Farley v. Kempff

Margaret’s husband, Bart, was general counsel for a Chicago-area real estate developer. He embezzled $1.2 million from his employer while the two were married. To evade detection, he attempted to replenish the stolen funds, borrowing $400,000 from his friend Farley on the ruse that the money would be used for a real-estate development. Bart gave Farley a third-priority lien on the couple’s home, forging Margaret’s signature on the note and mortgage. Bart’s employer discovered the embezzlement. Bart was convicted of felony theft. Margaret divorced him; the couple’s home went into foreclosure. Farley filed a cross-claim, seeking to enforce his lien, but the sale of the home did not yield nearly enough to cover even the first mortgage. Margaret filed for bankruptcy while the foreclosure was pending, which stayed Farley’s claim. Farley then filed an adversary complaint challenging Margaret’s eligibility for a Chapter 7 discharge. He claimed that she made a fraudulent transfer after filing her bankruptcy petition and made multiple false statements in her bankruptcy schedules. Margaret testified at trial that these were innocent mistakes. The bankruptcy judge credited her testimony and rejected each of Farley’s contentions. The district court and Seventh Circuit affirmed, describing Farley’s as “ill-considered” and noting that credibility determinations are almost never disturbed on appeal. View "Farley v. Kempff" on Justia Law