Court Opinion

ID: 9926406
Source: CourtListenerOpinion
Date Created: 2024-01-24 18:00:43.525952+00
Date Added: 2024-06-11T09:22:45.700686
License: Public Domain

NOT PRECEDENTIAL

                           UNITED STATES COURT OF APPEALS
                                FOR THE THIRD CIRCUIT
                                  _____________

                                       No. 22-3212
                                          _____

                              In re: MICHELLE A. VEALE,
                                    Debtor

                           STRATEGIC FUNDING SOURCE, INC.,
                                      Appellant

                                             v.

                                 MICHELLE A. VEALE
                                   _______________

                     On Appeal from the United States District Court
                                for the District of Delaware
                                 (D.C. No. 1-21-cv-01751)
                     District Judge: Honorable Richard G. Andrews

                                       _____________

                  Submitted Pursuant to Third Circuit L.A.R. 34.1(a) on
                                  December 6, 2023

              Before: SHWARTZ, CHUNG, and McKEE, Circuit Judges.

                            (Opinion filed January 24, 2024)
                                   _______________

McKEE, Circuit Judge.


  This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
       In 2018, Strategic Funding Source, Inc. (“Strategic”) sued Michelle Veale, the

Debtor, for repayment of a $230,000 loan at 39% interest in a Virginia State Court. The

loan was provided to her now defunct business, Retro Home Health Care Services

(“Retro”), and Veale personally guaranteed the loan. As a result of the Virginia lawsuit,

Strategic obtained a default judgment against Veale. In 2021, Veale filed for personal

bankruptcy. Strategic filed a complaint in Bankruptcy Court arguing that Veale should

not be allowed to discharge the guarantee pursuant to 11 U.S.C. §§ 523(a)(2), (4), or (6).

       The Bankruptcy Court dismissed the complaint with prejudice, finding that the

complaint failed to allege plausible claims for non-dischargeability. The Bankruptcy

Court then denied leave to amend based upon its conclusion that the “factual allegations

evince[d] a business loan that went sour, nothing more.”1 In a well-reasoned and

thorough opinion, the District Court affirmed.2 Strategic now appeals the Bankruptcy

Court’s dismissal to us, repeating almost verbatim the arguments that the District Court

rejected.3 Although Strategic argues that both the Bankruptcy Court and the District

Court failed to accept Strategic’s allegations as true and draw reasonable inferences in its

favor, we disagree.4

1
  Strategic Funding Source, Inc. v. Veale (In re Veale), No. 21-10418-BLS, 2021 WL
5614923, at *10, n.70 (Bankr. D. Del. Nov. 30, 2021).
2
  In re Veale Strategic Funding Source v. Veale, No. 21-10418-BLS, 2022 WL 14760676
(D. Del. Oct. 25, 2022).
3
  Strategic has since dropped the argument that the loan should not be discharged under
11 U.S.C. § 523(a)(4).
4
  We have jurisdiction under 28 U.S.C. § 158(d)(1). In reviewing the bankruptcy court’s
determinations, this Court “review[s] the bankruptcy court’s legal determinations de
novo, its factual findings for clear error and its exercise of discretion for abuse thereof.”
In re Trans World Airlines, Inc., 145 F.3d 124, 130 (3d Cir. 1998).
                                              2
       The District Court considered the totality of the circumstances alleged and

properly concluded that Strategic’s allegations did not support a claim under Section

523(a)(2)(A).5 The District Court correctly concluded that Strategic’s complaint did not

plead facts that would support an inference that the Debtor made written

misrepresentations about her or Retro’s financial condition, or that she intended to

deceive Strategic in connection with the guarantee under Section 523(a)(2)(B).6

Strategic’s remaining claim pursuant to Section 523(a)(6) is indeed a “stretch,”7 as

5
  Strategic claims that the Bankruptcy Court and District Court “construed reasonable
inferences against Strategic” in its Section 523(a)(2)(A) analysis, but this is wrong.
Appellant Br. at 40 (emphasis in original). Although the District Court noted that it
“cannot infer fraudulent intent from conduct that is equally susceptible to a more
innocent interpretation,” In re Veale, 2022 WL 14760676, at *5 (quoting Deer & Co. v.
Contella (In re Contella)), 166 B.R. 26, 31 (Bankr. W.D.N.Y. 1994) (internal quotation
marks omitted)), it was merely trying to make the point that intent may be inferred, but is
“never to be presumed.” Pinken v. Frank, 704 F.2d 1019, 1026 (8th Cir. 1983); see, e.g.,
Holden v. Altieri (In re Altieri), No. 11-12819 DHS, 2012 WL 3595298, at *4 (Bankr.
D.N.J. Aug. 20, 2012) (quoting Fariana v. Balzano (In re Balzano), 127 B.R. 524, 531
(Bankr. E.D.N.Y. 1991)) (dismissing an objection to discharge under 11 U.S.C. §
523(a)(2)(A) where the facts alleged “might suggest that some fraud occurred, [but]
nothing in the complaint indicates that the Debtor’s failures were the product of a
deliberate scheme to defraud as opposed to negligence or poor project management”).
        We accept as true that that the Debtor: (i) agreed to repay the loan, but then filed
for bankruptcy; (ii) agreed to not use the funds for personal expenses, but made some
purchases for fast food, groceries, and hotels, (iii) represented that Retro was in good
standing under the laws of the jurisdictions in which it was organized and/or operates,
when the business owed money to the Department of Labor, and (iv) stated that all
information provided to Strategic under the Loan Agreement and Guaranty was “true,
accurate and complete in all respects.” Appellant Br. at 34. Combined, and drawing all
reasonable inferences in the Appellant’s favor, these facts do not lead to an inference that
the Debtor made them with fraudulent intent when she applied for the loan.
6
  In re Veale, 2022 WL 14760676, at *6-8.
7
  A. 254.
        THE COURT: 523(a)(6) is willful and malicious injury.
        MS. BROWN: Correct.

                                             3
Strategic conceded before the Bankruptcy Court. The District Court correctly noted that

“Strategic puts forth no discernible error on appeal.”8

       Finally, we agree with the District Court that even assuming Strategic had

properly requested leave to amend—which it had not—amendment would have been

futile. All of the information Strategic seeks to add relates to facts that the District Court

had already presumed to be true and considered under the correct standard. As the

District Court recognized, repleading these facts would not have altered the outcome.

       As we noted at the outset, Strategic’s arguments on appeal basically repeat

verbatim the arguments that the District Court thoughtfully considered and rejected. The

Court explained its reasoning in a thorough and well-reasoned opinion. We will affirm

the Bankruptcy Court’s decision for substantially the same reasons set forth by the

District Court in that carefully crafted opinion.

       Accordingly, we will affirm the District Court’s order affirming the Bankruptcy

Court’s dismissal of Strategic’s complaint, with prejudice.

        THE COURT: This is a loan. Where do I get a willful and malicious injury?
        MS. BROWN: That would be the deliberate, willful attempt by her to defraud the
        lender. I know it’s a stretch --
        THE COURT: Yeah.
        MS. BROWN: -- Your Honor, but --
        THE COURT: Okay. We can move on.
        MS. BROWN: I’ll concede to that.
8
  In re Veale, 2022 WL 14760676, at *9.
                                              4