Stacey Jernigan is both the newest and the youngest bankruptcy judge in the State of Texas. However, in a recent opinion she made it clear that she is not one to be fooled by clever lawyers.
In Baker v. Sharpe, Adv. No. 06-3208 (Bankr. N.D. Tex. 9/28/06), a male debtor dressed to impress as he persuaded a recent divorcee to loan him large amounts of money. Having run through her money, he then filed chapter 7. She then sued to establish a non-dischargeable debt under Sec. 523(a)(2)(A) and 523(a)(6). The only problem was that most of her case revolved around verbal and implied statements concerning his solvency (including his statement that he could pay her out of the money he was hiding from his current wife).
Section 523(a)(2) draws a careful dichotomy between fraudulent statements of financial condition and other fraudulent representations. Section 523(a)(2)(A) expressly excludes statements of financial condition from its scope, while Section 523(a)(2)(B) only applies to written statements of financial condition. Thus, verbal statements of financial condition can never form the basis for a dischargeability action (at least not under Sec. 523(a)(2)).
The clever plaintiff's attorney tried to conceal this distinction from Judge Jernigan by omitting a few words when quoting the statute.
Judge Jernigan was not fooled. In a footnote, she stated:
"Indeed, Ms. Baker--or at least her attorney--knew there was this very large flaw in her argument, for in the Plaintiff's Brief in Support of Non-Dischargeability of Indebtedness Under Sec. 523(a)(2)(A) and (a)(6) filed with this court in advance of trial, the plaintiff quoted Section 523(a)(2)(A), but left out, with the convenient use of an ellipsis, the critical phrase 'other than a statement regarding the debtor's or an insider's financial condition.' Thankfully, the court has several copies of the Bankruptcy Code handy so it could consult the entire statutory provision in addressing this this question."
Memorandum Opinion, p. 26, n. 13 (emphasis added).
It is good to know that in these days of budgetary shortfalls that bankruptcy judges have not just one but several copies of the Bankruptcy Code available for use.
With the vigilant eye of the judge to protect him, the pro se defendant prevailed.