MEMORANDUM OPINION AND ORDER ON PLAINTIFF’S RULE 9023 MOTION TO REOPEN PROOFS OR ALTER, AMEND OR MODIFY JUDGMENT
This сause comes before the Court upon motion of Z. Lesman (“Plaintiff”) to reopen proofs or to modify this Court’s September 5, 1986 Order rendering judgment after trial on Plaintiff’s action to determine dis-chargeability of a debt. In the September 5, 1986 Order, the Court found only a por *525 tion of the debt owed by Debtor to Plaintiff to be nondischargeable under Section 523(a)(2)(B) of the Bankruptcy Code. Plaintiff now asserts that the Court erred in not finding the entire debt nondischargeable. This Court has core jurisdiction over this matter. 28 U.S.C. § 157(b). For the reasons set forth below, Plaintiffs motion to reopen proofs or to alter or amend judgment is denied.
The September 5, 1986 Order
The Court heard testimony on this case on July 15 and August 22, 1986. After final arguments on August 22, 1986, the Court gave findings of facts and conclusions of law from the bench in open court. These findings and conclusions were incorporated by reference into a Final Judgment Order signed September 5, 1986 and docketed September 9, 1986.
Plaintiff asked the Court to render Dеbt- or’s debt to Plaintiff nondischargeable under Sections 523(a)(2)(A) and 523(a)(2)(B) of the Bankruptcy Code. Plaintiff had extended credit to Debtor through renting her an apartment. The Court found that Debtor had published to Plaintiff two materially false written statements respecting the Debtor’s financial condition with the intent to deceivе — one on January 24, 1984 and another on March 26, 1985. Plaintiff was found to have reasonably relied on the March 26, 1985 false financial statement in extending credit after that date. Consequently, the Court held that Debtor’s debt to Plaintiff after March 26 until April 27, 1985 — the date Debtor vacated the premises — was nondischargeable under Section 523(a)(2)(B).
However, the Court found that Plaintiff had not relied on the January 24, 1984 false financial statement and therefore the debt between that date and March 26, 1985 was dischargeable. In the January 24 statement, Debtor had overstated her salary substantially. Plaintiff testified that she did not contact Debtor’s emplоyer, Kobs & Brady, to verify Debtor’s salary. The Court relied on a footnote in the Seventh Circuit case
In re Bogstad,
In addition, Plaintiff prayed for attorney’s fees pursuant to thе terms of the lease. The lease was not signed by either Debtor or Plaintiff. There was no testimony whatsoever that the parties ever discussed or agreed to attorney’s fees. The Court held that there was no agreement between the parties as to attorney’s fees and therefore Plaintiff was not entitled to them.
Plaintiff’s Motion to Reopen Proofs or to Alter or Amend Judgment
Plaintiff moves pursuant to Bankruptcy Rule 9023 and F.R.Civ.P. 59 to reopen the proofs in this case, take additional evidence, or alter, amend or modify the September 5, 1986 judgment. Plaintiff claims to have erred in her testimony that she did not verify Debtor’s emрloyment. She now claims she did in fact verify such employment. In addition, Plaintiff asserts that the Court erred in finding that there was no agreement on attorney’s fees. Finally, Plaintiff asks the Court to reconsider its conclusion that Plaintiff did not rely on Debtor’s false financial statement of January 24, 1984.
DISCUSSION
On a motion for a new trial in an actiоn tried without a jury, the court may open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions and direct the entry of a new judgment, or it may alter or amend the judgment. F.R.Civ.P. 59. There are three possible grounds for a new
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trial or to alter or amend a judgment in a court-tried аction: manifest error of law; manifest error of fact; or newly discovered evidence.
FDIC v. Meyer,
Plaintiffs Changed Testimony
Plaintiff seeks to change her testimony to the effect that she did in fact verify the employment of Debtor prior to Debtor moving into the premises Plaintiff leased to her. Plaintiff asserts that she originally testified in error because of a bad reaction to an anti-arthritis drug, and because of her worries about her husband’s health and about testifying.
The ground for new trial of “manifest error of fact” refers to the Court making a mistaken finding of fact based on the testimony given at the original trial. A new trial may not be given merely because a witness claims she made a mistake in her testimony. Even if Plaintiff was tired and nervous at trial, her attorney had ample opportunity to correct her alleged mistake in testimony by asking the appropriate questions. The interests of justice would not be served by allowing a witness to change her answer to the “right” answer after being told by the court that she has lost her case because she gave the “wrоng” answer. The Court will not reopen the proofs to take into evidence the offer of proof of Plaintiffs changed testimony.
Agreement as to Attorney’s Fees
Plaintiff next asserts that the Court erred in the September 5,1986 Order in not giving effect to the terms of the lease and awarding Plaintiff her attorney’s fees pursuant to that lease. Plaintiff then rehаshes arguments originally rejected at trial and raises an apparently new argument of detrimental reliance. Plaintiff may not use this motion to raise arguments that could and should have been made before judgment issued, or to argue a case under a new legal theory.
FDIC v. Meyer,
Reliance on the January 24, 1984 Statement
Plaintiff next asks that the Court reconsider its conclusion of law that Plaintiff did not rely on Debtor’s false financial statement of January 24, 1984. Aсcording to Plaintiff’s interpretation of the case law, a creditor need not investigate to show reasonable reliance unless there is some sort of “red-flag” or indication of falsity. Plaintiff concludes that because there was no red-flag, someone of Plaintiff’s position and capabilities had no duty to investigate. Therefore, Plaintiff concludes that Plaintiff reasonably relied on Debtor’s false financial statement of January 24, 1984, and consequently the entire debt owed by Debt- or to Plaintiff is nondischargeable.
Section 523(a)(2)(B) of the Bankruptcy Code provides:
(a) A discharge under section 727, 1141, 1228(a), 122(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
(2) fоr money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that thе debtor caused to be made or published with intent to deceive.
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The creditor seeking to have a debt found nondischargeable must prove all of the elements by clear and convincing evidence, a burden of proof more stringent than the standard burden in civil cases of a preponderanсe of the evidence.
IFG Leasing Co. v. Vavra (In re Harms),
Actual Reliance
Upon review, the Court modifies its views to the following extent: Plaintiff did in fact actually rely on the January 24, 1984 statement. Actual reliance may be shown by unchallenged testimony that the creditor would not have extended the credit if it had known the truth.
Martin v. Bank of Germantown (In re Martin),
In this casе, Plaintiff testified that if she had known that Debtor’s salary was much less then that listed on the January 24, 1984 statement, then she would not have allowed Debtor to move into her apartment. This testimony was unchallenged. Therefore, Plaintiff did adequately show actual reliance on the January 24, 1984 statement.
Reasonable Reliance
However, that Plaintiff actually relied on the false statement is insufficient to establish nondischargeability under Section 523(a)(2)(B). The question as properly framed is whether Plaintiffs actual reliance was reasonable. The standard for measuring the reasonableness of a creditor’s reliance is an objective one.
1
Pacific Int’l. Development Corp., Ltd. v. Sullivan (In re Sullivan),
The emerging standard of reasonableness requires the Court to measure the creditor’s actual conduct against three factors.
IFG Leasing Co. v. Vavra (In re Harms),
1.
The creditor’s standard practices in evaluating credit worthiness.
Absent other factors, there is reasonable reliance whеre the creditor follows its normal business practices.
See Norwest Card Services v. Barnacle (In re Barnacle),
2.
The standards or customs of the creditor’s industry in evluating creditworthiness.
For example, under this
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factor, commercial lenders such as banks or credit agencies are required to conduct a commercially reasоnable investigation of the information that has been supplied by a debtor before their reliance is reasonable.
See Thorp Credit Inc. of Ohio v. Bright (In re Bright),
3.
The surrounding circumstances existing at the time of the Debtor’s application for credit.
Under this factor, courts have found reliance to be unreasonable where the creditor knew or should have known the information supplied by the debtor was inaccurate, that is, where there are sо-called “red flags.”
See, e.g., In re Bogstad,
In this case, as to the third element of the surrounding circumstances present here, Plaintiff is an individual landlord of a 13-unit apartment building. She also operates the family business, L & S Tailors. Debtor claimed on the January 24, 1984 statement that she had an annual salary of $25,000 when in fact she received $14,200 per year plus bonuses and child support for four children. Debtor worked as a legal secretary or office clerk.
That a legal secretary or office clerk should list her salary as $25,000 is not so obviously wrong as to be a “red flag.” There is no evidence to show that Plaintiff knew or should have known that the listed salary was inaccurate. Therefore, there is nothing about the surrounding circumstances of this case to show that Plaintiff was put on notice to investigate before her reliance could be considered reasonable.
However, the real question presented here is whether it is reasonable for an individual landlord of a multi-unit apartment building to fail to telephone a potential tenant’s employer and verify the potential tenant’s salary. In other words, do landlords in Plaintiff’s situation have a duty of minimal investigation because, for example, financial information supplied by potential tenаnts is suspect a good portion of the time. The answer is determined under the first two elements of the objective test of reliability — the creditor’s own standards and industry standards.
In this case, Plaintiff testified that it was her usual practice to check up on information supplied by potential tenants but that she did not do so with Debtor. There was no testimony presented on the standard practice of landlords in evaluating the credit-worthiness of potential tenants.
In
Ponderosa, Inc. v. Consin (In re Consin),
Although the holding of Consin is persuasive it is not determinative here. Con-sin took place in a commercial setting where the risks were muсh higher than here. It would not be fair to hold an individual landlord with one multi-unit building to the standard of investigation of a nation-wide restaurateur with over 600 restaurants.
However, it would not be unfair to hold Debtor to her own standard, especially given that this standard is the only evidence of what is reasonable under the circumstancеs. Plaintiff knows better than anyone what is necessary to determine the creditworthiness of her potential tenants. She herself apparently determined — before any contact with Debtor — that it was necessary to check up on the information supplied by potential tenants. This was her usual practiсe. She did not follow it and therefore did not reasonably rely on the false statement as to Debtor’s income. The Court therefore concludes again that Plaintiff has not shown by clear and convincing evidence that Plaintiff reasonably relied on Debtor’s false financial statement of January 24, 1984.
CONCLUSION
It is therefоre ORDERED that Plaintiff’s Motion to Reopen Proofs or to Alter or Amend Judgment is denied in its entirety.
Notes
. Plaintiff cites the cases of
LaFata v. Burklow (In re Burklow),