Court Opinion

ID: 2964849
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:32:09.81804+00
Date Added: 2024-06-11T11:43:02.549752
License: Public Domain

USCA1 Opinion

	

                                For the First Circuit
                                ____________________
       No. 96-2202
                                STEPHEN A. PALMACCI,
                                     Appellant,
                                         v.
                               P. FERNANDO UMPIERREZ,
                                      Appellee.
                                ____________________
                                RICHARD B. ERRICOLA,
                                      Trustee.
                                ____________________
                    APPEAL FROM THE UNITED STATES DISTRICT COURT
                          FOR THE DISTRICT OF NEW HAMPSHIRE
                   [Hon. Steven J. McAuliffe, U.S. District Judge]
                                ____________________
                                       Before
                           Torruella, Chief Circuit Judge,
                            Bownes, Senior Circuit Judge,
                              and Lynch, Circuit Judge.
                                ____________________
            Dorothy F. Silver for appellant.
            Edward Foye, with whom Ian Crawford and Todd & Weld were on
       brief, for appellee.
                                ____________________
                                   August 11, 1997
                                ____________________

                      BOWNES, Senior Circuit Judge. This case arises out
            of a speculative investment that went bad. Plaintiff Stephen
            A. Palmacci invested $75,000 in a project, known as "the Chase
            project," to purchase and develop distressed real estate. He
            had heard that the defendant's brother, Gus Umpierrez, who was
            a real estate agent and knowledgeable in real estate matters,
            had "turned a pretty fast profit" on similar ventures, and he
            wanted to reap some of the same type of profits.
                      Palmacci acknowledges that he understood the risks
            inherent in any investment and, in particular, the increased
            risk involved in the speculative type of investment in which he
            was getting involved. He claims that he took this risk because
            his friend P. Fernando Umpierrez ("Umpierrez"), the defendant,
            and Umpierrez's brother, Gus, promised to invest $75,000 of
            their own personal funds in the project. According to
            Palmacci's testimony, he "decided that if they thought it was
            worth the risk with the knowledge that Gus had, that [Palmacci]
            would do the same." Palmacci also claims that he relied on the
            representation that project funds would be placed in a trust,
            which he believed would reduce the chance of "things going
            bad." The project failed (for reasons that are not set forth
            in the record), and Palmacci received only 80% of his principal
            back. 
                      Umpierrez filed a petition for bankruptcy protection
            under Chapter 7 of the United States Bankruptcy Code, and
                                         -2-
                                          2

            Palmacci filed an adversary proceeding pursuant to 11 U.S.C.
            S 523 (a)(2)(A), claiming that the debt owed him should not be
            discharged because it was the product of false representations.
            The United States Bankruptcy Court for the District of New
            Hampshire held a trial in the matter, and at the close of the
            plaintiff's evidence, entered a judgment as a matter of law in
            favor of the debtor, holding that the debt was dischargeable
            in bankruptcy. This ruling was affirmed by the United States
            District Court for the District of New Hampshire. We affirm.
                      A court reviewing a decision of the bankruptcy court
            may not set aside findings of fact unless they are clearly
            erroneous, giving "due regard . . . to the opportunity of the
            bankruptcy court to judge the credibility of the witnesses."
            Fed. R. Bankr. P. 8013;   see Commerce 
                                                    Bank 
                                                         &  
                                                            Trust 
                                                                  Co.  
                                                                       v.
            Burgess 
                    (In 
                        re 
                           Burgess), 955 F.2d 134, 137 (1st Cir. 1992);
            Fed. R. Civ. P. 52(c), advisory committee's note to 1991
            Amendment (applying clearly erroneous standard in the case of
            a judgment on partial findings). The bankruptcy court's legal
            conclusions, drawn from the facts so found, are reviewed de
            novo. Martin v. Bajgar (In re Bajgar)
                                                 , 104 F.3d 495, 497 (1st
            Cir. 1997). Although the district court has already reviewed
            the bankruptcy court's decision, on appeal we independently
                                
            1.  The trial court styled its ruling as the grant of
            defendant's motion for a directed verdict. In essence,
            however, the ruling was a judgment as a matter of law on
            partial findings. See Fed. R. Bankr. P. 7052; Fed. R. Civ. P.
            52(c). We will treat it as such.
                                         -3-
                                          3

            review that decision, applying the same standard of review that
            the district court applied. See 
                                            In re Bajgar
                                                       , 104 F.3d at 497;
            In 
               re 
                  G.S.F. 
                         Corp., 938 F.2d 1467, 1474 (1st Cir. 1991). No
            special deference is owed to the district court's
            determinations.  Grella v. Salem Five Cent Sav. Bank, 42 F.3d
            26, 30 (1st Cir. 1994).
                      A finding of fact is clearly erroneous, although
            there is evidence to support it, when the reviewing court,
            after carefully examining all the evidence, is "left with the
            definite and firm conviction that a mistake has been
            committed."  Anderson v. City of Bessemer City, 470 U.S. 564,
            573 (1985) (internal quotation marks omitted). Deference to
            the bankruptcy court's factual findings is particularly
            appropriate on the intent issue "[b]ecause a determination
            concerning fraudulent intent depends largely upon an assessment
            of the credibility and demeanor of the debtor." 
                                                           In re Burgess
                                                                        ,
            955 F.2d at 137 (internal quotation marks omitted) (applying
            S 727(a), relating to fraud by the debtor in representations in
            the course of the court proceeding). Particular deference is
            also due to the trial court's findings that depend on the
            credibility of other witnesses and on the weight to be accorded
            to such testimony.   See Fed. R. Bankr. P. 8013;   Keller 
                                                                       v.
            United 
                   States, 38 F.3d 16, 25 (1st Cir. 1994). Of course, a
            trial court may not
                      insulate [its] findings from review by
                      denominating them credibility
                                         -4-
                                          4

                      determinations, for factors other than
                      demeanor and inflection go into the
                      decision whether or not to believe a
                      witness. Documents or objective evidence
                      may contradict the witness' story; or the
                      story itself may be so internally
                      inconsistent or implausible on its face
                      that a reasonable factfinder would not
                      credit it. Where such factors are
                      present, the court of appeals may well
                      find clear error even in a finding
                      purportedly based on a credibility
                      determination.
            Anderson, 470 U.S. at 575. 
                      Section 523(a)(2)(A) of the Bankruptcy Code
            provides:
                      S 523. Exceptions to discharge
                      (a) A discharge under section 727, 1141,
                      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.
            See 11 U.S.C. S 523(a)(2)(A).
                      "Exceptions to discharge are narrowly construed in
            furtherance of the Bankruptcy Code's 'fresh start' policy,"
            and, for that reason, the claimant must show that his "claim
            comes squarely within an exception enumerated in Bankruptcy
            Code S 523(a)." Century 21 Balfour Real Estate v. Menna (In re
            Menna), 16 F.3d 7, 9 (1st Cir. 1994);  see In 
                                                          re 
                                                             Bajgar, 104
                                         -5-
                                          5

            F.3d at 498 n.1. The statutory requirements for a discharge
            are "construed liberally in favor of the debtor" and "[t]he
            reasons for denying a discharge to a bankrupt must be real and
            substantial, not merely technical and conjectural." Boroff v.
            Tully  
                  (In  
                       re  
                           Tully), 818 F.2d 106, 110 (1st Cir. 1987)
            (internal quotation marks omitted). On the other hand, we have
            noted that "the very purpose of certain sections of the law,
            like [S 727(a)(2)], is to make certain that those who seek the
            shelter of the bankruptcy code do not play fast and loose with
            their assets or with the reality of their affairs."       Id.
            Likewise, other sections of the law, like S 523(a)(2)(A), are
            intended to make certain that bankruptcy protection is not
            afforded to debtors who have obtained property by means of a
            fraudulent misrepresentation.
                      Palmacci alleges that Umpierrez made three
            misrepresentations which induced him to invest $75,000 in the
            project: (1) that Umpierrez and his brother would invest
            $75,000 of their own money in the project; (2) that the project
            would have a total investment of $250,000; and (3) that a trust
            would be established to hold the funds and to supervise the
            project. 
                      With respect to each of these three claims, Palmacci
            was required to establish both that he had a valid claim
            against Umpierrez and that the claim should not be discharged
            in bankruptcy. See 
                               Grogan v. Garner
                                              , 498 U.S. 279, 283 (1991).
                                         -6-
                                          6

            Here, the claim and the reason for exemption from discharge are
            essentially the same: the common law        tort of false
            representation, also known as deceit. 
                      Under the traditional common law rule, a defendant
            will be liable if (1) he makes a false representation, (2) he
            does so with fraudulent intent, i.e., with "scienter," (3) he
            intends to induce the plaintiff to rely on the
            misrepresentation, and (4) the misrepresentation does induce
            reliance, (5) which is justifiable, and (6) which causes damage
            (pecuniary loss). 2 F. Harper, et al., Law of Torts
                                                                S 7.1, at
            381 (2d ed. 1986); Restatement (Second) of Torts S 525 (1977).
                      Regarding the first element, the concept of
            misrepresentation includes a false representation as to one's
            intention, such as a promise to act. "A representation of the
            maker's own intention to do . . . a particular thing is
            fraudulent if he does not have that intention" at the time he
                                
            2.  In Field 
                         v. 
                            Mans, 116 S. Ct. 437, 443 & n.9 (1995), the
            Court construed S 523(a)(2)(A) to incorporate the "general
            common law of torts," i.e., the "dominant consensus of common-
            law jurisdictions, rather than the law of any particular
            State." Of course, if we were to hold that Umpierrez was not
            entitled to discharge them in bankruptcy, Palmacci's claims
            themselves would be determined in accordance with the common
            law of New Hampshire.
            3.  We set forth a similar, but not identical, list of elements
            in In 
                  re 
                     Burgess, 955 F.2d at 140. We interpret   Burgess to
            apply the same test we have articulated in the text here,
            except for the fifth element. In Burgess our reliance element
            required "reasonable" reliance, but the Supreme Court has since
            held that "justifiable" reliance is the proper test.      See
            Field, 116 S. Ct. at 445-46. 
                                         -7-
                                          7

            makes the representation. Restatement (Second) of Torts
            S 530(1); 
                     see 
                         Anastas v. American Sav. Bank (In re Anastas)
                                                                     , 94
            F.3d 1280, 1285 (9th Cir. 1996). "The state of a man's mind is
            as much a fact as the state of his digestion." Restatement
            (Second) of Torts S 530 cmt. a. Likewise, "a promise made
            without the intent to perform it is held to be a sufficient
            basis for an action of deceit." W. Page Keeton, et al.,
            Prosser and Keeton on the Law of Torts S 109, at 763 (5th ed.
            1984) (footnotes omitted); see Restatement (Second) of Torts
            S 530(1) cmt. c. On the other hand, if, at the time he makes
            a promise, the maker honestly intends to keep it but later
            changes his mind or fails or refuses to carry his expressed
            intention into effect, there has been no misrepresentation.
            Restatement (Second) of Torts at S 530 cmts. b, d. This is
            true "even if there is no excuse for the subsequent breach. A
            debtor's statement of future intention is not necessarily a
            misrepresentation if intervening events cause the debtor's
            future actions to deviate from previously expressed
            intentions." 4  Collier on Bankruptcy q 523.08[1][d], at 523-
            43. 
                      The test may be stated as follows. If, at the time
            he made his promise, the debtor did not 
                                                  intend to perform
                                                                   , then
            he has made a false representation (false as to his intent) and
            the debt that arose as a result thereof is not dischargeable
            (if the other elements of S 523(a)(2)(A) are met). If he did
                                         -8-
                                          8

            so intend at the time he made his promise, but subsequently
            decided that he could not or would not so perform, then his
            initial representation was not false when made. See, e.g.
                                                                     , 
                                                                       In
            re Anastas, 94 F.3d at 1285; Milwaukee Auction Galleries Ltd.
            v. 
               Chalk, 13 F.3d 1107, 1109 (7th Cir. 1994) (more than mere
            nonperformance of a contract was necessary to establish
            misrepresentation); Mellon  
                                        Bank  
                                             Corp.  
                                                    v.  
                                                       First  
                                                              Union  
                                                                     Real
            Estate, 951 F.2d 1399, 1410-11 (3d Cir. 1991) (same); 
                                                                 Craft v.
            Metromedia, 766 F.2d 1205, 1219, 1221 (8th Cir. 1985).
                      The scienter element refers to a different type of
            intent, namely, intent to deceive, manipulate, or defraud.
            Ernst 
                  & 
                    Ernst 
                          v. 
                             Hochfelder, 425 U.S. 185, 193 (1976). This
            requirement may be met in one of several ways: if the maker of
            the misrepresentation "(a) knows or believes that the matter is
            not as he represents it to be; (b) does not have the confidence
            in the accuracy of his representation that he states or
            implies; or (c) knows that he does not have the basis for his
            representation that he states or implies." Restatement
            (Second) of Torts S 526; see Keeton, et al., supra, S 107, at
            740-42.
                      Clause (b) of Restatement S 526 includes the
            situation where the maker of a misrepresentation asserts
            something "so positively as to imply that he has knowledge" of
            its factual basis, even though he is conscious that he does not
            know the fact to be true. Keeton, et al.,   supra, S 107, at
                                         -9-
                                          9

            742. Scienter exists even if he believes the "fact" is true,
            if he is aware that he does not in fact possess the certitude
            that he implies by the manner in which he makes his
            representation.   See Restatement (Second) of Torts S 526
            cmt. e. One who makes a statement as if it were one of
            positive fact ("as though he knew it") engages in a "conscious
            deception" if he realizes he does not know the truth of his
            statement, even though he honestly believes its truth. 2
            Harper, et al., supra, S 7.3, at 393-94. In such a case, the
            person is deemed to have the intent to deceive (scienter), not
            so much as to the fact itself, but rather as to the extent of
            his information.  Id. ("He has in effect represented that he
            knew a thing to be true when he knew that he only believed or
            surmised it to be true."); see Metropolitan 
                                                        Life 
                                                             Ins. 
                                                                  Co. 
                                                                       v.
            Ditmore, 729 F.2d 1, 5 (1st Cir. 1984) (Mass. law); Myron 
                                                                       N.
            Navison Shoe Co. v. Lane Shoe Co., 36 F.2d 454, 459 (1st Cir.
            1929); Keeton, et al., supra S 107, at 742. "This is often
            expressed by saying that fraud is proved if it is shown that a
            false representation has been made . . . recklessly, careless
            of whether it is true or false." Restatement (Second) of Torts
            S 526 cmt. e;  see  In 
                                   re 
                                      Burgess, 955 F.2d at 140 ("false
            representation" under section 523(a)(2)(A)); Harper,   supra,
            S 7.3, at 391-95.
                      The standard of proof of each element of a S 523
            claim is by a preponderance of the evidence. Grogan, 498 U.S.
                                        -10-
                                         10

            at 291. The burden of proof and the burden of production as to
            each element rests with the party contesting the
            dischargeability of a particular debt under Bankruptcy Code
            S 523. See 
                       In re Burgess
                                    , 955 F.2d at 136; 
                                                       see also
                                                                
                                                                Insurance
            Co. of N. Am. v. Cohn (In re Cohn)
                                            , 54 F.3d 1108, 1120 (3d Cir.
            1995) (regarding S 523(a)(2)(B)). Thus, if Palmacci failed to
            establish any one of the elements by a preponderance of the
            evidence, then the court should reject his claim.  See In 
                                                                       re
            Burgess, 955 F.2d at 139; 9A Wright & Miller, 
                                                        supra, S 2579, at
            542-43 (a factual finding that negates one element of the
            plaintiff's prima facie case renders findings concerning other
            elements unnecessary).
                      We will discuss each of Palmacci's three
            misrepresentation claims in turn. First, Palmacci claims that
            Umpierrez falsely represented that he and his brother would
            invest $75,000 of their own personal funds into the Chase
            project. Umpierrez responds that he made good on his
            representation because he did contribute $75,000 of his own
            personal funds, albeit by giving the bank a lien on the Chase
            project property as well as a second mortgage on his home.
            According to Umpierrez, encumbering the project property does
            not mean that he failed to satisfy his promise to contribute
            funds personally, because he never told Palmacci that he would
            not mortgage the Chase project property. The district court
            agreed with Umpierrez: it found that there was no
                                        -11-
                                         11

            misrepresentation because "there was no representation that a
            mortgage would not be placed on the project." We find this
            argument untenable. An ordinary lay person like Palmacci would
            not think, nor would it be reasonable to expect him to think,
            that Umpierrez's representation that he would invest "his own
            personal funds" in the Chase project could be read to include
            funds he borrowed from a bank secured by a mortgage on the
            project property itself. Thus, Umpierrez cannot claim that
            there was no misrepresentation.
                      Umpierrez is more persuasive in contending that
            Palmacci's first claim fails on the element of scienter or
            fraudulent intent which is required in order to establish an
            exception to discharge under S 523(a)(2)(A). See 2 Harper, et
            al., 
                supra, S 7.1, at 381; Restatement (Second) of Torts S 525.
            Palmacci does not dispute that Umpierrez intended to obtain
            most of the funds for his contribution to the project from a
            second mortgage on his residence. Palmacci's argument, in
            essence, is that, at the time Umpierrez induced Palmacci's
            investment with the promise to invest his own personal funds,
            Umpierrez's intention was fraudulent, based on a reckless
            indifference to the truth (which rose to the level of
            fraudulent intent) because Umpierrez knew or should have known
            that he did not have enough equity in the house to raise the
            money through a second mortgage, at least without encumbering
            the project property with a mortgage as well. 
                                        -12-
                                         12

                      We must parse this issue with some care. The factual
            question to be determined by the trier of fact is not whether
            Umpierrez knew or should have known that he did not have the
            money available to invest, but whether in good faith he
            intended to keep his promise. This is because "[a] finding
            that a debt is non-dischargeable under 523(a)(2)(A) requires a
            showing of actual or positive fraud, not merely fraud implied
            by law
                 ."  In re Anastas
                                  , 94 F.3d at 1286 & n.3 (emphasis added)
            (quoting 124 Cong. Rec. H11089 (Sept. 28, 1978) (statement of
            Rep. Edwards), reprinted in 1978 U.S.C.C.A.N. 5787, 6436, 6453
            ("Subparagraph (A) is intended to codify current case law . . .
            which interprets 'fraud' to mean actual or positive fraud
            rather than fraud implied in law.")). This is not a negligence
            case where the standard is whether a reasonable person would
            have acted as Umpierrez did. See generally
                                                      , 2 Harper, et al.,
            supra, S 7.3, at 392-95. Fraudulent intent requires an actual
            intent to mislead, which is more than mere negligence. Diduck
            v. 
               Kaszycki 
                        & 
                          Sons 
                               Contractors, 
                                             Inc., 974 F.2d 270, 277 (2d
            Cir. 1992). An honest belief, however unreasonable, that the
            representation is true and that the speaker has information to
            justify it is an insufficient basis for deceit. Keeton, et
            al., supra, at 742. A "dumb but honest" defendant does not
            satisfy the test of scienter. 2 Harper, et al., supra, S 7.3,
            at 393. 
                                        -13-
                                         13

                      Of course, the very unreasonableness of such a belief
            may be strong evidence that it does not in fact exist.    See
            Pullman-Standard v. Swint
                                    , 456 U.S. 273, 289 (1982); 
                                                                Norris v.
            First Nat'l Bank in Luling (In re Norris)
                                                    , 70 F.3d 27, 30 n.12
            (5th Cir. 1995); In 
                                re 
                                    Cohn, 54 F.3d at 1118-19 (permitting
            reckless disregard to be relied on as an evidentiary factor
            that is probative of intent to defraud, if the totality of
            circumstances supports that inference) (involving 11 U.S.C.
            S 523(a)(2)(B)). Where this conclusion is reached as an
            inference of fact, there is nothing inconsistent with that
            unreasonableness forming an evidentiary basis for a finding of
            intent.   See Keeton, et al.,    supra, at 742. But then
            unreasonableness would be providing evidentiary ballast, not
            serving by itself as an element of the tort. 
                                                        Id. For example,
            "[i]f [the] defendant had no adequate grounds for believing his
            statement to be true this may afford a rational inference that
            he did not in fact believe it to be true (so that there was
            scienter)." 2 Harper, et al.,    supra, S 7.3, at 393. The
            focus, however, should be on whether the surrounding
            circumstances or the debtor's actions "appear so inconsistent
            with [his] self-serving statement of intent that the proof
            leads the court to disbelieve the debtor." 
                                                      In re Hunt
                                                                , 30 B.R.
            425, 441 (Bankr. M.D.Tenn. 1983). 
                      Thus, while fraud may not be implied in law, it may
            be inferred as a matter of fact. The finder of fact may
                                        -14-
                                         14

            "infer[] or imply[] bad faith and intent to defraud based on
            the totality of the circumstances when convinced by a
            preponderance of the evidence." In re Anastas
                                                        , 94 F.3d at 1286
            n.3; In re Sheridan, 57 F.3d 627, 633 (7th Cir. 1995); cf. In
            re  
               Cohn, 54 F.3d at 1118-19 (S 523(a)(2)(B)). Among the
            circumstances from which scienter may be inferred are: the
            defendant's insolvency or some other reason to know that he
            cannot pay, his repudiation of the promise soon after made, or
            his failure even to attempt any performance. Keeton, et al.,
            supra, at 764-65. 
                      Where, as here, reckless disregard is being urged
            upon us as the basis for an inference of scienter, it is
            important to distinguish what the debtor is being accused of
            recklessly disregarding. Scienter may be found to exist where
            a debtor recklessly disregards the truth of the representation,
            e.g., in Umpierrez's case, whether he was recklessly
            indifferent to whether he would actually keep his promise to
            invest personal funds in the Chase project.  See Restatement
            (Second) of Torts S 526 cmt. e. There must, nonetheless, be an
            actual finding of intent to deceive: mere inability to pay
            does not constitute such a finding. 
                                               See 
                                                   In re Anastas
                                                                , 94 F.3d
            at 1286 ("[T]he hopeless state of a debtor's financial
            condition should never become a substitute for an actual
            finding of bad faith."). This distinction is apparent from the
            structure of the statute itself: 11 U.S.C. S 523(a)(2)(A)
                                        -15-
                                         15

            specifically excludes misrepresentations regarding a debtor's
            financial condition, whereas 11 U.S.C. S 523(a)(2)(B) provides
            separately for such misrepresentations. Thus, to the extent
            Palmacci is claiming that Umpierrez implicitly misrepresented
            his financial condition, that is not grounds for an exception
            to discharge under S 523(a)(2)(A).
                      In the instant case, if Umpierrez knew or clearly
            should have known that there was no realistic way for him to
            use his own money to invest, then that is probative of his lack
            of intent to keep his promise at the time he made the promise.
            But the focus must be on whether the representation was made in
            bad faith, i.e., whether he induced Palmacci's investment with
            the intention of reneging on his promise to invest personal
            funds (or while recklessly disregarding whether or not he would
            keep his promise).  See In 
                                       re 
                                          Anastas, 94 F.3d at 1286 (debt
            incurred with the intention of avoiding the debt by petitioning
            for bankruptcy). 
                      Palmacci contends that the court erred by relying
            exclusively on Umpierrez's self-serving testimony about his
            subjective intent, and failing to consider the surrounding
            circumstances in order to infer that Umpierrez's intent was not
            as he claimed it to be. We do not think Palmacci is correct in
            characterizing the trial court's reasoning as relying solely on
            Umpierrez's self-serving testimony while ignoring the
            circumstantial evidence Palmacci contends shows that testimony
                                        -16-
                                         16

            to be incredible. It is true that Umpierrez had just purchased
            the residence a few months earlier, for $105,000 and that he
            had an $80,000 mortgage on the residence at the time of
            purchase. Based on this undisputed fact, Palmacci claims that
            Umpierrez should have known that he only had $25,000 worth of
            equity in the home, against which he could borrow on a second
            mortgage without a likely encumbrance of the project property,
            and therefore that the bankruptcy court clearly erred in
            believing Umpierrez's testimony that, at the time he made his
            promise, he fully intended to keep it. Umpierrez's claim that
            an innocent lack of knowledge of these facts (and not a
            fraudulent intent) caused him to err when he promised to
            contribute the $75,000 arguably falls into the category of
            "reckless disregard for the truth" such as to rise to the level
            of establishing scienter.
                      These were not, however, the only facts before the
            trial court. There was also testimony that Umpierrez had
            discussed getting a personal loan with a banker, and that the
            banker had told him he thought the loan would be possible.
            Moreover, Umpierrez testified that he had had the house
            appraised in October (shortly before the representation that
            induced Palmacci to invest his money) and the house was valued
            at $185,000, more than enough to secure a loan for the full
                                
            4.  In addition, the Umpierrezes' share would include the
            $5,000 down payment they invested at the time of the purchase
            at auction. 
                                        -17-
                                         17

            amount of Umpierrez's promised contribution. Thus, even though
            Umpierrez did not have a commitment letter from the bank -- a
            fact that Palmacci emphasizes -- he could well have honestly
            believed that he could work something out with the bank whereby
            the bank could protect its security needs without encumbering
            the project property and therefore without rendering his
            representation to Palmacci fraudulent. The court's decision
            mentioned this possible interpretation, noting that the market
            value of the house in early November (when Palmacci was induced
            to make his investment in the Chase project) was not
            necessarily limited to the price that Umpierrez paid when he
            bought it in July.
                      Absent a showing to the contrary, and bearing in mind
            that the burden of proof was on Palmacci, we must assume that
            the trial court considered all the testimony (and other
            evidence before it) in its entirety, as well as all reasonable
            inferences therefrom, before making its determination that
            Umpierrez did not intend to defraud Palmacci at the time he
            promised to contribute $75,000 of his personal funds to the
            project. We perforce reject Palmacci's claim that the court
            relied exclusively on Umpierrez's testimony and failed to
            consider the surrounding circumstances.
                      Moreover, while Palmacci is correct that intent to
            deceive may be inferred from the totality of the circumstances,
            including inferences from circumstantial facts, 
                                                           see 
                                                               Desmond v.
                                        -18-
                                         18

            Varrasso 
                     (In 
                         re 
                            Varrasso), 37 F.3d 760, 764 (1st Cir. 1994),
            scienter cannot be presumed, 
                                        id. at 764-65; 
                                                      In re Cohn
                                                                , 54 F.3d
            at 1120. "The mere breach of a promise is not enough in itself
            to establish the fraudulent intent." Keeton, et al.,   supra,
            S 108, at 764.
                      Thus, although the evidence here might "support the
            bankruptcy court's decision had it inferred an intent to
            deceive from the circumstantial evidence admitted in this case,
            [it does] not compel such a finding and [does] not require us
            to reverse the court's holding." National Union Fire Ins. Co.
            of Pittsburgh v. Bonnanzio (In re Bonnanzio)
                                                       , 91 F.3d 296, 301
            (2d Cir. 1996) (emphasis added) (quoting  In 
                                                         re 
                                                            Sheridan, 57
            F.3d at 634); see also In re Varrasso, 37 F.3d at 764-65. It
            is the province of the trial court to determine this issue:
            the court may choose to infer intent or not to draw that
            inference, based on all the evidence.  Bonnanzio, 91 F.3d at
            301; In re Varrasso, 37 F.3d at 764-65. The determination of
            whether scienter exists based on certain circumstantial facts
            must be treated merely as "a   permissible inference of fact
            . . . and not a presumption of law, or else the distinction
            between fraud and negligence will be largely obliterated." 2
            Harper, supra, S 7.3, at 393 (emphasis added). Even where "a
            factfinder lawfully might draw an inference of fraud from the
            totality of the circumstances," we accept the trial court's
            findings unless the evidence "compels" such a conclusion. See
                                        -19-
                                         19

            In re Varrasso, 37 F.3d at 764-65; In re Burgess, 955 F.2d at
            137.
                      If the [bankruptcy] court's account of the
                      evidence is plausible in light of the
                      record reviewed in its entirety, the court
                      of appeals may not reverse it even though
                      convinced that had it been sitting as the
                      trier of fact, it would have weighed the
                      evidence differently. Where there are two
                      permissible views of the evidence, the
                      factfinder's choice between them cannot be
                      clearly erroneous.
            Anderson v. City of Bessemer City, 470 U.S. at 573-74.
                      In the instant case, Umpierrez testified that he
            thought he would be able to come up with his $75,000 investment
            from his personal funds, and the judge believed him, apparently
            taking into account all circumstances including the weight of
            the alleged unreasonableness of his belief. The bankruptcy
            court found, as a matter of fact, that Umpierrez did not intend
            to defraud Palmacci when he promised to contribute $75,000 of
            his own personal funds to the project. In the context of the
            record in this case, we read this as a determination that there
            was no scienter, i.e., that there was no knowing
            misrepresentation and no reckless disregard for the truth such
            as would rise to the level of fraudulent intent. After
            carefully reviewing the record in its entirety, we conclude
            that there is sufficient evidence for the trial court to have
            concluded that Umpierrez's intent was not fraudulent. We
            cannot say the trial court clearly erred in its choice of which
            inferences to draw from the evidence presented to it.
                                        -20-
                                         20

            Therefore we affirm the court's rejection of the first alleged
            misrepresentation claim.
                      Palmacci's second claim is that Umpierrez
            misrepresented to him that the project would have a total
            capital contribution of $250,000. This claim is derivative
            from the first: to whatever extent Umpierrez fell short on his
            contribution of $75,000, there would result a like shortfall in
            the total project capitalization. Palmacci does not make any
            argument as to his second claim that differs from his arguments
            on the first claim. Therefore, our rejection of the second
            flows ineluctably from our conclusion as to the first. 
                      Palmacci's third claim is that Umpierrez
            misrepresented the role of the trust that was created in
            connection with the Chase project. According to Palmacci's
            brief, Umpierrez represented that "the project was to be held
            in trust supervised by a New Hampshire attorney." Palmacci
            concedes that a trust was indeed set up after he made his
            investment, but he argues that "[t]he reality of the situation
            was that the trust had no role to play in the supervision of
            the project." Palmacci does not make it clear exactly what was
            allegedly represented to him regarding the trust's supervision
                                
            5.  Palmacci also argues that the bankruptcy court erred in
            holding that he was not justified in relying on Umpierrez's
            representations. We need not decide this issue because, having
            failed to meet his burden on the intent element, it does not
            avail him that he may have met the remaining elements; he must
            satisfy all requirements in order to establish his claim.
                                        -21-
                                         21

            of the Chase project. In his brief he seems to imply that
            Umpierrez actually told him the trust would supervise the
            investment project itself (as opposed to being simply a vehicle
            for controlling the flow of funds). Scrutiny of Palmacci's
            factual assertions, however, in his testimony and in the
            factual portion of his brief, reveal a claim merely that
            Palmacci's "idea of the role of the trust" was that the trustee
            would be responsible for and control how funds were used by the
            builders. Because of this "idea," Palmacci "felt assured" that
            the project "would be supervised correctly, and there was less
            chance of things going bad." Palmacci did not testify as to
            the basis for his subjective understanding. For all we know,
            the basis could have been merely that Palmacci himself thought
            a trust always does so supervise, without any representation by
            Umpierrez beyond the mere creation of a trust.
                      The bankruptcy court dismissed the trust issue on the
            ground that Palmacci could not have "justifiably relied" on the
            role of the trust as supervising the real estate project. The
            court reasoned that the trust was not established until
            November 11, 1991, several days after November 7, when Palmacci
            made his investment, so Palmacci could not have known the terms
            of the trust instrument and therefore could not have been
            justified in relying on any such terms. (The district court
            decision did not specifically address the alleged
            misrepresentation regarding the role of the trust.) 
                                        -22-
                                         22

                      Palmacci is correct that the bankruptcy court's
            analysis is flawed. Even if the trust was not actually created
            until after he invested his money, Palmacci could conceivably
            have relied on verbal (or written) representations from
            Umpierrez -- made on or before November 7 -- as to how the
            trust would be structured or what its role would be once the
            trust was created. And it might well have been justifiable for
            Palmacci to rely on such representations regardless of whether
            the trust instrument had yet been drafted. If such
            representations were false and made with scienter, then this
            third claim could not be dismissed based on the trial court's
            reasoning.
                      Nevertheless, we will affirm a correct result reached
            by the court below "on any independently sufficient ground made
            manifest by the record."  AIDS Action Comm. of Mass. v. MBTA,
            42 F.3d 1, 7 (1st Cir. 1994) (internal quotation marks
            omitted). Although the bankruptcy court's stated reason for
            rejecting Palmacci's argument concerning the establishment of
            a trust was based on flawed reasoning, its conclusion was
            correct. Our review of the record, including Palmacci's own
            testimony, reveals absolutely no evidence clearly indicating
            that Umpierrez's statements or actions were the basis for
            Palmacci's subjective "idea" or feeling that the trust would
            supervise the project. Indeed, as the bankruptcy court pointed
            out, the attorney who drew up the trust testified that the
                                        -23-
                                         23

            concept of a trust was not even discussed by the investors
            before Palmacci invested his money in the project. Thus, the
            only representation that is supportable on this record is that
            a trust would be created and that the trustee would be an
            attorney. This much was indisputably carried out. It is not
            enough for Palmacci to testify that his "idea of the role of
            the trust" was to supervise the operation of the project,
            without specifying the source of this idea. Because the record
            is devoid of evidence that would support a finding that a
            misrepresentation was made on the trust issue, we need not
            consider the dispute as to whether Palmacci was justified in
            relying on any alleged representation about the role of the
            trust.
                      Finally, Palmacci alleges that the bankruptcy court
            erred as a matter of law when it restricted the testimony of
            Palmacci's expert witness to events that took place only prior
            to or soon after the transaction at issue. A trial court has
            wide discretion in determining the admissibility of expert
            testimony, especially where the issue is being tried directly
            to the bench.   Allied 
                                    Int'l,  
                                           Inc. 
                                                 v. 
                                                    Int'l  
                                                           Longshoremen's
            Ass'n, 814 F.2d 32, 40 (1st Cir. 1987). Of course, this
            latitude does not mean that, on appeal, we will abdicate our
            responsibility to review such a determination. But, like other
            evidentiary rulings, the exclusion of all or part of an
            expert's proffered testimony is subject to review for abuse of
                                        -24-
                                         24

            discretion.  Williamson v. Busconi, 87 F.3d 602, 603 n.1 (1st
            Cir. 1996). The trial court's decision will be "sustained
            unless [its] discretion has been abused."  Allied 
                                                              Int'l, 814
            F.2d at 40.
                      In the instant case, the trial judge had heard
            testimony from the creditor, the debtor, and the attorney for
            the real estate project (who drew up the trust), as well as
            some of the testimony of the expert in dispute (i.e., that part
            of the expert's testimony relating to events that took place
            prior to or soon after Palmacci's investment in the project).
            The portion of the expert's proffered testimony that the court
            excluded related to whether, when the trust was dissolved in
            1993, Umpierrez "received a disproportionate return on his
            investment, compared to other investors, which would be to the
            detriment of Mr. Palmacci." 
                      Palmacci acknowledges, as we discussed 
                                                            supra at 7-9,
            that the alleged fraud must exist at the inception of the debt,
            and statements or actions which were neither false nor
            fraudulent when made will not be made so by the happening of
            subsequent events. Nor does failure to carry out one's
            intentions constitute a basis for finding a debt
            nondischargeable under S 523(a)(2)(A) absent a showing that the
            claimed fraud existed at the inception of the debt. 
                      Palmacci argues, however, that a promissor's
            subsequent conduct may reflect his state of mind at the time he
                                        -25-
                                         25

            made the promise, and thus may be considered in determining
            whether he possessed the requisite fraudulent intent 
                                                               ab initio
                                                                        .
            It is true that subsequent conduct may be relevant to an
            earlier state of mind. In  Williamson 
                                                  v. 
                                                     Busconi, 87 F.3d at
            603, we concluded that the bankruptcy court abused its
            discretion by excluding evidence as to conduct 
                                                          subsequent to a
            real estate closing, from which a factfinder reasonably could
            have inferred that Busconi had not intended to pay the note 
                                                                       at
            the time
                    it was executed. The lower court in 
                                                        Busconi said this
            evidence was irrelevant, and then expressly credited Busconi's
            testimony (although Williamson testified too). Finding that
            Williamson had failed to establish the requisite fraudulent
            intent, the bankruptcy court ruled the debt dischargeable. 
                                                                      Id.
                      We rejected that reasoning, noting that: 
                      As direct evidence is seldom available,
                      fraudulent intent normally is determined
                      from the totality of the circumstances.
                      And since "subsequent conduct may reflect
                      back to the promissor's state of mind and
                      thus may be considered in ascertaining
                      whether there was fraudulent intent" at
                      the time the promise was made, proper
                      application of the "totality" test in this
                      context often warrants consideration of
                      post-transaction conduct and
                      contemporaneous events.
            Id. at 603 (citation omitted) (quoting 
                                                 Krenowsky v. Haining (In
            re 
               Haining), 119 B.R. 460, 464 (Bankr. D. Del. 1990));    cf.
            United States v. Rodriguez, 858 F.2d 809, 816 (1st Cir. 1988)
            ("later events often may shed light on earlier motivations").
                                        -26-
                                         26

                      In the instant case, however, that relevance is very
            attenuated. The facts of this case are nothing like the facts
            in the cases relied upon by Palmacci,   where an overarching
            scheme to defraud the creditor was shown. In  In 
                                                             re 
                                                                 Haining,
            119 B.R. at 464, the debtor engaged in a pattern of
            transferring all her assets to a third party to the detriment
            of her creditors. The court reasonably concluded that the
            debtor's fraudulent scheme began prior to the debt in dispute,
            and continued throughout the period. Similarly, in   Comerica
            Bank v. Weinhardt (In re Weinhardt)
                                              , 156 B.R. 677, 680 (Bankr.
            M.D. Fla. 1993), the business into which the debtor was to have
            invested the creditor's funds never existed, and the debtor
            spent all the money on a gambling spree. The court concluded
            that evidence of the subsequent pattern of conduct helped to
            show that the debtor did not, even at the outset, intend to use
            the funds obtained for the purposes stated. 
                      In the instant case, the disputed testimony simply
            does not rise to the same level of probative value on the issue
            of Umpierrez's intent to defraud in the inducement. The
            proffered testimony related to events almost two years after
            Palmacci's investment was induced. Moreover, the allegations
                                
            6.  The timing and other aspects of relevance were not
            delineated in our opinion in Busconi. There we simply stated
            that the proffered evidence of subsequent conduct was evidence
            "from which a factfinder reasonably could have inferred that
            Busconi had not intended to pay the note at the time it was
            executed." 87 F.3d at 603. A similar conclusion cannot be
            drawn in the instant case.
                                        -27-
                                         27

            Palmacci sought to prove through his proffered expert -- that
            the losses on the investment were not proportionately shared
            and that the project's 1992 and 1993 financial statements
            indicated that Umpierrez did not spend all project money
            exactly as originally stated in the business proposal (although
            they did not indicate that he failed to apply the funds to the
            Chase project in some way) -- would not have been directly
            probative of Umpierrez's intent to deceive in 1991. Certainly
            the bankruptcy court, which heard all the evidence, did not
            abuse its discretion in refusing to hear the proffered expert
            testimony.
                      Even if we were to conclude on the present facts that
            the bankruptcy court erred in excluding the expert testimony,
            we need not reverse on this issue because excluding this
            evidence did not affect Palmacci's substantial rights.    See
            Busconi, 87 F.2d at 603. In order to win a reversal, an
            appellant who claims error in the admissibility of evidence
            must also show that the evidentiary ruling adversely affected
            his "substantial rights."  See Fed. R. Bankr. P. 9005, 9017
            (incorporating Fed. R. Civ. P. 61; Fed. R. Evid. 103(a)).
            Here, as in Busconi, "[i]n light of all the evidence in the
            record, we are not persuaded that the challenged judgment was
            substantially influenced by the [presumptively] erroneous
            evidentiary ruling." Busconi, 87 F.2d at 603 (citing 
                                                                 Lubanski
            v. Coleco Indus., Inc., 929 F.2d 42, 46 (1st Cir. 1991)).
                                        -28-
                                         28

                      In conclusion, we see no basis in the record for
            second-guessing the trial court's determination that the Chase
            project did not implicate fraudulent misrepresentation, and
            that it was simply a failed real estate investment in which all
            investors (including both the debtor and the creditor) lost a
            portion of their investments. Palmacci had hoped to "turn[] a
            pretty fast profit on it," as he had seen Gus Umpierrez do on
            prior real estate deals. At the same time, Palmacci understood
            that he was taking a risk; he might not only not make a "fast
            profit" but he might lose money on the deal. Now that the
            project has gone sour, Palmacci cannot prevent Umpierrez from
            discharging his debts in bankruptcy unless he demonstrates all
            the elements of fraud or false representation. He has failed
            to meet this burden with respect to at least one element of
            each of the three misrepresentations that he has alleged.
            Accordingly, the judgment is 
                                        affirmed. Costs on appeal awarded
            to appellee.
                                        -29-
                                         29