60
Syllabus
to confine the requirement to the specified instance. Assuming this argument to be sound, it would prove at most that the reasonableness standard was not intended, but would not reveal the correct standard. Here, however, there is reason to reject the negative pregnant argument even as far as it goes. If the argument proves anything here, it proves too much: this reasoning would also strip § 523(a)(2)(A) of any requirement to establish causation and scienter, an odd result that defies common sense. Moreover, the argument ignores the fact that § 523(a)(2)(A) refers to common-law torts and § 523(a)(2)(B) does not. The terms used in paragraph (A) imply elements that the common law has defined them to include, whereas the terms in paragraph (B) are statutory creations. Pp. 66-69. (c) This Court has an established practice of finding Congress's meaning in the generally shared common law where, as here, common-law terms are used without further specification. Since the District Court treated Mans's conduct as amounting to fraud, the enquiry here is into the common-law understanding of "actual fraud" in 1978, when it was added to § 523(a)(2)(A). The Restatement (Second) of Torts states that justifiable, rather than reasonable, reliance is the applicable standard. The Restatement rejects a general, reasonable person standard in favor of an individual standard that turns on the particular circumstances, and it provides that a person is justified in relying on a factual representation without conducting an investigation, so long as the falsity of the representation would not be patent upon cursory examination. Scholarly treatises on torts, as well as state cases, similarly applied a justifiable reliance standard. The foregoing analysis does not relegate the negative pregnant to the rubbish heap, but merely indicates that its force is weakest when it suggests foolish results at odds with other textual pointers. The Court's reading also does not leave reasonableness irrelevant, for the greater the distance between the reliance claimed and the limits of the reasonable, the greater the doubt about reliance in fact. Pp. 69-76. (d) It may be asked whether it makes sense to protect creditors who were not quite reasonable in relying on a fraudulent representation, but to apply a different rule when fraud is carried to the point of a written financial statement. This ostensible anomaly may be explained by Congress's apparent concerns about creditors' misuse of financial statements. Pp. 76-77. (e) The Bankruptcy Court's reasonable person test entailing a duty to investigate clearly exceeds the demands of the justifiable reliance standard that applies under § 523(a)(2)(A). P. 77.
36 F. 3d 1089, vacated and remanded.
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