Veritex Community Bank v. Osborne, No. 19-10479 (5th Cir. 2020)Annotate this Case
Veritex filed an adversary proceeding requesting that debtor's debt not be discharged because he furnished the bank with a materially false written financial statement. The bankruptcy court found that the statement was false and submitted with the intent to deceive, but discharged the debt because Veritex did not rely on the statement. The district court affirmed the bankruptcy court's judgment.
The Fifth Circuit reversed and held that the bankruptcy court's finding that Veritex did not reasonably rely on debtor's 2013 financial statement is clearly erroneous. In this case, Veritex looked to debtor to guarantee the loan, and it relied heavily on his financial statement; the alleged red flags were not significant enough to alert Veritex to debtor's dishonesty; and the bankruptcy court erred in focusing on the soundness of the loan rather than the truthfulness of debtor's representations. The court also held that a fraudulent statement by a debtor's partner or agent may be imputed to the debtor under 11 U.S.C. 523(a)(2)(B). Therefore, the bankruptcy court did not err in finding that debtor's wife was his agent. The court rendered judgment in favor of Veritex.