Court Opinion

ID: 4089729
Source: CourtListenerOpinion
Date Created: 2016-10-14 19:00:57.161978+00
Date Added: 2024-06-11T14:35:09.771565
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 16-1010

In Re:   SHARON J. COBHAM,

                Debtor.

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

NICOLE LECANN, D.D.S.; JOINT ENTITIES, LLC,

                Plaintiffs – Appellees,

           v.

SHARON J. COBHAM,

                Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh.     Louise W. Flanagan,
District Judge. (5:15-cv-00137-FL; 14-00002-8-SWH)

Submitted:   September 29, 2016            Decided:   October 14, 2016

Before KING, DUNCAN, and FLOYD, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Joshua H. Bennett, Roberta King Latham, Jasmine M. Pitt, BENNETT
& GUTHRIE, PLLC, Winston-Salem, North Carolina, for Appellant.
Robert E. Fields III, Samuel Pinero II, OAK CITY LAW LLP,
Raleigh, North Carolina; Jason L. Hendren, Rebecca F. Redwine,
HENDREN & MALONE, PLLC, Raleigh, North Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

       Sharon     J.      Cobham       appeals        the      district        court’s    order

affirming, on alternate grounds, the bankruptcy court’s order

determining that the judgment debt at issue is nondischargeable

in Cobham’s Chapter 7 proceeding.                        We affirm the determination

of nondischargeability.

       Cobham and Nicole LeCann are both dentists practicing in

North    Carolina        and       were,   for    some      years,      business      partners.

Together, they owned five dental practices — all professional

corporations         —     and       three       limited       liability        real     estate

companies,      all      in    the    Winston-Salem           area.       Cobham      served    as

president of the dental practices.                          Eventually, LeCann learned

that Cobham had been taking funds from the businesses, either in

the     form    of       unauthorized        loans       or      payments       for    personal

expenses, and sued her in North Carolina state court, asserting

both personal and derivative causes of action.

       The     state     court       ordered      a   dissolution         and    appointed       a

receiver to manage and wind up the affairs.                                The court later

awarded judgment in favor of LeCann and the businesses, finding

that “Cobham wrongfully and repeatedly transferred money out of

[the    businesses]           by    making   loans       to      [her    own    practice]       or

herself,       receiving           unauthorized        expense          reimbursements         and

providing      unjustified           reimbursements         to    herself,”      and     awarded

compensatory damages in the amount of $553,888.                                The court also

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found that punitive damages should be entered against Cobham

based     on    her    “willful          or    wanton            conduct    and      intentional

constructive fraud.”

     In October 2013, Cobham filed a Chapter 7 petition.                                        LeCann

filed    the    underlying          complaint       seeking         a    determination           that

Cobham’s        debt         is         nondischargeable                under        11         U.S.C.

§§ 523(a)(4),(6) (2012).                  The bankruptcy court determined that

the state court judgment was entitled to collateral estoppel

effect    and   that        the    judgment       is       nondischargeable          because       it

resulted from Cobham’s “willful and malicious injury,” within

the meaning of § 523(a)(6).                   See Kawaauhau v. Geiger, 523 U.S.
57, 61 (1998).          The court found it unnecessary to rule on the

applicability          of     §      523(a)(4)             (defalcation         of        fiduciary

obligations).

     On appeal, the district court found that the bankruptcy

court erred in determining that the debt arose out of a willful

and malicious injury.               Therefore, the district court concluded,

§ 523(a)(6) did not apply.                    Nevertheless, the court determined

that the debt was incurred as the result of a defalcation while

Cobham    was   acting        in    a    fiduciary          capacity;      accordingly,           the

court     determined         that       the    debt         is     nondischargeable             under

§ 523(a)(4).        Cobham appeals.

     We    review      the        judgment     of      a    district       court     sitting       in

review     of   a     bankruptcy          court     de       novo,       applying         the     same

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standards of review that were applied in the district court.                               In

re    Shangra-La,       Inc.,    167 F.3d 843,    847        (4th    Cir.     1999).

Specifically,       the    bankruptcy         court’s          factual       findings      are

reviewed for clear error, and legal determinations are reviewed

de novo.     Fed. R. Bankr. P. 8013; In re K & L Lakeland, Inc.,

128 F.3d 203, 206 (4th Cir. 1997).

       We have reviewed the record included on appeal, and the

parties’ briefs, and find that the bankruptcy court correctly

determined that LeCann met her burden of establishing that the

debt at issue is nondischargeable under § 523(a)(6).                             See Grogan

v. Garner, 498 U.S. 279, 291 (1991) (holding that the party

challenging the dischargeability of a debt bears the burden of

proving    the    debt    nondischargeable          by    a     preponderance         of   the

evidence).        Accordingly, we affirm on the bankruptcy court’s

reasoning.       In re Cobham (LeCann v. Cobham), Bankr. Ct. No. 14-

00002-8-SWH (E.D.N.C. Mar. 18, 2015).                          Because the bankruptcy

court properly concluded that the debt is nondischargeable under

§    523(a)(6),    we    express     no     view   as     to    the    district      court’s

alternative holding with respect to § 523(a)(4).                                We dispense

with oral argument because the facts and legal contentions are

adequately    presented         in   the    materials      before        this    court     and

argument would not aid the decisional process.

                                                                                     AFFIRMED

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