Matter of Fordyce

• Decision Date: 17 December 1985
• Docket Number: Bankruptcy No. 84-2737,Adv. No. 85-125.
• Parties: In the Matter of Michael FORDYCE, Debtor. The CHASE MANHATTAN BANK, Plaintiff, v. Michael FORDYCE, Defendant.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida

56 B.R. 102 (1985)

In the Matter of Michael FORDYCE, Debtor The CHASE MANHATTAN BANK, Plaintiff, v. Michael FORDYCE, Defendant.

Bankruptcy No. 84-2737, Adv. No. 85-125.

United States Bankruptcy Court, M.D. Florida, Tampa Division.

December 17, 1985.

Bruce A. Nants, Orlando, Fla., for plaintiff.

Gordon H. Coffman, Fort Myers, Fla., for defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION

ALEXANDER L. PASKAY, Chief Judge.

THIS IS a Chapter 7 case and the matter under consideration is the dischargeability, vel non, of a debt in the amount of $15,869.76, admittedly due and owing by Michael Fordyce (Debtor) to Chase Manhattan Bank (Chase). The Complaint challenging the dischargeability of this debt is based on the claim of Chase that the Debtor obtained a loan from Chase by false representation on which Chase relied when it granted the loan and, therefore, based on § 523(a)(2)(A) of the Bankruptcy Code, this obligation should be removed from the overall protection of the general bankruptcy discharge.

The facts, as developed at the final evidentiary hearing, are basically without dispute although the interpretation of those facts are not. The facts can be summarized as follows:

At the time relevant to the transaction under consideration, the Debtor was a professor of psychology employed by the Edison Community College in Ft. Myers, Fla. On or about June 20, 1984 the Debtor submitted a loan application to Chase and sought a loan in the amount of $15,000. This was a mail transaction and there is no evidence in this record that this Debtor ever had any direct face to face contact with any of the agents or employees of Chase, at least not in connection with this particular transaction.

On the loan application submitted by the Debtor, he stated that he received from the college an annual salary of $31,000; that in addition he earned $20,000 from a private practice, acting as a consulting psychologist for Cypress Lake Professional Center in Ft. Myers, Fla.; that he also operated a mail order business involving a publishing company from which he has earned $4,000; and, lastly, he stated that he had an income from a day care center of $30,000 per year. The loan application was submitted to Chase on July 11, 1984. On July 19, 1984, the Debtor, in response to a request by Chase, sent a letter to Chase in which he enclosed his tax records for the purpose of verifying his income. Since there was a discrepancy between the figures appearing in the tax return and the loan application, by way of explanation the Debtor stated in the letter that the tax return revealed his actual income for the tax year 1983, at which time he had taken a three month leave of absence without pay which accounted for a reduction in the amount of $9,000 from his annual salary and a reduction of $4,000 from his private practice. During the year 1983 the Debtor heavily invested in the day care center which, at that point, was breaking even. The letter also stated, however, that the Debtor was anticipating an income of $1,000 to $3,000 a month from the day care center in the coming year since the operation, hopefully, would be turned around.

The transmittal to Chase did not include a balance sheet containing the assets and liabilities of the day care center nor did it include any operating statement of the day care center or any other documentation which reflected the financial soundness of the operation. None of these documents were ever requested by Chase in order to substantiate the basis for the anticipated income from this operation.

The loan was approved by Chase in due course and the Debtor received a check from Chase in the amount of $15,000 and in connection with that transaction, executed a promissory note in the same amount. This was an installment loan which called for the repayment of the loan in sixty (60) equal monthly installments. The first installment became due on September 16, 1984 in the amount of $379.45. It is without dispute that the Debtor has not made any payment on this obligation at all and on November 30, 1984 the Debtor filed his voluntary petition for bankruptcy.

Although it is not clear, it further appears, however, that the day care center was, in fact, claimed to have been owned by the Debtor's wife and not by the Debtor, contrary to the statement on the loan application by the Debtor that he was the owner of the day care center. This last statement forms the sole basis for the claim of non-dischargeability asserted by Chase.

It is without dispute that the Debtor repeatedly made inconsistent statements concerning the ownership of the day care center. As noted earlier, in his loan application he indicated that he was the owner and that he received an income from the center. During the proceeding and until after the commencement of this litigation, he took the position that he was the owner, although in response to interrogatories he indicated that the day care center was, in fact, owned by his wife alone.

Be that as it may, whether or not his claimed ownership of the day care center stated on the loan application was true or false is really without any significance and has no bearing on the outcome of this litigation. This is so because it is clear that Chase did not rely on any of the assets of the day care center when it granted the $15,000 loan to the Debtor. This was a totally unsecured loan and there is hardly any doubt that the only thing Chase relied on in granting the loan was the Debtor's ability to meet the monthly installment obligations under the note of $379.45. Thus, in making this decision, Chase, without...