Marshburn v. Braswell

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
IN RE:
DAVID RAY BRASWELL, 	CASE NUMBER 05-10422-8-JRL
Chapter 7
DEBTOR.
BERRIE G. MARSHBURN, 	)
)
PLAINTIFF, 	)
) 	ADVERSARY PROCEEDING
v. 	) 	NO. L-06-00199-8-JRL
)
DAVID RAY BRASWELL, 	)
)
DEFENDANT. 	)
______________________________________________________________________________
ORDER
This case came before the court on the plaintiff’s motion for summary judgment. On
May 20, 2009, the court conducted a hearing on this matter in Wilmington, North Carolina. The
debtor, appearing pro se, was given notice, but did not appear.
JURISDICTION AND PROCEDURE
This court has jurisdiction over the parties and the subject matter of this proceeding
pursuant to 28 U.S.C. §§ 151, 157, and 1334, and the General Order of Reference entered by the
SO ORDERED.
SIGNED this 04 day of June, 2009.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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United States District Court for the Eastern District of North Carolina on August 3, 1984. This
is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), which this court may hear and
determine.
UNDISPUTED FACTS
1. 	At the time the debtor's bankruptcy case was filed, an action was pending against
defendant David Ray Braswell in the Superior Court of Johnston County.
2. 	The same action was brought against the debtor in the bankruptcy case with an
added objection to dischargeability of indebtedness under 11 U.S.C. § 523 and discharge under
11 U.S.C. § 727.
3. 	This court abstained from proceeding on matters that were based on state law
causes of action and the matters were returned to state court.
4. 	The case was reactivated in the Superior Court of Johnston County (Case No. 07
CVS 01210) and those matters have now been heard and determined.
5. 	Judgment was rendered for the plaintiff, Marshburn, on a motion for partial
summary judgment, against Braswell for $296,215.00 on the principal debt, plus courts costs and
interest at the legal rate of 8% per year from November 10, 2008.
STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 56(c), made applicable in bankruptcy by
Bankruptcy Rule 7056, summary judgment is proper “if the pleadings, depositions, answers to
interrogatories and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.” The “plain language of Rule 56(c) mandates the entry of summary judgment,
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after adequate time for discovery and upon motion, against a party who fails to make a showing
sufficient to establish the existence of an element essential to that party’s case, and on which that
party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.
Ct. 2548, 2552 (1986). In making this determination, conflicts are resolved by viewing all facts
and all reasonable inferences in the light most favorable to the nonmoving party. United States
v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 994 (1962).
ANALYSIS
Based on the record, the Johnston County Superior Court’s findings of fact fall neatly
within 11 U.S.C. § 523(a)(2)(A), (a)(4). Pursuant to § 523(a)(2)(A), debts for money may not be
discharged to the extent that they were incurred by “. . . false pretenses, false misrepresentation,
or actual fraud . . . .” The superior court found: (1) that the debtor (“Braswell”) knowingly made
false representations to the plaintiff (“Marshburn”) with the intent that Marshburn rely on them;
and (2) but for Braswell’s false representations, Marshburn would not have invested in the
business. The superior court further found that a relationship of confidence and trust existed
between Braswell and Marshburn. While acting under that relational capacity, Braswell sold
cars, incurred debts, withdrew funds, and transferred business assets. Section 523(a)(4) states
that a debt for money may not be discharged to the extent it was incurred by “. . . fraud or
defalcation while acting in a fiduciary capacity, embezzlement, or larceny. . . .” All of the
aforementioned actions were concealed from Marshburn.
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1In Sartin v. Macik, 535 F.3d 284, 89 (4th Cir. 2008) the court held that default
judgments cannot have collateral estoppel effect under North Carolina law. The defendant had
not answered requests for discovery, so the trial court entered a default judgment for plaintiff.
Id. At 286. The Fourth Circuit noted that The Supreme Court of North Carolina holds to the
traditional Restatement view with regard to collateral estoppel. Id. At 289, citing Restatement
(Second) of Judgments § 27 (1982). Accordingly, the court held that the defendant had not
actually litigated the issues in state court, so the trial court judgment had no collateral estoppel
effect. 535 F.3d at 289. In the case at bar, the Johnston County Superior Court ruled on a
motion for partial summary judgment. This indicates that Braswell answered the pleadings, and
actually litigated the issue in state court.
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Collateral estoppel applies to those issues decided in Johnston County Superior Court.
Accordingly, those findings of fact are binding on this court. 1
CONCLUSION
Based on the forgoing, the plaintiff’s motion for summary judgment is ALLOWED. The
debtor’s debt to the plaintiff will not be discharged pursuant to 11 U.S.C. §§ 523(a)(2)(A), (a)(4).
The request that the debtor’s discharge be denied entirely is dismissed on the request of counsel
for plaintiff.
END OF DOCUMENT
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