# MegaForce LLC v. Beach

> United States Bankruptcy Court, D. Kansas · June 15, 2021

URL: https://www.frixlaw.com/law-library/cases/10457840

## Case

- **Court:** United States Bankruptcy Court, D. Kansas
- **Decided:** June 15, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

Bank
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SO ORDERED. □□ □
“ec ASP
SIGNED this 15th day of June, 2021. Oe ey Ai a □
istrict ay

Dale L. Somers
ie States Cine Barikrupicy TUGEe

Designated for online use but not print publication
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS

In Re:
Brandi Leanne Beach, Case No. 19-41514
Chapter 7
Debtor.

MegaForce, L.L.C.,
Plaintiff,
Vv. Adv. No. 20-07009

Brandi Leanne Beach,
Defendant.
Memorandum Opinion and Order Denying
Plaintiffs Complaint to Determine that Debt is Nondischargeable
Plaintiff MegaForce, LLC (““MegaForce’”) objects to discharge of its claim

against Debtor Brandi Leanne Beach (“Beach”) under § 523(a)(2),1 false
pretenses, false representation, or actual fraud, and § 523(a)(6), willful and

malicious injury. The claim arose out of Beach’s guarantee of an obligation for
staffing services provided by MegaForce to Damascus Edge, Inc. (hereafter
“the Company”),2 a business run by Beach. In September 2018, after the
Company failed to make a payment owed to MegaForce under a 2017 agreed

settlement of a state court collection suit, the Company and Beach, as
guarantor, entered into an amended settlement agreement in which
MegaForce agreed to forbear from collection efforts in exchange for
$256,784.14 in periodic payments. Despite Beach’s efforts to sustain the

viability of the business, the Company failed and no payments were made.
Beach filed for relief under Chapter 7. MegaForce contends its claim against
Beach is excepted from discharge because Beach fraudulently intended not to
make payments, withheld relevant financial information, failed to provide a

UCC-1 financing statement, and willfully and maliciously intended to harm

1 11 U.S.C. § 523(a)(2). Future references in the text to sections of Title 11
shall be to the section number only.
2 The business was incorporated as Damascus Edge, Inc. in 2015. On
December 19, 2017, the name was changed to Mode3, Inc. For ease of reference, the
Court will refer to the business as the Company.
2
MegaForce. Trial was held on May 19, 2021.3 The Court finds that MegaForce
has failed to prove its allegations and enters judgment for Beach.

I. Findings of Fact
MegaForce presented its case through testimony of Beach, who
MegaForce used to explain exhibits evidencing the Company’s business
transactions, and Rob Thayer, the president and CEO of MegaForce. Beach

later testified in her defense. The defense also called Nathan Stewart, a
representative of Honor Technology, a business that contracted to purchase
the assets of the Company in a failed attempt to work out its debts. The
parties agreed that all offered exhibits were authentic and admissible. All of

the witnesses were credible.
MegaForce is in the business of providing staffing for technology and
construction businesses. From 2012 through 2017, Beach was employed by
MegaForce as a sales executive.4 In 2015, MegaForce and the Company,

which provided technology services to businesses, entered into a Master
Service Agreement. Under the agreement, MegaForce agreed to provide
staffing to the Company to complete technology projects awarded to the

3 Megaforce appears by Stephan L. Skepnek. Beach appears by Todd A.
Luckman.
4 For an unspecified period of time, Beach was employed by MegaForce and
also associated with the Company. She left MegaForce in June 2017.
3
Company by third parties. MegaForce paid the hourly compensation for the
Company’s staff and billed the Company with the expectation that it would

paid from the resulting receivables. From August 2015 through August 2017,
MegaForce invoiced the Company approximately $3,570,000 for services.
By January 30, 2017, the Company owed MegaForce a past due balance
of $227,167.17. At that time, the Company, through Beach who had become

its CEO, entered into an amendment of the Master Services Agreement in
which the Company agreed to use MegaForce as its exclusive provider of
contract labor/staffing until December 31, 2017 and to pay the past due
balance in bi-weekly installments. The payment obligation was stated in a

promissory note dated January 30, 2017, for $227,167.l7, due on December
20, 2017, executed by Beach, as CEO of the Company, and individually by
Beach and Jeffrey Shipley, the former CEO of the Company, as guarantors. In
June 2017, Beach left MegaForce to direct sales and operations of the

Company.
To finance its operations, the Company entered into a series of three
merchant agreements with 1 Global Capital, LLC (“1 Global”). These were
short-term, high-interest lending agreements in which a lump sum advance

was made to the Company in exchange for agreeing to the lender’s initiating
daily draws from the Company’s account, into which payments on accounts
4
receivable were deposited. For example, on March 1, 2017, the Company
entered into a merchant agreement with 1 Global under which the Company

received $90,000, in exchange for 220 daily withdrawals of $572.73, for a total
payment of $126,000. The merchant agreement obligations were secured by a
perfected security interest in the Company’s accounts receivable, and the
security agreements included a negative pledge whereby the Company agreed

not to create or permit to exist any other liens on its then owned and future
accounts.
MegaForce continued to invoice the Company for services. The
Company made payments, but by July 6, 2017, the balance due was

$702,659.70. The last invoice for services to the Company was dated August
3, 2017. MegaForce ceased providing services, and the Company responded by
hiring workers on a full time basis. MegaForce sued the Company and
guarantors Beach and Shipley in state court. The litigation was resolved by a

settlement agreement dated September 1, 2017. Under the agreement,
executed by Beach as CEO, the Company agreed to pay $100,000 on
September 1, 2017 and $543,351.17 in 24 monthly payments of $24,020.49.
The agreement provided that all future communications would be through

counsel, except with respect to the periodic payments. The Company, by
Beach its CEO, granted MegaForce a security interest in accounts receivable,
5
effective upon full payment by the Company to 1 Global. In paragraph 11, the
Company agreed “[u]pon reasonable request,” to provide “documentation

necessary to estimate” the date of such payment, and that on the date of such
payment to provide MegaForce with a UCC-1 in favor of MegaForce. The CEO
of MegaForce testified that he was aware that as of September 2017, the
filing of a UCC-1 by MegaForce would have been a violation of the Company's

agreement with 1 Global. In paragraph 12 of the settlement agreement,
Beach individually guaranteed the periodic payments to be made by the
Company. In her personal capacity, Beach executed the settlement agreement
for “purposes of paragraph 12 only.”

The Company paid the $100,000 lump sum on September 7, 2017, and
from September through the end of June 2018, made ten of the periodic
payments. On December 19, 2017, by filing with the office of the Kansas
Secretary of State, the Company changed its name from Damascus Edge, Inc.

to Mode3, Inc. On January 24, 2018, the Company entered into a new
merchant agreement with 1 Global to obtain an advance of $250,000. In April,
2018, the Company obtained a merchant advance from Cornell Funding. The
Company relied on the merchant funding to make payroll and stay afloat.

The Company failed to make the August 2018 monthly payment to
MegaForce. By August 2018, the Company’s client base was shrinking.
6
Beach continued to obtain financing in hope of saving the Company. For
example, Crestmark, an accounts receivable factoring company, advanced

$109,276.24 on September 19, 2018, Cast Capital advanced $100,000 on
September 21, 2018, and Arcarius advanced $97,500 on September 25, 2018.
The Company made a periodic payment to MegaForce on September 10, 2018
and a double payment on September 25, 2018. Proceeds of the financing from

Cornell Funding were used to pay MegaForce.
On September 26, 2018, when the balance owed by the Company under
the September 2017 settlement agreement was $256,784.14, MegaForce, the
Company, and Beach personally entered into an amended settlement

agreement. It provided for payment of the balance in 10 monthly installments
of $24,020.49, the same periodic amount as was owed under the original
settlement agreement, with the final payment and remaining balance due on
September 1, 2019. The amended agreement obligated the Company to

provide MegaForce with a fully executed UCC-1 in accord with the prior
agreement, and Beach affirmed her personal guaranty of the payments due.
Review of the Company’s customer balance detail shows that by
September 2018 invoices for services were declining from prior levels. Later

Beach learned that a former Company employee had reached an agreement to
directly provide services to significant former clients of the Company. Beach
7
also learned that another employee had dishonestly claimed that he, on
behalf of the Company, had developed an application that had been sold to

the Company’s clients, that did not perform. This also caused loss of clients.
On November 18, 2018, the Company entered into a workout process
through South Wind consultants. As a result, Honor Technology Solutions
agreed to purchase the Company’s assets and operate the business in

exchange for establishing a $200,000 escrow for the payment of the
Company’s major creditors, including 1 Global, Arcarius, Fast Forward, and
MegaForce.5 However, because most of the Company’s major clients had
already decided not to do business with the Company, accounts were not

generated and the escrow was not established.
The Company failed to make payment to MegaForce in accord with the
amended settlement agreement. On November 29, 2018, MegaForce filed a
state court petition against the Company for breach of the settlement

agreement, as amended, and against Beach to enforce her guarantee. In
addition to payment default, MegaForce believed that the Company had
breached paragraph 11 of the settlement agreement, which required the

5 MegaForce, as an unsecured creditor, is included in the schedule of business
debts attached to the Second Wind agreement. Exh. 22, p. 1. Beach testified that
she intended MegaForce to receive payments from the escrow, although MegaForce
was not a secured creditor listed in the recitals in the sales agreement with Honor
Technology. See Exh. 22, p. 12.
8
Company to inform MegaForce when the obligation to 1 Global was satisfied
and on that date to deliver an executed UCC-1 to MegaForce. MegaForce’s

CEO testified that numerous requests for information were made, that no
response was received, and that the UCC-1 was never provided.
Beach confirmed that the obligation to 1 Global that was outstanding in
September 2017 was satisfied and that a UCC-1 was not provided to

MegaForce. However, she also testified that the satisfaction was by renewal
of the 1 Global financing, which did not result in release of 1 Global’s security
interest or release of the Company’s covenant not to grant other security
interests in 1 Global’s collateral. Beach did not understand the settlement

agreement to prohibit the renewal. Beach testified that under the settlement
agreement all communications were through counsel, that she kept her
counsel informed about the Company’s borrowing, and she did not know what
communications may have been made between counsel for the two parties.

She recalled at least one instance when, upon request, she provided
information about the balance owed to 1 Global.
MegaForce’s CEO testified that the Company wrongly failed to inform
MegaForce of the change of the Company’s corporate name and to advise

about its ongoing borrowing from multiple lenders. He acknowledged that
Beach had not made an agreement that the name would not be changed.
9
Although MegaForce also acknowledged that Beach had not agreed to stop
obtaining funding or to generally turnover financial information, its CEO

asserted that Beach had a duty to advise MegaForce of the multiple loan
transactions in September 2018. MegaForce submits that if it had known of
the true state of affairs, it would have sued immediately rather forbearing
suit and then entering into the amended settlement agreement. From

MegaForce’s perspective, the cumulative effect of the evidence is that there
was no intent to pay the debt.
Beach filed for relief under Chapter 7 on December 11, 2019. Debtor’s
scheduled debts include her obligation as guarantor of the Company’s debt to

MegaForce, 1 Global, Arcarius, and Cornell Funding. MegaForce filed a proof
of claim for $256,784.14, the amount owed under the amended settlement
agreement.
On May 7, 2020, MegaForce filed this adversary proceeding.

II. Analysis
MegaForce objects to discharge of its claim against Beach under §
523(a)(2)(A) and (a)(6). “‘Exceptions to discharge are to be narrowly
construed, and because of the fresh start objectives of bankruptcy, doubt is to

10
be resolved in the debtors favor.’”6 In a prior ruling, the Court held that
MegaForce has the burden to prove both claims by a preponderance of the

evidence.7
A. MegaForce’s claim is not excepted from discharge under §
523(a)(2)(A)
Section 523(a)(2)(A) excepts from discharge a 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.” A
fraudulently induced forbearance qualifies as an extension or renewal of

credit.8 The September 2017 settlement agreement resulted in the dismissal
of litigation against Beach (and the other defendants), and as a result of the
September 2018 amended settlement agreement, MegaForce deferred filing a
second law suit for about two months. Section 523(a)(2)(A) could be applicable

if the required elements were satisfied.
To except such a debt from discharge under § 523(a)(2)(A), the creditor
must prove five elements: (1) debtor engaged in false pretenses, made a false
representation, or engaged in actual fraud; (2) the debtor had the intent to

6 Okla. Dep’t of Sec. v. Wilcox, 691 F.3d 1171, 1174 (10th Cir. 2012) (quoting
In re Sandoval, 541 F.3d 997, 1001 (10th Cir. 2008)).
7 Doc. 72.
8 See, e.g., Ojeda v. Goldberg, 599 F.3d 712, 718-19 (7th Cir. 2010).
11
deceive the creditor; (3) the creditor relied on the debtor’s conduct; (4) the
creditor’s reliance was justifiable; and (5) the creditor was damaged as a

proximate result.9 Of these elements, the first is the foundation for the
exception.
1. MegaForce has not proven it deferred collection because
of false pretenses, a false representation, or actual fraud.
As to the first element, which requires proof of false pretenses, a false
representation, or actual fraud, in the pretrial order MegaForce contends that
its claim is nondischargeable pursuant to § 523(a)(2)(A) because Beach:

had a duty to disclose information regarding the
financial circumstances of her company and her own
financial circumstances, including changing the name
of her company, the status of payments to 1 Global
Capital, UCC-1 Financing Statements, the existence of
additional merchant cash lenders and payments of
accounts receivable by [Beach’s] company to factoring
companies. . . . [Beach] made contemporaneous
fraudulent representations and omissions to
[MegaForce]. . . [Beach] did not seek an extension of
credit for the purpose of repaying [MegaForce], but
instead, to avoid a judgment in [MegaForce’s] favor
while [Beach] sought to liquidate the company assets
and sell the company.10
Beach responds that the Company’s obligations “were incurred under normal
9 See, e.g., Wagner v. Wagner (In re Wagner), 527 B.R. 416, 433 (10th Cir. BAP
2015); Solis v. Asif (In re Asif), 455 B.R. 768, 784 (Bankr. D. Kan. 2011).
10 Doc. 68, pp. 2-3.
12
business circumstances” and that she did not intend to “defraud, deceive or
otherwise engage in any false pretenses.”11 She also asserts that “[a]s adverse

parties in litigation,” she had no duty to MegaForce “to inform it of other
credit she had obtained or the changes to the business.”12 In closing
argument, counsel for MegaForce confirmed that its § 523(a)(2)(A) claim is
predicated upon alleged fraudulent nondisclosure and the contention that

Beach had no intent to pay MegaForce.
a. False pretenses
MegaForce’s primary allegations of fraud appear intended to come
within the false pretenses arm of § 523(a)(2)(A). Under this section, “[f]alse

pretenses . . . are implied misrepresentations intended to create and foster a
false impression. Unlike false representations, which are express
misrepresentations, false pretenses include conduct and material
omissions.”13 “Silence or concealment may constitute the requisite ‘false

pretenses,’ for nondischargeability purposes, if the debtor has a duty to
disclose the concealed facts.”14

11 Id. p. 3.
12 Id.
13 Bank of Cordell v. Sturgeon (In re Sturgeon), 496 B.R. 215, 223 (10th Cir
BAP 2013).
14 In re Asif, 455 B.R. at 787.
13
As to the existence of a duty to disclose, MegaForce relies on the
Restatement (Second) of Torts, § 551,15 which provides in part:

(2) One party to a business transaction is under a duty
to exercise reasonable care to disclose to the other
before the transaction is consummated,
(a) matters known to him that the other is entitled to
know because of a fiduciary or other similar relation of
trust and confidence between them; and
. . .
(e) facts basic to the transaction, if he knows that the
other is about to enter into it under a mistake as to
them, and that the other, because of the relationship
between them, the customs of the trade or other
objective circumstances, would reasonably expect a
disclosure of those facts.
The Court finds no fraudulent breach of a duty to disclose in this case.
Most importantly, the focus of MegaForce’s case is upon nondisclosure of
information about the Company leading up to and at the time of the amended
settlement agreement. But assuming the Company had a duty to disclose,
failure to fulfill that duty would not provide a basis to prevail in this case
where the issue is nondischargeability of MegaForce’s claim against Beach, as
guarantor, not the Company. There is no evidence that MegaForce requested
information about Beach’s ability to pay; MegaForce provides no argument as
15 Restatement (Second) of Torts § 551 (1977) (adopted by the Kansas
Supreme Court in Griffith v. Byers Constr. Co. of Kan., Inc., 510 P.2d 198, 203, 212
Kan. 65, 71 (Kan. 1973)).
14
to why the Court should find Beach had a duty to disclose financial
information. Beach individually was not bound by paragraph 11 of the

September 2017 settlement agreement, which required some disclosures by
the Company. There was no confidential relationship between Beach and
MegaForce; they were in an adversarial relationship, with MegaForce
threatening litigation. The circumstance of guarantor liability is not one

where one would expect disclosure without inquiry.
Further, even if the exception to discharge could be predicated upon
false pretenses about the finances of the Company, the Court would deny the
claim. MegaForce relies on failure to disclose the change of name of the

Company and alleged noncompliance with paragraph 11 of the September
2017 settlement. Under that portion of the settlement agreement, the
Company agreed “[u]pon reasonable request,” to provide “documentation
necessary to estimate” the date of payment of the Company’s obligation to 1

Global, and that on the date of such payment to provide MegaForce with a
UCC-1 in favor of MegaForce. It is undisputed that at the time of the
amended settlement agreement, when MegaForce agreed to defer litigation
over the company’s failure to make all of the required periodic payments,

MegaForce knew that it had not been provided a UCC-1 and the Company
had changed its name. Further, neither paragraph 11 nor any other provision
15
of the September 2017 settlement agreement or the amended settlement
agreement purports to create a general duty to disclose information about the

Company. There was no condition of trust or confidence between MegaForce
and the Company. There was no custom of trade or circumstances of the
transaction which would impose a duty of disclosure on the Company.
b. False representation

MegaForce also alleges its claim should be excepted from discharge
based upon a false representation. For purposes of § 523(a)(2)(A), a false
representation is an express statement.16 MegaForce argues that Beach
falsely represented her intent to pay the Company’s obligation. The only

evidence offered in support is her written guarantee of the Company’s debt,
followed by her failure to pay. This is evidence of breach of her guarantee, a
breach of contract; it is not a false representation.
c. Actual fraud

Finally, MegaForce alleges actual fraud. The discharge exception for
actual fraud applies “[w]hen a debtor engages in a scheme to deprive or cheat

16 In re Sturgeon, 496 B.R. at 223. It has been suggested that when there is a
duty to speak, concealment can constitute a misrepresentation. Tobias v. Alvarado
(In re Alvarado), 608 B.R. 877, 884 (Bankr. W.D. Okla. 2019). Because, as examined
above, there was no duty to speak in this case, the Court does not address the
question of whether silence can constitute a misrepresentation.
16
another of property or a legal right.”17 “Actual fraud consists of any deceit,
artifice, trick or design involving direct and active operation of the mind, used

to circumvent and cheat another—something said, done or omitted with the
design of perpetrating what is known to be a cheat or deception.”18
As to actual fraud, MegaForce argues that Beach did not intend to pay
the amounts due under the settlement agreement or the amended settlement

agreement. It also contends that the amended settlement agreement was not
sought for the purpose of repaying MegaForce, but instead “to avoid a
judgment in [MegaForce’s] favor while [Beach] sought to liquidate the
company assets and sell the company.”19

As to be expected, there is no direct evidence of fraud; rather
MegaForce relies upon the Company’s deteriorating financial circumstances
to evidence fraud. This approach suffers from the same fatal infirmity as does
MegaForce’s claim of false pretenses—it focuses entirely upon the Company,

not Beach’s financial circumstances. That evidence does not provide a basis to
decide that Beach as guarantor had no intent to pay MegaForce when she

17 Vickery v. Vickery (In re Vickery), 488 B.R. 680, 690 (10th Cir. BAP 2012)
(quoting Mellon Bank, N.A. v. Vitanovich (In re Vitanovich), 259 B.R. 873, 877 (6th
Cir. BAP 2001)).
18 4 Collier on Bankruptcy ¶ 523.08 (Richard Levin & Henry J. Sommer eds-
in-chief, 16th ed 2021).
19 Doc. 68, pp. 2-3.
17
agreed to the amended settlement agreement.
Further, if the focus were on the Company, the story of its failure

exhibits Beach’s struggle to both pay MegaForce and save the Company, not
to defraud MegaForce. This is most clearly exhibited in the payment history.
The settlement agreement is dated September 1, 2017, when the balance
owed by the Company to MegaForce was $543,351.17. In accord with the

agreement, on September 7, 2017, the Company paid MegaForce $100,000,
and generally made monthly payments of $24,020.49 through the end of June.
Thereafter, it made payments of late fees and interest, until September 10,
2018, when it paid one installment and September 25, 2018, when it made a

double installment payment, funded at least in part from proceeds of the
financing loan obtained in September 2018. The amended settlement
agreement is dated one day later, September 26, 2018. At that time the
balance was $256,784.14. Thereafter, the Company made two payments of

approximately $1000 each.
After entering into the amended settlement agreement, the Company
faced insurmountable hurdles. In the fall of 2018, the Company, through its
sale representative, was working to obtain contracts for significant new

projects from existing clients. One of the potential contracts would have been
for over $500,000 and, if it had been obtained, the Company would have been
18
able to survive. However, the sales representative left the Company, and
secured the new contracts for his own account. After the amended settlement

agreement, the Company learned that it had sold an application which did
not perform properly and which had been falsely claimed to have been
developed by an employee of the Company. In November 2018, the Company
entered into a workout process for the payment of its debts. As a result,

Honor Technology Solutions agreed to purchase the Company’s assets and
operate the business in exchange for establishing a $200,000 escrow for the
payment of the Company’s major creditors, including MegaForce. However,
because most of the Company’s major clients had already decided not to do

business with the Company, accounts were not generated and the escrow was
not established. All this indicates Beach tried to repay MegaForce, not
defraud MegaForce.
2. Elements two through five are not satisfied.

As stated above, to prevail on a § 523(a)(2)(A) claim, the creditor must
prove five elements. Here MegaForce has failed to prove the first, which is the
foundation for the exception. Elements two through five all relate to the
existence of the first—intent to deceive refers to a debtor’s motivation when

making the misrepresentation, false pretense, or actual fraud; justifiable
reliance refers to reliance on that conduct; and the damage element refers to
19
the harm resulting from the conduct. Because MegaForce has not proven the
first element, the analysis of these additional elements is superficial.

As suggested above, the Court finds no evidence that Beach intended to
deceive MegaForce. Because the exception from discharge is for a debt for
“money, property, services, or an extension, renewal, or refinancing of credit
to the extent obtained” by one of the enumerated wrongful acts, the intent to

deceive must exist at the time of the inception of debt, not just later when the
debt is not paid. Without more, failure to pay a debt is not evidence of intent
to deceive at the time the debt was incurred or credit extended.
The evidence does support a finding that MegaForce relied on whatever

information the Company provided, but that reliance was not justifiable.
Although the debt arose from an ordinary commercial transaction, MegaForce
did nothing to protect itself. MegaForce requested information about the
payment of 1 Global, but there is no evidence of other requests. MegaForce

relied on the Company to prepare a UCC-1, even though a creditor who has
been granted a security interest may unilaterally prepare and file a UCC-1.20
There is no evidence that MegaForce made any inquiry as to Beach’s personal
finances. As to the Company’s ability to pay, there is no evidence that

20 See K.S.A. § 84-9-502 (stating that a financing statement is sufficient if it
provides the name of the debtor, the name of the secured party, and indicates the
collateral covered). The signature of the debtor is not required.
20
MegaForce conducted a UCC search to determine if 1 Global was in fact the
holder of a perfected security interest in the Company’s accounts.

Finally, the Court finds no evidence that MegaForce was harmed by its
forbearance. Following the September 2017 settlement, its claim was reduced
from about $640,000 to $260,000. MegaForce filed suit a mere 58 days after
the amended settlement agreement. There is no evidence of harm caused by

this short delay.
B. MegaForce’s claim is not excepted from discharge under
§ 523(a)(6)
Section 523(a)(6) excepts from discharge a debt “for wilful and
malicious injury by the debtor to another entity or to the property of another
entity.” “[N]ondiscargeability takes a deliberate or intentional injury, not
merely a deliberate or intentional act that leads to injury.”21 Although the

exception “generally relates to torts not to contracts,”22 not even all tort
claims are included. The exception does not apply to situations where the act
is intentional, but the injury is unintended, such as a traffic accident
stemming from an intentional act.23 A knowing breach of contract also is not

21 Kawaauhau v. Geiger, 523 U.S. 57, 61 (1998).
22 4 Collier on Bankruptcy ¶ 523.12.
23 Kawaauhau, 523 U.S. at 62.
21
included.24
In the pretrial order, MegaForce contends the § 523(a)(6) exception

applies because:
[Beach] . . . failed to provide [MegaForce] with a
complete UCC-1 Financing Statement, failed to provide
information regarding the 1 Global security interest, .
. . failed to notify [MegaForce] that her indebtedness
was satisfied, . . . changing the name of Damascus Edge
to Mode3 without informing [MegaForce,] [and] by
withholding material facts from [MegaForce].
These allegations fail as a matter of law; they allege nothing but a breach of
express and/or implied contractual duty. There is no evidence to support a
finding that Beach intended to injure MegaForce, willfully and maliciously as
required by § 523(a)(6) or otherwise.
MegaForce’s claim against Beach is not excepted from discharge under
§ 523(a)(6).
III. Conclusion
For the foregoing reasons, MegaForce’s complaint to except its claim
against Beach from discharge under § 523(a)(2)(A) and (a)(6) is denied. In
addition to failure to prove the specifics of the elements of the exceptions to
discharge, two overarching failures in MegaForce’s case make this outcome

inevitable. First, this objection to discharge is filed in the personal
24 Id.
22
bankruptcy of Beach, who personally guaranteed payment of the Company’s
debt to MegaForce. Although discharge of the Company’s liability to

MegaForce is not in issue, the evidence focused exclusively upon the
Company and Beach’s actions as the Company’s representative. Second,
boiled down to its essentials, the evidence supports nothing but breach of
contract claims against the Company and Beach, as guarantor. Contract

claims do not come within the exceptions to discharge.
It is so ordered.
###

23

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10457840. Public record. Not legal advice.