                                                                             F I L E D
                                                                      United States Court of Appeals
                                                                              Tenth Circuit
                                       PUBLISH
                                                                              SEP 30 1997
                     UNITED STATES COURT OF APPEALS
                                                                          PATRICK FISHER
                                                                                  Clerk
                                  TENTH CIRCUIT



 In re: KURTIS GEORGE KASPAR and
 LINDA ANN KASPAR,

       Debtors,
 __________________________________

 BELLCO FIRST FEDERAL CREDIT
 UNION,
                                                            No. 96-1462
        Plaintiff-Appellant,
 v.

 KURTIS GEORGE KASPAR and
 LINDA ANN KASPAR,

       Defendants-Appellees.


           APPEAL FROM THE UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF COLORADO
                          (D.C. No. 95-D-1157)


Barry Meinster (Karl Duppen with him on the briefs), Denver, Colorado, for Plaintiff-
Appellant.

Glen R. Anstine, Denver, Colorado, for Defendants-Appellees.


Before PORFILIO, ANDERSON, and BALDOCK, Circuit Judges.


PORFILIO, Circuit Judge.
       This appeal presents the question of whether modern technology and business

practices grounded in convenience will prevail over the strict language of statutory law.

In particular, we address whether a computer generated statement of financial condition

given in an application for credit neither seen nor signed by the debtor constitutes “a

writing” under § 523(a)(2)(B) of the Bankruptcy Code. The Bankruptcy court concluded

it does not and granted debtors, Kurtis and Linda Ann Kaspar, partial summary judgment

in an adversary proceeding seeking an exception from discharge filed by appellant Bellco

First Federal Credit Union. On appeal, that judgment was affirmed by the district court,

and it is now before us for review. We believe the statute must be literally interpreted,

and the oral statements made by the debtor which led to the computer generated form are

not to be regarded as the functional equivalent of a “writing” within the meaning of

§ 523(a)(2)(B).

       Linda Kaspar telephoned Bellco to apply for a line of credit and a credit card.

During the ensuing conversation, the Bellco loan representative asked questions about

Linda’s financial condition, the name of her employer, her title, and salary. Linda orally

responded to all of these questions, and as the answers were given, the loan representative

entered the information into a loan application form on her computer screen. Linda then

put her husband, Kurtis, on the phone, and he answered the same questions. The Kaspars

also supplied the names of other creditors, the balances due on obligations owed those

creditors as well as the monthly payments on the debts. The loan representative then read


                                            -2-
the figures back to the Kaspars who orally verified their accuracy. Apparently, the

Kaspars neither saw nor signed the application form entered into the computer. On the

basis of the information in its database acquired from the Kaspars, Bellco issued them a

line of credit and a MasterCard, and the Kaspars proceeded to incur fresh debt to Bellco.

       Some time later, the Kaspars filed a petition for relief under Chapter 7 of the

Bankruptcy Code seeking to discharge the debt to Bellco as well as debts owed to other

creditors. Claiming the information supplied was fraudulently rendered, Bellco filed this

adversary proceeding to have its debt declared nondischargeable under 11 U.S.C.

§§ 523(a)(2)(A) and (B). Stipulating to dismissal of the § 523(a)(2)(A) claims, the parties

filed cross motions for summary judgment on whether the debt was nondischargeable

under § 523(a)(2)(B).1




       11 U.S.C. § 523 - Exceptions to discharge, states, in part, in (a)(2)(B):
       1



              (a) A discharge ... of this title does not discharge an individual debtor from
              any debt --
                (2) for money, property, services, or an extension, renewal, or refinancing
              of credit, to the extent obtained by --
                      (B) use of a statement in writing --
                          (i) that is materially false;
                         (ii) respecting the debtor’s or an insider’s financial condition;
                        (iii) on which the creditor to whom the debtor is liable for such
                        money,
                              property, services, or credit reasonably relied; and
                         (iv) that the debtor caused to be made or published with intent to
                              deceive....

                                            -3-
       Under § 523(a)(2)(B), Bellco’s burden of proof was to establish that the debtors

used a “statement in writing” (1) that is materially false; (2) respecting their financial

condition; (3) on which the creditor reasonably relied; and (4) which the debtors caused to

be made or published with the intent to deceive. Focusing on the element of a “writing,”

the bankruptcy court granted debtors’ motion. The court held because exceptions to

discharge are narrowly construed, the computer generated loan application did not

constitute a “statement in writing.” Bellco First Federal Credit Union v. Kaspar (In re

Kaspar), 200 B.R. 399 (Bankr. D. Colo. 1996). To so conclude, the bankruptcy court

rejected Bellco’s reliance upon Chevy Chase Federal Savings Bank v. Graham (In re

Graham), 122 B.R. 447, 451 (Bankr. M.D. Fla. 1990), in which a Florida bankruptcy

court denied dischargeability of a credit card debt arising from a credit card which was

obtained by a telephone solicitation. Although the Florida court equated the oral

application with one that the debtor “caused to be made or published,” the Colorado

bankruptcy court found without any showing of a writing or signed document, the

statements made by the Kaspars were oral and did not satisfy the express restriction to a

writing found in § 523(a)(2)(B). On appeal, the district court agreed, holding the weight

of authority under § 523(a)(2)(B) required a writing.

       Bellco asks us to embrace Graham because it recognizes the purported realities of

the credit industry marketplace and the cyberspace world. In Graham, the creditor bank

telephoned debtors to solicit their joint application for a credit card. Responding to


                                             -4-
requests for credit information, the debtors enhanced the value of their income, assets,

and years of employment. Denying the discharge of this debt, the Florida bankruptcy

court reasoned:

       Defendants caused a written statement regarding their financial condition to
       be published by providing plaintiff’s telephone solicitor the financial
       information contained on the written application for a credit card. A written
       statement does not have to be physically prepared by a defendant. The
       requirements of § 523(a)(2)(B) are met if the existence of a written
       statement was caused to be prepared by the defendant.

122 B.R. at 450 (citation omitted).

       Bellco now urges this case and Graham are factually indistinguishable except here

the Kaspars solicited the application, while in Graham the creditor bank called the

debtor; and the Kaspars orally verified the financial information they gave. Bellco urges

the “relevant inquiry” is whether the debtors knew or should have known when they

provided the credit information that “a written statement was prepared by the bank or

provided by the bank.” That is, the inquiry is whether a written statement was caused to

be prepared by the debtor. Bellco contends it would be impossible for Kaspars to show

they did not know the credit union was recording the information they provided. Bellco

equates Kaspars’ orally verifying the financial information with affirming the writing.

Bellco also cites First International Bank v. Kerbaugh (In re Kerbaugh), 162 B.R. 255

(Bankr. D.N.D. 1993), which relied on Graham to conclude that although debtors had not




                                            -5-
filled in all of the information on the loan application, their signing the application

another person prepared and later completed satisfied the written statement requirement.2

       Bellco urges we should read the text of § 523(a)(2)(B) as one continuous thought.

In that way the applicable portion would read: “Use of a statement in writing that the

debtor caused to be made or published.” That contextual juxtaposition would not only

focus on the making and publishing of a statement, but would also recognize the intent of

Congress to define a “written” statement as any statement which a debtor makes or causes

to be made for the purpose of obtaining money, services, or credit. From that premise, it

then follows, Bellco asserts, the computer generated form created by the Kaspars’ words

constitutes a written statement they caused to be made.

       Further, tweaking their argument with an appeal to our modernity, Bellco advises

us computers are a permanent fixture in today’s business world, increasing efficiency and

convenience. Given the role of computers, Bellco represents that many lenders generate

loan applications over the phone as an accepted business practice. “If section

523(a)(2)(B) does not pertain to this type of transaction, then the honest public will suffer


       2
         Chevy Chase Federal Savings Bank v. Graham (In re Graham), 122 B.R. 447
(Bankr. M.D. Fla. 1990), also relied on First Federal Savings & Loan Association of
Rochester v. Kelley (In re Kelley), 163 B.R. 27 (Bankr. E.D.N.Y. 1993), which held the
writing requirement was satisfied although debtors signed a blank form that was
subsequently filled in but later were given the opportunity to read over a final loan
statement; and Hudson Valley Water Resources v. Boice (In re Boice), 149 B.R. 40
(Bankr. S.D.N.Y. 1992), which also held the writing requirement was satisfied when
debtors stated orally and signed three incomplete written statements they owned their
home.

                                             -6-
from the consequences of lending institutions being forced to change the way they do

business,” Bellco declaims.

       In response, the Kaspars contend the congressional intent is not what Bellco

suggests, and, as a matter of sound policy, its argument should be rejected because the

logical result would be to allow any oral statement to be metamorphosed into a “writing”

by simply converting it into computerized data. This, debtors contend, frustrates the

obvious intent of the statute. They argue it cannot be seriously believed that Congress did

not intend a document be in writing before a creditor may rely upon its contents to

establish a debtor’s fraudulent intent.

       We start our analysis with recognition of the rule that exceptions to discharge are

to be narrowly construed, and because of the fresh start objectives of bankruptcy, doubt is

to be resolved in the debtor’s favor. In re Hunter, 780 F.2d 1577,1579 (11th Cir. 1986).

However, we also observe the dilemma of whether a writing can assume a form other

than a document does not come to us without some non-bankruptcy legal history. Indeed,

even Bellco’s counsel admitted in oral argument there is an historical basis in the law of

evidence which requires the documentation of statements as a predicate to actionability.

We need not delve, however, into that history for solution of the issue here because it is

simply a matter of unvarnished hornbook law.




                                            -7-
       To come within the exception of § 523(a)(2)(B), the statement, to be “in
       writing,” must either have been written by the debtor, signed by the debtor,
       or written by someone else but adopted and used by the debtor. The
       requirement of a writing is a basic precondition to nondischargeability
       under section 523(a)(2)(B).

4 Collier on Bankruptcy, ¶ 523.08[2][a] (15th ed. 1997) (emphasis added). See Investros

Credit Corp. v. Batie, 995 F.2d 85 (6th Cir. 1993) (financial statements submitted to

closing constitute a writing); Engler v. Van Steinburg, 744 F.2d 1060 (4th Cir. 1984)

(oral representations would not meet nondischargeability requirements). The Engler

court stated,

       Concededly, a statement that one’s assets are not encumbered is not a
       formal financial statement in the ordinary usage of that phrase. But
       Congress did not speak in terms of financial statements. Instead it referred
       to a much broader class of statements - those “respecting the debtor’s ...
       financial condition.” A debtor’s assertion that he owns certain property free
       and clear of other liens is a statement respecting his financial condition.
       Indeed, whether his assets are encumbered may be the most significant
       information about his financial condition. Consequently, the statement
       must be in writing to bar the debtor’s discharge.

744 F.2d at 1060-61 (citation omitted).

       Although we have never addressed whether a computer generated form produced

from a debtor’s oral statements will satisfy the definition of a “writing,” we perceive

distinct reasons for Congress to have intended § 524(a)(2)(B) to require a document in

writing under the entire scheme of the Bankruptcy Code. As noted in Engler, giving a

statement of financial condition is a solemn part of significant credit transactions;

therefore, it is only natural that solemnity be sanctified by a document which the debtor


                                             -8-
either prepares or sees and adopts. In a world where important decisions relating to the

extensions of credit and service will be made upon the contents of a statement relating to

financial condition, too much mischief can be done by either party to the transaction were

it otherwise. Somewhere in the commercial risk allocation picture, the writing must stand

as a bulwark which tends to protect both sides.

       A creditor who forsakes that protection, abandoning caution and sound business

practices in the name of convenience, may find itself without protection. For example, in

In re Ward, 857 F.2d 1082 (6th Cir. 1988), the court denied nondischargeability where

the debtor filled in the credit card application and the bank issued a $2,000 credit line and

credit card to “a person who was not only hopelessly insolvent, but who had recently been

convicted of an embezzlement offense.” Id. at 1083. The court reasoned a bank’s

extending that sort of risk must do some minimal investigation, a concept the Bankruptcy

Code embodies.

       One commenter has written, “[F]rom the perspective of the bankruptcy

proceeding, it is inequitable to reward a possibly imprudent creditor who failed to detect

the debtor’s misrepresentation by excepting her debt from discharge, while the debtor’s

other more prudent creditors have their claims evaluated collectively.” Zeigler, The

Fraud Exception to Bankruptcy, 38 Stan. L. Rev. 891, 907-08 (1986). Other courts have

noted a creditor who extends credit without proper investigation is not entitled to a

judgment of nondischargeability. Citibank v. Cox (In re Cox), 150 B.R. 807 (Bankr.


                                            -9-
N.D. Fla. 1992); First Card Services, Inc. v. Cronk (In re Cronk), 144 B.R. 903 (Bankr.

M.D. Fla. 1992). This authority demonstrates a reluctance to part from the precise

language of the Code to acknowledge and condone business practices which have been

adopted largely for the sake of convenience.

       In the information age, it is convenient to purchase goods over the telephone and

use our credit cards to make a purchase and avoid a visit to a vendor. We merely give the

seller our credit card number instead of signing the voucher, and our oral representations

are transferred into computer data which become a debt upon which we are obliged. The

seller also relies upon our oral statements for our convenience and to effect a sale that he

or she might otherwise have not made. Yet, these valid transactions do not rise to the

level of a statement of financial condition.

       By enactment of the provisions of 11 U.S.C. § 523(a)(2)(B), Congress has

conferred a special dignity on statements of that nature. They are not to be regarded in

the same manner as other legitimate transactions, nor are the deceptions that may be

employed in such a statement treated in the same way as other fraudulent acts in which a

debtor may engage. Even though fraud is a basis for nondischargeability under other

circumstances having no necessary relation to written documents, 11 U.S.C.

§ 523(a)(2)(A), Congress has provided deception made in statements of financial

condition must be in writing before a creditor is entitled to an exception from discharge.




                                               - 10 -
       As noted by Justice Souter in Field v. Mans, ___U.S.___, 116 S. Ct. 437, 441

(1995), there is a marked distinction in origin between § 523(a)(2)(A) which arises from

and is a codification of the principles of common law fraud, and § 523(a)(2)(B) whose

roots are purely statutory in origin. Distinguishing the two, he said:

       The sum of all this history is two close statutory companions barring
       discharge. One applies expressly when the debt follows a transfer of value
       or extension of credit induced by falsity or fraud (not going to financial
       condition), the other when the debt follows a transfer or extension induced
       by a materially false and intentionally deceptive written statement of
       financial condition upon which the creditor reasonably relied.

Id. at 441. Can it be said any plainer? A written statement of financial condition does not

mean an oral statement converted into an electronic format. Despite Bellco’s argument

that reasoning merely relates to the “process” by which the statement evolves while the

statute pertains to the “essence”of the statement, Fields addresses that contention as well

but in a less direct way.

       Justice Souter pointed out § 523(a)(2)(B) devolves from an amendment of the

Bankruptcy Act of 1898 which was adopted in its original form in 1903. Except for some

narrowing of its scope, the section has existed in its current format for over ninety-four

years without change. We know when it was adopted there was no device for the

conveyance of written information regarding financial condition except for a document.

It takes no imagination whatever, then, to assume when Congress adopted the language,

“statement in writing,” it meant a statement in a written document. Congress made no



                                            - 11 -
statutory distinction between the “process” and the “essence” of the statement.

Unequivocally, it addressed the only form of writing it knew.

       Bellco argues, however, technology has changed, and we should recognize the

change. But, the statute has not changed. It remains in the form originally conceived and

enacted by Congress. It goes without saying, we are bound by the law as we find it, not

as we would like it to be.

       We note with some wryness that in this instance the law lags behind technology

and custom, but that gap is a subject which must be addressed to the Congress and not the

courts. We will not undertake to rewrite the express language of a statute merely to

accommodate the commercial conveniences attributable to modern technology.

       AFFIRMED.




                                          - 12 -
