                                                  Filed: June 29, 1999

                   UNITED STATES COURT OF APPEALS

                       FOR THE FOURTH CIRCUIT


                             No. 98-2548
                      (CA-98-774-A, BK-97-1226)



Foley & Lardner,

                                                Plaintiff - Appellee,

          versus


Salvatore D. Biondo, et al,

                                           Defendants - Appellants.



                              O R D E R



     The court amends its opinion filed June 8, 1999, as follows:

     On page 6, first full paragraph -- the paragraph is rewritten

to read as follows:

          Section 523(a)(2)(A) covers debts incurred through
     the direct provision of “money, property, [or] services.”
     In short, the primary debtor-creditor relationship is
     covered by § 523(a)(2)(A) through express language
     extending its scope to debts incurred through the direct
     acquisition of value. See 11 U.S.C.A. § 523(a)(2)(A).
     Section 523(a)(2)(A), however, also reaches secondary
     debt   transactions    --   extensions,   renewals,   and
     refinancings.     See § 523(a)(2)(A) (extending the
     exception to discharge provision to debt for “an
     extension, renewal or refinancing of credit”); Codisco,
     Inc. v. Marx (In re Marx), 138 B.R. 633, 636 (Bankr. M.D.
                              - 2 -




     Fla. 1992) (holding that the terms “renewal or re-
     financing of credit ... necessarily contemplate the prior
     granting of credit to the debtor and arrangements to
     continue the credit”). Therefore, we believe that the
     disjunctive clauses in § 523(a)(2) cover two distinct
     scenarios.

(The placement and text of footnote 1 remain the same.)

     On page 6, second full paragraph, line 1 -- the paragraph is

corrected to begin: “We realize that some courts ....”

                                      For the Court - By Direction



                                       /s/ Patricia S. Connor
                                                Clerk
PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: SALVATORE D. BIONDO; SUSAN
J. BIONDO,
Debtors.

FOLEY & LARDNER,
                                                                      No. 98-2548
Plaintiff-Appellee,

v.

SALVATORE D. BIONDO; SUSAN J.
BIONDO,
Defendants-Appellants.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Claude M. Hilton, Chief District Judge.
(CA-98-774-A, BK-97-1226)

Argued: April 7, 1999

Decided: June 8, 1999

Before WILKINSON, Chief Judge, and HAMILTON and
WILLIAMS, Circuit Judges.

_________________________________________________________________

Affirmed by published opinion. Judge Williams wrote the opinion, in
which Chief Judge Wilkinson and Judge Hamilton joined.

_________________________________________________________________

COUNSEL

ARGUED: Steven Bret Ramsdell, TYLER, BARTL, BURKE &
ALBERT, P.L.C., Alexandria, Virginia, for Appellants. Joseph
Dowell Edmondson, Jr., FOLEY & LARDNER, Washington, D.C.,
for Appellee.

_________________________________________________________________

OPINION

WILLIAMS, Circuit Judge:

Salvatore and Susan Biondo (the Biondos) filed a joint voluntary
petition under Chapter 7 of the Bankruptcy Code on March 20, 1997.
On June 30, 1997, Foley & Lardner filed a complaint in the bank-
ruptcy court seeking a determination that its $175,663 claim for legal
fees and costs against the Biondos was not dischargeable. Foley &
Lardner lodged several objections under the discharge provisions of
11 U.S.C.A. § 727 (West 1993), and alleged that the claim was
excepted from discharge under 11 U.S.C.A. § 523 (West 1993 &
Supp. 1999), which excludes certain debts from discharge if they
were initiated through false representation, false pretenses, or actual
fraud. See 11 U.S.C.A. § 523(a)(2)(A) (West 1993). On April 28,
1998, the bankruptcy court entered final judgment in favor of Foley
& Lardner, holding that its claim was excepted from discharge under
11 U.S.C.A. § 523(a)(2)(A), and on appeal, the district court affirmed
the bankruptcy court's decision. The Biondos now appeal to this
Court. We also affirm.

I.

In the early 1990s, the Biondos employed the law firm of Foley &
Lardner to represent their interests in litigation over a real estate part-
nership. According to the partner in charge of Foley & Lardner's
Washington, D.C. office, the Biondos' legal bill grew to over
$100,000, with the Biondos having paid only about $5,000 during the
course of the representation. Because Foley & Lardner was unable to
collect the amount due, it withdrew from its representation of the
Biondos after receiving permission from the court.

Initially, the parties attempted to reach a suitable repayment agree-
ment, but they could not reach a consensus. To recover the outstand-
ing fees, Foley & Lardner filed essentially identical claims against the

                     2
Biondos in both the Circuit Court of Fairfax County, Virginia, and the
Circuit Court of Montgomery County, Maryland, in September of
1993.

While the suits were pending, and unbeknownst to Foley & Lard-
ner, the Biondos executed what the bankruptcy court aptly described
as an "elaborate" and "Byzantine collection of documents, referred to
as an estate plan." (J.A. at 173.) These estate planning instruments
created a limited partnership named B.E.F. L.P., of which both Susan
and Salvatore Biondo were general partners. The Biondos and two
other family members were limited partners. As a part of the overall
estate plan, the Biondos' interests in two real estate partnerships, Mar-
ket Square Partnership, Ltd. and Tectonics Southern Partnership, Ltd.
(the Partnerships), were transferred to B.E.F. L.P. To transfer their
interests in the Partnerships to B.E.F. L.P., both Susan and Salvatore
Biondo signed a "Bill of Sale and/or Assignment" for each of the
Partnerships. The documents were signed and the interests in the Part-
nerships were transferred on January 18, 1994.

During the same time frame, the Biondos again entered into negoti-
ations with Foley & Lardner. On March 18, 1994, the parties reached
an agreement to settle the outstanding debt. The terms of the signed
Settlement Agreement required Foley & Lardner to take a voluntary
nonsuit in the previously filed actions, temporarily to forbear any col-
lection actions, and to accept $54,671 plus eight percent annual inter-
est in full payment for the legal services, rather than the total amount
outstanding of $130,749. In return, the Biondos agreed to pay the
reduced amount by December 31, 1995, and assigned to Foley &
Lardner all distributions from the Partnerships. In connection with the
Settlement Agreement, the Biondos entered into an Assignment and
Security Agreement (the Security Agreement) and provided Foley &
Lardner with a Promissory Note (the Note). The Note detailed the
agreed upon payment terms and contained a confession-of-judgment
clause in case of default.

The Security Agreement established Foley & Lardner's interest in
the Partnerships through an assignment of all the Biondos' rights to
distributions. The assignment of interest in the Partnerships was
expressly stated to be a "material inducement to [Foley & Lardner]
to enter into the transactions contemplated by the Settlement Agree-

                     3
ment." (J.A. at 398.) The Security Agreement represented that the
Biondos "possesse[d] all requisite power and authority to enter into
and perform . . . obligations under the Settlement Agreement and this
Assignment and to carry out the transactions contemplated hereby and
thereby," and that no consents, authorizations, or approvals were nec-
essary from any outside parties. (J.A. at 399.) The Security Agree-
ment also stated that the Biondos were then and would be "the sole,
lawful, legal and beneficial owner[s]" of the interest in the collateral,
i.e., the Partnerships. (J.A. at 399.) Finally, the Security Agreement
pledged that "[a]ll information furnished by the [Biondos] concerning
the Collateral is and shall remain true, correct and complete in all
material respects." (J.A. at 400.)

The Biondos failed to pay the $54,671 to Foley & Lardner by
December 31, 1995. In accordance with the confession-of-judgment
rights contained in the Note, Foley & Lardner obtained judgment
against the Biondos in the amount of $175,663, consisting of the fees
for legal services, accrued interest, and attorneys' fees related to the
debt collection. The judgment was obtained on February 26, 1996. On
March 20, 1997, the Biondos filed for bankruptcy, leading to Foley
& Lardner's claim against the bankruptcy estate and this action.

Both the bankruptcy court and the district court held that the Bion-
dos' debt to Foley & Lardner was excepted from discharge under 11
U.S.C.A. § 523(a)(2)(A) (West 1993). Specifically, the bankruptcy
court found that the Biondos knowingly and falsely represented that
they maintained and could transfer interests in the Partnerships when,
in fact, those interests already had been placed into the B.E.F. L.P.
For the reasons that follow, we find no error in this holding and there-
fore affirm the judgment.

II.

"We review the judgment of a district court sitting in review of a
bankruptcy court de novo, applying the same standards of review that
were applied in the district court." Three Sisters Partners, L.L.C. v.
Harden (In re Shangra-La, Inc.), 167 F.3d 843, 847 (4th Cir. 1999).
Specifically, "[w]e review the bankruptcy court's factual findings for
clear error, while we review questions of law de novo." Loudoun
Leasing Dev. Co. v. Ford Motor Credit Co. (In re K&L Lakeland,

                     4
Inc.), 128 F.3d 203, 206 (4th Cir. 1997). When addressing exceptions
to discharge, we traditionally interpret the exceptions narrowly to pro-
tect the purpose of providing debtors a fresh start. See, e.g., Century
21 Balfour Real Estate v. Menna (In re Menna), 16 F.3d 7, 9 (1st Cir.
1994). We are equally concerned with ensuring that perpetrators of
fraud are not allowed to hide behind the skirts of the Bankruptcy
Code. See Cohen v. Cruz, 118 S. Ct. 1212, 1216 (1998). The parties
to this case present competing theories; the Biondos press the impor-
tance of a fresh start, while Foley & Lardner claims that it is a victim
of fraud. We turn to the governing statutes.

The lower courts determined that the Biondos' debt to Foley &
 1772 102 2 Lardner was excepted from discharge under 11 U.S.C.A.

§ 523(a)(2)(A) (West 1993). Section 523 reads:

          A discharge under section 727 . . . does not discharge an
          individual debtor from any debt . . . for money, property,
          services, or an extension, renewal, or refinancing of credit,
          to the extent obtained by . . . false pretenses, a false repre-
          sentation, or actual fraud, other than a statement respecting
          the debtor's or an insider's financial condition . .. .

11 U.S.C.A. § 523(a)(2)(A). The Biondos first contend that the Settle-
ment Agreement, Note, and Security Agreement, did not constitute an
"extension, renewal, or refinancing of credit," thus removing any
actions concerning those agreements from the purview of § 523(a)(2).
Second, they argue that the legal services were not "obtained by" false
pretenses, false representation, or actual fraud. Third, the Biondos
claim that their conduct did not amount to "false pretenses, a false
representation, or actual fraud." We address these contentions
seriatim.

A.

Through explicit language, Congress provided not only that debts
incurred through the direct provision of money, property, or services,
but also that the extension, renewal, or refinancing of credit, would
fall under the purview of Bankruptcy Code § 523(a)(2)(A). See 11
U.S.C.A. § 523(a)(2)(A). There is no argument that the original debt
was incurred through the provision of legal services. The question the

                    5
Biondos present is whether the Settlement Agreement and the ancil-
lary agreements were extensions, renewals, or refinancings of credit.
This inquiry requires that we define the boundaries of extending,
renewing, and refinancing, credit. The Bankruptcy Code does not
guide us to a unique interpretation of these terms; therefore, we will
turn to their common understanding. See Union Pac. R.R. Co. v. Hall,
91 U.S. 343, 347 (1875) ("Congress may well be supposed to have
used language in accordance with the common understanding."); see
also, e.g., Fischer v. Scarborough (In re Scarborough) 171 F.3d 638,
643 (8th Cir. 1999) (employing dictionary definitions to interpret the
terms of § 523); Field v. Mans, 157 F.3d 35, 43 (1st Cir. 1998)
(same); Lewis v. Scott (In re Lewis), 97 F.3d. 1182, 1186 (9th Cir.
1996) (same).

Section 523(a)(2)(A) covers debts incurred through the direct pro-
vision of "money, property, [or] services."1 In short, the primary debtor-
creditor relationship is covered by § 523(a)(2)(A) through express
 language extending its scope to debts incurred through the direct acquisition
of value. See 11 U.S.C.A. § 523(a)(2)(A). Section 523(a)(2)(A), however,
also reaches secondary debt transactions -- extensions, renewals, and refinancings.
See § 523(a)(2)(A) (extending the exception to discharge provision to debt
for “an extension, renewal or refinancing of credit”); Codisco, Inc. v. Marx
(In re Marx), 138 B.R. 633, 636 (Bankr. M.D. Fla. 1992) (holding that
the terms “renewal or refinancing of credit ... necessarily contemplate the prior
granting of credit to the debtor and arrangements to continue the credit”).
Therefore, we believe that the disjunctive clauses in § 523(a)(2) cover two
distinct scenarios.


We realize that some courts have held that the definition of "extension" also
_________________________________________________________________

1 Not every commercial transaction results in a debtor-creditor relation-
ship, as exemplified by the immediate, and theoretically simultaneous,
exchange of cash for goods. See, e.g., Bass v. Stolper, Koritzinksy, Brew-
ster & Neider, S.C., 111 F.3d 1322, 1332 n.4 (7th Cir. 1997) (Bauer, J.,
dissenting) ("The relationship of seller-buyer is much different from
creditor-debtor."). Often, however, the purchaser may, instead of tender-
ing cash, create a separate debtor-creditor relationship with the seller. See
Official Comm. of Unsecured Creditors v. Columbia Gas Sys., Inc. (In
re Columbia Gas Sys., Inc.), 997 F.2d 1039, 1060 (3d Cir. 1993)
("Typically, . . . debtor-creditor relationships are created by contractual
agreement between two parties.").

                     6
includes an original credit arrangement. See Field, 157 F.3d at 43
(holding that the original entry into the debtor-creditor relationship,
as well as the continuation of an established debtor-creditor relation-
ship constituted an "extension" of credit); see also William D. Hawk-
land & Lary Lawrence, Uniform Commercial Code Series § 3-302:09
(1984) ("A financed sale is, generally, any extension of credit by the
seller to the consumer to purchase the goods.").2 Although we find
this alternate interpretation accurate, we focus on the definitional
aspect of "extension" that is distinguishable from what Congress ear-
lier provided in § 523(a)(2) -- the clause embracing debts for the pro-
vision of money, property, and services. Our definition focuses on an
"extension" of credit as an autonomous transaction that results in the
lengthening of a debtor-creditor relationship. Black's Law Dictionary
defines extension as "[a]n allowance of additional time for the pay-
ment of debts." Black's Law Dictionary 583 (6th ed. 1990). In other
words, despite the fact that a debt may already be due, the creditor
grants a reprieve to the debtor. See John Deere Co. v. Gerlach (In re
Gerlach), 897 F.2d 1048, 1050 (10th Cir. 1990) ("An extension,
within the meaning of § 523(a)(2), is an indulgence by a creditor giv-
ing his debtor further time to pay an existing debt." (internal quotation
marks omitted)). An extension of credit is analogous to the classic
forbearance3 granted by a creditor in relation to a matured debt.
Extensions of credit under § 523(a)(2) are thus properly viewed as
merely an agreed enlargement of the time allowed for payment.

Renewal and refinancing are similar terms that also concern sec-
ondary debt transactions, but define somewhat different activities. A
renewal also extends the debt, but through a re-establishment of the
debtor-creditor relationship, even if the renewal is contemplated, but
_________________________________________________________________

2 We also recognize that the First Circuit interpreted an "extension of
credit" to encompass a creditor's later inaction regarding its right to
accelerate a debt and thereby end the debtor-creditor relationship. See
Field v. Mans, 157 F.3d 35, 43 (1st Cir. 1998). Because it is unnecessary
to this case, we will put off determining whether, in a given circum-
stance, complete inaction by the creditor can be termed an "extension of
credit."

3 "Forbearance" is defined as "[g]iving of further time for repayment of
obligation or agreement not to enforce claim at its due date." Black's
Law Dictionary 644 (6th ed. 1990).

                    7
not certain, under the original credit agreement. 4 See Norris v. First
Nat'l Bank (In re Norris), 70 F.3d 27, 29-30 (5th Cir. 1995) (holding
that a required annual approval of a secured note, before extending
the due date for an additional year, fell under the renewal provision
of § 523(a)(2)); cf. Shawmut Bank, N.A. v. Goodrich (In re Goodrich),
999 F.2d 22, 23 (1st Cir. 1993) (noting the annual "renewal" of a line
of credit as falling under § 523(a)(2)); Forbes v. Four Queens Enters.,
Inc., 210 B.R. 905, 913 (D.R.I. 1997) (distinguishing a renewal of
credit from a grant of new credit from the same lender). The hallmark
of credit "renewal" is therefore the re-establishment of a pre-existing
debtor-creditor relationship employing similar, if not identical, terms.

Refinancing, however, is such a significant change in circum-
stances that it results in the substitution of one debt for another.5 See
In re McFarland, 84 F.3d 943, 947 (7th Cir. 1996) (holding that
incurring new debt to retire a previously existing debt is "refinancing"
under § 523(a)(2)); Dominion Bank v. Nuckolls, 780 F.2d 408, 413
(4th Cir. 1985) (distinguishing a loan to "refinance a pre-existing debt
_________________________________________________________________

4 Black's Law Dictionary defines "renewal" as follows:

          The act of renewing or reviving. A revival or rehabilitation of an
          expiring subject; that which is made anew or re-established. The
          substitution of a new right or obligation for another of the same
          nature. A change of something old to something new. To grant
          or obtain extension of; to continue in force for a fresh period, as
          commonly used with reference to notes and bonds importing a
          postponement of maturity of obligations dealt with. An extension
          of time in which that obligation may be discharged; an obligation
          being "renewed" when the same obligation is carried forward by
          the new paper or undertaking, whatever it may be.

Black's Law Dictionary 1296-97 (6th ed. 1990).

5 Black's Law Dictionary defines "refinance" as follows:

          To finance again or anew; to pay off existing debts with funds
          secured from new debt; to extend the maturity date and/or
          increase the amount of an existing debt; to arrange for a new
          payment schedule. The discharge of an obligation with funds
          acquired through the creation of a new debt, often at a different
          interest rate.

Black's Law Dictionary 1281 (6th ed. 1990).

                    8
. . . by paying off the old loan [from] extending a new one" (internal
quotation marks omitted)). An actual exchange of money is, of
course, a mere formality if the obligation remains with the same cred-
itor. The dispositive characteristic is instead whether the terms of the
debt are so substantively different as to constitute a new obligation,
which, at least in part, extinguishes a preexisting debt.

The terms collectively used in § 523(a)(2) are thus broad enough
to account for virtually every type of secondary debt transaction. Nev-
ertheless, the Biondos argue that Foley & Lardner, by merely agree-
ing to forbear collection of the debt owed, did not enter into an
extension, renewal or refinancing of credit under §523(a)(2). As an
initial matter, like the lower courts, we reject the proposition that an
agreement to forbear debt collection would fall outside of the auspices
of § 523(a)(2). Such a forbearance agreement extends the debtor-
creditor relationship beyond the period originally contemplated and
can appropriately be labeled a credit extension. The Biondos admit as
much by noting that "[a]t most, the settlement agreement provided an
extension of time to pay the debt that was already due for legal ser-
vices." (Appellants' Br. at 11 (emphasis added).) Therefore, even if
we accepted the Biondos' argument that the Settlement Agreement
constituted a forbearance, that circumstance would very likely consti-
tute an extension under § 523(a)(2).

But, the Settlement Agreement, Security Agreement, and Note did
more than simply allow the Biondos to pay at a later date. The terms
of the Settlement Agreement also temporarily reduced the amount
due, added interest, and assigned Foley & Lardner an interest in any
income or distribution from the Partnerships. It also required Foley &
Lardner voluntarily to dismiss the suits that were pending against the
Biondos and contained a confession-of-judgment clause that would
obviate any later litigation that might otherwise be necessary to obtain
a judgment against the Biondos. Instead of owing the original
$130,749 sum, the Biondos were obligated to pay only $54,671 plus
accrued interest by a date certain. Following that date, various contin-
gencies would become operative and would substantially increase the
debt. The Settlement Agreement effectively substituted a new debt
obligation for the previously existing debt and thus satisfied the defi-
nition of a refinancing of credit. Accordingly, we agree with the lower

                    9
courts that the Settlement Agreement is a separate, identifiable refi-
nancing transaction covered under § 523(a)(2).

B.

Having affirmed that the Settlement Agreement falls under the pur-
view of § 523(a)(2), the Biondos' next argument need not detain us
long. The Biondos essentially argue that the original debt to Foley &
Lardner is dischargeable because it was incurred through the provi-
sion of legal services, which were not "obtained by" any actions
alleged to be fraudulent. Although Foley & Lardner does not take
issue with this contention, their complaint relates not to the establish-
ment of the original debt, but the Settlement Agreement, or as we
have now determined, the refinancing. Therefore, we will now turn
to the question of whether the Biondos engaged in fraudulent activity
and thereby "obtained" the refinancing.

C.

The Biondos contend that even if § 523(a)(2)(A) does extend to the
Settlement Agreement, their conduct did not constitute false pre-
tenses, a false representation, or actual fraud under § 523(a)(2)(A).
The lower courts held that the Biondos fraudulently misrepresented
their ownership interest and ability to assign the proceeds from the
Partnerships in the Settlement Agreement and Security Agreement.
To prevail on their assertion that the debt was subject to exception
from discharge under § 523(a)(2)(A), Foley & Lardner was required
to prove by a preponderance of the evidence that the Biondos did
engage in such misconduct. See Grogan v. Garner, 498 U.S. 279, 291
(1991).

In Field v. Mans, 516 U.S. 59 (1995), the Supreme Court estab-
lished that the terms within § 523(a)(2)(A) should be interpreted
according to the common understanding of those terms at the time the
statute was enacted. See id. at 70. To define actual fraud, the Supreme
Court looked to the definition of fraudulent misrepresentation under
the Restatement (Second) of Torts (1976). Because Foley & Lardner
alleges similar malfeasance, we will follow the Supreme Court's lead
and look to the Restatement to determine the elements required to

                     10
prove that claim. The Restatement defines the tort of fraudulent mis-
representation as:

          One who fraudulently makes a misrepresentation of fact,
          opinion, intention or law for the purpose of inducing another
          to act or to refrain from action in reliance upon it, is subject
          to liability to the other in deceit for pecuniary loss caused
          to him by his justifiable reliance upon the misrepresentation.

Restatement (Second) of Torts § 525 (1976). Thus, a plaintiff must
prove four elements: (1) a fraudulent misrepresentation; (2) that
induces another to act or refrain from acting; (3) causing harm to the
plaintiff; and (4) the plaintiff's justifiable reliance on the misrepresen-
tation. It is against this standard that the Biondos' arguments must be
addressed.

The Biondos first contend that if there was any misrepresentation,
it was innocent, because they believed that the Partnership interests
could be assigned to Foley & Lardner. The Biondos' state of mind is
a question of fact to be determined in the first instance by the bank-
ruptcy court that can be overturned on appeal only if the finding is
clearly erroneous. See Cooper v. Ashley Communications, Inc. (In re
Morris Communications NC, Inc.), 914 F.2d 458, 467 (4th Cir. 1990).

In this case the Biondos testified in court that they believed that the
Partnership interests could be assigned to Foley & Lardner. They sup-
ported their testimony with evidence that in late 1996 they sent a list
of debts to Foley & Lardner with the notation that the Foley & Lard-
ner debt was to be serviced with any income from the Partnerships
and the uncontested fact that they received the Partnerships' K-1 tax
forms personally. The bankruptcy court was obligated to balance that
testimony against the fact that the Biondos both signed a "Bill of Sale
and/or Assignment of Limited Partnership Interest" granting each of
their interests in the Partnerships to the B.E.F. L.P. only two months
before they entered into the Settlement Agreement and Security
Agreement. After reviewing the evidence, the bankruptcy court stated
that it found Susan Biondo's testimony "wholly unbelievable." (J.A.
at 185.) The bankruptcy court continued, "I don't believe anyone
could sign that massed [sic] papers without understanding what they
were doing; and given the proximity in time of having executed those

                     11
papers, signing the settlement agreement with Foley & Lardner, I can-
not find that the debtors would have forgotten what they had done or
that they thought it had no legal effect." (J.A. at 185.) The record
reveals no reason to believe this finding was clearly erroneous, espe-
cially considering the bankruptcy court's unique ability to judge the
credibility of the witnesses.

The Biondos next assert that they did not intend to deceive Foley
& Lardner, which is akin to arguing that they did not intend to induce
Foley & Lardner to act, the second required element of fraudulent
misrepresentation. To support their argument, the Biondos state that
all they received in return for the representation concerning the Part-
nerships was a period of forbearance and that it was to their great
advantage to comply with the new terms. The reality is, of course,
that the Biondos avoided two pending lawsuits, obtained a year and
one-half to pay a large debt, and received an opportunity to pay a sub-
stantially discounted amount to settle the entire debt. Without the
ability to assign the proceeds from the Partnerships, the outcome was
much less clear, as demonstrated by a recitation in the Security
Agreement noting that the assignment of the proceeds from the Part-
nerships were a "material inducement" for Foley & Lardner to enter
into the Settlement Agreement. (J.A. at 398.) Having already decided
that the Biondos knew the representation was false, we can find no
other reason for making the representation except to induce Foley &
Lardner to enter into the Settlement Agreement.

The third element, causation, is also satisfied. The Biondos argue
that the misrepresentation did not proximately cause any damage
because they could not have satisfied the debt regardless of the mis-
representation, and, therefore, Foley & Lardner lost nothing. We dis-
agree. It is axiomatic that in the context of a claim for exception to
discharge under § 523(a)(2)(A), the harm or damage is the provision
of credit. Cf. Wolf v. Campbell (In re Campbell), 159 F.3d 963, 966-
67 (6th Cir. 1998) (interpreting "to the extent obtained by" in
§ 523(a)(2) to require only a showing that the debtor acquired credit
and no further proof of damage to the creditor). In this case as in oth-
ers, the extension, renewal, or refinancing of credit, by its nature,
enhances the creditor's risk either by originally extending credit to the
debtor or by foregoing an immediate attempt to collect the outstand-
ing debt by renewing or refinancing the debt. In this case, Foley &

                     12
Lardner voluntarily withdrew its suits for collection and extended the
due date for well over a year, exposing itself to the risk that the Bion-
dos' financial circumstances would decline further. Having estab-
lished that Foley & Lardner did suffer the precise harm that
§ 523(a)(2)(A) was established to prevent-- the credit risk -- we
have little trouble determining that the Biondos' misrepresentations
were a root cause. As we noted earlier, the Security Agreement
expressly stated that the assignment of the proceeds and distributions
from the Partnerships was a material inducement to enter into the Set-
tlement Agreement. The causation hardly could be clearer -- the
fraudulent misrepresentation expressly induced the refinancing.

As to the fourth and final element, the Biondos argue that Foley &
Lardner did not justifiably rely on the misrepresentation because they
were a sophisticated entity and could have at least checked the Part-
nerships' financial statements. This argument has been expressly
rejected by the Supreme Court. In Field, the Supreme Court empha-
sized the minimal threshold presented by justifiable reliance:

          [T]he illustration is given of a seller of land who says it is
          free of encumbrances; according to the Restatement, a
          buyer's reliance on this factual representation is justifiable,
          even if he could have "walk[ed] across the street to the
          office of the register of deeds in the courthouse" and easily
          have learned of an unsatisfied mortgage.

Field, 516 U.S. at 70 (quoting Restatement (Second) of Torts § 540
(1976)). Using this minimal standard, it is clear that Foley & Lardner
was not required to inspect the Partnerships' financial statements and
was instead justified in relying upon the Biondos' representations that
they owned the interests in the Partnerships and could assign them.

We affirm the lower courts' determination that the elements of
actual fraud were met in this case.

III.

Because 11 U.S.C.A. § 523(a)(2)(A) (West 1993) encompasses the
Settlement Agreement as a refinancing of credit, and the Biondos

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obtained the refinancing through actual fraud when they misrepre-
sented their ability to assign certain interests in the Partnerships, we
hold that the debt is excepted from discharge.

AFFIRMED

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