Alside Supply Ctr. v. Aste (In re Aste), 129 B.R. 1012 (Bankr.D.Utah)
PUBLISHED
Creditor brought a non-dischargeability action against the debtor under 11 U.S.C. § 523(b)(2)(B), based on a line of credit that had been granted on the basis of a materially false financial statement. Debtor had signed the financial statement as vice president of a small non-party corporation, and had personally guaranteed the corporation's debt. In response to Grogan v. Garner, 498 U.S. 279 (1991), the court expressed a need to reconcile the newly imposed preponderance of the evidence standard in non-dischargeability cases with its obligation to narrowly construe exceptions to dischargeability in favor of the debtor. The court held that, since strict construction is applicable to statutory interpretation rather than to evidentiary burden, that standard was therefore unaffected by Grogan's change of the evidentiary standard. Applying a preponderance of the evidence standard, the court found that plaintiff had not established either that debtor had actual knowledge that the financial statement he signed, which had been prepared by another corporate employee, was false, or that his signing of the document had been reckless. Without proof of either actual intent to defraud or reckless disregard of the truth, the court concluded that plaintiff had failed to establish that its claim against debtor was non-dischargeable under § 523(b)(2)(B).