In the

United States Court of Appeals

For the Seventh Circuit

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No. 03-3299

In re: SHMUEL E. GULEVSKY, 

Debtor.

BLAKE BERKSON,

Plaintiff-Appellant,

v.

SHMUEL E. GULEVSKY,

Defendant-Appellee.

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Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 02 CV 6594—Blanche M. Manning, Judge.

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ARGUED FEBRUARY 19, 2004—DECIDED MARCH 31, 2004 

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Before CUDAHY, POSNER, and ROVNER, Circuit Judges.

ROVNER, Circuit Judge. Section 523(a)(2)(B) of the

Bankruptcy Code makes nondischargeable debts procured

by written misrepresentations of the debtor’s financial

condition. But does § 523(a)(6) allow for debts procured by

oral misrepresentations of the debtor’s financial condition

to be found nondischargeable? The bankruptcy court

answered that question negatively and dismissed the com-
2 No. 03-3299

plaint, and in a summary order, the district court affirmed.

We agree with those courts and affirm the judgment of the

district court.

Because this case was dismissed under Rule 12(b)(6)

for failure to state a claim, we review this case de novo,

accepting the allegations of the complaint as true. Enodis

Corp. v. Employers Insurance of Wausau (In re Consolidated

Indus. Corp.), No. 02-4030, slip op. at 5 (7th Cir. March 9,

2004).

In his complaint, Berkson alleged that he was working on

behalf of a real estate developer soliciting equity contributions for a project in La Jolla, California. In March 1995,

Gulevsky contracted to invest just under $1.2 million in the

project. But he did not make his payment by the required

date. Instead, Gulevsky allegedly made “repeated assurances” that he would assemble the funds he owed from

various accounts. At the end of the month the developer told

Berkson that he needed $100,000 from Gulevsky immediately in order for the project to go forward. Berkson passed

this information to Gulevsky, who told him that he had the

funds to fully fund his equity contribution, but that he

needed time to assemble the money because it was tied up.

Gulevsky asked Berkson to pay the $100,000 for him,

advising that he would reimburse Berkson shortly thereafter. So Berkson agreed to make the payment on Gulevsky’s

behalf. Gulevsky never made any further contributions to

the project. After the developer notified Gulevsky that he

was in breach of their contract, Gulevsky formally withdrew

from the project. Gulevsky never repaid Berkson, and

Berkson was not able to recover the $100,000 from the

project developer. Berkson alleges that Gulevsky knew that

he had no realistic prospect to repay the $100,000 at the

time he asked for the loan.

Berkson obtained a judgment in 1997 against Gulevsky

for $124,000. Berkson filed this adversary complaint to
No. 03-3299 3

have the debt declared nondischargeable under 11 U.S.C. §

523(a)(2)(A) and 11 U.S.C. § 523(a)(6). In an oral decision,

the bankruptcy court found that because Gulevsky’s

misrepresentations were of his financial condition, and were

oral, they were not actionable under any part of § 523(a)(2).

The court further found that Berkson did not state a claim

under § 523(a)(6) because allowing a creditor to proceed

under that section would render the writing requirement of

§ 523(a)(2)(B) superfluous. See McCrary v. Barrack (In re

Barrack), 217 B.R. 598, 606 (9th Cir. BAP 1998); Jefferey M.

Goldberg & Assoc. v. Holstein (In re Holstein), 272 B.R. 463,

482 (Bankr. N.D.Ill. 2001); Weiss v. Alicea (In re Alicea), 230

B.R. 492, 508 (Bankr. S.D.N.Y. 1999).

Berkson argues that under the interpretation of

§ 523(a)(6) adopted by the Supreme Court in Kawaauhau v.

Geiger, 523 U.S. 57, 61-62 (1998), the standard required to

bring a claim under § 523(a)(6) is more exacting than that

required under § 523(a)(2)(B), and thereby does not render

the writing requirement superfluous. Rather, Berkson reads

the two provisions as making it easier for a creditor to prove

a written fraud compared to an oral fraud.

The normal rules of statutory construction and interpretation of § 523 work against Berkson’s position. Exceptions to discharge are to be construed narrowly, and the

subsections of § 523 should not be construed to make others

superfluous. Kawaauhau, 523 U.S. at 62; In re Chambers,

348 F.3d 650, 654 (7th Cir. 2003). Furthermore, when both

a specific and a general provision govern a situation, the

specific one controls. Morales v. Trans World Airlines, Inc.,

504 U.S. 374, 384-85 (1992); In re Lifschultz Fast Freight

Corp., 63 F.3d 621, 628 (7th Cir. 1995). 

Berkson’s complaint alleges that the Debtor supplied him

with false statements about the Debtor’s financial condition

to induce him to make a loan. Fraud, of course, is an

intentional tort and § 523(a)(6) makes many intentional
4 No. 03-3299

torts nondischargeable. Kawaauhau, 523 U.S. at 61; In re

Williams, 337 F.3d 504, 508 (5th Cir. 2003); In re Diamond,

285 F.3d 822, 828 (9th Cir. 2002). But § 523(a)(6) cannot

make all debts procured by fraud nondischargeable, because

that would make superfluous § 523(a)(2), § 523(a)(4), and §

523(a)(11), all of which make different sorts of debts

procured by fraud nondischargeable. Berkson argues that

because § 523(a)(6) requires a higher standard of proof than

§ 523(a)(2), the two subsections do not overlap. Berkson’s

brief does not indicate exactly what the differing standards

are in the two subsections, but at oral argument, Berkson

suggested that the difference was that under Kawaauhau,

§ 523(a)(6) requires a creditor to prove that the injury was

intended, which is unnecessary under § 523(a)(2)(B).

Berkson argues that because of this, a creditor seeking to

hold a debt nondischargeable based on a false written

financial statement has an easier burden under

§ 523(a)(2)(B) than a creditor proceeding under § 523(a)(6).

But the distinction Berkson wishes to draw between

§ 523(a)(2)(B) and § 523(a)(6) is vanishingly thin. For although § 523(a)(6) does require proof that the injury was

intended, § 523(a)(2)(B) requires proof that the debtor had

the intent to deceive. We do not believe that any rational

distinction can be drawn between these two different intent

formulations, at least on the facts of this case. A debtor who

obtains money through false statements intended to deceive

by definition intends the financial injury that he causes.

Berkson’s argument therefore fails. 

The few other courts that have been confronted with the

dischargeability of false oral statements of financial condition are unanimous that § 523(a)(6) cannot be used to

circumvent § 523(a)(2)(B)’s writing requirement. See

Spencer v. Bogdanovich (In re Bogdanovich), 292 F.3d 104,

114-15 (2d Cir. 2002); McCrary v. Barrack (In re Barrack),

217 B.R. 598, 606 (9th Cir. BAP 1998); Jefferey M. Goldberg

& Assoc. v. Holstein (In re Holstein), 272 B.R. 463, 482
No. 03-3299 5

(Bankr. N.D.Ill. 2001); Weiss v. Alicea (In re Alicea), 230

B.R. 492, 508 (Bankr. S.D.N.Y. 1999). We agree that

creditors should not be able to use § 523(a)(6) in that way,

in no small part because of the Pandora’s box that would be

opened in the absence of § 523(a)(2)(B)’s writing requirement. 

Finally, we note that in the conclusion of his brief,

Gulevsky requests sanctions against Berkson for filing a

frivolous appeal. The request will not be granted because it

does not comply with the requirements of Federal Rule of

Appellate Procedure 38, which requires sanctions requests

to be presented in a “separately filed motion.” See

McDonough v. Royal Carribean Cruises, Ltd., 48 F.3d 256,

258 (7th Cir. 1995). Although the rule does allow this court

to sua sponte initiate sanctions proceedings, that power is

discretionary. See Fed.R.App.P. 38; Pokuta v. Trans World

Airlines, 191 F.3d 834, 841 (7th Cir. 1999). In any event, we

do not believe that sanctions are warranted in this case. An

appeal is frivolous when the appellant’s arguments are

utterly meritless and have no conceivable chance of success.

E.g., Jimenez v. Madison Area Technical College, 321 F.3d

652, 657-58 (7th Cir. 2003); United States v. Insurance

Consultants of Knox, Inc., 187 F.3d 755, 761 (7th Cir. 1999).

Berkson’s brief is relatively insubstantial but his argument

is not so foreclosed by precedent that it warrants sanctions.

AFFIRMED
6 No. 03-3299

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—3-31-04