Case Summary:
The plaintiffs alleged that the debtors fraudulently induced them to invest in an auction business. The parties had become friends after a chance meeting at a rummage sale, and their shared interests made them believe that they could operate a business together. The court found that the debtors did not make any false representations to the plaintiffs. The debtors used the plaintiffs’ investment in their partnership to pay down the secured debts of the business, but the plaintiffs were informed of this plan. There was no fiduciary relationship between the parties and the debtors’ conduct did not amount to a willful and malicious injury. However, the court found in the plaintiffs’ favor on their unjust enrichment claim, as the proceeds from the sale of the business real estate were the direct result of the plaintiffs’ investment in the business. Under the circumstances, it would be inequitable for the debtors to retain that benefit without payment to the plaintiffs.

Statute/Rule References:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - Fraud
11 U.S.C. § 523(a)(4) -- Nondischargeability - Fraud in Fiduciary Capacity
11 U.S.C. §523(a)(6) -- Nondischargeability - Willful and Malicious Injury

Key Terms:
Fraud
Fraud - Fiduciary Capacity
Injust Enrichment
Willful and Malicious