Sullivan v. Glenn

Bankruptcy Judge did not err in finding that debtor’s debt to creditor was dischargeable, even though: (1) debt was result of fraud committed by debtor’s agent in agent’s attempt to procure loan from creditor on behalf of debtor; and (2) certain debts obtained through false representations are barred from discharge under 11 USC section 523(a)(2)(A). While agent made false representations to creditor about existence of debtor’s $1 million line of credit that induced creditor to make $250,000 short-term loan to debtor, record showed that debtor was not complicit in said fraud. As such, court found that denial of discharge of debt in bankruptcy could only have occurred if creditor could have shown that debtor knew or should have known of fraud. Court further observed that creditor was in as good of position as debtor to have detected fraudulent nature of agent’s false representations about existence of line of credit.