E.Ted Taylor v. Edward Kirksey Wood, Jr.

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
AUG 21, 2007
No. 07-10828 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 03-02830-CV-S
BKCY No. 02-02514-TOM7
In Re: EDWARD KIRKSEY WOOD, JR.,
JO ANN CARLE WOOD,
Debtors.
__________________________________________________
E. TED TAYLOR,
Plaintiff-Appellant,
versus
EDWARD KIRKSEY WOOD, JR.,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(August 21, 2007)
Before BLACK, WILSON and PRYOR, Circuit Judges.
PER CURIAM:
Creditor Ted Taylor appeals the district court’s reversal of the bankruptcy
court’s order in this case. The bankruptcy court found Edward Kirksey Wood
liable for a nondischargeable debt for obtaining Taylor’s signature on a loan
guaranty by false pretenses, pursuant to 11 U.S.C. § 523(a)(2)(A). The district
court found the bankruptcy court’s factual findings did not support a legal finding
that the debt was nondischargeable.
On appeal, Taylor argues that Wood’s debt to him is nondischargeable
because Wood failed to discover and disclose to him material facts about another
partner’s limited guaranty on a loan for which Taylor signed an unlimited
guaranty. Taylor acknowledges that a creditor must show an intent to deceive to
find a debt nondischargeable based on false pretenses but asserts the bankruptcy
court’s factual findings impliedly found Wood intended to deceive because he
knowingly or recklessly failed to discover the truth.
We review the bankruptcy court’s judgment independently of the district
court’s. In re Int’l Pharmacy & Discount II, Inc., 443 F.3d 767, 770 (11th Cir.
2005). We review determinations of law made by the bankruptcy court or district
court de novo and the bankruptcy court’s findings of fact for clear error. Id.“[F]indings of fact are not clearly erroneous unless, in light of all the evidence, we
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are left with the definite and firm conviction that a mistake has been made.” Id.“[C]ourts generally construe the statutory exceptions to discharge in
bankruptcy liberally in favor of the debtor, and recognize that the reasons for
denying a discharge . . . must be real and substantial, not merely technical and
conjectural.” In re Miller, 39 F.3d 301, 304 (11th Cir. 1994) (internal citations and
quotations omitted). However, “the opportunity for a completely unencumbered
new beginning” is limited to the honest debtor. Grogan v. Garner, 498 U.S. 279,
286-87, 111 S. Ct. 654, 659 (1991). Section 523 of the Bankruptcy Code outlines
the exceptions to discharge in bankruptcy. See 11 U.S.C. § 523. The objecting
creditor bears the burden of proving the § 523(a) dischargeability exceptions by a
preponderance of the evidence. Grogan, 498 U.S. at 291, 111 S. Ct. at 661.
Section 523(a)(2)(A) excludes from discharge debts obtained through “false
pretenses, a false representation, or actual fraud.” 11 U.S.C. § 523(a)(2)(A). We
have noted that § 523(a)(2)(A) has generally been interpreted to require the
traditional elements of common law fraud. In re Bilzerain, 153 F.3d 1278, 1281
(11th Cir. 1998). The elements of a claim under § 523(a)(2)(A) are: (1) the debtor
made a false representation with the intention of deceiving the creditor; (2) the
creditor relied on the false representation; (3) the reliance was justified; and (4) the
creditor sustained a loss as a result of the false representation. Id.
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In In re Gilmore, 221 B.R. 864, 872 (Bankr. N.D. Ala. 1998), the
bankruptcy court discussed the meaning of false pretenses in § 523(a)(2)(A) and
noted the following:
The concept of false pretenses is especially broad. It includes any
intentional fraud or deceit practiced by whatever method in whatever
manner. False pretenses may be implied from conduct or may consist
of concealment or non-disclosure where there is a duty to speak, and
may consist of any acts, work, symbol, or token calculated and
intended to deceive. . . . It is a series of events, activities or
communications which, when considered collectively, create a false
and misleading set of circumstances, or a false and misleading
understanding of a transaction, by which a creditor is wrongfully
induced by a debtor to transfer property or extend credit to the
debtor. . . . Silence or concealment as to a material fact can constitute
false pretenses.
Gilmore, 221 B.R. at 872 (internal citations and quotations omitted). Additionally,
false pretenses contemplate a misrepresentation that is intentional or made with
reckless indifference to the truth. In re Booth, 174 B.R. 619, 623 (Bankr. N.D.
Ala. 1994).
In this case, the bankruptcy court’s factual findings do not support the legal
conclusion that Wood engaged in false pretenses under § 523(a)(2)(A). The
bankruptcy court found that Wood should have discovered and corrected Taylor’s
mistaken impression concerning another partner’s limited guaranty on the loan but
that Wood believed that partner’s guaranty was unlimited and may not have
discovered the truth until after Taylor signed the unlimited guaranty. The
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bankruptcy court failed to find that Wood recklessly disregarded the truth, noting
only that he was in the best position to learn the truth about the other partner’s
limited guaranty. We do not find this factual finding clearly erroneous. The
district court correctly applied the law to the bankruptcy court’s factual findings to
determine that those findings could not legally support the conclusion that Wood
engaged in false pretenses to obtain a debt. Therefore, we affirm the district court.
AFFIRMED.
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