Cadwell v. Joelson (In Re Joelson)

F I L E D
United States Court of Appeals
Tenth Circuit

October 24, 2005
PUBLISH
Clerk of Court
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

In re:

JEANNE LAVONNE JOELSON,

Debtor.
_______________________________

STANLEY CADWELL, No. 04-8052

Plaintiff - Appellee,
v.

JEANNE LAVONNE JOELSON,

Defendant - Appellant.

Appeal from the United States Bankruptcy Appellate Panel
of the Tenth Circuit
(No. WY-03-020) *

Ken McCartney, Cheyenne, Wyoming, for Defendant-Appellant.

Lawrence E. Middaugh, Casper, Wyoming, for Plaintiff-Appellee.

*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f) and 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.
Before EBEL, O’BRIEN and TYMKOVICH, Circuit Judges.

EBEL, Circuit Judge.

This appeal requires us to determine whether a state court judgment against

Defendant-Appellant Jeanne Joelson (“Debtor” or “Joelson”) based on Joelson’s

nonpayment of a loan from Plaintiff-Appellee Stanley Cadwell (“Creditor” or

“Cadwell”) should not be discharged in Joelson’s Chapter 7 bankruptcy because

Joelson made fraudulent misrepresentations to Cadwell in order to obtain the

loan. Relying on 11 U.S.C. § 523(a)(2)(A), the United States Bankruptcy Court

for the District of Wyoming (“bankruptcy court”) and the Bankruptcy Appellate

Panel of the Tenth Circuit (“BAP”) found that the state court judgment should not

be discharged. In this appeal, Joelson argues that the BAP erred because the

representations that she made to Cadwell were statements “respecting [her]

financial condition” as defined by § 523(a)(2)(A), and debts incurred based on

such statements are dischargeable under § 523(a)(2)(A) notwithstanding that

provision’s general prohibition on discharging debts obtained by “false pretenses,

a false representation, or actual fraud.” We affirm the judgment of the BAP.

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 BACKGROUND

I. The Underlying Events

Joelson has never contested the bankruptcy court’s factual findings.

Moreover, Joelson’s appendix contains only the bankruptcy court’s docket sheet,

order and judgment, and the BAP’s docket sheet and opinion. Thus we may not

disturb the bankruptcy court’s factual findings in this case, and we draw the

following description of the events underlying this suit from those findings. See

Jenkins v. Hodes (In re Hodes), 287 B.R. 561, 570 (D. Kan. 2002) (“[B]ecause

the parties do not specifically contest the bankruptcy court’s findings of fact, the

court will not disturb this ruling on appeal.”), aff’d, 402 F.3d 1005 (10th Cir.

2005); cf. McEwen v. City of Norman, 962 F.2d 1539, 1550 (10th Cir. 1991)

(noting that we are unable to review an appellant’s factual contention when the

evidentiary matters relied on by a lower court are not included in the record on

appeal).

Cadwell is a single, retired man who lives in Casper, Wyoming. Cadwell

met Joelson at a café in Casper where she was working as a waitress. Around

March 1996, Joelson told Cadwell that she needed to travel to Scottsdale, Arizona

to check on a house that she owned and pick up her mother.

Cadwell agreed to drive Joelson from Casper to Scottsdale. While Cadwell

and Joelson were in Scottsdale, someone gave Joelson money. Joelson

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represented to Cadwell that the money was rent for the house that she owned in

Scottsdale.

After Cadwell and Joelson returned to Casper, Joelson informed Cadwell

that she needed a loan of over $50,000 to save her Scottsdale home from

foreclosure. Joelson stated that her brother, Larry Oltman, would later loan her

these funds, and that as soon as Oltman did so, she would repay Cadwell. Joelson

promised that she would provide Cadwell with collateral to secure the loan and

represented that she owned residences in both Casper and Glendo, Wyoming; a

motel in Glendo; and a number of antique vehicles stored in Glendo. When

Cadwell asked to see the properties, Joelson took Cadwell to Glendo and showed

Cadwell the inside of a house, the outside of another house and a motel, and a

storage facility in which the antique cars were allegedly housed. Joelson also

provided Cadwell with a list of the antique cars that she allegedly owned.

After he viewed the properties, Cadwell mortgaged his home and borrowed

over $50,000. Joelson gave Cadwell a promissory note, 1 and the two traveled to

1
The promissory note is not part of the record, and there is no indication in
the opinions of the bankruptcy court or the BAP as to the note’s contents. Thus,
it is not clear whether all of the properties and the antique cars that Joelson said
she owned were intended as collateral. However, we need not determine what
Joelson listed as collateral in the note in order to resolve this appeal. This is
because we only need consider the fact that Joelson made representations as to her
ownership of various properties and vehicles in order to obtain a loan from
Cadwell.

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Arizona, where they met with a lender’s representatives regarding the foreclosure.

In the course of these dealings, Cadwell learned that the Arizona property was

titled in the name of “Joelene M. Joelson.” However, Cadwell knew Debtor as

“Jeanne Joelson,” not “Joelene M. Joelson.” After Debtor told Cadwell that she

and “Joelene M. Joelson” were the same person, Cadwell advanced approximately

$54,000 to Joelson to pay off the Deed of Trust.

Cadwell’s attempts to collect the loan have proved fruitless, as Joelson has

not repaid the loan or forfeited collateral. Joelson has rebuffed Cadwell’s claims

by asserting that she never had an interest in the Scottsdale property and that the

funds that Cadwell gave to her in connection with that property were a gift.

II. The Proceedings Below

Before bringing this suit, Cadwell brought suit in Wyoming state court on

the promissory note that Joelson had given to him. The state court entered

judgment (“the state court judgment”) against Joelson. After Joelson filed for

Chapter 7 bankruptcy, Cadwell filed an adversary proceeding in the bankruptcy

court seeking to bar all of Joelson’s debts—or, in the alternative, just the state

court judgment—from being discharged.

Joelson failed to appear before the bankruptcy court. Nonetheless,

Joelson’s counsel presented Joelson’s case to the court, and both parties presented

closing arguments. The bankruptcy court refused to deny the discharge of all

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claims against Joelson, but the court relied on § 523(a)(2)(A) to hold that

Cadwell’s claim was not dischargeable.

In making this ruling, the bankruptcy court was unable to conclude whether

Jolene Joelson, Joelene Joelson, and Jeanne Joelson are three names for Debtor,

or two (or three) separate people. However, the court did determine that

Joelson’s assertion that she owned “residences in both Casper and Glendo, a

motel in Glendo, and a number of antique vehicles stored in Glendo” was false.

On appeal, the BAP affirmed the bankruptcy court’s decision. The BAP

ruled that some of the misrepresentations that Joelson made to Cadwell were not

statements “respecting [her] financial condition.” As a result, the BAP ruled that

under § 523(a)(2)(A) those misrepresentations, which induced Cadwell to loan

money to Joelson, prevented the state court judgment from being discharged.

This appeal from Joelson followed.

DISCUSSION

I. Overview

We have jurisdiction over this appeal pursuant to 28 U.S.C. § 158. See 28

U.S.C. § 158(d). “When reviewing BAP decisions, we independently review the

bankruptcy court decision.” In re Myers, 362 F.3d 667, 670 (10th Cir. 2004). We

review the bankruptcy court’s legal determinations de novo. See Panalis v.

Moore (In re Moore), 357 F.3d 1125, 1127 (10th Cir. 2004).

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 In general, after an individual debtor files for Chapter 7 bankruptcy, a court

discharges all of the debtor’s pre-existing obligations. See 11 U.S.C. § 727.

However, some debts incurred as a result of the debtor’s fraudulent actions or

statements cannot be discharged in bankruptcy. See id. § 523(a)(2). The

Bankruptcy Code sets out the types of fraudulent actions or statements that render

debts incurred as a result of those statements either non-dischargeable or

dischargeable. See id.

Specifically, 11 U.S.C. § 523(a)(2)(A) states that a debt obtained by “false

pretenses, a false representation, or actual fraud” is not dischargeable. However,

§ 523(a)(2)(A) contains an exception: If a debt is obtained by a false oral

“statement respecting the debtor’s . . . financial condition,” the debt is

dischargeable. By contrast, 11 U.S.C. § 523(a)(2)(B) states that a debt obtained

by a false written statement “respecting the debtor’s . . . financial condition” is

not dischargeable, provided certain conditions are met.

Because the phrase “respecting the debtor’s . . . financial condition” is used

in both § 523(a)(2)(A) and § 523(a)(2)(B) and both provisions were enacted as

part of the same statute, see Pub. L. No. 95-598, Nov. 6, 1978, 92 Stat. 2590, this

is “a classic case for application of the normal rule of statutory construction that

identical words used in different parts of the same act are intended to have the

same meaning.” Sullivan v. Stroop, 496 U.S. 478, 484 (1990) (quotations

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omitted). However, because § 523(a)(2)(A) provides that a debt obtained by a

false oral statement “respecting the debtor’s . . . financial condition” is

dischargeable, and § 523(a)(2)(B) provides that a debt obtained by a false written

version of such a statement is not dischargeable, any interpretation of the phrase

“respecting the debtor’s . . . financial condition” will have opposing effects

depending on whether the statement was oral or written. If the phrase is broadly

construed so that more false oral statements qualify as “respecting the debtor’s

. . . financial condition,” more debts will be dischargeable under § 523(a)(2)(A)

because that provision allows debts obtained by oral versions of such statements

to be discharged—even though debts obtained by other false pretenses, false

representations, or actual fraud may not be discharged. By contrast, a broad

construction of the phrase “respecting the debtor’s . . . financial condition,” will

result in fewer debts obtained based on written versions of such statements to be

dischargeable under § 523(a)(2)(B) because that provision bars the discharge of

only those false statements that “respect[] the debtor’s . . . financial condition.”

The opposing nature of § 523(a)(2)(A) and (B) is visible from the text of

the statute, which provides:

(a) A discharge under section 727 . . . of this title does not discharge
an individual debtor from any debt—
....
(2) for money, property, services, or an extension, renewal, or
refinancing of credit, to the extent obtained by—

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 (A) false pretenses, a false representation, or actual
fraud, other than a statement respecting the debtor’s or
an insider’s financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s
financial condition;
(iii) on which the creditor to whom the debtor is
liable for such money, property, services, or credit
reasonably relied; and
(iv) that the debtor caused to be made or
published with intent to deceive.

11 U.S.C. § 523(a)(2)(A)-(B).

The phrase “respecting the debtor’s . . . financial condition” has a range of

potential meanings. Under what many of the courts who have considered this

issue refer to as the “broad interpretation,” a statement “respecting the debtor’s . .

. financial condition” is any communication that has a bearing on the debtor’s

financial position. Skull Valley Band of Goshute Indians v. Chivers (In re

Chivers), 275 B.R. 606, 614 (Bankr. D. Utah 2002). Thus, the broad

interpretation posits that a communication addressing the status of a single asset

or liability qualifies as “respecting the debtor’s . . . financial condition.” See id.

Under what courts refer to as the “strict interpretation,” a statement

“respecting the debtor’s . . . financial condition” is any communication that

presents an overall picture of the debtor’s financial position. Id. at 615. This

interpretation limits statements “respecting the debtor’s . . . financial condition”

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to communications that purport to state the debtor’s overall net worth, overall

financial health, or equation of assets and liabilities. See id.

In this case, because most of the pre-loan communications between Joelson

and Cadwell were oral, the parties focus on § 523(a)(2)(A), which addresses false

oral communications. 2 Joelson argues that the phrase “respecting the debtor’s . . .

financial condition” should be interpreted broadly to include all oral

communications that reflect on the extent of any of her assets, liabilities, and

income. Joelson takes this position because under § 523(a)(2)(A), although debts

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

dischargeable, debts obtained by false statements “respecting the debtor’s . . .

financial condition” are dischargeable. Thus, it is in Joelson’s interest for her

communications to Cadwell to qualify as “respecting [her] financial condition,”

so that the state court judgment can be discharged. As is discussed below,

Joelson’s communications with Cadwell did contain some information as to her

assets and income, so the state court judgment would be dischargeable under the

broad interpretation she urges.

2
Because neither the parties nor the courts below address whether the list of
antique vehicles that Joelson provided to Cadwell renders the state court judgment
nondischargeable under § 523(a)(2)(B), we need not and do not consider the
issue. See Singleton v. Wulff, 428 U.S. 106, 120 (1976); Bancamerica
Commercial Corp. v. Mosher Steel of Kan., Inc., 100 F.3d 792, 798-99 (10th
Cir.), op. amended on other grounds, 103 F.3d 80 (10th Cir. 1996).

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 On the other hand, Cadwell argues that the phrase “respecting the debtor’s .

. . financial condition” should be interpreted strictly to include only information

as to Joelson’s overall financial health, not information as to her individual assets

or liabilities. As is discussed below, none of Joelson’s communications with

Cadwell contain information on Joelson’s overall net worth, overall financial

condition, or overall ability to generate income. Thus, if the phrase “respecting

the debtor’s . . . financial condition” is interpreted strictly, the state court

judgment would not be dischargeable under § 523(a)(2)(A) because Joelson would

have obtained a loan by “false pretenses, a false representation, or actual

fraud”—not a false statement “respecting [her] financial condition.” This would

prevent Cadwell from having to settle for his claim against Joelson being resolved

at a discount in bankruptcy court.

Therefore, our legal interpretation of the scope of the phrase “respecting

the debtor’s . . . financial condition” will determine the outcome of this case. For

the reasons discussed below, we believe that the strict interpretation of the phrase

is most consistent with the text and structure of the Bankruptcy Code, Congress’s

intent as expressed in the legislative history of 11 U.S.C. § 523(a)(2)(A) and (B),

and case law.

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II. Legal Analysis

A. Text, Structure and Policy of the Bankruptcy Code

The Bankruptcy Code does not offer a definition of the phrase “respecting

the debtor’s . . . financial condition.” Nor does the Code even offer a definition

of the term “financial condition.” However, the Code’s definition of the term

“insolvent” provides tangential support for the proposition that the phrase

“respecting the debtor’s . . . financial condition” should be construed as relating

only to information on the debtor’s overall financial condition.

The Code defines “insolvent” as, inter alia, the “financial condition such

that the sum of [an] entity’s debts is greater than all of such entity’s property . . .

exclusive of [certain types] of property.” 11 U.S.C. § 101(32)(A) (emphasis

added); see also id. § 101(32)(C) (defining a municipality’s insolvency as the

“financial condition such that the municipality is (i) generally not paying its debts

as they become due unless such debts are the subject of a bona fide dispute; or (ii)

unable to pay its debts as they become due”) (emphasis added). The Code’s use

of the term “financial condition” in these definitions to refer to the difference

between an entity’s overall property and debts—the entity’s net worth—in

defining the word “insolvent” suggests that the term “financial condition” in

§ 523(a)(2)(A) and (B) also relates to a debtor’s net worth or overall financial

condition. This conclusion is buttressed by the fact that the Code uses the term

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“financial condition” to refer to an overall flow of funds—a cash flow—in

defining when a municipality is insolvent.

Perhaps more importantly, as noted above, the text and structure of

§ 523(a)(2)(A) and (B) reveal that any interpretation of the phrase “respecting the

debtor’s . . . financial condition” will have opposing impacts on debtors and

creditors under each of the sections. A strict reading fits better within the overall

structure of the statute. The statute treats oral and written statements “respecting

the debtor’s . . . financial condition” very differently. If a debtor’s oral

statements “respecting [his or her] financial condition” later turn out to be false,

debts obtained based on such statements can still be discharged under §

523(a)(2)(A). However, other fraudulent oral communications still bar from

discharge debts obtained based on such communications under that provision, and

under § 523(a)(2)(B) written statements “respecting the debtor’s . . . financial

condition” bar debts obtained based on them from discharge.

In oral communication, it is far more difficult to portray accurately one’s

overall financial position than to represent the condition of one particular asset or

liability. After all, such communication is often informal and spontaneous, and

one might simply forget a particular asset or liability when listing all of one’s

assets and liabilities. However, when asked to describe a particular asset or

liability, one has had a particular subject called specifically to mind. Therefore, it

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is logical to give more leeway (and more dischargeability) to a debtor who errs in

stating his or her overall position orally, since it is more likely that he or she may

have made a mistake inadvertently. It is also logical to give less leeway to a

debtor who makes a specific oral misrepresentation as to a particular asset,

because it is less likely that such a misrepresentation is inadvertent. By the same

token, it is logical to give little leeway (and less dischargeability) under §

523(a)(2)(B) to a debtor who fraudulently misstates his or her overall financial

position in writing, since such communications carry an air of formality that their

oral counterparts do not and are typically made after more studied consideration.

Thus, a strict interpretation of the phrase “respecting the debtor’s . . .

financial condition” to limit such representations to statements going to a debtor’s

overall financial net worth or financial condition is in keeping with the text and

structure of § 523(a)(2)(A) and (B).

B. Legislative History of § 523(a)(2)(A) and (B)

The legislative history of § 523(a)(2)(A) and (B) corroborates the view that

the strict definition of “respecting the debtor’s . . . financial condition” is most in

keeping with Congress’s intent in promulgating these provisions. 3

3
We may examine this legislative history because this is not a case where
the meaning of the Bankruptcy Code is clear from the statute’s text. Cf. United
States v. Ron Pair Enters., Inc., 489 U.S. 235, 240-41 (1989).

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 1. Roots of § 523(a)(2)(A) and (B)

Section 523(a)(2)(A) has its roots in the Bankruptcy Act of 1898, 30 Stat.

544. When the predecessor to § 523(a)(2)(A) was included in the Bankruptcy

Code in 1898 and amended in 1903, it barred the discharge of debts arising from

false pretenses or false representations. See Bankruptcy Act of 1898, 30 Stat.

544, 550-51, § 17(a)(2); Act of Feb. 5, 1903, ch. 487, 32 Stat. 797, 798,

§ 17(a)(2). In contrast to present-day § 523(a)(2)(A), neither the 1898 nor the

1903 provision allowed the discharge of debts obtained by false oral statements

“respecting the debtor’s . . . financial condition.” See id. This approach

remained substantially unchanged until 1978, when the 1903 provision was

reworded and recodified as § 523(a)(2)(A).

Congress inserted the predecessor of § 523(a)(2)(B) into the Bankruptcy

Act of 1898 in 1903. See Act of Feb. 5, 1903, ch. 487, 32 Stat. 797, 797-98, § 4.

The predecessor to § 523(a)(2)(B) was a separate provision that provided grounds

for a court to deny the discharge of all of a debtor’s obligations, not merely to

deny the discharge of a particular debt obtained through the use of a materially

false statement in writing. See id. at § 4(b)(3) (“The judge shall . . . discharge the

applicant unless he has . . . obtained property on credit from any person upon a

materially false statement in writing . . . .”). Therefore, as of 1903, if a debtor

had obtained property on credit through the use of an oral misrepresentation, that

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particular debt would be excepted from discharge; if a debtor had obtained

property on credit through the use of a written misrepresentation, none of the

debtor’s debts could be discharged.

2. 1960 Amendments

By 1960 it had become clear to Congress that the predecessor to

§ 523(a)(2)(B) was having undesirable effects: imposing severe penalties on

noncommercial bankrupts, opening the way to abuse by some creditors, and

yielding windfalls for other creditors. See S. Rep. No. 1688, at 2-3 (1960),

reprinted in 1960 U.S.C.C.A.N. 2954, 2955. Congress was particularly concerned

with the abusive practices of certain commercial creditors who “frequently

condoned, or even encouraged, [would-be debtors’] issuance of statements

omitting debts with the deliberate intention of obtaining a false agreement for use

in the event that the borrower subsequently goes into bankruptcy.” Id. (quoting

H.R. Rep. No. 1111, at 2-3 (1959)) (quotations in original omitted), reprinted in

1960 U.S.C.C.A.N. 2954, 2955. “[A]rmed with a false financial statement,” these

creditors had “a powerful weapon with which to intimidate a debtor into entering

an agreement in which the creditor agree[d] not to oppose the discharge in return

for the debtor’s agreement to pay the debt in full after discharge.” Id. (quotations

in original omitted).

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 Based on these concerns, Congress recrafted the predecessor to §

523(a)(2)(B) so that false written financial statements made by individuals no

longer barred the discharge of all of an individual debtor’s obligations. See Act

of July 12, 1960, Pub. L. No. 86-621, 74 Stat. 408, 409, § 2. Instead, the

statutory language addressing such written statements was combined with the

precursor of § 523(a)(2)(A) so that only the specific debt incurred as a result of

the false written financial statement was not dischargeable. See id. Under the

1960 amendment the language of the newly-combined predecessor provision to

§ 523(a)(2)(A) and (B) did not explicitly allow the discharge of debts incurred

based on oral misrepresentations going to financial condition. See id.

However, the legislative history’s repeated references to false “financial

statement[s],” S. Rep. No. 1688, at 2-3 (1960) (using the term “financial

statement” seven times) (quotations in original omitted), reprinted in 1960

U.S.C.C.A.N. 2954, 2955, lends support to a strict interpretation of that phrase

restricting it to statements pertaining to the overall financial condition of the

debtor—and, by extension, to a similarly strict interpretation of the similar phrase

“respecting the debtor’s . . . financial condition” in § 523(a)(2)(A) and (B). The

term “financial statement” has a strict, established meaning, suggesting that the

phrase “statement respecting [the bankrupt’s] financial condition” for which it is

so freely substituted should be given the same meaning. See Black’s Law

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Dictionary (8th ed. 2004) (defining “financial statement” as “[a] balance sheet,

income statement, or annual report that summarizes an individual's or

organization’s financial condition on a specified date or for a specified period by

reporting assets and liabilities” or an “income-and-expense declaration”).

Moreover, the legislative history’s reference to businesses’ use of financial

statements to establish credit standing also lends support to the strict

interpretation of the phrase “statement respecting [the bankrupt’s] financial

condition,” for it is communications as to a person’s overall financial condition

that are typically used to establish such standing. See S. Rep. No. 1688, at 2-3

(1960), reprinted in 1960 U.S.C.C.A.N. 2954, 2955.

3. 1978 Recodification

In 1978, Congress gave the provisions at issue in this case much of their

current wording and recodified them as § 523(a)(2)(A) and (B). See Pub. L. No.

95-598, Nov. 6, 1978, 92 Stat. 2590. The House Committee on the Judiciary

noted that the bill that formed the backbone of § 523(a)(2)(A) and (B) was

“modified only slightly” from its predecessor, and none of the modifications

noted by the Committee impact the meaning of “respecting the debtor’s . . .

financial condition.” H. Rep. No. 95-595, at 364, reprinted in 1978 U.S.C.C.A.N.

5963, 6320; see also S. Rep. No. 95-989, at 78, reprinted in 1978 U.S.C.C.A.N.

5787, 5864. Indeed, Don Edwards, a member of the House Committee on the

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Judiciary, introduced the amendment that embodied the compromises worked out

by the Conference Committee—the final amendment to the bill before its

passage—by stating that § 523(a)(2)(A) “is intended to codify current case law.”

Statement by the Hon. Don Edwards, Sept. 28, 1978, 124 Cong. Rec. H. 11089,

reprinted in 1978 U.S.C.C.A.N. 6436, 6453; see also Statement by the Hon.

Dennis DeConcini, Oct. 6, 1978, 124 Cong. Rec. S. 17406, reprinted in 1978

U.S.C.C.A.N. 6505, 6522 (introducing the House amendment to the Senate).

Thus, there is no indication in the legislative history that Congress’s 1978

decision to allow debts obtained by false oral statements “respecting the debtor’s .

. . financial condition” to be dischargeable under § 523(a)(2)(A) was intended to

work a substantive change in the law. That is, there is no indication in the

legislative history that Congress intended to remove from the coverage of

§ 523(a)(2)(A) any of the debts based on oral misrepresentations going to

financial condition that had been within the coverage of that provision’s

predecessors.

Thus, the legislative history of § 523(a)(2)(A) and (B) supports the strict

reading of the phrase “respecting the debtor’s . . . financial condition.” There

simply is no indication in the legislative history that Congress wished to exclude a

large class of specific oral misrepresentations from the coverage of §

523(a)(2)(A). Indeed, it appears that § 523(a)(2)(B) and its predecessors were

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designed to provide an additional remedy for violations premised on the use of a

fraudulent writing, not undermine the coverage of § 523(a)(2)(A) and its

predecessors.

C. Courts’ Treatment of § 523(a)(2)(A) and (B)

Cases interpreting the phrase “respecting the debtor’s . . . financial

condition” have split on this issue. See Schneiderman v. Bogdanovich (In re

Bogdanovich), 292 F.3d 104, 112-13 (2d Cir. 2002) (collecting cases). However,

we find the cases adopting the strict definition to be more persuasive.

1. Supreme Court

In Field v. Mans, 516 U.S. 59 (1995), the court held that debts extended

based on a debtor’s oral fraudulent statements may be barred from being

discharged under § 523(a)(2)(A) if a creditor “justifiably” relied on those

statements, while debts extended based on a debtor’s written financial statements

may only be barred from being discharged under § 523(a)(2)(B) if a creditor

“reasonably” relied on those statements. Although that decision did not address

the issue directly, it lends some support to the notion that a statement “respecting

the debtor’s . . . financial condition” must relate to a debtor’s overall financial

health. In discussing § 523(a)(2)(A) and (B), the Court freely substituted the

phrases “statement of financial condition” and “financial statement” for the

phrase “statement respecting the debtor’s . . . financial condition.” “Statement of

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financial condition” and “financial statement” are terms with established

meanings that involve an individual or entity’s overall financial health. See

Black’s Law Dictionary (8th ed. 2004) (defining “statement of condition” with a

cross-reference to “balance sheet”—“[a] statement of an entity’s current financial

position, disclosing the value of the entity’s assets, liabilities, and owners’

equity”—and defining “financial statement” as “[a] balance sheet, income

statement, or annual report that summarizes an individual’s or organization’s

financial condition on a specified date or for a specified period by reporting

assets and liabilities” or an “income-and-expense declaration”). Thus, the Court’s

substitution of these established phrases for the more unusual “statement

respecting the debtor’s . . . financial condition” implies that this unusual phrase

should be given a meaning similar to that of the established phrases—not an

expansive meaning that might embrace statements respecting only a single aspect

of the debtor’s financial condition.

Moreover, if the phrase “respecting the debtor’s . . . financial condition”

were given a broad reading, the resulting exclusion might eliminate coverage for

many misrepresentations typical of the common-law torts that Field represents as

lying at the heart of § 523(a)(2)(A). See 516 U.S. at 68-69 (noting that “the

substantive terms in [§] 523(a)(2)(A) . . . refer to common-law torts” and stating

that “[t]he operative terms in § 523(a)(2)(A) . . . ‘false pretenses, a false

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representation, or actual fraud’ carry the acquired meaning of terms of art”).

Under the broad interpretation, debts incurred as a result of many of the

fraudulent statements cited in the Restatement (Second) of Torts, see Field, 516

U.S. at 70, could not be excepted from discharge under § 523(a)(2)(A), since the

fraudulent statements would qualify as “respecting the debtor’s . . . financial

condition” and therefore would be dischargeable. See, e.g., Restatement (Second)

of Torts (1976), § 525, illus. 3 (describing a seller’s statement that stock shares

will pay dividends within five years); id., § 529, illus. 2 (describing a seller’s

statement that apartments in a building are rented to tenants at a particular rate,

but neglecting to mention that the rate has not been approved by rent control

authorities, as a fraudulent misrepresentation); id., § 540, illus. 1 (treating a

seller’s statement to a potential buyer that land is free from encumbrances as a

fraudulent misrepresentation of fact).

2. Tenth Circuit

The Tenth Circuit has not directly addressed the question of how to

interpret the phrase “respecting the debtor’s . . . financial condition.” In Bellco

First Federal Credit Union v. Kaspar (In re Kaspar), 125 F.3d 1358 (10th Cir.

1997), we quoted a passage from a Fourth Circuit case that appeared to adopt a

broad interpretation of the phrase “respecting the debtor’s . . . financial

condition”:

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 “Congress did not speak in terms of financial statements. Instead it
referred to a much broader class of statements—those ‘respecting the
debtor’s . . . financial condition.’ A debtor’s assertion that he owns
certain property free and clear of other liens is a statement respecting
his financial condition. Indeed, whether his assets are encumbered
may be the most significant information about his financial
condition. Consequently, the statement must be in writing to bar the
debtor’s discharge.”

Id. at 1361 (quoting Engler v. Van Steinburg (In re Van Steinburg), 744 F.2d

1060, 1061 (4th Cir. 1984)). However, while the Fourth Circuit decision quoted

by Kaspar turned on whether a statement that an asset was not encumbered was a

statement “respecting [a] debtor’s . . . financial condition,” Kaspar cited the

Fourth Circuit case only as part of its analysis that a statement must be in writing,

and about a debtor’s financial condition, for a debt incurred as a result of that

statement to be nondischargeable under § 523(a)(2)(B). See id. at 1360-61.

Kaspar’s discussion of the quoted passage was limited to the statement that “[a]s

noted in Engler, giving a statement of financial condition is a solemn part of

significant credit transactions.” Id. at 1361.

In any event, the debtors’ statements in Kaspar likely would have qualified

as “respecting the debtor[s’] . . . financial condition” even under the strict

definition of that phrase. The oral representations made by the debtors in Kaspar

included representations as to the debtors’ “financial condition, the name of

[their] employer[s], [their] title[s], and salar[ies]. . . . the names of other

creditors, the balances due on obligations owed those creditors as well as the

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monthly payments on the debts.” Id. at 1359. Thus, while Engler indicates that a

debtor’s statement that an asset is unencumbered is enough to qualify as

“respecting the debtor’s . . . financial condition,” Kaspar does not go so far.

Rather, Kaspar addresses only two debtors’ statements that, because they

contained general information about the debtors’ overall financial health, would

have qualified under the strict definition of the phrase “respecting the debtor’s . .

. financial condition.”

For these reasons, we view the question of how to interpret “respecting the

debtor’s . . . financial condition” as an open issue in this circuit.

3. Other Courts

The trend and reasoning in other courts’ decisions interpreting the phrase

“respecting the debtor’s . . . financial condition” offer persuasive support for a

strict reading of the phrase. Chivers, 275 B.R. at 606, succinctly summarizes the

trend in these courts’ efforts:

The emerging viewpoint follows a strict interpretation.
Although it does not require any specific formality, the strict
interpretation limits an actionable statement of financial condition to
financial-type statements including balance sheets, income
statements, statements of changes in financial position, or income
and debt statements that provide what may be described as the debtor
or insider’s net worth, overall financial health, or equation of assets
and liabilities. Cases supporting this view generally recite four
arguments. First, they argue that the normal commercial meaning and
usage of “‘statement’ in connection with ‘financial condition’
denotes either a representation of a person’s [an entity’s] overall ‘net
worth’ or a person’s [an entity’s] overall ability to generate income.”

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 Second, they cite to legislative history that references the statutes’
application to the “‘so-called false financial statement.’” Third, they
argue that the strict interpretation promotes better bankruptcy policy,
because narrowing the definition of financial condition in
§ 523(a)(2)(B) necessarily expands those statements, both written
and oral, that do not relate to financial condition that fall within
§ 523(a)(2)(A) and better harmonizes the statute. Finally, they argue
that a strict interpretation is consistent with the historical basis of
§ 523(a)(2)(B), which was designed to protect debtors from abusive
lending practices.

Id. at 615 (citations and footnotes in original omitted). The Chivers court went

on to adopt the emerging, strict interpretation:

[T]he strongest argument in favor of the broad
interpretation—that had Congress wanted § 523(a)(2)(B) limited to
false financial statements, it would have so drafted the statute—is
gutted by the Supreme Court’s repeated statements in Field v. Mans
that § 523(a)(2)(B) refers to false financial statements. While it
might be convenient to dismiss Field’s repeated references to false
financial statements as dicta, Field’s meticulous comparison of
§§ 523(a)(2)(A) and (B) does not lend itself to that interpretation.
Rather, it makes it more difficult to dismiss as unintentional the
recharacterization of “a statement in writing . . . respecting . . .
financial condition” as a false financial statement. Lastly, Field’s
recitation of the history of § 523(a)(2)(B) and its goal of preventing
abuse by consumer finance companies, which sometimes have
encouraged false financial statements by their borrowers for the
purpose of insulating their own claims from discharge, lends strong
support for adoption of the strict interpretation.
Therefore, the better approach is the strict interpretation of §
523(a)(2)(B) that requires a false written statement to describe the
debtor’s net worth, overall financial health, or ability to generate
income. It is the most consistent with the Supreme Court’s
interpretation of the statute, it is consistent with the history of the
reason for the creation of the statute, it strictly construes
§ 523(a)(2)(B) against the creditor and liberally in favor of the
debtor, and it . . . reconciles §§ 523(a)(2)(A) and (B) without
impairing their effectiveness.

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Id. at 615-16.

The Bankruptcy Court for the Southern District of New York has also

propounded a Chivers-style justification for the strict approach:

Under the so-called strict interpretation, [§ 523(a)(2)(B)] is
limited to financial-type statements that are sufficient to determine
the entity’s overall financial responsibility, but no specific formality
is required. These typically include balance sheets, income
statements, statements of changes in financial position, or income
and debt statements in the case of an individual wage earner, that
reflect a person’s ability to pay an additional debt. By contrast, a
statement relating to the financial condition of a single asset does not
qualify.
Proponents of the strict view rely on the language used in the
code, and point to its legislative history. They give “financial
condition” its normal commercial meaning and usage. Further, the
floor statements by Representative Edwards and Senator DeConcini,
sponsors of the Bankruptcy Reform Act of 1978, indicate that the
exception encompassed the use of the “so-called false financial
statement.” . . .
Finally, the strict view promotes better bankruptcy policy.
Virtually any statement concerning an asset or liability arguably
relates to financial condition. If drawn too broadly, the definition
will sweep in many oral misrepresentations, and therefore exclude
them from coverage under subdivision (A). These debtors will
thereby escape the anti-discharge provisions completely.
....
The arguments supporting the strict view are more persuasive
[than those supporting the broad view]. [The arguments supporting
the strict view] are consistent with ordinary usage and faithful to the
intent of Congress as reflected in the statements of the sponsors.
Moreover, the strict view better reflects the limited purpose that
subdivision (B) was intended to serve. Subdivision (B) and its
predecessors (dating back to 1903) were designed to protect debtors
from abusive lending practices. . . .
Th[ese] practice[s] gave the lender leverage to extract a
settlement or reaffirmation, despite a weak case, from a debtor intent
on avoiding litigation costs. Section 523(a)(2)(B) (and its

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 predecessors) . . . were intended to reduce the pressure on the honest
debtor to settle. The lender must defend the adequacy of its lending
form in the comparatively debtor-friendly bankruptcy court. Under §
523(d), the prevailing debtor may recover costs and attorneys fees
from the creditor. Finally, § 523(a)(2)(B) requires proof of
reasonable reliance, an objective standard. Hence, the lender’s
access to other information regarding the debtor's financial condition
is relevant.
Admittedly, section 523(a)(2)(B) is not limited to extensions of
credit by consumer finance companies or other lenders. It also
applies where the debtor obtains goods or services. Nevertheless, it
was designed to deal with a specific problem—tricking the debtor
into presenting a false picture of his overall financial condition.
Certainly, it was not intended to create an exception that swallowed
up the general rule in subdivision (A). In this regard, virtually every
statement by a debtor that induces the delivery of goods or services
on credit relates to his ability to pay. The broad interpretation would
permit many dishonest debtors to avoid the consequences of oral
fraud. The better rule decides cases on their merits, rather than upon
the construction of an ambiguous, statutory phrase that grants a fresh
start without regard to the honesty of the debtor.

Weiss v. Alicea (In re Alicea), 230 B.R. 492, 502-04 (Bankr. S.D.N.Y. 1999)

(citations and footnotes in original omitted).

Given the smaller number of circuit court decisions interpreting the phrase

“respecting the debtor’s . . . financial condition,” discerning a trend in the circuit

court decisions is difficult. As noted above, the Fourth Circuit appears to have

adopted the broad interpretation, though it did so only in a brief 1984 opinion that

it has never cited again. See Engler, 744 F.2d at 1061 (“A debtor’s assertion that

he owns certain property free and clear of other liens is a statement respecting his

financial condition.”). The Eighth Circuit’s decision in Rose v. Lauer (In re

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Lauer), 371 F.3d 406, 413-14 (8th Cir. 2004) (finding a debt nondischargeable

under § 523(a)(2)(A) because the debtors “committed garden variety common law

fraud when they induced [the creditors] to sell their limited partner interests by

concealing material changes in the [partnership’s] asset mix”), provides support

for the strict interpretation. 4

Ultimately, we conclude that the trend cited by Chivers and the reasoning

employed by Chivers and Alicea offer persuasive support for the strict reading.

D. Summary of Legal Analysis

For the above reasons, it appears that the strict reading of “respecting the

debtor’s . . . financial condition” is correct. It is the reading most consistent with

the text and structure of the Bankruptcy Code, the legislative history of

§ 523(a)(2)(A) and (B), and case law. To state generally that we adopt a strict

interpretation is not enough to resolve this case or to provide guidance to future

courts, however; we must also define precisely the scope of the phrase “respecting

the debtor’s . . . financial condition.”

4
While the issue of how to interpret the phrase arose in two other circuit
court cases, those courts did not definitively interpret the scope of the phrase.
See Bogdanovich, 292 F.3d at 113-14 (refraining from adopting either the strict or
the broad interpretation for justiciability reasons); Berkson v. Gulevsky (In re
Gulevsky), 362 F.3d 961, 962-64 (7th Cir. 2004) (declining to address a
bankruptcy court finding that “because [the debtor]’s misrepresentations were of
his financial condition, and were oral, they were not actionable under any part of
§ 523(a)(2)”).

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 Title 11, United States Code § 523(a)(2)(A) generally bars the discharge of

the debts of an individual debtor to the extent that those debts were obtained by

false pretenses, a false representation, or actual fraud. However, to the extent

that those debts were obtained by the use of a false oral statement respecting the

debtor’s or an insider’s financial condition, they are dischargeable. We hold that

such false statements are those that purport to present a picture of the debtor’s

overall financial health. Statements that present a picture of a debtor’s overall

financial health include those analogous to balance sheets, income statements,

statements of changes in overall financial position, or income and debt statements

that present the debtor or insider’s net worth, overall financial health, or equation

of assets and liabilities. However, such statements need not carry the formality of

a balance sheet, income statement, statement of changes in financial position, or

income and debt statement. What is important is not the formality of the

statement, but the information contained within it—information as to the debtor’s

or insider’s overall net worth or overall income flow.

III. Application

In this case, the findings of the bankruptcy court indicate that Joelson made

at least two types of representations. First, Joelson made representations as to her

ownership of certain specific assets (the “Ownership Representations”). Second,

Joelson made representations as to her intention and specific ability to obtain

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financing from her brother to repay Cadwell’s loan (the “Repayment

Representations”).

The Ownership Representations address only Joelson’s ownership of certain

assets. Thus, the Ownership Representations do not constitute a statement as to

Joelson’s overall financial health analogous to a balance sheet, income statement,

statement of changes in financial position, or income and debt statement.

Therefore, the Ownership Representations do not qualify as “respecting the

debtor’s . . . financial condition” under the strict definition of that phrase. See

Lauer, 371 F.3d at 413-14; Bal-Ross Grocers, Inc. v. Sansoucy (In re Sansoucy),

136 B.R. 20, 23 (Bankr. D. N.H. 1992) (“[A]n oral misrepresentation that certain

collateral was free and clear of any liens [i]s actionable under 523(a)(2)(A).”).

Similarly, the Repayment Representations are not a statement as to

Joelson’s overall financial health. Joelson’s representation to Cadwell that

Cadwell would be able to look to Joelson’s brother for repayment is analogous to

Joelson’s representation to Cadwell that she owned one particular asset. Just as a

statement about one of Joelson’s assets is not a statement that reflects Joelson’s

overall financial health, and therefore does not “respect[] the debtor’s . . .

financial condition,” a statement about one part of Joelson’s income flow—the

flow of funds from her brother—does not reflect Joelson’s overall financial

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health. Therefore, the Repayment Representations also are not “respecting the

debtor’s . . . financial condition.”

Because the Ownership and Repayment Representations do not constitute

statements “respecting [Joelson’s] financial condition,” the state court judgment

on Cadwell’s loan to Joelson is not dischargeable under § 523(a)(2)(A). Thus, the

bankruptcy court and BAP correctly held that the debt owed by Joelson to

Cadwell is non-dischargeable under § 523(a)(2)(A). 5

CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the BAP.

5
Debtor also represented that she and Joelene Joelson are the same person
(the “Identity Representation”). We refrain from addressing whether the Identity
Representation is sufficient to render the state court judgment nondischargeable.
Because the bankruptcy court was unable to conclude “whether Jolene or Joelene
is simply a name used by [Debtor] or a different person entirely,” it is not clear
whether the Identity Representation was a false representation as defined by §
523(a)(2)(A) that would bar the state court judgment from being discharged, and
we may not attempt to resolve this factual issue. See Novelly v. Palans (In re
Apex Oil Co.), 960 F.2d 728, 731 (8th Cir. 1992) (“If we conclude that the
bankruptcy court’s findings are silent or ambiguous as to an outcome
determinative factual question, we may not make our own findings . . . .”).

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