In re Byrd

• Decision Date: 02 March 1981
• Docket Number: Bankruptcy No. 80-00287
• Citation: 9 BR 357
• Parties: In re Cecil C. BYRD, II, Debtor. Peter R. BYRD, Plaintiff, v. Cecil C. BYRD, II, Defendant.
• Court: United States Bankruptcy Courts – District of Columbia Circuit

9 B.R. 357 (1981)

In re Cecil C. BYRD, II, Debtor.

Peter R. BYRD, Plaintiff, v. Cecil C. BYRD, II, Defendant.

Bankruptcy No. 80-00287, Adversary Proceeding

United States Bankruptcy Court, District of Columbia.

March 2, 1981.

Nancy Lee Cate, Washington, D.C., for plaintiff Peter Byrd.

Robert Joel Zakroff, Washington, D.C., for defendant Cecil Byrd.

MEMORANDUM OPINION

(Complaint to Except Debt from Discharge)

ROGER M. WHELAN, Bankruptcy Judge.

The sole issue presented for resolution by this court, in connection with the plaintiff's complaint to except the debt from discharge pursuant to § 523(a)(2)(A) of the Bankruptcy Code, is whether certain oral representations made to the plaintiff in connection with a loan constituted actionable fraud within the aforementioned section of the Bankruptcy Code.¹ At the conclusion of the plaintiff's case, the defendant debtor made a motion for dismissal pursuant to Bankruptcy Rule 741. Based upon all the evidence presented by the plaintiff and viewing the evidence in the light most favorable to the plaintiff, the Court grants the defendant's motion for an involuntary dismissal as the plaintiff has shown no right to relief upon the evidence.

The tragic scenario of this suit which pits brother against brother establishes that in November, 1978, the defendant debtor telephoned and requested a loan from the plaintiff. Representations were made as to profitability of the debtor's business. Plaintiff was also told that financial aid would be forthcoming from the government. Plaintiff then loaned his brother $5,000. The evidence, presented by the plaintiff, establishes that in connection with the loan indebtedness a series of post-dated checks were given to the plaintiff, and it was the final check, presented in September, 1979, which forms the basis of the present law suit. The first three post-dated checks presented to the plaintiff were honored. The final check, presented in September of 1979, was returned for insufficient funds.² There is absolutely no evidence of record to establish that at the time the post-dated checks were given to the plaintiff in connection with the loan indebtedness, that there was any intention not to repay the debt. In fact, from the evidence of record, it is clear that the plaintiff's own proof mitigates against any showing or intention of fraud or false pretenses on the part of the defendant debtor. The fact that the first three checks were honored was an indication that the defendant debtor intended to repay the obligation and that for some unexplained reason in September, 1979 the plaintiff was financially unable to meet his commitment to his brother. The testimony of the plaintiff, taken in the light most favorable to him, fails to establish any basis for actual fraud or false pretenses within the meaning of 11 U.S.C. § 523(a)(2)(A).

It is well established that there must be proof of positive fraud to fall within the meaning of false pretense or representation.³ This involves a showing that the acts which constitute the fraud involve moral turpitude or an intentional wrong. Fraud implied in law, which does not require a showing of bad faith or immorality, is insufficient to constitute a false pretense or representation, or actual fraud as envisioned under 11 U.S.C. § 523(a)(2)(A).⁴ Section 523(a)(2)(A) encompasses only frauds which "in fact, involve moral turpitude or intentional wrong; fraud implied in law which may exist without imputation of bad faith or immorality, is insufficient."⁵ It is also well established in the law that if the consideration for the loan was secured prior to the making of the false representations of the defendant, any...