787 F.2d 503 (10th Cir. 1986), 83-1960, In re Black

Docket Nº:83-1960.
Citation:787 F.2d 503
Party Name:In re Gerald T. BLACK and Denise B. Black, Debtors. Garth L. DRIGGS, Plaintiff-Appellant, v. Gerald T. BLACK, Defendant-Appellee.
Case Date:March 19, 1986
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

Page 503

787 F.2d 503 (10th Cir. 1986)

In re Gerald T. BLACK and Denise B. Black, Debtors.

Garth L. DRIGGS, Plaintiff-Appellant,


Gerald T. BLACK, Defendant-Appellee.

No. 83-1960.

United States Court of Appeals, Tenth Circuit

March 19, 1986

Page 504

John B. Anderson of Anderson & Holland, Salt Lake City, Utah, for plaintiff-appellant.

Richard F. Bojanowski (Peter J. Kuhn with him, on brief), Salt Lake City, Utah, for defendant-appellee.

Before BARRETT and SEYMOUR, Circuit Judges, and BOHANON, [*] District Judge.

SEYMOUR, Circuit Judge.

Garth Driggs, a judgment creditor of Gerald Black, brought this adversary proceeding in bankruptcy court seeking a determination

Page 505

that the debt owed to him by Black is not dischargeable in bankruptcy. The bankruptcy judge found that Driggs had failed to sustain his burden of proof and dismissed the complaint. Driggs sought review in the district court, which affirmed the order of the bankruptcy judge. Driggs appealed and we affirm.

Black was the majority stockholder and chief operating officer of British Auto Imports, Inc. (BAI), an auto dealership. Driggs began work with BAI as a salesman in 1976 and acquired increased responsibilities in the following years. Black and Driggs had discussed Driggs' desire to buy into BAI several times before Black offered him an opportunity to do so in 1979. At that time Driggs knew BAI was in serious financial trouble because it was out of trust with its financing bank and in danger of foreclosure. Nonetheless Driggs borrowed $35,000 from his parents and bought ten percent of BAI. Although the buy-in agreement allowed Driggs to recover his investment upon tendering written notice, when he attempted to do so in 1980 BAI and Black were unable to refund the money. Driggs then brought a breach of contract action in state court and obtained a judgment against Black for $35,000. Black subsequently filed a bankruptcy petition and Driggs instituted this adversary proceeding, asserting that the state court judgment represents a debt for money obtained by fraud or defalcation and therefore is not dischargeable under 11 U.S.C. Secs. 523(a)(2)(A), 523(a)(2)(B), and 523(a)(4) (1982).

Exceptions to discharge are construed narrowly, and the burden of proving that a debt falls within a statutory exception is on the party opposing discharge. See Waterbury Community Federal Credit Union v. Magnusson (In re Magnusson), 14 B.R. 662, 667 (Bankr.N.D.N.Y.1981); Kuehne v. Huff (In re Huff), 1 B.R. 354, 357 (Bankr.D.Utah 1979). We may overturn the bankruptcy court's resolution of Driggs' claims only if the court's findings...

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