In Re: Marsha McQuarrie Lang, Debtor. Robert F. Lang, M.D. v. Marsha McQuarrie Lang

Citations: 106 F.3d 413; 1997 WL 26585; 1997 U.S. App. LEXIS 25864Docket: 95-4198

Court: Court of Appeals for the Tenth Circuit; January 23, 1997; Federal Appellate Court

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Unpublished opinions may now be cited if they have persuasive value on a material issue and are accompanied by a copy when cited in documents or oral arguments, as per the General Order dated November 29, 1993. In the case of Robert F. Lang, M.D. v. Marsha McQuarrie Lang, the Tenth Circuit Court of Appeals reviewed an adversary proceeding stemming from Marsha Lang's bankruptcy. Following their 1980 divorce, Robert Lang discovered in December 1991 that the children he believed to be his were actually fathered by another man. He filed a state court action against Marsha for damages due to this revelation. In her bankruptcy proceedings, Marsha sought to discharge any debts, including potential judgments from Robert's claims of fraud and emotional distress. 

The bankruptcy court ruled in favor of Marsha, stating that while she had deceived Robert regarding paternity, there was no intent to harm him, and thus no actionable fraud or emotional distress. The court found that Robert did not suffer damages from Marsha's actions. The district court affirmed this decision, reviewing legal questions de novo and factual findings for clear error. The appellate court concurred with the bankruptcy court's findings, particularly that Marsha's actions were not intended to cause harm, affirming that Robert had no cause of action under 11 U.S.C. § 523(a)(2)(A), § 523(a)(4), and § 523(a)(6) for nondischargeability.

The treatment of the fraud claim by both the district and bankruptcy courts raises significant concerns. The bankruptcy court's ruling lacked clarity on which element of fraud was deficient, initially noting that the defendant misrepresented paternity to the plaintiff but concluding that the misrepresentation was not intended to harm the plaintiff and that he suffered no damage. The district court affirmed this finding based on the bankruptcy court’s conclusion of no specific intent to harm, which is a misapplication of fraud law, as intent to harm is not a requisite element of fraud. According to Utah law, the essential elements of fraud include false representations about material facts, reliance on those representations, and resultant damages.

The bankruptcy court also found that the plaintiff incurred no damages due to his relationship with the children, highlighting his love and support for them and asserting that seeking monetary damages contradicts his affection for the children. However, this reasoning conflates the nature of the relationship with the issue of damages. The plaintiff's claim is that he incurred significant financial obligations due to reliance on the defendant's misrepresentation regarding paternity, which should be evaluated independently of his emotional ties to the children. The bankruptcy court's assertion that the plaintiff suffered no monetary damage due to his relationship with the children is deemed clearly erroneous.

Furthermore, the bankruptcy court did not reference the relevant case of Masters v. Worsley, which discusses the elements of fraud. While the district court acknowledged this case, it determined that it was not applicable because the bankruptcy court did not explicitly find a false representation during divorce proceedings. The district court also ruled that testimony from the plaintiff's divorce attorney regarding a statement made by the defendant about not having extramarital affairs was inadmissible.

The bankruptcy court's ruling did not address the divorce counsel's testimony, leaving uncertainty about whether it was considered. The district court incorrectly deemed this testimony inadmissible hearsay and a violation of the best evidence rule, asserting that the written deposition transcript or counsel's notes were not produced. However, the testimony regarding the defendant's statements during her deposition qualifies as an admission by a party-opponent, thus not constituting hearsay. It also does not violate the best evidence rule since it was not intended to prove the contents of a writing. Consequently, the fraud claim is remanded to the bankruptcy court for reconsideration of the evidence, including the divorce counsel's testimony about the defendant's alleged false representation. The bankruptcy court must also assess the relevance of the case Masters, 777 P.2d 499. The district court's affirmation of the bankruptcy court's ruling on emotional distress claims is upheld, but its decision on the divorce counsel's testimony and the fraud claim is reversed. The case is sent back to the district court with instructions to remand to the bankruptcy court for further examination. The ruling is not binding precedent, except under specific legal doctrines, and the citation of this order is subject to certain conditions. Additionally, the defendant did not submit a brief for this appeal and failed to object to the testimony at trial, limiting the bankruptcy court's ability to rule on its admissibility.