62
Opinion of the Court
sent to any conveyance of the encumbered real estate during the term of the secured indebtedness, failing which the entire unpaid balance on the note would become payable upon a sale unauthorized.
On October 8, 1987, Mans's corporation triggered application of the clause by conveying the property to a newly formed partnership without the Fields' knowledge or consent. The next day, Mans wrote to the Fields asking them not for consent to the conveyance but for a waiver of their rights under the due-on-sale clause, saying that he sought to avoid any claim that the clause might apply to arrangements to add a new principal to his land development organization. The letter failed to mention that Mans had already caused the property to be conveyed. The Fields responded with an offer to waive if Mans paid them $10,500. Mans answered with a lower bid, to pay only $500, and again failed to disclose the conveyance. There were no further written communications.
The ensuing years brought a precipitous drop in real estate prices, and on December 10, 1990, Mans petitioned the United States Bankruptcy Court for the District of New Hampshire for relief under Chapter 11 of the Bankruptcy Code. On the following February 6, the Fields learned of the October 1987 conveyance, which their lawyer had discovered at the registry of deeds. In their subsequent complaint in the bankruptcy proceeding, they argued that some $150,000 had become due upon the 1987 conveyance for which Mans had become liable as guarantor, and that his obligation should be excepted from discharge under § 523(a)(2)(A) of the Bankruptcy Code, 11 U. S. C. § 523(a)(2)(A), as a debt resulting from fraud.1
The Bankruptcy Court found that Mans's letters constituted false representations on which petitioners had relied
1 Although we observe the distinction between Mans and his corporations, the record before us does not indicate that the parties thought anything should turn on treating them separately. As the case comes to us, Mans is presented as the originator of both debt and misrepresentation.
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