Barnes v. Belice (In Re Belice)
461 B.R. 564
| 9th Cir. BAP | 2011Background
- Barnes loaned Belice $15,000 in 2008 with a security interest in a warrant to 30% of the Belice-Mehta Partnership; a further $10,000 loan followed.
- Belice filed Chapter 7; schedules showed roughly $10,000 in exempt property; the case was reviewed as a no-asset bankruptcy.
- Barnes alleged Belice made multiple misrepresentations about income, assets, and the proposed collateral to induce the loans.
- The bankruptcy court dismissed Barnes’s § 523(a)(2)(A) claim as insufficient and treated some statements about collateral value as financial-condition statements.
- Barnes amended his complaint multiple times; the court dismissed again, questioning whether the statements were “statements respecting the debtor’s financial condition.”
- The Ninth Circuit granted leave to appeal to resolve the unsettled scope of the phrase “statement respecting the debtor’s financial condition” under § 523(a)(2)(A).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard for misrepresentations as financial condition | Barnes: Joelson should apply narrow interpretation. | Belice: court should apply broad interpretation as to financial condition statements. | Court adopts narrow interpretation framework; reverses on this point. |
| Whether statements a–f constitute financial-condition statements | Barnes: several income/expense statements reflect overall financial health. | Belice: those are asset-specific items, not overall financial condition. | Under narrow reading, these do not state overall financial condition. |
| Fraudulent omission regarding Running Horse Liability | Barnes: failure to disclose liability was a fraudulent omission. | Belice: no duty to disclose; silence cannot be misrepresentation. | No duty to disclose found; omission not actionable under § 523(a)(2)(A). |
| Interlocutory appealability and jurisdiction | Barnes sought immediate review of dismissal order. | Belice argued lack of finality and no interlocutory appeal right. | Court retains jurisdiction to hear immediate appeal; grant leave under Rule 8003. |
Key Cases Cited
- In re Joelson, 427 F.3d 700 (10th Cir. 2005) (narrows the interpretation of financial-condition statements)
- In re Kirsh, 973 F.2d 1454 (9th Cir. 1992) (addresses broad vs narrow interpretation; financial condition context)
- In re Van Steinburg, 744 F.2d 1060 (4th Cir. 1984) (broad interpretation historically favored by some courts)
- Field v. Mans, 516 U.S. 59 (U.S. 1995) (legislative history of nondischargeability; context for misrepresentation)
- In re Barrack, 217 B.R. 598 (9th Cir. BAP 1998) (interlocutory dismissal and finality considerations)
- In re Medley, 214 B.R. 607 (9th Cir. BAP 1997) (recognizes debate over broad vs narrow interpretation)