PUBLISH 

UNITED STATES BANKRUPTCY APPELLATE PANEL 

OF THE TENTH CIRCUIT 

_________________________________ 

IN RE RESON LEE WOODS and SHAUN 

WOODS, 

 Debtors. 

___________________________________ 

GRANGE INSURANCE ASSOCIATION, 

 Plaintiff - Appellee, 

v. 

RESON LEE WOODS and SHAUN 

WOODS, 

 Defendants - Appellants.

BAP No. CO-23-012

Bankr. No. 21-15592 

Adv. No. 22-01108 

Chapter 7 

OPINION 

_________________________________ 

Appeal from the United States Bankruptcy Court 

for the District of Colorado 

_________________________________ 

Drew Moore of Grand Junction, Colorado for Defendant – Appellants. 

Martin E. Long of Long & Long P.C., Denver, Colorado for Plaintiff – Appellee. 

_________________________________ 

Before JACOBVITZ, LOYD, and THURMAN, Bankruptcy Judges. 

_________________________________ 

JACOBVITZ, Bankruptcy Judge. 

Mistakes happen, but mistakes, by definition, are not the result of clearly planned 

efforts. Appellant-Debtors, Shaun and Reson Lee (“Lee”) Woods, contend that Shaun 

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Woods mistakenly submitted a receipt for a riding lawn mower and a bill of sale for a 

diamond ring in support of replacement cash value insurance claims for the mower and 

ring lost in a fire. These replacement cash value claims initiated Appellee Grange 

Insurance Company’s (“Grange”) insurance fraud claim in a Colorado state district court. 

On summary judgment, the state court found Lee and Shaun Woods committed insurance 

fraud by submitting claims for payment for loss of the mower and ring based on 

fabricated documentation and concluded that the fraud voided the insurance contract 

entitling Grange to recover all the funds it paid under their insurance policy. The state 

court entered a summary judgment against Lee and Shaun Woods in the amount of 

$582,122.79. The Colorado Court of Appeals affirmed.

Armed with these decisions, the Bankruptcy Court determined the state court 

rulings precluded further litigation of the fraud issue in the nondischargeability adversary 

proceeding and granted Grange’s motion for summary judgment under § 523(a)(2)(A)1

on the theory of actual fraud, which it determined does not require proof of justifiable 

reliance. In the alternative, the Bankruptcy Court determined that Grange justifiably 

relied on the fabricated documentation. 

But that is not the entire story. Grange paid at most $1,186.58 on the replacement 

cash value claim for the mower, and it made no payment on the claim for the ring. The 

Debtors, having obtained at most $1,186.58 by fraud, both ended up with a $582,122.79 

nondischargeable judgment. The Debtors appealed.

1 Unless other specified, references to “section” and “§” are to sections of title 11 

of the United States Code. 

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We agree that the Bankruptcy Court properly determined that Shaun Woods made 

false representations with intent to deceive based on the issue-preclusive effect of the 

state court judgment. But the Bankruptcy Court erred when it ruled that Grange was not 

required to prove justifiable reliance under § 523(a)(2)(A) on a theory of actual fraud

and, in the alternative, determined that there was no genuine dispute of material fact with 

respect to proof of justifiable reliance under § 523(a)(2)(A). There is also a genuine 

dispute of material fact regarding whether Grange suffered a loss because of the false 

representations, precluding summary judgment. 

Accordingly, we REVERSE and REMAND to the Bankruptcy Court for further 

proceedings consistent with this opinion.

I. Background

A. The Insurance Dispute

The Debtors owned a farm near Ignacio, Colorado and bought an insurance policy 

(the “Policy”) from Grange in 2016. The Policy included coverage on the farm, the 

residence on the farm, and the Debtors’ personal property. In 2017, the farmhouse, where 

the Debtors resided, burned down. 

The Debtors then submitted insurance claims to Grange related to the farmhouse, 

use of the farmhouse, and personal property damaged in the fire. A dispute arose as to the 

value of the farmhouse. The parties attempted to settle the dispute, but the bank holding a 

mortgage against the property would not agree to the settlement and negotiations ended. 

Grange then, in accordance with the Policy, initiated a declaratory judgment action before 

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a Colorado state court (the “State District Court”) to obtain a judicial valuation of the 

farmhouse (the “State Court Litigation”). 

The Debtors answered the complaint and asserted counterclaims for, among other 

things, breach of contract, bad faith, and violation of the Colorado Consumer Protection 

Act. The State District Court valued the farmhouse at $354,660.11. Grange tendered a 

check in that amount to the Debtors. Grange paid the Debtors additional amounts on their 

claims for loss of use of the farmhouse and damage to personal property. That included 

payment of claims for the actual cash value of damaged personal property, which did not 

require submission of documentation in support of the claims.

Despite continuing to dispute the amount Grange owed for damage to the 

farmhouse, the Debtors cashed the check for the court-determined value. The Debtors 

then had their counsel reach out to Grange to see what other claims Grange would 

consider for reimbursement. Grange’s counsel responded by email that Grange would 

“entertain any submissions made pursuant to the terms of the policy.”2 Following this 

email, the Debtors submitted replacement cash value claims with supporting 

documentation for various items of personal property under the contents provision of the 

Policy, seeking the difference between the replacement cash value and the actual cash 

value Grange had already paid. Unlike actual cash value claims, the Policy required that 

replacement cash value claims be supported by appropriate documentation.

2 November 20, 2018 email from Stuart Morse, in Appellants’ App. at 114.

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The Debtors’ replacement cash value claims included claims for a Kubota Mower 

Z-122 R-42 riding lawn mower (the “Mower”) and a diamond ring (the “Ring”). The 

documentation Shaun Woods submitted to Grange in support of these replacement cash 

value claims included a purported receipt and a purported bill of sale showing that the 

Debtors purchased the Mower from Jose Sergio Verboonen for $3,825 and purchased the 

Ring from Italian Design Jewelers for $2,900.

The day after the Debtors submitted the claims, Grange sent a letter and check for 

$2,817.48 representing the difference between the replacement cash value and the 

previously paid actual cash value for the replacement cash value claims it decided to pay. 

Grange attached to the letter various documents Shaun Woods had submitted with 

follow-up requests noted for the claims it would not pay without further documentation. 

The claim for the Ring was among the claims Grange would not pay without further 

documentation. The $2,817.48 check included $1,186.58 in payment of the replacement 

cash value claim for the Mower. The same day Grange sent the letter and check to the 

Debtors, it also served them with its first set of discovery requests relating to the claim

for the Mower. Following this set of discovery requests, the Debtors’ counsel emailed 

Grange’s counsel offering to return the $2,817.48 check to Grange or to destroy it. The 

Debtors then filed a response to the first set of discovery requests contending Shaun 

Woods mistakenly included the Mower receipt in support of the claims. 

Grange then served the Debtors with a second set of discovery requests. Through 

those requests, Grange obtained an admission that the Debtors did not purchase the 

Mower from Jose Sergio Verboonen for $3,825. In defense, Shaun Woods stated: “I 

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made a clerical error in creating an invoice for reimbursement for the Kubota Mower by 

including Jose Sergio Verboonen as the seller.”3 In fact, Dr. Verboonen was a medical 

doctor who performed gastric sleeve surgery on Shaun Woods in Tijuana, Mexico at a 

cost of $3,825. Similarly, in the same discovery response, Shaun Woods admitted that 

she did not purchase the Ring from Italian Design Jewelers for $2,900. Shaun Woods 

maintained that she “mistakenly” submitted the claims for the Mower and the Ring. Lee 

Woods continued to assert he had no knowledge of or involvement in these acts. 

Following these admissions, Grange amended its state court complaint to include 

insurance fraud and breach of contract claims related to the false replacement cash value

claims for the Mower and the Ring. Grange also filed a motion for summary judgment 

contending the Debtors submitted false and misleading information in support of their 

insurance claims. On August 2, 2019, the State District Court granted Grange’s motion 

for summary judgment determining “[t]he facts establish that [the Debtors] engaged in 

fraud in presenting the claimed losses for payment.”4

The State District Court further determined the fraudulent conduct triggered the 

fraud provision in the Policy, voiding the insurance contract and entitling Grange to 

recover all benefits it had paid to the Debtors under the Policy as permitted under 

Colorado law. The State District Court entered a summary judgment against the Debtors 

(the “State Court Judgment”) for $579,339.15 plus costs of $2,783.64, for a total of 

3 Response to Petitioner’s Second Set of Written Discovery to Respondents at 2, in 

Appellants’ App. at 188.

4 State Court Judgment, in Appellants’ App. at 195.

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$582,122.79 (the “Judgment Debt”). The State District Court also denied the Debtors’

counterclaims. Subsequently, the Debtors appealed, and after de novo review, the 

Colorado Court of Appeals affirmed the State Court Judgment. The Debtors then filed a 

petition for writ of certiorari to the Colorado Supreme Court, which denied the petition. 

The State District Court summary judgment is a final judgment.

B. The Bankruptcy 

On November 8, 2021, the Debtors commenced their voluntary chapter 7 case. 

Grange then filed a proof of claim and an adversary proceeding seeking to have the 

Judgment Debt declared nondischargeable under § 523(a)(2)(A) and (a)(6). Grange filed 

a motion for summary judgment (the “MSJ”) in the adversary proceeding, asserting the 

State Court Judgment should be given preclusive effect to establish the necessary 

elements for nondischargeability under § 523(a)(2)(A) on an actual fraud theory. The 

Bankruptcy Court agreed and determined that the entire Judgment Debt was 

nondischargeable as to both Debtors under § 523(a)(2)(A). The Bankruptcy Court did not 

address the § 523(a)(6) claim. The Debtors appealed. 

II. Jurisdiction

The Tenth Circuit Bankruptcy Appellate Panel has jurisdiction to hear timely filed 

appeals from “final judgments, orders, and decrees” of bankruptcy courts within the 

Tenth Circuit, unless a party timely elects to have the district court hear the appeal.5 The 

Debtors timely filed an appeal of the Bankruptcy Court’s Order Granting Motion for 

5 28 U.S.C. § 158(a)(1), (b)(1), and (c)(1); Fed. R. Bankr. P. 8003, 8005.

BAP Appeal No. 23-12 Docket No. 83 Filed: 07/11/2024 Page: 7 of 28
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Summary Judgment. Because the order did not appear to be a final order, on May 16, 

2023, this Court entered its Order Regarding Rule 54(b) Certification requiring the 

Debtors to secure a Rule 54(b) certification or an order explicitly adjudicating all claims 

from the Bankruptcy Court.6 On May 22, 2023, the Bankruptcy Court entered an order 

making a Rule 54(b) certification that there was no just reason for delay.

7 Following the 

Bankruptcy Court’s Rule 54(b) certification, on May 24, 2023, this Court entered its 

Order Allowing Appeal to Proceed concluding the Order Granting Motion for Summary 

Judgment was a final appealable order.8 No party has elected to have the district court 

hear the appeal. Accordingly, this Court has jurisdiction to hear and decide this appeal.

III. Statement of Issues, the Standard of Review, and Summary Judgment 

Standards

A. The Issues on Appeal

There are four issues on appeal from the Bankruptcy Court’s Order Granting 

Motion for Summary Judgment. First, whether the Bankruptcy Court erred by granting 

summary judgment in favor of Grange on the § 523(a)(2)(A) nondischargeability claim 

by giving preclusive effect to the State Court Judgment to establish the Debtors obtained 

the Judgment Debt by actual fraud. Second, whether the Bankruptcy Court erred by 

determining, in the alternative, that there was no genuine dispute of material fact with 

respect to proof of justifiable reliance under § 523(a)(2)(A). Third, whether the 

Bankruptcy Court erred by determining the entire Judgment Debt was nondischargeable. 

6 Order Regarding Rule 54(b) Certification, in Appellants’ App. at 4128.

7 Judgment Pursuant to Fed. R. Civ. P. 54(b), in Appellants’ App. at 4131.

8 Order Allowing Appeal to Proceed, in Appellants’ App. at 4133.

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And fourth, whether the Bankruptcy Court erred by determining the entire Judgment 

Debt was nondischargeable as to Lee Woods who claims he is an innocent spouse. 

B. The Standard of Review

We review the Bankruptcy Court’s grant of summary judgment de novo.

9 “De 

novo review requires an independent determination of the issues, giving no special 

weight to the bankruptcy court’s decision.”10 Accordingly, we give no deference to the 

Bankruptcy Court’s decision but apply the same standard as the Bankruptcy Court.11

C. The Summary Judgment Standard

Summary judgment will be granted when, taking the evidence in the light most 

favorable to the non-moving party, the moving party shows that there is no genuine 

dispute as to any material fact and the moving party is entitled to judgment as a matter of 

law.12 The moving party bears the initial burden to show the absence of a genuine dispute 

9 Harris v. Beneficial Okla., Inc. (In re Harris), 209 B.R. 990, 993 (10th Cir. BAP 

1997) (“The grant or denial of summary judgment is reviewed de novo.”); see also Dodge 

v. Cotter Corp., 203 F.3d 1190, 1197 (10th Cir. 2000) (reviewing the trial court’s “entry 

of summary judgment barring claims under the doctrine of collateral estoppel de novo, 

construing the record in the light most favorable to the non-moving party and drawing all 

inferences in that party’s favor”); Missouri v. Audley (In re Audley), 275 B.R. 383, 386

(10th Cir. BAP 2002) (reviewing the bankruptcy court’s decision to give collateral 

estoppel effect on summary judgment de novo).

10 In re Liehr, 439 B.R. 179, 182 (10th Cir. BAP 2010) (citing Salve Regina Coll. 

v. Russell, 499 U.S. 225, 238 (1991)).

11 Carlile v. Reliance Standard Life Ins. Co., 988 F.3d 1217, 1221 (10th Cir. 

2021).

12 Fed. R. Civ. P. 56(a) made applicable by Fed. R. Bankr. P. 7056.

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as to any material fact and that it is entitled to judgment as a matter of law,13 even if the 

nonmovant fails to respond to the motion.14

As part of its initial burden, the moving party must identify the material facts with 

respect to which it asserts no genuine dispute exists, properly supported by evidence, 

admissions, and other materials in the record.15 Although the court must review the 

materials submitted by the parties in support of or in opposition to summary judgment 

that are adequately brought to its attention, the court may but is not required to consider 

other materials in the record.16

If the moving party fails to properly support a material fact it asserts is not in 

genuine dispute or a nonmoving party fails to address the movant’s assertion of a fact, as 

required by Rule 56(c), the court may:

(1) give [the movant] an opportunity to properly support or [a nonmovant 

an opportunity to properly support or] address the fact;

(2) consider the fact undisputed for purposes of the motion;

(3) grant summary judgment if the motion and supporting materials—

including the facts considered undisputed—show that the movant is 

entitled to it; or

13 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (The “party seeking 

summary judgment always bears the initial responsibility of informing the . . . court of 

the basis for its motion, and . . . demonstrat[ing] the absence of a genuine issue of 

material fact.”); Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 

1991) (“The moving party has the initial burden to show ‘that there is an absence of 

evidence to support the nonmoving party’s case.’”) (quoting Celotex Corp., 477 U.S. at 

325)).

14 Fed. R. Civ. P. 56(a); Perez v. El Tequila, LLC, 847 F.3d 1247, 1254 (10th Cir. 

2017).

15 Fed. R. Civ. P. 56(c)(1).

16 See Lazy S Ranch Props., LLC v. Valero Terminaling & Distrib. Co., 92 F. 4th 

1189, 1198 (10th Cir. 2024) (the court need only review the materials adequately brought 

to its attention); Torry v. City of Chicago, 932 F. 3d 579, 584 (7th Cir. 2019) (citing Fed. 

R. Civ. P. 56(c)(3)); Spencer v. Abbott, 731 F. App’x 731, 738 (10th Cir. 2017) (same).

BAP Appeal No. 23-12 Docket No. 83 Filed: 07/11/2024 Page: 10 of 28
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(4) issue any other appropriate order.”17

When determining whether summary judgment should be granted, the Court must 

“examine the factual record and reasonable inferences therefrom in the light most 

favorable to the party opposing summary judgment.”18 Under this standard, summary 

judgment is appropriate “if the evidence points only one way and no reasonable 

inferences could support the non-moving party’s position.”19 In other words, no genuine 

dispute of material fact exists if “the record taken as a whole could not lead a rational 

trier of fact to find for the non-moving party.”20

IV. Analysis

Determining whether a debt is nondischargeable is a two-step process.21 First, the 

creditor must establish a debt is owed by the debtor to the creditor under applicable 

nonbankruptcy law.22 If that showing is made, the creditor must then show that the debt is 

excepted from the discharge.23

17 Fed. R. Civ. P. 56(e) made applicable by Fed. R. Bankr. P. 7056.

18 Wolf v. Prudential Ins. Co. of Am., 50 F.3d 793, 796 (10th Cir. 1995) (quoting 

Applied Genetics Int’l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir. 

1990)); see also Genberg v. Porter, 882 F.3d 1249, 1253 (10th Cir. 2018) (same).

19 Genberg, 882 F.3d at 1253. 

20 Matsushita Elec. Indus. Co., Ltd., v. Zenith Radio Corp., 475 U.S. 574, 587 

(1986).

21 Glencove Holdings, LLC v. Bloom (In re Bloom), 634 B.R. 559, 579 (10th Cir. 

BAP 2021), aff’d, No. 22-1005, 2022 WL 2679049 (10th Cir. July 12, 2022).

22 Id.

23 Id.; accord Smithyman v. Crawford (In re Crawford), No. 22-52999-WLH, 

2023 WL 6307067, at *7 (Bankr. N.D. Ga. Sept. 27, 2023); Amex Elec. Servs. Dallas–

Fort Worth, Inc. v. Molinar (In re Molinar), No. 21-31109-SWE-7, 2023 WL 4414409, at 

*2 (Bankr. N.D. Tex. July 7, 2023); Burkhalter v. Burkhalter (In re Burkhalter), 635 B.R. 

284, 289 (Bankr. N.D. Miss. 2022); Williams v. Jackson (In re Jackson), 625 B.R. 906, 

919 (Bankr. C.D. Ill. 2021).

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The first step, establishing a debt is owing by the debtor to the creditor, is not at 

issue on appeal. The State District Court entered a final summary judgment in favor of

Grange and against the Debtors in the amount of $579,339.15 plus costs of $2,783.64

under an insurance contract and a Colorado insurance fraud statute. The parties do not 

dispute the claim preclusive effect of that judgment. The second step, which requires the 

creditor to show that the debt is excepted from the discharge, is at issue on appeal. The 

Bankruptcy Court ruled, by summary judgment, that the debt at issue is excepted from 

the discharge under § 523(a)(2)(A).

A. The Bankruptcy Court erred insofar as it ruled that Grange was not 

required to prove reliance to establish a debt is nondischargeable under 

§ 523(a)(2)(A) based on “actual fraud.”

The Bankruptcy Court ruled that Grange was not required to prove reliance to 

establish a nondischargeable “actual fraud” claim under § 523(a)(2)(A). The Bankruptcy 

Court explained that under Colorado law, insurance fraud requires proof of a materially 

false statement by the insured with the intent to deceive the insurer and induce it to pay 

more under the insurance policy than the amount of the loss sustained. The Bankruptcy 

Court determined that the State Court Judgment established that the Debtors were liable 

for insurance fraud and gave the State Court Judgment issue-preclusive effect to establish 

that the Debtors acted with fraudulent intent by submitting fraudulent insurance claims 

for payment to deceive Grange and induce it to pay more under the Policy. The 

Bankruptcy Court further concluded those preclusive findings were sufficient to meet the 

elements of “actual fraud” under § 523(a)(2)(A) without Grange’s justifiable reliance. We 

disagree.

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Section 523(a)(2)(A) provides,

(a) A discharge under section 727, 1141, 1192, 1228(a), 1228(b), or 

1328(b) 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—

(A)false pretenses, a false representation, or actual fraud, other 

than a statement respecting the debtor’s or an insider’s 

financial condition[.]24

“Actual fraud,” as used in § 523(a)(2)(A), overlaps with false pretenses and false 

representations. As explained in the discussion of Supreme Court authority below, even if 

the creditor asserts “actual fraud” as a basis for its nondischargeability claim, a claim of 

nondischargeability under § 523(a)(2)(A) requires proof of justifiable reliance if the 

alleged fraud was perpetrated by a false representation.

25

In Husky International Electronics, Inc. v. Ritz,

26 the United States Supreme Court 

resolved a circuit split regarding whether “actual fraud” in § 523(a)(2)(A) necessarily 

requires a misrepresentation.27 The Supreme Court ruled that “actual fraud” is difficult to 

define precisely but “connotes deception or trickery” that is “done with wrongful intent,”

and the fraud must be “actual” “in contrast to ‘implied’ fraud or fraud ‘in law.’”28 The 

24 11 U.S.C. § 523(a)(2)(A).

25 See Field v. Mans, 516 U.S. 59, 61 (1995) (holding that there is a justifiable 

reliance requirement to except a debt from discharge under § 523(a)(2)(A) based on a 

false representation, which is a form of inducement-based fraud); see also Johnson v. 

Riebesell (In re Riebesell), 586 F.3d 782, 789 n.3 (10th Cir. 2009). 26 578 U.S. 355 (2016).

27 Id. at 360. 28 Id.

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Supreme Court held: (a) “[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,”29 and (b) proof of reliance is not required to except a debt from discharge 

under § 523(a)(2)(A) based on a fraud that is not an inducement-based fraud, such as a 

fraudulent conveyance scheme.30

These holdings are consistent with and expand upon the Supreme Court decision 

Field v. Mans,

31 which held that excepting a debt from discharge under § 523(a)(2)(A) 

based on a false representation requires proof of justifiable reliance.32 Husky

distinguished Field on the basis that Field involved a misrepresentation, which is a form 

of inducement-based fraud (that is, a fraud that induces a creditor’s reliance) requiring

proof of justifiable reliance, whereas Husky involved a fraud perpetrated through a 

fraudulent conveyance scheme, which is not an inducement-based fraud.33

Read together, Husky and Field stand for the proposition that proof of reliance is 

not required by § 523(a)(2)(A) if the fraud at issue is not of a type that induces reliance, 

but proof of justifiable reliance is required if the fraud at issue is a false representation 

because that is a form of fraud that induces a creditor’s reliance. Proof of justifiable 

reliance, therefore, is required to except a debt from discharge based on a false 

29 Id. at 359. 30 Id. at 365–66. 31 516 U.S. 59 (1995).

32 Id. at 61. 33 See Husky, 578 U.S. at 361, 365–66.

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representation even if the creditor alleges the misrepresentation constituted “actual 

fraud.”34

Here, Shaun Woods submitted fabricated documentation to Grange in support of 

her replacement cash value insurance claims relating to the Mower and Ring to induce 

Grange to pay the claims. Submission of the fabricated documentation constituted false 

representations that the documents were genuine. That is a form of inducement-based 

fraud. Accordingly, because the fraud is premised on false representations, to establish a 

claim under § 523(a)(2)(A), Grange must prove it justifiably relied on the fabricated 

documentation in making payment. 

The Bankruptcy Court relied on the Tenth Circuit BAP opinion In re Thompson35

for the proposition that Grange was not required to prove reliance. In Thompson, we 

reversed a summary judgment in favor of the debtor holding that “actual fraud” under 

§ 523(a)(2)(A) predicated on the debtor draining bank accounts and diverting the funds to 

other businesses owned by the debtor or his brother may constitute nondischargeable 

“actual fraud” under § 523(a)(2)(A) even though it did not induce the creditor to part with 

34 Various courts have reached a similar conclusion. See e.g., T. Levy Assocs., Inc. 

v. Kaplan (In re Kaplan), 634 B.R. 673, 687 (Bankr. E.D. Pa. 2021); GSY Corp. v. 

Hazan, Dafna v. Hazan (In re Hazan), Nos. 1-15-01070-NHL, 1-15-01071-NHL, 2018 

WL 4718976, at *6 (Bankr. E.D.N.Y. Sept. 28, 2018); Lenchner v. Korn (In re Korn), 

567 B.R. 280, 302 (Bankr. E.D. Mich. 2017); Argento v Cahill (In re Cahill), No. 15-

08298-REG, 2017 WL 713565, at *7 (Bankr. E.D.N.Y. Feb. 22, 2017). But see Rajsic v. 

Valley Forge Ins. Co., 574 B.R. 312, 319 (S.D. Fla. 2017) (refusing to make a specific 

finding of justifiable reliance in the case of actual fraud but conceding that “[a]ny other 

finding would lead to absurd results and frustrate the Bankruptcy Code.”). 

35 555 B.R. 1 (10th Cir. BAP 2016). 

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property or extend credit.36 The fraud alleged in Thompson, like a fraudulent conveyance 

scheme, is not an inducement-based fraud. By contrast, the fraud perpetrated by Shaun 

Woods is an inducement-based fraud, which requires proof of justifiable reliance to 

establish a nondischargeable debt under § 523(a)(2)(A). 

Because the fraud at issue here is inducement based, we conclude the Bankruptcy 

Court applied the incorrect standard. 

B. The facts not subject to genuine dispute establish some, but not all, of the 

elements Grange must prove to establish a nondischargeable debt under 

§ 523(a)(2)(A). 

Tenth Circuit authority is clear that to prevail on a nondischargeability claim under 

§ 523(a)(2)(A) based on a misrepresentation, where the debtor is the perpetrator of the 

fraud,37 the creditor must establish the following elements by a preponderance of the 

evidence:38 

(a) The debtor made a false representation; 

(b) The debtor made the representation with the intent to deceive the creditor; 

(c) The creditor relied on the representation; 

(d) The creditor’s reliance was justifiable; and 

(e) The debtor’s representation caused the creditor to sustain a loss.39

36 Id. at 10, 12. 

37 This limitation is based on Bartenwerfer v. Buckley, 598 U.S. 69 (2023), which 

holds that in certain circumstances, a debt of an innocent debtor may be nondischargeable 

under § 523(a)(2)(A). As of the date of this opinion, the Tenth Circuit has not specifically 

addressed this issue. 

38 See Grogan v. Garner, 498 U.S. 279, 287 (1991) (establishing preponderance of 

the evidence standard for nondischargeability claims). 

39 In re Young, 91 F.3d 1367, 1373 (10th Cir. 1996). Young expressed the fourth 

element as requiring “reasonable” reliance. The Tenth Circuit has since clarified that 

under Field v. Mans, 516 U.S. 59, 74–75 (1995), the fourth element requires “justifiable” 

reliance. Johnson v. Riebesell (In re Riebesell), 586 F.3d 782, 789 n.3, 792 (10th Cir. 

2009). 

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Here, the Debtors did not contest any of the facts included in Grange’s motion for 

summary judgment, and the Bankruptcy Court treated those facts as undisputed for 

purposes of the motion for summary judgment in accordance with Federal Rule of Civil 

Procedure 56(e)(2). 

1. The First and Second Requirements: The State Court Judgment 

preclusively establishes that Shaun Woods made false representations 

with intent to deceive Grange. 

The Bankruptcy Court determined that the issue-preclusive effect of the State 

Court Judgment establishes that Shaun Woods made false representations with the intent 

to deceive Grange when she submitted fabricated documents in support of the Debtors’ 

replacement cash value claims for the Mower and Ring. We agree.40

Issue preclusion, also known as collateral estoppel, bars relitigation of issues of 

fact determined in a prior state court action resulting in a final judgment, and may be 

invoked to establish the nondischargeability of a particular debt in a subsequent 

bankruptcy case.

41 A federal court reviews the preclusive effect of a state court judgment 

under the issue preclusion doctrine of the state in which the judgment was rendered—in 

40 The Bankruptcy Court also determined that the preclusive effect of the State 

Court Judgment established that Lee Woods participated in the fraud, and, in any event, 

Lee Woods’ debt is nondischargeable even if he is an innocent spouse. We do not need 

to, and therefore do not, reach those issues. 

41 Klemens v. Wallace (In re Wallace), 840 F.2d 762, 764 (10th Cir. 1988); see 

also Grogan, 498 U.S. at 284 n.11 (“[C]ollateral estoppel [issue preclusion] principles do 

indeed apply in discharge exception proceedings pursuant to § 523(a).”); Taylor v. Jasper 

(In re Jasper), Nos. NM-06-092, 07-05-14282-SA, 05-1192-S, 356 B.R. 787, at *3 (10th 

Cir. BAP 2007) (unpublished) (“Collateral estoppel [issue preclusion] may be applied in 

bankruptcy proceedings to determine dischargeability of a debt.”), aff’d, 312 F. App’x. 

97 (10th Cir. 2008). 

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this case, Colorado.42 In Colorado, for a court to give a final judgment in a prior 

proceeding issue-preclusive effect, four requirements must be satisfied: 

(1) The issue precluded is identical to an issue actually litigated and 

necessarily adjudicated in the prior proceeding; (2) The party against whom 

estoppel was sought was a party to or was in privity with a party to the prior 

proceeding; (3) There was a final judgment on the merits in the prior 

proceeding; and (4) The party against whom the doctrine is asserted had a 

full and fair opportunity to litigate the issues in the prior proceeding.43

Here, the Debtors dispute only whether the issues precluded are identical to the issues 

actually litigated in the State Court Litigation. The Debtors contend that the Bankruptcy 

Court erred by applying issue preclusion because insurance fraud under Colorado law 

differs from “actual fraud” under § 523(a)(2)(A).

The Colorado insurance fraud statute provides: 

A fraudulent insurance act is committed if a person knowingly and with 

intent to defraud presents, causes to be presented, or prepares with 

knowledge or belief that it will be presented to or by an insurer, a purported 

insurer, or any insurance producer any written statement as part or in support 

of an application for the issuance or the rating of an insurance policy or a 

claim for payment or other benefit pursuant to an insurance policy that the 

person knows to contain false information concerning any fact material to 

the application or claim or if the person knowingly and with intent to defraud 

or mislead conceals information concerning any fact material related to the 

application or claim.44

There is an identity of issues with respect to (1) Grange’s insurance fraud claim 

adjudicated in the State Court Litigation and (2) the requirements of false representation 

42 Cherry v. Neuschafer (In re Neuschafer), 514 B.R. 719, at *5 (10th Cir. BAP 

2014); Cobb v. Lewis (In re Lewis), 271 B.R. 877, 883 (10th Cir. BAP 2002). 

43 Bebo Const. Co. v. Mattox & O’Brien, P.C., 990 P.2d 78, 84–85 (Colo. 1999) 

(quoting Michaelson v. Michaelson, 884 P.2d 695, 700–01 (Colo. 1994)).

44 Colo. Rev. Stat. Ann. § 10-1-128 (1).

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with intent to deceive needed to establish a claim under § 523(a)(2)(A). The Colorado 

insurance fraud statute required Grange to prove that Shaun Woods knowingly and with 

intent to defraud presented a false claim that contained or omitted materially false 

information. That is the functional equivalent of requiring proof of a false representation 

or false pretenses with intent to deceive.

45

The Debtors also assert Grange did not establish sufficient scienter to prove the 

Debtors’ intent to deceive Grange in the State Court Litigation, and thus, the Bankruptcy 

Court committed error by relying on the State Court Judgment to establish the Debtors’ 

intent. We disagree. The Debtors could not relitigate the State Court Judgment, and 

findings therein, before the Bankruptcy Court because the findings were entitled to issue 

preclusive effect as discussed above.

46 The Debtors’ recourse, if they disagreed with the 

State Court Judgment, was to appeal. In fact, they did, and the Colorado Court of Appeals 

affirmed the State Court Judgment.

Thus, the State Court Judgment preclusively established that Shaun Woods made 

false representations with intent to deceive Grange by submitting fabricated 

45 “False pretenses under Section 523(a)(2)(A) are implied misrepresentations 

intended to create and foster a false impression” and “‘can be defined as any series of 

events, when considered collectively, that create a contrived and misleading 

understanding of a transaction, in which a creditor is wrongfully induced to extend 

money or property to the debtor.’” Bank of Cordell v. Sturgeon (In re Sturgeon), 496 B.R. 

215, 223 (10th Cir. BAP 2013) (quoting Stevens v. Antonious (In re Antonious), 358 B.R. 

172, 182 (Bankr. E.D. Pa. 2006)). “Intent to deceive can be inferred from the totality of 

the circumstances.” Id. at 222 (citing Copper v. Lemke (In re Lemke), 423 B.R. 917, 922 

(10th Cir. BAP 2010)).

46 In re Miller, 666 F.3d 1255, 1261 (10th Cir. 2012) (observing a party’s attempt 

to relitigate an issue determined in state court is to be analyzed under issue preclusion 

principles). 

BAP Appeal No. 23-12 Docket No. 83 Filed: 07/11/2024 Page: 19 of 28
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documentation to Grange in support of the replacement cash value claims for the Mower 

and Ring. That precludes the Debtors from relitigating the first two requirements of 

Grange’s nondischargeability claim under § 523(a)(2)(A). 

2. The Third Requirement: The facts not in genuine dispute show that 

Grange relied on the false representation regarding the Mower, but not 

the Ring. 

After receiving the Debtors replacement cash value claims for a variety of items of 

personal property with supporting documentation, which included claims for the Mower 

and Ring, Grange sent the Debtors a check for $2,817.48. The Debtors did not dispute 

this fact. Although the fact is undisputed, the fact does not by itself show which claims 

were included in the payment. 

Shaun Woods’ submission of the supporting documentation relating to the Mower 

and the Ring constituted the false representations upon which Grange’s 

nondischargeability claim under § 523(a)(2)(A) is based. A review of Exhibits C, D, and 

F to the MSJ shows the check for $2,817.48 included $1,186.58 in payment for the claim 

on the Mower, but it did not include any amount in payment for the claim on the Ring or 

any other claims for which Grange required further documentation before making 

payment. Thus, Grange relied on the false representation regarding the Mower (the 

falsified receipt for the Mower) by including $1,186.58 in the check on account of the 

claim for the Mower, but it did not rely on the false representation regarding the Ring 

(the falsified invoice for the Ring) as it made no payment on that claim. 

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3. The Fourth Requirement: The facts not in genuine dispute do not show 

that Grange’s reliance on the false representation regarding the Mower 

was justifiable. 

The Debtors assert there are genuine disputes of material fact relating to the issue 

of justifiable reliance that precludes summary judgement. The Bankruptcy Court found, 

in the alternative, that Grange justifiably relied on Shaun Woods’ false representations 

based on the following: 

• The Debtors sent Grange an email asking whether they could submit 

“contents documentation” in order to get Grange to pay reimbursement for 

the items submitted. Grange responded that it would entertain such 

submissions made pursuant to the Policy. 

• The Debtors submitted their reimbursement cost claims for the Mower and 

Ring, along with numerous other items, with the intent of receiving 

reimbursement for those items from Grange. 

• One day later, and after considering the documentation, Grange sent the 

Debtors a letter and check for $2,817.48, which represented the 

replacement cash value difference owed to the Debtors for these and other 

items. 

At most this shows reliance, not justifiable reliance.47 But because we may affirm 

a grant of summary judgment on grounds other than those relied on by the Bankruptcy 

Court,48 we will independently analyze whether the facts not in genuine dispute before 

the Bankruptcy Court showed Grange justifiably relied on the false representation 

relating to the Mower. 

47 But Grange’s proffered evidence shows it made no payment of the replacement 

cash value claim for the Ring. Therefore, there was no reliance with respect to that claim. 

48 Stewart v. City of Okla. City, 47 F.4th 1125, 1132 (10th Cir. 2022) (“[W]e 

may affirm a grant of summary judgment ‘on grounds other than those relied on by the 

district court when the record contains an adequate and independent basis for that 

result.’”) (quoting Bones v. Honeywell Int’l, Inc., 366 F.3d 869, 875 (10th Cir. 2004)). 

BAP Appeal No. 23-12 Docket No. 83 Filed: 07/11/2024 Page: 21 of 28
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(a) The Justifiable Reliance Standard 

To prove justifiable reliance, a creditor need not show that it acted consistent with 

ordinary prudence and care.49 Instead, to determine whether a creditor’s actual reliance 

was justifiable, the Court applies a subjective standard that takes into account the 

qualities and characteristics of the particular creditor,50 not a community standard of 

conduct applicable to all cases.51 To justifiably rely, a party is “required to use its senses, 

and cannot recover if it blindly relies upon a misrepresentation, the falsity of which 

would be patent to it if it had utilized its opportunity to make a cursory examination or 

investigation.”52 In other words, 

justifiable reliance is the standard applicable to a victim’s conduct in cases 

of alleged misrepresentation and . . . “[i]t is only where, under the 

circumstances, the facts should be apparent to one of its knowledge and 

intelligence from a cursory glance, or it has discovered something which 

should serve as a warning that it is being deceived, that it is required to make 

an investigation of its own.”53 

Justifiable reliance on a false representation requires a creditor to make an 

investigation only if: (1) (a) the creditor discovers a “red flag” (which is a warning sign 

49 Backlund v. Stanley-Snow (In re Stanley-Snow), 405 B.R. 11, 23 (1st Cir. BAP 

2009); see also Field v. Mans, 516 U.S. 59, 71 (1995) (justifiable reliance does not 

require conduct that conforms with the standard of the reasonable person). 

50 Johnson v. Riebesell (In re Riebesell), 586 F.3d 782, 792 (10th Cir. 2009). 

51 Field, 516 U.S. at 71. 

52 Id. (quoting Restatement (Second) of Torts (1976), § 545A, cmt. a, with the 

pronouns “he,” him,” and “his” changed to “it.”); Com. Cash Flow, L.L.C. v. Matkins (In 

re Matkins), 605 B.R. 62, 94 (Bankr. E.D. Va. 2019) (“A plaintiff who disregards 

warning signs or ‘red flags’ cannot satisfy the justifiable reliance standard.”). 

53 Field, 516 U.S. at 71 (quoting W. Prosser, Law of Torts § 108, p. 718 (4th 

ed.1971), with the pronouns “he,” him,” and “his” changed to “it.”). 

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that calls into question the veracity of the representation)54 or the creditor otherwise is, in 

fact, suspicious of a deception,

55 or (b) under the circumstances, a red flag should have 

been obvious to the creditor, taking into account the creditor’s knowledge and 

sophistication, so that the creditor should have been suspicious of a deception;56 and (2) 

the red flag or other suspicion indicates that reliance is unwarranted without further 

investigation.57 If, after making an investigation, the creditor concludes that the 

representation is credible, the reliance is justifiable.58

(b) There is a genuine dispute of material fact as to whether Grange 

justifiably relied on the false representation relating to the 

Mower.

There is a genuine dispute of material fact regarding whether Grange justifiably 

relied on the false representation relating to the Mower. Justifiable reliance on the 

falsified receipt for the Mower (the false representation) required Grange to make an 

54 Gross v. Osborne (In re Osborne), 520 B.R. 861, 872 (Bankr. D.N.M. 2014) 

(“‘[R]ed flags’ raise questions as to the veracity of the representations.”).

55 See In re Matkins, 605 B.R. at 94 (“[A] plaintiff must investigate when he is 

warned or suspicious of a deception.”); Ardizzone v. Scialdone (In re Scialdone), 533 

B.R. 53, 62 (Bankr. S.D.N.Y. 2015) (“[O]nce he became aware of the inaccuracies 

contained within the document, he could no longer blindly rely on the Debtor’s 

representations. After that point, he had a duty to investigate . . . .”). 

56 See Wang v. Ling (In re Ling), 646 B.R. 540, 547 (Bankr. S.D. Fla. 2022) 

(“Whether a creditor justifiably relied on a debtor’s misrepresentation turns on whether 

the creditor should have known the representation was false ‘from a cursory glance’ or a 

red flag should have warned the creditor.”) (quoting Field, 516 U.S. at 71). 57 See generally Saenz v. Gomez, 899 F.3d 384, 392 (5th Cir. 2018) (“a person may 

not justifiably rely on a representation if there are ‘red flags’ indicating such reliance is 

unwarranted.”) (internal quotation marks and citation omitted). 58 In re Matkins, 605 B.R. at 94 (“If the investigation leads the plaintiff to 

conclude that the debtor’s representations are credible, the plaintiff can satisfy the 

justifiable reliance standard.”).

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investigation only if (a) before paying the replacement cash value claim for the Mower

Grange spotted a red flag or otherwise was, in fact, suspicious of a deception, or (b) a red 

flag should have been obvious to Grange and, therefore, it should have been suspicious of 

a deception when it paid the claim. If an investigation was required and it appeared to 

Grange after making an investigation that the receipt for the Mower was authentic, the 

reliance was justifiable. 

Grange’s proffered evidence shows that the $2,817.48 check included $1,186.58

for the replacement cash value claim for the Mower.

59 The documentation Shaun Woods 

submitted in support of the claim consisted of a fabricated receipt showing the Debtors’ 

payment by cashier’s check for $3,825.00 to Jose Sergio Verboonen for the Mower and a 

copy of the cashier’s check. The cashier’s check was used to pay for a surgical procedure 

Dr. Verboonen performed on Shaun Woods in Mexico, not to pay for the Mower.

Material fact number 19 included in Grange’s MSJ states that on the same day 

Grange sent the $2,817.48 check to the Debtors, Grange served the Debtors 

with written discovery requests concerning Defendants’ purchase of the 

Kubota Mower from Jose Sergio Verboonen [that asked the Debtors] to 

supply the address, telephone number, and business entity associated with 

Jose Sergio Verboonen as well as the serial number for the Kubota Mower 

that [the Debtors] represented that they had purchased.60

Service of those discovery requests suggests that before Grange mailed the check 

to the Debtors, Grange, a sophisticated party in the business of examining insurance 

claims, may have spotted a red flag or otherwise was suspicious of a deception indicating 

59 MSJ, in Appellants’ App. at 486. 

60 Id., in Appellants’ App. at 487.

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that further investigation into the legitimacy of the claim was warranted. If so, justifiable 

reliance on the falsified receipt for the Mower (the false representation) required Grange 

to conclude, after an investigation, that the receipt for the Mower appeared to be 

authentic. That creates a genuine dispute of material fact. 

4. The Fifth Requirement: Facts not in genuine dispute do not show that 

Shaun Woods’ false representations caused Grange to sustain a loss. 

The fifth and final requirement for a debt to be nondischargeable under 

§ 523(a)(2)(A) is that the “representation caused the creditor to sustain a loss.”61 The 

Debtors argue that Grange did not sustain a loss as a result of any false representations 

because the Debtors never cashed the $2,817.48 check. Grange argues it sustained a loss 

when the check was delivered, and payment thereby was made, regardless of whether the 

check was cashed. Apart from the evidence that the Debtors offered to return or destroy 

the check, there is no evidence before us regarding whether the check was cashed.

The Supreme Court in Cohen v. de la Cruz62 gave guidance for applying the fifth 

requirement, explaining that under § 523(a)(2)(A) “‘[t]o the extent obtained by’ modifies 

‘money, property, services, or . . . credit’—not ‘any debt’—so that the exception 

encompasses ‘any debt for money, property, services, or . . . credit, to the extent [that the 

money, property, services, or . . . credit is] obtained by’ fraud.”63 Applying this 

construction of § 523(a)(2)(A), the Supreme Court concluded that “[t]he phrase thereby 

makes clear that the share of money, property, etc., that is obtained by fraud gives rise to 

61 Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1373 (10th Cir. 1996). 

62 523 U.S. 213 (1998). 

63 Id. at 218 (revisions in original). 

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a nondischargeable debt. Once it is established that specific money or property has been 

obtained by fraud, however, ‘any debt’ arising therefrom is excepted from discharge.”64

Applying these principles to the false representations made by Shaun Woods, the 

requirement that the false representations caused Grange to sustain a loss more 

specifically requires that Grange sustained a loss in the form of specific money, property, 

services, or an extension, renewal, or refinancing of credit that the Debtors obtained by 

the false representations. Only when that is established is any debt arising from the fraud

excepted from discharge.

Grange failed to satisfy the fifth requirement with respect to the Ring because its 

proffered evidence does not show it made any payment to the Debtors on account of the 

falsified invoice for the Ring.65 Grange therefore did not show it sustained a loss of 

specific money, property, or credit with respect to the Ring.

Further, there is a genuine dispute of material fact regarding whether Grange 

sustained a loss caused by the Debtors’ submission of the falsified receipt for the Mower. 

Grange’s evidence shows that Grange included $1,186.58 for the claim for the Mower in 

the $2,817.48 check Grange mailed to the Debtors to pay the replacement cash value 

claims.

66 Material fact number 20 included in Grange’s MSJ states:

64 Id.

65 Exhibit C attached to the MSJ contains Grange’s letter in response to the copies 

of the submitted receipts with comments on those receipts that could not be processed. 

The receipt submitted for the Ring shows Grange could not process it at the time it 

processed the claims for which the check was sent. See Appellants’ App. at 580. Thus, 

the check sent with the letter does not appear to include any payment for the Ring claim. 

66 Exhibit F attached to the MSJ contains the content valuation report setting forth 

the actual cash value and replacement cost value for the Debtors’ property claims. The 

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Six days [after Grange mailed the $2,817.48 check], on December 4, 2018, 

Defendants (through counsel) sent an email stating that there was an item 

that was included in the Woods last submittal that was mistakenly included 

in the request. This was the claim for Verbooten (sic). Would you like the 

Woods to destroy the check and resubmit the correct amount or would you 

prefer the check returned with the correct submittal?67

This raises a genuine dispute of material fact as to whether Grange’s bank account was 

ever debited for $2,817.48 or any other amount that represented payment of the 

replacement cash value claim for the Mower. The issue is not whether Grange delivered a 

check in payment of the claim. The issue is whether it sustained a loss. If Grange’s bank 

account was never debited for $2,817.48 or any other amount that represented payment of 

the replacement cash value claim for the Mower, the falsified document submitted in

support of the claim (which is the false representation) did not cause Grange to sustain a 

loss.

C. Remaining Issues

The Debtors raise two other issues on appeal. First, the Debtors assert that the 

amount of the nondischargeable debt should be limited to the amount of funds the 

Debtors obtained from Grange by the alleged fraud (at most $1,186.58) and should not 

include the entire $582,122.79 Judgment Debt. Because there are genuine disputes of 

material fact as to whether Grange suffered an actual loss, which appears from the record

to be at most $1,186.58, we decline to reach the issue of whether an actual loss of 

$1,186.58 can give rise to a nondischargeable debt of $582,122.79. Second, the Debtors 

difference in the report between the replacement cost value and the actual cash value for 

the Mower is $1,186.58. See Appellants’ App. at 586. 

67 MSJ at 9, in Appellants’ App. at 487.

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assert that Lee Woods is an innocent spouse who should not be saddled with a 

nondischargeable debt.68 Because we reverse the Bankruptcy Court’s decision granting 

summary judgment on the § 523(a)(2)(A) claim, we also decline to reach this issue. 

V. Conclusion 

For the foregoing reasons, we conclude the Bankruptcy Court did not err by giving 

preclusive effect to the State Court Judgment on the issues of false representations made 

with intent to deceive, but we must REVERSE the Bankruptcy Court’s decision granting 

summary judgment in favor of Grange on its § 523(a)(2)(A) nondischargeability claim 

and REMAND to the Bankruptcy Court for further proceedings consistent with this 

opinion. 

68 The Bankruptcy Court relied on the preclusive effect of the State Court 

Judgment and, in the alternative, on Bartenwerfer v. Buckley, 598 U.S. 69 (2023), to rule 

that the debt was nondischargeable as to Lee Woods. In Bartenwerfer, the Supreme Court 

held that under certain circumstances debts of an innocent debtor can be 

nondischargeable. 

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