Toye v. O'Donnell (In re O'Donnell)

Citation:
13-9001 (1st Cir. August 26, 2013)
Tag(s):
Ruling:
The appeals court upheld the Bankruptcy Court's determination that David O'Donnell's (the "Debtor") debt to Thomas Toye III ("Toye") was nondischargeable. The Bankruptcy Court had held that the Debtor had failed to properly supervise a loan adviser's preparation of the Debtor's personal financial statement that was submitted to Toye as part of the Debtor's agreement to repay a loan made by Toye to a Debtor controlled entity. The Bankruptcy Court had determined that the loan adviser qualified as the Debtor's agent and the Debtor caused the personal financial statement to be published. The Bankruptcy Court also had found that the Debtor exhibited reckless indifference by failing to properly oversee the agent's preparation of the personal financial statement. The Debtor's reckless indifference satisfied the intent to deceive element of section 523(a)(2)(B) of the Bankruptcy Code.
Procedural context:
The case was on appeal from a B.A.P. decision affirming the bankruptcy court's determination that Toye's guaranty claim was not discharged pursuant to section 523(a)(2)(B) of the Bankruptcy Code.
Facts:
The Debtor was a real estate developer who guaranteed a loan made by Toye to an entity controlled by the Debtor and his business partner. An individual that arranged loans for the Debtor submitted a personal financial statement to Toye. The Debtor had provided enough information for the loan adviser to partially prepare the Debtor's personal financial statement, but not enough to complete the statement. The loan adviser used public records and other sources of information to fill out the personal financial statement. The financial statement had material inaccuracies. The Debtor did not repay the guaranty and filed a chapter 7 bankruptcy.
Judge(s):
Torruella, Selya and Thompson

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