R. Scott Appling v. Lamar, Archer & Cofrin, LLP
848 F.3d 953
11th Cir.2017Background
- Appling hired law firm Lamar, Archer & Cofrin on an hourly basis and fell behind; by March 2005 he owed ~$60,820.
- At a March 2005 meeting Appling orally told the firm he expected a large (~$100,000) tax refund and would use it to pay fees; the firm continued representation in reliance.
- The Applings’ return claimed a ~$60,718 refund; they received ~$59,851 and spent it on their business; they did not pay Lamar.
- Lamar obtained a state-court judgment against Appling ($104,179.60) in 2012; the Applings filed bankruptcy shortly thereafter and Lamar sued in adversary proceeding to except the debt from discharge under 11 U.S.C. § 523(a)(2).
- Bankruptcy court and district court held the debt nondischargeable under § 523(a)(2)(A) (fraud by oral misrepresentation). Appling appealed, arguing his oral statements were a “statement respecting the debtor’s ... financial condition” and thus governed by § 523(a)(2)(B), which requires a writing.
- The Eleventh Circuit reversed: it held that an oral statement about a single asset (the tax refund) can be a “statement respecting” financial condition, so because the statements were not in writing the debt is dischargeable under § 523(a)(2)(B).
Issues
| Issue | Plaintiff's Argument (Lamar) | Defendant's Argument (Appling) | Held |
|---|---|---|---|
| Whether an oral statement about a single asset qualifies as a “statement respecting the debtor’s ... financial condition” under § 523(a)(2) | Single-asset statements do not describe overall financial condition and thus fall outside § 523(a)(2)(B); oral fraud is nondischargeable under § 523(a)(2)(A) | A statement about an asset (expected tax refund) "respects" financial condition and so falls under § 523(a)(2)(B); absent a writing the debt is dischargeable | The court held a statement about a single asset can be a statement "respecting" financial condition; because Appling's statements were oral (not written), § 523(a)(2)(B) applies and the debt may be discharged. |
Key Cases Cited
- Field v. Mans, 516 U.S. 59 (1995) (justifiable vs. reasonable reliance distinction and discussion of § 523(a)(2) scheme)
- Engler v. Van Steinburg, 744 F.2d 1060 (4th Cir. 1984) (single-asset assertion held to respect financial condition)
- In re Bandi, 683 F.3d 671 (5th Cir. 2012) (single-asset statements do not constitute statements respecting overall financial condition)
- In re Joelson, 427 F.3d 700 (10th Cir. 2005) (narrow reading excluding single-asset statements)
- Grogan v. Garner, 498 U.S. 279 (1991) (bankruptcy discharge policy: protect honest debtor)