In re Faulk
| Decision Date | 18 August 1986 |
| Docket Number | Bankruptcy No. 84-40587,Adv. No. 85-4009. |
| Citation | 69 BR 743 |
| Parties | In re Beverly Louise FAULK, Debtor(s). SEARS ROEBUCK AND COMPANY, Plaintiff(s), v. Beverly Louise FAULK, Defendant(s). |
| Court | U.S. Bankruptcy Court — Northern District of Indiana |
COPYRIGHT MATERIAL OMITTED
James Kocher, Marion, Ind., for plaintiff.
Frank McLane, Marion, Ind., for defendant.
Findings of Fact, Conclusions of Law and Judgment
This adversary proceeding came on for bench trial on the 3rd day of October, 1985, pursuant to pretrial order of this Court on July 15, 1985.
The Plaintiff's complaint alleges that the scheduled indebtedness to it by the Defendant in the sum of $1,578.18 or in the alternative $1,609.57 is nonsdischargeable in bankruptcy on two alternative theories arising under 11 U.S.C. § 523(a)(2)(A) and § 523(a)(2)(C).
The first theory is that the Defendant obtained credit from the Plaintiff via a credit card by false pretense or actual fraud in that the Defendant made certain changes with such a card in contemplation of filing Bankruptcy and without the intention of paying therefore pursuant to 11 U.S.C. § 523(a)(2)(A). The second theory, is that the Defendant used the credit card to charge purchases for luxury goods within forty (40) days immediately preceeding the filing of her bankruptcy petition pursuant to 11 U.S.C. § 523(a)(2)(C).
The Defendant filed a specific denial to the Plaintiff's complaint on April 10, 1985, and the issues were closed.
The Defendant commenced her bankruptcy proceeding on the 21st day of December, 1984.
The parties filed their stipulated Group Exhibit No. 1. This Group Exhibit consisted of the Plaintiff's copies of eight (8) cash register statements and one (1) auditing copy of an invoice issued by the Plaintiff arising out of auto supplies and services sold and provided by Plaintiff to the Defendant.
The parties also filed their Stipulated Group Exhibit No. 2, which is the Plaintiff's "account itemization form" which reflects the balance the Plaintiff shows due and owing on the credit card account as shown in the Defendant's name. The Defendant stipulated that this exhibit accurately reflects the balance due and owing pursuant to the Plaintiff's records on the credit card account in the Defendant's name as being $2,789.88 at the time of the Defendant's petition, and that purchases were made with the credit card issued in the Defendant's name in the sum of $1,578.18 between December 3, 1984 and December 19, 1984 which covers a period of 2 to 18 days prior to her bankruptcy. The Defendant expressly did not stipulate, however, that these changes were necessarily made by the Defendant personally or reflect her personal liability thereon.
The Defendant testified she is divorced, and has two children, Clifford, Jr. age 22, and Kimberly, age 19, living with her together with two grandchildren by her other children. Neither child is employed nor has any other source of income or support than the Defendant. They have resided with the Defendant since birth. She related that she had been on sick leave from her job since May of 1985 and previously filed bankruptcy in July of 1977.
The Defendant admitted that she applied for one credit card from the Plaintiff and that one card only was issued to her in her name alone. The Defendant could not recall what her authorized credit limit was with the Plaintiff or her highest average balance. The Defendant's schedule of creditors reflect a balance due to the Plaintiff of $3,500.00 as an unsecured, unliquidated creditor.
The Defendant indicated that she allowed her two children to occasionally use the credit card with her consent and in so doing they would sign her name. She further related that the children knew where she kept the card at home as she did not carry it on her person and at times the children would take the card without her prior authorization or knowledge and use the same for various purchases, which she would acknowledge as being her debt when billed for the same and which she would pay.
The Defendant stated the purchases were made for the benefit of her children or grandchildren as necessities and were not purchases for Christmas gifts.
As to stipulated Group Exhibit No. 1, the Defendant admitted the following items were purchased and the following charges were incurred for the following purposes arising out of the use of the Defendant's credit card:
Per Def. Date
Items Purchased Purchased By Amount Purpose Per Def. Purchased
1. One sweater, and Defendant $ 57.73 for self or grandchild 12/06/84
two shorts
2. Four nylon boots Defendant $104.96 for self & daughter 12/06/84
possibly grandchildren
3. Three gift sets & Defendant's $ 67.99 for daughter 12/06/84
cologne daughters
4. Black oxford shoes Defendant $ 26.24 can't remember 12/06/84
5. Black boots Defendant $ 47.25 can't remember, but 12/06/84
for someone in
household
6. Auto blanket son $ 31.49 unknown 11/23/84
7. Lingerie and slacks Defendant $ 48.30 self 12/03/84
8. Fashion accessories unknown $ 15.75 unknown 12/03/84
9. Auto repairs son $ 95.32 self 12/03/84
(adaptor, muffler
pipe, etc.)
The Plaintiff introduced into evidence Plaintiff's Group Exhibit No. 1 which consisted of the Plaintiff's copies of various charge slips that had not been stipulated to in stipulated Group Exhibit No 1. Upon being shown these charge slips the Defendant testified as follows regarding the purchases set out below.
Per Def. Date
Items Purchased Purchased By Amount Purpose Per Def. Purchased
1. Men's outerwear son or $ 57.74 for son or daughter 12/06/84
(no description) daughter
2. Four Junior Shop son or $ 83.96 for son or daughter 12/06/84
items & jeans (no daughter
description
3. Three Junior Shop son or $ 73.49 for son or daughter 12/06/84
items & two levi daughter
pants
4. Auto blanket & does not $ 66.13 Defendant admitted 12/07/84
coffee maker know received
5. Men's outerwear does not $ 71.39 Does not know who 12/06/84
know received
6. Misc. unknown $ 52.59 unknown 12/06/84
The Defendant testified that her daughter was in a car accident and since she was liable therefore and had no insurance coverage, she was compelled to file this bankruptcy proceeding. She also related she was two months behind on her utility bill and one month behind on her real estate mortgage payment when she filed her petition. The Court takes judicial notice of the Defendant's schedule of creditors filed on the 21st day of December, 1984. The schedules reflect $22,000.00 in secured claims, and 20 unsecured creditors totaling $8,672.00 of which Sears was scheduled for $3,500.00 as unliquidated and which was the largest unsecured debt. Many of the other unsecured creditors are medical bills ranging from $26.00 to $2,139.00. There is scheduled a lawsuit versus the Defendant arising out of an auto accident which the Defendant asserts that she had joint liability with her daughter.
The Defendant's schedule further reflects assets composed of $3,000.00 equity in her real estate and $1,000.00 equity in tangible personal property.
The Defendant's schedule of current income and expenditures (exclusive of any allocation for the undersecured debts set out above) shows a monthly take home pay per month of $1,675.00 with $1,242.40 in expenses, the net difference being $433.00 a month.
The Defendant also reaffirmed her obligation to the Foster-Forbes Employees Federal Credit Union in the sum of $1,463.71. This creditor held the lien on her car.
Tom Wattenbarger, the collection manager for Sears, stated that the balance of the charge slips could not be located by the Plaintiff and thus though certain codes tell generally what types of merchandise and services had been obtained with the credit card, the specific types could not be ascertained. He further testified that the highest previous monthly balance of the Defendant was $1,238 in November, 1984, and that her previously established credit limit was $1,120.00. He also advised that the monthly statements to the Defendant advised her that she had exceeded her credit line and that he never received any complaints from the Defendant regarding her billings. Mr. Wattenbarger admitted on cross-exam however, that the January, 1985 billing for the December, 1984 purchases was probably not sent to the Defendant because of the automatic stay arising from the bankruptcy. No evidence was submitted that the Plaintiff ever attempted to revoke the Defendant's use and possession of the credit card or preclude further charges, although Wattenberger stated that the monthly charge card statements would indicate to the Defendant that the Defendant's credit line had been exceeded.
At the outset the Court would like to note some basic legal principles that apply to adversary proceedings instituted by a creditor to have a debt determined to be nondischargeable pursuant to 11 U.S.C. § 523.
In keeping with the purpose of the Bankruptcy Code, exceptions to the general rule of...
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