IN RE JOSEPH M. CURRAN, Debtor.
JOSEPH M. CURRAN, Defendant, Appellee. CAROLYN PRIVITERA, Plaintiff, Appellant,
FROM THE BANKRUPTCY APPELLATE PANEL FOR THE FIRST CIRCUIT
W. Hughes, with whom Michael B. Kimberly, Karianne Jones,
Mayer Brown LLP, William C. Parks, and Parks Law Offices were
on brief, for appellant.
S. Haskell, with whom Joy D. Hotchkiss and Law Office of
Louis S. Haskell were on brief, for appellee.
Howard, Chief Judge, Selya and Lynch, Circuit Judges.
bankruptcy appeal, the parties ask us to resolve an issue
that has divided our sister circuits: whether the phrase
"statement . . . respecting the debtor's . . .
financial condition, " as used in 11 U.S.C. §
523(a)(2)(B), should be interpreted narrowly to refer only to
those documents that speak directly to the debtor's
overall financial condition or broadly to include those
documents that merely reference a single asset or liability.
Compare, e.g., Bandi v. Becnel
(In re Bandi), 683 F.3d 671, 676 (5th Cir. 2012),
and Cadwell v. Joelson (In re
Joelson), 427 F.3d 700, 714 (10th Cir. 2005) (employing
narrow approach), with Appling v.
Lamar, Archer & Cofrin, LLP (In re
Appling), 848 F.3d 953, 960 (11th Cir. 2017) and
Engler v. Van Steinburg (In re Van
Steinburg), 744 F.2d 1060, 1061 (4th Cir. 1984)
(employing broad approach). But courts should not rush to
decide unsettled issues when the exigencies of a particular
case do not require such definitive measures. Here, we see no
need to enter onto terra incognita but, rather, decide the
case on less controversial principles of pleading and
materiality. When all is said and done, we affirm.
begin with a brief description of the legal foundation on
which this case rests. Chapter 7 liquidation proceedings
enable an individual debtor to gain a "fresh start"
by granting him a discharge that releases him from almost all
debt previously incurred. Grogan v.
Garner, 498 U.S. 279, 283 (1991); Harrington v.
Simmons (In re Simmons), 810 F.3d 852, 855 (1st
Cir. 2016). Such a discharge is available, though, only to
the "honest but unfortunate debtor." Premier
Capital, LLC v. Crawford (In re
Crawford), 841 F.3d 1, 7 (1st Cir. 2016) (quoting
Grogan, 498 U.S. at 286-87). To this end, the
bankruptcy code exempts some debts - especially those rooted
in fraud and deceit - from discharge. See 11 U.S.C.
§ 523(a). These exemptions are construed stringently and
creditors must show that a debt "comes squarely"
within a particular exemption. McCrory v.
Spigel (In re Spigel), 260 F.3d 27, 32 (1st
case, which deals with a creditor's attempt to avail
herself of two such exemptions, was resolved on what amounts
to a motion for judgment on the pleadings. Accordingly, we
rehearse the facts as they appear in the plaintiff's
complaint (and the documents incorporated by reference
therein) and draw all reasonable inferences in the
plaintiff's favor. See Shay v.
Walters, 702 F.3d 76, 78 (1st Cir. 2012).
November of 2007, the debtor, Joseph M. Curran, and the
plaintiff, Carolyn Privitera, were romantically involved. In
need of funds, the debtor turned to the plaintiff, who
promised to loan him $30, 000. During negotiations, the
plaintiff (represented by counsel) asked the unrepresented
debtor to draw up a list of his property. In response, the
debtor gave her a list of property (the List), comprising
property "belonging" to him "either by title
or by physical possession" and used in his landscaping
business. The plaintiff's attorney made only minor
changes to the List before converting it into what he
unilaterally styled as a "List of Collateral." The
attorney then prepared a loan agreement (the Agreement) and
attached the List as an exhibit.
List included sixteen different landscaping-related items
ranging from a variety of clippers and trimmers to two
trucks. The purchase price of each item was listed beside the
item in a column labeled "cost." Excluding the
trucks, the total cost of the remaining items was slightly
over $22, 000. With the trucks, the total cost of all the
items ballooned to more than $86, 000. Unbeknownst to the
plaintiff, the debtor was still making installment payments
on at least one of the trucks and that truck remained titled
to the lender.
II of the Agreement specified that the debtor would execute
and deliver a security agreement and financing statements
"covering" the property included in the List. It
further provided that the debtor would record and file all
documents necessary to "perfect and protect" the
plaintiff's security interest. To ensure this protection,
Article II empowered the plaintiff to sign and file financing
statements on the debtor's behalf.
Agreement was executed in November of 2007, and the plaintiff
transferred $30, 000 to the debtor's bank account. Even
so, no security agreement or financing statement was
presented, and neither the plaintiff nor the debtor took any
steps to perfect the plaintiff's security interest in the
property. The loan proved to be a poor investment: the debtor
repaid less than $5, 000 before defaulting in 2012.
plaintiff sued the debtor in a Massachusetts state court and,
in March of 2014, secured a default judgment in the amount of
$137, 030.78 (a sum that included damages, interest, and
costs). Later that year, the debtor - without making any
payment on the judgment - filed for Chapter 7 bankruptcy
protection. See 11 U.S.C. §§ 701-784.
course, the plaintiff commenced an adversary proceeding in
the bankruptcy court seeking an order declaring the debt
non-dischargeable. She claimed that the List was a false
statement submitted to induce her to make the loan, thus
bringing the debt within the purview of 11 U.S.C. §
523(a)(2)(B), which renders non-dischargeable debts obtained
through "use of a statement in writing - (i) that is
materially false; (ii) respecting the debtor's . . .