In re Joelson

• Citation: 427 F.3d 700
• Parties: In re Jeanne Lavonne JOELSON, Debtor. Stanley Cadwell, Plaintiff-Appellee, v. Jeanne Lavonne Joelson, Defendant-Appellant.
• Decision Date: 24 October 2005
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 700

427 F.3d 700

In re Jeanne Lavonne JOELSON, Debtor Stanley Cadwell, Plaintiff-Appellee, v. Jeanne Lavonne Joelson, Defendant-Appellant.

No. 04-8052.

United States Court of Appeals, Tenth Circuit.

October 24, 2005.^*

COPYRIGHT MATERIAL OMITTED

Ken McCartney, Cheyenne, WY, for Defendant-Appellant.

Lawrence E. Middaugh, Casper, WY, for Plaintiff-Appellee.

Before EBEL, O'BRIEN and TYMKOVICH, Circuit Judges.

EBEL, Circuit Judge.

This appeal requires us to determine whether a state court judgment against Defendant-Appellant Jeanne Joelson ("Debtor" or "Joelson") based on Joelson's nonpayment of a loan from Plaintiff-Appellee Stanley Cadwell ("Creditor" or "Cadwell") should not be discharged in Joelson's Chapter 7 bankruptcy because Joelson made fraudulent misrepresentations to Cadwell in order to obtain the loan. Relying on 11 U.S.C. § 523(a)(2)(A), the United States Bankruptcy Court for the District of Wyoming ("bankruptcy court") and the Bankruptcy Appellate Panel of the Tenth Circuit ("BAP") found that the state court judgment should not be discharged. In this appeal, Joelson argues that the BAP erred because the representations that she made to Cadwell were statements "respecting [her] financial condition" as defined by § 523(a)(2)(A), and debts incurred based on such statements are dischargeable under § 523(a)(2)(A) notwithstanding that provision's general prohibition on discharging debts obtained by "false pretenses, a false representation, or actual fraud." We affirm the judgment of the BAP.

BACKGROUND

I. The Underlying Events

Joelson has never contested the bankruptcy court's factual findings. Moreover, Joelson's appendix contains only the bankruptcy court's docket sheet, order and judgment, and the BAP's docket sheet and opinion. Thus we may not disturb the bankruptcy court's factual findings in this case, and we draw the following description of the events underlying this suit from those findings. See Jenkins v. Hodes (In re Hodes), 287 B.R. 561, 570 (D.Kan.2002) ("[B]ecause the parties do not specifically contest the bankruptcy court's findings of fact, the court will not disturb this ruling on appeal."), aff'd, 402 F.3d 1005 (10th Cir.2005); cf. McEwen v. City of Norman, 926 F.2d 1539, 1550 (10th Cir.1991) (noting that we are unable to review an appellant's factual contention when the evidentiary matters relied on by a lower court are not included in the record on appeal).

Cadwell is a single, retired man who lives in Casper, Wyoming. Cadwell met Joelson at a café in Casper where she was working as a waitress. Around March 1996, Joelson told Cadwell that she needed to travel to Scottsdale, Arizona to check on a house that she owned and pick up her mother.

Cadwell agreed to drive Joelson from Casper to Scottsdale. While Cadwell and Joelson were in Scottsdale, someone gave Joelson money. Joelson represented to Cadwell that the money was rent for the house that she owned in Scottsdale.

After Cadwell and Joelson returned to Casper, Joelson informed Cadwell that she needed a loan of over $50,000 to save her Scottsdale home from foreclosure. Joelson stated that her brother, Larry Oltman, would later loan her these funds, and that as soon as Oltman did so, she would repay Cadwell. Joelson promised that she would provide Cadwell with collateral to secure the loan and represented that she owned residences in both Casper and Glendo, Wyoming; a motel in Glendo; and a number of antique vehicles stored in Glendo. When Cadwell asked to see the properties, Joelson took Cadwell to Glendo and showed Cadwell the inside of a house, the outside of another house and a motel, and a storage facility in which the antique cars were allegedly housed. Joelson also provided Cadwell with a list of the antique cars that she allegedly owned.

After he viewed the properties, Cadwell mortgaged his home and borrowed over $50,000. Joelson gave Cadwell a promissory note,¹ and the two traveled to Arizona, where they met with a lender's representatives regarding the foreclosure. In the course of these dealings, Cadwell learned that the Arizona property was titled in the name of "Joelene M. Joelson." However, Cadwell knew Debtor as "Jeanne Joelson," not "Joelene M. Joelson." After Debtor told Cadwell that she and "Joelene M. Joelson" were the same person, Cadwell advanced approximately $54,000 to Joelson to pay off the Deed of Trust.

Cadwell's attempts to collect the loan have proved fruitless, as Joelson has not repaid the loan or forfeited collateral. Joelson has rebuffed Cadwell's claims by asserting that she never had an interest in the Scottsdale property and that the funds that Cadwell gave to her in connection with that property were a gift.

II. The Proceedings Below

Before bringing this suit, Cadwell brought suit in Wyoming state court on the promissory note that Joelson had given to him. The state court entered judgment ("the state court judgment") against Joelson. After Joelson filed for Chapter 7 bankruptcy, Cadwell filed an adversary proceeding in the bankruptcy court seeking to bar all of Joelson's debts—or, in the alternative, just the state court judgment—from being discharged.

Joelson failed to appear before the bankruptcy court. Nonetheless, Joelson's counsel presented Joelson's case to the court, and both parties presented closing arguments. The bankruptcy court refused to deny the discharge of all claims against Joelson, but the court relied on § 523(a)(2)(A) to hold that Cadwell's claim was not dischargeable.

In making this ruling, the bankruptcy court was unable to conclude whether Jolene Joelson, Joelene Joelson, and Jeanne Joelson are three names for Debtor, or two (or three) separate people. However, the court did determine that Joelson's assertion that she owned "residences in both Casper and Glendo, a motel in Glendo, and a number of antique vehicles stored in Glendo" was false.

On appeal, the BAP affirmed the bankruptcy court's decision. The BAP ruled that some of the misrepresentations that Joelson made to Cadwell were not statements "respecting [her] financial condition." As a result, the BAP ruled that under § 523(a)(2)(A) those misrepresentations, which induced Cadwell to loan money to Joelson, prevented the state court judgment from being discharged.

This appeal from Joelson followed.

DISCUSSION

I. Overview

We have jurisdiction over this appeal pursuant to 28 U.S.C. § 158. See 28 U.S.C. § 158(d). "When reviewing BAP decisions, we independently review the bankruptcy court decision." In re Myers, 362 F.3d 667, 670 (10th Cir.2004). We review the bankruptcy court's legal determinations de novo. See Panalis v. Moore (In re Moore), 357 F.3d 1125, 1127 (10th Cir.2004).

In general, after an individual debtor files for Chapter 7 bankruptcy, a court discharges all of the debtor's pre-existing obligations. See 11 U.S.C. § 727. However, some debts incurred as a result of the debtor's fraudulent actions or statements cannot be discharged in bankruptcy. See id. § 523(a)(2). The Bankruptcy Code sets out the types of fraudulent actions or statements that render debts incurred as a result of those statements either non-dischargeable or dischargeable. See id.

Specifically, 11 U.S.C. § 523(a)(2)(A) states that a debt obtained by "false pretenses, a false representation, or actual fraud" is not dischargeable. However, § 523(a)(2)(A) contains an exception: If a debt is obtained by a false oral "statement respecting the debtor's . . . financial condition," the debt is dischargeable. 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.

Because the phrase "respecting the debtor's . . . financial condition" is used in both § 523(a)(2)(A) and § 523(a)(2)(B) and both provisions were enacted as part of the same statute, see Pub.L. No. 95-598, Nov. 6, 1978, 92 Stat. 2590, this is "a classic case for application of the normal rule of statutory construction that identical words used in different parts of the same act are intended to have the same meaning." Sullivan v. Stroop, 496 U.S. 478, 484, 110 S.Ct.2499, 110 L.Ed.2d 438 (1990) (quotations omitted). However, because § 523(a)(2)(A) provides that a debt obtained by a false oral statement "respecting the debtor's . . . financial condition" is dischargeable, and § 523(a)(2)(B) provides that a debt obtained by a false written version of such a statement is not dischargeable, any interpretation of the phrase "respecting the debtor's . . . financial condition" will have opposing effects depending on whether the statement was oral or written. If the phrase is broadly construed so that more false oral statements qualify as "respecting the debtor's. . . financial condition," more debts will be dischargeable under § 523(a)(2)(A) because that provision allows debts obtained by oral versions of such statements to be discharged—even though debts obtained by other false pretenses, false representations, or actual fraud may not be discharged. By contrast, a broad construction of the phrase "respecting the debtor's . . . financial condition," will result in fewer debts obtained based on written versions of such statements to be dischargeable under § 523(a)(2)(B) because that provision bars the discharge of only those false statements that "respect[ ] the debtor's . . . financial condition."

The opposing nature of § 523(a)(2)(A) and (B) is visible from the text of the statute, which provides:

(a) A discharge under section 727 . . . 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—

(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition;

(B) use of a statement in writing—

(i) that is...