R. Scott Appling v. Lamar, Archer & Cofrin, LLP , 848 F.3d 953 ( 2017 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 16-11911
________________________
D.C. Docket Nos. 3:15-cv-00031-CAR; 3:13-bkc-03042-JPS
In re: R. SCOTT APPLING,
Debtor.
________________________
R. SCOTT APPLING,
Plaintiff - Appellant,
versus
LAMAR, ARCHER & COFRIN, LLP,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Georgia
_______________________
(February 15, 2017)
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Before WILLIAM PRYOR and ROSENBAUM, Circuit Judges, and
MARTINEZ, * District Judge.
WILLIAM PRYOR, Circuit Judge:
This appeal presents a question that has divided the federal courts: Can a
statement about a single asset be a “statement respecting the debtor’s . . . financial
condition”? 11 U.S.C. § 523(a)(2). Ordinarily, a debtor cannot discharge any debt
incurred by fraud, id. § 523(a)(2)(A), but a debtor can discharge a debt incurred by
a false statement respecting his financial condition unless that statement is in
writing, id. § 523(a)(2)(B). R. Scott Appling made false oral statements to his
lawyers, Lamar, Archer & Cofrin, LLP, that he expected a large tax refund that he
would use to pay his debt to the firm. After Lamar obtained a judgment against
Appling for the debt, Appling filed for bankruptcy and Lamar initiated an
adversary proceeding to have the debt ruled nondischargeable. The bankruptcy
court and the district court ruled that Appling’s debt could not be discharged under
section 523(a)(2)(A) because it was incurred by fraud. But we disagree. Because
Appling’s statements about his tax refund “respect[] [his] . . . financial condition,”
id. § 523(a)(2)(B)(ii), and were not in writing, id. § 523(a)(2)(B), his debt to Lamar
can be discharged in bankruptcy. We reverse and remand.
* Honorable Jose E. Martinez, United States District Judge for the Southern District of Florida,
sitting by designation.
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I. BACKGROUND
R. Scott Appling hired the law firm Lamar, Archer & Cofrin, LLP, to
represent him in litigation against the former owners of his new business. Appling
agreed to pay Lamar on an hourly basis with invoices for fees and costs due
monthly. Appling became unable to keep current on the mounting legal bill and as
of March 2005, owed Lamar $60,819.97. Lamar threatened to terminate the firm’s
representation and place an attorney’s lien on all work product unless Appling paid
the outstanding fees.
Appling and his attorneys held a meeting in March 2005. The bankruptcy
court found that during this meeting Appling stated he was expecting a tax refund
of “approximately $100,000,” which would be enough to pay current and future
fees. Lamar contends that in reliance on this statement, it continued its
representation and did not begin collection of its overdue fees.
When Appling and his wife submitted their tax return, they requested a
refund of only $60,718 and received a refund of $59,851 in October. The Applings
spent this money on their business. They did not pay Lamar.
Appling and his attorneys met again in November 2005. The bankruptcy
court found that Appling stated he had not yet received the refund. Lamar contends
that in reliance on this statement, it agreed to complete the pending litigation and
forego immediate collection of its fees but refused to undertake any additional
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representation. In March 2006, Lamar sent Appling his final invoice for a principal
amount due of $55,303.66 and $6,185.32 in interest.
Five years later, Lamar filed suit against Appling in a superior court in
Georgia. In October 2012, Lamar obtained a judgment for $104,179.60. Three
months later, the Applings filed for bankruptcy.
Lamar initiated an adversary proceeding against Appling in bankruptcy
court. The bankruptcy court ruled that because Appling made fraudulent statements
on which Lamar justifiably relied, Appling’s debt to Lamar was nondischargeable,
11 U.S.C. § 523(a)(2)(A). The district court affirmed. The district court rejected
Appling’s argument that his oral statements “respect[ed] . . . [his] financial
condition,” 11 U.S.C. § 523(a)(2)(B), and should have been dischargeable. The
district court ruled that “statements respecting the debtor’s financial condition
involve the debtor’s net worth, overall financial health, or equation of assets and
liabilities. A statement pertaining to a single asset is not a statement of financial
condition.” The district court agreed with the bankruptcy court that Appling made
material false statements with the intent to deceive on which Lamar justifiably
relied.
II. STANDARD OF REVIEW
When we sit as the second appellate court to review a bankruptcy case, In re
Glados, Inc., 83 F.3d 1360, 1362 (11th Cir. 1996), we “assess the bankruptcy
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court’s judgment anew, employing the same standard of review the district court
itself used,” In re Globe Mfg. Corp., 567 F.3d 1291, 1296 (11th Cir. 2009). “Thus,
we review the bankruptcy court’s factual findings for clear error, and its legal
conclusions de novo.” Id.
III. DISCUSSION
The Bankruptcy Code gives a debtor a fresh start by permitting him to
discharge his pre-existing debts. But there are many exceptions to discharge. And
some of those exceptions protect victims of fraud.
Section 523(a)(2) creates two mutually exclusive 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;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial
condition;
(iii) on which the creditor to whom the debtor is liable for
such money, property, services, or credit reasonably
relied; and
(iv) that the debtor caused to be made or published with
intent to deceive; . . .
11 U.S.C. § 523(a)(2) (emphasis added).
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The Code treats debts incurred by a statement “respecting the debtor’s . . .
financial condition” differently from other debts. Id. All fraud “other than a
statement respecting the debtor’s . . . financial condition” is covered by subsection
(A). Id. § 523(a)(2)(A). Under subsection (A), a debtor cannot discharge a debt
obtained by any type of fraudulent statement, oral or written. Id. A creditor also
need prove only justifiable reliance. Field v. Mans, 516 U.S. 59, 61 (1995). But if a
statement is made “respecting the debtor’s . . . financial condition,” then subsection
(B) governs. 11 U.S.C. § 523(a)(2)(B)(ii). To avoid discharge of a debt induced by
a statement respecting the debtor’s financial condition, a creditor must show
reasonable reliance and that the statement was intentional, materially false, and in
writing. Id. § 523(a)(2)(B). Thus, a debt incurred by an oral, fraudulent statement
respecting the debtor’s financial condition can be discharged in bankruptcy.
We must determine whether Appling’s statements about a single asset are
“statement[s] respecting [his] . . . financial condition.” Id. § 523(a)(2). The
bankruptcy court found that Appling made false oral statements about his
anticipated tax refund to receive an extension of credit from Lamar. If these
statements do not respect his financial condition, Appling can discharge his debt to
Lamar in bankruptcy only if he disproves an element of fraud. Id. § 523(a)(2)(A).
But if the statements do respect his financial condition, Appling can discharge his
debt to Lamar because the statements were not in writing. Id. § 523(a)(2)(B).
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The circuits and other federal courts are split on this question. The Fourth
Circuit has held that a “debtor’s assertion that he owns certain property free and
clear of other liens is a statement respecting his financial condition.” Engler v. Van
Steinburg, 744 F.2d 1060, 1061 (4th Cir. 1984). Several bankruptcy courts—
including one in this Circuit, In re Aman, 492 B.R. 550, 565 & n.47 (Bankr. M.D.
Fla. 2010)—have agreed. See, e.g., In re Carless, No. 10-42988, slip op. at *3–4
(Bankr. D.N.J. Jan. 6, 2012); In re Nicolai, No. 05-29876, slip op. at *1 (Bankr.
D.N.J. Jan. 31, 2007); In re Hambley, 329 B.R. 382, 399 (Bankr. E.D.N.Y. 2005);
In re Priestley, 201 B.R. 875, 882 (Bankr. D. Del. 1996); In re Kolbfleisch, 97 B.R.
351, 353 (Bankr. N.D. Ohio 1989); Matter of Richey, 103 B.R. 25, 29 (Bankr. D.
Conn. 1989); In re Rhodes, 93 B.R. 622, 624 (Bankr. S.D. Ill. 1988); In re
Howard, 73 B.R. 694, 702 (Bankr. N.D. Ind. 1987); In re Panaia, 61 B.R. 959,
960–61 (Bankr. D. Mass. 1986); In re Roeder, 61 B.R. 179, 181 n.1 (Bankr. W.D.
Ky. 1986); In re Prestridge, 45 B.R. 681, 683 (Bankr. W.D. Tenn. 1985). But the
Fifth, Eighth, and Tenth Circuits have held that a statement about a single asset
does not respect a debtor’s financial condition because it “says nothing about the
overall financial condition of the person making the representation or the ability to
repay debt.” In re Bandi, 683 F.3d 671, 676 (5th Cir. 2012); see also In re Lauer,
371 F.3d 406, 413–14 (8th Cir. 2004); In re Joelson, 427 F.3d 700, 706 (10th Cir.
2005). And some bankruptcy courts in other circuits have agreed. See, e.g., In re
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Feldman, 500 B.R. 431, 437 (Bankr. E.D. Penn. 2013); In re Banayan, 468 B.R.
542, 575–76 (Bankr. N.D.N.Y. 2012); In re Campbell, 448 B.R. 876, 886 (Bankr.
W.D. Penn. 2011).
“[I]nterpretation of the Bankruptcy Code starts ‘where all such inquiries
must begin: with the language of the statute itself.’” Ransom v. FIA Card Servs.
N.A., 562 U.S. 61, 69 (2011) (quoting United States v. Ron Pair Enters, Inc., 489
U.S. 235, 241 (1989)). Because the Code does not define the relevant terms, we
look to “their ordinary, everyday meanings—unless the context indicates that they
bear a technical sense.” Antonin Scalia & Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 69 (2012); see also In re Piazza, 719 F.3d 1253, 1261
(11th Cir. 2013) (applying this canon to the Bankruptcy Code). The text and
context establish that a statement about a single asset can be a “statement
respecting the debtor’s . . . financial condition.” 11 U.S.C. § 523(a)(2).
“Financial condition” likely means one’s overall financial status. Elsewhere
in the statute, the Bankruptcy Code defines “insolvent” as the “financial condition
such that the sum of such entity’s debts is greater than all of such entity’s
property.” Id. § 101(32)(A). In this context, the statute uses “financial condition”
to describe the overall state of being insolvent, not any particular asset on its own.
Because “[a] word or phrase is presumed to bear the same meaning throughout a
text,” Scalia & Garner, supra, at 170, we should interpret “financial condition” in
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section 523(a)(2) in the same way. Whether by its ordinary meaning or as a term of
art, “financial condition” likely refers to the sum of all assets and liabilities.
But even if “financial condition” means the sum of all assets and liabilities,
it does not follow that the phrase “statement respecting the debtor’s . . . financial
condition,” Id. § 523(a)(2) (emphasis added), covers only statements that
encompass the entirety of a debtor’s financial condition at once. Read in context,
the phrase “statement respecting the debtor’s . . . financial condition,” id., includes
a statement about a single asset. We must not read the word “respecting” out of the
statute. See Scalia & Garner, supra, at 174 (“If possible, every word . . . is to be
given effect.”).
“Respecting” is defined broadly as “[w]ith regard or relation to; regarding;
concerning.” Respecting, Webster’s New International Dictionary 2123 (2d ed.
1961); see also Respecting, Oxford English Dictionary (online ed.) (“With respect
to; with reference to; as regards.”). For example, documents can “relate to” or
“concern” someone’s health without describing their entire medical history.
Articles can “reference” the Constitution without quoting its entire text. Likewise,
a statement can “respect” a debtor’s “financial condition” without describing the
overall financial situation of the debtor. The Supreme Court has interpreted “with
respect to” in a statute to mean “direct relation to, or impact on.” Presley v. Etowah
Cty. Comm’n, 502 U.S. 491, 506 (1992). And the Court has interpreted
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“respecting” in the First Amendment to include any partial step toward the
establishment of religion. Lemon v. Kurtzman, 403 U.S. 602, 612 (1971). A
statement about a single asset “relates to” or “impacts” a debtor’s overall financial
condition. And knowledge of one asset or liability is a partial step toward knowing
whether the debtor is solvent or insolvent.
If the statute applied only to statements that expressed a debtor’s overall
financial condition, Congress could have said so. Lamar argues that “the
preposition ‘respecting’ has no magic, expansive effect in the statute, it is simply a
required grammatical device necessary to connect two related terms.” Perhaps this
argument would have more sway if the statute said “statement of the debtor’s
financial condition.” But Congress did not use this language. Congress also did not
say “statement indicating” or “revealing” or “disclosing” or “encompassing” the
debtor’s financial condition, phrases that would connote a full or complete
expression of financial condition.
Lamar dismisses the focus on the word “respecting” as “nothing more than a
game of semantics,” but judges have a responsibility to interpret the whole text.
And “[s]ometimes the canon [of ordinary meaning] governs the interpretation of so
simple a word as a preposition.” Scalia & Garner, supra, at 71. A statement about a
single asset is still a statement respecting a debtor’s financial condition.
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Lamar argues that because the legislative history often used “financial
statement” in place of “statement respecting the debtor’s . . . financial condition,”
11 U.S.C. § 523(a)(2), we should read the statute to apply only to financial
statements, but the word “statement” should also be given its ordinary meaning.
Mere proximity of “statement” to “financial condition” is not enough to limit the
meaning of the text. “Statement” is defined as “[t]hat which is stated; an
embodiment in words of facts or opinions; a narrative; recital; report; account.”
Statement, Webster’s New International Dictionary 2461 (2d ed. 1961). The
definition of financial statement is technical and would exclude a statement about a
single asset: “A balance sheet, income statement, or annual report that summarizes
an individual’s or organization’s financial condition on a specified date or for a
specified period by reporting assets and liabilities.” Financial Statement, Black’s
Law Dictionary (10th ed. 2014). Setting aside the problems with legislative
history, Lamar’s argument works against it. Precisely because “[t]he term
‘financial statement’ has a strict, established meaning,” Joelson, 427 F.3d at 709,
we should expect the statute to say “financial statement” if it conveys that
meaning. But the statute instead says “statement.” To limit the definition to only
“financial statements,” Congress need only say so. Cf. 11 U.S.C. § 1125 (using the
term “disclosure statement”); Id. § 101(49)(A)(xii) (“registration statement”).
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The surplusage cannon supports our determination that “statement” should
be given its ordinary meaning. “If possible, every word and every provision is to
be given effect. . . . None should needlessly be given an interpretation that causes it
to duplicate another provision or to have no consequence.” Scalia & Garner, supra,
at 174; see also Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979). In subsection
(B), the statute says “use of a statement in writing.” 11 U.S.C. § 523(a)(2)(B).
Because a formal financial statement is almost always a written document (it is
hard to imagine an oral recitation of all assets and liabilities), reading the statute to
cover only financial statements would render the writing requirement surplusage.
And in the context of a statute about fraud, the ordinary meaning of the word
“statement” makes sense. Section 523(a)(2) creates two similar exceptions to
discharge for debts incurred by fraud. Subsection (A) references specific common-
law torts. See Field, 516 U.S. at 69 (“‘[F]alse pretenses, a false representation, or
actual fraud,’ carry the acquired meaning of terms of art. . . . [T]hey imply
elements that the common law has defined them to include.” (quoting 11 U.S.C.
§ 523(a)(2)(A))). Subsection (B) enumerates its own elements which are
analogous, but not identical to the common law elements. For example, where the
common law requires justifiable reliance, section 523(a)(2)(B)(iii) requires
reasonable reliance. Field, 516 U.S. at 72–75. Similarly, where the common law
requires either an affirmative representation or an intentional omission, section
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523(a)(2)(B) requires a “statement,” as opposed to an omission. True, if Congress
wanted to exclude omissions from subsection (B), it could have used the term
“representation” and avoided the confusion with the term “financial statement.”
But Congress would not have said “false representation” without implying the
common law term of art. See Field, 516 U.S. at 69. Accordingly, “statement”
means an expression or embodiment in words, as opposed to a nonactionable
omission.
Lamar also argues that the “only way to give Section 523(a)(2)(A) meaning
is to interpret it to provide a distinction between oral and written representations,”
but this argument reveals a fundamental misunderstanding of the statute. Section
523(a)(2)(A) covers most fraud. But section 523(a)(2)(B) covers statements
respecting financial conditions. Lamar states that “certain oral misrepresentations
must be non-dischargeable.” They are. Any debt incurred by an oral
misrepresentation that is not “respecting the debtor’s financial condition” is
nondischargeable under subsection (A). Appling provides a list of examples,
including false representations about job qualifications and lies about the purpose
and recipient of a payment. The question is how broadly to define the phrase
“statement respecting the debtor’s . . . financial condition,” not whether allowing
discharge of debts incurred by oral misrepresentations about finances is a good
idea. The statute allows the discharge of debts incurred by oral statements so long
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as they “respect” the debtor’s “financial condition.” Lamar’s argument is based on
policy, not statutory structure.
When the language of the statute is clear, we need not look any further. See
Puerto Rico v. Franklin Cal. Tax-Free Tr., 136 S. Ct. 1938, 1946 (2016) (When
“the statute’s language is plain,” “that is also where the inquiry should end.”
(internal quotations omitted)); United States v. Great Northern Ry. Co., 287 U.S.
144, 154 (1932) (“[W]e have not traveled, in our search for the meaning of the
lawmakers, beyond the borders of the statute.”). A distaste for dishonest debtors
does not empower judges to disregard the text of the statute. Because the text is not
ambiguous, we hold that “statement[s] respecting the debtor’s . . . financial
condition” may include a statement about a single asset.
This result is also perfectly sensible. The requirement that some statements
be made in writing promotes accuracy and predictability in bankruptcy disputes
that often take place years after the facts arose. Lamar refers to our interpretation
as a “giant fraud loophole.” But the requirement of a writing is not at all unusual in
the history of the law. From the Statute of Frauds to the Uniform Commercial
Code, law sometimes requires that proof be in writing as a prerequisite to a claim
for relief. This requirement may seem harsh after the fact, especially in the case of
fraud, but it gives creditors an incentive to create writings before the fact, which
provide the court with reliable evidence upon which to make a decision. In the
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context of a debt incurred by fraud, a lender concerned about protecting its rights
in bankruptcy can easily require a written statement from the debtor before
extending credit. Lamar, a law firm, could have required Appling to put his
promise to spend his tax return on their legal fees in writing before continuing to
represent him.
This rule strikes a reasonable balance between the “‘conflicting interests’ of
discouraging fraud and of providing the honest but unfortunate debtor a fresh
start.” In re Vann, 67 F.3d 277, 284 (11th Cir. 1995) (quoting Grogan v. Garner,
498 U.S. 279, 287 (1991)). The code does not unfairly reward dishonest debtors,
but instead imposes different requirements of proof for different kinds of
statements. A statement respecting a debtor’s financial condition must be in
writing, which helps both the honest debtor prove his honesty and the innocent
creditor prove a debtor’s dishonesty. And providing an incentive for creditors to
receive statements in writing may reduce the incidence of fraud. Because a
statement about a single asset can be a “statement respecting the debtor’s . . .
financial condition,” and because Appling’s statements were not in writing, his
debt can be discharged under section 523(a)(2)(B).
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IV. CONCLUSION
We REVERSE the order ruling that Appling’s debt to Lamar is
nondischargeable and REMAND for further proceedings consistent with this
opinion.
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ROSENBAUM, Circuit Judge, concurring:
Sometimes things are not as they seem. Today we conclude that the phrase
“statement respecting . . . the debtor’s financial condition” in 11 U.S.C. § 523(a)(2)
warrants a broad reading. As a result, Appling, the debtor in this case, will receive
a discharge of the debt he incurred by lying about how he would pay for the legal
services he dishonestly obtained. That certainly seems to frustrate a “primary
purpose” of the Bankruptcy Act to provide relief to only the “honest debtor.” See
Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934) (citation and internal quotation
marks omitted).
But in actuality, the broad reading we give to the phrase “statement
respecting . . . the debtor’s financial condition” better promotes congressional
intent to give a fresh start to only the “honest debtor” than does a narrow
construction of the same phrase. This is so because the very same phrase appears
in both §§ 523(a)(2)(A) and (B), and it must have the same meaning in both
subsections. Though a narrow construction of the phrase in subsection (A) seems
to further congressional intent to protect only the “honest debtor,” a broad
interpretation of the phrase in subsection (B) better comports with congressional
intent. And the reality is that a broad construction of the phrase “statement
respecting . . . the debtor’s financial condition” in subsection (B) advances
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congressional intent to provide relief for only the “honest debtor” more than a
narrow interpretation of the same phrase in subsection (A).
Because the words of the phrase alone are ambiguous, we must construe the
phrase with an eye towards congressional intent in enacting the Bankruptcy Act.
When we do that, it is clear that “statement respecting . . . the debtor’s financial
condition” must have the broad meaning that the panel attributes to it.
I.
There’s no getting around it. Standing alone, the words of the phrase
“statement respecting . . . the debtor’s financial condition” are not unambiguous.
True, the panel seems to think they are and argues that the words clearly mean any
statement about any finance, asset, or liability that the debtor may have. But other
courts have concluded that the language “statement respecting . . . the debtor’s
financial condition” refers to only statements about a debtor’s overall financial
circumstances—which do not include statements about only a single asset or
liability.
Among the courts that appear to have understood the phrase to mean the
opposite of what we conclude today is the Supreme Court, though the Supreme
Court has not expressly addressed the meaning of the language. In Field v. Mans,
516 U.S. 59 (1995), the Court held that a creditor need show only justifiable
reliance on a fraudulent misrepresentation in order to except the debt incurred as a
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result of that reliance, from discharge under § 523(a)(2)(A). In reaching this
conclusion, the Supreme Court discussed § 523(a)(2)(A) and (B)’s references to “a
statement respecting the debtor’s . . . financial condition” and conveyed its
understanding that the words “financial condition” in § 523(a)(2) are a prohibition
on excepting from discharge under both subsections (A) and (B) “debts traceable
to . . . a materially false financial statement,” id. at 64 (emphasis added),
apparently meaning “financial statement” as a term of art referring to a statement
of net worth, not a statement about a single asset or liability. So at least at the time
it decided Field, the Supreme Court appeared to have a different understanding of
the phrase “a statement respecting the debtor’s . . . financial condition” than we
embrace today.
To be sure, I do not suggest that Field’s discussion of the meaning of “a
statement respecting the debtor’s . . . financial condition” purports to instruct
courts on the proper meaning of § 523(a)(2)(A). But the Supreme Court’s
understanding as conveyed in Field demonstrates that the language of the phrase is
fairly susceptible of more than one meaning.
Three other circuits have likewise concluded that the phrase “a statement
respecting the debtor’s . . . financial condition” must be construed narrowly, to
refer to only those statements about a debtor’s overall net worth—though they do
not appear to have determined the language of the phrase to have an unambiguous
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meaning. See, e.g., In re Bandi, 683 F.3d 671 (5th Cir. 2012); In re Lauer, 371
F.3d 406 (8th Cir. 2004); In re Joelson, 427 F.3d 700 (10th Cir. 2005).
But while the language itself of the phrase in question may not be
unambiguous, that doesn’t mean that § 523(a)(2) is ambiguous in the overall
statutory scheme. When we construe a statute, we must do so not only by looking
to the language itself, but also by reference to “the specific context in which that
language is used, and the broader context of the statute as a whole.” Yates v.
United States, 125 S. Ct. 1074, 1081-82 (2015) (citation and quotation marks
omitted). And when we do that, it is clear that we must give the phrase “a
statement respecting the debtor’s . . . financial condition” a broad construction.
The Supreme Court has repeatedly emphasized that the Bankruptcy Code
“limits the opportunity for a completely unencumbered new beginning to the
‘honest but unfortunate debtor.’” Grogan v. Garner, 498 U.S. 279, 287 (1991)
(quoting Hunt, 292 U.S. at 244). For this reason, only honest debtors receive the
benefit of the general policy that exceptions to discharge are to be construed
strictly against the creditor and liberally in favor of the debtor. In re St. Laurent,
991 F.2d 672, 680 (11th Cir. 1991). Indeed, we have said that “the malefic debtor
may not hoist the Bankruptcy Code as protection from the full consequences of
fraudulent conduct.” Id. at 680-81.
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So to the extent that the language “statement respecting . . . the debtor’s
financial condition” is fairly and reasonably susceptible of a construction that
better furthers congressional intent to protect only the honest debtor, we are
obliged to apply that interpretation. When it comes to § 523(a)(2), a broad
construction is reasonable and better accomplishes this purpose than a narrow one.
As the panel notes, the phrase “statement respecting . . . the debtor’s
financial condition” appears in both subsections (A) and (B). We therefore
presume it to have the same meaning in both subsections. See Mohasco Corp. v.
Silver, 447 U.S. 807, 826 (1980) (“[W]e cannot accept respondent’s position
without unreasonably giving the word ‘filed’ two different meanings in the same
section of the statute.”).
But though the words have the same meaning in both subsections (A) and
(B), they have opposite effects on whether a debtor may discharge a debt for
something obtained through the use of a “statement respecting . . . the debtor’s
financial condition.” Under subsection (A), which refers to oral statements, if a
statement falls within the meaning of “statement respecting . . . the debtor’s
financial condition,” the debt incurred as a result of that statement is dischargeable.
Meanwhile, under subsection (B), which refers to written statements, if a statement
comes within the meaning of “statement respecting . . . the debtor’s financial
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condition,” the debt incurred as a result of that statement is not dischargeable,
provided that the other conditions in subsection (B) are satisfied.
So if the phrase has a broad meaning, more false oral statements will have
the effect of exempting a debt incurred as the result of a misrepresentation, from
the exception to discharge (meaning that such debts will be discharged), than if we
construe the phrase narrowly. But fewer false written statements will result in
excusing a debt for a fraudulently obtained asset, service, or loan. And since it
seems likely that, at least in arm’s length transactions, most significant debts are
obtained as the result of written representations about finances, as opposed to oral
ones, a broader interpretation of the phrase is less likely to benefit dishonest
debtors than a narrow construction of it.
II.
For these reasons, I agree with the panel that we must construe the phrase
“statement respecting . . . the debtor’s financial condition” broadly. To be sure,
doing so has the effect of allowing Appling’s debt for legal services, which the
bankruptcy court concluded he obtained by lying to Lamar about the tax refund, to
be discharged. But in the overall statutory scheme, the broad interpretation better
promotes Congress’s concern to provide relief to “honest debtors” only.
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