In re Bermingham

• Decision Date: 09 October 1996
• Docket Number: 96-30062 and 96-40687,96-3030,96-3024 and 96-4088.,Bankruptcy No. 96-30079,96-30123,Adv. No. 96-3028
• Citation: 201 BR 808
• Court: U.S. Bankruptcy Court — Western District of Missouri
• Parties: In re Debra BERMINGHAM, Debtor. AT & T UNIVERSAL CARD SERVICE, Plaintiff, v. Debra BERMINGHAM, Defendant. In re Lisa FORT, Debtor. MERCANTILE BANK OF ILLINOIS, Plaintiff, v. Lisa FORT, Defendant. In re Rana Shiddharth DHAR, Debtor. MERCANTILE BANK OF ILLINOIS, Plaintiff, v. Rana Shiddharth DHAR, Defendant. In re Monica SHAW, Debtor. MERCANTILE BANK OF ILLINOIS, Plaintiff, v. Monica SHAW, Defendant.

201 B.R. 808 (1996)

In re Debra BERMINGHAM, Debtor.

AT & T UNIVERSAL CARD SERVICE, Plaintiff, v. Debra BERMINGHAM, Defendant.

In re Lisa FORT, Debtor.

MERCANTILE BANK OF ILLINOIS, Plaintiff, v. Lisa FORT, Defendant.

In re Rana Shiddharth DHAR, Debtor.

MERCANTILE BANK OF ILLINOIS, Plaintiff, v. Rana Shiddharth DHAR, Defendant.

In re Monica SHAW, Debtor.

MERCANTILE BANK OF ILLINOIS, Plaintiff, v. Monica SHAW, Defendant.

Bankruptcy Nos. 96-30079, 96-30123, 96-30062 and 96-40687, Adv. Nos. 96-3028, 96-3030, 96-3024 and 96-4088.

United States Bankruptcy Court, W.D. Missouri.

October 9, 1996.

COPYRIGHT MATERIAL OMITTED

Amy J. Ginsberg, Kramer & Frank, P.C., Kansas City, MO, Kathryn A. Klein, Kramer & Frank, P.C., St. Louis, MO, for AT & T Universal Card Service.

Daniel S. Rabin, Berman, Singer & Rabin, Kansas City, MO, for Mercantile Bank of Illinois.

Robert Parrish, Joplin, MO, for Debra Bermingham.

Jerry L. Holcolmb, Joplin, MO, Philip J. Metz, Joplin, MO, Lydia M. Carson, Carson Law Center, P.C., Kansas City, MO, for defendants.

MEMORANDUM OPINION

ARTHUR B. FEDERMAN, Bankruptcy Judge.

I. FACTUAL BACKGROUNDS

These four adversary proceedings all involve the dischargeability of credit card debt incurred by the four Chapter 7 debtors. They are further related by the fact that all four debtors and creditors negotiated a settlement prior to a trial on the merits and asked this Court to render a consent judgment in favor of the creditor. I take all four of the cases up in this consolidated opinion to demonstrate why I entered the consent judgment in two of the cases, refused to enter judgment in a third, and allowed the debtor to withdraw her Stipulation and Consent Judgment in the fourth. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) over which the Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b), 157(a), and 157(b)(1). I will set out the facts of each of the four cases separately.

A. MERCANTILE BANK OF ILLINOIS v. MONICA SHAW

Debtor/defendant Monica Shaw ("debtor" or "Ms. Shaw") filed a Chapter 7 bankruptcy petition on March 8, 1996. At the time of the filing debtor was indebted to creditor Mercantile Bank of Illinois, Southwestern Bell Visa ("Mercantile") for the sum of $1,705.03. Mercantile claims in its Complaint that debtor obtained a Southwestern Bell Visa in June of 1995, and incurred charges and cash advances which caused debtor to exceed her credit limit. Doc. # 1. The last charge debtor incurred on her credit card was July 26, 1995. Doc. # 8, Ex. B. Mercantile also states that debtor made two payments totaling $90.00 prior to filing her bankruptcy petition. Id. Prior to a trial on the merits in this proceeding, the parties entered into a settlement agreement and asked this Court to sign and enter a document entitled Journal Entry of Judgment (the "Document"). Doc. # 8, Ex. B. The Document stipulated in relevant part that:

3. At this sic time debtor used the subject credit card, the debtor represented to Plaintiff with each usage that she had the ability and intent to pay for the charges when they were incurred.

4. At the time debtor made these representations through her usage of the credit card, the debtor knew that these were false based upon the fact that the debtor knew she lacked the ability and intent to pay for the charges when they were incurred.

5. The debtor made these representations to the Plaintiff with the intention and purpose of deceiving the Plaintiff and leading the Plaintiff to extend credit to the Defendant on the subject credit card account.

6. The Plaintiff relied on these representations and was justified in relying on these representations of the debtor concerning her ability and intent to repay.

. . . . .

8. The Defendant\'s debt to Plaintiff herein in the amount of $1,700.00 is agreed to be nondischargeable.

. . . . .

ORDERED, ADJUDGED AND DECREED that the indebtedness due to Mercantile Bank of Illinois, Inc. from the Defendant in the amount of $1,700.00 be and it is hereby determined to be nondischargeable; and it is

FURTHER ORDERED, ADJUDGED AND DECREED that Mercantile Bank of Illinois, Inc. is hereby granted a judgment in its favor against Defendant for the sum of $1,700.00, and it is

FURTHER ORDERED, ADJUDGED AND DECREED that the Defendant is hereby granted a stay of execution so long as she pays Plaintiff the sum of $50.00 per month, commencing on August 1, 1996, and continuing on the 1st day of each month thereafter, and Plaintiff will accept the sum of $1,700.00 without interest, if paid in a timely manner.

Id. Pursuant to this Court's policy, as articulated in AT & T Universal Card Services Corp. v. Grayson (In re Grayson), 199 B.R. 397, 401 (Bankr.W.D.Mo.1996), a hearing was scheduled on the parties' proposed settlement prior to the entry of a judgment. The hearing was held on September 10, 1996. Mercantile elected not to appear at the hearing, and, instead, submitted the sworn affidavit of Jill Sachtleben, an employee of Mercantile, as well as a supplemental affidavit, also by Jill Sachtleben. Doc. # # 8 and 10. Debtor appeared in person and by counsel Lydia Carson. Debtor testified as to the circumstances surrounding her bankruptcy and as to her understanding regarding the settlement agreement. Debtor stated that she was a single mother with two children. She said she was able to make the payments on the credit card at the time she acquired it and during the time when she made the charges. She said she had some personal problems which required her to hire an attorney, and then she lost her job in January.

After she lost her job, debtor stated she was unable to continue making payments on her debts and felt she had no choice except to file for bankruptcy. Debtor said she is now working two jobs. Debtor testified that at the time she obtained the credit card she was employed with Commerce Bank and that she intended to repay the bill. She also stated she was current on all her obligations at the time she incurred the charges to Mercantile. Debtor did not know what fraud was, or that she would be subject to a judgment which stated she committed fraud if the Court entered the judgment. Based upon debtor's testimony, this Court hereby finds that Ms. Shaw no longer consents to the entry of a judgment according to the terms set forth in the Document. As such, I refuse to approve the settlement or enter judgment in favor of Mercantile.

B. AT & T v. DEBRA BERMINGHAM

Debtor/defendant Debra Bermingham ("debtor" or "Ms. Bermingham") filed a Chapter 7 bankruptcy petition on February 20, 1996. At the time of filing, debtor's bankruptcy schedules indicate that she had $43,403.60 in nonpriority unsecured debt. Case No. 96-30079, Doc. # 4. Debtor's schedules also indicate that most of the unsecured debt was incurred in 1995. Debtor opened two credit card accounts in August of 1995, with creditor/plaintiff AT & T Universal Card Services, Corp. ("AT & T").

The first account was for an AT & T Universal MasterCard (the "Classic Card") with a credit limit of $3,000.00. The Classic Card, issued on August 21, 1996, was pursuant to a pre-approved application. Debtor incurred debt on the Classic Card, totaling $1,824.71, between October 23, 1995, and November 14, 1995. Of those charges, one was a $1,300.00 cash advance. At the time of the bankruptcy petition the debt was $1,854.42 with interest and late payment penalties. No payments were ever made on the Classic Card account. Pl.Ex. A(1), (2), (3), and (4).

The second account was for an AT & T Universal Gold MasterCard (the "Gold Card") with a credit limit of $5,000.00. The Gold Card was also issued pursuant to a pre-approved application on August 30, 1996. Debtor incurred charges on the Gold Card, totaling $1,684.82, between October 23, 1995, and November 4, 1995. Many of the charges were for gasoline, however, debtor stated she made one purchase for sculpting supplies in the amount of $1,450.00. At the time of the bankruptcy petition the debt was $1,714.90 with interest and late payment penalties. No payments were ever made on the Gold Card account. Pl.Ex. # B(1)(2), (3), and (4).

AT & T filed a Complaint objecting to the discharge of its debt, in the combined sum of $3,636.14 pursuant, to 11 U.S.C. § 523(a)(2)(A). On April 3, 1996, prior to filing its Complaint, AT & T contacted debtor's attorney to discuss a settlement of the debt. Pl.Ex. D. The deadline for filing a dischargeability complaint was June 3, 1996. AT & T filed a Complaint on that date as it had failed to reach an agreement with debtor's attorney. As negotiations were continuing, debtor did not file a response to the Complaint. On July 15, 1996, the parties filed a Stipulation and Consent Judgment with this Court. Doc. # 6. The Stipulation provides in relevant part:

6. That Defendant secured the aforesaid cash advances and made additional purchases on the account at a time when Defendant was unable to meet her existing financial obligations as they became due and when Defendant was already in default on debt payments to other creditors.

7. That at the time Defendant secured cash advances and made purchases referred to above, Defendant represented that she had the ability to repay the loan, when, in fact, Defendant did not have the ability nor the intent to repay the loan to Plaintiff.

8. That Plaintiff justifiably relied on the aforesaid representation in extending credit to Debtor/Defendant.

9. That the Court may enter an order finding the sum of $3,636.14 owed to the Plaintiff to be nondischargeable pursuant to 11 U.S.C. § 523.

10. That the court may enter a judgment in favor of the Plaintiff and against the defendant, Debra Bermingham for the sum of $3,636.14.

11. That Plaintiff will stay execution on said amount conditioned upon the payment to Plaintiff of the sum of $100.00 per month, beginning July 25, 1996 and due the 25st sic day of each month thereafter until the total sum of $1,800.00 is paid in full; at which time, said judgment

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