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Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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FlL .ciV 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

United St.a.ts::is Com of Appeal;:; 'f €', t.~ C!r.::ui<: 

APR O 3 i992 

) 

) 

) 

) 

ROBERT L. HOECKEE 

Clerk SIGNET BANK, 

Plaintiff-Appellee, 

v. ) No. 91-8039 

ERIC EDWARD KEYES; APRIL ELAINE KEYES, 

Defendants-Appellants. 

) (D.C. No. 91-CV-0008-K) 

) (D. Wyo.) 

) 

) 

ORDER AND JUDGMENT* 

Before EBEL, BARRETT, Circuit Judges, and KANE,** Senior District 

Judge. 

**Honorable John L. Kane, Jr., Senior 

States District Court for the District of 

designation. 

District Judge, United 

Colorado, sitting by 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

The case is therefore ordered 

Eric and April Keyes (Debtors) appeal the district court's 

order affirming the bankruptcy court decision holding Debtors' 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 91-8039 Document: 010110239128 Date Filed: 04/03/1992 Page: 1 
credit card debt owed to Plaintiff Signet Bank (Bank) 

nondischargeable under 11 U.S.C. § 523(a) (2) (A). The primary 

issue presented is whether the bankruptcy court erred in granting 

the Bank's motion for summary judgment. This court will review 

the bankruptcy and district courts' summary judgment 

determinations de novo, viewing the record in the light most 

favorable to the nonmoving party. Deepwater Invs., Ltd. v. 

Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir. 1991). See 

generally Citizens Nat'l Bank & Trust Co. v. Serelson (In re 

Burkart Farm & Livestock), 938 F.2d 1114, 1115 (10th Cir. 1991) (in 

reviewing bankruptcy court decisions, appellate courts apply same 

standards of review that govern appeals in other cases). 

Summary judgment is appropriate only if there is no genuine 

issue of material fact and the moving party is entitled to 

judgment as a matter of law. 

56(c). Upon consideration 

appellate arguments, we affirm. 

Bankr. R. 7056; 

of the record and 

Fed. R. Civ. P. 

the parties' 

The undisputed facts, viewed in the light most favorable to 

Debtors, are as follows: In October 1989, Debtors received from 

the Bank an unsolicited invitation to apply for a preapproved 

credit card with a credit limit of up to $5,000. Debtors 

completed the Bank's "Acceptance Certificate" and returned the 

Certificate to the Bank. At the time Debtors returned the 

Certificate, Debtors knew that they would eventually have to file 

for bankruptcy relief, due to a debt Eric Keyes owed the Veterans 

Administration in the amount of $22,661.87, the result of a 

deficiency in an earlier foreclosure proceeding. As a result of 

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Appellate Case: 91-8039 Document: 010110239128 Date Filed: 04/03/1992 Page: 2 
their completing the Bank's Certificate, Debtors received two 

credit cards from the Bank with a total credit limit of $4,000. 

Between November 2 and November 21, 1989, Debtors used the 

credit cards to incur charges or receive cash advances totalling 

$4,407.03. Debtors used $3,300 of that amount to pay off other 

creditors and consolidate their debts under the lower interest 

rate offered by the Bank's credit cards. Although Debtors failed 

to make a single payment on the balance owed the Bank as a result 

of these charges, they contend that they "fully intended to pay 

all amounts due on this credit card when the charges were made." 

Appellants' App., ex. 10. 

Debtors assert that, in December 1989, it became imperative 

for them to file for bankruptcy relief in order for Eric Keyes, a 

captain in the Wyoming National Guard, to obtain a security 

clearance necessary for his job. Debtors filed for Chapter 7 

bankruptcy relief in March 1990. 

The Bank commenced this adversary proceeding July 10, 1990, 

seeking to prevent the discharge of this credit card debt under 11 

U.S.C. § 523(a) (2). Debtors responded to the complaint, on 

August 8, with a motion to dismiss or, in the alternative, a 

motion for a more definite statement. The Bank filed its motion 

for summary judgment September 26. Debtors responded to the 

summary judgment motion, filing a pleading in opposition to 

summary judgment which was supported by Debtors' affidavit. 

The bankruptcy court scheduled a hearing on Debtors' motion 

to dismiss for October 10. At that hearing, however, the 

bankruptcy court summarily denied the motion to dismiss and heard 

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Appellate Case: 91-8039 Document: 010110239128 Date Filed: 04/03/1992 Page: 3 
argument on the summary judgment motion. Following the hearing, 

the bankruptcy court granted the Bank summary judgment. 

On appeal, Debtors first argue that the bankruptcy court 

erred in summarily denying their motion to dismiss. Federal Rule 

of Civil Procedure 9(b), applicable to adversary proceedings in 

bankruptcy under Bankr. R. 7009, Lawrence Nat'l Bank v. Edmonds 

(In re Edmonds), 924 F.2d 176, 180 (10th Cir. 1991), requires 

that, ''[i]n all averments of fraud . , the circumstances 

constituting fraud ... shall be stated with particularity." 

Reviewing the complaint de nova, Seattle-First Nat'l Bank v. 

Carlstedt, 800 F.2d 1008, 1011 (10th Cir. 1986), we agree with the 

bankruptcy and district courts that the Bank pleaded fraud with 

sufficient particularity. 

Debtors further contend that the bankruptcy court, in 

summarily denying their motion to dismiss at the outset of the 

hearing, deprived Debtors of due process. 

lacks merit. 

This argument also 

Next, Debtors argue that the bankruptcy court failed to give 

the parties adequate notice that the summary judgment motion would 

be addressed at the October 10 hearing. Federal Rule of Civil 

Procedure 56, made applicable to adversary proceedings in 

bankruptcy by Bankr. R. 7056, In re Edmonds, 924 F.2d at 180, 

provides that a court must hold a hearing on a summary judgment 

motion no earlier than ten days after the motion has been served 

on opposing counsel. See Geear v. Boulder Community Hosp . , 844 

F.2d 764, 766 (10th Cir.), cert. denied, 488 U.S. 927 (1988). 

Rule 56(c), however, does not require a formal evide ntiary hearing 

4 

Appellate Case: 91-8039 Document: 010110239128 Date Filed: 04/03/1992 Page: 4 
with oral argument; "(r]ather, the parties' right to be heard may 

be fulfilled by the court's review of the briefs and supporting 

affidavits and materials submitted to the court." Id. Debtors 

had adequate notice of, and an opportunity to respond to, the 

Bank's motion for summary judgment. Debtors did respond by filing 

a pleading in opposition to summary judgment. Because Debtors had 

a sufficient opportunity to respond to the summary judgment 

motion, the fact that the bankruptcy court provided an additional 

opportunity for the parties to address the motion through oral 

argument, without prior notice, did not prejudice Debtors. 

Debtors next assert that the bankruptcy court's consideration 

of the summary judgment motion was premature because discovery was 

still ongoing. There is no requirement that discovery be complete 

before summary judgment is awarded . Weir v. Anaconda Co., 773 

F.2d 1073, 1081 (10th Cir. 1985). Debtors filed a pleading in 

opposition to summary judgment, accompanied by a supporting 

affidavit. In the alternative, Debtors could have filed an 

affidavit under Rule 56(f), asserting that they could not present 

facts essential to their opposition and requesting a continuance 

of the court's consideration of the summary judgment motion until 

completion of discovery. See Pasternak v. Lear Petroleum 

Exploration. Inc . , 790 F. 2d 828, 832-33 (10th Cir. 1986). The 

record indicates Debtors failed to file such an affidavit. 

"Where a party opposing summary judgment and seeking a 

continuance pending completion of discovery fails to take 

advantage of the shelter provided by Rule 56(f) by filing an 

affidavit, there is no abuse of discretion in granting summary 

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Appellate Case: 91-8039 Document: 010110239128 Date Filed: 04/03/1992 Page: 5 
judgment if it is otherwise appropriate." Id . The bankruptcy 

court, therefore, did not err in awarding summary judgment prior 

to the completion of discovery. 

Debtors further contend, however, that summary judgment was 

not "otherwise 

nondischargeability 

appropriate" on the issue of the 

of their credit card debt. 11 U.S.C. 

§ 523(a) (2) (A) provides that a debt is not dischargeable if 

obtained by "false pretenses, a false representation, or actual 

fraud, other than a statement respecting the debtor's. 

financial condition." In order to establish the 

nondischargeability of a debt under§ 523(a) (2) (A), therefore, the 

Bank had to establish, by a preponderance of the evidence, see 

Nelson v. Tsamasfyros (In re Tsamasfyros), 940 F. 2d 605, 607 (10th 

Cir. 1991), that Debtors made a false repre sentation or a willful 

misrepresentation, with the intent to deceive the Bank, and upon 

which the Bank reasonably relied to its detriment. See First Bank 

v. Mullet (In re Mullet), 817 F.2d 677, 680 (10th Cir. 1987). 

Debtors' use of the credit cards to charge purchases and to 

obtain cash advances implied a representation by the Debtors to 

the Bank that Debtors had the ability and the intention to pay the 

obligations incurred. See, e.g., First Nat'l Bank v. Cloud (In re 

Cloud), 107 B.R. 156, 159 (N.D. Ill. 1989); FCC Nat'l Bank v. 

Bartlett (In re Bartlett), 128 B.R. 775, 779-80 (Bankr. W.D . Mo. 

1991). Debtors contend, however, that they did not make these 

representations with the intent to deceive the Bank. 

The parties do not dispute the historical facts underlying 

these credit card transactions. Those facts indicated tha t 

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Appellate Case: 91-8039 Document: 010110239128 Date Filed: 04/03/1992 Page: 6 
Debtors applied for and accepted credit cards from the Bank while 

experiencing severe financial difficulties and while aware that 

they would eventually have to file for bankruptcy relief. Upon 

receiving the credit cards, Debtors incurred a large amount of 

debt in a very short period of time, exceeding their credit limit. 

Most telling, Debtors failed to make even a single payment to the 

Bank on their credit card obligation, despite a three-month period 

between incurring these debts and filing for bankruptcy. These 

undisputed facts are sufficient to permit the court to infer that 

Debtors intended to deceive the Bank because they incurred these 

obligations with no intention or ability to pay them. See 

generally Citibank s. Oak., N.A. v. Dougherty (In re Dougherty), 

84 B.R. 653, 657 (9th Cir. BAP 1988) (discussing twelve objective 

factors which courts consider in determining whether debtor 

incurred credit card debt with no intention of paying that 

obligation). 

Faced with a properly supported summary judgment motion, 

Debtors could not rest on mere allegations or denials, but rather 

were required to assert specific facts which would create a 

genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 

U.S. 242, 256 {1986). In light of the undisputed e v idence 

establishing Debtors' intent to deceive the Bank by incurring 

credit card obligations with no intention of paying those debts, 

Debtors' unsupported assertions that they did intend to satisfy 

these obligations were insuffic ient to create a genuine issue for 

trial. summary judgment was, therefore, appropriate. See id. 

(summary judgment appropriate, even when party's state o f mind is 

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Appellate Case: 91-8039 Document: 010110239128 Date Filed: 04/03/1992 Page: 7 
at issue, if party fails to assert specific facts establishing 

genuine issue for trial). 

Debtors also argue that, had they been allowed to complete 

discovery, they may have been able to establish the existence of a 

genuine issue of material fact concerning the reasonableness of 

the Bank's reliance on Debtors' misrepresentations. Because 

Debtors failed to file a Rule 56(f) affidavit seeking to continue 

the bankruptcy court's consideration of the summary judgment 

motion until discovery was completed, Debtors cannot now assert 

that a genuine issue of fact might have been established through 

further discovery. 

Finally, Debtors assert that the bankruptcy and district 

courts erred by failing specifically to address the issue of the 

Bank's reasonable reliance on Debtors' misrepresentations. Where 

the misrepresentation at issue is a debtor's implied 

misrepresentation to a credit card issuer, arising from the 

debtor's use of the card, reliance is also implied. See Citicorp 

Credit Servs., Inc. v. Hinman (In re Hinman), 120 B.R. 1018, 1022 

(Bankr. D.N.D. 1990) ("Reliance on the part of the issuer is 

inherent in the [credit card] system because a card holder in 

using the credit card forces the issuer to honor its guarantee to 

the merchant."). Absent "red flags" which would put the creditor 

on notice that further inquiry is necessary, the Bank's continued 

reliance on Debtors' implied representations was reasonable. Cf. 

First Deposit Servs. Corp. v. Preece (In re Preece), 125 B.R. 474, 

478 (Bankr. W.D. Tex. 1991) (reasonable reliance is established if, 

after hav ing acted diligently and following normal business 

8 

Appellate Case: 91-8039 Document: 010110239128 Date Filed: 04/03/1992 Page: 8 
practices in initially extending debtor credit, there was nothing 

to put creditor on "notice of anything being amiss"). But cf. 

Manufacturer's Hanover Trust Co. v. Ward (In re Ward), 857 F.2d 

1082, 1085 (6th Cir. 1988) (reliance on debtor's implied 

representations is unreasonable if creditor failed to obtain 

credit report before issuing card) (dicta). It was, therefore, not 

reversible error for the bankruptcy and district courts not to 

address specifically the issue of the Bank's reliance. 

The judgment of the United States District Court for the 

District of Wyoming, affirming the bankruptcy court's decision is, 

therefore, AFFIRMED. 

Entered for the Court 

James E. Barrett 

Senior Circuit Judge 

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