NHSS LLC et al v. Penn

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
In re: 	:
SARITA MARIE PENN, 	: 	Case No. 25-53061
: 	Chapter 7
Debtor. 	: 	Judge Nami Khorrami
_______________________________________________________________________
NHSS LLC, et al., 	:
:
Plaintiffs, 	:
:
v. 	: 	Adv. Pro. No. 25-02060
:
SARITA MARIE PENN, 	:
:
Defendant. 	:
OPINION AND ORDER GRANTING MOTION OF DEFENDANT
SARITA MARIE PENN TO DISMISS COMPLAINT (DKT. NO. 3)
________________________________________________________________
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: July 22, 2026
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I. 	Introduction
Plaintiffs, NHSS, LLC, and Cash Buyer 1, LLC (collectively “Plaintiffs” and individually
“NHSS” or “Cash Buyer”) filed the Complaint1 as an adversary proceeding in the underlying
bankruptcy case against the debtor, Sarita Marie Penn (“Defendant” or “Debtor”). The relief
requested in the Complaint is twofold, one being an objection to the Debtor receiving a general
discharge of her debts and the other being a request that a debt in the amount $1,000,000 (the
“Debt”) that is allegedly owed by Defendant to Plaintiffs be excepted from discharge under
§ 523(a). Defendant, on the other hand, requests dismissal of the Complaint on the basis that it
fails to state a claim upon which relief can be granted under Federal Rule of Civil Procedure (“Civil
Rule”) 12(b)(6).2 Defendant asserts that the Complaint is a “shotgun pleading” that fails to contain
a short and plain statement of the claims evidencing that Plaintiffs are entitled to the relief
requested, in violation of Civil Rule 8. Defendant also argues that the claims regarding fraud have
not been pleaded with particularity, as required by Civil Rule 9, and that an award of attorney fees
is not warranted in this case.3
For the reasons stated, the Complaint must be dismissed for failure to state a claim upon
which relief can be granted. 	Plaintiffs are granted leave to amend the causes of action that are
dismissed without prejudice.
1 Plaintiffs filed their Adversary Complaint Objecting to Entry of Discharge Pursuant to 11 U.S.C. §§ 727(a) and
523(a) (the “Complaint”) on October 21, 2025. Compl., Dkt. No. 1.
2 Civil Rule 12(b)(6) is made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure
(“Bankruptcy Rule”) 7012(b).
3 The Motion of Defendant Sarita Marie Penn to Dismiss Complain (Doc. 1)t (the “Motion”) was filed on February
9, 2026. Mot., Dkt. No. 3. On March 3, 2026, Plaintiffs filed their Memorandum in Opposition to the Motion of
Defendant Sarita Marie Penn to Dismiss Complaint (Doc. 3) (the “Response”). Resp., Dkt. No. 5. And in response,
Defendant filed her Reply to Plaintiffs’ Response to Defendant’s Motion to Dismiss (Doc. 5) on March 16, 2026 (the
“Reply”). Reply, Dkt. No. 8. Plaintiffs and the Defendant (collectively, the “Parties”) filed the Stipulations Regarding
Jurisdiction and Consideration of Exhibits indicating that they agree that this Court has subject matter jurisdiction
with respect to the allegations in the Complaint and that the Court may consider and rely upon the exhibits that are
attached to the Response. Stips. ¶¶ 1-2, Dkt. No. 9.
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II. 	Jurisdiction
This Court has jurisdiction under 28 U.S.C. § 1334(b) and the Amended General Order 05-
02 entered by the United States District Court for the Southern District of Ohio, referring all
bankruptcy matters to this Court. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I). Venue
is proper in this Court under 28 U.S.C. §§ 1408 and 1409.
III. 	Facts4
The Complaint contains twenty-six general background allegations followed by four
causes of action. 	The first allegation under each cause of action provides that “Plaintiffs
incorporate by reference the allegations contained in the previous paragraphs as though set forth
fully herein.” 	Compl. ¶¶ 27, 34, 35, 39, Dkt. No. 1. 	Plaintiffs assert that they 	are owners of
residential properties (the “Properties”) that are leased to tenants.5 Compl. ¶¶ 6, 7, 12. And that
Plaintiffs hired Defendant and her company, the Center for Development and Property Solutions,
LLC (individually “CDPS” and collectively with Defendant “Management”), to manage the
Properties. 	Compl. ¶ 13. 	According to Plaintiffs, the business relationship between them and
Management is governed by two management agreements (the “Agreements”)6 which, each in
brief, required Management to manage the Properties in exchange for a management fee. Compl.
¶¶ 13, 16. The Agreements, however, do not identify Plaintiffs or Defendant as named parties to
4 “As this matter comes before the Court on a motion to dismiss, the Court must accept the well-pleaded allegations
in the Complaint as true. Bassett v. Nat'l Collegiate Ath. Ass'n, 528 F.3d 426, 430 (6th Cir. 2008). But in reporting the
background here based on those allegations, the Court reminds the reader that they are just that—allegations.”
Shanghai Weston Trading Co. v. Tedia Co., LLC, 707 F. Supp. 3d 737, 741 n.1 (S.D. Ohio 2023).
5 Plaintiffs’ principal offices are in Franklin County, Ohio. Compl. ¶¶ 6, 7, 12, Dkt. No. 1.
6 Although the Complaint references the Agreements as being attached to it as Exhibit A, the Agreements were not in
fact attached. Compl. ¶ 13. Exhibit A that is attached to the Complaint is a duplicate of the Complaint. Id. Ex. A,
Dkt. No. 1. To clarify the record, Plaintiffs attached a copy of the Agreements to the Response. Resp. Ex. A, Dkt. No.
5-1. 	One of the Agreements is for management of property known as Cash Buyer 1, LLC (the “Cash Buyer
Agreement”) and the other is for management of property known as NHSS, LLC (the “NHSS Agreement”). And the
Parties agree “that the Court may consider and rely upon the exhibit[] attached to Plaintiffs’ Response as if [it was]
attached to the Complaint (Doc. 1).” Stips. ¶ 2, Dkt. No. 9.
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the contracts. 	Resp. Ex. at 1 and 9, Dkt. No. 5-1. 	The first two paragraphs of the Cash Buyer
Agreement provide as follows:
“Brian White, herein known as ‘Owner’ and The Center for Development and
Property Solutions, LLC, a (Ohio) Corporation, herein known as ‘Broker,’ agrees
[sic] as follows:
Appointment of Broker: 	The Owner hereby appoints, and grants Broker the
exclusive right to rent, lease operate and manage the property known as: Cash
Buyer 1, LLC, 1063 Bryden Rd. and NHSS, LLC.
Resp. Ex. A, at 1. The first two paragraphs of the NHSS Agreement are the same except that the
properties to be managed is limited to the list of the properties known as NHSS, LLC. Resp. Ex.
A, at 9. The signature pages for the Agreements contain the signatures of Brian White as Owner
and Sarita Penn with the entity name CDPS below her signature line along with an address, a
redacted business and fax number, and a redacted email address. Resp. Ex. A at 7 and 15.
Under the Agreements, Defendant and CDPS were required to perform the following tasks:
i. Advertising and renting the properties;
ii. Recovering rents and other sums due to Plaintiffs;
iii. Making and/or supervising repairs and improvements to the properties;
iv. Obtaining prior approval from Plaintiffs for any expenditure over One Thousand
Dollars ($1,000.00);
v. Collecting security deposits on behalf of Plaintiffs;
vi. Hiring and supervising vendors and persons required for the operation and
maintenance of the properties;
vii. Paying expenses and costs for the properties from Plaintiffs’ funds held by
Defendants;
viii. Depositing receipts collected for Plaintiffs in a financial institution whose
deposits are insured by an agency of the United States government;
ix. Disbursing Plaintiffs’ funds to Plaintiffs[.]
Compl. ¶ 14. 	Defendant also agreed to act as the agent of Plaintiffs in any lease or rental
transaction involving the Properties. Compl. ¶ 15.
In early 2024, Plaintiffs became aware of “some mismanagement of the subject properties
by [Defendant] and CDPS” when tenants of the Properties reported complaints to Plaintiffs about
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Management. 	Compl. ¶ 17. 	After investigating the complaints, “Plaintiffs [became] aware of
large-scale mismanagement ultimately resulting in over One Million Dollars ($1,000, 000.00) of
lost income and other damages to Plaintiffs.” Compl. ¶ 18.
Plaintiffs “have come to understand” that Management engaged in 	the following
misconduct in relation to managing the Properties:
i. 	Debtor and CDPS failed to market or fill vacant apartments promptly. For
example, Plaintiffs are aware of at least one rental unit which remained
vacant for over one year because the unit required maintenance which
Debtor and CDPS neglected to take care of. Debtor and CDPS also
neglected to notify Plaintiffs of the required maintenance;
ii. 	Debtor and CDPS failed to charge reasonable rents for the properties.
Debtor and CDPS neglected to raise rents for several years despite changing
market conditions and values, costing Plaintiffs hundreds of thousands of
dollars in cumulative uncollected rent.
iii. 	Debtor and CDPS charged tenants fees, including electronic payment fees
and late fees, which were not in writing and which Plaintiffs were unaware
of. Debtor and CDPS pocketed the money received from these fees.
iv. 	Debtor and CDPS continued to send notices charging fees and rents to
tenants after the Management Agreements had been terminated, and could
no longer collect fees or rents in connection with the subject properties.
v. 	Debtor and CDPS neglected to timely and efficiently hire vendors to
perform necessary maintenance work on the properties.
vi. 	Debtor and CDPS neglected to compensate vendors and workers for
maintenance and work which was performed on the property, in violation
of the Management Agreements. Plaintiffs continue to receive requests for
payment from vendors who were hired by Debtor and CDPS and who CDPS
were required to pay pursuant to the Management Agreements. Debtors and
CDPS further failed to keep records regarding these expenses and the work
that was done.
vii. 	Debtor and CDPS failed to notify Plaintiffs of expenses over One Thousand
Dollars ($1,000) as specified in the Management Agreements.
viii. 	Debtor and CDPS failed to maintain complete accurate and required
paperwork as required by the Management Agreements and by law. This
paperwork includes, but is not limited to complete and accurate tenant
ledgers, complete and accurate operating statements and income statements,
files relating to Ohio Housing Finance Agency (OHFA) and Columbus
Metropolitan 	Housing 	Authority 	(CMHA) 	inspections 	and 	reports,
communications with tenants, documentation of maintenance requests,
property condition photos and reports, and complete and accurate bank
records.
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ix. 	Debtor and CDPS failed to update or renew leases, as numerous tenants did
not have a signed lease agreement when the Management Agreements were
ultimately terminated by Plaintiffs.
x. 	Debtor and CDPS failed to timely and fully remit security deposit moneys
to Plaintiffs.
xi. 	Debtor and CDPS failed to manage or install metered water devices at the
subject properties, resulting in the cumulative loss of thousands of dollars
in utility expenditures.
xii. 	Debtor and CDPS’s theft of Plaintiffs’ funds, the true extent of which cannot
be determined due to Debtor’s refusal to cooperate.
Compl. ¶ 19. 	Plaintiffs promptly terminated the Agreements after discovering Defendant’s
misconduct and ended the business relationship. Compl. ¶ 20. In time, the business relationship
between Plaintiffs and Defendant deteriorated, and, according to Plaintiffs, Defendant became
obstructive, which resulted in Plaintiffs having to hire legal counsel and send demand letters
requesting missing documentation and payments. 	Compl. ¶¶ 22-23. 	After receiving some
information from Defendant, Plaintiffs were better able to gain “insight to the true extent of
Debtor’s misconduct” at which time Defendant ceased communications with Plaintiffs. Compl. ¶
24. At some point, Plaintiffs filed a complaint with the Ohio Department of Commerce Division
of Real Estate against Defendant and CDPS. Compl. ¶ 24. And Plaintiffs “filed a lawsuit in the
Franklin County Court of Common Pleas [styled as] Cash Buyer 1, LLC, et al., v. The Center for
Development and Property, et al., Case Number 25 CV 004155” asserting claims for breach of
contract, negligence, breach of fiduciary duty, fraud, and accounting. Compl. ¶ 3. The state court
case did not proceed to judgment and was eventually stayed by the filing of Defendant’s voluntary
petition for relief under chapter 7 of the Bankruptcy Code on July 14, 2025. Compl. ¶¶ 3, 9.
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IV. 	Standard of Review under Civil Rule 12(b)(6)
A motion to dismiss under Civil Rule 12(b)(6) tests the facial sufficiency of the complaint
under Civil Rules 8 and 9(b).7 Riverview Health Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505,
512 (6th Cir. 2010). 	The party seeking dismissal under Civil Rule 12(b)(6) has the burden of
showing that the complaint fails to state a claim upon which relief can be granted. 	Directv, Inc.
v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citation omitted). “The court must construe the
complaint in the light most favorable to plaintiffs . . . .” League of United Latin Am. Citizens v.
Bredesen, 500 F.3d 523, 527 (2007) (citing Kottmyer v. Maas, 436 F.3d 684, 688 (6th Cir. 2006)).
Two primary principles guide the Court’s review in deciding a motion under Civil Rule
12(b)(6). Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). First,
although the allegations of the complaint are generally assumed to be true for purposes of a motion
to dismiss, allegations that “are no more than conclusions” are not. Id. Further, “a legal conclusion
couched as a factual allegation” should not be accepted as true. Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). 	Second, “only a complaint that states
a plausible claim for relief survives a motion to dismiss.” Iqbal, 556 U.S. at 679 (citing Twombly,
550 U.S. at 556). 	“A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678 (citation omitted). To survive a motion to dismiss, a complaint
must contain “either direct or inferential allegations” plausibly asserting “all material elements to
sustain a recovery under some viable legal theory.” Terry v. Tyson Farms, Inc., 604 F.3d 272, 275-
76 (6th Cir. 2010).
7 Civil Rules 8 and 9 are made applicable to this adversary proceeding by Bankruptcy Rules 7008 and 7009,
respectively.
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As previously noted, several Civil Rules can come into play when a court is determining a
motion to dismiss under Civil Rule 12(b)(6).
Operating in harmony with Rule 12(b)(6), Rule 8(a)(2) of the Federal Rules of Civil
Procedure provides that a claim for relief must contain a short and plain statement
of the claim showing that the pleader is entitled to relief. Even though Rule 8(a)(2)
does not require a complaint to set out detailed factual allegations, mere conclusory
allegations or legal conclusions masquerading as factual allegations will not
suffice.
Castillo v. Berkley (In re Berkley), Chapter 7, Case No. 24-12845, Adversary Proceeding No. 24-
01074, 2025 Bankr. LEXIS 1211, at *8-9 (Bankr. N.D. Ohio May 15, 2025). Civil Rule 9 provides
that “a party must state with particularity the circumstances constituting fraud, and at a minimum,
the complaint must allege the time, place, and content of the alleged misrepresentation.” Berkley,
2025 Bankr. LEXIS 1211, at *9 (citation modified).
Civil Rule 10(c) provides that a “written instrument that is an exhibit to a pleading
is a part of the pleading for all purposes.” Fed. R. Civ. P. 10(c). Thus, if a written
instrument is attached to a complaint, a court is required to consider it in
adjudicating a motion to dismiss.
Go-Mart, Inc. v. Bazell (In re Bazell), 677 B.R. 836, 843 (2026) (citation omitted). And finally,
Civil Rule 17, made applicable to adversary proceedings by Bankruptcy Rule 7017, provides that
“[a]n action must be prosecuted in the name of the real party in interest.” Fed. R. Civ. P. 17(a)(1).
Civil Rule 17 also provides that:
The court may not dismiss an action for failure to prosecute in the name of the real
party in interest until, after an objection, a reasonable time has been allowed for the
real party in interest to ratify, join, or be substituted into the action. After
ratification, joinder, or substitution, the action proceeds as if it had been originally
commenced by the real party in interest.
Fed. R. Civ. P. 17(a)(3).
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Reading against this backdrop, the Court must decide whether the Complaint fails to state
a claim upon which relief can be granted. To begin, the Court must determine whether the proper
parties are before it in this adversary proceeding.
V. 	Analysis
A. Civil Rule 17 - Real Party in Interest
Defendant asserts, among other things, that the Complaint fails to state a claim upon which
relief can be granted because the Agreements were executed by third parties other than Plaintiffs
and Defendant.8 Under Civil Rule 10(c), the Court can consider the Agreements when deciding
the Motion without converting it to a motion for summary judgment; Civil Rule 10(c) provides in
part that “a written instrument9 that is an exhibit to a pleading is a part of the pleading for all
purposes.” Fed. R. Civ. P. 10(c); see also Com. Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d
327, 335-36 (6th Cir. 2007).
Ordinarily, when a district court considers evidence outside the pleadings, a
12(b)(6) motion will be treated as one for summary judgment and disposed of as
provided in Rule 56. However, a written instrument attached as an exhibit to a
pleading is considered a part of the pleading, and thus does not fall under the just-
cited rule.
Benzon v. Morgan Stanley Distribs., 420 F.3d 598, 603 (6th Cir. 2005) (citation modified).
Moreover, “[a] document referred to or attached to the pleadings, and integral to plaintiff's claims,
may also be considered without converting a motion to dismiss into one for summary judgment.”
8 Defendant asserted this argument for the first time in her Reply. Reply ¶ 5, Dkt. No. 8. Defendant, however, was
not able to discover who the named parties were under the Agreements until same was attached to the Response as
the Complaint misrepresented that the Agreements were attached to it as an exhibit when in fact they were not. Reply
¶ 5; Resp. ¶ 5. Considering these facts, the Court deems it appropriate to consider Defendant’s argument regarding
the Complaint failing to state a claim because the real parties in interest are not before the Court.
9 As noted previously, the Parties consent to the Agreements being considered by the Court in deciding the Motion,
so the Court need not determine whether the Agreements are in fact written instruments. That said, in the absence of
any Sixth Circuit precedent regarding what constitutes a written instrument under Civil Rule 10(c), courts in this
district apply the legal definition for instrument as “set forth in Black’s Law Dictionary as a written legal document
that defines rights, duties, entitlements, or liabilities, such as a statute, contract, will, promissory note, or share
certificate.” LaGuardia v. Designer Brands, Inc., 2020 U.S. Dist. LEXIS 199262, at *11 (2020) (citation modified).
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Burns v. United States, 542 Fed. Appx. 461, 466 (6th Cir. 2013) (citing Com. Money Ctr., Inc. v.
Ill. Union Ins. Co., 508 F.3d 327, 336 (6th Cir. 2007)).
In this case, Plaintiffs allege that they “hired Defendant Penn and her company the Center
for Development and Property Solutions, LLC . . . to manage their residential properties[]” and
reference the Agreements. Compl. ¶ 13. According to Plaintiffs, the Agreements are what define
the contractual relationship between the Parties and determine each party’s rights and obligations
with respect to the management of the Properties. 	The alleged breach of the Agreements is the
basis for Plaintiffs’ claims against Defendant. 	Thus, the Agreements are integral to Plaintiffs’
claims and can be considered by this Court in making its determination on whether the Complaint
should be dismissed.
A close review of the Agreements shows that the Complaint fails to include the real parties
in interest. 	Civil Rule 17 requires that “[a]n action must be prosecuted in the name of the real
party in interest.” Fed. R. Civ. P. 17(a)(1). “Under Ohio10 law, a breach-of-contract claim may
be brought only by a party to the contract or an intended third-party beneficiary.” B. & V. Distrib.
Co., Inc., v. Dottore Cos., LLC, 278 Fed. App’x 480, 484 (6th Cir. 2008) (citing Thornton v.
Windsor House, Inc., 57 Ohio St. 3d 158, 566 N.E.2d 1220, 1223 (Ohio 1991)).
In general, a third-party beneficiary is one for whose benefit a promise has been
made in a contract but who is not a party to the contract. 	Ohio contract law
distinguishes between intended third-party beneficiaries and incidental third-party
beneficiaries. While an intended third-party beneficiary has enforceable rights
under a contract, an incidental third-party beneficiary does not.
10 Although the Agreements do not contain a choice of law provision, Plaintiffs refer to litigation pending between the
Parties in a state court in Ohio, and Defendant contends that Ohio law applies to this case. Compl. ¶ 3, Dkt. No. 1;
Mot. ¶ 36, Dkt. No. 3. Also, Plaintiffs’ principal places of business are in Franklin County, Ohio, and the Properties
that were subject to the Agreement appear to all be located in and around Columbus, Ohio. Accordingly, the Court
will look to Ohio law when applicable.
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State ex rel. Atty. Gen. v. Mastergard, 2016-Ohio-660, ¶ 10, 60 N.E.3d 540, 543 (Ohio Ct. App.
2016) (citation modified).
In this case, the Complaint identifies NHSS and Cash Buyer as the real parties in interest
by defining them as the “Plaintiffs” or “Creditors” who are seeking a denial of discharge and/or a
determination of dischargeability with respect to the Debt. 	According to the allegations in the
Complaint, the Agreements are the documents that define the Parties’ relationship and the breach
of which is the basis for the Debt being owed by Defendant. Upon examination of the Agreements,
however, neither Plaintiffs nor Defendant are named parties to the contracts.
Indeed, the first two paragraphs of the Cash Buyer Agreement provides as follows:
“Brian White, herein known as ‘Owner’ and The Center for Development and
Property Solutions, LLC, a (Ohio) Corporation, herein known as ‘Broker,’ agrees
[sic] as follows:
Appointment of Broker: 	The Owner hereby appoints, and grants Broker the
exclusive right to rent, lease operate and manage the property known as: Cash
Buyer 1, LLC, 1063 Bryden Rd. and NHSS, LLC.
Resp. Ex. A, at 1, Dkt. No. 5-1. The first two paragraphs of the NHSS Agreement are the same
except that the clause regarding “the property known as” is limited to just NHSS, LLC. Resp. Ex.
A, at 9, Dkt. No. 5-1. Furthermore, neither Plaintiffs nor Defendant signed the Agreements. The
only signatures that appear on the signature pages of the Agreements are those of Brian White and
Sarita Penn signing for CDPS. In fact, Brian White’s name does not appear at all in the Complaint
nor are there any allegations in the Complaint to explain why that is when he is a signatory to the
contracts. Plaintiffs are also requesting judgment be entered by this Court against Defendant based
on her alleged obligations under the Agreements, yet Defendant is not a named party in the
Agreements.
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The Agreements are replete with references to Brian White and CDPS, via the use of the
defined terms “Owner” and “Broker,” that contradict the allegations in the Complaint. For
example, the Complaint contains an allegation that Defendant “also agreed to act as the agent of
Plaintiffs in any lease or rental transaction involving any property covered by the [Agreements]”
which is followed by a citation to section 8 of the Agreements. 	Compl. ¶ 15, Dkt. No. 1. 	In
contrast, however, section 8 of the Agreements provides that “Broker agrees to act as the agent of
Owner in any resulting lease or rental transaction involving any Property covered by this
Agreement.” 	Resp. Ex. A, at 6 and 14, Dkt. No. 5-1. 	Broker as defined by the Agreements is
CDPS and Owner as defined by the Agreements is Brian White. Plaintiffs’ assertion that section
8 of the Agreements provides that Sarita Penn agreed to act as agent for Cash Buyer and NHSS is
inaccurate. This is especially true given the defined terms in the Agreements provide that CDPS
agreed to act as agent for Brian White.
Another inconsistency between the allegations in the Complaint and the Agreements can
be found in paragraph 13 of the Complaint which provides that “Plaintiffs hired Defendant Penn
and her company the Center for Development and Property Solutions, LLC (“CDPS”) to manage
their residential properties.” Compl. ¶ 13, Dkt. No. 1. Yet, the language in the Agreements makes
no mention of Defendant being engaged to manage the Properties. In fact, the only place where
Defendant’s name appears in the Agreements is on the signature lines as signatory for CDPS.
Plaintiffs allege that Defendant and CDPS had various obligations under the Agreements. Compl.
¶ 14, Dkt. No. 1. 	But the Agreements directly contradict this allegation as they fail to name
Defendant as a party that was obligated under the Agreements. Nor does the Complaint contain
any allegations that NHSS and Cash Buyer are intended third-party beneficiaries under the
Agreements.
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When the allegations in a complaint are inconsistent with a document attached to a pleading
that is integral to the plaintiff’s claims against the defendant, the allegations need not be accepted
as true by the court when it is determining a motion to dismiss for failure to state a claim. 	See
Williams v. CitiMortgage, Inc., 498 Fed. App’x 532, 536 (6th Cir. 2012). 	A plaintiff “cannot
survive a motion to dismiss, even if it has pleaded the existence of a contract, if the written
instrument plainly contradicts the pleadings because when a written instrument contradicts
allegations in the complaint to which it is attached, the exhibit trumps the allegations.”
Creelgroup, Inc. v. NGS Am., Inc., 518 Fed. App’x 343, 347 (6th Cir. 2013) (citation modified).
Here, the Agreements contradict the allegations in the Complaint that Plaintiffs and
Defendant are parties to the Agreements and thereby obligated to each other under them. 	The
Complaint also lacks any allegations that Plaintiffs are intended third-party beneficiaries. 	The
Court must then accept as true that the Agreements are between Brian White and CDPS, and as
non-parties to the Agreements, Plaintiffs cannot state a claim for relief. Therefore, Plaintiffs are
not the real parties in interest and cannot pursue a claim under the Agreements.
Even though Plaintiffs are not the real parties in interest to pursue a claim under the
Agreements, the Court need not dismiss the Complaint. Civil Rule 17(a)(3) provides that:
The court may not dismiss an action for failure to prosecute in the name of the real
party in interest until, after an objection, a reasonable time has been allowed for the
real party in interest to ratify, join, or be substituted into the action. After
ratification, joinder, or substitution, the action proceeds as if it had been originally
commenced by the real party in interest.
Fed. R. Civ. P. 17(a)(3). “The determination of a reasonable time for the real party in interest to
take action is a matter of judicial discretion.” Barefield v. Hanover Ins. Co., 521 B.R. 805, 810
(E.D. Mich. 2014) (citation modified).
Courts have varied in their balancing of Rule 17(a)(3)'s purpose and its timeliness
requirement, noting that the Rule is designed to protect defendants from a
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subsequent action by the party actually entitled to recover as much as it is meant to
protect plaintiff's claim from dismissal on a procedural technicality.
Toledo v. CSX Transp., Inc., No. 3:16-CV-475-TAV-DCP, 2018 U.S. Dist. LEXIS 174265, at *13-
14 (E.D. Tenn. Oct. 10, 2018) (citation modified). 	Contrary to the express language of Rule
17(a)(3), not every plaintiff will be afforded an opportunity to cure the defect of not being the
proper party in interest. See Barefield, 521 B.R. at 810. 	Some “courts have held that when the
determination of the proper party is not difficult and when there has been no understandable
mistake, dismissal is warranted despite Rule 17(a)(3).” Id. (citing Gardner v. State Farm Fire &
Cas. Co., 544 F.3d 553, 563 (3d Cir. 2008); U.S. for Use & Benefit of Wulff v. CMA, Inc., 890 F.2d
1070, 1075 (9th Cir. 1989)).
Here, a close reading of the Agreements shows that the contracting parties were Brian
White and CDPS. Thus, determining the proper party in interest to pursue a claim under the
Agreements does not appear to be difficult. 	That said, Defendant did not present the issue of
whether Plaintiffs were the proper party in interest until she filed the Reply, which deprived
Plaintiffs of an opportunity to respond to the argument. Under this circumstance, the Court will
permit Plaintiffs a reasonable time for the real party in interest to ratify, join, or be substituted into
the action.
Even when a complaint is subject to dismissal for failing to state a claim upon which relief
can be granted under Civil Rule 12(b)(6), a court, in its discretion, may grant the plaintiff leave to
cure the defects. See The Clock Tower by West Element, Ltd., v. Scott (In re Scott), Case No. 25-
30494, Chapter 7, Adv. Pro. No. 25-03037, 2026 Bankr. LEXIS 1590, at *32-33 (Bankr. S.D. Ohio
June 23, 2026).
In the event that dismissal is found appropriate under Civil Rule 12(b)(6),
it generally is not with prejudice—meaning, not immediately final or on the
merits—because the court normally will give the plaintiff leave to file an amended
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complaint to see if the shortcomings of the original document can be corrected.
Because of the federal policy of deciding cases on the basis of the substantive rights
involved rather than on technicalities, granting leave to amend is appropriate even
when the judge doubts that the plaintiff will be able to overcome the shortcomings
in the initial pleading. Further, it is potentially an abuse of discretion to dismiss a
complaint without giving a plaintiff another chance to plead its claims.
Id. In furtherance of the policy in favor of deciding cases on the merits, Plaintiffs will be granted
leave in this case to amend the Complaint to address the real party in interest defect and as
otherwise indicated below.
Being mindful of the Parties’ limited resources and in the interests of judicial economy,
the Court will briefly address the additional bases for dismissal even though it is not required to
do so once a determination has been made that the Complaint fails to state a claim upon which
relief can be granted. See Go-Mart, Inc. v. Bazell (In re Bazell), 677 B.R. 836, 849 n.3 (Bankr.
S.D. Ohio Feb. 27, 2026) (“Because it is dismissing the § 523(a)(4) claim under Civil Rule
12(b)(6), the Court need not address whether the allegations of the Amended Complaint satisfy
the particularity requirement of Fed. R. Civ. P. 9(b).”) (citation modified). And in so doing, the
Court will set aside the issue regarding the discrepancies with the named parties in the Agreements
versus the named parties in the Complaint so that the other substantive arguments requesting
dismissal can be addressed for the benefit of the Parties.
B. Civil Rule 8 – Shotgun Pleading
Defendant seeks dismissal of the Complaint on the basis that it is a “shotgun” pleading that
fails to meet the pleading requirements of Civil Rule 8 because it incorporates every antecedent
allegation by reference into each subsequent claim for relief. Civil Rule 8 requires a pleading to
contain “a short and plain statement of the claim showing that the pleader is entitled to relief” for
it to state a claim for relief. Fed. R. Civ. P. 8(a)(2). In addition, Civil Rule 8 requires a plaintiff
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to “connect specific facts or events with the various causes of action she asserted.” 	Arnold v.
Coopersurgical, Inc., 681 F. Supp. 3d 803, 824 (S.D. Ohio 2023) (citation modified).
A shotgun pleading is one where a party indiscriminately incorporates assertions
from one count to another, for example, by incorporating all facts or defenses from
all previous counts into each successive count preventing the opposing party from
reasonably being able to prepare a response or simply making the burden of doing
so more difficult. Incorporation by reference is permitted by Rule 10(b) and (c), but
when it is used indiscriminately, it becomes a shortcut by counsel that violates Rule
8.
Gibson v. City of Portland, 165 F.4th 1265, 1288 (9th Cir. 2026) (citation modified); but cf. Arnold,
681 F. Supp. 3d at 825 (finding that the complaint was not a shotgun pleading because, among
other things, it “sets forth unique factual matter for each count that goes beyond incorporating the
foregoing paragraphs”). “[T]he problem with shotgun pleadings11 is that they make it difficult, if
not impossible, for the opposing party to formulate a response. Gibson, 165 F.4th at 1288 (citing
Weiland v. Pam Beach Cnty. Sheriff’s Off., 792 F.3d 1313, 1323 (11th Cir. 2015)).
In this case, the Complaint contains twenty-six general factual allegations followed by four
causes of action. 	The first allegation under each cause of action provides that “Plaintiffs
incorporate by reference the allegations contained in the previous paragraphs as though set forth
fully herein.” Compl. ¶¶ 27, 34, 35, 39, Dkt. No. 1. In addition, the allegations contained under
each cause of action are no more than a formulaic recitation of the elements for each cause of
action without any additional unique factual matter being pleaded that is specific to that count.
11 There are four main types of shotgun pleadings:
(1) a complaint containing multiple counts where each count adopts the allegations of all preceding
counts, causing each successive count to carry all that came before and the last count to be a
combination of the entire complaint; (2) a complaint that is replete with conclusory, vague, and
immaterial facts not obviously connected to any particular cause of action; (3) a complaint that fails
to separate into a different count each cause of action or claim for relief; and (4) a complaint that
asserts multiple claims against multiple defendants without specifying which of the defendants are
responsible for which acts or omissions, or which of the defendants the claim is brought against.
Weiland v. Pam Beach Cnty. Sheriff’s Off., 792 F.3d 1313, 1321-23 (11th Cir. 2015).
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The Complaint 	here does not set forth any unique factual matter for each count beyond
incorporating the preceding paragraphs. This form of pleading forces the Defendant and the Court
to have to “cull through the allegations, identify the claims, and, as to each claim identified, select
the allegations that appear to be germane to the claim.” Gibson, 165 F.4th at 1289. It would be
appropriate for the Complaint to be dismissed as a shotgun pleading that violates Civil Rule 8.
The Plaintiffs, however, will be granted leave to amend to address this defect.
C. First Cause of Action — 11 U.S.C. § 727(a)(3)
Defendant contends that Plaintiffs’ claim under 11 U.S.C. § 727(a)(3) (the “First Cause of
Action”) fails to allege sufficient facts to establish a prima facie case for relief under § 727(a)(3)
and that it violates Civil Rule 8 by incorporating by reference twenty-six prior paragraphs of the
Complaint without connecting specific facts from those prior paragraphs to the First Cause of
Action.
While objections to discharge are to be strictly construed against the party seeking
to deny the discharge as has been stated many times the fresh start promised by the
Bankruptcy Code is reserved for the honest but unfortunate debtor. A fundamental
bedrock of the bankruptcy process is that unless a debtor is transparent and forthright
during the entirety of the bankruptcy proceeding, the debtor is not entitled to receive
a discharge.
Gardiners Bay Landscape & Design, Inc. v. Postiglione (In re Postiglione), Case No. 8-16-75377-
reg, Chapter 7, Adv. Pro. No. 8-17-08012-reg, 2019 Bankr. LEXIS 1887, at *4 (Bankr. E.D.N.Y.
June 24, 2019). 	Section 727(a)(3) provides a basis for denying a debtor a discharge if he “has
concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information,
including books, documents, records, and papers, from which the debtor’s financial condition or
business transactions might be ascertained, unless such act or failure to act was justified under all
of the circumstances of the case[.]” 11 U.S.C. § 727(a)(3). The purpose of this statutory section
is “to provide creditors with enough information to ascertain the debtor's financial condition and
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track his financial dealings with substantial completeness and accuracy for a reasonable period
past to present.” Colebrook v. Thompson (In re Thompson), 668 B.R. 156, 187-188 (B.A.P. 6th
Cir. 2025) (quoting Farm Credit Mid-Am, PCA, v. Tingle (In re Tingle), 594 B.R. 396, 402 (Bankr.
E.D. Ky. 2018)) (citation modified). 	Moreover, a plaintiff’s “failure to allege any facts that
indicate in what manner, the debtor has concealed, destroyed, mutilated, falsified or failed to keep
or preserve recorded information does not sufficiently apprise the defendant of the complaint
against him, is merely repetitive of the statutory language, and fails to state a cause of action.”
Colebrook, 668 B.R. at 188.
The Complaint here fails to state a claim under 11 U.S.C. § 727(a)(3). 	The Complaint
contains twenty-six factual allegations that precede the First Cause of Action. A close reading of
the factual allegations reveals that only one of them arguably applies to a request to deny
Defendant’s discharge for failure to keep or preserve books and records under § 727(a)(3) which
Plaintiffs concede in their Response —
Debtor and CDPS failed to maintain complete accurate and required paperwork as
required by the Management Agreements and by law. This paperwork includes, but
is not limited to complete and accurate tenant ledgers, complete and accurate
operating statements and income statements, files relating to Ohio Housing Finance
Agency 	(OHFA) 	and 	Columbus 	Metropolitan 	Housing 	Authority 	(CMHA)
inspections 	and 	reports, 	communications 	with 	tenants, 	documentation 	of
maintenance requests, property condition photos and reports, and complete and
accurate bank records.
Compl. ¶ 19(viii), Dkt. No. 1; Resp. ¶ 4, Dkt. No. 5. This allegation is further qualified by Plaintiff
in a footnote indicating that:
Some of the documentation referenced here has been slowly produced to Plaintiffs
through Plaintiffs efforts to resolve these issues. However, not all of the required
documentation has been released, and the overall delay in providing the required
documentation has compounded the harm done to Plaintiffs as well as to tenants of
the subject properties.
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Compl. ¶ 19(viii) n.2, Dkt. No. 1. The factual allegation that Plaintiffs rely upon as establishing a
claim under § 727(a)(3) is conclusory and essentially a recitation of the statutory element regarding
failure to keep or preserve books or records. This is insufficient. Plaintiffs do not allege facts that
would indicate the way Defendant has “concealed, destroyed, mutilated or failed to keep or
preserve recorded information.” Colebrook, 668 B.R. at 188. Moreover, the footnote that qualifies
the factual allegation cited by Plaintiffs as establishing a claim under § 727(a)(3) indicates that
Defendant has in fact provided “some of the documentation referenced” in the Complaint, but the
qualification lacks any specificity to determine what has been produced and what has not been
produced. The conclusory nature of the factual allegation regarding Defendant’s failure to keep
records and the general statement that some documentation has been produced without specifying
more do not provide sufficient notice to Defendant of the complaint against her such that she could
formulate a response.
Accepting the allegation regarding the Defendant’s failure to keep records as true, the
Complaint still lacks any factual allegations regarding how Defendant’s failure to keep records has
impacted Plaintiff’s ability to “ascertain the debtor’s financial condition and track [her] financial
dealings” which is the purpose § 723(a)(3). 	Colebrook, 668 B.R. at 187-88. 	And of greater
concern, the allegations regarding Defendant’s failure to keep and preserve records relates to the
contractual obligations between the parties to the Agreements, i.e., Brian White and CDPS,
without any further allegations as to how that impacts Defendant personally and individually such
that Plaintiffs cannot ascertain the Defendant’s personal financial condition because of the lack of
records. 	Plaintiffs do not allege how the separate legal entity’s record keeping impacts the
Defendant’s personal and individual record keeping. Accordingly, the Complaint does not contain
sufficient allegations to state a claim under § 727(a)(3). Even so, the Court is not convinced that
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it is impossible for Plaintiffs to assert a claim under § 727(a)(3), and as such will grant Plaintiffs
leave to amend.
D. Second Cause of Action — 11 U.S.C. § 727(a)(5)
Defendant argues that Plaintiffs failed to plead a prima facie case for denying Defendant’s
discharge under 11 U.S.C. § 727(a)(5) (the “Second Cause of Action”) for her failure to explain
the loss of assets or her insolvency. Under § 727(a)(5), a debtor may be denied a discharge if she
“has failed to explain satisfactorily, before determination of denial of discharge under this
[statutory section], any loss of assets or deficiency of assets to meet the debtor’s liabilities[.]” 11
U.S.C. § 727(a)(5).
A creditor is not required to rely on a debtor's statement that he no longer has certain
assets. For that reason, the plaintiff need only establish a prima facie case that some
of the debtor's assets are missing and that the debtor has failed upon request of the
plaintiff to give a satisfactory explanation, the debtor has the burden of going
forward with evidence that will explain satisfactorily the losses.
A prima facie case has been held to exist where a creditor shows that a debtor has
listed assets in his schedules at a lower figure than he has previously presented
himself to be worth, or where there was an unusual and unexplained disappearance
of assets shortly before the debtor filed bankruptcy.
Huntington Nat’l Bank v. Schwartzman (In re Schwartzman), 63 B.R. 348, 360 (Bankr. S.D. Ohio
1986) (citation modified). To succeed on a claim under § 727(a)(5), a plaintiff must show that:
(1) at a time not too remote from the bankruptcy, the Debtor owned identifiable
assets; (2) on the day that he commenced his bankruptcy case, he no longer owned
the particular assets in question; and (3) his schedules and/or the pleadings in the
bankruptcy case do not offer an adequate explanation for the disposition of the
assets in question.
Institutional Jobbers Co. v. Hobby (In re Hobby), Case No. 07-31772, Adv. Proc. No. 07-3078,
2007 Bankr. LEXIS 3766, at *12 (Bankr. E.D. Tenn. Oct. 31, 2007) (citing Schilling v. O'Bryan
(In re O'Bryan), 246 B.R. 271, 279 (Bankr. W.D. Ky. 1999).
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Here, Plaintiffs failed to respond to Defendant’s argument that the Second Cause of Action
should be dismissed for failure to state a claim. “When a defendant files a motion to dismiss and
a plaintiff fails to respond to an argument or defense, the plaintiff effectively abandons undefended
claims.” Irvin v. Wayne Cnty. Friend of the Ct., Case No. 25-cv-10088, 2025 U.S. Dist. LEXIS
116537, at *9 (E.D. Mich. June 18, 2025); see also Doe v. Bredesen, 507 F.3d 998, 1007 (6th Cir.
2007) (“The district court correctly noted, however, that Doe abandoned those claims by failing to
raise them in his brief opposing the government's motion to dismiss the complaint. Accordingly,
we need not consider those claims.”). The Response filed by Plaintiffs does not defend or discuss
their Second Cause of Action. Consequently, the Court finds that Plaintiffs have abandoned their
Second Cause of Action, and the Court dismisses Plaintiff’s claim under 11 U.S.C. § 727(a)(5)
with prejudice.
E. Dischargeability Actions under 11 U.S.C. § 523(a)
“One of the main purposes of the federal bankruptcy system is to aid the unfortunate debtor
by giving him a fresh start in life, free from debts, except of a certain character. To that end, the
Bankruptcy Code contains broad provisions for the discharge of debts, subject to exceptions.”
Lamar, Archer & Cofrin, LLP v. Appling, 584 U.S. 709, 715, 138 S. Ct. 1752, 201 L. Ed. 2d (2018)
(citation modified).
Plaintiffs’ remaining causes of action allege two of these exceptions in the Complaint.
One being a request that the Debt be determined nondischargeable under 11 U.S.C. § 523(a)(2)(A)
on the basis that Defendant obtained money, property, or services through false pretenses, false
representations, and actual fraud. And the other being an allegation that the Debt should be found
nondischargeable under 11 U.S.C. § 523(a)(4) on the basis that Defendant committed fraud while
acting in a fiduciary capacity and embezzlement. For Plaintiffs’ claims under § 523(a) to survive
a motion to dismiss, the allegations in the Complaint must establish that Defendant owes a debt to
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Plaintiff and state with particularity the circumstances constituting fraud. See Conley v. Conley
(In re Conley), 482 B.R. 191, 207 (2012); Guardian Fin. Co. v. Metzger (In re Metzger), Case No.
17-11585, Chapter 7, Adv. No. 17-1037, 2018 Bankr. LEXIS 3335, at *6 (Bankr. S.D. Ohio Sept.
4, 2018).
1. 	The Debt Owed by Defendant
The Complaint does not contain sufficient allegations to establish the existence of a debt
under state law. 	A plaintiff must first establish that a valid debt exists before he can seek a
determination of dischargeability of that debt. 	See Rich Triple Eight, LLC v. Dawson (In re
Dawson), Case No. 25-11904, Chapter 7, Adv. No. 25-1047, 2026 Bankr. LEXIS 1415, at *7
(Bankr. S.D. Ohio June 8, 2026). 	“The dischargeability of a debt is a matter separate from the
merits of the debt itself. 	A dischargeability action under 11 U.S.C. § 523(a) encompasses two
distinct claims: (1) whether the debtor owes a debt to the plaintiff and (2) whether the debt owed
by the debtor to the plaintiff is nondischargeable.” Est. of Mingus v. Lombardo (In re Lombardo),
No. 04-8060, 2005 Bankr. LEXIS 692, at *10 (B.A.P. 6th Cir. 2005) (citation modified). 	To
establish the existence of a debt, the creditor must show that a debt is owed under state law. See
Conley v. Conley (In re Conley), 482 B.R. 191, 207 (Bankr. S.D. Ohio 2012) (citation omitted). If
a creditor has not yet obtained a judgment before the bankruptcy case is filed, then she must allege
“non-bankruptcy law claim(s) in the adversary complaint to establish a debtor’s liability and to
quantify damages for this Court to determine the debt’s dischargeability.” Dawson, 2026 Bankr.
LEXIS 1415, at *7. 	The bankruptcy court will then liquidate the debt prior to determining the
dischargeability of the debt. 	Conley, 482 B.R. at 207. “While the existence of the debt is
determined through the application of state law, determination of the dischargeability of any such
debt must be determined under the nondischargeability provisions of § 523(a).” Id.
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Here, Plaintiffs did not obtain a judgment against Defendant before the bankruptcy case
was filed, so it was incumbent on them to allege non-bankruptcy law claims in the Complaint to
establish that a debt under state law exists. Plaintiffs did not provide any bases for the existence
of the Debt here. The Complaint makes cursory reference to the state law claims that were sought
against Defendant under a complaint that was filed in the state court for breach of contract,
negligence, breach of fiduciary duty, fraud, and accounting.12 	Simply identifying the type of
claims that are asserted in a complaint that was filed in a state court is not sufficient. Plaintiffs
needed to allege in the Complaint that is filed in this adversary proceeding the elements of the state
law claims that form a basis for the Debt. The Complaint, here, contains no allegations regarding
the elements for Plaintiffs’ state law causes of action and the specific facts supporting the elements
required under the state cause of action.
The Complaint alleges that Defendant is liable to Plaintiffs for the Debt. But, as discussed,
the Agreements were executed between Brian White and CDPS. Any liability for a breach of the
Agreements would be between Brian White and CDPS. 	Plaintiffs allege that Defendant is the
owner of CDPS, and she does not dispute this allegation. 	The Complaint, however, does not
contain any allegations from which the Court could conclude directly or inferentially that
Defendant is liable for any damages that resulted from a breach of the Agreements by virtue of
being the owner. 	More specifically, Plaintiffs have not alleged a basis for holding Defendant
personally liable for any debt of CDPS that is owed by it under the Agreements.
A corporation is a separate legal entity from its shareholders, even where there is but
one shareholder. Under Ohio law there are circumstances that exist where courts
will disregard the corporate form and hold an individual shareholder liable for
corporate misdeeds, known as piercing the corporate veil. The corporate entity and
the individual shareholder are then treated as a single entity and the corporate
liabilities become the liabilities of the individual shareholder.
12 The state court never entered judgment on those claims because the case was stayed by the filing of Defendant’s
bankruptcy case.
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Sutton v. Berkley (In re Berkley), 2025 Bankr. LEXIS 227, at *10-11 (Bankr. N.D. Ohio 2025)
(citation modified). 	The Complaint here does not contain any allegations that would support a
basis for Defendant being liable for the debts of CDPS. Accordingly, the Complaint fails to state
a claim under 11 U.S.C. § 523 because it lacks allegations sufficient to establish a debt exists under
state law. Nevertheless, the Court will grant Plaintiffs leave to amend the Complaint to address
this deficiency.
Defendant further argues that Plaintiffs’ causes of action under § 523(a)(2)(A) and (a)(4)
fail to state a plausible claim for relief and were not pleaded with particularity as required under
Civil Rule 9. The Court will now discuss these causes of action.
2. 	Third Cause of Action — 11 U.S.C. § 523(a)(2)(A)
Plaintiff 	contends 	that 	the 	Debt 	should 	be 	determined 	nondischargeable 	under
§ 523(a)(2)(A) (the “Third Cause of Action”) which provides that:
A discharge under section 727 does not discharge an individual debtor from any
debt for money, property, services, or an extension, renewal, or refinancing of
credit, to the extent obtained by—false pretenses, a false representation, or actual
fraud, other than a statement respecting the debtor’s or an insider’s financial
condition.
11 U.S.C. § 523(a)(2)(A) (citation modified). To except a debt from a debtor’s discharge under
this statutory section for false pretenses or a false representation, the creditor must establish the
following:
(1) the debtor obtained money through a material misrepresentation that, at the
time, the debtor knew was false or made with gross recklessness as to its truth; (2)
the debtor intended to deceive the creditor; (3) the creditor justifiably relied on the
false representation; and (4) its reliance was the proximate cause of loss.
Rembert v. AT&T Universal Card Servs. (In re Rembert), 141 F.3d 277, 280-281 (6th Cir. 1998)
(citing Longo v. McLaren (In re McLaren), 3 F.3d 958, 961 (6th Cir. 1993)). In contrast, “[t]he
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term ‘actual fraud’ in §523(a)(2)(A) encompasses forms of fraud, like fraudulent conveyance
schemes, that can be effected without a false representation.” Husky Int'l Elecs., Inc. v. Ritz, 578
U.S. 355, 359, 136 S. Ct. 1581, 194 L. Ed. 2d 655 (2016). 	Still, “the actual fraud prong of
§ 523(a)(2)(A) retains the requirement that the debtor act with intent to effectuate the fraud.”
Dottore v. Scheibal (In re Scheibal), Case No. 24-55161, Chapter 13, Adv. Pro. No. 25-02012,
2026 Bankr. LEXIS 1203, at *18 (Bankr. S.D. Ohio May 14, 2026) (citation modified).
In this case, Plaintiffs fail to plead a plausible claim for relief under the Third Cause of
Action because the allegations in the Complaint are too vague. While the Complaint contains a
section identified as “Defendant’s Fraud and Misrepresentation,” it only contains formulaic
recitations of the statutory elements and general references to Debtor’s misconduct, which are
insufficient. Compl. 4, Dkt. No. 1. There are no allegations specifically identifying the money,
property, services, or an extension, renewal, or refinancing of credit that was obtained by a false
pretense, false representation, or actual fraud.
Furthermore, Civil Rule 9(b) applies to § 523(a)(2)(A) and § 523(a)(4) complaints. Fabian
v. Goss (In re Goss), 605 B.R. 189, 198 (Bankr. S.D. Ohio 2019) (citing Bennett v. Lindsey (In re
Lindsey), 733 F. App'x 190, 192 (5th Cir. 2018)); Burton Food Servs. v. Aseireh (In re Aseireh),
526 B.R. 246, 250 (Bankr. N.D. Ohio 2015). Thus, they “must state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). 	“Rule 9(b) requires that the
plaintiff specify the who, what, when, where, and how of the alleged fraud.” New London Tobacco
Mkt., Inc. v. Ky. Fuel Corp., 44 F.4th 393, 411 (6th Cir. 2022) (citation modified). Civil Rule 9(b)
applies to § 523(a)(2)(A) and § 523(a)(4) complaints. 	Goss, 605 B.R. at 198 (citing Bennett v.
Lindsey (In re Lindsey), 733 F. App'x 190, 192 (5th Cir. 2018)); Burton Food Servs. v. Aseireh (In
re Aseireh), 526 B.R. 246, 250 (Bankr. N.D. Ohio 2015). “To assure that they have satisfied the
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Rule 9(b) requirements, plaintiffs should strive to specify the statement they contend is fraudulent,
identify the speaker, time, and location of the statement, and explain why the statement is indeed
untrue or a misrepresentation.” 	Rautu v. U.S. Bank, 557 Fed. App’x 411, 414 (6th Cir. 2014)
(citing Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008)). In this case, the Complaint does
not specify the statement that Plaintiffs contend is fraudulent, identify the speaker, the time, or
location of the statement. 	Nor do Plaintiffs explain why the statement is untrue. 	For all these
reasons, the Third Cause of Action has not been pleaded with particularity in violation of Civil
Rule 9(b). Again, Plaintiffs will be granted leave to address these deficiencies.
3. 	Fourth Cause of Action — 11 U.S.C. § 523(a)(4)
Next, Plaintiffs assert that the Debt should be excepted from the Defendant’s discharge
under § 523(a)(4) (the “Fourth Cause of Action”) which provides that “a discharge under section
727 does not discharge an individual debtor from any debt for fraud or defalcation while acting in
a fiduciary capacity, embezzlement, or larceny.” 11 U.S.C. § 523(a)(4) (citation modified). “In
plain language, § 523(a)(4) excepts from discharge three different types of debts: (1) debts for
fraud or defalcation while acting in a fiduciary capacity; (2) debts for embezzlement; and (3) debts
for larceny.” 	Thompson v. McCoy (In re McCoy), Case No. 18-49076-MBM, Chapter 7, Adv.
Proc. No. 18-04441, 2019 Bankr. LEXIS 500, at *13 (Bankr. E.D. Mich. Feb. 20, 2019) (citing
Graffice v. Grim (In re Grim), 293 B.R. 156, 166-67 (Bankr. N.D. Ohio 2003). 	The fiduciary
requirement 	only 	applies 	to 	debts 	resulting 	from 	fraud 	or 	defalcation; 	claims 	based 	on
embezzlement or larceny do not require a plaintiff to establish the existence of a fiduciary
relationship. Long v. Piercy (In re Piercy), 21 F.4th 909, 919 (6th Cir. 2021).
A creditor proves embezzlement under § 523(a)(4) by showing that he
entrusted his property to the debtor, the debtor appropriated the property for a use
other than that for which it was entrusted, and the circumstances indicate fraud.
The only difference between embezzlement and larceny under this subsection is
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that embezzled property comes into the debtor's hands lawfully, while larceny
requires 	that 	the 	debtor 	obtain 	the 	property 	unlawfully. Both 	larceny 	and
embezzlement under § 523(a)(4) require an element of fraudulent intent.
A 	defalcation 	under 	the 	fraud 	or defalcation while 	acting 	in
a fiduciary capacity prong of § 523(a)(4) encompasses not only embezzlement and
misappropriation by a fiduciary, but also the failure to properly account for such
funds. Notably, embezzlement or larceny under the second prong of § 523(a)(4)
requires demonstrating a debtor's fraudulent intent, whereas defalcation under the
first prong requires only a showing of gross recklessness.
Long v. Piercy (In re Piercy), 21 F.4th 909, 919 (6th Cir. 2021) (citation modified). Defalcation
“includes a culpable state of mind . . . involving knowledge of, or gross recklessness in respect to,
the improper nature of the relevant fiduciary behavior.” 	Bullock v. BankChampaign, N.A., 569
U.S. 267, 269 133 S. Ct. 1754, 185 L. Ed. 2d 922 (2013) (emphasis added). “Historically, the term
fiduciary has been construed narrowly for purposes of §523(a)(4), and is not intended to apply to
an ordinary commercial or contractual relationship, or encompass a mere agent or representative
relationship.” 	Pa. Lawyers Fund for Client Sec. v. McKee (In re McKee), 648 B.R. 147, 169
(Bankr. E.D. Pa. 2023) (citation modified); see also Bd. of Trs. of the Ohio Carpenters’ Pension
Fund v. Bucci (In re Bucci), 493 F.3d 635, 643 (6th Cir. 2007) (“The key point for bankruptcy
purposes, however, is that [the defendant] had only a contractual obligation to pay the employer
contributions. This is not enough, for the debtor must hold funds in trust for a third party to satisfy
the fiduciary relationship element of the defalcation provision of § 523(a)(4).”) 	(citation
modified)).
For nondischargeability purposes, the Sixth Circuit construes the term fiduciary
capacity more narrowly than the term is used in other circumstances. A fiduciary
capacity exists where there is an express or technical trust, but not where the trust
is an implied trust imposed by operation of law as a matter of equity and not where
the trust is a constructive trust that arises by virtue of alleged wrongdoing. Also, a
common law fiduciary relationship does not give rise to a fiduciary capacity for
purposes of § 523(a)(4).
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Go-Mart, Inc. v. Bazell (In re Bazell), 677 B.R. 836, 847 (Bankr. S.D. 2026) (citation modified).
The Complaint here does not contain any allegations that when accepted as true would establish
the existence of an express or technical trust for which Defendant owed a fiduciary duty.
Accordingly, The Fourth Cause of Action fails to state a claim for fraud or defalcation while acting
in a fiduciary capacity.
Plaintiffs also contend that the Debt is nondischargeable based on an allegation of
embezzlement under § 523(a)(4).
Federal law defines embezzlement under section 523(a)(4) as the fraudulent
appropriation of property by a person to whom such property has been entrusted
or into whose hands it 	has lawfully come. A creditor proves embezzlement by
showing that he entrusted his property to the debtor, the debtor appropriated the
property for a use other than that for which it was entrusted, and the circumstances
indicate fraud.
Brady v. McAllister (In re Brady), 101 F.3d 1165, 1172-1173 (6th Cir. 1996) (citation modified).
Further, "a breach of contract, without more, is not embezzlement under § 523(a)(4).” 	Long v.
Piercy (In re Piercy), 21 F.4th 909, 921 (6th Cir. 2021) (citation modified). The Complaint does
not contain any allegations showing that Plaintiffs entrusted their property to Defendant or that the
Defendant appropriated the property for use other than that for which it was entrusted. As a result,
the Fourth Cause of Action fails to state a claim for embezzlement.
As with the Third Cause of Action, Plaintiffs were required to state with particularity the
circumstances constituting fraud under the Fourth Cause of Action. The Plaintiffs, however, did
not specify the who, what, when, where, and how of the alleged fraud related to the Fourth Cause
of Action. The Complaint therefore does not state a plausible claim under § 523(a)(4). The Court
will grant Plaintiffs leave to amend the Complaint to remedy these defects.
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F. Award of Attorney’s Fees
Defendant contends that Plaintiff’s request for an award of attorney’s fees should be
dismissed because none of the claims in the Complaint specifically allege items of special damage
as required by Civil Rule 9.
[T]he Sixth Circuit has ruled that "[c]laims for attorney fees are items of special
damage which must be specifically pleaded under Federal Rule of Civil Procedure
9(g). In the absence of allegations that the pleader is entitled to attorney's fees,
therefore, such fees cannot be awarded." American Cas. Co. v. City of Detroit (In re
American Cas. Co.), 851 F.2d 794, 802 (6th Cir. 1988), quoting, Maidmore Realty
Co. v. Maidmore Realty Co., Inc., 474 F.2d 840, 843, 9 V.I. 560 (3rd Cir. 1973).
Federal Rule of Civil Procedure 9(g) applies to this adversary proceeding pursuant
to BR 7009.
Antioch Co. Litig. Trust v. Morgan (In re Antioch Co.), 451 B.R. 810, 816 (Bankr. S.D. Ohio
2011). 	Plaintiffs did not respond to Defendant’s request that the demand for attorney’s fees be
dismissed. Thus, they have conceded that dismissal of the request for attorney’s fees is warranted.
Irvin v. Wayne Cnty. Friend of the Ct., Case No. 25-cv-10088, 2025 U.S. Dist. LEXIS 116537, at
*9 (E.D. Mich. June 18, 2025); see also Doe v. Bredesen, 507 F.3d 998, 1007 (6th Cir. 2007).
Accordingly, Plaintiff’s demand for attorney’s fees is dismissed with prejudice.
VI. 	Conclusion
Based on the reasons stated here, it is ORDERED that the Motion of Defendant Sarita
Marie Penn to Dismiss Complaint (Dkt. No. 3) is GRANTED.
It is further ORDERED that the First Cause of Action, the Third Cause of Action, and the
Fourth Cause of Action are dismissed without prejudice.
It is further ORDERED that the Second Cause of Action and Plaintiff’s request for
attorney’s fees are dismissed with prejudice.
It is further ORDERED that Plaintiffs are granted leave to amend the Complaint as
specified in this opinion and order and shall have thirty (30) days from the date of entry of this
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order to do so. If an amended complaint is not filed timely, the Court may enter an order dismissing
the entire Complaint with prejudice without further notice or hearing.
IT IS SO ORDERED.
Copies to:
Michael Neiman, Attorney for Plaintiffs
Michael A. Cox, Attorney for Defendant
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