Westlake Flooring Company, LLC v. Shafer

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
In re: 	:
: 	Case No. 24-52835
LEV V. SHAFER, 	: 	Chapter 7
: 	Judge Cobb
Debtor. 	:
:
Westlake Flooring Company, LLC, 	:
:
Plaintiff, 	:
:
v. 	: 	Adv. Pro. No. 24-2070
:
Lev V. Shafer, 	:
:
Defendant. 	:
OPINION AND ORDER DENYING
MOTION FOR PARTIAL SUMMARY JUDGMENT (DOC. 16)
I. Introduction
Westlake Flooring Company, LLC 	(“Westlake”) moves for summary judgment on its
nondischargeability claims against chapter 7 debtor Lev V. Shafer (“Mr. Shafer”) under
________________________________________________________________
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: March 27, 2026
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§ 523(a)(2) and § 523(a)(6) of title 11 of the United States Code (the “Bankruptcy Code”). The
nondischargeability of Mr. Shafer’s debt to Westlake under § 523(a)(2) turns on whether he made
a representation to Westlake with the intent of defrauding it, and the nondischargeability of his
debt under § 523(a)(6) turns on whether he willfully and maliciously injured Westlake or its
property. Because Mr. Shafer made no representation to Westlake; because the issue of his intent
is not amenable to adjudication on summary judgment; and because nothing in the record indicates
that he willfully and maliciously injured Westlake or its property, the Court denies Westlake’s
summary judgment motion (Doc. 16) (“Motion”).1
II. Jurisdiction and Constitutional Authority
The Court has jurisdiction to hear and determine this adversary proceeding under 28 U.S.C.
§§ 157 and 1334 and the general order of reference entered in this district. This is a core
proceeding. 28 U.S.C. § 157(b)(2)(I). The Court also has the constitutional authority to enter this
order. An order denying a motion for summary judgment is not a final order, Shurn v. Gilbert (In
re Gulf Coast Glass & Erection Co.), No. 10-33933-H2-11, 2012 WL 2994473, at *3 (Bankr. S.D.
Tex. July 20, 2012), and even if it were, bankruptcy courts have the constitutional authority to
enter final orders adjudicating the dischargeability of debts, Hart v. S. Heritage Bank (In re Hart),
564 Fed. App’x 773, 777 (6th Cir. 2014).
III. Analysis
A. 	Standards Governing Summary Judgment Motions
Under Rule 56(a) of the Federal Rules of Civil Procedure, made applicable here by Rule
7056 of the Federal Rules of Bankruptcy Procedure, a court “shall grant summary judgment if the
1 The complaint commencing this adversary proceeding (“Complaint”) (Doc. 1) also includes a claim under
§ 523(a)(4), but Westlake does not seek summary judgment on that claim.
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movant shows that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. Civ. R. 56(a). At the summary judgment stage, the Court must
construe the evidence and draw all reasonable inferences in favor of the non-movant. See Doe v.
Univ. of Ky., 111 F.4th 705, 715 (6th Cir. 2024).
B. 	Background
Westlake’s claims against Mr. Shafer stem from a floor-plan financing arrangement
between Westlake and Rempro Inc. d/b/a Shafer Auto Group (“Shafer Auto Group”). Compl. at 2.
In 2018, Westlake and Shafer, as president of Shafer Auto Group, executed a Promissory Note and
Loan and Security PNLSA (“PNLSA”),2 by which Westlake agreed to lend Shafer Auto Group up
to $400,000 to finance the purchase of vehicles for its inventory (the “Financed Inventory”). See
id. at 2. By the PNLSA, Shafer Auto Group granted Westlake a security interest in all of its assets,
including the Financed Inventory. See id. at 3. The PNLSA required Shafer Auto Group to use the
proceeds from the sale of the Financed Inventory to repay Westlake on account of Shafer Auto
Group’s obligations under the PNLSA. See id. Mr. Shafer personally guaranteed Shafer Auto
Group’s liabilities under the PNLSA. See id. In early 2024, Westlake learned that Shafer Auto
Group was selling Financed Inventory without paying the proceeds of the sales to Westlake, which
is known as selling vehicles “out of trust.” Id. at 4.
C. 	Intent Is a Sine Qua Non of the Provisions on Which Westlake Relies.
Westlake relies on both § 523(a)(2)(A) and § 523(a)(6) of the Bankruptcy Code in support
of the Motion. “[A] finding of nondischargeability under each of the subsections on which [the
plaintiff] relies requires the common element of scienter, whether it is an intent to defraud/deceive
under § 523(a)(2) . . . or the intentional injury to [another entity or] another’s property under
2 A copy of the PNLSA is attached as Exhibit 1 to the Complaint.
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§ 523(a)(6).” Fabian v. Goss (In re Goss), 605 B.R. 189, 195 (Bankr. S.D. Ohio 2019) (cleaned
up).
Section 523(a)(2)(A) of the Bankruptcy Code provides:
(a) A discharge under section 727 . . . of this title does not discharge an individual debtor
from any debt—
. . .
(2) for money, property, services, or an extension, renewal, or
refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than
a 	statement 	respecting 	the 	debtor’s 	or 	an 	insider’s 	financial
condition[.]
11 U.S.C. § 523(a)(2)(A).
Intent is the “key element for all three categories under § 523(a)(2)(A).” Brennan v. Hall
(In re Hall), No. 19-60278-6, 2022 WL 4451471, at *6 (Bankr. N.D.N.Y. Sept. 23, 2022).
Section 523(a)(6) of the Bankruptcy Code states:
(a) A discharge under section 727 . . . of this title does not discharge an individual debtor
from any debt—
. . .
(6) for willful and malicious injury by the debtor to another entity or
to the property of another entity
11 U.S.C. § 523(a)(6).
Like § 523(a)(2)(A), § 523(a)(6) requires a showing of intent. See Attorneys’ Title Guar.
Fund v. Wolf (In re Wolf), 519 B.R. 228, 249 (Bankr. N.D. Ill. 2014) (“[I]ntent is a required element
of section 523(a)(6)[.]”). So in order for a debt to be nondischargeable under § 523(a)(6), the
debtor must have intended to injure the creditor or its property. See Kawaauhau v. Geiger, 523
U.S. 57, 61 (1998) (holding that nondischargeability under § 523(a)(6) “takes a deliberate or
intentional injury, not merely a deliberate or intentional act that leads to injury”).
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D. Mr. Shafer’s Intent Cannot Be Assessed on Summary Judgment, and Nothing in the
Record Suggests that He Willfully and Maliciously Injured Westlake or Its Property.
Critically here, “matters regarding intent are rarely amenable to summary judgment.”
Bailey v. Bailey (In re Bailey), No. 23-8001, 2024 WL 1511984, at *16 (B.A.P. 6th Cir. Apr. 8,
2024); see also Farm Credit Mid-Am. v. Tingle (In re Tingle), 594 B.R. 396, 400 (Bankr. E.D. Ky.
2018) (“Evaluation of the evidence on this count raises intent and credibility concerns that are the
type best left for trial. Therefore, summary judgment is denied on Farm Credit’s claim for non-
dischargeability pursuant to § 523(a)(2)(A).”); Kloeber v. Montanari (In re Montanari), No. 12-
33189, 2015 WL 603874, at *9 (Bankr. E.D. Tenn. Feb. 12, 2015) (holding that “because the
record does not establish that [the debtor] had the requisite intent under § 523(a)(2)(A), summary
judgment is not appropriate on this claim”); Ibew Local 231 v. Pottebaum (In re Pottebaum), No.
ADV 11-09050, 2012 WL 4059905, at *3 (Bankr. N.D. Iowa Sept. 14, 2012) (“Debtor’s state of
mind or intent . . . is generally not amenable to summary judgment.”); PNC Bank v. Laskey (In re
Laskey), 2010 WL 3745655, at *2 (Bankr. N.D. Ohio Sept. 17, 2010) (“Determinations concerning
a debtor’s state of mind require a subjective assessment of the debtor’s intent which often can only
be made by the trier-of-fact after it has had the opportunity to assess the credibility and the
demeanor of witnesses who testify at trial during both direct and cross examination.”); Lukes v.
Stover (In re Stover), No. 11-13506-AJM-7, 2012 WL 4867407, at *6 (Bankr. S.D. Ind. Oct. 12,
2012) (“Like § 523(a)(2)(A), a showing of the requisite intent is required under § 523(a)(6) and
whether a defendant possesses such intent under this section is a subjective inquiry, generally not
suitable for determination by summary judgment.”).
That said, “[a]lthough intent is difficult to establish at summary judgment, it can be
appropriate to do so if the nonmoving party responds only with ‘conclusory allegations,
improbable inferences, and unsupported speculation.’” Reynolds v. I.R.S., No. CIV.A. 13-10788-
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NMG, 2014 WL 201610, at *3 (D. Mass. Jan. 15, 2014) (quoting Smith v. Stratus Comput. Inc.,
40 F.3d 11, 12 (1st Cir.1994)). The question, then, is whether Mr. Shafer has pointed to more than
conclusory allegations, improbable inferences, and unsupported speculation. The Court find that
he has. Citing his deposition transcript, a portion of which is attached as an exhibit to the Motion,
he contends that Shafer Auto Group’s failure to pay the proceeds of the sale of Financed Inventory
to Westlake “was the result of poor business management,” not intentional conduct, Resp. at 5
(citing Shafer Dep. at 84, 102 & 113). “Poor business judgment . . . is insufficient conduct to be
actionable under § 523(a)(2)(A),” Carroll & Sain v. Vernon (In re Vernon), 192 B.R. 165, 172
(Bankr. N.D. Ill. 1996), and also is insufficient under§ 523(a)(6). See Banc of Am. Strategic Sols.,
Inc. v. Bryan (In re Bryan), 364 B.R. 263, 267 (Bankr. S.D. Tex. 2007) (holding that the debtor’s
“actions reflect[ing] poor business judgment . . . does not amount to ‘wilful and malicious’ conduct
which would deny dischargeability of a debt under section 523(a)(6)”).
Westlake relies heavily on Kraus Anderson Capital, Inc. v. Bradley (In re Bradley), 507
B.R. 192 (B.A.P. 6th Cir. 2014) for the proposition that Mr. Shafer acted willfully and maliciously
when Shafer Auto Group failed to remit funds owed to Westlake. See Mem. in Supp. of Mot. at
9–12; Reply (Doc. 21) at 10–12. But the Bradley court repeatedly emphasized that the debtor had
lied to the creditor about selling vehicles out of trust. Bradley, 507 B.R. at 203–04 (“Debtor’s
action of selling the collateral and lying about it so that he did not have to turn over the proceeds
of the collateral shows that Debtor knew that his conduct would cause injury to Lender’s right to
receive the proceeds.”); id. at 205 (“In the stipulated facts and at trial, Debtor testified that he lied
to Lender regarding which pieces of equipment had been sold prior to entering into the Settlement
Agreement.”); id. at 206 (“He admitted that he continued to lie to Lender for over eighteen months
because he was trying to give himself more time to pay off the debt. . . . Additionally, he lied to
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Lender’s auditors and supplied them with false documents so that Lender would not know that its
collateral had been sold.”); id. at 208 (“Lender suffered a loss due to Debtor’s misrepresentations
and lies regarding the status of the collateral.”). Here, nothing in the record indicates that Mr.
Shafer lied to Westlake. To the contrary, the record shows that he was upfront with Westlake about
the fact that vehicles were being sold out of trust. See Shafer Dep. at 83:11–84:22. Bradley
therefore does not support Westlake’s argument that Mr. Shafer engaged in willful and malicious
conduct.
E. Mr. Shafer Did Not Represent to Westlake that Shafer Auto Group Was Holding the
Proceeds of the Sale of Vehicles in Trust.
The PNLSA, which defines Shafer Auto Group as the “Borrower” and Westlake as the
“Lender,” includes a representation that “any request for an Advance shall constitute an
affirmative representation by Borrower to Lender that Borrower is in full compliance with all
terms, conditions, representations, warranties and covenants made under this Note and the other
Loan Documents, in each case as of the date of such request.” PNLSA at 4 (emphasis added).
Westlake argues that, by this provision, Mr. Shafer misrepresented to Westlake that Shaffer Auto
Group was complying with the PNLSA’s requirement that the proceeds of vehicle sales be held in
trust. Mem. in Supp. of Mot. at 7.
But the fact of the matter is that there remains a material issue of fact as to whether Mr.
Shafer made any such representation to Westlake. The PNLSA is an agreement between Westlake
and Shafer Auto Group; Mr. Shafer signed the PNLSA only in his capacity as the president of
Shafer Auto Group, not individually; so, the PNLSA is not a candidate for a source of
representations by Mr. Shafer himself. The only document that Mr. Shafer signed in his individual
capacity is the guaranty that is attached as Exhibit C to the Complaint (“Guaranty”). And by the
Guaranty, Mr. Shafer did not make the representations set forth in the PNLSA. The Guaranty
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provides that Mr. Shafer “hereby voluntarily, unconditionally, and absolutely guarantees: (i) the
full and prompt payment when due, whether by acceleration or otherwise, and at all times hereafter,
of all Liabilities.”
The Guaranty defines “Liabilities” to mean
any and all Advances, debts, financial obligations, fees, charges,
expenses, attorneys’ fees, and costs of collection owing, arising,
due, or payable from Borrower to Lender or any of its Affiliates, of
any kind or nature, present or future, under any instrument,
guaranty, or other document, whether arising under the Note or any
other Loan Document, whether directly or indirectly, absolute or
contingent, primary or secondary, due or to become due, now
existing or hereafter arising, and however acquired.
The terms Liabilities does not include representations. The Guaranty also provides that Mr.
Shafer guarantees “(ii) the full and prompt performance of all the terms, covenants, conditions,
and agreements related to the Liabilities.” Guaranty at 1. Notably missing from that litany is the
term “representations.” Cf. Reybold Venture Grp. XVI LLC v. Cresswell, 115 A.3d 1215 (Del.
2015) (“[A] representation is not the same as a covenant.”). There is nothing in the summary
judgment record supporting the contention that Mr. Shafer represented to Westlake that Shafer
Auto Group was holding the proceeds of the sale of vehicles in trust.
IV. Conclusion
For the reasons set forth above, the Motion is DENIED.
IT IS SO ORDERED.
Copies to:
Morgan K. Napier and Jason William Palmer, Attorneys for Plaintiff
Michael A. Cox and Allison Harrison, Attorneys for Defendant
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