Haig

MEMORANDUMl OF DECISION DETERMINING THAT IMPUTATION OF FRAUD COMMITTED BY DEBTOR/HUSBAND TO DEBTOR/SPOUSE IS UNWARRANTED UNDER § 523(a)(2)(A)

This matter is before the Court on remand from the Bankruptcy Appellate Panel, which stated:

BAP Memorandum, 2:6 — 2:10.

For the reasons stated below, I am of the firm belief that imputation of the fraud of John Shart to his wife Elke Gordon-Schardt is unwarranted under § 523(a)(2)(A) and is hostile to the well accepted principle that Congress intended to enact bankruptcy law “by which the honest citizen may be relieved from the burden of hopeless insolvency.” Neal v. Clark, 95 U.S. 704, 709 , 24 L.Ed. 586 (1877).

The Origin of the Imputation of Fraud in Non-Dischargeability Proceedings

The source of the imputation of fraud to an otherwise innocent person is Strang v. Bradner, 114 U.S. 555 , 5 S.Ct. 1038 , 29 L.Ed. 248 (1885), a five page opinion in which the U.S. Supreme Court held that under § 33 of the Bankruptcy Act of 1867, the fraud of one partner could be imputed to the other partner for the purpose of exceptions to discharge. The entire discussion of the imputation of fraud is found in the last paragraph of the decision.…