Lazaron v. Lucas

1Because the Response to Motion for Summary Judgment and Cross Motion for
Judgment on the Pleadings includes two requests for relief: denial of the Plaintiff’s Motion and
judgment on the pleadings in favor of Defendant, the Clerk of the Bankruptcy Court instructed
Defendant to file a separate motion for judgment on the pleadings. The Court will address
Defendant’s arguments within the context of the Plaintiff’s request for summary judgment.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	JASON T. LUCAS, 	7-07-11560 MA
Debtor.
______________________________________________________________________________
TERRY L. LAZARON,
Plaintiff,
v. 	Adversary No. 07-1133 M
JASON T. LUCAS,
Defendant.
ORDER DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
THIS MATTER is before the Court on Plaintiff’s Motion for Summary Judgment
(“Motion”). 	The Motion is supported by Plaintiff’s Memorandum of Points and Authorities in
Support of Motion for Summary Judgment (“Memorandum”). 	Plaintiff, pro se, asserts that
Defendant’s admissions establish that the debt at issue in this adversary proceeding was obtained
through false pretenses which bar the discharge of the debt under 11 U.S.C. § 523(a)(2).
Defendant, by and through his attorney, Steve H. Mazer, counters that genuine issues of material
fact preclude summary judgment, and asserts that he should be granted judgment on the
pleadings inasmuch as the acts and omissions complained of do not fall within the subsection of
11 U.S.C. § 523(a)(2) plead by Plaintiff in the Complaint. See Response to Motion for Summary
Judgment and Cross Motion for Judgment on the Pleadings.1 Defendant also filed a Sur-Reply
to Defendant’s Response (“Sur-Reply”) (Docket # 15), wherein his counsel denies having
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received a request for admissions or any other request for discovery, and does not agree that any
admissions have been made by Defendant in connection with this adversary proceeding.
Plaintiff filed a reply to Defendant’s response (Docket # 16), asserting that Plaintiff has
established all elements necessary to grant summary judgment, and citing In re Joelson, 427 F.3d
700 (10 th Cir. 2005), for the proposition that oral and written statements that are financial in
nature but do not present a comprehensive picture of the debtor’s overall financial condition fall
within the parameters of 11 U.S.C. § 523(a)(2)(A).
Upon review of the Motion and other documents submitted by the parties, the Court finds
that under the Tenth Circuit’s strict construction of the phrase “statements respecting the
debtor’s . . . financial condition,” the oral and written statements made by the Debtor do not fall
within the express exception for such statements contained in 11 U.S.C. § 523(a)(2)(A), but that
Plaintiff has failed to establish sufficient undisputed facts from which the requisite intent to
defraud under 11 U.S.C. § 523(a)(2)(A) can be inferred as a matter of law. 	Accordingly, the
Motion will be denied.
DISCUSSION
Allegations in the Complaint/Plaintiff’s Claim of Non-dischargeability
Plaintiff’s Complaint to Determine Dischargeability of Debt (“Complaint”) alleges that a
certain debt represented by a judgment obtained by the Plaintiff against the Defendant under the
Uniform Owner-Resident Relations Act entered in the Metropolitan Court of Bernalillo County
on October 10, 2003 in Case No. CV-10713-03 based on Defendant’s failure to pay rent is non-
dischargeable under 11 U.S.C. § 523(a)(2)(A). Plaintiff alleges that Defendant made false
representations in a Residential Rental Application, including a representation that he was
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employed with United Parcel Service (“UPS”) with gross monthly pay of $800.00, when, in fact
he was not employed by UPS at the time of the application. See Complaint ¶ 8 and 14. 	Plaintiff
further alleges that Defendant said he would pay the first month’s rent on Friday, August 31,
2003, but never did; that Defendant had no intention of paying any rent for the time he had
possession of the apartment; that Defendant failed to disclose his living arrangements at the time,
including the fact that he owned a house with his girlfriend and child; and that Plaintiff relied on
Defendant’s representations in agreeing to enter into a lease agreement and granted Defendant
access to the apartment for occupancy, beginning August 1, 2003.
Summary Judgement Standards.
It is appropriate for the Court to grant summary judgment if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law. Rule 56, Fed.R.Civ.P., made applicable to bankruptcy proceedings
by Rule 7056, Fed.R.Bankr.P. 	“[A] party seeking summary judgment always bears the initial
responsibility of informing the . . . court of the basis for its motion, and . . . [must] demonstrate
the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323,
106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
In determining whether summary judgment should be granted, the Court will view the
record in the light most favorable to the party opposing summary judgment. Harris v. Beneficial
Oklahoma, Inc. (In re Harris), 209 B.R. 990, 995 (10th Cir. BAP 1997)). 	In order to defeat a
motion for summary judgment, the opposing party may not simply rest on its pleading or denials
of the allegations, but must demonstrate that genuine issues of material fact require a trial. See
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2The Motion also asserts that Defendant’s Residential Rental Application misrepresented
that Defendant had never been sued for non-payment of rent, and attaches as an exhibit to the
Motion a copy of a Transcript of Judgment against Defendant and Gina Iadanza in favor of SNK
Park Pointe, Inc. d/b/a Ariosa at North East Heights Apts. Because the Complaint does not
include any allegations concerning this issue, the Court will not address it as part of Plaintiff’s
request for summary judgment.
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Rule 56(e)(2), Fed.R.Civ.P. (A party opposing a properly supported motion for summary
judgment “may not rely merely on allegations or denials in its own pleading; rather its response
must –by affidavits or as otherwise provided in this rule – set out specific facts showing a
genuine issue for trial.”).
Undisputed Facts.
In support of Plaintiff’s Motion, Plaintiff attaches copies of certain documents, including
a copy of the Residential Rental Application dated July 31, 2003 wherein the Defendant stated
that he was employed by UPS, and a copy of the Answer by Garnishee dated December 5, 2003
wherein UPS reports that Defendant’s employment with UPS ended July 21, 2003.2 Defendant
denied in his Answer to Complaint to Determine Dischargeability (Docket # 5) Plaintiff’s
allegations that he made any misrepresentation of facts regarding his employment with UPS at
the time of the Residential Rental Application, denied that he never paid rent and never intended
to pay rent, and further asserted in his Sur-Reply that requests for admissions were not properly
served upon his counsel, but did not otherwise offer any affidavit or other evidence in to create a
genuine issue of material fact in defense of the Motion. See Rule 56(e)(1), Fed.R.Civ.P., made
applicable to bankruptcy proceedings by Rule 7056, Fed.R.Bankr.P. Thus the Residential Rental
Application and the Answer by Garnishee offered by Plaintiff in support of the Motion establish
that Defendant was not employed with UPS as of the date reflected on the Residential Rental
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3Rights of possession under a property lease constitute property within the meaning of 11
U.S.C. § 523(a)(2). See 4 Collier on Bankruptcy, ¶ 523.08[1][b] (Alan N. Resnick and Henry J.
Sommer, eds., 15h ed. rev. 2007)(“The rights obtained by a debtor under a lease are property
under section 523(a)(2).”); Phillips v. Napier (In re Napier), 205 B.R. 900, 905 (Bankr.N.D.Ill.
1997) (finding that lease for residential property “was an interest in property for purposes of §
523(a)(2)(B)”).
4Subsection (B) provides:
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 –
(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)(B).
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Application.
Required elements for non-dischargeability under 11 U.S.C. § 523(a)(2)(A)
Pursuant to 11 U.S.C. § 523(a)(2)(A), a debt for money, property3, or services will not be
discharged to the extent obtained by: “false pretenses, a false representation, or actual fraud,
other than a statement respecting the debtor’s or an insider’s financial condition.” 11 U.S.C. §
523(a)(2)(A). Section 523(a)(2)(A) expressly excepts statements respecting a debtor’s financial
condition; written statements respecting a debtor’s financial condition fall within subsection (B)
of 11 U.S.C. § 523(a)(2).4 See 11 U.S.C. § 523(a)(2)(A) (“false pretenses, false representation,
or actual fraud, other than a statement respecting the debtor’s or an insider’s financial
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5Many courts state that 11 U.S.C. § 523(a)(2)(A) and 11 U.S.C. § 523(a)(2)(B) are
“mutually exclusive.” See, e.g., Thul v. Ophaug (In re Ophaug), 827 F.2d 340, 343 (8th Cir.
1997)(stating that “sections 523(a)(2)(A) and 523(a)(2)(B) are mutually exclusive.”); McCrary
v. Barrack (In re Barrack), 217 B.R. 598, 605 (9th Cir. BAP 1998)(“It is well established that
these subsections are mutually exclusive.”)(citation to legislative history omitted); In re
McCleary, 284 B.R. 876, 883 (Bankr.N.D.Iowa 2002)(“Case law has consistently and
unanimously held that paragraphs (A) and (B) of § 523(a)(2) are mutually exclusive.”). This
statement seems over broad. Rather, the distinction between the two subsections hinges upon the
definition of “statement respecting the debtor’s . . . financial condition.” 	If a statement falls
within the category of “statement[s] respecting the debtor’s . . . financial condition,” it is
expressly excluded from subsection (A); and in order to be actionable under subsection (B), must
be a statement in writing. 11 U.S.C. § 523(a)(2)(A) and (B). If a statement does not constitute a
“statement respecting the debtor’s . . . financial condition,” it may nevertheless be actionable
under subsection (A) whether the statement is oral or based on a writing, but will not support a
non-dischargeability claim under subsection (B) even if it is in writing. 	See In re Chivers, 275
B.R. 606, 617 and 623 (Bankr.D.Utah 2002) (concluding that written letter did not constitute a
statement respecting an insider’s financial condition and granting debtor’s motion for summary
judgment on plaintiff’s claim under § 523(a)(2)(B), and positing that written statements that do
not constitute a statement of financial condition are actionable under § 523(a)(2)(A)).
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condition.”)(emphasis added).5 Thus debts incurred as a result of oral misrepresentations
respecting a debtor’s financial condition are nevertheless dischargeable under 11 U.S.C. §
523(a)(2)(A). See Joelson, 427 F.3d at 704 (“If a debt is obtained by a false oral ‘statement
respecting the debtor’s . . . financial condition,’ the debt is dischargeable.”)(emphasis in
original).
In Joelson, the Tenth Circuit construed the phrase “respecting the debtor’s . . . financial
condition” which is found in both 11 U.S.C. § 523(a)(2)(A) and 11 U.S.C. § 523(a)(2)(B). 	The
Tenth Circuit adopted a narrow, or strict construction of that phrase. Joelson, 427 F.3d at 706.
Under this strict construction, only a communication that presents an overall picture of the
debtor’s financial condition, purports to state the debtor’s overall net worth, overall financial
health, or overall ability to generate income, or a statement that provides an equation of assets
and liabilities constitutes a “statement respecting the debtor’s . . . financial condition” within the
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6See also, Frankford Bank v. Chryst (In re Chryst), 177 B.R. 486, 493 (Bankr.E.D.Pa.
1994) (“The ‘representation’ under § 523(a)(2)(A) can be a spoken or written representation,
other than a statement regarding the debtor's financial condition which is governed by §
523(a)(2)(B), or an act by debtor.”); Matter of Gross, 175 B.R. 277, 283 (Bankr.N.D.Ind.
1994)(noting that “false pretenses” under § 523(a)(2)(A) “involves an implied representation,
while the other [“false representation”] is expressed, either oral or written.”); Union Bank of the
Middle East, Ltd. v. Luthra (In re Luthra), 182 B.R. 88, 92 (E.D.N.Y. 1995)(stating generally
that § 523(a)(2)(A) “addresses oral and other written representations by the debtor”).
7Defendant cites In re Gulevsky, 362 F.3d 961 (7th Cir. 2004) in support of his argument
that the acts and omissions of which Plaintiff complains constitute “statements respecting the
debtor’s . . . financial condition” which are expressly excepted from 11 U.S.C. § 523(a)(2)(A).
Defendant’s reliance on Gulevsky seems misplaced inasmuch as Gulevsky considered whether
false oral statements respecting a debtor’s financial condition can form the basis of a claim for
non-dischargeability action under 11 U.S.C. § 523(a)(6) as a means of circumventing the writing
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meaning of 11 U.S.C. § 523(a)(2)(A) or (B). Id. at 705 (citing Chivers, 275 B.R. at 614). In
order for a “statement respecting the debtor’s . . . financial condition” to form the basis of a non-
dischargeable debt, it must be written. 11 U.S.C. § 523(a)(2)(B); Joelson, 427 B.R. at 704 (“By
contrast, 11 U.S.C. § 523(a)(2)(B) states that a debt obtained by a false written statement
‘respecting the debtor’s . . . financial condition’ is not dischargeable, provided certain conditions
are met.”)(emphasis in original). Conversely, both oral statements and written statements that do
not fall within the narrow scope of the phrase “statements respecting the debtor’s . . . financial
condition” can form the basis of a non-dischargeable debt under 11 U.S.C. § 523(a)(2)(A),
provided all other elements are satisfied. See Chivers, 275 B.R. at 623 (acknowledging that
written representations, other than a statement respecting the debtor’s financial condition are
actionable under § 523(a)(2)(A)).6
Defendant argues that Plaintiff’s alleged misrepresentations constitute statements
respecting the Defendant’s financial condition, which are dischargeable under 11 U.S.C. §
523(a)(2)(A).7 This Court disagrees. Under the narrow view, a “statement respecting the
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requirement contained in 11 U.S.C. § 523(a)(2)(B). Gulevsky, 362 F.3d at 964.
8See Chivers, 275 B.R. at 615 (describing the strict interpretation as one that “does not
require any specific formality” but “limits an actionable statement of financial condition to
financial-type statements including balance sheets, income statements, statements of changes in
financial position, or income and debt statements that provide what may be described as the
debtor or insider’s net worth, overall financial health or equation of assets and
liabilities.”)(citation omitted).
9At least one court in a different jurisdiction has held that a similar rental application
could serve as the basis for non-dischargeability under 11 U.S.C. § 523(a)(2)(B). See Napier,
205 B.R. at 905 (finding that a rental application which contained statements regarding the
debtor’s employment, weekly gross earnings and additional income constituted a written
statement respecting the debtor’s financial condition). Whether the broad or narrow approach
should be taken with respect to the scope of “statement respecting the debtor’s . . . financial
condition” under 11 U.S.C. § 523(a)(2)(A) and (B) has not yet been addressed by the Seventh
Circuit.
8
debtor’s . . . financial condition,” is restricted to those types of statements, like balance sheets,
income statements, or other financial statements from which the debtor’s overall financial
situation can be ascertained.8 The statement regarding Defendant’s employment is certainly
relevant to the Defendant’s apparent ability to pay rent, but does not represent the Defendant’s
overall financial condition. 	The Residential Rental Application does not purport to reflect all of
the Defendant’s assets and liabilities. 	It provides information about certain aspects of the
Defendant’s financial condition, but because it does not present an overall picture of the
Defendant’s net worth, the Court finds that it does not fall within the narrow scope of
“statements respecting the debtor’s financial . . . condition” as defined by the Tenth Circuit in
Joelson. 9
Other elements necessary to a claim under 11 U.S.C. § 523(a)(2)(A)
To prevail on under 11 U.S.C. § 523(a)(2)(A) Plaintiff must establish the following
elements: 1) that the Defendant made a false representation; 2) that the representation was made
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10Fowler Bros v. Young (In re Young), 91 F.3d 1367, 1373 (10 th Cir. 1996) (identifying
the five elements necessary to a determination of non-dischargeability under 11 U.S.C. §
523(a)(2)(A), but requiring reasonable reliance); Field v. Mans, 516 U.S. 59, 69-76, 116 S.Ct.
437, 133 L.Ed.2d 351 (1995) (establishing justifiable reliance standard under § 523(a)(2)(A)).
11Grogan v. Garner, 498 U.S. 279, 287, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991)
(establishing preponderance of the evidence standard for dischargeability actions).
12See In re Baines, 337 B.R. 392, 400 (Bankr.D.N.M. 2006) ("The issue of fraudulent
intent, central to a claim for non-dischargeability under 11 U.S.C. § 523(a)(2)(A) is a material
issue which is not easily subject to adjudication by summary judgment.")(citing In re Redden,
234 B.R. 49, 51 (Bankr.D.Del.1999) (citations omitted)); In re Sutherland-Minor, 345 B.R. 348,
356 (Bankr.D.Colo. 2006) ("Even if the Defendant had admitted making false representations,
summary judgment is difficult to obtain when the issue is the intent of one of the parties.")(citing
Jobin v. Waukau (In re M & L Bus. Mach. Co., Inc.), 166 B.R. 723, 724-25 (Bankr.D.Colo.
1993)).
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with intent to deceive; 4) that the party justifiably relied on the representation; and 5) that the
party was damaged as a result of the false representation.10 Plaintiff must establish each element
by a preponderance of the evidence.11
Plaintiff has established some, but not all of the required elements necessary to her cause
of action for purposes of summary judgment. 	The Residential Rental Application and the
Answer by Garnishee establish that the Defendant made a false representation. But Plaintiff has
not established the second element requiring proof of an intent to deceive. Rarely is it
appropriate to grant summary judgment on a claim for non-dischargeability based on 11 U.S.C. §
523(a)(2)(A) because intent to defraud often depends upon the credibility of witnesses.12
Of course, a debtor accused of making false representations is not likely to admit that he
or she made such representations with the intended purpose of defrauding a creditor. For this
reason, a creditor may establish an intent to deceive based upon the totality of the surrounding
facts and circumstances from which fraudulent intent may be inferred. 	See Young, 91 F.3d at
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1375 (fraudulent intent may inferred based on the "totality of the circumstances")(citations and
internal quotations omitted); AT & T v. Herrig (In re Herrig), 217 B.R. 891, 896
(Bankr.N.D.Okla. 1998)(noting that courts taking the "totality of the circumstances” approach do
so because "rarely, if ever, will a debtor admit his or her intent to deceive while under
oath.")(citation omitted).
Plaintiff asserts that summary judgment should be granted based upon the deemed
admissions and documentary evidence attached to the Motion. 	But as examined above, the
documentary evidence only establishes a falsehood which does not also serve to satisfy the
intent requirement of 11 U.S.C. § 523(a)(2)(A). See Chivers, 275 B.R. at 620 ("In order to
qualify as a fraudulent misrepresentation, the representation must be supported by the element of
scienter [intent].")(citing Restatement (Second) of Torts § 526 (1976)). And Defendant's Sur-
Reply disputes that Plaintiff is entitled to any deemed admissions based on a request for
admissions Defendant asserts were not properly served upon Defendant’s counsel. In sum,
Plaintiff’s Motion and Memorandum fail to establish as a matter of law that Defendant possessed
the requisite intent to defraud at the time Plaintiff alleges Defendant made certain
misrepresentations and/or omissions sufficient to render the debt at issue non-dischargeable
under 11 U.S.C. § 523(a)(2)(A).
WHEREFORE, IT IS HEREBY ORDERED that the Motion is DENIED.
_________________________________________
MARK B. McFEELEY
United States Bankruptcy Judge
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COPY TO:
Terry L. Lazaron
1721 Princeton Dr. SE
Albuquerque, NM 87106
Steve H. Mazer
Attorney for Defendant
2501 Yale SE 2nd Floor
Albuquerque, NM 87106-2901
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