In re Archangeli, Bankruptcy No. 179-10075

• Decision Date: 05 September 1980
• Docket Number: Adv. 180-0012.,Bankruptcy No. 179-10075
• Citation: 6 BR 50
• Parties: In re Sebastian J. ARCHANGELI, Debtor. CAMDEN NATIONAL BANK, Plaintiff, v. Sebastian J. ARCHANGELI, Defendant.
• Court: U.S. Bankruptcy Court — District of Maine

6 B.R. 50 (1980)

In re Sebastian J. ARCHANGELI, Debtor CAMDEN NATIONAL BANK, Plaintiff, v. Sebastian J. ARCHANGELI, Defendant.

Bankruptcy No. 179-10075, Adv. 180-0012.

United States Bankruptcy Court, D. Maine.

September 5, 1980.

Anita M.V. Frier, Rockland, Me., for debtor.

Robert C. Perkins, Harmon, Jones & Sanford, Camden, Me., for plaintiff.

MEMORANDUM DECISION

CONRAD K. CYR, Bankruptcy Judge.

Camden National Bank Bank seeks a dischargeability determination under Bankruptcy Code § 523(a)(2).

On July 24, 1979, the debtor received a loan in the principal amount of $6,000.00 from the Bank. A financial statement submitted by the debtor in October of 1978 in connection with a separate loan transaction reflects that the debtor was employed by Bicknell Manufacturing Company, Harper Tool Company, and Consolazio Tool Company, from whom he listed annual net income of $11,480.00, $15,000.00 and $5,000.00, respectively, for a total annual net income of $31,480.00. This financial statement also describes certain assets of the debtor, including real estate in Rockland, Maine having a value of $45,000.00, out-of-state real estate having a value of $25,000.00, a 1978 Grady White boat and motor having a value of $9,000.00, and a 1972 Lincoln Continental valued at $3,100.00. The listed liabilities consist of a $30,600.00 mortgage debt on the Rockland property, a $4,000.00 mortgage debt on the out-of-state real estate, and unsecured debts totaling $13,550.00.

The Bank's Vice President testified that the subject loan was made to the debtor on the basis of the information contained in the earlier financial statement, an independent credit check, and the prior excellent credit dealings between the parties. At the date of bankruptcy, the balance due the Bank was $5,931.43, plus interest.

The financial statement greatly exaggerates the debtor's income from Harper Tool Company and Consolazio Tool Company. In fact, the debtor testified that he received $800.00 in 1977, approximately $5,000.00 in 1978, and approximately $4,000.00 in 1979 from Harper Tool Company. The debtor admitted that he received no income whatever from Consolazio Tool Company at any time. In addition, the financial statement fails to show that the Grady White boat and motor were mortgaged to Damariscotta Savings Bank.

The evidence established that the financial statement was signed by the debtor, although the debtor testified that the statement was signed in blank, an assertion which was categorically denied by the Bank's loan officer. The court finds that the financial statement was made and published by the debtor in order to induce the Bank to grant the loan. The debtor submitted the financial statement, knowing it to be false, with the intent that the Bank rely upon it. The debtor at no time indicated to the loan officer that the financial statement was anything other than what it appeared to be an accurate statement of the debtor's financial condition.

While the debtor testified that his commission sales relationships with Harper Tool Company and Consolazio Tool Company offered the potential for realizing the income listed on the financial statement, at the time the debtor published the statement he had no such income and the history of his relationships with these two companies does not warrant these exaggerated income projections. These gross exaggerations, coupled with the listing as an unencumbered asset of the 1978 Grady White boat and motor, evidence an active intent to deceive.

The false representations made by the debtor concerned his financial condition. The Bank's claim of nondischargeability under Bankruptcy Code § 523(a)(2)(A) cannot therefore be sustained, since the false representations involved "a statement respecting the debtor's . . . financial condition." Bankruptcy Code § 523(a)(2)(A).

In order for discharge relief to be withheld under Bankruptcy Code § 523(a)(2)(B) it is necessary not only that the false financial statement be made or published with intent to deceive, but that the statement be materially false and that the creditor reasonably rely thereon to its detriment.¹

The representations on the...