Public Finance Corp. of Lynchburg v. Londeree, 4878
| Decision Date | 26 January 1959 |
| Docket Number | No. 4878,4878 |
| Citation | 200 Va. 607,106 S.E.2d 760 |
| Court | Virginia Supreme Court |
| Parties | PUBLIC FINANCE CORPORATION OF LYNCHBURG v. CYRUS B. LONDEREE AND BESSIE LONDEREE. Record |
William Rosenberger, Jr. (Perrow & Rosenberger, on brief), for the plaintiff in error.
Harold B. Singleton (Shrader & Singleton, on brief), for the defendants in error.
Virgil R. Goode and Howard W. Dobbins (Wallerstein, Goode, Adamson & Dobbins, on brief), for Virginia Consumer Finance Association, amici curiae.
This action was instituted in the county court of Amherst county, Virginia, by Public Finance Corporation, hereinafter at times called plaintiff, against Cyrus B. Londeree and Bessie Londeree, hereinafter called defendants, to recover $555.83, with interest. In the warrant it was alleged that the sum sued for was owing by defendants because they obtained money from the corporation 'by false representation.'
On April 27, 1957, judgment was awarded plaintiff for $555.83 with interest from date. On appeal by defendants to the circuit court, all matters of law and fact were submitted to the court for decision and from a judgment in favor of defendants, the plaintiff obtained a writ of error.
Summarized, the pertinent evidence is as follows:
On November 14, 1955, defendants obtained a loan of $600 from the Public Finance Corporation, a licensee under the small loan act. Sections 6-274 to 6-338, Code 1950. The principal was repayable, with interest included, in monthly installments. During February, 1956, this indebtedness had been reduced to $264.28, and on February 29, 1956, defendants applied to the corporation for a loan of $600. It was understood that if and when this new loan was made, $264.28 would be used to pay the balance due plaintiff and the residue of $335.72 paid to defendants.
On this day Londeree informed plaintiff's representative that he was indebted to Peoples National Bank for $149.00 and owed State taxes of $81.91, but it does not appear that he then advised plaintiff that he was otherwise indebted, nor was he asked if he owed other debts. Following this interview, plaintiff, as is its usual practice, contacted the retail credit bureau to obtain such information as was available from that local informant as to defendants' credit standing. No information of moment was obtained from that agency. On March 1, 1956, defendants appeared at the corporation's office to consummate the transaction, but before the loan was made, plaintiff required defendants to fill out and execute a financial statement. The writing, as executed by defendants, reads in part as follows:
'Financial Statement
Date 3/1/56
'To Public Finance Corporation of Lynchburg:
For the purpose of inducing you to extend credit by making a loan to me or refinancing for me the loan, if any, mentioned in 1 below, and to show my ability to repay same, I hereby furnish the following information:
Notwithstanding any previous dealings had with you or the value of any property mortgaged, I UNDERSTAND THAT IN MAKING THIS LOAN YOU ARE RELYING ON MY FINANCIAL CONDITION AS SHOWN BY ME IN THIS STATEMENT.
1. I/we owe the above named company now $264.28'
Listed as creditors under paragraphs numbered 4 and 5 are the Peoples National Bank, loan, $149; State taxes $81.91. The three items of indebtedness listed in the statement are then summarized as follows:
The statement concludes with the following authorization and assertions:
'8. You may contact and inquire of my references, creditors, my employer, present and future, and visit my home concerning credit and collection, either before or after the loan is made. We owe no other debts than stated above.
S/ X Bessie Londeree'
The last line, 'We owe no other debts than stated above,' was, at the direction of plaintiff's agent, written into the form by Cyrus B. Londeree before he and his wife signed the instrument.
Upon execution of the statement, defendants then signed the usual form note in the principal sum of $600, payable with interest included, in twenty monthly installments of $37.53, and they also executed a deed of trust on their household goods and furniture. As authorized by § 6-301, 1956 Cum. Supp., Code 1950, 1 the note provided for payment of 2 1/2 per cent per month on unpaid principal not in excess of $300 and 1 1/2 per cent per month on the remainder of the principal.
Two payments of $37.53 were made by defendants before they defaulted and Cyrus B. Londeree filed his voluntary petition in bankruptcy on June 21, 1956, in which he listed the balance due plaintiff as one of the items of indebtedness.
The petition in bankruptcy disclosed that Londeree was indebted in the sum of $1,190, in excess of what he had listed in the financial statement, the greater part of which existed on March 1, 1956. Part of the excess consisted of an item of $300 that had been borrowed by defendants prior to March 1, 1956, from Household Finance Company, and part was represented by a balance of $269.50 owing on a loan theretofore obtained from Royal Loan Company. Additional smaller items, some incurred prior to March 1, 1956, made up the balance. No opposition to defendant's discharge in bankruptcy was interposed, and it was granted in due course.
Londeree was called as an adverse witness and asked if he did not know when he signed the financial statement that he was indebted to Household Finance Corporation and to Royal Loan Company. His answer was that he knew that he was indebted to those companies but in explanation of why he did not include those items on the statement, he said, 'Well, I just didn't put them on there, didn't think about them at the time.'
When the statement was offered in evidence by plaintiff § 6-314, Code 1950, was invoked by defendants, and they insisted that under its provisions, the statement was inadmissible. That section reads as follows:
'No written financial statement given by any applicant for a loan, or by any borrower, to a licensee under this chapter, shall be received in evidence, or otherwise used, against such applicant, or borrower, in any proceeding to recover the indebtedness incurred in connection with which the statement was given; nor shall any such statement be used in opposition to the granting of a discharge in bankruptcy.'
The court admitted the statement subject, however, to a final ruling on its admissibility after all the evidence had been heard. At the conclusion of the case it ruled that the last two lines of § 6-314, i.e., '[Nor] shall any such statement be used in opposition to the granting of a discharge in bankruptcy,' were invalid because that provision invaded the field occupied by the Bankruptcy Act and was in effect an attempted amendment of that legislation. The court, however, found that clause to be severable from the other part of § 6-314 which it held to be constitutional. This resulted in the exclusion of the written statement, and the court then concluded that on the evidence plaintiff was not entitled to recover and judgment was entered for defendants.
By plaintiff's several assignments of error, it is in effect asserted that (1) the oral evidence, exclusive of the financial statement, establishes its right to recover, (2) § 6-314 is not applicable to this action, (3) § 6-314 is void because (a) it is in derogation of the Bankruptcy Act, (b) denies due process of law to plaintiff, and (c) is class legislation that denies equal protection of the law to plaintiff.
The evidence fails to show that Bessie Londeree made any oral representations before the financial statement was executed. Though it does show that the oral statements made by Cyrus B. Londeree about their indebtedness were not full and complete, yet they were not untrue. Nor does it appear from the testimony that on February 29 when the oral statements were made upon which a right to recover is now asserted that he made any statements or representations that he owed no debts other than the items thereafter included in the writing.
When fairly appraised, the oral statements made by Cyrus B. Londeree on February 29 are thus clearly insufficient to sustain a finding that they were untrue or that plaintiff relied upon them when it made the loan.
This brings us to the question of whether or not the provision of § 6-314 prohibiting the admission in evidence of the statement against a borrower is applicable to this character of action.
The identical amount of principal, i.e., $555.83 owing by defendants after crediting the two monthly payments on the debt is the sum sued for. The only damage claimed to have been sustained by plaintiff is loss of the unpaid balance of the money allegedly advanced upon the representations contained in the financial statement. It evidently elected to proceed in tort against defendants and refrained from attempting to recover that sum in an action ex contractu because the contractual obligation of Cyrus B. Londeree had been discharged in bankruptcy. Yet its present claim arose out of the transaction and unless § 6-314 was intended to apply to this action, it is ineffectual and meaningless. That is necessarily true because if the action had been on the note and defendants' debt had been discharged in bankruptcy but the discharge not pleaded, or if it had not been discharged in bankruptcy, there would be no point in offiering the statement in evidence. It could be of no value in such an action. The word 'indebtedness' as used in the act must be accorded its full scope and broad meaning -- state of being indebted -- so that the legislation may accomplish its obvious purpose.
The contention that this action is in tort and that an action of...
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