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                                                                      [PUBLISH]



            IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT
                      ________________________

                            No. 19-11699
                      ________________________

                  D.C. Docket No. 1:18-cv-00027-JB-N
                    Bkcy. No. 17-bkc-01568-HAC-7



In Re: JERRY DEWAYNE GADDY,

                                                 Debtor.
_____________________________________________________________

SE PROPERTY HOLDINGS, LLC,

                                                          Plaintiff - Appellant,

                                    versus

JERRY DEWAYNE GADDY,


                                                        Defendant - Appellee.

                      ________________________

               Appeal from the United States District Court
                  for the Southern District of Alabama
                      ________________________

                            (September 29, 2020)
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Before WILLIAM PRYOR, Chief Judge, GRANT, Circuit Judge, and ANTOON,*
District Judge.

ANTOON, District Judge:

       A Chapter 7 bankruptcy is intended to give the debtor a fresh start, free from

debt. The process usually entails liquidating the debtor’s assets and applying the

proceeds toward satisfaction of creditors’ claims. If all goes well for the debtor,

the court will, in the end, discharge the outstanding debts. But the Bankruptcy

Code, in 11 U.S.C. § 523(a), exempts certain kinds of debts from discharge.

       This is an appeal from an order rejecting a claim that a debt was not exempt

from discharge under § 523(a). SE Property Holdings, LLC (“SEPH”) brought an

adversary proceeding in Jerry Gaddy’s Chapter 7 bankruptcy. SEPH requested

that the court declare Gaddy’s debt to SEPH exempt from discharge under 11

U.S.C. § 523(a)(2)(A) and (a)(6) because Gaddy fraudulently conveyed his

property, thwarting SEPH’s efforts to collect the debt. But the bankruptcy court

determined that Gaddy had not fraudulently obtained money or property as

required for exemption from discharge under § 523(a)(2)(A) and that Gaddy had

not injured SEPH within the meaning of § 523(a)(6). The court thus rejected

SEPH’s claims, granted Gaddy’s motion for judgment on the pleadings, and

dismissed the adversary proceeding. SEPH now appeals the district court’s


       *
         Honorable John Antoon II, United States District Judge for the Middle District of
Florida, sitting by designation.

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affirmance of the bankruptcy court’s dismissal. We affirm.

                                   I. BACKGROUND

      Gaddy’s debt to SEPH arose from two business loans made in 2006 by

SEPH’s predecessor-in-interest, Vision Bank, to Water’s Edge LLC. The loans

were made to fund a real estate development project in Baldwin County, Alabama.

Gaddy, an investor in the project, personally guaranteed repayment of the entire

first loan—$10 million—and $84,392.00 of the second loan. In 2008, he

reaffirmed those guaranties and increased his obligation on the first guaranty to

$12.5 million. About a year after the reaffirmances, several of the more than thirty

guarantors began missing required capital contributions, and it became clear that

the development project was in trouble. The missed payments prompted the bank

to send a letter to the guarantors warning of potential default.

      In October 2009, less than two weeks after the bank’s warning, Gaddy

conveyed parcels of real property to a newly formed LLC, of which the initial

members were Gaddy, his wife, and his daughter; Gaddy later conveyed his own

membership interest in the LLC to his wife and daughter. These were part of a

series of conveyances of personal assets—including real property, cash, and

business interests—that Gaddy made over the next five years to family members

and entities that he controlled.

      Water’s Edge defaulted on both loans in 2010, and the bank demanded


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payment from Gaddy as a guarantor. Four months later, the bank sued Water’s

Edge, Gaddy, and other guarantors in an Alabama state court. Meanwhile, Gaddy

continued to transfer his assets. In December 2014, SEPH, by then having been

substituted for Vision Bank due to a merger, prevailed in the Water’s Edge

litigation. The state court entered a judgment in favor of SEPH and against Gaddy

for more than $9.1 million. Gaddy made two more transfers of assets that same

month.

      Eventually, SEPH sued Gaddy and his wife in federal court to set aside

Gaddy’s transfers of property under the Alabama Uniform Fraudulent Transfer Act

(“AUFTA”). After SEPH amended its complaint to add Gaddy’s daughter and

several business entities as defendants in the AUFTA case, Gaddy filed for

bankruptcy. This prompted SEPH to initiate the adversary proceeding in the

bankruptcy court objecting to the discharge of its debt. In its complaint, SEPH

described Gaddy’s allegedly fraudulent transfers and asserted they had damaged

SEPH by “depriv[ing SEPH] of assets of Jerry Gaddy that could be used to satisfy

the judgment entered in the Water’s Edge Litigation.”

      SEPH’s complaint requested that the bankruptcy court declare its Water’s

Edge judgment against Gaddy exempt from discharge under 11 U.S.C.

§ 523(a)(2)(A) and (a)(6). In relevant part, these provisions state:

      (a) A discharge under section 727 . . . of this title does not discharge
      an individual debtor from any debt—
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              ....
              (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 . . . ; [or]
              ....
              (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)(2)(A), (a)(6). SEPH urged the court to find that the debt was

exempt from discharge under § 523(a)(2)(A) because Gaddy had fraudulently

transferred assets to “hinder SEPH’s collection.” And SEPH claimed that the debt

was exempt under § 523(a)(6) because through his transfers of assets, Gaddy had

“willfully and maliciously injured” SEPH or its property.

       A month after answering SEPH’s complaint, Gaddy filed a motion for

judgment on the pleadings.1 Gaddy argued that SEPH’s complaint failed to state a

claim under either § 523(a)(2)(A) or § 523(a)(6) because he did not defraud SEPH

in guarantying the loans and because his conveyances did not injure SEPH or its

property. In its response to Gaddy’s motion, SEPH argued not only that the

Water’s Edge judgment debt was exempt from discharge but also that “any

fraudulent transfer judgment SEPH obtains against Gaddy would be” exempt if, as

SEPH claims, those transfers were made “with a willful and malicious intent.”


1
 Federal Rule of Civil Procedure 12(c) provides: “After the pleadings are closed—but early
enough not to delay trial—a party may move for judgment on the pleadings.” Federal Rule of
Bankruptcy Procedure 7012(b) incorporates Rule 12(c) in adversary proceedings.
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And during oral argument on Gaddy’s motion, SEPH requested leave to amend its

complaint to add allegations that Gaddy’s conveyances resulted in a separate debt

to SEPH that was not exempt from discharge.

      The bankruptcy court granted Gaddy’s motion for judgment on the pleadings

and dismissed the adversary proceeding. The court found that SEPH’s

§ 523(a)(2)(A) claim failed because SEPH did “not contend that the underlying

debt from the guaranties was obtained by fraud or was anything other than a

standard contract debt.” And the court similarly rejected SEPH’s § 523(a)(6)

argument because “[t]he underlying debt is the result of personal guaranties, not

any willful and malicious injury by Gaddy.” Finally, the court found no basis for

amendment of SEPH’s complaint to add a claim that a new, separate, fraudulent

transfer debt under the AUFTA was exempt from discharge, noting that SEPH had

“not provided any Alabama law that [a] debtor/transferor who fraudulently

transfers property is liable to a creditor for the value of the transferred property.”

      SEPH appealed the bankruptcy court’s decision, and the district court

affirmed, “agree[ing] with [the bankruptcy judge] for all the reasons articulated in

his order.” It is from that decision that SEPH now appeals.

                          II. STANDARD OF REVIEW

      “Judgment on the pleadings is appropriate when material facts are not in

dispute and judgment can be rendered by looking at the substance of the pleadings


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and any judicially noticed facts.” Bankers Ins. Co. v. Fla. Residential Prop. &

Cas. Joint Underwriting Ass’n, 

, 1295 (11th Cir. 1998). “We review

legal determinations made by either the bankruptcy court or the district court de

novo.” Crumpton v. Stephens (In re Northlake Foods, Inc.), 

, 1255

(11th Cir. 2013). We also “review the legal significance accorded to the facts de

novo.”

a ruling on a motion for judgment on the pleadings,

“we must accept all facts in the complaint as true and view those facts in the light

most favorable to the plaintiff.” Sun Life Assurance Co. of Canada v. Imperial

Premium Fin., LLC, 

, 1207 (11th Cir. 2018). While the Bankruptcy

Code protects creditors harmed by a debtor’s “egregious conduct,” statutory

exemptions to discharge of debts are construed strictly against the creditor and

liberally in favor of the honest debtor. St. Laurent v. Ambrose (In re St. Laurent),

, 680 (11th Cir. 1993) (quoting In re Britton, 

, 606 (9th

Cir. 1991)).

      Generally, we review the denial of a motion for leave to amend a complaint

for abuse of discretion. Fla. Evergreen Foliage v. E.I. DuPont De Nemours & Co.,

, 1040 (11th Cir. 2006). But where the lower court denies leave to

amend based on futility of the proposed amendment, we review that decision de

novo because it is a “conclu[sion] that as a matter of law an amended complaint

would necessarily fail.”

omitted) (quoting Freeman


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v. First Union Nat’l, 

, 1234 (11th Cir. 2003)).

                                 III. DISCUSSION

      On appeal, SEPH challenges the bankruptcy court’s rulings that SEPH failed

to state a claim that the Water’s Edge judgment debt is exempt from discharge

under § 523(a)(2)(A) or (a)(6). It also challenges the court’s ruling that the

AUFTA does not support a claim against Gaddy based on a “new” debt created by

the fraudulent transfers themselves. We address these contentions in turn.

    A. The Water’s Edge Debt Is Not Exempt From Discharge Under 11 U.S.C.
                                 § 523(a)(2)(A)

      Section 523(a)(2)(A) exempts from a debtor’s discharge “any debt . . . for

money, property, services, or an extension, renewal, or refinancing of credit, to the

extent obtained by . . . false pretenses, a false representation, or actual fraud.” 11

U.S.C. § 523(a)(2)(A) (emphasis added). That is, “it prevents discharge of ‘any

debt’ respecting ‘money, property, services, or . . . credit’ that the debtor has

fraudulently obtained.” Cohen v. de la Cruz, 

, 218 (1998) (alteration

in original). The bankruptcy court and the district court both concluded that

SEPH’s § 523(a)(2)(A) claim failed because the loans that Gaddy guarantied were

not “obtained by . . . false pretenses, a false representation, or actual fraud.” They

were correct, and we reject SEPH’s efforts to expand case law to encompass the

circumstances presented by this case.

      SEPH does not—and cannot—argue that Gaddy or the entity whose debt he
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guarantied fraudulently obtained money or property from SEPH’s predecessor. A

state court awarded SEPH a judgment on its ordinary breach of contract claim, and

that judgment makes no findings of fraud. The only fraud that SEPH alleges—

Gaddy’s conveyances of real and personal property—happened years after Gaddy

incurred the debt by signing the guaranties. The money that the bank loaned is

obviously not traceable to those later conveyances.

      SEPH nonetheless asserts that Gaddy’s post-guaranty transfers of assets

render the judgment debt exempt from discharge because Gaddy made those

transfers to hinder its collection. In doing so, SEPH relies largely on a strained

interpretation of, and dicta in, the Supreme Court’s 2016 decision in Husky

International Electronics, Inc. v. Ritz, 

(2016). But Husky does not

advance SEPH’s position.

      In Husky, the Supreme Court reviewed the ruling of the Court of Appeals for

the Fifth Circuit that the “obtained by . . . actual fraud” language in § 523(a)(2)(A)

requires a fraud that “involves a false representation to a 

, something not typically present in the fraudulent transfer context. Reversing

the Fifth Circuit, the Supreme Court held that “[t]he term ‘actual fraud’ in

§ 523(a)(2)(A) encompasses forms of fraud, like fraudulent conveyance schemes,

that can be effected without a false representation.”

In doing so, the

Court reached the same conclusion the Seventh Circuit had reached sixteen years


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earlier in McClellan v. Cantrell, 

(7th Cir. 2000), the other case upon

which SEPH heavily relies.

      But the facts of Husky and McClellan are distinguishable, and their holdings

are narrow. In both cases, someone other than the bankruptcy debtor initially owed

a debt for which the bankruptcy debtor later became at least partially liable. In

Husky, a corporation owed an ordinary debt to 

. A

corporate insider then became potentially personally liable to Husky under a Texas

veil-piercing statute when he “drained [the corporation] of assets it could have

used to pay its debts to creditors like Husky.”

the

bankruptcy debtor’s brother owed money on a 

. The brother

fraudulently transferred the creditor’s security to his more-than-complicit sister,

the debtor, who then became potentially liable to McClellan based on her role in

the fraud. See

Because of the sister’s fraud, depriving McClellan

of his security interest, the sister’s debt was exempt from discharge in her

bankruptcy.

      Neither the Supreme Court nor the Seventh Circuit eliminated the

requirement that for a debt to be exempt from discharge under § 523(a)(2)(A), the

money or property giving rise to the debt must have been “obtained by” fraud,

actual or otherwise. Instead, these Courts merely recognized the possibility that

fraudulent schemes lacking a misrepresentation—including fraudulent transfers of


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assets to avoid creditors—can satisfy the “obtained by” requirement in some

circumstances. 

(noting that “fraudulent conveyances are not

wholly incompatible with the ‘obtained by’ requirement” of § 523(a)(2)(A), though

“[s]uch circumstances may be rare”); 

(noting that

although the debtor did not obtain the money by a fraud against her brother, she

“would not have obtained a $160,000 windfall” but for fraud).2

       SEPH seizes on this dictum and on the Supreme Court’s comment that if a

recipient of a fraudulent transfer “later files for bankruptcy, any debts ‘traceable to’

the fraudulent conveyance will be nondischarg[e]able under § 523(a)(2)(A).”

(citation omitted). But these are not the facts of the case

before us, and nothing in Husky suggests that a debtor’s fraudulent transfer of

assets renders an existing breach of contract judgment debt exempt from discharge

under § 523(a)(2)(A). In both Husky and McClellan, fraudulent acts created or

potentially created the very debts at issue. See 

(describing debtor’s “drain[ing]” of corporate assets); 

(“The debt that McClellan is seeking to collect from [the bankruptcy debtor] (and

prevent her from discharging) arises by operation of law from her fraud. That debt

arose not when her brother borrowed money from McClellan but when she



2
 As to whether the “obtained by” requirement was satisfied under the facts of Husky, the
Supreme Court remanded to the circuit 

n.3.
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prevented McClellan from collecting from the brother the money the brother owed

him.” (emphasis in original)). Here, SEPH’s assertions fail not because Gaddy did

not engage in “actual fraud” by conveying his assets 3 but because the Water’s

Edge loans were not “obtained by” fraud as required for exemption under

§ 523(a)(2)(A).

         Again, the Water’s Edge debt existed long before Gaddy began transferring

his assets, and that debt is an ordinary contract debt that did not arise from fraud of

any kind. SEPH presents no binding authority that supports its assertion that a

debtor’s fraudulent conveyance of assets in an attempt to avoid collection of a

preexisting debt renders that preexisting debt exempt from discharge under

§ 523(a)(2)(A).

    B.     The Water’s Edge Debt Is Not Exempt From Discharge Under 11 U.S.C.
                                     § 523(a)(6)

         To qualify as exempt from discharge under § 523(a)(6), a debt must be a

“debt . . . 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). SEPH claims that the Water’s

Edge debt is exempt under this provision because SEPH was injured by Gaddy’s

fraudulent conveyances of his personal assets—conveyances that SEPH asserts



3
  We make no findings on whether Gaddy’s transfers were indeed fraudulent. We accept the
allegations of SEPH’s complaint as true in reviewing a ruling on a motion for judgment on the
pleadings. See Sun Life 

.
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Gaddy made willfully and maliciously. We are not persuaded; SEPH has not

alleged cognizable “injury” under § 523(a)(6).

      “A debtor is responsible for a ‘willful’ injury when he or she commits an

intentional act the purpose of which is to cause injury or which is substantially

certain to cause injury.” Kane v. Stewart Tilghman Fox & Bianchi, P.A. (In re

Kane), 

, 1293 (11th Cir. 2014) (quoting Maxfield v. Jennings (In re

Jennings), 

, 1334 (11th Cir. 2012)). And “‘[m]alicious’ means

wrongful and without just cause or excessive even in the absence of personal

hatred, spite or ill-will.”

(quoting 

).

      In focusing on the nature of Gaddy’s conduct, SEPH skips an important step

in its § 523(a)(6) analysis. To be exempted from discharge under this provision, an

obligation must be a “debt . . . for willful and malicious injury.” 11 U.S.C.

§ 523(a)(6) (emphasis added). As the Supreme Court has explained, “‘debt for’ is

used throughout [§ 523(a)] to mean ‘debt as a result of,’ ‘debt with respect to,’

‘debt by reason of,’ and the like.” 

(citing American

Heritage Dictionary 709 (3d ed. 1992) and Black’s Law Dictionary 644 (6th ed.

1990)). In this case, the Water’s Edge debt is a contract debt that was incurred

long before the challenged conveyances. SEPH’s complaint in the adversary

proceeding did not allege that the Water’s Edge debt was the “result of,” “with

respect to,” or “by reason of” Gaddy’s tortious conduct. The only misconduct


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alleged by SEPH pertains to Gaddy’s fraudulent conveyances of assets. But those

conveyances occurred years after Gaddy became indebted to SEPH for the Water’s

Edge guaranties, and the conveyances are not traceable to that debt, which arose

from an ordinary breach of contract.

      SEPH argues that it should prevail under Maxfield, in which this Court

affirmed a ruling that a fraudulent transfer judgment was exempt from discharge

under § 523(a)(6). But as the bankruptcy court correctly concluded, Maxfield is

distinguishable because the debt at issue there—the debtor’s joint and several

liability for part of her ex-husband’s preexisting debt—arose from the debtor’s

participation as a conspirator in the fraudulent transfer of property; it thus was “for

willful and malicious injury” and qualified for exemption under § 523(a)(6).

–34. In contrast, the Water’s Edge debt arose from

breach of guaranty, not from a “willful and malicious injury.”

      We are not persuaded by SEPH’s argument that actions taken by a debtor

after a debt is incurred, even if in an effort to thwart a creditor’s collection efforts

by fraudulently conveying assets, create a separate injury for the purposes of

§ 523(a)(6). The Water’s Edge debt—incurred long before Gaddy’s conveyances

of assets—was not “for willful and malicious injury” to SEPH or its property, and

SEPH’s § 523(a)(6) claim that its Water’s Edge judgment is exempt from

discharge fails as a matter of law.


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   C. The Bankruptcy Court Correctly Denied Leave to Amend Because of the
          Futility of SEPH’s Proposed Amendment Under the AUFTA

      We now turn to the issue that SEPH belatedly raised in the bankruptcy court.

SEPH contends that Gaddy’s fraudulent transfers of assets gave rise to a new debt

to SEPH under the AUFTA—separate from the Water’s Edge judgment—that

qualifies as exempt from discharge under both § 523(a)(2)(A) and § 523(a)(6).

Although SEPH did not rely on this theory in its adversary complaint, during oral

argument in the bankruptcy court SEPH requested leave to amend to specifically

add it as a basis for relief. Under this alternative approach, SEPH argues that the

transfers resulted in Gaddy becoming indebted to SEPH for an amount equal to the

value of the assets conveyed. These debts, SEPH maintains, arise from “actual

fraud” under § 523(a)(2)(A) and were “for willful and malicious injury” within the

meaning of § 523(a)(6). The bankruptcy court rejected the proposed amendment

on the view that Alabama law would not permit recovery against a fraudulent

transferor. We also reject the proposed amendment, though for a different reason.

We conclude that Alabama law would not permit the double recovery SEPH seeks.

      There can be no issue as to dischargeability unless a debt or potential debt

exists. Although there is no dispute that Gaddy owes the Water’s Edge debt—

which, as discussed earlier, did not arise from fraud or willful and malicious

injury—SEPH has not established a basis for a “fraudulent transfer debt” owed or

potentially owed by Gaddy to SEPH.
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      The AUFTA specifies the remedies available to creditors when a debtor

fraudulently transfers property:

      (a) In an action for relief against a transfer under this chapter, the
      remedies available to creditors . . . include:

             (1) Avoidance of the transfer to the extent necessary to satisfy
             the creditor’s claim;

             (2) An attachment or other provisional remedy against the asset
             transferred or other property of the transferee in accordance
             with the procedure prescribed by any applicable provision of
             any other statute or the Alabama Rules of Civil Procedure;

             (3) Subject to applicable principles of equity and in accordance
             with applicable rules of civil procedure,

                  a. An injunction against further disposition by the debtor or
                  a transferee, or both, of the asset transferred or of other
                  property;

                  b. Appointment of a receiver to take charge of the asset
                  transferred or of other property of the transferee; or

                  c. Any other relief the circumstances may require.

Ala. Code § 8-9A-7(a). SEPH relies on the “[a]ny other relief the circumstances

may require” language of § 8-9A-7(a)(3)(c) to argue that it is entitled to a money

judgment against Gaddy in the amount of the fraudulent transfers, and it relies on

11 U.S.C. § 523(a)(2)(A) and § 523(a)(6) to argue that this judgment is exempt

from discharge.

      Generally, Alabama permits only one recovery for a given harm. Braswell

v. ConAgra, Inc., 

, 1173–74 (11th Cir. 1991); see also Steger v.
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Everett Bus Sales, 

, 609 (Ala. 1986). Yet SEPH seeks a new

judgment for the same debt. It already has a judgment against Gaddy for the

unpaid Water’s Edge guaranties. It now seeks a second judgment entitling it to the

same damages. SEPH asserted below no independent, freestanding harm from the

fraudulent transfers themselves; it complained only that the transfers kept it from

collecting the underlying debt.

      Attempting to support its double-recovery theory, SEPH directs our attention

to Johns v. A.T. Stephens Enterprises, Inc., 

(Ala. 2001). There, the

Supreme Court of Alabama affirmed a jury’s award of compensatory damages

under § 8-9A-7(a)(3)(c) on a conspiracy-to-defraud claim.

But

Johns is not helpful to SEPH’s argument. That case involved the plaintiff’s lease

of trucks to a corporate defendant. The jury awarded compensatory damages on

plaintiff’s conspiracy claim against that defendant and conspiring codefendants for

the plaintiff’s lost profits—a harm separate from the underlying debt. Id.; see also

A.T. Stephens Enters., Inc. v. Johns, 

(Ala. 2000) (prior appeal

providing background facts). Here, by contrast, SEPH asserts no harm from the

fraudulent transfers other than its inability to collect the underlying debt. Johns

offers no support for that theory of recovery because it does not change the

principle that “Alabama law bars double recovery of compensatory damages for a

fraud claim and a contract claim based on a single transaction.” Braswell, 936


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.

      SEPH now also asserts that it could potentially recover punitive damages,

attorney’s fees, lost profits, or consequential damages on its fraudulent transfer

claims against Gaddy. However, not only are these claims vague, but also SEPH

did not raise these points before the bankruptcy court. We therefore decline to

address them. See JWL Entm’t Grp., Inc. v. Solby+Westbrae Partners (In re

Fisher Island Invs., Inc.), 

, 1193–94 (11th Cir. 2015).

      For these reasons, we conclude that the bankruptcy court correctly

determined that SEPH was not entitled to leave to amend its adversary complaint

because such amendment would have been futile.

                                 IV. CONCLUSION

      Accordingly, we affirm the judgment of the district court.




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