Bush, In re
| Decision Date | 06 January 1983 |
| Docket Number | No. 82-1771,82-1771 |
| Citation | 696 F.2d 640 |
| Parties | , Bankr. L. Rep. P 68,945 In re Randall Wayne BUSH and Karen Anne Bush, a/k/a Karen Anne Peterson, Debtors; VALLEY NATIONAL BANK, Appellee, v. Randall Wayne BUSH, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Joe W. Cadwell, Cadwell, Sanford & Deibert, Sioux Falls, S.D., for appellant.
John N. Gridley, III, Sioux Falls, S.D., for appellee.
Before ARNOLD, Circuit Judge, HENLEY, Senior Circuit Judge, and JOHN R. GIBSON, Circuit Judge.
This is an appeal from the judgment of the United States District Court for the District of South Dakota reversing a judgment of the United States Bankruptcy Court entered in an adversary proceeding in bankruptcy. In early 1980, Valley National Bank of Sioux Falls (Valley) lent Randall Bush and his wife, Karen, almost $8,000. The Bushes were unable to pay back the loan and eventually filed a Chapter 7 petition for relief in bankruptcy. Valley then brought suit in the Bankruptcy Court pursuant to 11 U.S.C. Sec. 523(a)(2)(B) (Supp. V 1981), 1 objecting to the discharge in bankruptcy of the Bushes' indebtedness to Valley. Valley alleged that the Bushes had submitted, with the intent to deceive, a materially false credit application upon which Valley had reasonably relied in extending credit to the Bushes. The Bankruptcy Court tried the claim on the merits and entered judgment in favor of the Bushes. 2 On appeal the District Court reversed and rendered judgment for Valley. We reverse.
On February 27, 1980, Randall Bush submitted a credit application to Valley loan officer Rick Moon with the "Applicant A" portion of the form already completed in Karen Bush's name. (The form contained space for information about two applicants, called "A" and "B.") The application indicated that Karen wanted a $2,800 loan to refinance a loan made by Seminary State Bank (Seminary) of Fort Worth, Texas, to Randall for the purchase of a used car. Karen was seeking this loan purportedly to build up her credit. Along with the credit application, Randall gave Moon Seminary's credit-rating sheet on the Bushes, which revealed that they had paid off ten installment loans totaling $11,881.66 and had a current outstanding balance of $5,735.96 on three other loans totalling $6,385.96. Upon receiving these documents, Moon took Randall to his office to discuss the credit application. The testimony regarding what was said at this meeting was highly controverted and gave rise to this action.
Moon testified that Randall led him to believe that the credit application was in fact a joint application by both Karen and Randall, even though the application as initially submitted was clearly an individual application by Karen only. According to Moon, Randall never said anything about obtaining a loan for the purpose of establishing credit in Karen's name. In Moon's opinion, Randall appeared eager to establish an account with Valley so that he could obtain loans for his automobile-restoration business and suggested transferring all three of his outstanding loans at Seminary to Valley. Although Moon eventually admitted that it was his idea to transfer the Seminary loans to Valley, Randall approved of the transfer.
Moon took the credit application and began filling in the "Applicant B" portion of the application in Randall's presence, asking Randall for the information needed to complete the form and writing down his answers in the appropriate blanks. When Moon asked Randall about his occupation and income, Randall allegedly replied that he had been self-employed for four years restoring old cars and earning $24,000 per year. Although Moon was aware of Randall's indebtedness to Seminary from the Seminary credit-rating sheet, he did not fill in the Applicant B section of the application labelled "Other Debts," where that information should have appeared. Moon explained that he did not believe it was necessary to copy all the information from the Seminary credit-rating sheet onto the credit application since he considered the Seminary credit-rating sheet a part of the application. Moon's testimony was unclear on whether he ever specifically asked Randall about his current debts or assumed that his only debts were the outstanding loans from Seminary. If Moon had asked Randall about his other debts, he might have discovered that Randall had a delinquent loan of $2,318.67 from the South Branch of the National Bank of South Dakota, which he never mentioned to Moon. Moon claimed that he did ask Randall to disclose all his current debts, credit references, open accounts, and bank accounts at the time he handed the credit application to Randall to sign.
Randall's account of his meeting with Moon contradicted much of Moon's testimony. Randall maintained that he had repeatedly emphasized to Moon that the credit application was to be in Karen's name only and for the sole purpose of building up her credit. Randall added his name to the application only after Moon asked him to do so as a convenience to Valley for record-keeping purposes and intimated that the loan was more likely to be approved if Randall's name was on the application. Randall said that he agreed to sign the application as a favor to Valley with the express understanding the loan would be based entirely on Karen's credit-worthiness.
According to Randall, when Moon asked about his occupation and income, he replied that he was currently unemployed, but would like to be self-employed doing automobile restoration work. Randall explained to Moon that he had been restoring old cars as a hobby for about four years and believed that if given the money to work with, he could potentially earn $24,000 a year. Randall vigorously denied that Moon ever asked him about his current indebtedness. Randall could not remember whether the "Applicant B" section of the application was even filled in when he signed it, although he believed his signing was a mere formality for Valley's convenience.
After Randall left, Moon verified the statements in the credit application by contacting a Seminary loan officer and the Credit Bureau. Moon stated that the Seminary loan officer verified that Randall had been self-employed in automobile restoration and that all the loans from Seminary were for that purpose. Both Randall and Karen testified that when they obtained...
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