Beneficial Finance Co. of Charleston v. Collins, 12488

CourtSupreme Court of West Virginia
Citation149 S.E.2d 221,150 W.Va. 655
Decision Date28 June 1966
Docket NumberNo. 12488,12488
PartiesBENEFICIAL FINANCE COMPANY OF CHARLESTON, a corporation v. Woodrow COLLINS et al.

Page 221

149 S.E.2d 221
150 W.Va. 655
BENEFICIAL FINANCE COMPANY OF CHARLESTON, a corporation
v.
Woodrow COLLINS et al.
No. 12488.
Supreme Court of Appeals of West Virginia.
Submitted May 3, 1966.
Decided June 28, 1966.

Page 222

Syllabus by the Court

1. A discharge in bankruptcy, awarded pursuant to a proper petition, releases the bankrupt from the legal obligation of paying the debts listed in such petition, unless some provision of the [150 W.Va. 656] Bankruptcy Act creates an exception to the general rule of discharge.

2. Section 17(a)(2) of the Bankruptcy Act creates an exception to the general rule of discharge in providing that a discharge in bankruptcy shall release a bankrupt from all of his provable debts, except such as are liabilities for obtaining money or property by false pretenses or false representations, or for obtaining money in reliance upon a materially false statement in writing respecting his financial condition made or published with intent to deceive.

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3. The burden is upon the lender to prove that a loan was obtained by false representations, that the loan was made in reliance upon such representations, and that the borrower's representations were made with intent to deceive; and such proof may be established not only by direct testimony but by the circumstances and situation of the parties as revealed by the evidence.

4. If a false representation of his financial condition is knowingly made by a borrower to induce the lender to make a loan, intent to deceive must be presumed.

5. 'Where the evidence given on behalf of defendant is so clearly insufficient to support a verdict for him that such verdict, if returned by the jury, must be set aside, and the evidence in support of plaintiff's claim is clear and convincing, it is the duty of the trial court, when so requested, to direct a verdict for the plaintiff.' Point 4, Syllabus, Vaccaro Brothers & Company v. Faris et al., 92 W.Va. 655 (115 S.E. 830).

Paul M. Friedberg, Charleston, for appellant.

No appearance for appellee.

[150 W.Va. 657] CAPLAN, President.

In this action instituted in the Circuit Court of Kanawha County, West Virginia, the plaintiff, Beneficial Finance Company of Charleston, a corporation, sought to recover from the defendants Woodrow Collins and Irene Collins, husband and wife, a certain sum of money which it alleged was due and owing on a promissory note signed by the defendants. Answering the complaint, the defendants denied the allegations made therein and stated that Woodrow Collins, upon his petition in the United States District Court for the Southern District of West Virginia, was awarded a discharge in bankruptcy. Their answer also noted that the plaintiff was listed as a creditor in said bankruptcy petition.

In reply the plaintiff stated that if the defendant, Woodrow Collins, secured a discharge in bankruptcy, the discharge does not operate to release the obligation sued upon 'for the reason that such obligation constitutes a liability for obtaining money or property by false pretenses or false representations within the meaning of Section 17a(2) of the Bankruptcy Act.' Specifically, the plaintiff alleges that the loan was obtained by the defendants by false representations in that they signed and submitted to the plaintiff a materially false financial statement which grossly misrepresented their indebtedness to other creditors and that the loan was made in reliance upon such financial statement.

The case was tried before a jury and a verdict was returned for the defendants. After a motion to set aside the verdict and for a new trial was denied the plaintiff prosecuted this appeal. Defendants, appellees here, have made no appearance in this Court and no brief has been filed on their behalf.

This controversy arose from a transaction between the plaintiff and the defendants wherein, on June 8, 1963, the defendants borrowed $800.00 from the plaintiff and signed the note recovery under which is the subject of this action. At the time the loan was made, and as a part of the loan application, the defendants were required to submit a complete financial statement. The application executed by the [150 W.Va. 658] defendants included on its face these words: 'and to induce you to grant said loan, I hereby represent and warrant to you that a full complete and correct list of all my debts and liabilities and other claims against me is as follows:' Thereunder the defendants listed indebtedness to Household Finance in the sum of $217.31, American Finance Corp. in the sum of $281.66 and Haddad Clothing in the sum of $32.00, for a total indebtedness of $530.97. Elsewhere on the face of the loan application

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was the express admonition: 'You must list all of your debts.' The defendant stated therein that his salary was $550.00 per month.

The application was signed by the defendants and the loan was granted by the plaintiffs, after which three monthly payments were made thereon. On November 1, 1963, defendant Woodrow Collins, having filed a petition in the United States District Court for the Southern District of West Virginia, was awarded a discharge in bankruptcy. His petition in bankruptcy revealed an indebtedness of approximately $6,500.00, and, by stipulation, the defendants admitted that the amount of indebtedness shown on such petition was owed by them when the loan of June 8, 1963 was made by the plaintiff.

On February 19, 1964 the plaintiff instituted this action for recovery on the defendants' note in the amount of $780.67. This figure was predicated on the amount of the note less a credit for the return of recomputed interest as of the date of the bankruptcy petition of Woodrow Collins. Prior to the taking of testimony the trial court informed the jury that the parties had stipulated at a pre-trial conference that the defendant, Woodrow Collins, was discharged in bankruptcy on November 1, 1963 and that obligations were due and owing by the defendants, prior to the date of the financial statement involved herein, in the sum of $6,428.70.

Upon the trial of this case the plaintiff, by the manager of its Charleston office and by its employee who had actually consummated the loan transaction with the defendants, introduced the financial statement and testified that the loan was made on the strength of and in reliance upon said financial[150 W.Va. 659] statement. These witnesses further testified that had they been aware of the actual indebtedness of the defendants the loan would not have been granted. Mr. Elmore, the employee of the plaintiff who had made the loan to the defendants, stated upon direct examination that he had asked defendant Woodrow Collins about certain other debts listed on a credit report and not shown on the subject financial statement and had been told by the defendant that these debts had been taken care of. That the defendant made this statement in regard to the payment of these other debts remained undisputed.

An objection was interposed on behalf of the defendants to the admission of the testimony of the plaintiff's witness Elmore. The ground therefor was that the witness was not testifying as to the actual transaction with Collins but rather was testifying to what his usual procedure was on an application for a loan. The court then interrogated Mr. Elmore, who testified that although he did not remember all of his conversation with Woodrow Collins he did recall that he had asked Collins if the financial statement revealed a complete list of his debts, to which the latter replied in the affirmative. The court then overruled the objection, saying that the 'weight of the evidence is for the jury'.

Defendant Woodrow Collins testified that he had received a blank loan application in the mail and that, upon completing the application and presenting it to Mr. Elmore, he obtained the subject loan. After he admitted that he had received a discharge in bankruptcy on November 1, 1963, the following questions and answers appear in the transcript of the record: 'Q. I believe that the petition states that you owed approximately $6,500; is that right? A. I did. Q. You are the same Woodrow Collins that obtained a loan on June 8, 1963, from Beneficial Finance Company? A. Yes. Q. At the time you obtained this loan from Beneficial did you owe most of these debts that were listed on your bankruptcy petition? A. I did.' This defendant testified that in listing only a part of his actual debts on the financial statement he did not intend to deceive the plaintiff company but thought that the company only wanted the [150 W.Va. 660] names of a few of his creditors for reference purposes. Testifying further, he said

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that he had obtained at least two prior loans from this company and that on those occasions he had included only a partial list of his indebtedness on the financial statements.

Irene Collins acknowledged during direct examination that she and her husband were indebted to more creditors than were indicated on the financial statement and that the sum of their debts was more than the $530.97 listed. She further stated that she knew that the purpose of filling out the statement was to borrow money.

At the conclusion of the testimony and after the parties had rested, the court and counsel retired to the judge's chambers where the plaintiff made a motion for a directed verdict. In support of its motion the plaintiff, after stating that there had been no evidence introduced challenging the authenticity of the note or the amount involved and that there had been no denial of the obligation, took the position that the defense of bankruptcy was ineffective in this case. It averred that Section 17(a)(2) of the Bankruptcy Act specifically exempts from discharge in bankruptcy those liabilities incurred for obtaining money by false representations or for obtaining money on credit in reliance upon a materially false statement in writing respecting the financial...

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    ...conclusion only, a question of law is presented which is to be answered by the court, not the jury." Beneficial Finance Co. v. Collins, 150 W.Va. 655, 149 S.E.2d 221, 227-28 (1966). In so holding, we do not attempt to delineate the parameters of reasonable accommodation. Such a determinatio......
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    ...of intent to deceive as a matter of law and should not have submitted this question to the jury. Beneficial Fin. Co. v. Collins, 150 W.Va. 655, 666-67, 149 S.E.2d 221 (1966). We accordingly hold that Debtor is collaterally estopped from litigating whether his misrepresentation was made with......
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    ...such posture that it would be compelled to set aside a verdict for the other party. Beneficial Finance Company of Charleston v. Collins, 150 W.Va. 655, 149 S.E.2d 221; Adkins v. City of Hinton, 149 W.Va. 613, 142 S.E.2d 889; McCoy v. Cohen, 149 W.Va. 197, 140 S.E.2d 427; Lightner v. Lightne......
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