Opinion for the Court filed by Circuit Judge WALD.
John R. Spicer appeals from a judgment of the district court holding that bankruptcy does not discharge his $339,000 debt to the United States. Spicer promised to pay this amount in settlement of the government’s civil claims against him for fraud. The district court held the debt nondischargeable under 11 U.S.C. § 523(a)(2)(A), which provides that bankruptcy “does not discharge an individual debtor from any debt ... for money [or] property ... to the extent obtained by ... false pretenses, a false representation, or actual fraud.” We affirm.
I. BACKGROUND
On October 3,1989, real estate broker and investor John R. Spicer entered a guilty plea in the United States District Court for the District of Columbia on a single count of interstate transportation of money obtained by fraud. Spicer admitted that in documents submitted to the Department of Housing and Urban Development (“HUD”), he had intentionally overstated the down payment made by a home buyer in order to help the buyer qualify for an FHA-insured mortgage.
Spicer was sentenced to incarceration for four months. Although the fraud conviction was predicated upon a single transaction involving a property at 764 Howard Road, S.E., in the District of Columbia, Spicer admitted in factual stipulations that he had made similar misreрresentations on a total of 81 applications for FHA-insured mortgages in 1983 and 1984. The district court included in his sentence an order to pay restitution to the government in the amount of $340,000, equal to the profits he earned as a result of these misrepresentations. In each case, Spicer overstated the down payment made by the buyer, who used that false information to obtain an FHA-insured mortgage. In each case, Spicer’s misrepresentation was germane to HUD’s determination that the buyer qualified for an FHA-insured mortgage. 1 And in each case, Spicer profited from the transaction either as the seller of the property or as the seller’s broker, earning a commission on the sale. Buyers of 43 of the 81 parcels subsequently defaulted, resulting in losses of $1.8 million to HUD.
After being convicted on the criminal fraud count, Spicer reached a settlement agreement with the government on all its pending civil claims against him under the False Claims Act, 31 U.S.C. §§ 3729 et seq., and for common law fraud. Under the terms of the agreement, Spicer did not admit liability, but did promise to pay the government $339,000, plus interest at 8.5%, over a 10-year period. On October 26, 1990, Spicer executed two promissory notes to that effect. In rеturn, the government explicitly released all its civil claims (except tax claims) against him. Once this settlement agreement was reached on the civil claims, the district court deleted the restitution order from Spicer’s criminal sentence.
On July 29, 1992, Spicer filed a voluntary Chapter 7 bankruptcy petition, seeking,
inter alia,
to discharge his obligations on his promissory notes to the government. On October 29, 1992, the government filed an adversary complaint in bankruptcy court seeking a determination that the $339,000 Spicer owed to the government is not dis-chargeable in bankruptcy, under a provision of the Bankruptcy Code stating that bankruptcy “does not discharge an individual debtor from any debt ... for money [or] property ... to the extent obtained by ... false pretenses, a false representation, or actual fraud,” 11 U.S.C. § 523(a)(2)(A). The bankruptcy court granted the government’s
*1155
motion for summary judgment.
In re Spicer,
II. Analysis
A. Nondischargeability Under 11 U.S.C. § 523(a)(2)(A)
If Spicer’s debt to the government is “debt for money [or] property ... obtained by ... fraud,” it is not dischargeable in bankruptcy under the plain terms of 11 U.S.C. § 523(a)(2)(A). Both the bankruptcy court and the district court held that Spicer’s debt fell under that statutory provision.
On appeal, Spicer contends that the district court erred in characterizing his debt as one “for money or property obtained by fraud.” Relying principally on two Seventh Circuit eases,
Maryland Casualty Co. v. Cushing,
Maryland Casualty
and
West
do indeed lend support to Spicer’s theory. In
West,
an embezzler executed a promissory note to her defrauded employer in exchange for an express release of the employer’s civil claims against her, then a short time later petitioned for bankruptcy. Applying the rule established in
Maryland Casualty,
the
West
court held the note dischargeable, explaining that “[e]ven if the obligation arising from ... [the] embezzlement would have been nondis-chargeable due to its fraudulent nature, no allegations of fraud surrounded the note, and the note substituted a contractual obligation for a tortious one.”
We decline to follow the
Maryland Casualty
approach, however, because in our view it improperly elevates legal form over substance. We cannot agree with a rule under which, through the alchemy of a settlement agreement, a fraudulent debtor may transform himself into a nonfraudulent one, and thеreby immunize himself from the strictures of § 523(a)(2)(A). The weight of recent authority rejects the
Maryland Casualty
approach because it is contrary to the public policy embodied in § 523(a)(2)(A) of preventing fraudulent debtors from escaping their obligations at the expense of innocent defrauded creditors. The leading case is
Greenberg v. Schools,
The
Greenberg
approach has been followed in most recent decisions in the bankruptcy courts.
See, e.g., In re Marceca,
*1156
We think the
Greenberg
approach sound because, as numerous courts have noted, it effectuates the policy Congress sought to implement when it enacted § 523(a)(2)(A). “A debtor’s ‘fresh start’ is not absolute; the [Bankruptcy] Code embodies a delicate balance between the rights of debtors and the rights of defrauded creditors.”
In re Pavelka,
In contrast, under the
Maryland Casualty
approach “[t]he intent of Congress to except from discharge debts incurred by fraud could effectively be shortcircuited by a simple execution of settlement. To disregard the settlement agreement and look at the underlying nature of the claim would not hinder the overall scheme of the Bankruptcy Code of giving the
honest
debtor a fresh start.”
In re Bobofchak,
In
Matter of West,
the Seventh Circuit argued that
Greenberg
and its progeny can be reconciled with
Maryland Casualty,
and specifically criticized the bankruptcy court’s decision below,
In re Spicer,
for its rejection of the
Maryland Casualty
novation theory. The
West
court reasoned that because in
Greenberg
there was no express mention that the settlement agreement included a waiver or release of the underlying fraud claim, there was no novation and the underlying fraud claim retained its vitality.
The
West
court also asserts that, with the sole exception of
In re Spicer,
the bankruptcy eases following
Greenberg v. Schools
did not reach the question of whether settlement agreements including express waivers or releases of underlying fraud claims constitute novations, substituting new dischargeable debts for the original nondischargeable obligations. On our reading of those cases, however, they cannot be reconciled with
Maryland Casualty.
For example,
In re Bobofchak,
Following Greenberg v. Schools, we look beyond the form of the settlement agreement to the substance of the underlying obligation, and conclude that Spicer’s debt to the government did indeed “originate from” and “derive from” his fraudulent conduct. Although the subsequent settlement agreement alters the legal form of that obligation, it does not transmogrify its essential nature so as to immunize it from the command of § 523(a)(2)(A) that debt for money or property obtained by fraud is not dischargeable in bankruptcy.
B. Causation
Spicer next contends the distriсt court erred in concluding that his debt was for “property ... obtained by ... fraud” because the government failed to prove that his misrepresentations proximately caused HUD’s losses on the defaulting mortgages. Spicer candidly admits that he made misrepresentations to HUD on buyers’ applications for FHA-insured mortgages. It is undisputed that some of those mortgagors subsequently defaulted, and that HUD lost $1.8 million as a result. Spicer argues, however, that his misrepresentations caused HUD’s injury only in an incidental “but-for” sense; the mortgagors’ defaults were proximately caused by a variety of factors, such as job lоss or other personal financial reversals, all beyond Spicer’s control. To establish that his debt is nondischargeable due to fraud, Spicer insists, the government must prove that his misrepresentations were the proximate cause of its losses, and it has not done so here.
Proximate causation — loss or damage to the creditor “as a proximate result of’ the debtor’s misrepresentation — is an element that must be proved in order to establish nondischargeability under § 523(a)(2)(A).
In re Britton,
For its part, the government contends that proof of causation is not necessary at all in this case, because the uncontested facts and the settlement agreement conclusively establish both the fraudulent nature of Spicer’s conduct and the extent of his nondischargeablе debt for purposes of § 523(a)(2)(A). The government relies on cases holding that when a prior court judgment conclusively establishes the extent of a nondischargeable debt, collateral estoppel precludes relitigation of that issue.
See, e.g., In re Comer,
We are not persuaded that the uneontested facts and the settlement agreement in themselves establish as much as the government claims. It is certainly true, as the government asserts, that the extent of Spicer’s debt to the government is conclusively determined by the settlement agreement. But Spicer does not dispute the amount of his debt; *1158 instead, he disputes the gоvernment’s assertion that the entire amount of that debt has been conclusively determined to be nondis-chargeable due to fraud. In our view, the mere fact that the debt was in settlement of the government’s (untried and unproven) fraud claims, without more, is insufficient to establish its nondischargeability. Nor was the character of the debt as the product of Spicer’s fraudulent conduct conclusively established either in Spicer’s criminal conviction or in the settlement agreement. Spi-cer’s guilty plea to one count of fraud in his criminal trial establishes at most the fraudulent nature of but a single transaction involving a single parcel of property, upon which the criminal count was predicated. That single fraud count cannot be said to conclusively establish the fraudulent nature of the other 80 transactions 2 ; nor does Spicer’s criminal conviction establish that his misrepresentations caused HUD’s losses, the precise question raised here. We note that the factual stipulations in the criminal case, in which Spicer admitted to making misrepresentations in 80 additional transactions without admitting that his conduct amounted to fraud, pointedly reach no conclusion as to whether the ultimate “defaults and foreclosures” were the “result of the conduct with which Mr. Spicer was associated.” Appellant’s Appendix (“App.”) 13-14. We further note that in recitals in the settlement agreement on the civil fraud claims, Spicer expressly denies “liability, legal fault, or responsibility” for any losses to the government. App. 1. Thus neither the criminal proceeding nor the settlement agreement can be said to conclusively establish that all of Spicer’s misrepresentations amounted to fraud. Nor do they establish that Spicer’s misrepresentations proximately caused the government’s losses, an essential element of nondischargeability.
Nonetheless, we think the requisite element of proximate causation was established by the courts below. The bankruptcy court addressed the question of causation as follows:
In arguing that the defaulting mortgagors caused the government’s losses, the debtor seeks to avoid responsibility for his actions _ The government program at issue here required by law that the mortgagor make a downpayment as a pre-condition to obtaining federal mortgage insurance. Thus, absent the debtor’s false statements, the government would never have been called uрon to pay off the mortgages. The debtor is not entitled to escape or limit liability by laying the blame for the government’s losses on the defaulting mortgagors where his false statements resulted in the government agreeing to insure the mortgages in the first place.
In re Spicer,
The district court recognized this ambiguity in the bankruptcy court’s statement:
*1159 The Bankruptcy Court appears to have adopted a “but-for” test for causation in this case, yet this passage implicitly recognizes that appellant’s misrepresentations were a substantial causal factor of the government’s loss.... Without choosing a definitive test for causation, the Court holds that a sufficient nexus between Spi-cer’s misrepresentation and monetary losses to the government has been demonstrated in this case.
Memorandum Opinion at 5-6, App. 29-30.
The district court thus identifies the ambiguity in the bankruptcy court’s statement, and, crucially, goes on to clarify that, based on the undisputed facts, Spicer’s misrepresentations caused HUD’s losses in a legally sufficient sense — even if the stricter standard of proximate causation applies.
We agree with Spicer thаt proof that his misrepresentation proximately caused harm to the government is required in order to establish the fraudulent nature of his debt for purposes of § 523(a)(2)(A). Applying that standard, the district court concluded that Spicer’s misrepresentations proximately caused HUD’s losses. Spicer’s misrepresentations were material to HUD’s determination that the mortgage applicants met the financial requirements to qualify for FHA-insured mortgages and had a sufficient personal financial stake in the properties to have the proper incentives to avoid default. The misrepresеntations were thus more than a “but-for” cause; they proximately caused HUD’s losses when the buyers to whom HUD improvidently granted FHA-insured mortgages on the basis of Spicer’s misrepresentations of their financial qualifications defaulted. The defaults were thus a foreseeable consequence of Spicer’s conduct. It is undoubtedly true that in each case other factors also “caused” the buyer’s default, but that is of no moment, for as long as Spicer’s misrepresentations were a material and proximate cause, they need not have been the sole factor causing HUD’s losses.
See In re Sobel,
Spicer cites prior cases in which no proximate causation was found, but these are easily distinguished on the facts. For example, in
United States v. Hibbs,
Because this case was decided below on a motion for summary judgment, we must review the decision to grant summary judgment
de novo. In re Varrasso,
In this case, the underlying facts are undisputed. From those facts, the district court determined that Spicer’s misrepresentations were a proximate cause of HUD’s subsequent losses. But “if, based on the record, inferences contrаry to those drawn by the trial court are also plausible, summary judgment must be reversed.”
Santiago v. Lane,
C. Extent of Debt Obtained by Fraud
Spicer finally contends that the district court erred by assuming that the entire amount of his debt was nondischargeаble, when some (or all) of it was punitive in nature. Section 523(a)(2)(A) says that debts “for money [or] property
... to the extent
obtained by” fraud are nondischargeable. 11 U.S.C. § 523(a)(2)(A) (emphasis added). Thus only that portion of a debt attributable to the debtor’s fraud is nondischargeable.
In re Church,
Courts are divided on the question of whether punitive damages awarded in fraud cases are nondischargeable.
Compare In re St. Laurent,
The bankruptcy court reasoned that the entire amount of the settlement agreement, $339,000, was a “debt” for “money or property ... obtained by ... fraud,” insofar as the debt resulted entirely from Spicer’s fraudulent conduct. The relevant “property” was, in this ease, the FHA mortgage guarantees, which Spicer secured for third parties.
See In re Sprague,
We agree with the conclusion of the courts below, even while recognizing that there is arguably some ambiguity in the phrasе “debt ... for money [or] property ... to the extent obtained by_fraud.” Some courts have said that “to the extent obtained by fraud” modifies “debt,” so that if the debt is “obtained by” the debtor’s fraudulent conduct it is nondischargeable.
See, e.g., In re Levy,
III. Conclusion
Because John R. Spicer’s $339,000 debt to the United States is in its entirety debt for money or property obtained by fraud, under 11 U.S.C. § 523(a)(2)(A) it is nondischargeable in bankruptcy. The judgment of the district court is affirmed.
It is so ordered.
Notes
. FHA mortgages generally require relatively small down payments. Nonetheless, a down payment is required in order to ensure that the borrower has a sufficient personal financial stake to avoid default. In the transactions at issue here, Spicer sold houses with down payments smaller than required for FHA mortgages, or in some cases no down payment at all. Spicer then intentionally misrepresented the transactions in documentation submitted to HUD, showing down payments sufficient to qualify the buyers for FHA-insured mortgages.
. In
Brown v. Felsen,
Like the Supreme Court in Brown v. Felsen, we need not decide whether collateral estoppel applies. We conclude only that even if Spicer's fraud conviction conclusively determines the fraudulent nature of the single transaction involved there, it surely does not determine that the 80 transactions not directly at issue in that case were also fraudulent.
. Spicer argues that because the $339,000 settlement figure equals his net proceeds from the 81 fraudulent transactions, this somehow establishes that the settlement amount is unrelated to the government's losses. But the government could have agreed to settle its fraud claims for any amount, determined by any method or no method at all. It could have chosen Spicer's net worth, some factor of his income-earning potential, or a purely arbitrary figure acceptable to the parties. The fact that it chose a figure based on Spicer's net proceeds does not convert the settlement into punishment.