Dornan et al v. Witt

UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
In re:
Carl R. and Melinda L. Witt,
Debtors.
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Case No. 04-35400
Chapter 7
Judge William A. Clark
Dick and Carol Dornan,
Plaintiffs,
v.
Carl R. Witt,
Defendant.
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Adv. Pro. No. 04-03286
MEMORANDUM DECISION GRANTING DEFENDANT CARL R. WITT’S
MOTION FOR SUMMARY JUDGMENT
Dated at Dayton, Ohio this 10th Day of June, 2005:
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: June 10, 2005
____________________________________________________________
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This matter is before the court on the Motion for Summary Judgment filed by the Debtor
and Defendant, Carl R. Witt, on April 22, 2005 (the “Motion”). 	[Adv. Doc. # 23.] 	Plaintiffs,
Dick and Carol Dornan, have not responded to the Motion with any pleading. 	In the Motion,
Witt seeks summary judgment as to the Dornans’ claim that Witt’s debt to the Dornans is
nondischargeable because Witt obtained the money by embezzlement, false pretenses, and fraud.
Because the evidence before the court is completely lacking in proof of embezzlement, false
pretenses, or fraud, Witt’s Motion is granted and this adversary proceeding will be dismissed. 1
The court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the
standing general order of reference entered in this district. 	This matter is a core proceeding
pursuant to 28 U.S.C. § 157(b)(2). The following decision is determined in accordance with Fed.
R. Bankr. P. 7056.
I. Factual and Procedural Background
Defendant Witt worked as a financial consultant for Solomon Smith Barney. 	In the
course of his business, Witt became acquainted with various Solomon Smith Barney clients,
including Thelma Bergland, Samuel Casey, Dick and Carol Dornan, Leroy and Betty Scrivner,
John 	R. 	Stenger, 	and 	Holly 	and 	Jerine 	Harris 	and 	Don 	Weisenbord 	(collectively, 	the
“Plaintiffs”). Between September 10, 2001 and January 27, 2004, Witt individually approached
the Plaintiffs and asked for and received personal loans. 	Witt did not pay those loans back
before he filed for Chapter 7 bankruptcy relief on June 23, 2004. 	On October 15, 2004, the
1 	This adversary proceeding was one of six proceedings based upon the same set of facts and circumstances.
Similar orders granting summary judgment to Witt are being filed in all six of the adversary proceedings as follows:
Bergland v. Witt, Adv. Pro. No. 04-3284; Casey v. Witt, Adv. Pro. No. 04-3285; Dornan, et al. v. Witt, Adv. Pro.
No. 04-3286; Scrivner, et al. v. Witt, Adv. Pro. No. 04-3287; Stenger v. Witt, Adv. Pro. No. 04-3288; and Harris v.
Witt, Adv. Pro. No. 04-3289.
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Plaintiffs 	each 	filed 	complaints 	against 	Witt 	arguing 	that 	the 	personal 	loans 	are
nondischargeable.2
The complaints argue that Witt defrauded the plaintiffs while acting in a fiduciary
capacity and committed embezzlement. 	The complaints allege nondischargeability under 11
U.S.C. §§ 523(a)(2)(A) and 523(a)(4). 	Other than identifying Witt as a financial advisor—a
position that could potentially involve a fiduciary duty to the plaintiffs—the complaints do not
contain any specific factual allegations of fraud, deceit, and dishonesty or provide any evidence
of embezzlement.
In his answer to the complaints, Witt admits that he received the personal loans from the
Plaintiffs, but denies all allegations of fraud, deceit, and embezzlement. 	Witt points to
interrogatory answers provided by the Plaintiffs regarding the nature of the transactions. Each of
the Plaintiffs’ interrogatories admit that the transactions were personal loans to Witt and,
although several of the Plaintiffs allege that Witt never intended to return the loaned money,
none provided any evidence of that fact or any other evidence of fraud or deceit. 	In addition,
none of the interrogatory answers indicate that Witt utilized his position as an investment advisor
inappropriately. Instead, all of the interrogatory answers indicate that all of the parties involved
knew that the loans were personal in nature.
On the basis of the interrogatories, Witt now moves for summary judgment arguing that
the plaintiffs cannot meet their burden of proving fraud or embezzlement under § 523 of the
Bankruptcy Code. None of the plaintiffs have responded to Witt’s motion.
2 The personal loans totaled $32,403.86 and consisted of eight (8) individual loans as follow: $2,403.86 from Casey
on September 10, 2001; $5,000 from Holly and Jerine Harris and Don Weisenbord on September 5, 2002; $5,000
from Thelma Bergland on November 8, 2002; $3,000 from Dick and Carol Doran on February 19, 2003; $5,000
from John R. Stenger on May 5, 2003; $5,000 from John R. Stenger on October 22, 2003; $2,000 from Leroy and
Betty Scrivner on January 24, 2004; and $5,000 from Thelma Bergland on January 27, 2004.
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II. Summary Judgment Standard
The appropriate standard to be used by the court to address a motion for summary
judgment is contained in Fed. R. Civ. P. 56(c) and is incorporated in bankruptcy adversary
proceedings by reference in Fed. R. Bankr. P. 7056. 	Rule 56(c) states in part that a court must
grant summary judgment to the moving party 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.
Fed. R. Bankr. P. 7056(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). 	If the
burden is on the nonmoving party at trial, the movant must: (1) submit affirmative evidence that
negates an essential element of the moving party’s claim; or (2) demonstrate to the court that the
nonmoving party’s evidence is insufficient to establish an essential element of the non-moving
party’s claim. See Celotex, 477 U.S. at 331-32.
Thereafter, the opposing party “must come forward with ‘specific facts showing that
there is a genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 586-87 (1986) (citations omitted); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-51
(1986). “When the moving party has carried its burden under Rule 56(c), its opponent must do
more that simply show that there is some metaphysical doubt as to the material facts.”
Matsushita, 475 U.S. at 586. To this end, the non-moving party must show more than the “mere
existence of some alleged factual dispute between the parties to defeat an otherwise properly
supported motion for summary judgment; the requirement is that there be no genuine issue of
material fact.” 	Anderson, 477 U.S. at 248 (emphasis added). 	All inferences drawn from the
underlying facts must be viewed in a light most favorable to the party opposing the motion.
Matsushita, 475 U.S. at 586-88.
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In a case such as this, where the nonmoving party fails to respond to the summary
judgment motion, the trial court is under no obligation to “search the entire record to establish
that it is bereft of a genuine issue of material fact.” 	Street v. J.C. Bradford & Co., 886 F.2d
1472, 1479-80 (6 th Cir. 1989) (citation omitted). 	Instead, the trial court may rely on the “facts
presented by the moving party.” 	Guarino v. Brookfield Township Trustees, 980 F.2d 299, 404
(6th Cir. 1992). As such, the court has not searched for legal or factual support for the plaintiffs
position, but instead relies on the affirmative evidence set forth by Witt in the motion and the
interrogatories.
III. Discussion
The Plaintiffs allege that the debts owed by Witt are nondischargeable under 11 U.S.C.
§§ 523(a)(2)(A) and 523(a)(4). The court will examine each section separately.
Section 523(a)(2)(A) states that a debt will not be dischargeable if it was obtained by
“false pretenses, a false representation, or actual fraud.” 	This court has found that in order to
succeed on a charge of nondischargeability under §523(a)(2)(A), the creditor must prove four
elements as follows:
(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 the 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 the loss.
In re Henderson, 277 B.R. 889, 892 (Bankr. S.D. Ohio 2002) (quoting Rembert v. AT&T
Universal Card Service, Inc. (In re Rembert), 141 F.3d 277, 280-81 (6 th Cir. 1998).
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The evidence before the court fails each of those elements. 	Other than unsupported
allegations that Witt did not intend to pay the money back found in a few of the Plaintiffs’
answers to interrogatories, no evidence exists that Witt misrepresented anything when requesting
and obtaining the loans. In fact, the written receipts provided by Witt in several cases show that
Witt made it perfectly clear that the loan was personal in nature and that he intended to pay it
back. The record is also void of evidence indicating that Witt intended to deceive the Plaintiffs.
Thus, 	the 	court 	finds 	that 	the 	Plaintiffs 	cannot 	support 	a 	cause 	of 	action 	for
nondischargeability under § 523(a)(2)(A) and summary judgment will be granted to Witt on
those claims.
Section 523(a)(4) states that a debt will not be dischargeable if the debt was “for fraud or
defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” 	The Plaintiffs
complaints indicate that the loans were obtained using fraud while acting in a fiduciary capacity
and embezzlement.
The complaints, and the evidence before the court, are completely lacking of support for
these claims. Witt asked for the loans in his personal capacity. No evidence indicates otherwise.
If Witt had taken the money while acting in his capacity as a Solomon Smith Barney financial
advisor by indicating to the Plaintiffs that it was being used as an investment in their personal
portfolios, then an argument for fraud in a fiduciary capacity might be successful.3 In this case,
however, Witt simply asked the Plaintiffs for a personal loan and they complied. Any fiduciary
relationship that existed between Witt and the plaintiffs was not implicated here.
In addition, none of the facts before the court indicate that embezzlement occurred. For
purposes of § 523, embezzlement is defined as “the fraudulent appropriation of property by a
3 The court emphasizes “might” be successful. The court makes no determination whether a fiduciary relationship
existed between Witt and the Plaintiffs, only that such a fiduciary capacity, if it existed, was not implicated in the
circumstances surrounding these loans.
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person to whom such property has been entrusted or into whose hands it has lawfully come.” In
re Thompson, 262 B.R. 407, 411 (6 th Cir. B.A.P. 2000) (quoting Gribble v. Carlton (In re
Carlton), 26 B.R. 202, 205 (Bankr. M.D. Tenn. 1982)). Under that definition, the court is unable
to see how embezzlement took place in this case. There is no evidence that Witt represented that
he would do something other than use the loaned money for his own purposes. As is indicated in
each of the Plaintiffs’ interrogatory answers, he asked for a personal loans and got what he asked
for. Embezzlement simply did not take place.
Since none of the nondischargeability claims set forth by the Plaintiffs are supported by
the facts before the court, summary judgment will be granted and the claims will be dismissed.
It is therefore ORDERED, ADJUDGED, AND DECREED, that:
(1) Debtor and Defendant Carl R. Witt’s Motion for Summary Judgment is granted.
(2) The Plaintiffs’ claims and allegations regarding nondischargeability are unsupported
by the record and are dismissed.
It is so ordered.
cc:
Dick and Carol Dornan, 4494 Bonham Road, Oxford, Ohio 45056
Carl R. Witt, Kensington Place Nursing Home, 751 Kensington Street, Middletown, Ohio 45042
J. Gregory Howard, 723 Dayton Street, Hamilton, Ohio 45011
Gene E. Schaefer, Combs & Schafer Law Firm, 1081 North University Blvd, Suite B, Middletown, Ohio 45042
United States Trustee
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