocable access to 

that Account for payment; (10) Merchant would ensure that funds adequate to remit payment to 

Kapitus were kept in the Account; and (11) Merchant would not enter into any arrangement, 

agreement or commitment for any additional financing, whether in the form of a purchase of 

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receivables or a loan to the business with any party other than Kapitus without Kapitus’s written 

permission. Kapitus reasonably relied on these representations, among others, made by the 

Debtor/Defendant, both on behalf of Merchant and as Guarantor, in deciding to enter into the 

Agreement and fund the Purchase Price to Merchant. 

214. Despite having made the above representations, among others, to Kapitus to induce 

Kapitus to purchase Merchant’s Receipts, Debtor/Defendant, on behalf of Merchant and as 

Guarantor, at a minimum: 

a. Failed to disclose Merchant’s true financial condition to Kapitus; 

b. Failed to disclose Debtor/Defendant’s true financial condition to Kapitus; 

c. Took out and failed to disclose additional financing to Kapitus; 

d. Filed for bankruptcy within 12 months of funding under chapter 7 of the 

Bankruptcy Code on July 30, 2023 (Case No. 23-42207); 

e. Failed to maintain the Account with sufficient funds to cover the payments due 

under the Agreement to Kapitus; 

f. Failed to provide Kapitus with irrevocable access to the Account for payment; 

g. Prohibited Kapitus from collecting on the amounts rightly owed to it under the 

Agreement7; 

h. Closed the Merchant’s operations; and 

i. Transferred or sold the Merchant’s assets. 

215. Upon information and belief, the Debtor/Defendant, on behalf of Merchant and as 

Guarantor, entered into the Agreement with the specific intent to transfer or hide the Purchase 

Price and Collateral and prevent Kapitus from collecting the obligations owed to it. 

216. Upon information and belief, Debtor/Defendant obtained the Purchase Price from 

Kapitus by committing fraud and defalcation while acting in a fiduciary capacity as the 100% 

owner and director of Merchant. 

217. Upon information and belief, Debtor/Defendant misappropriated portions of the 

Purchase Price and receivables for her own benefit by fraudulent intent or deceit. 

7

 Exhibit 2 shows Merchant/Debtor having an account with Citizens National Bank of Texas ending in #9331 and that 

the account listed in Exhibits 15 -17, Citizens National Bank of Texas ending in #9231 is no longer open. However, 

Exhibit 2’s listing of the account ending #9331 may be in error with the correct, open account for Merchant/Debtor 

ending in #9231. 

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218. Upon information and belief, Debtor/Defendant used the Purchase Price/funds 

received and the receivables without explanation, reason, or purpose relating to Merchant’s 

business, and failed to use Purchase Price/funds received for business materials as represented in 

the Agreement. 

219. Because of the insolvency of Merchant, the Debtor/Defendant had fiduciary 

obligations to Kapitus as a creditor. 

220. Members and/or managing member of a limited liability company owe fiduciary 

duties to the limited liability company’s creditors when the limited liability company is insolvent 

or in the zone of insolvency. 

221. When a limited liability company becomes insolvent, the members and/or managing 

member stand in a trust relation towards creditors, and as trustees of company properties for the 

benefit of creditors. Hence, the members and/or managing member of an insolvent company are 

placed in a fiduciary relation to its creditors. 

222. The Debtor/Defendant was the sole and managing member of Merchant. 

223. Upon information and belief, Merchant was insolvent at the time it received the 

Purchase Price from Kapitus or became insolvent shortly thereafter. Therefore, the 

Debtor/Defendant owed fiduciary duties to manage Merchant’s assets in trust for Merchant’s 

creditors, including Kapitus. 

224. The Debtor/Defendant’s failure to manage Merchant’s assets is a breach of 

fiduciary duty. 

225. Upon information and belief, the Debtor/Defendant used her power as the sole and 

managing member of Merchant for the purpose of obtaining a preference or advantage to herself. 

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226. Upon information and belief, the Debtor/Defendant misappropriated portions of 

Merchant’s receipts for her own benefit. 

227. These were breaches of fiduciary duty owed to Kapitus. 

228. The Debtor/Defendant’s actions in violation of these fiduciary duties constitute 

legal fraud. 

229. Virginia law governs the Agreement. 

230. Under Virginia law, an express trust can be found through the parties’ actions and 

does not need to be in writing. All that is necessary is the unequivocal intent that the legal estate 

be vested in one person, to be held in some matter or for some purpose on behalf of another. A 

trust is created if the intention is that the money be kept or used as a separate fund for the benefit 

of the payor or a third person. 

231. An express trust is a fiduciary relationship with respect to property. 

232. Here, the parties intended to and did enter into an express trust, and 

Debtor/Defendant owed a fiduciary duty to Kapitus. 

233. Debtor/Defendant was supposed to hold Merchant’s receipts in the Account for 

Kapitus’ benefit. Upon information and belief, she did not do so. 

234. Kapitus sustained damages because of the Debtor/Defendant’s fraud and 

defalcation while acting as a fiduciary, embezzlement and/or larceny of the funding and 

receivables. 

235. Upon information and belief, all the acts and omissions that constitute a breach or 

default of the Agreement were performed or omitted by, at the direction of, or with the consent 

of, the Debtor/Defendant and thus the Debtor/Defendant is in breach of the Agreement giving 

Kapitus a right to recover damages. 

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236. Debtor/Defendant’s obligation to Kapitus is a debt for fraud or defalcation while 

acting in a fiduciary capacity, embezzlement, or larceny, and is nondischargeable. 

237. Kapitus is entitled to an Order from this Court declaring that, pursuant to 11 U.S.C. 

§ 523(a)(4), the Debtor/Defendant’s debt to Kapitus is non-dischargeable and a judgment for 

money damages pursuant to the request herein. 

238. Kapitus is also entitled to attorneys’ fees and costs of suit incurred in prosecuting 

this Complaint and the contractual interest rate. 

COUNT IV 

Non-Dischargeability Of Debt Pursuant To 11 U.S.C. § 523(a)(6) 

Willful And Malicious Injury By The Debtor/Defendant, Individually 

239. Kapitus repeats and realleges paragraphs 1 through 179 above and incorporates the 

same as though set forth herein. 

240. Pursuant to section 523(a)(6) of the Bankruptcy Code, a debt incurred by a debtor 

who engages in willful malicious conduct which results in damage shall be nondischargeable. 

241. Kapitus believes and alleges Debtor/Defendant, both on behalf of Merchant and as 

Guarantor, entered into the Agreement with the specific intent not to use the Purchase Price 

proceeds for business purposes and/or to not pay Kapitus the Receipts Purchased Amount. 

242. In addition, Kapitus believes and alleges Debtor/Defendant, both on behalf of 

Merchant and as Guarantor, made false statements to Kapitus with the intent to induce Kapitus to 

transfer the Purchase Price. 

243. Further, upon information and belief, Debtor/Defendant, both on behalf of 

Merchant and as Guarantor, willfully and maliciously executed the Agreement and represented 

to Kapitus that: (1) Neither Debtor/Defendant nor Merchant planned to file for bankruptcy 

protection within the next 12 months; (2) Neither Debtor/Defendant nor Merchant were insolvent; 

(3) There were no material adverse changes, in the financial condition, operation, or ownership of 

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Merchant; (4) Merchant’s financial condition was accurately reflected to Kapitus; (5) Merchant 

would not close without prior written notice to Kapitus; (6) Merchant would not transfer or sell 

all or substantially all of the Merchant’s assets or equity interests without prior written notice to 

Kapitus; (7) Merchant intended to use the funding amount for business purposes rather than 

personal, family, or household purposes; (8) Neither Debtor/Defendant nor Merchant were in 

arrears with any of their creditors; (9) Merchant would use one Account for payment under the 

Agreement and provide Kapitus with irrevocable access to that Account for payment; (10) 

Merchant would ensure that funds adequate to remit payment to Kapitus were kept in the Account; 

and (11) Merchant would not enter into any arrangement, agreement or commitment for any 

additional financing, whether in the form of a purchase of receivables or a loan to the business 

with any party other than Kapitus without Kapitus’s written permission. Kapitus justifiably relied 

on these representations. 

244. Kapitus justifiably relied on the Debtor/Defendant’s representations made on behalf 

of Merchant and as Guarantor when it entered into the Agreement and transferred the Purchase Price 

to Merchant. 

245. In spite of having made the above representations, among others, to Kapitus to 

induce Kapitus to enter into the Agreement and purchase Merchant’s Receipts, Debtor/Defendant, 

on behalf of Merchant and as Guarantor, at a minimum: 

a. Failed to disclose Merchant’s true financial condition to Kapitus; 

b. Failed to disclose Debtor/Defendant’s true financial condition to Kapitus; 

c. Took out and failed to disclose additional financing to Kapitus; 

d. Filed for bankruptcy within 12 months of funding under chapter 7 of the 

Bankruptcy Code on July 30, 2023 (Case No. 23-42207); 

e. Failed to maintain the Account with sufficient funds to cover the payments due 

under the Agreement to Kapitus; 

f. Failed to provide Kapitus with irrevocable access to the Account for payment; 

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g. Prohibited Kapitus from collecting on the amounts rightly owed to it under the 

Agreement8; 

h. Closed the Merchant’s operations; and 

i. Transferred or sold the Merchant’s assets. 

246. Debtor/Defendant’s activities on behalf of Merchant and as Guarantor described 

herein constitute willful and malicious conduct which resulted in damage to Kapitus. 

247. Kapitus is entitled to an Order from this Court declaring that, pursuant to 11 U.S.C. 

§ 523(a)(6), the Debtor/Defendant’s debt to Kapitus is non-dischargeable and a judgment for 

money damages pursuant to the request herein. 

248. Kapitus is also entitled to its attorneys’ fees and costs of suit incurred in prosecuting 

this Complaint and the contractual interest rate. 

COUNT V 

Fraud Against Debtor/Defendant, individually 

249. Kapitus repeats and realleges paragraphs 1 through 179 above and incorporates the 

same as though set forth herein. 

250. Upon information and belief, Debtor/Defendant, on behalf of Merchant and as 

Guarantor, obtained money and services by actual fraud under Virginia law. 

251. Upon information and belief, Debtor/Defendant, on behalf of Merchant and as 

Guarantor, intentionally and knowingly, made false and material representations in the August 

2022 Application, during the application process, in the R&A, and in the Agreement, as described 

above, and had no intention to honor the Agreement, including the Guaranty. 

252. As fully detailed above, Debtor/Defendant, on behalf of Merchant and as Guarantor, 

made false statements in connection with the 2022 Application, the financial documents 

8

 Exhibit 2 shows Merchant/Debtor having an account with Citizens National Bank of Texas ending in #9331 and that 

the account listed in Exhibits 15 -17, Citizens National Bank of Texas ending in #9231 is no longer open. However, 

Exhibit 2’s listing of the account ending #9331 may be in error with the correct, open account for Merchant/Debtor 

ending in #9231. 

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submitted in support of the application process, and in connection with the warranties and 

representations included in the R&A as well as the Agreement, including the Guaranty. 

253. Upon information and belief, Debtor/Defendant knew her statements made on 

behalf of Merchant and as Guarantor were false, and, as a direct and proximate cause of these 

intentional and material misrepresentations and omissions, intended to induce and did induce 

Kapitus to enter to the Agreement and tender the Purchase Price to Merchant. 

254. Upon information and belief, Debtor/Defendant intended to induce Kapitus to act 

or refrain from acting upon Debtor/Defendant’s false statements made on behalf of Merchant and 

as Guarantor. 

255. Kapitus reasonably relied upon Debtor/Defendant’s false statements made on 

behalf of Merchant and as Guarantor in entering into the Agreement and funding the Purchase 

Price to Merchant. 

256. Kapitus has suffered damages as a direct and proximate consequence of the false 

representations made by Debtor/Defendant on behalf of Merchant and as Guarantor. 

257. As a result of false statements and fraud by Debtor/Defendant, both on behalf of 

Merchant and as Guarantor, Merchant obtained the Purchase Price from Kapitus, which purchase 

Kapitus would not have authorized if the Debtor/Defendant’s false representations had not been 

made or if material facts omitted and concealed by Debtor/Defendant had been disclosed. 

258. On August 26, 2022, Kapitus funded the Purchase Price to Merchant as required 

under the Agreement, in reliance on the Debtor/Defendant’s false and material representations 

made on behalf of Merchant and as Guarantor in the August 2022 Application, the financial 

documents submitted in support of the application process, and in connection with the warranties 

and representations included in the R&A and Agreement, including within the Guaranty. 

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259. Debtor/Defendant, both on behalf of Merchant and as Guarantor, entered into the 

Agreement with the specific intent to take these funds from Kapitus without intent to repay the 

Purchase Price per the Agreement. 

260. Debtor/Defendant’s statements and acts described above made both on behalf of 

Merchant and as Guarantor constitute actual fraud under Virginia law. 

261. Upon information and belief, Debtor/Defendant misappropriated significant 

portions of the Purchase Price and/or Receipts for her own benefit by fraudulent intent or deceit. 

262. Upon information and belief, Debtor/Defendant transferred the Purchase Price 

and/or Receipts into accounts not accessible by Kapitus. 

263. Upon information and belief, Debtor/Defendant used the Purchase Price and/or 

Receipts without explanation, reason, or purpose relating to Merchant’s business. 

264. Upon information and belief, Debtor/Defendant closed the Specified Account to 

avoid making payments to Kapitus under the Agreement. 

265. Upon information and belief, Debtor/Defendant transferred the Purchase Price 

and/or Receipts into accounts other than the Specified Account to avoid making payments to 

Kapitus under the Agreement. 

266. Kapitus is entitled to an award of damages of $191,023.12, which represents the 

value of Receipts purchased and remaining owed to Kapitus, plus attorneys’ fees, costs incurred, 

such other relief as the Court deems just and proper. 

COUNT VI 

Conversion Against Debtor/Defendant, individually, and 

BSMG Construction Management, LLC 

267. Kapitus repeats and realleges paragraphs 1 through 179 above and incorporates the 

same as though set forth herein. 

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268. Upon information and belief, BSMG via Debtor/Defendant received fraudulent 

transfers from Debtor/Defendant by way of the use of Merchant’s personal property subject to 

the valid lien filed by Kapitus. See generally Merchant Statement Dated October 31, 2022 

(Redacted), Exhibit 15; Merchant Statement Dated November 30, 2022 (Redacted), Exhibit 16; 

Merchant Statement Dated December 31, 2022 (Redacted), Exhibit 17.

269. Kapitus, pursuant to the Agreement, has an interest superior to the 

Debtor/Defendant, individually, and BSMG in the Receipts and other Collateral previously 

belonging to Merchant. 

270. Debtor/Defendant, individually, and as an owner/managing member of BSMG, 

without authorization, wrongfully assumed and exercised dominion and control over the Receipts 

and other Collateral of the Merchant. 

271. Kapitus was entitled to possession of the Receipts and other Collateral because of 

its superior interest under the Agreement and the related Kapitus UCC-1 filing. 

272. Upon information and belief, Debtor/Defendant, individually, and as an 

owner/managing member of BSMG has intentionally and without authority, assumed and 

exercised control over the Merchant’s Receipts and other Collateral properly belonging to 

Kapitus, interfering with Kapitus’s right of possession. 

273. Upon information and belief, Debtor/Defendant, individually, and as an 

owner/managing member of BSMG has utilized and depleted the Merchant’s Receipts and other 

Collateral. 

274. Kapitus seeks damages from Debtor/Defendant, individually, and as an 

owner/managing member of BSMG because of her conversion, including judgment in the amount 

of $191,023.12, plus attorneys’ fees, costs incurred, punitive damages, and such other relief as the 

Court deems just and proper. 

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COUNT VII 

Fraudulent Transfer Against Debtor/Defendant, Individually, 

and BSMG Construction Management, LLC 

275. Kapitus repeats and realleges paragraphs 1 through 179 above and incorporates the 

same as though set forth herein. 

276. Kapitus also asserts actual intent fraudulent transfer claims and constructive 

fraudulent transfer claims against Debtor/Defendant, individually, and BSMG with respect to the 

transfer of any and all assets to BSMG. 

277. Upon information and belief, BSMG via Debtor/Defendant received fraudulent 

transfers from Debtor/Defendant by way of the use of Merchant’s personal property subject to the 

valid lien filed by Kapitus. See generally Merchant Statement Dated October 31, 2022 (Redacted), 

Exhibit 15; Merchant Statement Dated November 30, 2022 (Redacted), Exhibit 16; Merchant 

Statement Dated December 31, 2022 (Redacted), Exhibit 17.

278. Under Va. Code Ann. § 55-80 (and any other similar state law applicable here 

under), a transfer is voidable as to a creditor, if the debtor made the transfer or incurred the 

obligation with actual intent to hinder, delay, or defraud a creditor of the debtor, or if the debtor 

made the transfer or incurred the obligation without fair consideration or receiving reasonably 

equivalent value. 

279. Upon information and belief, Debtor/Defendant, individually, and as an 

owner/managing member of BSMG intended to hinder, delay, or defraud Kapitus by transferring 

the Receipts and other Collateral to BSMG. 

280. Upon information and belief, in addition to those facts specifically pled above, many 

of the additional factors considered as probative of fraudulent transfer under the applicable law are 

present in this case. For example: (a) the transfers were concealed; (b) the Debtor/Defendant’s 

business operations with the Merchant were folding and the Debtor/Defendant was in the process of 

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re-establishing a new business within the same business market; (c) the Debtor/Defendant concealed 

assets and information from Kapitus; (d) the Debtor/Defendant received little, if any, value in 

exchange for the transfer/sale of assets; (e) the transfers occurred when the Debtor/Defendant was 

insolvent; (f) Debtor/Defendant effectively retained possession of the property. 

281. BSMG was on actual notice of Kapitus’ security interest in the Merchant’s 

Receipts and other Collateral because its 49% owner/director, the Debtor/Defendant, was aware 

of Kapitus’ security interest in the Merchant’s Receipts and other Collateral. 

282. The elements of “actual intent” are satisfied by the facts set forth herein. 

283. Upon information and belief, Debtor/Defendant transferred the Merchant’s 

Receipts and other Collateral to Debtor/Defendant, individually, and to BSMG without fair 

consideration or receiving reasonably equivalent value. 

284. Upon information and belief, Debtor/Defendant, individually, and/or BSMG did not 

give the Merchant any consideration for the Receipts and other Collateral. 

285. The elements of a “constructive” fraudulent conveyance are satisfied by the facts 

set forth herein. 

286. Kapitus is entitled to avoid all of the transfers of the Merchant’s Receipts and other 

Collateral to Debtor/Defendant, individually, and/or BSMG under applicable state law. 

287. Pursuant to Va. Code Ann. § 55-80, judgment should be entered avoiding the 

transfers of the Receipts and the Collateral to Debtor/Defendant, individually, and/or BSMG, 

entering judgment against Debtor/Defendant, individually, and/or BSMG in favor of Kapitus for 

the value of the property transferred, plus interest, attorney’s fees and costs. 

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COUNT VIII 

Replevin Against Debtor/Defendant, individually, 

and BSMG Construction Management, LLC 

288. Kapitus repeats and realleges paragraphs 1 through 179 above and incorporates the 

same as though set forth herein. 

289. The Agreement and Guaranty are valid and enforceable agreements. 

290. Debtor/Defendant has defaulted under her obligations under the Agreement and 

Guaranty by virtue of, inter alia, the events identified above and failing to pay all amounts due 

thereunder and thus, Kapitus has been damaged. 

291. Kapitus has a duly perfected interest in Receipts and other Collateral. 

292. In accordance with the Agreement, Kapitus is entitled to exercise all rights and 

remedies available to it at law or in equity, as well as those available to a secured party under the 

UCC. 

293. The UCC provides, in part, “... after default, a secured party may require the debtor 

to assemble the collateral and make it available to the secured party at a place to be designated by 

the secured party which is reasonably convenient to both parties.” UCC § 9-609(c). 

294. The secured party’s right to possession of the collateral upon default may be 

asserted against a third party in possession, which may not properly refuse upon the secured 

party’s request for delivery. 

295. Upon information and belief, Debtor/Defendant, individually, and BSMG is in 

possession of Kapitus’ Receipts and other Collateral. 

296. Upon information and belief, by reason of Debtor/Defendant, individually, and 

BSMG’s wrongful retention of the Receipts and other Collateral, Kapitus is entitled to an order 

for replevin under section 9-609(c) of the Uniform Commercial Code. 

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COUNT IX 

Unjust Enrichment against Debtor/Defendant, individually, and 

BSMG Construction Management, LLC and Imposition of Constructive Trusts 

297. Kapitus repeats and realleges paragraphs 1 through 179 above and incorporates the 

same as though set forth herein. 

298. Kapitus conferred a benefit on Debtor/Defendant through the Purchase Price that 

it paid for Merchant’s receivables. 

299. Upon information and belief, Debtor/Defendant, individually, and BSMG have 

been benefiting from the Purchase Price and use of Kapitus’ Receipts and other Collateral without 

making any payments or restitution to Kapitus for same. 

300. Debtor/Defendant knew or should have known of the benefit conferred by Kapitus 

and the expectation of payment. 

301. The retention and use of the Purchase Price, Receipts, and other Collateral by 

Debtor/Defendant, individually, and/or BSMG is unjust. 

302. Debtor/Defendant, individually, and/or BSMG have been unjustly enriched by 

using the Purchase Price, Receipts, and other Collateral without making payments or restitution 

to Kapitus for them. 

303. By reason of the foregoing, Debtor/Defendant, individually, and BSMG, have 

damaged Kapitus in an amount to be determined at trial, but no less than $191,023.12, which 

represents the value of Receipts purchased and remaining owed to Kapitus, plus attorneys’ fees, 

costs incurred, such other relief as the Court deems just and proper. 

304. By reason of the foregoing, Kapitus is entitled to the imposition of a constructive 

trusts because Debtor/Defendant, individually and BSMG are receiving unjust enrichment 

through the use of the Purchase Price, Receipts, and other Collateral that rightly belongs to 

Kapitus. 

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PRAYER FOR RELIEF 

WHEREFORE, Plaintiff Kapitus Servicing, Inc., as Servicing Agent for Kapitus LLC prays 

for entry of judgment against the Debtor/Defendant Keri Denette Blalock, individually, and 

Defendant, BSMG Construction Management, LLC as follows: 

A. For an order providing that the debt owed by Debtor/Defendant to Kapitus is nondischargeable in the instant bankruptcy case, in any other proceeding under Title 11 to which this 

case may be converted, and in any future bankruptcy case filed by or against the Debtor/Defendant; 

B. Judgment declaring the entire debt owed by Debtor/Defendant to Kapitus is 

nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), 11 U.S.C. §523(a)(2)(B), 11 U.S.C. § 

523(a)(4), and 11 U.S.C. § 523(a)(6); 

C. Judgement against Debtor/Defendant, individually for fraud; 

D. Judgment against Debtor/Defendant, individually, and BSMG Construction 

Management, LLC for conversion; 

E. Judgement against Debtor/Defendant, individually, and BSMG Construction 

Management, LLC for fraudulent transfer; 

F. Judgment granting an order for replevin against Debtor/Defendant, individually, 

and BSMG Construction Management, LLC under section 9-609(c) of the Uniform Commercial 

Code; 

G. Judgment against Debtor/Defendant, individually, and BSMG Construction 

Management, LLC for unjust enrichment and imposition of constructive trust over the Collateral; 

H. Granting Kapitus an award of damages from Debtor/Defendant, individually, and 

BSMG Construction Management, LLC in the amount of $191,023.12, plus interest from the date 

of default plus post judgment interest; 

I. Granting Kapitus an award of damages from Debtor/Defendant, individually, and 

BSMG Construction Management, LLC for Kapitus’ attorneys’ fees and costs herein incurred; 

and 

J. Granting such other and further relief as this Court may deem just and proper. 

Dated: November 13, 2023 

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SPENCER FANE LLP 

/s/ Misty A. Segura _____________ 

Misty A. Segura 

Texas Bar No. 24033174 

3040 Post Oak Boulevard, Suite 1400 

Houston, TX 77056 

Telephone: 713.212.2643 

E-mail: msegura@spencerfane.com 

/ s / E l i z a b e t h M . L a l l y 

Elizabeth M. Lally (Pro Hac Vice to be filed) 

Illinois Bar No. 6286664 

Indiana Bar No. 28278-49 

Iowa Bar No. AT0013010 

Nebraska Bar No. 26428 

13815 FNB Parkway, Suite 200 

Omaha, NE 68154 

Telephone: 402.965.8600 

E-mail: elally@spencerfane.com 

Attorneys for Plaintiff, Kapitus Servicing, Inc., 

as servicing agent for Kapitus LLC 

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