In re Briese
| Decision Date | 06 May 1996 |
| Docket Number | Bankruptcy No. 95-10989-7. Adv. No. A95-1116-7. |
| Citation | 196 BR 440 |
| Parties | In re David M. BRIESE and Noreen K. Briese, Debtors. CHEVY CHASE BANK, FSB, Plaintiff, v. David M. BRIESE and Noreen K. Briese, Defendants. |
| Court | U.S. Bankruptcy Court — Western District of Wisconsin |
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Randi L. Osberg, Garvey, Anderson, Johnson, Gabler & Geraci, Eau Claire, WI, for Plaintiff.
James T. Remington, New Richmond, WI, for Defendants.
On March 4, 1996, the Court held a trial on the plaintiff's complaint to determine the dischargeability of a debt under 11 U.S.C. § 523(a)(2)(A). The plaintiff, Chevy Chase Bank, FSB, is an issuer of credit cards, and seeks to except from discharge its claim on a card issued to the debtors, David and Noreen Briese. The plaintiff contends that the debt should be determined nondischargeable on the grounds that the debtors falsely represented their intent to pay for a number of cash advances Mrs. Briese obtained with the card. The debtors are represented by James T. Remington, while the plaintiff is represented by Randi L. Osberg.
Lured by the availability of easy credit and the promise of easy money, the debtors in this case found themselves trapped between a modern-day version of Scylla and Charybdis, the mythical sea monsters encountered by Homer's Odysseus.1 For these debtors, such monstrous images undoubtedly personify both the consumer credit industry and legalized gambling. The growth recorded over recent years by these twin titans has been phenomenal,2 and as they have grown they have become intertwined. Indeed, this case is a painful demonstration of how insidiously easy it is to utilize credit cards to finance one's turn at the tables.3 The question for the Court is whether the credit card debts Mrs. Briese incurred to fuel her gambling fever were obtained in a manner proscribed by 11 U.S.C. § 523(a)(2)(A).
The facts are as follows. David Briese is a machinist, and has worked for the same employer for a number of years. He is a high school graduate and completed the two years of vocational school necessary for his position. He earns approximately $30,000.00 per year. Noreen, his wife of almost 14 years, works part-time as a nurse's aide and earns about $16,000.00 per year. They have five children, ranging in ages from three to 13. In the past, Mr. Briese paid all the household expenses from his salary. Mrs. Briese's paycheck was to use as she chose. Unfortunately for all involved, she chose to use it to fund her gambling habit.4
If Mrs. Briese had funnelled only her own money into the "one-armed bandits" and other games of chance, the debtors likely would not be before this Court. However, she also obtained numerous cash advances on a variety of credit cards, virtually all of which she spent at the casino. By the fall of 1994, she had incurred approximately $30,000.00 in unsecured credit card debt.5 She was paying approximately $800.00 per month, or well over half of her gross monthly paycheck, simply to make the minimum payments on these debts. When she reached the credit ceiling on a particular card, she would destroy it; her testimony was that she had destroyed most of her credit cards long before the bankruptcy filing. It does not appear that she ever went over her credit limit on any card, and she was in fact current on her credit card payments as of the petition date.
According to Michael J. Miele, a representative of the plaintiff, the relationship between the parties began that fateful fall of 1994. In September of that year, Chevy Chase Bank requested credit information from Equifax, one of the nation's largest providers of credit reporting services. Like virtually all credit card companies, the plaintiff desired to expand its customer base. What it sought from Equifax was a listing of potential customers who fit the desired profile and fell within a certain range of credit history "scores." Essentially, the plaintiff wanted likely targets for its credit card solicitations. The debtors' names were among the thousands forwarded to the plaintiff from Equifax.
Thereafter, the plaintiff sent the debtors a "pre-approved" credit card solicitation promising them a credit line "up to $10,000.00." Since Mrs. Briese had "maxed out" nearly all of her other cards, she and her husband signed the form and returned it to the plaintiff. Thereafter, the plaintiff conducted a credit check on the debtors. The testimony of Mr. Miele was most instructive in this regard. He acknowledged that the plaintiff knew the debtors had a debt-to-income ratio of 66% (in other words, their unsecured debts exceeded 2/3 of their annual income). The credit report obtained by the plaintiff also provided numerous details regarding the debtors' past credit history, including their history of timely payment and the fact that they typically carried large outstanding balances on their credit cards.
After conducting this credit check, the plaintiff issued a credit card to the debtors with a credit line of $11,500.00.6 Initially, the plaintiff placed a $3,450.00 cap on cash advances the debtors could receive, although this limit was ultimately raised to $11,500.00 as well.7 Mrs. Briese testified that she was "surprised" to receive such a generous credit allotment, especially since several other lenders had only recently rejected her applications. However, she was nonetheless quite happy to get the card, as she was just entering the most destructive phase of her gambling addiction and never had enough money to spend. During this period of time, it seems she spent every available moment, and every available dollar, at the casino.
Mrs. Briese's work schedule was ideally suited to her addiction. As a nurse's aide, she would work just five days in a two-week period. Her youngest child was in day care and her older children were in school. Consequently, without anyone to monitor her activities she could gamble away her days off. Prior to the fall of 1994, she worked a shift which ended at about two o'clock in the afternoon; as a result, she could not visit the casino on the days she worked because she had to be home to greet her husband and children. That fall, however, she switched to a shift that ended at about eleven o'clock at night. Since her husband and children were asleep she often went gambling after work, sometimes returning home at dawn. Apparently, her credit cards financed these late-night escapades. In its rush to increase profits, the plaintiff gave her yet another opportunity to wager more borrowed money at the same time her schedule granted her the time necessary to do so.
Given the frequency of her trips to the casino, it is perhaps unsurprising that Mrs. Briese intermittently beat the odds and actually won sizeable sums of money. In the years prior to 1995, this had never amounted to more than $5,400.00; however, in February of 1995 she won two jackpots totalling approximately $33,000.00. She testified that it was only after she won these jackpots that she actually calculated her entire credit card debt and realized how deep in the hole she really was. After payment of income taxes, the debtors paid a couple of unsecured creditors and made a few improvements to their home. This left approximately $15,000.00, which Mrs. Briese took to the casino in an unproductive attempt to make enough to pay off all her credit card debt.8
After Mrs. Briese lost her "winnings," the debtors decided to file bankruptcy because of their large credit card bills, on which they could make little more than minimum payments. They filed for relief under chapter 7 of the bankruptcy code and scheduled a number of credit card companies, including the plaintiff, among their unsecured creditors. The plaintiff now seeks to have its claim against them declared nondischargeable under 11 U.S.C. § 523(a)(2)(A), contending that by her use of the credit card in the months prior to the bankruptcy filing, Mrs. Briese obtained credit totalling $7,811.05 through "false pretenses, a false representation, or actual fraud."
The purpose of the bankruptcy code is to permit debtors to "reorganize their financial affairs, make peace with their creditors, and enjoy `a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.'" Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 659, 112 L.Ed.2d 755 (1991) (citations omitted). However, this fresh start is available only to the "honest but unfortunate debtor." Id., 498 U.S. at 287, 111 S.Ct. at 659. Section 523(a)(2)(A) is among those provisions of the bankruptcy code which sift the chaff from the wheat, so to speak — it prohibits the discharge of those debts incurred through fraud, thus limiting the fresh start of the dishonest debtor. However, like all exceptions to discharge, it is to be narrowly construed in favor of the debtor. Meyer v. Rigdon, 36 F.3d 1375, 1385 (7th Cir.1994); Matter of Ford, 186 B.R. 312, 316 (Bankr.N.D.Ga.1995); In re Friend, 156 B.R. 257, 260 (Bankr.W.D.Mo.1993); 3 Lawrence P. King, et al., Collier on Bankruptcy, ¶ 523.05C, at 523-20 (15th ed. 1996).
The creditor has the burden of establishing nondischargeability by a preponderance of the evidence. Grogan, 498 U.S. at 287, 111 S.Ct. at 659. The Seventh Circuit has articulated the elements of an action under § 523(a)(2)(A) as follows:
to succeed on a claim that a debt is nondischargeable under section 523(a)(2)(A), a creditor must prove three elements. First, the creditor must prove that the debtor obtained the money through representations which the debtor either knew to be false or made with such reckless disregard for the truth as to constitute willful misrepresentation. Carini v. Matera, 592 F.2d 378, 380 (7th Cir.1979). The creditor also must prove that the debtor possessed scienter, i.e., an intent to deceive. Gabellini...
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