In re Simpson, Bankruptcy No. 80-03346
| Decision Date | 11 April 1983 |
| Docket Number | Bankruptcy No. 80-03346,Adv. No. 80-0513. |
| Citation | 29 BR 202 |
| Parties | In re Leslie G. SIMPSON, aka Leslie George Simpson, dba Farmer, Debtor. WEBSTER CITY PRODUCTION CREDIT ASSOCIATION, Plaintiff, v. Leslie G. SIMPSON, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Iowa |
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Carroll Wood, Webster City, Iowa, for plaintiff/creditor.
Neven J. Mulholland, Fort Dodge, Iowa, for defendant/debtor.
Findings of Fact, Conclusions of Law, and ORDER Denying § 523 Complaint, with Memorandum
The matter before the Court is the § 523 dischargeability complaint of the Plaintiff/Creditor, Webster City Production Credit Association, against the Defendant/Debtor, Leslie G. Simpson. On October 14, 1981, an order issued from this Court taking the matter under advisement and directing each party to submit a statement of the case and proposed findings of fact. Plaintiff's statement was filed with this Court on November 13, 1981. Defendant's statement was filed August 20, 1982.
The Court, now being fully advised, makes the following Findings of Fact, Conclusions of Law, and Orders:
FINDINGS OF FACT
1. On November 7, 1980, the Defendant, Leslie G. Simpson, filed a Chapter 7 Petition with this Court. On December 16, 1980, the Plaintiff, Webster City Production Credit Association, commenced this adversary proceeding, objecting to the discharge of the debt owed to it by the Defendant. On January 23, 1981, the Defendant was granted a discharge of all dischargeable debts by Order of this Court.
2. In the spring of 1979, Mr. Larry Ites (hereinafter Plaintiff's agent), then a loan officer of the Webster City Production Credit Association (hereinafter, PCA), contacted the Defendant/Debtor, Mr. Leslie G. Simpson (hereinafter, Simpson), as part of the Plaintiff's loan recruitment campaign known as the "Blitz Program."
3. In June, 1979, Defendant/Simpson contacted Plaintiff's agent at Plaintiff's Clarion, Iowa, office to inquire about new financing for the Defendant's farming operation. On June 26, 1979, Plaintiff's agent, with the aid of Defendant/Simpson, prepared an inspection report concerning various items of Defendant's farm property that was to be collateral for a loan. The agent made a note in the report that he had not seen all the equipment listed.
4. On July 3, 1979, Plaintiff's agent prepared a balance sheet, which Defendant signed, purporting to state the assets and liabilities of the Defendant. The balance sheet was prepared, in part, from the inspection report of June 26, 1979. In addition, the agent prepared a loan application for Defendant's signature. The balance sheet contained at least two errors. Sixty sows were listed as assets, but only 20 were owned by the Defendant. The other 40 were leased. In addition, some machinery was listed that Defendant did not own. The Defendant admitted that the balance sheet was in error on those two points, but insisted that he had informed Plaintiff's agent of the true status of those assets before the balance sheet was prepared. Plaintiff's agent denied any knowledge of such facts. This balance sheet is the basis for Plaintiff's claim under § 523(a)(2)(B).
5. The loan to Defendant was approved by Plaintiff's loan committee, and Defendant executed three notes and a security agreement, all dated July 16, 1979. In return, Defendant was to receive loans totaling $145,942.00, to be disbursed by Plaintiff as needed by Defendant to finance his farming operation and meet living expenses. Plaintiff claims that Defendant promised to obtain clear title to his pickup truck and deliver that title as additional security for the July 16 loans. Defendant denies making such a promise. Plaintiff's agent testified that the loans possibly would have been made even if PCA knew it wasn't going to receive title to the truck. On September 12, 1979, Defendant made an application for an additional loan and that additional financing was approved by Plaintiff. Plaintiff's agent testified that the loan was approved even though the truck title had not been delivered and proceeds from a sale of sows had not been turned over to Plaintiff as requested. The agent asserted, however, that Plaintiff was still expecting to receive those items, but he could not say that the loan would not have been approved if Plaintiff had known it would not receive the title and hog proceeds. On May 13, 1980, Plaintiff made another loan to Defendant. The note evidencing that indebtedness was signed by Defendant and co-signed by Defendant's father. Disbursements were made pursuant to those loans, from time to time, beginning July 16, 1979, and continuing until about September or October of 1980.
6. During October and November of 1979, the Plaintiff/PCA did not disburse all the sums that had been promised and/or anticipated at the time the loan agreement was made. In one instance during November, 1979, the Plaintiff/PCA did issue a check to Defendant Simpson for nearly $10,000, but Plaintiff subsequently stopped payment on that check, with the result that many checks issued by the Defendant were returned for insufficient funds. The Plaintiff apparently stopped disbursements during October and November because of its concern for its security position and because it wanted the Defendant to provide additional security for the outstanding loan.
7. On a number of occasions, Defendant sold livestock or crops that were covered by Plaintiff's security interest, and retained the proceeds for his own use. Defendant apparently used those proceeds to meet living expenses and pay bills associated with his farming operation. Whether that action was necessary because Defendant was not a good businessman or (at least in part) because Plaintiff withheld promised funds, is unclear on the record before the Court. The proceeds from some livestock and crops sales were paid to the Plaintiff. It is unclear from the facts before the Court whether all the proceeds actually paid were voluntarily remitted by the Defendant, but he apparently made some good faith efforts to repay the loan.
8. Evidence presented at trial revealed that at least by September 12, 1979, Plaintiff was aware of possible problems in regards to its loan to the Defendant. Subsequently, many balance sheets, loan applications, and inspection reports were prepared, but no further loans were made to Defendant after September 12, 1979, until May 13, 1980, when Defendant's father co-signed a note. Mr. Steven Stahly, President of Plaintiff/PCA, testified that a balance sheet of March 4, 1980, was submitted by the Defendant, but Mr. Stahly believed that it was inaccurate and the PCA neither relied upon it nor made any loan at that time. He also testified that a balance sheet submitted on December 6, 1979, had impressed him as being unsound. On February 4, 1980, Defendant gave Plaintiff a mortgage on certain real property that Defendant had acquired. The mortgage was apparently given as additional security for the existing loans, and probably delayed foreclosure proceedings by the Plaintiff.
9. The Plaintiff admitted that the May 13, 1980, loan was made to the Defendant to improve its security position on Defendant's outstanding loan balance. The Defendant gave the Plaintiff a security interest in all 1980 crops, and agreed that all proceeds from those crops would be applied to the current and past loans. In addition, Plaintiff required the signature of Defendant's father as surety for the loan, and Plaintiff apparently would not have made the loan without the signature of a co-signer.
10. The Plaintiff's reliance on the July 3, 1979, financial statement was not clearly reasonable, given the other facts known or available to the Plaintiff. Further, the Defendant did not clearly intend to deceive the Plaintiff when he gave Plaintiff the July 3, 1979, financial statement.
11. The Defendant willfully and maliciously converted grain (of a value of $1,200.00) in which the Plaintiff had an interest, by his sale of that grain in November of 1980. The Defendant did not, however, both willfully and maliciously convert any other property in which the Plaintiff had an interest.
3. Plaintiff proved by clear and convincing evidence that the Defendant willfully and maliciously converted grain, in the amount of $1,200.00, in violation of § 523(a)(6), and that Defendant should not be discharged from that particular debt.
4. Plaintiff did not show by clear and convincing evidence that Defendant's conversion of other secured property was a willful and malicious act committed with the intent to harm the Plaintiff.
5. Plaintiff's claim should be denied, and the Defendant's debt declared dischargeable except for the grain conversion in the sum of $1,200.00.
IT IS THEREFORE ORDERED that Plaintiff's § 523 dischargeability complaint be sustained in part, and that Defendant's debt is nondischargeable to the extent of $1,200.00.
IT IS FURTHER ORDERED that Plaintiff's Complaint is denied in all other respects and is dismissed.
IT IS FURTHER ORDERED that Defendant's debt, except as heretofore declared nondischargeable, is included in the effect of the discharge that has been granted by this Court.
MEMORANDUMThe Creditor, Webster City Production Credit Association (hereinafter, PCA), is seeking to have the debt owed to it by the debtor, Leslie G. Simpson (hereinafter, Simpson), declared nondischargeable. In support of its dischargeability complaint, the PCA alleges that the...
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- In re Higgins, Bankruptcy No. 80-04114.
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Van Horne, Matter of, 86-1817
...to obtain, the creditor may present evidence of the surrounding circumstances from which intent may be inferred. See In re Simpson, 29 B.R. 202, 211 (Bankr.N.D.Ia.1983). Accord In re Frye, 48 B.R. 422, 427 (Bankr.M.D.Ala.1985); In re Brown, 55 B.R. 999, 1004 (Bankr.E.D.N.Y.1986). When the c......