Summary of a Recent
Judicial Development in
Bankruptcy

Bank Failed to Establish Requisite
Reliance and Intent

Jeffrey A. Peterson
National AgLaw Center Graduate Assistant

In In re Owens, 322 B.R. 411 (Bankr. E.D. Ark. 2005), debtors David and Glinda Owens ("Debtors") were general partners in Owens Planting Company ("Partnership"), which was engaged in farming and trucking businesses. See id. at 413. The Partnership borrowed certain funds from the First National Bank of Stuttgart, Arkansas ("Bank") for the operation of its business, and the Debtors personally guaranteed the indebtedness of the Partnership. See id. In June of 2003, the Debtors filed a Chapter 7 bankruptcy petition and the Bank subsequently filed a complaint to determine the indebtedness owed to the Bank to be non-dischargeable because the Partnership (through the Debtors) made material misrepresentations on its financial statements when it failed to disclose unpaid crop expenses. See id.

The bankruptcy court held that the Bank neither established that it actually or reasonably relied on the financial statements nor that the Debtors acted with the requisite intent to deceive the Bank as required by § 523(a)(2). Id. The court thus discharged the indebtedness. See id. at 421-22.

The case was decided on March 7, 2005; this summary was posted Nov. 6, 2006.