In re Keane, Bankruptcy No. 82-1165
| Decision Date | 15 October 1984 |
| Docket Number | Bankruptcy No. 82-1165,Related Case: 82-01550. |
| Citation | 44 BR 679 |
| Parties | In re Richard Patrick KEANE, fdba Pat Keane Motors and Peggy Lee Keane, Debtors. ADRIAN STATE BANK, Plaintiff, v. Richard Patrick KEANE, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
William T. Maloney, Toledo, Ohio, for plaintiff.
Donald T. Ciepichal, Toledo, Ohio, for defendant-debtor.
This cause comes before the Court upon the Motion for Summary Judgment filed by the Plaintiff in this adversary action. The parties have each submitted written arguments regarding the merits of the Motion and the affidavits, documents, and transcripts upon which those arguments rely. They have also had the opportunity to respond to the arguments set forth by opposing counsel. The Court has reviewed these arguments as well as the entire record in this case. Based upon that review and for the following reasons the Court finds that the Motion for Summary Judgment should be DENIED.
Prior to the filing of his voluntary Chapter 7 Petition, the Debtor-Defendant was the owner-operator of Pat Keane Motors, a car dealership located in Adrian, Michigan. On or about September 19, 1980, the Debtor entered into an agreement with the Plaintiff, Adrian State Bank, whereby the Plaintiff would extend to the Debtor a line of credit upon which he could purchase vehicles from the manufacturer for resale. On or about June 16, 1981, through the renewal of an existing capital loan, the Plaintiff extended an additional sum of money to the Debtor for use in the general operations of the business. The Plaintiff also made several other smaller loans to the Debtor in apparently unrelated transactions. In return for these lines of credit the Plaintiff received a security interest in a variety of the Debtor's assets, including his inventory. The security agreement required that the Debtor submit monthly financial reports to the bank and that the reports include a listing of the vehicles remaining in his inventory. The agreement further called for the Debtor to pay the proceeds generated by each vehicle to the bank immediately upon consumation of a sale.
At some time during the course of the parties' relationship, the Plaintiff became aware of the fact that the Debtor had not been disclosing the sale of each vehicle in the monthly reports. Instead, the reports reflected as being in his possession vehicles that had, in fact, been sold. As a result of this disclosure and at the request of the Plaintiff, the Debtor voluntarily surrendered all of the vehicles which remained in his inventory, as well as all other assets that were subject to the security agreement. The Plaintiff then proceeded to liquidate those assets and apply the proceeds to the aggregate balance owed by the Debtor. The resulting deficiency amounted to One Hundred Seventeen Thousand Four Hundred Fifty-three and 59/100 Dollars ($117,453.59).
On or about October 5, 1982, the Debtor was tried and convicted of certain offenses which stemmed from the out-of-trust sale of vehicles. During the course of that trial, testimony was taken as to how the Plaintiff discovered the out-of-trust sales. Testifying in his own behalf, the Debtor admitted that the reports submitted to the bank were false. On July 21, 1982, the Debtor filed his Petition with this Court. In that Petition he listed the Plaintiff as a creditor for the deficiency owing on the loans. Believing the debt to be nondischargeable as the result of the Debtor's previous conduct, the Plaintiff filed this adversary action.
The Plaintiff's allegations of nondischargeability are based on the provisions of 11 U.S.C. § 523(a) which state in pertinent part:
This provision excludes from discharge any debt that was created by or attendant to the use of a fraudulent financial statement. In order to prevail in an action based upon this section, the plaintiff must demonstrate that the debtor 1) made a written representation respecting his financial condition, 2) that the representation was materially false, 3) that the document was issued with the intent to deceive, and 4) that the plaintiff reasonably relied on the representation. Thorp Credit Inc. of Ohio v. Saunders (In re Saunders), 37 B.R. 766 (Bkcy.N.D.Ohio 1984), W.C.T.A. Federal Credit Union v. Volpe (In re Volpe), 32 B.R. 314 (Bkcy.W. D.N.Y.1983). Each of the elements of this provision must be shown in order to have the debt held nondischargeable. W.C.T.A. Federal Credit Union v. Volpe, supra.
When ruling on a motion for summary judgment, it is well settled that the moving party has the burden of establishing that there are no issues of material fact and that they are entitled to judgment as a matter of law. Todd v. Heekin, 95 F.R.D. 184 (S.D.Ohio 1982). In doing so the movant may only rely on such evidence as would be admissible at trial. General GMC Trucks, Inc. v. Mercury Freight Lines, Inc., 704 F.2d 1237 (11th Cir.1983), Utility Control Corp. v. Prince William Const. Co., Inc., 558 F.2d 716 (4th Cir. 1977). Accordingly, hearsay evidence may not be considered by the Court when ruling on a motion for summary judgment. Daily Press, Inc. v. United Press Intern, 412 F.2d 126 (6th Cir.1969).
In the present case, a review of the record finds that the Plaintiff, in asserting its Motion, relies upon the admissions made by the Debtor in the criminal trial and upon the affidavit of a bank officer. Although the Plaintiff has also attached copies of the notes and other instruments which created the security interests, it has not submitted any of the reports that were filed with it by the Debtor.
In the affidavit the affiant states that he is an employee of the Plaintiff, that his information is based upon his review of the Bank's...
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