In re Feld
| Decision Date | 18 December 1996 |
| Docket Number | Adversary No. 95-0889.,Bankruptcy No. 95-16748DWS |
| Parties | In re Amy FELD, Debtor. AT & T UNIVERSAL CARD SERVICES CORP., Plaintiff, v. Amy FELD, Debtor. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania |
COPYRIGHT MATERIAL OMITTED
Ronald Beifeld, Norristown, PA, for Debtor.
Melvyn S. Mantz, Doylestown, PA, for Plaintiff.
Joseph Minni, United States Trustee, Philadelphia, PA.
The plaintiff in the instant adversary proceeding, AT & T Universal Card Services, Corp. ("AT & T"), seeks to have a credit card debt declared nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), the fraud exception. At issue is a debt in the amount of $8,195.48 resulting primarily from cash advances taken by the debtor Amy Feld ("Debtor") on plaintiff's credit card. We find that the debt is dischargeable.
As recently articulated by the United States Supreme Court in Field v. Mans, ___ U.S. ___, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995), the issue of dischargeability under § 523(a)(2)(A) is measured by the standards traditionally associated with an action for fraudulent misrepresentation under common law. Under these standards, a plaintiff must establish that it relied to its detriment on a misrepresentation that was intentionally false. In this case, the Debtor in using her credit card represented to AT & T that she intended to repay the money she borrowed. Based on an evaluation of all the circumstances, however, including the Debtor's credibility as a witness, the Debtor's representations were more likely to be false than true. Nevertheless, because AT & T presented no evidence that it relied on the Debtor's representations to any extent, its cause must fail.
Debtor, aged 32, received a Bachelors degree from Marywood College in 1985 and more recently, in 1995, earned a Masters Degree in social work at Widener University. Following college, and until 1990, Debtor worked as a department manager at Bloomingdales. In 1990, Debtor ceased working, was certified as disabled and began receiving social security disability benefits. According to Debtor, her disability was caused by mental and emotional illness. She stated that she has received various diagnoses including depression, anxiety, post-traumatic stress and that she had suicidal thoughts. Debtor began studying for her Masters Degree part-time in 1992. She testified that she initially looked forward to working full-time following graduation from Widener, but these plans never came to fruition due to continuing illness. Starting in 1994, she began feeling fatigued, leading to a diagnosis the following year of chronic fatigue syndrome. Combined with her other ailments, the chronic fatigue has prevented Debtor from trying to achieve full-time employment.
Before and after graduating from Widener, Debtor relied primarily upon social security benefits for support although she supplemented her income by working part-time as a counselor. Debtor indicated in Schedule "I" of her petition that her income from social security was $866 per month for 1995, augmented by about $200 net income each month which she earned as an independent contractor working part-time as a counselor at the Norristown Life Center. Exhibit P-5. In 1993 and 1994, her income was $9,000 and $9,500, respectively. Exhibit P-7. During the summer of 1996, she was recertified to receive security disability benefits into the future.
On the subject of credit cards, Debtor stated that she had several of them and that she rotated their use. Other than some small medical bills, the bulk of her $17,350.62 scheduled unsecured claims is on account of credit card debt. Exhibit P-6. She obtained her AT & T card at an unknown date sometime prior to 1995. The circumstances surrounding her securing the card were not revealed. Thus, we do not know if the card was solicited or unsolicited and what credit information was given to AT & T to qualify for the credit extension. Debtor did acknowledge requesting the convenience checks she used to secure certain of the cash advances. The sole evidence of the circumstances surrounding issuance of the card is an unsigned, undated form AT & T Card-member Agreement, Exhibit P-1, and Debtor's admission that she agreed to be bound by the terms and conditions of the cardholder agreement although she could not recall what they were.
The card issued to Debtor had a credit limit of $7,700. As of the June statement, the balance was $514 stemming from a single cash advance in the amount of $500 taken on May 26. Exhibit P-2. The charges that prompted AT & T to file the instant adversary proceeding all took place within the following two months. The Debtor's next statement showed five transactions taking place between June 19 and July 10 aggregating $6,595 and consisting of three large cash advances and two small charges. Exhibit P-3. The first cash advance was for $1,000 and was taken on June 19 at Progress Federal Bank in Jeffersonville. When AT & T's counsel questioned Ms. Feld regarding her use of this money, she indicated that she did not remember. On July 3, Ms. Feld made out a convenience check to herself in the amount of $4,000. When asked to identify her use of this money, Ms. Feld testified that she was not entirely certain but thought she may have used the money to pay a debt owed to her psychiatrist. On July 10, Ms. Feld took out a third cash advance, also in the form of a convenience check, for $1,500. This check, however, was made out directly to her psychiatrist. Finally, the credit card statement shows two small charges, one on June 27 for $66 and the second on July 6 for $29. Ms. Feld's next statement shows that between July 18 to 26 she used seven more convenience checks totaling $660 and incurred one charge for $64.50. Exhibit P-4. Combined with the finance charge, these transactions placed the Debtor's balance in excess of $300 over her credit limit.
Debtor filed a Chapter 7 bankruptcy on September 1, 1995, just slightly one month after her final cash advance. Debtor indicated that she contacted an attorney in August after first seeking advice from a consumer credit counseling agency which informed her that bankruptcy might be her best option and that she should seek the advice of legal counsel. On December 1, 1995, AT & T filed its complaint objecting to discharge, contending that Debtor had the intent to defraud AT & T in the use of her credit card account. Trial was held on September 24, 1996.1
AT & T requests that Ms. Feld's debt to it be declared nondischargeable based on 11 U.S.C. § 523(a)(2)(A)2 which states:
11 U.S.C. § 523(a)(2)(A). The language in subsection (A) has its origins in the Bankruptcy Act of 1898 and is interpreted to encompass acts of fraudulent misrepresentation involving moral turpitude or intentional wrong. 3 Collier on Bankruptcy ¶ 523.084 (Lawrence J. King, ed., 15th ed. 1996) "Collier".3
As with all exceptions to discharge, § 523(a)(2)(A) should be interpreted narrowly in favor of the debtor. United States v. Stelweck, 108 B.R. 488, 495 (E.D.Pa.1989); Griffith, Strickler, Lerman, Solymos & Calkins (In re Taylor), 195 B.R. 624, 627 (Bankr.M.D.Pa.1996). As the party objecting to discharge, AT & T must prove all of the elements of fraud by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 289-88, 111 S.Ct. 654, 659-60, 112 L.Ed.2d 755 (1991).
An overriding goal of bankruptcy is to provide debtors a fresh start so they may begin life anew free from the pressure and discouragement of unmanageable indebtedness. Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934). Section 523(a)(2)(A), however, represents a policy determination that the goal of providing debtors a fresh start must yield to the protection of creditors against fraud. Fundamentally, the section seeks to prevent debtors from incurring debt with the intention of not paying by obtaining a discharge in bankruptcy. Although the concept behind the section appears simple enough, the application of the exception in the context of credit cards has been fraught with doctrinal difficulty. Differences exist respecting how to judge a debtor's intent, what if anything a debtor represents by using a credit card, and how a credit card lender relies on a debtor's representations when extending credit.
The Supreme Court recently acted to clarify the standards applicable to § 523(a)(2)(A) in Field v. Mans, albeit in a context other than use of a credit card. Its analysis is instructive in resolving the case sub judice. In Field, the Court held that § 523(a)(2)(A) encompasses the common law tort action of fraudulent misrepresentation, reasoning that words of art employed by Congress when drafting the statute should be accorded their accepted meaning. The Court identified the elements of fraud to be applied based on the Restatement of Torts and a leading treatise, Prossor's Law of Torts, recognizing that these sources represent a distillation of the common law applied by the states generally. ___ U.S. at ___, 116 S.Ct. at 444.
Following this same approach, we note that Prossor lists the elements of fraud as follows:
To continue reading
Request your trial