Bartenwerfer v. Buckley (Feb 22, 2023) (Bankruptcy, Fraud Exception, Partnership)

Audio of Bartenwerfer v. Buckley (2023) Majority Opinion - Unanimous

Before David and Kate Bartenwerfer were even married, they bought a house together and decided to join the house-flipping bandwagon. So, they bought a home in San Francisco and renovated it - a project the couple claimed was mostly David's thing - Kate was largely uninvolved in that process. Soon, the Bartenwerfer's flipped the home, selling it to Kieran Buckley. But, what Buckley didn't know was that the home was riddled with significant defects that David knowingly withheld from him. Buckley sued and a jury awarded damages. But, the Bartenwerfer's, now married and deeply in debt, had become insolvent and filed for Chapter 7 bankruptcy.   

The bankruptcy court found that the debt could not be discharged in bankruptcy because it had been obtained fraudulently - finding that the couple had intended to deceive Buckley and, specifically, that David knew he was lying about the condition of the house during the sale - and even if Kate didn't know about the fraudulent scheme, she could still be held accountable for the debt because of their partnership relationship.

By the time this case found its way before the Court, the question was whether a bankruptcy debtor can be held liable for someone else's fraud, even if they didn't know anything about the fraud when it was committed.

 

Music by Epidemic Sound