Restructuring

Contributed by Doron P. Kenter.
It may only be Galentine’s Day as we post this, but given that V-Day is imminent, The Bachelor is in full-swing, and Fifty Shades of Gray just came out on the big screen, we decided to find some reasonable nexus between bankruptcy, romance, and love. In this year’s edition, we learn that all bets are off when former lovers end up in court.
In Morales v. Giddens (In re Giddens), the plaintiff, Marta Morales, brought a complaint against her ex-husband, Christopher Giddens, seeking a finding that Giddens’ various debts to her were nondischargeable pursuant to various subsections of section 523 of the Bankruptcy Code.
The bankruptcy court’s decision includes a full recitation of the sordid details of the dissolution of Giddens’ and Morales’ relationship. In brief, in connection with their divorce, Giddens agreed to turn over to Morales a series of shared items, including cars, flat screen televisions, furniture, and cash. After Giddens continued to fail to satisfy his obligations under the Judgment of Dissolution of Marriage, he met a loan officer named Agnieszka Materna. Materna and Giddens dated for some time, and Materna eventually agreed to invest $20,000 with Giddens for property that Giddens intended to “flip” for a profit. The $20,000 was never repaid.
Which brings us back to Marta Morales’s adversary proceeding in Giddens’ bankruptcy case. After Materna found out about Giddens’ bankruptcy case (he had, of course, neglected to schedule her as a creditor because, he alleged, she was “helping [him] out” by virtue of their romantic relationship at the time), she came forward to testify regarding information to which she had been privy in the course of her business and … personal dealings with Giddens. In particular, she was aware of efforts made by Giddens to hold property (including a car and real estate holdings) in family members’ names so that he could hide it from his ex-wife.
In response, Giddens’ counsel argued that the bankruptcy court should disregard Materna’s testimony because she was “both a spurned lover and a creditor.” The court rejected that argument, instead finding Materna’s testimony “very credible.” As the court noted:

First, her demeanor on the witness stand was forthright and unembellished. Second, she has no dog in this fight. Marta Morales seeks a finding that her debt and her debt alone is nondischargeable. If Materna is owed money, any claim she has will be unaffected by this lawsuit even if Morales prevails. Supporting Morales’ claim for nondischargeability actually makes it less likely that Materna will ever see any money from Giddens.

Moreover, the court noted that it had “never seen a witness as unbelievable as Christopher Giddens[],” who “seemed incapable of telling the truth.” Although this blogger can understand the rationale for attempting to argue that a spurned lover would not be entirely credible in testifying against her one-time beau (has anyone else been reading the ongoing reports about the winners and losers of Bachelor/Bachelorette past?), Morales v. Giddens reminds us that passion and resentment toward lovers can only go so far, and does not alone justify collateral attacks on a witness’s credibility. And for what it’s worth, I’m sure Andi Dorfman – my favorite former Assistant District Attorney – would agree.