           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT United States Court of Appeals
                                                   Fifth Circuit

                                                                            FILED
                                                                          August 11, 2008

                                       No. 07-40450                   Charles R. Fulbruge III
                                                                              Clerk

In The Matter Of: ANTHONY FRANCIS ORSINI; REBECCA LYNN ORSINI

                                                  Debtors

THE CADLE COMPANY

                                                  Appellant
v.

ANTHONY FRANCIS ORSINI; REBECCA LYNN ORSINI

                                                  Appellees



                   Appeal from the United States District Court
                        for the Eastern District of Texas
                             USDC No. 4:06-CV-203


Before JONES, Chief Judge, and DAVIS and GARZA, Circuit Judges.
PER CURIAM:*
       The Cadle Company appeals the bankruptcy and district courts’ decisions
holding that discharge and dischargeability of their debts should not be denied
under 11 U.S.C. §§ 523(a)(2)(B), 727(a)(3), or 727(a)(5). We AFFIRM.




       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
                                  No. 07-40450

                              I. BACKGROUND
      In 1999, Anthony and Rebecca Orsini formed Orsini Family, Inc. for the
purpose of acquiring a high-end gift shop named Foxglove and an associated
restaurant, which the Orsinis renamed Foxglove Dining (collectively,
“Foxglove”). Later that year, the Orsinis, through Orsini Family, Inc., applied
to Transamerica Small Business Capital (“TSBC”) for a $300,000.00 loan.
Because the Orsini’s were required to personally guarantee the loan, Rebecca
met with a TSBC employee to provide information about the couple’s financial
condition. The TSBC employee posed questions to Rebecca during a face-to-face
interview and recorded her answers in a computer-generated document entitled
“Personal Financial Statement Dated December 13, 1999” (“the December 1999
statement”). Neither Rebecca nor Anthony signed or reviewed the December
1999 statement after it was prepared, but Rebecca conceded at trial that it
accurately reflects the answers she gave during the interview. The December
1999 statement lists the following assets:
      (i) Cash & Marketable Securities $75,000.00
      (ii) Retirement Assets $260,000.00
      (iii) Life Insurance $10,000.00
      (iv) Real Estate $250,000.00
      (v) Autos & Other Personal Assets $30,000.00
      After evaluating the December 1999 statement, TSBC sent a Conditional
Commitment Letter to the Orsinis, notifying them that Orsini Family, Inc. had
been approved for a $300,000.00 loan, provided that (a) the Small Business
Administration (“SBA”) approve and guarantee 75 percent of the loan, (b) the
Orsinis make a cash injection of $66,000.00 into the business, and (c) the Orsinis
reconcile certain aspects of their December 1999 statement. In response, the
Orsinis completed and submitted a Personal Financial Statement (“the March
2000 statement”), which lists the following assets:


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      (i) Cash on Hand and in Banks $25,000.00
      (ii) IRA or Other Retirement Accounts $300,000.00
      (iii) Life Insurance $10,000.00
      (iv) Stocks and Bonds $85,000.00
      (v) Real Estate $250,000.00
      (vi) Automobile $20,000.00
      (vii) Other Personal Property $20,000.00
      (viii) Other Assets $20,000.00
      Following the submission of the March 2000 statement, the Orsinis’
guaranties were accepted, and the loan closed in July 2000.           Despite the
assistance of the loan, Foxglove was not profitable. The business closed in
February 2002, and Orsini Family, Inc. defaulted on the loan. After the Orsinis
failed to fulfill their guarantee, Cadle purchased the loan from TSBC for pennies
on the dollar.
      On October 23, 2002, Orsini Family, Inc. and the Orsinis, as individuals,
filed voluntary petitions under Chapter 7 of the United States Bankruptcy Code.
The Orsinis’ personal bankruptcy schedule lists the following relevant assets:
      (i) Homestead $200,000.00
      (ii) Retirement $40,542.42
      (iii) Stamps $125.00
      (iv) Coins $325.00
      (v) Jewelry $75.00
      Cadle appeared at the meeting of creditors and requested production of all
documents relevant to the Orsinis’ financial transactions over the five-year
period preceding their bankruptcy. The Orsinis initially furnished three boxes
of documents, and later provided more in response to specific requests. Cadle,
however, was dissatisfied with what it deemed to be an inadequate record from
which to form a clear picture of the Orsinis’ financial activities. On February 14,


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2003, Cadle filed an adversary proceeding under 11 U.S.C. §§ 523(a)(2)(B),
727(a)(3), and 727(a)(5), objecting to the discharge of the Orsinis’ personal
guarantee of the loan and their bankruptcy discharge.                       After a trial, the
bankruptcy judge issued a Memorandum Opinion overruling Cadle’s objections
to discharge. The district court affirmed. Both courts wrote lengthy, carefully
reasoned opinions. Cadle now appeals to this court.
                                     II. DISCUSSION
       We review the bankruptcy court’s findings of fact for clear error and its
conclusions of law de novo. Gen. Elec. Capital Corp. v. Acosta (In re Acosta),
406 F.3d 367, 372 (5th Cir. 2005). “Under a clear error standard, this court will
reverse ‘only if, on the entire evidence, we are left with the definite and firm
conviction that a mistake has been made.’” Otto Candies, L.L.C. v. Nippon Kaiji
Kyokai Corp., 346 F.3d 530, 533 (5th Cir. 2003) (quoting Walker v. Cadle Co. (In
re Walker), 51 F.3d 562, 565 (5th Cir. 1995)).
                A. Fraudulently Inflated Financial Statements
       Citing 11 U.S.C. § 523(a)(2)(B), Cadle argues that the Orsinis’ guarantee
is not dischargeable in bankruptcy because the Orsinis obtained the loan by
intentionally making materially false statements in both the December 1999 and
March 2000 statements.               Specifically, Cadle asserts that the Orsinis
misrepresented the value of (a) their cash on hand, (b) their personal property,
which consisted of stamps, coins, and jewelry, and (c) their residence.1 Section
523(a)(2)(B) provides that a debt is excepted from discharge if it is obtained by
(i) use of a statement in writing; (ii) that is materially false; (iii) respecting the
debtor’s or an insider’s financial condition; (iv) on which the creditor to whom the
debtor is liable for such credit reasonably relied; and (v) that the debtor caused

       1
        In its brief to this court, Cadle also suggests that the Orsinis falsely inflated the value
of their retirement accounts and securities. Because Cadle specifically abandoned this
contention as it relates to the § 523(a)(2)(B) claim during the hearing before the bankruptcy
court, we do not address it.

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to be made or published with the intent to deceive. 11 U.S.C. § 523(a)(2)(B). A
plaintiff must establish each of these elements by a preponderance of the
evidence. See Grogan v. Garner, 498 U.S. 279, 286-87 (1991).
      In this case, the bankruptcy court found that the December 1999
statement was not “in writing,” and that Cadle had failed to establish that the
March 2000 statement satisfied several of the other elements of § 523(a)(2)(B).
We discuss first the court’s analysis of the 2000 statement, and then turn to the
1999 statement.
                                       i.
      The bankruptcy court found, inter alia, that the Orsinis lacked any intent
to deceive in stating the value of their cash, other personal property, and
residence on the March 2000 statement. On appeal, Cadle concedes that there
is no explicit evidence of an intent to deceive, but argues that the bankruptcy
court should have inferred such an intent from the Orsinis’ actions. Intent to
deceive under § 523(a)(2)(B) can be inferred from the totality of the
circumstances surrounding the debtor’s acts, including the debtor’s knowledge
of or reckless disregard for the accuracy of his financial statements. See Norris
v. First Nat’l Bank (In re Norris), 70 F.3d 27, 30 n.12 (5th Cir. 1995) (citing
Equitable Bank v. Miller (In re Miller), 39 F.3d 301, 305 (11th Cir. 1994)).
      Although the evidence in this case might support an inference of an intent
to deceive, it does not compel such a finding. See Acosta, 406 F.3d at 374. The
bankruptcy court heard and credited the testimony of both Rebecca and Anthony
Orsini regarding the valuations of the cash, other personal property, and
residence. Rebecca testified that “if I made that statement [regarding the March
2000 report], then . . . we must have had [that] cash on hand in banks or in our
Fidelity [account].” With respect to the other personal property, including the
stamps, coins, and jewelry, the bankruptcy court found that neither of the
Orsinis had any expertise in valuing these types of assets. The court found that

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Rebecca estimated the value of the stamps in good faith, by taking into account
the large number in the collection and her ability to package the stamps as art
to sell in the gift shop. As to the house, the Orsinis testified that they estimated
the value at $250,000 because Rebecca had seen a comparable home in the
neighborhood listed for this price. Although the house appraised for $200,000
at the time they filed for bankruptcy, the court credited the Orsinis’ testimony
that their residence declined in value after they prepared the statements
because several billboards were erected in view of the home, a dump opened near
the home, and they did not perform maintenance or repairs on the home.
      Having reviewed the record, we find it plausible that the Orsinis’ financial
estimates, though perhaps careless or overoptimistic, were made without
dishonest intent. See Miller, 39 F.3d at 305-06. The bankruptcy court did not
clearly err in finding that the Orsinis lacked the requisite intent to deceive.
Because Cadle must prove all elements to sustain its claim of non-
dischargeability under § 523(a)(2)(B), we need not address the bankruptcy
court’s analysis of the other elements.
                                        ii.
      Cadle also challenges the bankruptcy court’s finding that the December
1999 statement was not “in writing.”          For purposes of this appeal, it is
unnecessary to reach this question. Because all of the misrepresentations the
Orsinis allegedly made in applying for the loan appeared in the March 2000
statement, the bankruptcy court considered them. As explained, the court found
that the alleged misrepresentations failed to satisfy the other elements of
§ 523(a)(2)(B), and we have affirmed the court’s finding that the Orsinis lacked
an intent to deceive.
      Cadle argues that we must nevertheless consider the bankruptcy court’s
finding that the December 1999 statement did not constitute a writing because
it affected the court’s analysis of the March 2000 statement — including whether

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the Orsinis had the requisite intent to deceive. Cadle asserts that the fact that
the Orsinis repeated the misstatements demonstrates that they were not merely
the result of a one-time mistake or oversight, but were intentional. However, of
the three misstatements Cadle alleges, only one was repeated — the value of the
residence. The valuations of the cash on hand at $25,000.00 and the stamps,
coins, and jewelry at $20,000.00 were included for the first time on the March
2000 statement. Therefore, Cadle’s argument has no force with respect to these
assets. As to the residence, we disagree that the Orsinis’ “pattern” of repeating
the same value for the house should have affected the district court’s
consideration of whether the couple had any intent to deceive in reporting that
value. First, the bankruptcy court did not interpret the allegedly inflated
valuation as a mere mistake or oversight. Second, all of the reasons the court
stated for finding a lack of intent would apply with equal force if the December
1999 statement had been considered. The Orsinis estimated the value of the
residence at $250,000 because Rebecca had seen a comparable listing in the
neighborhood before she prepared either statement. The court also accepted the
Orsinis’ explanation that the home had declined in value due to the billboards,
dump, and deferred maintenance — all of which came about after the December
1999 statement was filed. Thus, the bankruptcy court’s finding that the 1999
statement was not “in writing,” although dubious, is inconsequential for
purposes of this appeal.2 We affirm the bankruptcy court’s finding that the debt
arising from the Orsinis’ guarantee is dischargeable under 11 U.S.C.
523(a)(2)(B).


       2
         We note that we question the circuit opinion on which the bankruptcy court relied in
reaching this conclusion: Bellco First Federal Credit Union v. Kaspar (In re Kaspar), 125 F.3d
1358, 1361 (10th Cir. 1997). In Kaspar, the Tenth Circuit held that “[a] written statement of
financial condition does not mean an oral statement converted into an electronic format.” Id.
at 1362. Thus, a computer-generated form produced from a debtor’s oral statements did not
satisfy § 523(a)(2)(B). Id. Contrary to the reasoning in Kaspar, the text of § 523(a)(2)(B) does
not explicitly state that a “writing” must be originally made on paper.

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                           B. Inadequate Records
      Cadle also asserts that discharge was improper because the Orsinis did not
comply with their duty to maintain and produce adequate records in accordance
with 11 U.S.C. § 727(a)(3). Section 727(a)(3) allows the court to deny discharge
if the debtor “has concealed, destroyed, mutilated, falsified, or failed to keep or
preserve any recorded information, including books, documents, records, and
papers, from which the debtor’s financial condition or business transactions
might be ascertained, unless such act or failure to act was justified under all of
the circumstances of the case.” Id. The plaintiff bears the initial burden of
proving that the debtor’s financial records are inadequate and that this failure
prevented the plaintiff from ascertaining the debtor’s financial condition.
Robertson v. Dennis (In re Dennis), 330 F.3d 696, 703 (5th Cir. 2003). Although
a debtor’s financial records need not contain full detail, there should be written
evidence of the debtor’s financial condition. Id. If the records are inadequate,
the burden shifts to the debtors to show the inadequacy is justified under all of
the circumstances. Id. A bankruptcy court has “wide discretion” in making
these findings, which we review for clear error. Id.
      Here, the bankruptcy court determined that the numerous documents
produced by the Orsinis formed an adequate picture of the Orsinis’ financial
condition prior to their bankruptcy. We cannot say that this was clear error.
First, as the district court noted, our ability to scrutinize this finding is
complicated by the fact that many of the financial documents the Orsinis
supplied to Cadle — including their tax returns and certain bank account
statements — were not made a part of the record. Because Cadle bears the
burden of proof, the absence of these documents undermines its claim.
      Second, Cadle’s heavy reliance on our unpublished opinion in Cadle Co. v.
Terrell is unpersuasive. 46 F. App’x 731, 2002 WL 1973217 (5th Cir. July 30,
2002).   In Terrell, the debtor failed to produce any credit card or bank

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statements, and an expert witness testified that the available records were
insufficient to understand the debtor’s financial condition in the years preceding
the bankruptcy. See No. 4:01-CV-0399, 2002 WL 22075, at *4-5 (N.D. Tex. Jan.
7, 2002). In contrast, the Orsinis produced three boxes of documents, including
bank statements and credit card information, and later provided additional
materials in response to Cadle’s specific requests. Further, Cadle offered no
testimony specifying which, if any, of the missing documents prevented it from
ascertaining the Orsinis’ financial condition.
      Third, while the extent of a debtor’s records should be commensurate with
his or her financial sophistication, the bankruptcy court did not clearly err in
finding that the Orsisnis were not so sophisticated as to require imposition of a
higher-than-average standard of record keeping.           Rebecca worked as a
stockbroker for a period of time, but her degree was in elementary education.
Prior to opening Foxglove, she had no experience running a business. Anthony
has a degree in finance, but his employment had been primarily technical and
computer-oriented. We affirm the bankruptcy court’s finding that discharge
should not be denied under 11 U.S.C. § 727(a)(3).
                            C. Explanation of Loss
      Finally, Cadle argues that the bankruptcy and district courts erred in
concluding that the Orsinis were not subject to denial of discharge under
11 U.S.C. § 727(a)(5) because they failed to explain the loss in value to their
jewelry and coin collection. Section 727(a)(5) provides, “The court shall grant the
debtor a discharge unless . . . the debtor has failed to explain satisfactorily,
before determination of denial of discharge under this paragraph, any loss of
assets or deficiency of assets to meet the debtor’s liabilities.” In this context,
      [t]he word “satisfactorily” . . . may mean reasonable, or it may mean
      that the court, after having heard the excuse, the explanation, has
      that mental attitude which finds contentment in saying that he
      believes the explanation — he believes what the bankrupts say with

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      reference to the disappearance or shortage. He is satisfied. He no
      longer wonders. He is contented.

First Tex. Sav. Ass’n, Inc. v. Reed (In re Reed), 700 F.2d 986, 993 (5th Cir. 1983).
      The bankruptcy court concluded that “there was no loss of assets within
the meaning of section 727(a)(5), and to the extent a loss could be said to have
occurred, the Orsinis have satisfactorily explained the loss.” Cadle argues that
the Orsinis attributed $10,000 of the “other personal property” listed on their
March 2000 statement to their jewelry and coin collection.           Yet, on their
bankruptcy schedules two and a half years later, the Orsinis reported the value
of the coin collection as $325 and the value of the jewelry as $75. Cadle asserts
that the Orsinis only explained the loss of a single piece of jewelry worth about
$1000.00, and have thus failed to adequately explain the 95 percent decline in
the value of these assets.
      The bankruptcy court found, however, that the values listed in the
financial statement were based on the fair market value of the assets, while the
values in the bankruptcy schedules were liquidation values. Cadle has offered
no evidence that any of the coins or jewelry, other than the piece of jewelry
Rebecca acknowledges she lost, are missing. Like the district court, we are
unwilling to reject the bankruptcy court’s findings, premised upon its
observations of the witnesses and the evidence at trial, based solely upon Cadle’s
skepticism about the reduction in value of these assets. We, therefore, affirm
the bankruptcy court’s finding that discharge should not be denied under
11 U.S.C. § 727(a)(5).




                               III. CONCLUSION
      For these reasons, the decisions of the bankruptcy and district courts
permitting discharge of the Orsinis’ debts are AFFIRMED.

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