Accounts Supervision Co. v. Atley

• Decision Date: 29 June 1956
• Docket Number: No. 4232,4232
• Citation: 89 So.2d 508
• Parties: ACCOUNTS SUPERVISION COMPANY, d/b/a Asco Loan Company, Plaintiff-Appellee, v. Charles ATLEY, Defendant-Appellant.
• Court: Court of Appeal of Louisiana — District of US

Page 508

89 So.2d 508

ACCOUNTS SUPERVISION COMPANY, d/b/a Asco Loan Company Plaintiff-Appellee, v. Charles ATLEY, Defendant-Appellant.

No. 4232.

Court of Appeal of Louisiana, First Circuit.

June 29, 1956.

Rehearing Denied Sept. 24, 1956.

Newton C. Dalton, H. G. Bagwell, Baton Rouge, for appellant.

Franz Joseph Baddock, Baton Rouge, for appellee.

TATE, Judge.

This is a suit by plaintiff finance company (hereinafter denoted as 'Asco Loan') to collect the balance due on a promissory note. Defendant Atley pleads discharge in bankruptcy as defense and appeals from adverse judgment.

The note is dated July 13, 1954. Defendant Atley filed a bankruptcy petition on February 18, 1955 and was adjudicated a bankrupt five days later. It is not disputed that his liability herein would be discharged by his adjudication as a bankrupt, except for the possible applicability of the Bankruptcy Act, specifically, 11 U.S.C.A. § 35, which provides insofar as here pertinent:

'A discharge in bankruptcy shall release a bankrupt from all his provable debts, * * * except such as * * * (2) are liabilities for obtaining money or property by false pretenses or false representations * * *.'

In Personal Finance Co. of Lake Charles, Inc., v. Huber, La.App. 1 Cir., 77 So.2d 740, at page 742, we have recently restated the settled interpretation of this statute, quoting from the case of De Latour v. Lala, 15 La.App. 276, 131 So. 211, 212 as follows:

"Analyzing this language, it would appear to us that, before section 17 (11 U.S.C.A. § 35) would be applicable, the plaintiff must show: (1) That defendant made false representations; (2) that these representations were made with the intention of defrauding the plaintiff, and (3) that the plaintiff relied upon and was misled by the false pretenses or representations."

Otherwise stated, 'the bankrupt's representations must have been material and false in fact, must have been made with an intent to deceive and defraud, and the creditor must have believed, acted, and relied upon them to its prejudice,' Annotation, 'What constitutes false representations * * * rendering liability * * * nondischargeable,' 17 A.L.R.2d 1208, at page 1209. See Annotation, 'Exceptions in discharge provisions of Bankruptcy Act,' etc., 133 A.L.R. 440, at pages 448-460.

See also: 8 C.J.S., Verbo Bankruptcy, § 573, p. 1513, at pages 1514-1515; 6 Am.Jur. 1007, Verbo 'Bankruptcy', Section 781.

The De Latour case further stated, 131 So. 212: 'The burden of proof is upon the creditor, who claims that his duly scheduled debt is excepted from the operation of the discharge in bankruptcy because of fraud.'

The face amount of the note sued upon, dated July 13, 1954, was $1,170. Asco Loan's former manager testified from office records that this face amount represented the following disbursements or charges: Cash to Atley, $240 (which Atley testified was secured for the purpose of payment upon an outstanding grocery bill); life insurance on Atley to secure face amount of note, $46.80; Commerce Loan Co. (to pay off one of two loans outstanding with that finance company), $561.78; discount of face amount of note (charged by Asco Loan as its profit on the loan), $321.42.

The alleged misrepresentation by Atley consisted of a 'Financial Statement' containing the following printed statements:

'I hereby apply to you for a loan of $...... For the purpose of showing my ability to repay the same and to induce you to grant said loan, I hereby declare that a list of all my debts and liabilities as follows:

(Name of Creditor) (Amount)

[Here follows an lilegible line of scribbling consisting apparently of two words in which at most four or five disconnected characters resemble letters of the alphabet.]

'I hereby state, affirm, represent and warrant to you that my total indebtedness and liabilities on this date do not exceed [$1170.00]'.

The bracketed sum of $1,170.00 was filled in by pen by Asco Loan's manager. The statement was signed by Atley, and the illegible line was technically written by the hand of Atley, who is illiterate.

As to this alleged misrepresentation, the District Court stated:

'The defendant testified in this case and he impressed me as being a well-meaning, but typically illiterate Negro laborer, who on his own originality could not spell a single word he is said to have written * * * I give judgment for plaintiff in the case with considerable misgivings and doubt that the plaintiff made this loan on false representations that defendant did not owe any other debts. Mr. Thomas [Asco Loan's manager] testified that if he had been aware of other debts he would not have made the loan. * * * There is another phase of the matter on which I look with some suspicion and that is the fact that Mr. Thomas had this defendant try to write the financial statement in his own handwriting, when I am sure Mr. Thomas had to spell out to him every word on it, because of defendant's total lack of learning and inability to write. I think this was done to conform to the pattern set by the facts and the decision in Morris Finance Co. v. Dickerson, La.App., 57 So.2d 786.'

Louis Thomas, Asco Loan's former manager, admitted that he himself could not decipher the illegible line on the 'financial statement', but felt it was supposed to represent 'I owe Asco Loan only', or words to this effect. Atley (who could neither read nor write) testified that as part of the paper work to receive the loan, he had endeavored to copy on the page what the manager told him to write there. He thought the intended meaning of the line was 'Don't owe no loan company but Asco.'

Atley testified positively that he had informed Asco Loan's manager that he was borrowing this money in order to pay his grocery bill and to consolidate both notes owed by him to the Commerce Loan Co.; however, he said, Asco Loan's manager had told him Asco Loan could refinance only one of the latter two debts, plus the grocery bill. Atley further stated that he had not been asked as to certain furniture, hospital, and funeral debts, or whether he owed any other debts.

Thomas, the manager (working for another loan company at time of trial), testified he was not informed of these other debts, despite his questioning of Atley concerning any other indebtedness. However, he admitted he had no independent recollection of the circumstances of the loan. ¹

The substance of Thomas's testimony concerning Atley's nondisclosure of other debts is, Tr-37-38:

'Q. In your conversation with Charles Atley did he disclose any extensive indebtedness on his part other than to finance companies?

'A. Could I answer that in my own way. Would that be permissible? On a loan of this type when you make it you don't make a loan like this to get a person half way out of debt.

You are defeating your own purposes if you do. The object of a loan like that is to clear a person's liability up and make his payments be smaller so that he can take care of it in accordance with his salary. That's the reason this loan was made. It was supposed to have cleaned him out of debt for he told me it would. I loaned him the money on the basis of the information that I got from him on that score. Had I known that the man had Four or Five Thousand Dollars outstanding in debts I certainly would not have made a Thousand Dollar loan to have gotten him out of debt.'

But Thomas was mistaken in this testimony because he...