Opinion ID: 626064
Heading Depth: 3
Heading Rank: 2

Heading: Oster’s Intent

Text: The bankruptcy court, after determining that Oster knew the misrepresentations in the loan agreements and the figures in the financial statements to be false, inferred “from that knowledge [Oster’s] intent to deceive the bank.” The district court agreed, noting that “the evidence indicates that [Oster] knew he was submitting documents to Clarkston that misrepresented his individual net worth.” Oster contends that Clarkston’s failure to provide evidence of his deceptive intent precluded the bankruptcy court from finding that Oster’s actions met the intent requirement articulated in § 523(a)(2)(B)(iv). He further argues, without support from any case law, that because he neither saw nor provided the financial statements to Clarkston, and because he did not read the contents of the loan agreements, he did not know the statements to be untrue. We do not require proof of the debtor’s subjective intent to satisfy our inquiry under this prong. In this Court, § 523(a)(2)(B)(iv) is met if “the debtor either intended to deceive the Bank or acted with gross recklessness . . . .” Martin, 761 F.2d at 1167 (emphasis added); see also First Nat. Bank of Centerville, TN v. Sansom, 142 F.3d 433, at  (6th Cir. 1998) (unpublished) (“In applying -8- No. 11-1388 Oster v. Clarkston State Bank the holding of Martin, this court has also held that gross recklessness is sufficient to establish an intent to deceive and to satisfy § 523(a)(2)(B)(iv).”) (internal quotation marks and citation omitted). “It is not uncommon that intent to deceive must be established by circumstantial evidence and by way of inference.” Thorp Credit, Inc. v. Carmen (In re Carmen), 723 F.2d 16, 19 (6th Cir. 1983) (Wellford, J., dissenting). At a minimum, Oster’s actions—signing a loan agreement directly adjacent to the marketable securities requirement, seeking a loan under his own name when he knew that only his spouse had an interest in the securities, and permitting his accountant to provide financial statements to Clarkston that Oster did not review–amount to gross recklessness. See, e.g., Bank One, Lexington, N.A. v. Woolum (In re Woolum), 979 F.2d 71, 74 (6th Cir. 1992) (affirming the bankruptcy court’s finding of gross recklessness when the debtor failed to include a guaranty obligation of $388,000 in his financial statements for a $225,000 loan). If we were to adopt Oster’s position, borrowers would be encouraged to submit statements and to sign loan agreements without having reviewed them, knowing that they could always claim a defense of ignorance if they sought to have their debt discharged. But even had Oster not acted with gross recklessness, other evidence in the record supports the conclusion that Oster purposefully deceived Clarkston. The bankruptcy court had before it the affidavit of Donald Bolton, a Clarkston employee, in which he stated that Claude Oster represented to me verbally that he personally had liquid assets in excess of $4 million to support his request for loans from the Bank totaling $1.35 million. He gave me financial statements, prepared by his accountant, which reflected over $8 million in marketable securities held jointly with his wife. I reviewed these statements with him . . . . -9- No. 11-1388 Oster v. Clarkston State Bank (emphasis added). Oster asserts that it was improper for the bankruptcy court to rely on the affidavit because Bolton did not begin working at Clarkston until 2006, two years after the first loan originated. But, it appears that the discussions referred to in Bolton’s depositions were about the 2007 renewal, not the original 2004 loan request. Neither the bankruptcy nor district court considered this direct evidence, but we may affirm on any grounds supported by the record. See Lawrence v. Chancery Ct. of TN, 188 F.3d 687, 691 (6th Cir. 1999). Because § 523(a)(2) applies to both the original loan request and any “extension, renewal, or refinancing,” this misrepresentation to Bolton would be strongly probative of Oster’s subjective intent to deceive. Taken as a whole, the record supports the bankruptcy court’s factual findings that Clarkston satisfied § 523(a)(2)(B)(iv). It was not clear error for the bankruptcy court to conclude that Oster, an experienced businessman who had transferred assets out of his control to keep them from creditors, was either grossly reckless or had the requisite intent to deceive when he submitted the false financial statements or signed the loan agreements.