In re Vegh, Bankruptcy No. 81-00206-BKC-SMW

• Citation: 14 BR 345
• Decision Date: 21 August 1981
• Docket Number: Adv. No. 81-0254-BKC-SMW-A.,Bankruptcy No. 81-00206-BKC-SMW
• Parties: In re Cynthia M. VEGH, Debtor. SOUTHEAST SERVICES, INC., a Florida Corporation, Plaintiff, v. Cynthia M. VEGH, Defendant.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Florida

14 B.R. 345 (1981)

In re Cynthia M. VEGH, Debtor SOUTHEAST SERVICES, INC., a Florida Corporation, Plaintiff, v. Cynthia M. VEGH, Defendant.

Bankruptcy No. 81-00206-BKC-SMW, Adv. No. 81-0254-BKC-SMW-A.

United States Bankruptcy Court, S.D. Florida.

August 21, 1981.

Britton, Cohen, Kaufman, Benson & Schantz, Miami, Fla., for plaintiff.

Houston, Faircloth, Easthope & Traver, Ft. Lauderdale, Fla., for defendant.

SIDNEY M. WEAVER, Bankruptcy Judge.

THIS CAUSE came on to be heard upon a creditor's complaint, objecting to the dischargeability of a debt. This Court having heard the testimony of witnesses and having examined the evidence presented, having observed the candor and demeanor of the witnesses, having considered the arguments of counsel, and being otherwise fully advised in the premises, does hereby make the following Findings of Fact and Conclusions of Law:

Plaintiff, SOUTHEAST SERVICES, INC. ("Southeast") filed an adversary proceeding against the Defendant/Debtor, CYNTHIA M. VEGH ("Vegh") seeking a money judgment in the amount of $34,573.18, and a determination that the debt is non-dischargeable pursuant to 11 U.S.C. Sec. 523(a)(2)(A), in that Vegh obtained money in the form of an extension of credit from Southeast by false pretenses, false representation, and actual fraud. Vegh answered, denying the material allegations of the Complaint, and the matter was tried before this Court on June 24, 1981.

The material facts are undisputed. Southeast issued to Vegh two credit cards, a Master Card having a credit limit of $800.00, and a Visa Card having a credit limit of $400.00. For more than one year, Vegh made regular monthly payments and stayed within her credit limit on each card. During the month of August 1980, however, Vegh, a young unemployed single woman, used the two credit cards to make 617 separate purchases of items for her personal use, aggregating more than $24,000.00. Each of those 617 purchases was in an amount less than $50.00. By the time Vegh filed a voluntary petition in this Court, she owed Southeast $34,573.18. Vegh admitted at trial that she knew the credit limit on each of her cards, and that she knew in August 1980, she was well in excess of those limits; but attributed these over-the-limit charges to a lack of self-control, exacerbated by a drinking problem.

Southeast bases its claim that the full debt owed by Vegh is non-dischargeable on the theory that it is the victim of a systematic scheme of false and fraudulent representation by Vegh. Credit card cases such as this one clearly fall within the rubric of false pretenses and actual fraud sufficient to except a debt from discharge pursuant to 11 U.S.C. Sec. 523(a)(2)(A). Both the rationale underlying that conclusion and the applicable test for non-dischargeability have been recently summarized as follows:

Purchase of merchandise by use of a credit card is an implied representation to the merchant and to the issuer of the card, that the buyer has the means and the intention to pay for the purchase. In re Cushingberry, 5 B.C.D. 954 (E.D.1977); In re Boydston, 520 F.2d 1098 (5th Cir. 1975); In re Black, 373 F.Supp. 105 (E.D. Wis.1974). Accordingly, when one purchases goods on credit and either knows that he is unable to comply with the payment requirements of his contract with the card issuer, or when it appears from the evidence that he had no intention to pay for them, he obtains the goods through false pretenses which constitutes a form of fraud on the creditor. In re Banasiak, 8 B.R. 171, 174 (Bkrtcy.M.D. Fla.1981).

The burden thus falls on Southeast to show that Vegh obtained money and credit from Southeast by materially false or fraudulent misrepresentations in that she presented the credit card to merchants and made purchases on credit when she, in fact, lacked both the means and the intent to pay for them, and that Southeast relied on such false or fraudulent representations. See, In re Banasiak, 8 B.R. 171 (Bkrtcy.M.D.Fla. 1981); In re Ratajczak, 5 B.R. 583 (Bkrtcy. M.D.Fla.1980); In re Perticaro, 5 C.B.C. 664 (E.D.N.Y.1975).

Southeast, as Plaintiff, has met its burden with clear and convincing proof, which Vegh has failed to overcome. On the evidentiary record, this Court is satisfied that Vegh lacked the ability and the intent to pay Southeast for her various credit card purchases, and that she thus obtained money or property or services by false pretenses.

Clearly, Congress intended, in enacting the Bankruptcy Code, that an honest debtor might be relieved of his debts and obtain a fresh start by a Bankruptcy discharge. This is not, however, a case involving an honest debtor. Rather, the evidentiary record depicts a conscious and willful scheme, contrived and...