In re Toleikis, Bankruptcy No. 80-00920
| Decision Date | 07 May 1982 |
| Docket Number | Bankruptcy No. 80-00920,Adv. No. 80-0552. |
| Citation | 19 BR 944 |
| Parties | In re Kenarth P. TOLEIKIS, Debtor. Stanley GROAT, Plaintiff, v. Kenarth P. TOLEIKIS, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
Judson B. Robb, Wyandotte, Mich., for plaintiff.
Charles E. Raymond, Wyandotte, Mich., for defendant.
The issue presented in this adversary proceeding is simply stated: Does 11 U.S.C. Section 523(a)(2)(A) except a debt from discharge where the Debtor obtains an unsecured personal loan to purchase a motor vehicle, subsequently sells said motor vehicle and uses the proceeds from the sale to purchase a second vehicle, giving a security interest therein to the third party creditor?
This Court finds that the Plaintiff Creditor has not shown by clear and convincing evidence that the Defendant Debtor obtained the unsecured personal loan from Plaintiff under false pretenses so as to render the debt to Plaintiff non-dischargeable under Section 523(a)(2)(A) of the Code.
This adversary proceeding comes before this Court upon Plaintiff Stanley Groat's hereinafter "Plaintiff" Trial Memorandum and Brief, Defendant Kenarth P. Toleikis' hereinafter "Defendant" Responsive Memorandum of Law, Plaintiff's and Defendant's Joint Motion for Summary Judgment, and depositions of both parties. The statement of facts giving rise to this cause are as follows.
On December 9, 1976, Plaintiff loaned Defendant, his then son-in-law, $5,206.95 to enable the latter to purchase a 1976 Ford Van. This unsecured personal loan was in the form of a negotiable instrument tendered directly to the seller dealership; Plaintiff made a notation on the face of the check to the effect that the amount so advanced constituted a personal loan to Defendant. Title to the purchased vehicle was solely in Defendant's name.
On or about November 25, 1977, Defendant began working for Plaintiff, and a weekly sum of $25 was deducted from Defendant's paycheck and remitted to Plaintiff pursuant to the parties' repayment agreement. This relationship terminated, along with the weekly $25 payments, sometime in January, 1978. Thereafter, on January 19, 1980, Defendant sold the 1976 Ford Van and purchased a 1977 Dodge Van.1 To finance this purchase Defendant obtained either a $6,000 loan or a $7,800 loan2 from Wyandotte Government Credit Union; a second mortgage on real estate and the 1977 Dodge Van were given as security for this loan. Finally, Defendant filed this Chapter 7 proceeding on February 27, 1980, listing Plaintiff as an unsecured creditor.
Section 523(a)(2)(A) excepts from discharge loans obtained under false pretenses, fraudulent representations, or by actual fraud. Specifically, that Section provides:
Thus, in order for a debt to be found nondischargeable under this provision, the creditor must show by clear and convincing evidence that the following were true at the time the money was obtained: (1) the debtor employed means to obtain the money which he knew were false, or which were in reckless disregard for the truth; (2) the debtor must have subjectively intended to deceive or otherwise wrongfully induce the creditor into advancing a sum of money to him; (3) the creditor actually relied upon such misrepresentations; and (4) such reliance was reasonable and consistent with that of a reasonably prudent person. In the Matter of Schnore, 13 B.R. 249, 252 (Bkrtcy. D.Wis.1981).
Although Plaintiff at bar is relying upon Section 523(a)(2)(A) as the basis for his cause, nothing can be deduced from the evidence presented to constitute a clear and convincing showing of the threshold question, namely, was money obtained under false pretenses at the time of the making of the loan? Counsel for Plaintiff takes several stabs at this showing, but each time misses the mark; numerous allegations are made that Defendant's acts of purchasing the 1977 Dodge Van in part with the proceeds from the sale of the 1976 Ford Van constitute "moral turpitude or intentional wrong-doing sic" within the meaning of Section 523(a)(2)(A). Plaintiff failed to show that Defendant made any representations amounting to fraud at the time of the making of the loan. In fact, Plaintiff has readily conceded that a repayment agreement was formulated and carried out for a certain period of time, although the payments ceased prior to the satisfaction of the obligation. The Court is unwilling to engage in a strained interpretation of the plain meaning of the statute, or to deviate from sound case authority.
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