Beller et al v. Krieger

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
IN RE:
KURT KRIEGER,
Debtor,
ROBERT G BELLER, ELLEN BELLER, and
THE SETH BELLER TRUST,
Plaintiffs,
v.
KURT KRIEGER,
Defendant.
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CASE NO. 1:21-bk-01043-HWV
CHAPTER 13
ADVERSARY NO. 1:22-ap-00019-HWV
Nature of Proceeding: 62 Dischargeability –
523(a)(2), false pretenses, false
representation, actual fraud; 67
Dischargeability – 523(a)(4), fraud as
fiduciary, embezzlement, larceny
MEMORANDUM OPINION
This adversary proceeding arises from a commercial lease and related construction
financing involving property owned by Robert G. Beller and Ellen Beller (collectively, the
“Bellers”). The Bellers and The Seth Beller Trust (collectively, the “Plaintiffs”) allege that Kurt
Krieger (the “Debtor” or “Kurt”) caused them to receive a personal guaranty purporting to bear
the signatures of his brother, Krisman Krieger, and sister-in-law, Amy Krieger, even though those
signatures were not authentic or authorized. Plaintiffs contend that the Debtor knew, or was
grossly reckless as to whether the guaranties were valid, and nevertheless caused them to be
supplied in connection with the transaction. Based on those allegations, Plaintiffs seek a
determination that the resulting debt is nondischargeable under 11 U.S.C. § 523(a)(2)(A). (Doc.
44.)
For the reasons set forth below, the Court concludes that Plaintiffs have established the
first four elements of their claim under § 523(a)(2)(A). Because the parties agreed to bifurcate
damages, however, the Court reserves determination of the fifth element, together with the
amount of any resulting nondischargeable debt, for the damages phase.
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I. JURISDICTION
The Court has subject matter jurisdiction over this adversary proceeding pursuant to 28
U.S.C. §§ 1334 and 157. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I), and the Court
has authority to enter a final judgment.
II. FACTUAL B ACKGROUND AND PROCEDURAL P OSTURE
Kurt Krieger and his brother, Krisman Krieger (“Kris”), jointly operated a group of
fitness businesses under the KK Fit name. Kurt testified that he and Kris were “equal partners” in
the businesses and that he served as CEO, CFO, and COO. (Doc. 96, Trial Tr. 81:15– 19.) Kurt
also managed the KK Fit office in York, Pennsylvania, where Elizabeth Hagens (“Hagens”)
worked as an employee and notary public. (Id. at 81:23–82:1.) Hagens performed administrative
functions for the KK Fit businesses under Kurt’s management, including notarizing and
transmitting transaction documents. (Ex. P-32 at 25:14–26:12, 39:5–19, 51:2–53:19.)
After KK Fit Allentown, Inc. (“KK Fit Allentown”) lost its lease at its existing Allentown
location, Kurt and Kris began looking for a replacement location and identified property at 2919
Lehigh Street in Allentown, Pennsylvania (the “Property”), owned by the Bellers. (Trial Tr.
83:4– 13.) In 2011, KK Fit Allentown negotiated with the Bellers to lease the Property and obtain
financing to convert it for use as a gym. The resulting transaction provided KK Fit Allentown
with a lease of the Property (the “Lease”) and up to $420,000 in construction financing for
improvements to the Property.1 (Exs. P-1, P-2.)
In connection with the financing, the Bellers required personal guaranties from Kurt,
Kris, and Kris’s wife, Amy Krieger (“Amy”). (See Exs. P-4, P-6; see also Trial Tr. 46:7–9.) The
requirement generated disagreement among the Kriegers. Kurt was recently divorced and
1 The note and associated guaranty were later transferred to The Seth Beller Trust, which then became the lender. (Trial
Tr. 46:12–15.)
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therefore could not provide a corresponding spousal guaranty. (Trial Tr. 110:24– 111:4.) Kris
objected to exposing Amy to a personal guaranty when Kurt would not be providing one from a
spouse, an objection Kurt acknowledged at trial. (Id. at 110:24–111:10, 116:21–117:9.) Amy, for
her part, had little involvement in the day-to-day operation of the KK Fit businesses. (Id. at
140:14–15, 141:14–20, 153:25–154:6.) Whether Amy nevertheless authorized execution of the
guaranty on her behalf later became a principal factual dispute in this proceeding.
The guaranty returned to the Bellers (the “Guaranty”) identified Kurt, Kris, and Amy as
guarantors and bore signatures purporting to be theirs. (Ex. P-4.) It contained a separate notarial
acknowledgment for each guarantor, executed by Hagens, stating that the named person had
personally appeared before her and acknowledged voluntarily signing the document. (Id.) Kurt
testified that Hagens notarized documents only when instructed by him, Kris, or both. (Trial Tr.
107:25–108:4.) When asked whether Hagens had been so instructed to notarize this Guaranty,
Kurt answered, “Absolutely.” (Id. at 107:21–108:7.) After the documents were completed, they
were transmitted to the Bellers. Kurt testified that Hagens transmitted them under his supervision
and management and that he and Kris wanted the completed documents transmitted. (Id. at
96:21–24, 97:14–98:5, 100:6–15.)
The circumstances surrounding the signatures and notarizations are central to the present
dispute. Kurt acknowledged that Hagens sometimes notarized Kris’s signature when Kris was
not present and that the instruction to do so could come from either Kurt or Kris. (Id. at
94:5– 95:11.) He further acknowledged that Kris had signed Amy’s name on other occasions. (Id.
at 95:20.) When asked whether he and Kris would “enable and expect” Hagens to notarize Amy’s
signature when he believed Kris had signed Amy’s name, Kurt answered, “Yeah, correct.” (Id. at
105:5– 106:10; see also 117:5–9.) Amy denied signing this Guaranty or authorizing anyone else
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to sign it for her, id. at 131:21–132:23, 139:23–140:7, and Kris testified that he did not go to the
York office on November 14, 2011 to have the Guaranty notarized, id. at 153:9–18. Amy
likewise testified that she did not believe she saw Hagens that day. (Id. at 132:25–133:8.) The
parties sharply dispute what may be inferred from these circumstances concerning the Guaranty,
including whether Amy authorized execution on her behalf, whether Kris and Amy personally
appeared before Hagens, and what Kurt knew or believed when the completed Guaranty was
transmitted. Those matters are addressed in detail below.
KK Fit Allentown later defaulted on its obligations arising from the transaction, and the
Bellers commenced litigation in the Court of Common Pleas of Lehigh County against KK Fit
Allentown and the Kriegers. During that litigation, Kris and Amy disputed their obligations
under the Guaranty, and the state court ultimately entered judgment in their favor. (See Ex.
P-44.)2
Kurt filed a voluntary Chapter 13 petition on May 7, 2021. Plaintiffs commenced this
adversary proceeding on May 6, 2022 and later filed the operative Amended Complaint. (Doc.
44.) Plaintiffs now proceed solely under 11 U.S.C. § 523(a)(2)(A).3
The Court conducted trial on September 17, 2025. Robert Beller, Kurt, Amy, and Kris
testified, and the evidentiary record also included Hagens’s deposition testimony and
2 The state court judgment is recounted only as part of the procedural history. The parties do not contend that the
decision has preclusive effect, and this Court agrees that it does not. Plaintiffs expressly disclaimed reliance on res
judicata. (Trial Tr. 197:4–5 (“I’m not suggesting that it’s res judicata, Your Honor.”).) At trial, the Court also noted
that Kurt was no longer participating as a party in the state-court proceeding and had not necessarily been afforded a
full and fair opportunity to litigate the forgery issue. (Id. at 196:16–197:3.) Consistent with that limitation, the state
court decision was admitted “for purposes of its existence only,” with the Court expressly stating that it was “not
bound by the findings by the state court.” (Id. at 197:19–24.)
3 Plaintiffs have withdrawn Count II of the Amended Complaint, which sought nondischargeability under 11 U.S.C.
§ 523(a)(4). Although Count I did not specify which subsection of § 523(a)(2) Plaintiffs invoked, their post-trial brief
clarified that they proceed solely under § 523(a)(2)(A). (See Doc. 102.) Plaintiffs confirmed that position at oral
argument. (Doc. 110.)
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documentary exhibits. By agreement, the Court reserved damages for a separate phase of the
proceeding. (See Trial Tr. 51:19–22, 53:6–8, 166:12–21.) Following trial, the parties submitted
post-trial briefs, Docs. 102, 106,4 and the Court heard oral argument on February 24, 2026. The
issues addressed in this Opinion are now ready for decision.
III. ANALYSIS
The issue before the Court is whether Kurt caused the Bellers to enter the Lease and
financing transaction through material misrepresentations concerning the Guaranty, such that any
resulting debt is nondischargeable under § 523(a)(2)(A).
Plaintiffs contend that the completed Guaranty falsely represented that Kris and Amy had
undertaken the personal obligations stated in it and that each had personally appeared before a
notary and acknowledged signing it. They contend those representations are attributable to Kurt,
that he knew they were false or acted with gross recklessness as to their truth, that he intended to
deceive the Bellers, and that the Bellers relied on them in proceeding with the Lease and
financing.
Kurt disputes that Plaintiffs have established any material misrepresentation attributable
to him. He contends that Plaintiffs failed to prove that Kris’s and Amy’s purported undertakings
were unauthorized, that he caused any unauthorized signature to be affixed, or that he knew or
was grossly reckless as to the falsity of any representation or intended to deceive the Bellers. He
also disputes the “obtained by” and reliance requirements of § 523(a)(2)(A). The Court considers
the parties’ respective arguments below.
4 The Court does not consider Plaintiffs’ Supplemental Brief, Doc. 108, because it was not authorized by the Court’s
September 18, 2025 Order setting the post-trial briefing schedule, Doc. 88, and was filed approximately two hours
before oral argument.
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Exceptions to discharge under § 523(a) are “strictly construed against creditors and
liberally construed in favor of debtors because of the overriding bankruptcy purpose of granting
debtors a fresh start.” Jou v. Adalian (In re Adalian), 474 B.R. 150, 160 (Bankr. M.D. Pa. 2012)
(citation omitted); Grogan v. Garner, 498 U.S. 279, 286–87 (1991). Section 523(a)(2)(A) excepts
from discharge any debt “for money, property, services, or an extension, renewal, or refinancing
of credit, to the extent obtained by—false pretenses, a false representation, or actual fraud, other
than a statement [regarding] the debtor’s or an insider’s financial condition[.]” 11 U.S.C.
§ 523(a)(2)(A).
To establish nondischargeability under § 523(a)(2)(A), a creditor must prove by a
preponderance of the evidence that: “(1) the debtor obtained money, property[,] or services
through a material misrepresentation; (2) the debtor, at the time, knew the representation was
false or made with gross recklessness as to its truth; (3) the debtor intended to deceive the
creditor; (4) the creditor justifiably relied on the debtor’s false representation; and (5) the creditor
sustained a loss and damages as a proximate result of the debtor’s materially false
representations.” United States SEC v. Bocchino (In re Bocchino), 794 F.3d 376, 380–81 (3d Cir.
2015) (approving the formulation adopted in Cohen v. De La Cruz (Cohen III), 106 F.3d 52,
54– 55 (3d Cir. 1997), and quoting De La Cruz v. Cohen (Cohen II), 191 B.R. 599, 604 (D.N.J.
1996)); see also Field v. Mans, 516 U.S. 59, 70–71 (1995) (holding that the fourth element
requires justifiable reliance, not reasonable reliance). The creditor must prove each element by a
preponderance of the evidence. Grogan, 498 U.S. at 289. A failure to establish any one element
is fatal to the claim. Johnnie’s Rest. & Hotel Serv. v. Witmer (In re Witmer), 541 B.R. 769, 777
(Bankr. M.D. Pa. 2015).
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A. Money, Property, or Services Obtained Through a Material Misrepresentation
The first element requires Plaintiffs to establish that qualifying money, property, services,
or credit was obtained through a material misrepresentation. Two distinct questions arise under
this element: first, whether § 523(a)(2)(A)’s “obtained by” requirement is satisfied even though
Kurt did not personally receive the Lease or construction-financing proceeds; and second,
whether the Guaranty contained or conveyed a material misrepresentation through which the
Lease and financing were obtained. The Court begins with the “obtained by” requirement.
1. 	The “Obtained By” Requirement
The relevant language of § 523(a)(2)(A) is “any debt . . . for money, property, services, or
an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a
false representation, or actual fraud.” 11 U.S.C. § 523(a)(2)(A). On its face, the statute does not
require that the debtor directly and personally receive the money, property, services, or credit
obtained through fraud. The authorities interpreting § 523(a)(2)(A) support that textual reading
and establish two principles that guide the Court’s analysis of this requirement.
First, “[o]nce it is established that specific money or property has been obtained by fraud,
. . . ‘any debt’ arising therefrom is excepted from discharge.” Cohen v. de la Cruz, 523 U.S. 213,
218 (1998). Section 523(a)(2)(A) excepts from discharge “debts in which the debtor used
fraudulent means to obtain money, property, services, or credit.” Nunnery v. Rountree (In re
Rountree), 478 F.3d 215, 219 (4th Cir. 2007). Thus, § 523(a)(2)(A) requires that qualifying
money, property, services, or credit be obtained through fraud, but once that occurs, the
exception extends to any debt arising from that fraudulent acquisition.5
5 The Supreme Court’s textual analysis in Bartenwerfer v. Buckley, 598 U.S. 69, 75–76 (2023), reinforces this reading.
In construing § 523(a)(2)(A), the Court explained that the provision focuses on an event rather than a particular actor.
Id. at 75.
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Second, and consistent with the first principle, “[t]he fact that a third party received the
proceeds of a loan does not preclude a creditor’s nondischargeability claim against a guarantor of
the credit facility.” Sherwin Williams Co. v. Grasso (In re Grasso), 497 B.R. 434, 443 (Bankr.
E.D. Pa. 2013); see also Brady v. McAllister (In re Brady), 101 F.3d 1165, 1172 (6th Cir. 1996)
(rejecting the proposition that nondischargeability requires proof that “the debtor directly and
personally received every dollar lost by the creditor”). Thus, the value obtained through the fraud
need not pass directly to the debtor.6
Applying these principles here is straightforward. It is undisputed that KK Fit Allentown
obtained qualifying property and credit through the transaction in the form of the Lease and
construction financing from the Bellers. The fact that KK Fit Allentown, rather than Kurt
personally, received that property and credit does not, by itself, defeat § 523(a)(2)(A)’s “obtained
by” requirement. Plaintiffs must separately establish that the Lease and financing were obtained
through material misrepresentations attributable to Kurt, and the Court addresses that question
below. But if Plaintiffs establish that nexus, Kurt’s lack of personal receipt does not bar
satisfaction of the “obtained by” requirement.
Kurt argues otherwise, relying on Hydock v. Schermer (In re Schermer), 388 B.R. 123,
127–28 (Bankr. E.D. Pa. 2008). That reliance is misplaced. The § 523(a)(2)(A) claim in
Schermer failed because the complaint did not allege that money, property, services, or credit had
been obtained through fraud. Id. at 127–28. Thus, although Schermer quoted an earlier decision
stating that something of value must be “transferred to the debtor from the creditor,” id. at 128
(quoting Fledderman v. Glunk (In re Glunk), 343 B.R. 754, 758 (Bankr. E.D. Pa. 2006)), that
6 Courts have taken differing approaches to whether a debtor who does not personally receive the value obtained
through fraud must nevertheless derive some direct or indirect benefit from it. See Glencove Holdings, LLC v. Bloom
(In re Bloom), No. 22-1005, 2022 WL 2679049, at *5–6 (10th Cir. July 12, 2022). The Court need not resolve that
question because, as discussed below, any such requirement is satisfied here.
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proposition did not control its disposition. Moreover, a later decision from the same court held in
the guarantor context that “[t]he fact that a third party received the proceeds of a loan does not
preclude a creditor’s nondischargeability claim against a guarantor of the credit facility.” In re
Grasso, 497 B.R. at 443. Schermer therefore does not establish the personal-receipt requirement
Kurt advances.
Even assuming § 523(a)(2)(A) requires a debtor who does not personally receive the
value obtained through fraud to derive some direct or indirect benefit from the transaction, that
requirement is satisfied here. Under the receipt-of-benefits approach, an indirect benefit to the
debtor may suffice by way of a debtor’s ownership and management relationship to the entity or
enterprise that received the value obtained through the fraud. See, e.g., Glencove Holdings, LLC
v. Bloom (In re Bloom), No. 22-1005, 2022 WL 2679049, at *6 (10th Cir. July 12, 2022)
(declining to decide whether a direct or indirect benefit requirement applies, but concluding that
even if it did, the requirement was satisfied because the debtor was the sole member of a
business which had obtained money due to the debtor’s fraud); In re Grasso, 497 B.R. at 443
(concluding that the debtor’s relationship to the recipient enterprise was “sufficient to establish
that benefits accrued to him as a result of the . . . investment”).
That standard is satisfied here. The Court finds that Kurt held at least a fifty-percent
ownership interest in KK Fit Allentown at the time of the transaction. (See Ex. D-1.) Kurt
testified that he and Kris were “equal partners” in the KK Fit businesses and that he served as
CEO, CFO, and COO. (Trial Tr. 81:15– 19.) KK Fit Allentown obtained the Lease as tenant and
up to $420,000 in construction financing as borrower. (Exs. P-1, P-2.) Kurt also acted on behalf
of KK Fit Allentown in the transaction. The Lease identified him as its CEO, and he signed the
loan agreement on behalf of the corporate borrower. (Trial Tr. 41:10–42:5; Exs. P-1, P-2.)
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Because the value obtained through the transaction went directly to an entity in which Kurt held
a substantial ownership interest and which he managed, the receipt-of-benefits requirement, if
applicable, is satisfied.
Accordingly, Kurt’s lack of personal receipt does not defeat the “obtained by”
requirement. And even if § 523(a)(2)(A) additionally requires a direct or indirect benefit to Kurt,
that requirement is satisfied.
2. 	Material Misrepresentation
The second issue here is whether Plaintiffs have established by a preponderance of the
evidence that the completed Guaranty contained or conveyed one or more material
misrepresentations attributable to Kurt. Plaintiffs contend that the Guaranty falsely represented
that Kris and Amy had undertaken the personal guaranty obligations stated in it. They further
contend that it falsely represented that each had personally appeared before the notary and
acknowledged signing it. Kurt responds that Plaintiffs have not proven that either purported
undertaking was unauthorized. He also contends that they have not shown that he personally
wrote or caused any unauthorized signature to be affixed, or otherwise made or adopted a false
representation concerning the Guaranty.
Section 523(a)(2)(A) encompasses both express and implied misrepresentations. “A ‘false
pretense’ is an implied misrepresentation or conduct which creates and fosters a false impression,
as distinguished from a ‘false representation’ which is an express misrepresentation.” Adalian,
474 B.R. at 160 (quoting Stevens v. Antonious (In re Antonious), 358 B.R. 172, 182 (Bankr. E.D.
Pa. 2006) (internal quotation marks omitted)); see also Wolstein v. Docteroff (In re Docteroff),
133 F.3d 210, 216 (3d Cir. 1997) (explaining that fraud under § 523(a)(2)(A) “does not require
an affirmative statement” and may be predicated on the failure to disclose a material fact).
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As reflected in the governing § 523(a)(2)(A) standard, the misrepresentation must also be
material. See In re Bocchino, 794 F.3d at 380–81. Because the fraud terms used in § 523(a)(2)(A)
carry their common-law meaning, common-law principles inform the materiality inquiry. See
Field, 516 U.S. at 68–70. Consistent with those common-law principles, the Third Circuit has
explained in the closely related § 523(a)(2)(B) context that “[i]t is sufficient that the false
statement is one that is capable of influencing, or had a natural tendency to influence, a creditor’s
decision.” Insurance Co. of North America v. Cohn (In re Cohn), 54 F.3d 1108, 1115 (3d Cir.
1995).
Applying these standards, the Court considers in turn whether the notarial
acknowledgments were false, whether Amy’s purported guaranty obligation was unauthorized,
whether those misrepresentations are attributable to Kurt, and whether they were material.
a. 	False Notarial Acknowledgments
The Guaranty is a single agreement purporting to bear the signatures of Kurt, Kris, and
Amy. Each purported guarantor is the subject of a separate notarial acknowledgment. (Ex. P-4.)
As to both Kris and Amy, Hagens certified that the named person “personally appeared before
me this day” and acknowledged that he or she “voluntarily signed the foregoing document for
the purpose stated therein and in the capacity indicated.” (Id.)
The Court finds by a preponderance of the evidence that neither Kris nor Amy personally
appeared before Hagens for those acknowledgments. Kris testified that he did not go to the York
office on November 14, 2011 to have Hagens notarize the Guaranty. (Trial Tr. 153:9–18.) Amy
likewise testified that she did not believe she saw Hagens that day. (Id. at 132:25–133:8.) Hagens
could not recall the circumstances surrounding the subject notarizations or whether Kris and
Amy signed the documents in her presence. (Ex. P-32 at 57:12–18, 67:24–68:8.) She also
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acknowledged a practice of notarizing signatures when the purported signer was absent. (See id.
at 57:12– 18, 64:12–65:16, 67:24–68:8.)
Kurt’s testimony also supports that finding and is consistent with Hagens’s practice.
Specifically, Kurt testified that he did not recall seeing Kris or Amy sign these documents. (Trial
Tr. 89:2–3.) He further testified that Amy “hardly ever” came to the York office and that Kris
“hardly ever” came there in November 2011. (Id. at 89:9–13.) Kurt also acknowledged that
Hagens would notarize Kris’s signature when Kris was not present. (Id. at 94:5–95:11.) He
further testified that Hagens notarized documents only when instructed by him, Kris, or both. (Id.
at 108:3– 4.) When asked whether Hagens had been so instructed to notarize this Guaranty, Kurt
answered, “Absolutely.” (Id. at 107:21–108:7.)
Accordingly, the notarial acknowledgments falsely represented that Kris and Amy had
personally appeared before Hagens.
b. 	Amy’s Purported Guaranty Obligation
The Guaranty expressly identified Amy as one of the “Guarantors” and obligated the
Guarantors to guarantee KK Fit Allentown’s payment and performance. It also bore a signature
purporting to be Amy’s. (Ex. P-4.) Presented as a completed transaction document, the Guaranty
therefore represented that Amy had undertaken the personal guaranty obligations stated in it.
The Court finds, by a preponderance of the evidence, that Amy did not undertake those
obligations. Amy denied signing the Guaranty and denied authorizing anyone else to sign it on
her behalf. (See Trial Tr. 131:21–132:23, 139:23–140:7). Handwriting expert J. Wright Leonard’s
state court testimony corroborated that the signature was not written by Amy. (Ex. P-68A at
35:6–36:9.) The surrounding circumstances also support Amy’s denial of authorization. She
played little role in KK Fit’s day-to-day business affairs. (See Trial Tr. 140:14–15, 141:14–20,
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153:25–154:6.) Kris also specifically objected to exposing Amy to the guaranty obligation, a
circumstance Kurt himself acknowledged. (See id. at 110:24–111:10, 116:21–117:9.)
Although there was evidence that Kris had signed Amy’s name on other occasions, the
Court gives that evidence limited weight as proof that Amy authorized execution of this
Guaranty. Kris testified that, to the extent he may have signed Amy’s name on other occasions, it
was not on matters “of relative importance,” and he identified something such as a donation to a
local baseball team as the type of matter on which he might have done so. (Id. at 155:2–10.) This
Guaranty was materially different. It imposed an unconditional personal guaranty of KK Fit
Allentown’s obligations under a $420,000 note. (Ex. P-4.) That was plainly a matter of “relative
importance.”
The Court credits Amy’s testimony on this point. Although her recollection of some of
the surrounding circumstances was incomplete, her denial that she authorized anyone to sign the
Guaranty on her behalf was unequivocal and consistent with the surrounding evidence described
above. The Court need not determine who physically wrote Amy’s name. Plaintiffs have proven
that Amy did not write it and did not authorize another person to sign the Guaranty on her behalf.
The completed Guaranty therefore falsely represented that Amy had undertaken those
obligations.
The Court need not independently determine whether Kris authorized another person to
sign the Guaranty on his behalf. The false notarial acknowledgments, together with the false
representation that Amy had undertaken the guaranty obligations attributed to her, provide the
misrepresentations relevant to the remaining inquiry. The Court therefore turns to whether those
misrepresentations are attributable to Kurt and were material to the transaction.
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c. 	Attribution to Kurt
The next question is whether these misrepresentations are attributable to Kurt. They are.
This was not a circumstance in which Kurt merely received a completed document previously
notarized by an independent third party. Hagens worked under Kurt’s management, and Kurt
testified that she notarized documents only when instructed by him, Kris, or both. (Trial Tr.
107:25–108:4.) When asked whether Hagens had been so instructed to notarize this Guaranty,
Kurt answered, “Absolutely.” (Id. at 107:21–108:7.) After the documents were completed, they
were transmitted to the Bellers. Kurt testified that Hagens transmitted them under his supervision
and management and that doing so was what he and Kris wanted. (Id. at 96:21–24, 97:14–98:5,
100:6–15). He also agreed that he sent the documents to the Bellers after they had been signed.
(Id. at 117:14–16.) The Court need not resolve who actually transmitted the documents because,
under either account, Kurt caused the completed documents to be transmitted to the Bellers. His
testimony further established that he understood the Bellers expected all three guarantors’
signatures and notarizations. (Id. at 107:2– 7.)
Kurt therefore did more than merely transmit representations made by others. By helping
procure the notarization and causing the completed Guaranty to be transmitted, Kurt conveyed
the representations at issue. Those representations were that Amy had undertaken the guaranty
obligations attributed to her and that Kris and Amy had personally appeared before Hagens and
acknowledged signing the Guaranty. Because Kurt conveyed those representations through his
conduct rather than through an affirmative statement of his own, they are properly analyzed as
false pretenses under § 523(a)(2)(A).
Plaintiffs were not required, for purposes of establishing this element, to prove that Kurt
personally wrote the disputed signatures or directed another person to do so. Whether Kurt knew
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the representations were false or acted with gross recklessness as to their truth, and whether he
intended to deceive the Bellers, are separate questions addressed below.
d. 	Materiality
Both misrepresentations were material. The Guaranty itself recites that the “Lender [wa]s
unwilling to lend funds to Borrower unless Guarantors unconditionally guarantee payment of the
Note,” confirming the importance of the personal guaranties to the loan transaction. (Ex. P-4.)
Robert Beller likewise testified that if only two of the three required signatures and
acknowledgments had been returned, he would have sent the documents back for completion
and, if they remained incomplete, would not have proceeded with the transaction. (Trial Tr.
44:9– 18.) He further testified that the Bellers “needed and insisted” from early in the transaction
upon adequate security and guarantees for the loan. (Id. at 45:25–46:9.)
The false acknowledgments were independently material. When asked whether he would
have proceeded if the documents had been returned without notarial seals for the three
guarantors, Beller answered, “Absolutely not.” (Id. at 44:19–22.) When the question was
narrowed to whether he would have advanced the $420,000 without those seals, he again
answered, “Absolutely not.” (Id. at 45:3–5.) The representations that Amy had undertaken the
guaranty obligations attributed to her and that Kris and Amy had personally appeared and
acknowledged signing the Guaranty were therefore capable of influencing, and had a natural
tendency to influence, the Bellers’ decision to proceed with the transaction and fund the loan.
Accordingly, Plaintiffs have proven by a preponderance of the evidence that the
completed Guaranty materially misrepresented that Amy had undertaken the guaranty obligations
attributed to her and that Kris and Amy had personally appeared before Hagens and
acknowledged signing it. For the reasons stated above, those misrepresentations are attributable
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to Kurt for purposes of § 523(a)(2)(A). The Court need not independently determine whether
Kris authorized another person to sign the Guaranty on his behalf. The Court next considers the
remaining state-of-mind elements.
B. Knowledge or Gross Recklessness
The second element requires Plaintiffs to prove that Kurt, at the time of the
misrepresentation, “knew the representation was false or made [it] with gross recklessness as to
its truth.” In re Bocchino, 794 F.3d at 380. Because § 523(a)(2)(A) does not specify the required
level of intentionality, the Third Circuit looks to the common law for guidance. Id. at 381. As the
Supreme Court explained in Field, the statute uses common-law terms that “imply elements that
the common law has defined them to include.” 516 U.S. at 69. Accordingly, Bocchino looked to
the Restatement (Second) of Torts, which provides:
A misrepresentation is fraudulent if the maker (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.
In re Bocchino, 794 F.3d at 381 (quoting Restatement (Second) of Torts § 526).
Bocchino also drew support from Bullock v. BankChampaign, N.A., 569 U.S. 267 (2013).
There, in construing § 523(a)(4), the Supreme Court explained that reckless conduct may
substitute for actual knowledge when the actor “consciously disregards” or is willfully blind to
“a substantial and unjustifiable risk,” and that disregard involves “a gross deviation from the
standard of conduct that a law-abiding person would observe in the actor’s situation.” Bullock,
569 U.S. at 274. The Third Circuit concluded that Bullock’s reasoning applies “with similar force
to § 523(a)(2)(A).” In re Bocchino, 794 F.3d at 381–82. Thus, gross recklessness satisfies this
element even in the absence of actual knowledge, but requires more than negligence or a
showing that the debtor should have known the representation was false. Id. at 380–82.
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Plaintiffs have satisfied the gross-recklessness alternative of this element. The most
significant evidence comes from Kurt’s own testimony concerning his knowledge of Hagens’s
notarization practices and his participation in that process. Kurt acknowledged that Hagens
sometimes notarized Kris’s signature when Kris had not appeared before her. (Trial Tr.
94:5– 95:11.) He further acknowledged that Kris had signed Amy’s name on other occasions.
When asked whether he and Kris would “enable and expect” Hagens to notarize Amy’s signature
when he believed Kris had signed Amy’s name, Kurt answered, “Yeah, correct.” (Id. at
105:5– 106:10.) This was not merely a failure to investigate. Kurt knew from experience that a
notarial acknowledgment from Hagens did not necessarily mean that the named signer had
personally appeared before her.
The circumstances surrounding this Guaranty further support a finding of gross
recklessness. Kurt testified that Hagens notarized documents only when instructed by him, Kris,
or both. When asked whether Hagens had been so instructed to notarize this Guaranty, Kurt
answered, “Absolutely.” (Id. at 107:21–108:7.) Kurt also understood that the Bellers expected all
three signatures and notarizations. Yet, despite knowing that Hagens notarized signatures when
the named signer was absent, he could identify no specific knowledge of how Kris’s and Amy’s
signatures appeared on the Guaranty and could not recall what steps he took to ensure the
document was properly signed and notarized. (Id. at 107:2–20.) The completed documents were
nevertheless transmitted to the Bellers under Kurt’s supervision and management. (Id. at
100:6– 15.)
Kurt’s reliance on Hagens’s notarizations did not provide a factual basis for believing that
Kris or Amy had personally appeared before her. Although Kurt testified that he assumed the
signatures were genuine because Hagens had notarized them, id. at 100:16–101:13, he also knew
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from experience that Hagens notarized signatures when the named signer was absent. (See id. at
93:24–95:11, 96:11–17.) Thus, the notarizations themselves gave Kurt no reliable basis for
believing that personal appearance had occurred. And even if Kurt believed the signatures were
otherwise authorized, that would not establish personal appearance. Authorization and personal
appearance are distinct propositions.
On these facts, Kurt’s state of mind falls within the circumstances described in
Restatement (Second) of Torts § 526(b) and (c). At a minimum, Kurt did not possess the
confidence in the accuracy of the acknowledgments that his conduct implied, and he knew that
he lacked a reliable basis for representing that Kris and Amy had personally appeared before
Hagens. His conduct also exceeded mere carelessness. Kurt helped procure the notarization of
this Guaranty through a process he knew Hagens used even when the named signer was absent.
Yet he lacked a factual basis for believing that Kris and Amy had personally appeared before her.
By proceeding in those circumstances, Kurt consciously disregarded a substantial and
unjustifiable risk that the acknowledgments were false. Considering the nature of his conduct,
the purpose the completed Guaranty was intended to serve, and the circumstances known to him,
his disregard of that risk constituted a gross deviation from the standard of conduct that a law-
abiding person would observe in his situation. It therefore constituted gross recklessness under
Bocchino and Bullock.
The evidence likewise establishes at least gross recklessness as to the representation that
Amy had undertaken the guaranty obligations attributed to her. Kurt knew that Kris had
specifically objected to exposing Amy to those obligations. (See Trial Tr. 110:24–111:10,
116:21–117:9.) He also knew that Kris had signed Amy’s name on other occasions. (Id. at
117:8– 9.) Yet Kurt did not confirm whether Amy herself had signed this Guaranty. (Id. at
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117:11–13.) When asked about that issue, he explained that “Kris signed Amy’s name numerous
times, so I just got the signed documents.” (Id. at 117:5–13.) And when addressing whether Amy
had agreed to the Guaranty notwithstanding Kris’s earlier objection, Kurt testified, “So I assume
she agreed.” (Id. at 128:5– 13.)
Those circumstances provided no reliable basis for representing that Amy had undertaken
the guaranty obligations attributed to her. At a minimum, Kurt lacked the confidence in the
accuracy of that representation that his conduct implied, and he knew that he lacked a reliable
basis for it. By proceeding nonetheless, he consciously disregarded a substantial and unjustifiable
risk that the completed Guaranty falsely represented that Amy had undertaken those obligations.
Considering the circumstances known to Kurt, his disregard of that risk constituted a gross
deviation from the standard of conduct that a law-abiding person would observe in his situation.
That disregard therefore constituted gross recklessness under Bocchino and Bullock.
Accordingly, Plaintiffs have proven by a preponderance of the evidence that Kurt acted
with gross recklessness as to the truth of both misrepresentations established above. Because
gross recklessness satisfies the second element, the Court need not determine whether Kurt
actually knew that Kris and Amy had not personally appeared before Hagens or that Amy had not
authorized execution of the Guaranty. The Court next turns to the separate question of whether,
considering the circumstances underlying that finding together with the record as a whole, Kurt
intended to deceive the Bellers.
C. Intent to Deceive
Under the governing standard, Plaintiffs must establish deceptive intent as a separate
element. In re Bocchino, 794 F.3d at 380–82. Because direct evidence of deceptive intent is
rarely available, “intent to deceive can be inferred from the totality of the circumstances,
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including the debtor’s reckless disregard for the truth.” In re Cohn, 54 F.3d at 1118–19.7 Thus, “a
creditor can establish intent to deceive by proving reckless indifference to, or reckless disregard
of, the accuracy of the information . . . when the totality of the circumstances supports such an
inference.” Id. at 1119; see also In re Bocchino, 794 F.3d at 382.
Applying that standard, the totality of the circumstances supports the inference that Kurt
intended to deceive the Bellers. Here, that inference rests not only on the gross recklessness
found above, but also on Kurt’s role in the transaction, the purpose the Guaranty was intended to
serve, and the Court’s assessment of his testimony concerning how the document came to be
completed and transmitted.
Kurt understood that the Bellers required a completed Guaranty from all three Kriegers
before proceeding with the Lease and financing. He also played a central role in the transaction
and in the office that processed, notarized, and transmitted the Guaranty. He managed Hagens,
knew of the office’s nonstandard signing and notarization practices, and was unequivocal that
Hagens had been instructed by him, Kris, or both to notarize this particular Guaranty. Yet, despite
that degree of knowledge and involvement, Kurt professed little recollection of how Kris’s and
Amy’s signatures came to appear on the document.
The Court does not find Kurt’s professed lack of knowledge and recollection fully
credible. In light of his management of the office, his executive role in the KK Fit businesses, his
involvement in this transaction, his understanding of the Bellers’ requirements, and his
participation in the processing, notarization, and transmission of this Guaranty, the Court finds
7 Cohn arose under § 523(a)(2)(B). In Bocchino, however, the Third Circuit expressly relied on Cohn’s reasoning in
construing § 523(a)(2)(A), observing that Cohn permitted intent to deceive to be established through reckless
indifference or reckless disregard when supported by the totality of the circumstances. 794 F.3d at 382. The court
further explained that it had been presented with no strong reason to read § 523(a)(2)(A) differently from related
provisions of the Bankruptcy Code. Id.
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that Kurt knew more about the circumstances surrounding the disputed signatures than his
testimony disclosed. That finding does not establish who physically wrote either signature, nor
does the Court infer the opposite of Kurt’s testimony merely because portions of his account
were unpersuasive. Rather, his lack of candor reinforces the inference of deceptive intent already
supported by the objective evidence.
That inference is especially strong because Kurt’s conduct aimed to secure a completed
Guaranty that would permit the transaction to proceed. He knew the Bellers expected the
document to show that Amy had undertaken the guaranty obligations attributed to her and that
Kris and Amy had personally appeared before the notary. Yet he helped procure the completed
instrument and caused it to be transmitted while consciously disregarding a substantial and
unjustifiable risk that those representations were false. His explanation that, with respect to Amy,
he simply “assume[d] she agreed” does not support an innocent inference that he merely passed
along a document he reasonably believed to be accurate. Considered with the surrounding
circumstances, it instead supports the inference that Kurt intended to deceive the Bellers through
the representations conveyed by the completed Guaranty and thereby induce them to proceed
with the Lease and financing.
The Court need not determine whether Kurt and Kris expressly agreed that the disputed
signatures would be affixed, whether Amy knew at the time that her name would be used, or
precisely how either signature came to appear on the Guaranty. The relevant inquiry is whether,
considering the circumstances as a whole, Kurt intended to deceive the Bellers into believing that
Amy had undertaken the guaranty obligations attributed to her and that Kris and Amy had
personally appeared before Hagens and acknowledged signing the Guaranty, so that the Bellers
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would proceed with the Lease and financing. The Court finds by a preponderance of the evidence
that he did.
Accordingly, Plaintiffs have established the third element.
D. Justifiable Reliance
The fourth element requires Plaintiffs to establish that they actually and justifiably relied
on the misrepresentations. Field, 516 U.S. at 70, 74–75. Justifiability depends upon “the qualities
and characteristics of the particular plaintiff, and the circumstances of the particular case,” rather
than an objective reasonable-person standard. Id. at 71 (quoting Restatement (Second) of Torts
§ 545A cmt. b). Under this standard, § 523(a)(2)(A) “requires justifiable, but not reasonable,
reliance.” Id. at 74–75. Accordingly, a creditor may justifiably rely on a representation even
though an investigation would have revealed its falsity, id. at 70, but cannot recover if he
“blindly relies upon a misrepresentation the falsity of which would be patent to him” upon a
cursory examination. Id. at 71 (quoting Restatement (Second) of Torts § 541 cmt. a).
Robert Beller’s testimony establishes actual reliance. As discussed above, he testified that
if the Guaranty had been returned with only two of the three required Krieger signatures and
acknowledgments, he would have returned it for completion and, if it remained incomplete,
would not have proceeded with the transaction. (Trial Tr. 44:9–18.) He likewise testified that he
would “Absolutely not” have proceeded without the required notarial seals and would not have
advanced the $420,000 without them. (Id. at 44:19–45:5.) The completed Guaranty was returned
bearing Amy’s purported signature and separate acknowledgments representing that Kris and
Amy had personally appeared before Hagens. The Bellers thereafter proceeded with the Lease
and financing. That evidence establishes that the Bellers in fact relied on the representations that
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Amy had undertaken the guaranty obligations attributed to her and that Kris and Amy had
personally appeared before Hagens.
That reliance was also justifiable. The Guaranty presented to the Bellers appeared on its
face to be a completed transaction document bearing the required signatures and notarial
acknowledgments. Nothing on the face of the document disclosed that Kris and Amy had not
personally appeared before Hagens or that Amy had not authorized another person to sign the
Guaranty on her behalf. Nor is there evidence that the Bellers knew of the nonstandard signing
and notarization practices described at trial. The circumstances that made Kurt grossly reckless
as to the truth of the representations were not apparent to the Bellers from examination of the
completed Guaranty.
Field does not require the Bellers to investigate the circumstances of execution
independently merely because such an investigation might have uncovered the falsity. The
relevant limitation is whether the falsity was patent upon cursory examination. On this record, it
was not. The Bellers were therefore entitled to rely on the completed Guaranty and its facially
regular acknowledgments without undertaking an independent inquiry into whether Amy had
authorized another person to sign the Guaranty on her behalf or whether Kris and Amy had
actually appeared before Hagens.
Accordingly, Plaintiffs have proven by a preponderance of the evidence that they actually
and justifiably relied on the misrepresentations established above.
E. Proximate Causation and Loss
The fifth element requires Plaintiffs to prove that they “sustained a loss and damages as a
proximate result of the debtor’s materially false representations.” In re Bocchino, 794 F.3d at
380–81 (internal quotation marks omitted). “Proximate cause is a term of art, demanding
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sufficient connection between the injury and the conduct alleged[,]” and “includes both cause-in-
fact and legal causation.” Id. at 382–83. Cause-in-fact “depends on whether an act or omission
played a material part in bringing about an event[,]” and an act or omission is not a cause-in-fact
“if the particular event would have occurred without it.” Fedorczyk v. Caribbean Cruise Lines,
Ltd., 82 F.3d 69, 73 (3d Cir. 1996). “Legal cause is established where the loss was reasonably
expected to result from reliance upon the misrepresentation.” In re Bocchino, 794 F.3d at 383.
If Plaintiffs ultimately establish the fifth element, the resulting exception from discharge
is not limited to the value initially obtained through the fraud. Rather, “[o]nce it is established
that specific money or property has been obtained by fraud . . . ‘any debt’ arising therefrom is
excepted from discharge.” Cohen, 523 U.S. at 218.
Because the Court bifurcated the damages phase from this phase of the proceeding, it
does not presently determine whether Plaintiffs have established the fifth element. (See Trial Tr.
51:19–22, 53:6–9.) While defense counsel acknowledged that “there was a monetary default,” id.
at 54:19–22, that concession does not establish that Plaintiffs sustained a loss proximately caused
by the fraud, nor does it determine the nature or amount of any such loss. Because the parties did
not present the damages case in this phase pursuant to the agreed bifurcation, the record was not
developed to permit those determinations. Accordingly, the Court reserves determination of the
fifth element, together with the amount of any resulting nondischargeable debt, for the damages
phase.
IV. CONCLUSION
For the reasons stated above, Plaintiffs have established by a preponderance of the
evidence the first four elements of their claim under § 523(a)(2)(A). The Lease and construction
financing satisfy the statute’s “obtained by” requirement; the completed Guaranty contained
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material misrepresentations attributable to Kurt; Kurt acted with gross recklessness as to the truth
of those misrepresentations and with intent to deceive the Bellers; and the Bellers actually and
justifiably relied on them in proceeding with the transaction.
The Court does not presently determine whether Plaintiffs sustained a loss proximately
caused by Kurt’s fraud. Because the parties did not litigate damages at this phase of the
proceeding, the Court has reserved determination of the fifth element, together with the amount
of any resulting nondischargeable debt, for the damages phase. Accordingly, final determination
of Plaintiffs’ claim under § 523(a)(2)(A) will await that proceeding.
An appropriate Order will be entered.
By the Court,
____________________________________
Henry W. Van Eck, Chief Bankruptcy Judge
Dated: September 28, 2026
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