In re Hammett

• Decision Date: 28 May 1985
• Docket Number: Bankruptcy No. 84-188-BK-J-GP,Adv. No. 84-145.
• Citation: 49 BR 533
• Parties: In re John Randall HAMMETT, a/k/a J.R. Hammett, Randy Hammett, John Hammett, Debtor. TIMBERLINE SYSTEMS, INC., Plaintiff, v. John Randall HAMMETT, a/k/a J.R. Hammett, Randy Hammett, John Hammett, Defendant.
• Court: U.S. Bankruptcy Court — Middle District of Florida

49 B.R. 533 (1985)

In re John Randall HAMMETT, a/k/a J.R. Hammett, Randy Hammett, John Hammett, Debtor TIMBERLINE SYSTEMS, INC., Plaintiff, v. John Randall HAMMETT, a/k/a J.R. Hammett, Randy Hammett, John Hammett, Defendant.

Bankruptcy No. 84-188-BK-J-GP, Adv. No. 84-145.

United States Bankruptcy Court, M.D. Florida, Jacksonville Division.

May 28, 1985.

Hugh A. Carithers, Jr., Jacksonville, Fla., for plaintiff.

Peter C. Blinn, Ocala, Fla., for defendant.

MEMORANDUM OPINION

GEORGE L. PROCTOR, Bankruptcy Judge.

THIS MATTER was heard at trial on the issue of the dischargeability under 11 U.S.C. § 523(a) of a debt of $36,369, plus interest. The facts are simple: the defendant was in the business, through Computer Accounting Specialists, Inc., a corporation of which the debtor/defendant was the sole officer and shareholder, of retail sales of computer hardware and software. The plaintiff was a wholesale supplier of those items. At an earlier time in their relationship, the plaintiff had sold wholesale goods to the defendant on an open account basis but prior to the transactions giving rise to this adversary proceeding, the relationship had been changed at the plaintiff's instance to payment in cash on delivery. On or about February 2, and March 9, 1984, the defendant ordered goods from the plaintiff and when they were delivered simultaneously delivered checks aggregating the amount in controversy to the plaintiff. The checks were dishonored and have remained uncollected by the plaintiff. The defendant testified at trial that he intended and expected to make the checks good with the proceeds of sales of the equipment so obtained; the Court finds his testimony to be credible.

The issues raised are whether the plaintiff has shown the elements which the case law has set forth as necessary to support a dischargeability count under § 523 and whether the defendant is protected by the fact that he acted as an agent for a corporation, or alternatively, whether it is appropriate to pierce the corporate veil and find individual liability. The Court will not be required to address the corporate veil issue as it has determined for reasons set forth infra, that it cannot find a basis for liability on the part of any entity.

Bankruptcy courts have developed five elements which must all be proved in order for a plaintiff to prevail on a dischargeability count under § 523(a)(2):

1) That the defendant in fact made the representations;

2) That he knew at the time that he made them that they were false;

3) That he made them with the intention of deceiving the creditor;

4) That the creditor relied on those representations; and

5) That the creditor sustained the alleged loss and damage as the proximate result of those misrepresentations.

This Court at trial ruled in favor of the plaintiff on all elements necessary to support a judgment in its favor (without regard to the corporate veil question) with respect to all elements except intent to deceive. While it is not necessary to formally recede from our ruling that the debtor knowingly made a false representation, because receding would not change the outcome of this proceeding, we note that the language of a United States Supreme Court case which makes highly doubtful the correctness of that ruling. In Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 3092, 73 L.Ed.2d 767 (1982) a majority of a strongly divided Court faced with whether 18 U.S.C. § 1014, which makes it a crime to

knowingly make any false statement or report . . . for the purpose of influencing in any way the action certain enumerated financial institutions upon any application, advance, purchase agreement, repurchase agreement, commitment, or loan. . . .

is applicable to a check drawn on insufficient funds.

In that context, the Court says:

Although petitioner deposited several checks that were not supported by sufficient funds, the course of conduct did not involve the making of a `false statement,\' for a simple reason: technically speaking, a check is not a factual assertion at all, and therefore cannot be characterized as `true\' or `false.\' Petitioner\'s bank checks served only to direct the drawee banks to pay the face amounts to the bearer while committing petitioner to make good the obligations if the banks dishonored the drafts. Each check did not, in its terms, make any representation as to the state of the petitioner\'s bank balance.

We fully recognize that the cited decision was in the context of a criminal case and that the application of the rule on lenity may have had some impact on the outcome. Still, the Court's characterization of a check as a non-statement is so broad and unequivocal that this Court does not feel able to...