In re Hollock
| Decision Date | 13 September 1979 |
| Docket Number | Civ. No. 79-548.,Bankruptcy No. 76-201 |
| Citation | 1 BR 212 |
| Parties | In re Stephen A. HOLLOCK, Individually and trading as S & R T.V. Electronics, Bankrupt. PIERCE-PHELPS, INC. and First Pennsylvania Banking & Trust Company, Appellees, v. Stephen A. HOLLOCK, Individually and trading as S & R T.V. Electronics, Appellant. |
| Court | U.S. District Court — Middle District of Pennsylvania |
Charles A. Shea III, Shea, Shea & Caputo, Wilkes-Barre, Pa., for appellant.
John Q. Durkin, Nogi, O'Malley & Harris, Scranton, Pa., for appellees.
Stephen A. Hollock, individually and trading as S & R T.V. Electronics, filed a Voluntary Petition in Bankruptcy on February 20, 1976. Pursuant to Rules 701 and 712, Pierce-Phelps, Inc. and First Pennsylvania Banking and Trust Company brought an adversary proceeding against Hollock to determine the dischargeability of a debt which he owed to them. A hearing on the matter was held before Bankruptcy Judge Gibbons, and he determined that the Plaintiffs Pierce-Phelps and First Pennsylvania Bank were entitled to have their debt excepted from the order of discharge. Hollock has appealed that determination to this court pursuant to Bankruptcy Rule 801. Since we find that the facts as found by the Bankruptcy Judge are amply supported by the record, and do support his conclusions of law we will affirm the determination of the Bankruptcy Judge.
The indebtedness which is the subject of this action is the result of a floor plan financing agreement which was entered into by Pierce-Phelps as supplier, First Pennsylvania Bank as financing agent and Hollock as dealer. The bankrupt applied for this plan in June of 1973. He submitted credit applications and financial statements in support of his application. None of these initial statements were false or misleading in any way. Hollock's application was approved, and on July 2, 1973, he executed a Dealer Floor-Plan Agreement and Signatory Authorization with First Pennsylvania. This contract granted him a secured line of credit in the amount of $20,000.
Under the dealer floor-plan arrangement, Pierce-Phelps supplied equipment to Hollock, and was paid for the items delivered by the bank. When Hollock subsequently sold an item he was to forward his payment for it immediately to the bank. Pierce-Phelps employed checkers, who went to the individual dealers each month to check the inventory against their records, and determine that proper payments were being made. If the checker found that a piece of equipment was not in the inventory, and payment for it had not been forwarded to the bank, he was to collect payment before leaving the dealer.
Hollock maintained his place of business in his home, and stored his equipment in his basement. During the seven months prior to December of 1974, it became increasingly difficult for the checker assigned to Hollock to perform his duties, because the cartons were stored in an inaccessible area. Hollock helped the checker by reading the serial numbers from the cartons to him, while the checker compared them to his list. After the physical count was completed, both the checker and Hollock would sign and verify the report before it went back to Pierce-Phelps.
In December of 1974, Hollock informed Pierce-Phelps' credit manager that he had "cheated" on the reports that he had made with the checker. He had called model and serial numbers from empty cartons, even though some of the items had in fact been missing since July of 1974. The total value of all the missing items was determined to be $9,150.32.
Section 17(a) of the Bankruptcy Act, 11 U.S.C. § 35(a), excepts certain debts from discharge in bankruptcy, including:
"(2) . . . liabilities for obtaining money or property by false pretenses or false representations, or for obtaining money or property on credit or obtaining an extension or renewal of credit in reliance upon a materially false statement in writing respecting his financial condition made or published or caused to be made or published in any manner whatsoever with intent to deceive."
The party seeking to declare a debt nondischargeable under this section must prove the following elements:
"`(1) the debtor made the representations; (2) that at the time he knew they were false; (3) that he made them with the intention and purpose of deceiving the creditor; (4) that the creditor relied on such representations and (5) that the creditor sustained the alleged loss and damage as the proximate result of the representations having been made.\'" Sweet v. Ritter Finance Co., 263 F.Supp. 540, 543 (W.D.Va.1967).
Collier on Bankruptcy, 14th Edition Paragraph 17.16 p. 1641 discusses this provision:
The Bankruptcy Judge, based on the above provisions of law, found that the inventory statements in question...
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