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Court Locations

6500 Cherrywood Ln - Greenbelt, MD 20770 - Main Tel: 301-344-8018 map
101 W Lombard St Room 8530 - Baltimore, MD 21201 - Main Tel: 410-962-2688

Plaintiff filed a two-count complaint for nondischargeability of debt pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (B). The Debtor, an experienced real estate developer, sought to refinance an existing loan secured by a first lien on the real property at issue. Plaintiff was to receive a first lien on the real property when the loan was settled. Prior to the settlement with the Plaintiff and unbeknownst to it, Debtor granted an indemnity deed of trust in favor of non-party private investors, securing it with the same real property that was to be pledged to the Plaintiff. This resulted in a loss of the lien priority bargained for by the Plaintiff. The Court found that Plaintiff’s Section 523(a)(2)(A) claim failed because the Debtor’s omission or active misrepresentation regarding the Plaintiff’s lien status was a statement regarding the Debtor or an insider’s financial condition and outside that section’s scope. However, the Court concluded that the Debtor had made materially false written statements regarding an insider’s financial condition with the intent to deceive which were reasonably relied upon by the Plaintiff, thus satisfying all elements of Section 523(a)(2)(B) and requiring that the underlying debt be excepted from the Debtor’s discharge.

Robert A. Gordon