Matter of Ford, Bankruptcy No. A94-69516-WHD. Adv. No. 94-6752A.
| Decision Date | 29 August 1995 |
| Docket Number | Bankruptcy No. A94-69516-WHD. Adv. No. 94-6752A. |
| Citation | 186 BR 312 |
| Parties | In the Matter of Lee J. FORD, Debtor. The CHASE MANHATTAN BANK, N.A., Plaintiff, v. Lee J. FORD, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
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D. Ruth Primm, Atlanta, GA, for plaintiff.
M. Buffy Blue, Paul L. Hanes, P.C., Atlanta, GA, for defendant.
Currently before the Court in these proceedings is the Motion for Summary Judgment of Lee J. Ford (hereinafter "the Debtor"). The Debtor's motion comes in response to a Complaint to Determine Dischargeability of Debt, filed by Chase Manhattan Bank, N.A. (hereinafter "Chase"). These matters fall within the subject matter jurisdiction of the Court, see 28 U.S.C. § 157(b)(2)(I), and they will be disposed of as provided in the Findings of Fact and Conclusions of Law which follow.
The factual background to this proceeding remains largely undisputed. On June 1, 1979, the Debtor set up a credit card account with Chase. The Debtor held this card, numbered XXXXXXXXXXXXX, for quite some time, using it without incident during those initial years. However, in May of 1993, the Debtor and his wife were divorced, and this event dramatically changed the Debtor's financial picture. Pursuant to that divorce decree, a Georgia court ordered the Debtor to turn over approximately 47% of gross monthly income in the form of child support and property settlement payments.1
The Debtor quickly fell behind in those obligations and, for several months, attempted to negotiate a more feasible arrangement with his ex-wife.2 No such accord could be reached, and the Debtor's divorce-related arrearages soon climbed to $16,950.00. The Debtor's ex-wife then enlisted the aid of the Cherokee County Superior Court. In a May 1994 Order which characterized the Debtor's failure to pay as an act of contempt, the Superior Court gave him twenty-four hours to produce $11,450.00 of the overdue payments. The court also ordered that, if the Debtor had not remitted the funds by the deadline, the county sheriff was to incarcerate him until he produced the funds. Faced with this ultimatum, the Debtor took $9000.00 in cash advances from his Chase credit account and presented those funds to his ex-wife. The Debtor then resumed his attempts to resuscitate his finances, but these efforts soon proved fruitless. On July 11, 1994, he filed for bankruptcy as yet another property settlement payment was about to come due.
It is the Debtor's May 1994 cash advances, and the interest charges arising therefrom, which form the core of the instant controversy. Pointing to the Debtor's insolvency at the time of those withdrawals and his consequent inability to repay such a $9000.00 obligation, Chase argues that the Court should declare this debt non-dischargeable for "false pretenses, false representation, or actual fraud", pursuant to 11 U.S.C. § 523(a)(2)(A). In response to Chase's assertions, the Debtor avers that he had no such fraudulent intent to incur an obligation which he knew he never would pay. Specifically, the Debtor argues that, at the time of the withdrawals, he reasonably believed an impending sale of his residence would provide him with the funds to pay this $9000.00 debt to Chase within thirty days after its creation.3 Accordingly, the Debtor asks this Court to grant his Motion for Summary Judgment on the question of whether this debt should be discharged in bankruptcy.
In accordance with Federal Rule of Civil Procedure 56 (), this Court will grant summary judgment only if "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is material if it might affect the outcome of a proceeding under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A dispute of fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The moving party has the burden of establishing the right of summary judgment, Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991); Clark v. Union Mut. Life Ins. Co., 692 F.2d 1370, 1372 (11th Cir.1982), and the Court will read the opposing party's pleadings liberally. Anderson, 477 U.S. at 249, 106 S.Ct. at 2510-11.
In determining whether a genuine issue of material fact exists, the Court must view the evidence in the light most favorable to the party opposing the motion. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Rosen v. Biscayne Yacht & Country Club, Inc., 766 F.2d 482, 484 (11th Cir.1985). The moving party must identify those evidentiary materials which establish the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); see also Fed.R.Civ.P. 56(e). Once the motion is supported by a prima facie showing that the moving party is entitled to judgment as a matter of law, the party opposing the motion must go beyond the pleadings and demonstrate that there is a material issue of fact which precludes summary judgment. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553; Martin v. Commercial Union Ins. Co., 935 F.2d 235, 238 (11th Cir.1991).
The concept of discharging pre-existing debt forms one of the most primary tenets of bankruptcy policy. See 3 COLLIER ON BANKRUPTCY ¶ 523.05A (15th ed. 1995) ( the Code's liberal policy). Indeed, "a central purpose of the Code is to provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy `a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.'" Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 659, 112 L.Ed.2d 755 (1991) (citations omitted). At the same time, however, a separate equitable policy mandates that any such mechanism for an unencumbered fresh start only should redound to the benefit of those debtors who truly are unfortunate, yet honest. See id. at 286-87, 111 S.Ct. at 659-60; see also Tran-South Fin. Corp. v. Johnson, 931 F.2d 1505, 1508 (11th Cir.1991) (citing Local Loan v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934)). In light of these competing policy goals, Congress included the following provision in the Bankruptcy Code:
11 U.S.C. § 523(a)(2)(A). Thus, through section 523(a)(2)(A), the Code offers a means of denying those individuals who do not qualify as "honest but unfortunate debtors" the benefits of a fresh start. Grogan, 498 U.S. at 287, 111 S.Ct. at 659. Like other exceptions to discharge, however, the provisions of section 523(a)(2)(A) warrant narrow construction. Gleason v. Thaw, 236 U.S. 558, 562, 35 S.Ct. 287, 289, 59 L.Ed. 717 (1915); Schweig v. Hunter (In re Hunter), 780 F.2d 1577, 1579 (11th Cir.1986).
In practice, the creditor bears the burden of establishing non-dischargeability under section 523(a)(2)(A). Hunter, 780 F.2d at 1579. Specifically, the creditor must establish by a preponderance of the evidence that:
See Grogan, 498 U.S. at 285-90, 111 S.Ct. at 658-61; see also Hunter, 780 F.2d at 1579 (citations omitted); Signet Bank v. Keyes, 959 F.2d 245 (10th Cir.1992); Mfr's. Hanover Trust Co. v. Ward (In re Ward), 857 F.2d 1082, 1088 (6th Cir.1988) (Merritt, J., dissenting).
When one attempts to establish the dischargeability of a credit card debt under the above-mentioned criteria and principles, several problems quickly become apparent. Specifically, at the time of a credit card purchase, the cardholder and bank have no personal contact. First Nat'l Bank of Mobile v. Roddenberry, 701 F.2d 927, 930-31 (11th Cir.1983). Consequently, the cardholder cannot be said to have directly represented anything to the issuing bank. Id. Also, the bank has nothing upon which to base an act of reliance. Id.
To circumvent these problems of application, several courts have turned to a doctrine of "implied representation". Under this approach, the debtor always is said to have impliedly represented at the time of a credit card sale that: (1) he had the ability to pay the debt in question; and (2) he also had the intention of paying that debt. See, e.g., Signet Bank v. Rawoot, 14 F.3d 596 (4th Cir. 1993) (); Sears Roebuck & Co. v. Naimo (In re Naimo), No. CIV.A. 95-456, 1995 WL 163598, at *1 (E.D.Pa. Apr. 6, 1995) (citations omitted); Comerica Bank-Midwest v. Kouloumbris, 69 B.R. 229, 230 (N.D.Ill.1986); Mercantile Trust Co. v. Schmidt (In re Schmidt), 36 B.R. 459, 460 (E.D.Mo.1983). Having established these fictional forms of holder-issuer representation, courts then utilize a presumption that the issuing bank reasonably relied on those factors in guaranteeing the payment at issue. Mfr's. Hanover Trust Co. v. Ward (In re Ward), 857 F.2d 1082, 1087 (6th Cir.1988) (Merritt, J., dissenting) (citations omitted); Mfr's. Hanover...
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