In re: Windsor Terrace Healthcare LLC, Debtor v. Hazel Alers and Alejandro Alers, Plaintiff-Appellants

Summary

The United States District Court for the Central District of California affirmed the Bankruptcy Court’s dismissal with prejudice of Hazel and Alejandro Alers’ adversary complaint against Windsor Terrace Healthcare, LLC. The court held that the exceptions to discharge under 11 U.S.C. § 523(a)(2) and (a)(6) apply only to individual debtors, not entity debtors such as a limited liability company, and that the asserted admissions and waivers did not support an independent claim. The court also affirmed denial as moot of the motion to substitute a proper party and rejected the appellants’ remaining arguments concerning amendment, discharge, and the underlying state-court litigation.

Holdings

1. The exceptions to discharge in 11 U.S.C. § 523(a)(2) and § 523(a)(6) apply only to individual debtors and do not apply to debts owed by Windsor Terrace, a limited liability company.
2. The third cause of action based on purported admissions and waivers was properly dismissed because it supplied no independent substantive claim and depended on the legally unavailable nondischargeability claims.
3. The Bankruptcy Court properly denied Plaintiffs' motion to substitute Alejandro Alers, Jr. as a party because substitution would not cure the defects requiring dismissal of the adversary complaint.
4. The Bankruptcy Court properly dismissed the adversary complaint with prejudice and without leave to amend because the proposed amendments could not cure the dispositive legal defects.
5. Plaintiffs' challenges to the state-court adjudication could not support reversal because the Rooker-Feldman doctrine prevents federal courts, including bankruptcy courts, from conducting de facto appellate review of state-court judgments.

Questions Presented

1. Whether 11 U.S.C. § 523(a)(2) and § 523(a)(6) apply to debts owed by an entity debtor, including a limited liability company.
2. Whether Plaintiffs' purported admissions-and-waivers claim could proceed when the underlying nondischargeability claims were legally unavailable.
3. Whether denial of Plaintiffs' motion to substitute Alejandro Alers, Jr. as a party was proper.
4. Whether Plaintiffs' arguments concerning § 727(a)(1), amendment of the complaint, state-law claims, and the state-court judgment warranted reversal.
5. Whether the Bankruptcy Court properly dismissed the adversary complaint with prejudice without leave to amend.

Disposition

affirmed