In re Kolbfleisch, Bankruptcy No. B88-0002-Y

• Decision Date: 08 February 1989
• Docket Number: Adv. No. 88-0015,88-0016.,Bankruptcy No. B88-0002-Y
• Parties: In re Donna Jane KOLBFLEISCH, Debtor. The FARMERS NATIONAL BANK OF CANFIELD, Plaintiff, v. Donna Jane KOLBFLEISCH, Defendant.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio

97 B.R. 351 (1989)

In re Donna Jane KOLBFLEISCH, Debtor.

The FARMERS NATIONAL BANK OF CANFIELD, Plaintiff, v. Donna Jane KOLBFLEISCH, Defendant.

Bankruptcy No. B88-0002-Y, Adv. Nos. 88-0015, 88-0016.

United States Bankruptcy Court, N.D. Ohio.

February 8, 1989.

Gary J. Rosati, Canfield, Ohio, for plaintiff.

Richard G. Zellers, Youngstown, Ohio, for defendant.

MEMORANDUM OPINION

WILLIAM T. BODOH, Bankruptcy Judge.

These twin causes of action are before the Court to determine whether the Debtor generally is entitled to a discharge and whether a specific obligation is dischargeable.

Beginning in January 1985, it appears that the Debtor cohabited with one Larry Welling at 16936 Route 224, Berlin Center, Ohio. The residence was owned by Mr. Welling's parents, who also resided there. Over the course of several years, it appears that the Debtor and Mr. Welling purchased at least a dozen vehicles, many of which were wrecked, and proceeded to strip the cars and sell individual parts from the vehicles. The Debtor was generally aware of Mr. Welling's practice of selling automotive parts from vehicles. The proceeds from these sales apparently were used in part to pay Debtor's obligations.

On March 28, 1986, the Debtor applied for, and apparently was approved for, a Three Thousand & 00/100 Dollar ($3,000.00) loan from City Loan Bank ("City Bank"). On or about March 31, 1986, the Debtor and Mr. Welling apparently decided to purchase a 1984 Chevrolet Citation "as is" from Vintage Auto Sales ("Vintage Auto"). Pursuant to this transaction, Mr. Emmanual (also known as "Skip") Williams completed a loan application for The Farmers National Bank of Canfield ("Farmers") to finance the purchase of the vehicle. Mr. Williams testified that the information for the application was elicited from the Debtor; the Debtor disputes this. Among others, the application incorrectly stated that the Debtor owned her own home and was employed as a receptionist at Century 21 earning approximately Two Hundred & 00/100 Dollars ($200.00) per week. The application also neglected to note the City Bank loan which had been procured three days earlier. Finally, the application was allegedly signed by the Debtor, although the Debtor contends that her signature was forged. Mr. Williams called Farmers and conveyed the information he had received to a loan secretary, Ms. Cindy Young. Ms. Young requested and received a Credit Bureau report on the Debtor and forwarded the information to Mr. Alfred Ridel, a loan officer, for review. A loan for Four Thousand, Three Hundred Seventy-Nine & 00/100 Dollars ($4,379.00) apparently was approved on April 1, and funds were disbursed on April 2, 1986.

The Debtor testified that the engine in the new vehicle failed about one month later. Farmers refused to extend further credit to either the Debtor or Mr. Welling to repair the engine. Farmers contends that the vehicle was operational until September, 1987. In either event, the vehicle eventually failed and was not repaired. Sometime after the vehicle ceased operating, parts were removed from the automobile and presumably sold.

In November 1987, the Debtor defaulted on the loan and Mr. Vince Luce, a collection manager at Farmers, attempted to contact the Debtor concerning her delinquency. When telephonic and written notice proved fruitless, Mr. Luce visited the Debtor's residence in Berlin Center. Initially, the Debtor falsely told Mr. Luce that the car was not there. However, after contacting her attorney, the Debtor admitted the car was in a barn in back of the residence. Mr. Luce viewed the car and reported that it evidently had been stripped for parts.¹

On November 20, 1987, the Debtor left the Berlin Center address and moved elsewhere. On January 5, 1988, the Debtor filed a Petition for Relief under Chapter 7 of Title 11 of the United States Code. On August 9, 1988, Farmers filed two (2) Third Amended Complaints. The first Complaint asked the Court to find the specific Farmers obligation to be nondischargeable pursuant to Sections 523(a)(2)(A), 523(a)(2)(B), and 523(a)(6) of the United States Bankruptcy Code. The second Complaint asked the Court to generally deny the Debtor a discharge pursuant to Sections 727(a)(2), (4) and (5) of the United States Bankruptcy Code. A trial was held on October 24, 1988.

I. EXCEPTION TO DISCHARGE

11 U.S.C. Secs. 523(a)(2)(A), 523(a)(2)(B), and 523(a)(6) read, in pertinent part:

A discharge . . . does not discharge an individual debtor from any debt—

. . . . .

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—

(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor\'s or an insider\'s financial condition;

(B) use of a statement in writing—

(i) that is materially false;

(ii) respecting the debtor\'s or an insider\'s financial condition;

(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and

(iv) that the debtor caused to be made or published with intent to deceive;

. . . . .

(6) for willful and malicious injury by the debtor to another entity or to the property of another entity.

A. First Count

In its First Count, Farmers alleges that the Debtor's obligation to it ought to be nondischargeable by virtue of 11 U.S.C. Sec. 523(a)(2)(B). This Court has previously held that the elements for nondischargeability under Sec. 523(a)(2)(B) are:

(1) debtor made a materially false representation in writing;

(2) the false writing concerned the debtor\'s financial condition;

(3) the creditor relied on the representation in extending credit and the creditor\'s reliance on the representation was reasonable;

(4) the representation was made with the intent to deceive.

Credithrift of America v. Greene (In re Greene), 85 B.R. 747, 750 (Bankr.N.D.Ohio 1988).

Plaintiff maintains that Debtor failed to list a Three Thousand & 00/100 Dollar ($3,000.00) debt to City Bank on the loan application for Farmers, which was completed by Mr. Williams.² Debtor's counsel responds that (1) the Debtor made no financial statement; (2) no representations were made to Farmers; and (3) Farmers did not rely on the statement.

Mr. Williams testified unequivocally that he had obtained the financial information from the Debtor. The Debtor testified that she provided no statement to Vintage Auto concerning her financial condition. Viewed in the context of all the evidence, the Court does not find the Debtor's testimony to be persuasive. She fails to offer any suggestion how Mr. Williams obtained the information contained on the statement, which is substantially correct in many respects.³ In support of her contention, the Debtor points out that her father's name is spelled incorrectly, a telephone number is incorrectly listed, and the signature at the bottom of the application was not hers. The errors can be attributed to Mr. Williams' having recorded the information on the application so that a misspelling or number transcription would not be unusual. A comparison of the signature appearing on the Debtor's Schedules to the one on the statement supports the Debtor's contention that she did not sign the statement. However, the Court does not find this factor alone to be determinative. The Court believes that the Debtor provided financial information to Mr. Williams, who recorded it on the application. Although she may have left Vintage Auto before signing the application, her provision of the information is sufficient to constitute a "materially false representation in writing concerning her financial condition." The Court also concludes that the Debtor's intent was to deceive Vintage Auto or any financial institution that chose to finance the transaction.

The Debtor also argues that she made no representations to Farmers. While it is true that her representations were made to Vintage Auto which, in turn, transmitted them to Farmers, she must have known the purpose for which the information was elicited. She must have known that the information would be transmitted to a bank in order to arrange financing. It would be unreasonable to shield the Debtor from liability for her misrepresentations simply because her statements were transmitted to Farmers through an intermediary.

Finally, the Debtor contends that Farmers did not rely on the statement. Mr. Ridel testified that the application and credit report were the only documents utilized in reaching a determination regarding the approval of the loan. However, Mr. Ridel never indicated the extent to which he relied on the statement of liabilities in the application, which omitted the City Bank loan. Mr. Ridel only testified that he would have been concerned if a large obligation would have been omitted which would have required further investigation. The Court has some reason to question these statements due to his testimony regarding the amount of obligations omitted from the application but revealed on the credit report. Even accepting his statements as true, Mr. Ridel's testimony is insufficient to show reliance. The credit report showed other substantial obligations that a prudent lender would almost certainly question. Accordingly, we dismiss the Count for Plaintiff's failure to prove that Farmers reasonably relied on any misrepresentations of Debtor in extending credit to her.

B. Second Count

The Plaintiff also contends, in its Second Count, that the same omission is reason to withhold a discharge of this obligation pursuant to 11 U.S.C. Sec. 523(a)(2)(A). The Court dismisses this Count as a matter of law. Section 523(a)(2)(A) allows for the nondischargeability of a debt for property "obtained by false pretenses . . . other than a statement respecting the debtor's . . . financial condition." The allegation that the Debtor neglected to inform Mr. Williams of the City Bank loan certainly concerns the Debtor's financial condition. Th...