Opinion ID: 682026
Heading Depth: 2
Heading Rank: 2

Heading: 11 U.S.C. Sec. 523(a)(2)(B)

Text: 11 Glen Eagle argued the Brocks knowingly or with gross recklessness supplied it with a false financial statement on which it relied to consummate the lease-purchase. The action of the Brocks allegedly violated Sec. 523(a)(2) of the Bankruptcy Code, which, if true, would have invalidated the discharge of their debt to Glen Eagle. 12 Section 523(a)(2) of the Bankruptcy Code provides 13 A discharge under ... this title does not discharge an individual debtor from any debt ... for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by ... 14 (B) use of a statement in writing-- 15 (i) that is materially false; 16 (ii) respecting the debtor's or an insider's financial condition; 17 (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and 18 (iv) that the debtor caused to be made or published with intent to deceive.... 19 Item (iv) in Section 523(a)(2)(B) is at issue in this case. The party seeking an exception from discharge in bankruptcy under Sec. 523(a)(2) has the burden of proof by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 291 (1991). 20 In the bankruptcy court proceeding, Glen Eagle presented evidence that the Brocks submitted a fraudulent financial statement. The financial statement included as an asset a house and lot, valued at $55,000, which did not belong to Brock. Brock admitted, although the house belonged to him at one time, it has belonged to his former wife since 1980 pursuant to their divorce settlement. 21 Brock claimed he had no intention of deceiving Glen Eagle and further asserted the financial statement was prepared by Holloway and was not complete at the time it was signed by Brock. Glen Eagle argued the applicable standard is whether there was an intent to deceive or whether the party acted with gross recklessness. See Knoxville Teachers Credit Union v. Parkey, 790 F.2d 490, 491 (6th Cir.1985). Glen Eagle asserted Brock's intent was irrelevant, his conduct in signing the incomplete financial statement constituted gross recklessness, conduct thereby satisfying the standard established in Parkey. Gross recklessness occurs when a financial statement is prepared by a third party and the statement is signed without the debtor reading it. In Re Archer, 55 B.R. 174, 179 (Bankr.M.D.Ga.1985). 22 In support of his argument that he did not intend to deceive Glen Eagle, Brock testified he told Holloway not to include the house on his financial statement, and further, at the time he signed the statement it did not include the house. Additionally, Holloway testified that when Brock became aware the house was included on the financial statement he became upset and chided Holloway for this inaccuracy. Glen Eagle argued this testimony is insufficient to overcome other evidence indicating that Brock was aware of the contents of the statement or acted with such gross recklessness as to constitute the intent to deceive. 23 The bankruptcy court determined in its findings of fact that the financial statement was Holloway's work product; the statement was prepared well before the purchase of the Motel was ever considered; and Holloway knew the house no longer belonged to Brock. Based on the foregoing information the bankruptcy court held Brock neither intended to deceive Glen Eagle, nor acted with gross recklessness by signing the financial statement. 24 After a review of the record we find there is sufficient evidence to support the findings of the bankruptcy court. Accordingly, we find no error warranting reversal. In light of our determination that the debt of Thomas N. Brock was properly discharged there is no need to address appellant's additional arguments.