- Case Type:
- Case Status:
- 16-9006 (1st Circuit, Apr 20,2017) Published
- Without pleaded facts adequate to support a reasonable inference of material falsity, the plaintiff's section 523(a)(2)(B) claim does not cross the line from possible to plausible. The plausibility requirement demands something more than facts showing that a claim is conceivable. The bankruptcy Court order dismissing the complaint and denying the amendment to the same is affirmed.
- Procedural context:
- Plaintiff appeals the bankruptcy court's dismissal of her complaint under 523(a)(2)(B) and the denial of her request for leave to amend the complaint to add a claim under section 523(a)(2)(A). Plaintiff first filed an adversary proceeding seeking an order declaring her claim non- dischargeable under section 523(a)(2)(B). After Debtor answered the complaint and presented a motion to dismiss, the plaintiff seek to amend the complaint to include a claim under 523(a)(2)(A). The bankruptcy Court granted Debtor's motion to dismiss with respect to the section 523(a)(2)(B) claim and denied the plaintiff's motion to amend as futile, noting that the proposed amended complaint did not allege that the debtor had made any affirmative misrepresentations and that the plaintiff's failure to perfect any security interest "would be fatal in any case." The Bankruptcy Appellate Panel affirmed the order on dismissal and the denial of the request for leave to amend. The Bap hold that the List was not a statement and that the plaintiff did not plead sufficient facts to show that the List was materially false. Before the Court of Appeals the plaintiff also invoked the tenet that a party to a transaction must disclose "matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading." Restatement (Second) of Torts § 551(2)(b). Since no argument premised on section 551(2)(b) was raised below, the court of appeals noted that arguments advanced for the first time on appeal are deemed waived.
- in November 2007 Plaintiff loaned Debtor $30,000. During the negotiations for the loan Plaintiff, represented by counsel, asked the unrepresented Debtor to draw up a list of his property. Debtor gave her a list of his property (the List), comprising property "belonging" to him "either by title or by physical possession" and used in his landscaping business. Plaintiff's counsel identified the list as a list of collateral and attached it as an exhibit to the loan agreement. The list included two trucks and a variety of clippers and trimmers that he used for his landscaping business. the agreement specified that the debtor would execute and deliver a security agreement and financing statements "covering" the property included in the List. Also, empowered the plaintiff to sign and file financing statements on the Debtor's behalf. But, no security agreement or financing statement was presented after the transfer of the $30,000 loan, and neither the plaintiff nor the debtor took any steps to perfect the plaintiff's security interest in the property. Debtor defaulted on the loan and plaintiff sued in the state court and, in March 2014, secured a default judgment in the amount of $137,030.78. debtor filed for chapter 7 bankruptcy protection. Plaintiff filed an adversary proceeding seeking an order declaring the debt non dischargeable. She claimed that List was a false statement submitted to induce her to make the loan (since Debtor didn't stated that one of the trucks was encumbered), thus bringing the debt within the purview of section 523(a)(2)(B) of the Bankruptcy Code, which renders non-dischargeable debts obtained through "use of a statement in writing — (i) that is materially false; (ii) respecting the debtor's . . . financial condition; (iii) on which the creditor . . . reasonably relied; and (iv) that the debtor . . . published with intent to deceive." After Debtor answered the complaint and moved to dismiss for failure to state a claim, Plaintiff opposed the motion and moved to amend the complaint to include an alternative claim that the debt was non- dischargeable under section 523(a)(2)(A). That section exempts from discharge debts obtained through "false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's . . . financial condition." On appeal the Court afford no particular deference to decisions of the first-tier appellate tribunal (be it the district court or the BAP) and focus instead on the bankruptcy court's decision. In this instance, the Court treated the motion for judgment on the pleadings "as a vehicle to test the plausibility of a complaint," it is treated like a motion to dismiss under Rule 12(b)(6). The Court of Appeals reviewed the bankruptcy court's dismissal of the complaint de novo, accepting all well-pleaded facts as true and drawing all reasonable inferences in the pleader's favor. The Court concluded that the critical datum was that the plaintiff failed to plausibly allege that the List was materially false, she rather focused on whether the List was a statement respecting Debtor's financial condition. Noted that to make out a claim that a statement is materially false within the purview of section 523(a)(2)(B), a plaintiff must plausibly allege that the statement misrepresented the kind of information that "would normally affect the decision to grant credit" and thus portrayed a substantially untruthful picture of the debtor's financial condition. Aslo noted that to sink to the level of a misstatement by omission, the party privy to the omitted information must have been obligated to furnish it. The complaint only alleged that the plaintiff expected the debtor to supply a list of property "belonging to [him], either by title or by physical possession." In response, the debtor gave her exactly what she had requested: a list of items that he either owned or possessed. Debtor added the cost (that is, the purchase price) of each of the items. The plaintiff did not claim that the substance of the List was in any way untrue, nor did she claim that the debtor made any affirmative misrepresentations about the nature of his interest in the enumerated items.
- Howard, Selya and Lynch
Church Joint Venture, L.P. v. Earl Blasingame
Summarizing by Amir Shachmurove
3202 in the system
2 Being Processed