And when Congress next overhauled bankruptcy law, it deleted the phrase “of the bankrupt” from the discharge exception for fraud. The Court so held despite the fact that the relevant 19th-century discharge exception for fraud disallowed the discharge of debts “created by the fraud or embezzlement of the bankrupt.” 14 Stat. 555, the Court held that the fraud of one partner should be imputed to the other partners, who “received and appropriated the fruits of the fraudulent conduct.” Id., at 561. (b) Any remaining doubt about the textual analysis is eliminated by this Court’s precedent and Congress’s response to it. Whatever the rationale, it does not defy credulity to think that Congress established differing rules for (A) and (B).
But the Court offered a possible answer for this disparity in Field v.
Bartenwerfer suggests it would defy credulity to think that Congress would bar debtors from discharging liability for fraud they did not personally commit under (A) while allowing debtors to discharge debt for (potentially more serious) fraudulent statements they did not personally make under (B). If there is an inference to be drawn here, the more likely one is that (A) excludes debtor culpability from consideration given that (B) and (C) expressly hinge on it. but omits it in another section of the same Act,’ ” the Court generally takes “the choice to be deliberate.” Badgerow v. This argument turns on its head the rule that “ ‘hen Congress includes particular language in one section. Bartenwerfer claims that these neighboring provisions make explicit what is unstated in (A). 558, 559–562.īartenwerfer also seeks support from §523(a)(2)(A)’s neighboring provisions in subparagraphs (B) and (C), both of which require some culpable action by the debtor herself. The Court, however, has never used this principle to artificially narrow ordinary meaning, invoking it instead to stress that exceptions should not extend beyond their stated terms. Understanding §523(a)(2)(A) to reflect “agnosticism” as to the identity of the wrongdoer is consistent with the age-old rule of fraud liability.īartenwerfer points out that “ ‘exceptions to discharge should be confined to those plainly expressed.’ ” Bullock v. But the legal context relevant to §523(a)(2)(A)-the common law of fraud-has long maintained that fraud liability is not limited to the wrongdoer. It is true that context can confine a passive-voice sentence to a likely set of actors. Congress framed §523(a)(2)(A) to “focu on an event that occurs without respect to a specific actor, and therefore without respect to any actor’s intent or culpability.” Dean v. The passive voice in §523(a)(2)(A) does not hide the relevant actor in plain sight, as Bartenwerfer suggests-it removes the actor altogether. Bartenwerfer argues that an ordinary English speaker would understand that “money obtained by fraud” means money obtained by the individual debtor’ s fraud. (a) Kate (hereinafter, Bartenwerfer) disputes a straightforward reading of §523(a)(2)(A)’s text. Held: Section 523(a)(2)(A) precludes Kate Bartenwerfer from discharging in bankruptcy a debt obtained by fraud, regardless of her own culpability. 555, the court held that a debtor who is liable for her partner’s fraud cannot discharge that debt in bankruptcy, regardless of her own culpability. The Ninth Circuit reversed in relevant part. On remand, the Bankruptcy Court determined that Kate lacked such knowledge and could therefore discharge her debt to Buckley.
The Bankruptcy Appellate Panel disagreed as to Kate’s culpability, holding that §523(a)(2)(A) barred her from discharging the debt only if she knew or had reason to know of David’s fraud. The Bankruptcy Court found that David had committed fraud and imputed his fraudulent intent to Kate because the two had formed a legal partnership to renovate and sell the property. false pretenses, a false representation, or actual fraud.” 11 U. S. C. Buckley then filed an adversary complaint in the bankruptcy proceeding, alleging that the debt owed him on the state-court judgment was nondischargeable under the Bankruptcy Code’s exception to discharge of “any debt.
Unable to pay that judgment or their other creditors, the Bartenwerfers filed for Chapter 7 bankruptcy. Buckley sued in California state court and won, leaving the Bartenwerfers jointly responsible for more than $200,000 in damages. After the purchase, Buckley discovered several defects that the Bartenwerfers had failed to disclose. In conjunction with the sale, Kate and David attested that they had disclosed all material facts related to the property. They eventually sold the house to respondent Kieran Buckley. David took charge of the project, while Kate remained largely uninvolved. Kate and David Bartenwerfer decided to remodel the house they jointly owned in San Francisco and to sell it for a profit.
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