Real Estate Agent Defrauded His Customer

CourtThe following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.

Minnesota Bankruptcy Case:

Medlock v. Meahyen (In re Meahyen), 422 B.R. 192 (Bankr. D. Minn. 2/4/10) (Kressel, J.).

Case Summary:

Real Estate Agent Defrauded His Customer

The plaintiff sued the debtor, seeking to except the debtor’s debt to him from his discharge, pursuant to 11 U.S.C. §§ 523(a)(2)(A), 523(a)(4) and 523(a)(6). The bankruptcy court found that the plaintiff proved the elements of a claim under 11 U.S.C. § 523(a)(2)(A): “(1) the debtor made a representation; (2) at the time the representation was made the debtor knew it was false; (3) the debtor made the representation deliberately and intentionally with the intent and purpose to deceive the creditor; (4) the creditor justifiably relied upon such representation; and (5) the creditor sustained injury as a proximate result of the representation.” See Gadtke v. Bren (In re Bren), 284 B.R. 681, 690 (Bankr. D. Minn. 2002).

The debtor had sold two properties to the plaintiff as investments, and had contracted to serve as the general contractor for extensive remodeling on the properties. The court found that the debtor had held himself out as a real estate agent, obscured his own profits, and deliberately misled the plaintiff about the value of the properties, the cost of renovation, and his own ability to manage the renovations. In addition, the debtor had signed lien waivers without authority and taken construction draws without using all of he money to pay subcontractors. Although many of the debtor’s misleading statements were opinions, because the debtor held himself out at the plaintiff’s agent, the court found that he had the duty to disclose his conflict of interest. The court found that the debtor’s dishonest conduct justified excepting the debt from his discharge.

Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.