Professional Documents
Culture Documents
again
review
issues
plaintiffs-appellants
arising
In this bankruptcy
from
("appellants"),
a
who
appeal,
dispute
between
were the
former
York's
and
counties ("the
Land").
a constructive trust on
determination
that
Originally,
Lane's Chapter 11
Lane's
indebtedness
to
U.S.C.
523.
On our initial
appellants'
523(a)(2)(A).1
("Lane I").
______
claims
except
In re Lane,
___________
the
one
937 F.2d
arising
694 (1st
all
under
Cir. 1991)
day trial and held that the debt owed appellants did not fall
under
this
district
dischargeability
court
affirmed.
exception.
After careful
On
review,
review,
we
the
now
affirm.
____________________
1. Section 523(a)(2)(A) provides that
money, property,
services, or an extension, renewal, or refinancing of credit
is not discharged to the extent it is obtained by: "false
pretenses, a false representation, or actual fraud, other
than a statement respecting the debtor's or an insider's
financial condition."
-22
I.
I.
__
This
dispute
years, generating
only
those
has
lingered
for
more than
facts
relevant
to
this
appeal.
its
Gargan,
treasurer,
contract
Terence
under which
Indian
it agreed
("Putnam") for
We cull
In
1987,
Land.
Hill
to purchase
seven
Through
executed
the
Land from
$3,425,000.
Indian
closing was
Land.
both money
that
one of
whom
Critically,
is a
became
obvious
as
lawyer, wanted
Indian
Massachusetts-based
developer,
residential
development on
Land.
McCallion
said
Negotiations
tentative
outstanding
that
he
ensued and
agreement
Indian
help
eventually
Hill
joint
that
was available, he
under
about
Lane rejected
Hill's
approached Lane, an
experienced
proposal but
short on
development, inadequacies
events unfolded.
the
to
which
shares
for
secure
the
financing.
parties reached
Lane
would
$1,675,000,
buy
a
all
thereby
-33
contract.
In
October 1987,
Indian Hill
sent Lane
a draft
November 3, 1987,
At the meeting,
and attended by
Lane, McCallion,
but not
Indian Hill
closing
at
However, McCallion
shareholders faced
and
the other
an imminent problem:
their
with Putnam was scheduled for the next day and, with
no financing
was
certain.
risk.
Immediately
following
the
Bankers
Trust
restaurant.
an extension
to acquire
McCallion
of the
indicated that he
closing date
Indian Hill's
shares.
if Lane
could
signed a
Lane testified
that
he made
project
clear that
unless financing
however, the
was
deal presented
he would
shareholders.
restaurant meeting,
("November 3rd
not go through
available.
an
With
financing,
attractive opportunity
Eventually,
Lane and
with the
during the
the Indian
course of
McCallion signed
for
the
an agreement
to Lane.
The terms
Lane to pay a
of the November
3rd agreement
required
signing the
-44
agreement,
$75,000
installments
$250,000.
have
on November
of $350,000
4,
each, and
1987,
three additional
a final
his checkbook
with him in
New York
installment of
Lane did not
but said
that he
Putnam
an extension
1988.
Lane,
of the
however,
McCallion pressed
closing date
never
Lane for
sent
until
the
January 4,
deposit
the deposit.
check.
On November
30,
contingent upon
and,
financing.
on January
The new
4, 1988, the
Indian Hill
shareholders and
Indian
of the January
Hill's original
4th amendment
deposit
would
be
until February
$1,675,000
conditional
schedule
on
was
installments,
Lane
Lane
share
12, 1988;
sale price
securing
established
under
development, and;
governmental
were
the
were made
approval
the
made expressly
(3)
which
-55
payments on
financing;
totalling $600,000,
securing
(2)
for
payment
final
two
conditional on
residential
to "forever release
no claims
against Lane
arising or
alledged
4,
deposit
was
financing
1987),
and
released to
for Lane.
Hill's
Putnam.
original
$300,000
Bankers Trust
approved
made no
state
court
failing
to
zoning of
further payments
charging
disclose
due on
and filed
appellants
facts
with
about
A dispute
as a
suit in
result,
New York
misrepresenting
the
Land.
or
Appellants
$468,313.2
Indian
Hill
For
reasons
dispute, Lane
apparently
filed
unrelated to
Chapter 11
the
bankruptcy
the
end, appellants
investment, receiving
In October
1989,
more
than doubled
$785,000
appellants
in
payments
began this
their
from
adversary
____________________
2. The state
court dismissed
appellants except McCallion.
the
claims
against
all
3. Lane and his companies were among the largest real estate
developers in New England.
According to the record in this
bankruptcy
proceeding
dischargeability
of,
installments, which
seeking
to
alternatively,
determine
the
balance
the
of
the
interest, or the
II.
II.
___
Bankruptcy
"[f]indings
of fact,
evidence, shall
and
due
Rule
be given
938
the court's
or documentary
clearly erroneous,
the opportunity
of the
conclusions of law de
__
to
that
on oral
provides
whether based
not be
regard shall
8013
novo.
____
In re G.S.F. Corp.,
___________________
In an
appeal from a
district
court
independently
review
of
bankruptcy
court
order,
court's decision.
we
See,
___
F.3d ___
under
so.
is that
by promising,
to pay the
$300,000 down
the intent to
To
establish
appellants must
(2) that at
523(a)(2)(A)
payment to
do
theory
claim
the time he
under
Lane made
this
subsection,
representations;
(3) that he
made
-77
(5) that the appellants sustained the alleged loss and damage
as the
proximate result
made.4
See, e.g., In
of the representations
having been
n.1 (8th
___
____
_____________
Cir. 1987).
A
fraud.
misrepresentation
with
intention can
of
not
3 Collier on Bankruptcy
_____________________
constitute
523.08 at
to comply
with
its terms
and
later
perform is
subsequent
not sufficient
conduct contrary
In re Krause, 114
____________
evidence of
to the
scienter
nor is
original representation
intent.
In re Zachary,
_____________
bankruptcy court
informed the
found
that
Lane did
[appellants]
of the
not
"at all
necessity that
he
____________________
4. As we noted in our earlier decision in this case, whether
appellants must prove reasonable reliance is an open question
__________
in this court.
Lane I, 937 F.2d at 698 n.8. As we do not
____
reach the issue in this case, we continue to take no position
in the matter.
-88
agreement
[appellants]."
did
not
of the
which he
Thus, the
fall
exception.
under
believed
he had
with
to
the
appellants' debt
523(a)(2)(A)
dischargeability
the
January 4th
He intended
released Lane
conclusion,
most of
which
have
little
misapprehend
issue
fundamentally the
determine whether
on appeal:
in its factual
we
must
a full trial,
did
agreement.6
must point
state
the issue
to evidence, direct or
of mind
Instead,
Because
sufficient to
appellants
offer
is intent,
appellants
circumstantial, of Lane's
overcome the
arguments
court's finding.
grounded
in
parol
and
his general
conduct.
pattern of seemingly
"Lane
general conduct
refer to
consistently makes
Specifically, they
up
stories to
the truth."
subsequent
They also
to the
suit his
purposes
point to
November 3rd
Lane's
agreement,
precondition for
payment to
appellants of
the last
two
installments.
____________________
7. At oral argument, appellants offered a new theory.
Seizing on language contained in In re Krause, 114 B.R. 582,
____________
606 (Bankr. N.D. Ind. 1988), a case cited by the panel in
Lane I, and which we cite above, supra at 8, appellants argue
______
_____
that fraud occurred because Lane never intended to comply
with the contract's terms.
They argue that the bankruptcy
_____
court erred by failing to analyze Lane's intent to comply
with the terms of the November 3rd contract, which purports
to be fully integrated, and thus cannot incorporate any parol
agreement regarding financing.
On this record, we do not
agree.
As discussed more fully below, Lane could not have
the intent to misrepresent when, as the court found, he
repeatedly made clear that the agreement was expressly
conditioned on securing financing, the legal effect of the
underlying document notwithstanding.
We think the court was
correct to look to Lane's statements to appellants as direct
evidence of his intent to comply with the "terms" that he
announced, rather than to infer fraud from the fact that
those "terms" may have had no legal effect under the language
of the contract.
-1010
Appellants'
argument
trial
efforts
record
to
far
short
of
reveals
impeach
falls
that
Lane's
appellants
testimony.
made strenuous
In
reaching
its
deference.
record
As to
contains
Lane's
ample
a decision to
post-November
evidence
conclusion that
Lane's intent
clear
beginning:
from the
corroborating
that
is,
it
1987
the
the court's
agreement was
was
merely
an
his November
3rd conduct,
in signing the
which we accord
financing.
of the agreement
Most significantly,
but he
also
performed
as
In the
the principal
determined that
exception
Upon
testimony from
523(a)(2)(A)
of the record, we
took a
credit
-1111
for Lane's
699.
we
Lane I, 937
_______
F.2d at
Because
find
unsecured promise to
no
determination
clear
that Lane
523(a)(2)(A) does
litigation is
error
had
not apply
pay.
with
respect
no intent
to
the
to misrepresent,
to appellants' claim,
finally brought to
an end.
court's
and this
Accordingly, the
-1212