               UNITED STATES COURT OF APPEALS 
                    FOR THE FIRST CIRCUIT
                                         

No. 92-2262

                  IN RE:  PAUL W. GOODRICH,

                           Debtor.

                                         

                     SHAWMUT BANK, N.A.,

                    Plaintiff, Appellant,

                              v.

                      PAUL W. GOODRICH,

                     Defendant, Appellee.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. A. David Mazzone, U.S. District Judge]
                                                    

                                         

                            Before

                    Boudin, Circuit Judge,
                                         
               Campbell, Senior Circuit Judge,
                                             
                  and Stahl, Circuit Judge.
                                          

                                         

Michael C.  Gilleran  with whom  Paul  M.  Tyrrell and  Shafner  &amp;
                                                                  
Gilleran were on brief for appellant.
    
Robert H.  Quinn with whom Austin S. O'Toole and  Quinn and Morris
                                                                  
were on brief for appellee.

                                         

                        July 26, 1993
                                         

     BOUDIN,  Circuit Judge.   Shawmut  Bank, N.A.  asked the
                           

bankruptcy court to rule that the $109,000 debt owed to it by

Paul  W.  Goodrich is  not  dischargeable  in his  Chapter  7

bankruptcy because it was obtained through deliberately false

statements on  which the bank  relied.  The  bankruptcy court

held  that only $10,000 of the  debt was nondischargeable and

the district  court affirmed.   We  conclude that the  entire

debt is nondischargeable and remand.

     On September 4, 1985,  Goodrich signed a promissory note

and  credit agreement  with Shawmut  giving him  an unsecured

revolving  $100,000  line   of  credit.     This  arrangement

reflected his  long-standing relationship  with the bank  and

his partnership in a Boston law firm.  Goodrich agreed to pay

periodic finance charges and to repay the outstanding balance

and any accrued  interest on demand.  He was  not asked for a

personal financial statement at the time but agreed to submit

such  statements on  request.   The  line  of credit  was  to

expire, and  any  outstanding  principal  and  interest  were

payable, on the anniversary date.

     On  February 22,  1986,  Shawmut increased  the line  of

credit to $150,000, and then on September 4, 1986, it renewed

the line of credit.  On  June 24, 1987, Goodrich gave Shawmut

a personal financial statement dated as of December 31, 1986,

which  represented that the bank  could rely upon  it as true

unless given written notice of a  change.  The line of credit

                             -2-

was  renewed  again  on  September  4,  1987,  and  again  on

September  7, 1988.  Prior to the September 4, 1987, renewal,

Goodrich  had drawn down and  owed $99,000 under  the line of

credit.    On  November  18,  1988,  Goodrich  drew  down  an

additional  $10,000,  making  his   total  debt  to   Shawmut

$109,000, exclusive of interest.

     Thereafter,  Goodrich filed for bankruptcy under Chapter

7.  Shawmut, on  July 8, 1991, began an  adversary proceeding

in this  bankruptcy objecting to any  discharge of Goodrich's

debt  to the bank.  It claimed that Goodrich in his financial

statement  submitted  in June  1987  had  failed  to list  $9

million  in  contingent  liabilities and  made  certain other

material  misstatements or  omissions.    Shawmut invokes  11

U.S.C.   523(a)(2)(B), which provides:

             (a)  A  discharge  under section  727,
          1141,  1228(a),  1228(b),  or 1328(b)  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-

     The  bankruptcy court,  after  an  evidentiary  hearing,

found in  an oral  opinion that the  financial statement  did

contain material falsehoods  respecting Goodrich's  financial

condition made with intent to deceive; and as these  findings

are uncontested on this  appeal, we need not elaborate.   The

bankruptcy  judge also found that Shawmut  had proved that it

"would not have renewed  the loan had Mr. Goodrich  made full

and complete  disclosure  of these  contingent  liabilities."

But, the  bankruptcy judge continued, this fact does not show

that such a refusal  to renew would have meant  that Goodrich

would  then  have  repaid  the  loan  (which  then  stood  at

$99,000).  The oral opinion concluded:

          And so, to that  extent, to the extent of
          the balance which  was outstanding at the
          time  that  they  [Shawmut] received  and
          could  have  relied  upon this  financial
          statement  there was  no  reliance.   The
          money was  already out the door and would
          not   come  home  just  because  a  false
          financial statement was given.

     The bankruptcy judge then ruled that the bank had proved

reliance  upon the  false financial  statement to  the extent

that it  had advanced  $10,000 after the  financial statement

was provided  to  it  and that  this  amount,  together  with

pertinent costs, was the amount that would  not be discharged

by bankruptcy.  On  appeal, the district court affirmed  in a

memorandum, echoing the reasoning of the bankruptcy judge and

relying specifically  upon Danns v. Household  Finance Corp.,
                                                           

558 F.2d 114 (2d Cir. 1977), which we discuss below.

                             -4-

     Although  we disagree  with the  outcome reached  by the

bankruptcy judge and the  district court, it is only  fair to

say  that this  provision of  the Bankruptcy  Code, governing

nondischargeability  for false statements, has spawned a fair

amount of  case law, inter-circuit conflicts and considerable

confusion.   The seeming  simplicity of  section 523(a)(2)(B)

conceals  not only a couple of linguistic traps but a lineage

of opaque legislative history.  Still, the simple language of

section 523(a)(2)(B) is the  starting point for analysis and,

in the end, the basis for our decision.

     Reading the statute  literally, Shawmut appears  to meet

each  of its  requirements needed  to make  the $99,000  loan

nondischargeable.  The $99,000 loan was a "debt" reflecting a

"renewal . . . of credit"; the renewal was "obtained by . . .

use  of  a  statement  in  writing";  and  the   writing  was

"materially  false," it was  related to  Goodrich's financial

condition, Shawmut "reasonably relied" on it, and it was made

with intent  to deceive.  Although the statute bars discharge

only "to the  extent" that  the renewal was  obtained by  the

false  statement,  we  think  this   causation  element--also

reflected in the  statute's "reliance" requirement--is easily

satisfied here as to the full $99,000.

     The bank offered evidence from  a bank official that the

$99,000 loan would "probably" not have been renewed in either

1987 or 1988  if the true  financial liabilities of  Goodrich

                             -5-

had been set forth  in the financial statement  he submitted;

that  the bank  relied upon  the  financial statement  in its

renewal  of  the loan;  and  that  the omission  of  material

information   was  a  "substantial  factor"  in  causing  the

renewal.   This evidence,  presumably, led to  the bankruptcy

court's  finding  that  "the   bank  has  demonstrated  by  a

preponderance of the  evidence that they [sic] would not have

renewed the  loan  had Mr.  Goodrich made  full and  complete

disclosure . . . ."

     The evidence  amply supports the  finding.   Likelihoods

are about all that can be expected where the question is what

the  bank would  have  done five  years ago  if faced  with a

disclosure that did  not occur.   Indeed, there  is case  law

that  supports the view that it is enough if the misstatement

or omission is a "substantial factor" in the decision to make

or renew  a loan.  In  re Gerlach, 897 F.2d  1048, 1052 (10th
                                 

Cir.  1990) (collecting cases).   After  all, if  a financial

statement is materially false and intended to deceive, then a

showing that the creditor  "relied" upon it arguably requires

no more than that the creditor took it  into account and gave

it  weight.   Here, the  bankruptcy court's  explicit finding

already quoted makes fine distinctions unnecessary.

     Although  each of the  statutory requirements of section

523(a)(2)(B)  is thus  satisfied, Goodrich  remarkably enough

does have  two decent arguments in  his favor.  The  first is

                             -6-

that  some  courts have  read  into the  statute  yet another

requirement, not reflected in its explicit language, that the

creditor show  that it  was damaged  by the  false statement.
                                   

See  Norton, Bankruptcy Law and Practice,   27.41, at pt. 27,
                                        

p.  76 &amp; n.22 (1991)  (collecting cases); cf.  In re Siriani,
                                                            

967 F.2d  302 (9th  Cir. 1992) (limited  damage requirement).

Damage  is  easily shown  where  the bank  lends  money after
                                                             

receiving a false statement  and in reliance upon it.  But in

the  case of a  renewal of an  earlier untainted  loan, it is

possible that the bank would have called the loan if accurate

information had been furnished on renewal and yet been unable

to collect a penny before bankruptcy.

     This possibility appears to be what the bankruptcy judge

had in mind when he said of the $99,000 that "[t]he money was

already out  the door and would not  come home just because a

false   financial  statement  was   given."     Although  the

bankruptcy judge  used the phrase  "no reliance"  immediately

before making  this statement, a later  passage suggests that

he meant that  the bank  had not--so far  as the $99,000  was

concerned--"relied to  its detriment."   In other  words, the

bank  relied on the false statement in renewing the loan (the

judge had  already so  found), but--in the  judge's view--the

bank  had not  shown that  the reliance  caused the  ultimate

loss.

                             -7-

     The bank on appeal  zealously contests this "finding" of

no detriment.  It asserts that Goodrich's financial statement

on renewal showed  that he  had over $800,000  in cash,  bank

deposits   and  marketable  securities.    It  follows,  says

Shawmut,  that the  bank could  have collected  the money  by

calling  the loan  or  by insisting  that securities  or real

property interests of Goodrich be pledged to secure the loan.

In any event, Shawmut argues, there is no requirement that it

show  detriment in  the  sense of  ultimate loss;  reasonable

reliance  on  the false  statement  in renewing  the  loan is

enough.

     We agree with Shawmut that  the only detriment that need

be shown is the  renewal of the loan.   To be sure, it  would

not be absurd  to require,  in addition, that  the bank  show

that  it could--or  even  would--have collected  on the  loan

prior  to bankruptcy but for  the renewal.   Some courts have

done so.   The nondischargeability  provisions are frequently

construed in favor  of debtors.   3 Collier  on Bankruptcy   
                                                          

523.05A  (15th ed.  1993) (collecting  cases).   Further, one

could argue that if the bank was not ultimately harmed by the

renewal,  it should not be  able to improve  its situation in

the bankruptcy proceeding based  on the happenstance that the

renewal was based on a false statement.

     The   difficulty   is   that  including   this   further

requirement of actual damage is a policy choice.  There is no

                             -8-

indication in the statutory  language that Congress made such

a  choice,  and  the  evidence from  legislative  history  is

inconclusive.     The  statute  is  quite   detailed  in  its

conditions for nondischargeability.   Had Congress  wished to

add "damage" as  an element,  it could easily  have done  so,

especially  since   some  of  the  decisions   favoring  this

requirement   were  issued   before   the   elaboration   and

reenactment of section 523(a)(2)(B) in 1978.  Congress, as we

shall see, actually had some knowledge of case law construing

the predecessor section when it adopted its new version.

     If  it  considered the  matter  at  all, Congress  could

easily  have  concluded  on  policy  grounds  that  a  damage

requirement was not appropriate.   The debtor, by hypothesis,

has caused the trouble by making a materially false statement

with intent to deceive and the creditor has reasonably relied

upon the statement in renewing the loan.  Congress could have

thought that making the bank  shoulder the further burden  of

proving  that  it  could have  collected  the  loan  prior to

bankruptcy--a matter of solvency on which the debtor has most

of  the  information--was  not   a  proper  addition  to  the

compromises reflected in section 523(a)(2)(B).  

     The  legislative  history  of  section  523(a)(2)(B)  is

invoked at  some length by  both sides, and  it does  in fact

discuss the  case in which  a loan is  renewed.  We  find the

discussion tangled,  if not  contradictory, but note  that it

                             -9-

lends some support to Shawmut by stressing that "[t]he amount

of the  debt  made nondischargeable  on  account of  a  false

financial statement  is not  limited to `new  value' extended

when a loan is  rolled over."   H. Rep. No.  595, 95th Cong.,

1st  Sess. 129-30 (1977).   The problem is  that the question

here is when, and on what conditions, is the "old money" made

nondischargeable,  and on  that  issue  the same  legislative

history may be more confusing than helpful.  Id.1
                                               

     In  all events,  even if  Congress never  considered the

point  one way  or  the  other,  the  outcome  is  the  same.

Congress enacted  a  detailed  statute  without  an  explicit

damage requirement.  In the  face of conflicting policies for

and against, there is no warrant for the court to  add such a

requirement.  Accordingly, there is no need here to weigh the

bank's evidence or disturb the  bankruptcy judge's conclusion

that there was no detriment, in  the sense he used the  term,

so far as  the $99,000 is  concerned.   Instead we hold  that

detriment  or damage  in  that  sense  is  not  required  for

nondischargeability.   Accord  In re  Gerlach, 897  F.2d 1048
                                             

(10th Cir. 1990).  To the extent that the Ninth Circuit is in

                    

     1Just as  the  House Report  is  on balance  helpful  to
Shawmut, so  there are  floor statements (quoted  below) that
are marginally helpful to Goodrich.  This floor language does
use the phrase  "relied to his detriment,"  as the bankruptcy
judge  did in this case; but the  phrase was used only in the
context of discussing the special problem of In re Danns, and
                                                        
we  decline to  read it  as a general  gloss on  the statute,
which contains no such words.

                             -10-

disagreement,  see In re Siriani,  we prefer to  follow In re
                                                             

Gerlach for the reasons already set forth.
       

     Yet there  is more to be  said.  The district  court, in

affirming  the  bankruptcy  court,  used  some  of  the  same

reasoning but  also invoked a different  argument, renewed by

Goodrich in  this court, by  relying upon Danns  v. Household
                                                             

Finance  Corp., 558  F.2d 114  (2d  Cir. 1977).   Danns  is a
                                                       

curious  case  decided  under  the   predecessor  to  section

523(a)(2)(B) which used largely  similar language.  There the

debtor secured a  new loan  from a finance  company based  on

false  statements; and  the question  was whether  this false

statement also rendered nondischargeable an earlier untainted

loan that  the finance company consolidated with  the new one

simply because state  law forbad the company  from having two

loans to the same debtor.

     The Second Circuit  ruled in a  very brief opinion  that

"there  was no evidence that the original loan was renewed in

reliance on  the false  representations," but instead  it was

renewed  and consolidated because of the state law.  558 F.2d

at 116.   Thus, said the  court, the renewal was  not "a true

extension of the original loan; the record does not show that

[the original loan] . . . would have fallen due sooner had it

not been for the refinancing."  Id.  The court concluded that
                                   

"the   only   credit   extended   in   reliance   on   Danns'

                             -11-

misrepresentation was the additional amount loaned," and only

this new cash was nondischargeable.  Id.
                                        

     We have  devoted this space to  describing Danns because
                                                     

Congress, in adopting  section 523(a)(2)(B) in  the following

year, may  be taken to have  endorsed it by name.   After the

bill  emerged  from   a  House-Senate  Conference  Committee,

Section   523(a)(2)(B) was  explained to  both the House  and

Senate in the following terms:

             In many cases,  a creditor is required
          by state law to refinance existing credit
          on which  there has been no  default.  If
          the creditor does not forfeit remedies or
          otherwise  rely  to  his  detriment  on a
          false financial statement with respect to
          existing   credit,   then  an   extension
          renewal, or refinancing of such credit is
          nondischargeable  only  to the  extent of
          the  new  money  advanced; on  the  other
          hand, if  an existing loan is  in default
          or  the   creditor  otherwise  reasonably
          relies  to  his   detriment  on  a  false
          financial  statement  with  regard to  an
          existing  loan, then  the entire  debt is
          nondischargeable       under      section
          523(a)(2)(B).       This   codifies   the
          reasoning expressed by the second circuit
          in In  re Danns, 558 F.2d  114 (2d [C]ir.
                         
          1977).

124 Cong. Rec. 24, 32399 (1978) (statement of  Rep. Edwards),

124  Cong.   Rec.  25,   33998  (1978)  (statement   of  Sen.

DeConcini).    We  do  not find  this  general  language very

helpful in resolving the present case--there was no state law

here requiring  refinancing and,  while the $99,000  loan was

not "in default," Goodrich's debt to Shawmut was repayable on

demand.  Further, we  regard the floor discussion more  as an

                             -12-

attempt  to explain and approve Danns than as a general gloss
                                     

on the statute.

     Nevertheless,  the  floor  statements  are  pretty  good

evidence  that  Congress  approved  of  Danns  and,  on  that
                                             

assumption, it is appropriate to measure our case against the

rationale of Danns.  The Second Circuit's holding  was framed
                  

as an  interpretation of  the "reliance" requirement  that is

explicit in the  statute.   The court said  that the  finance

company did not "rely"  on the false statement in  continuing

the original loan because the old loan was not up for renewal

at  the  time  of  the  new   loan,  and  the  old  loan  was

consolidated and  renewed solely  because of New  York's "one

loan" law.  Danns may have depended also on the court's sense
                 

of  fairness.   After all,  whatever the  causal relationship

between  the false statement and the renewal of the old loan,

it  was sheer accident--a twist of New York law--that the old

untainted loan was renewed rather than left alone.

     By  contrast, Goodrich's loan expired in September 1987,

and then again in September 1988, unless renewed.  It was the

bank that  called for  the financial statement  prior to  the

September 1987 renewal, presumably because it had an interest

in managing the line of credit and the $99,000 loan.   So far

as  appears,  the later  draw  down  of $10,000  more,  which

occurred  in  late  1988, was  not  an  issue  when the  bank

accepted the  false financial statement and  considered it in

                             -13-

renewing  the loan in 1987.   Here, the  evidence showed that

the bank did "rely" on the false statement in renewing a loan

that would otherwise have fallen  due.  Accordingly, we think

that Danns is distinguishable in both letter and spirit.  
          

     We therefore  vacate the judgment of  the district court
                         

and remand to the bankruptcy court with directions to include
          

the $99,000  original  loan  in the  amount  of  debt  deemed

nondischargeable, together with the later  $10,000 loan whose

status  is undisputed.  The  question of what  costs and fees

are  appropriately due to Shawmut is not before us, and we do

not address it.

     It is so ordered.
                      

                             -14-
