Public Finance Corp. v. Xarhakos

• Decision Date: 20 February 1964
• Docket Number: No. 14-626-8982,14-626-8982
• Citation: 2 Conn.Cir.Ct. 469,202 A.2d 255
• Court: Circuit Court of Connecticut. Connecticut Circuit Court, Appellate Division
• Parties: PUBLIC FINANCE CORPORATION v. George XARHAKOS.

Page 255

202 A.2d 255

2 Conn.Cir.Ct. 469

PUBLIC FINANCE CORPORATION v. George XARHAKOS.

No. 14-626-8982.

Circuit Court of Connecticut, Appellate Division.

Argued Nov. 4, 1963.

Decided Feb. 20, 1964.

Paul Pasquariello, Torrington, for appellant (plaintiff).

Thomas P. Heslin, Hartford, for appellee (defendant).

JACOBS, Judge.

The Public Finance Corporation, hereinafter referred to as the finance company, of Hartford, a duly licensed small loan company, brought this action to recover the balance due it on a note, alleging, in substance, that on May 19, 1961, it made a loan to the defendant in reliance on a written statement given to it by the defendant in which he stated that the total amount of his debts, excluding his then indebtedness to the plaintiff, was $2540. It is further alleged that this statement was materially false in that in addition to the debts disclosed, the defendant was then, in fact, indebted to various other creditors in substantial amounts. The execution, delivery and terms of the note are not in dispute. The defendant has pleaded discharge in bankruptcy as a special defense.

The findings made by the trial court, with such corrections as the plaintiff is entitled to, disclose these facts: The defendant and his wife were separated and had been living separate and apart for about eight years prior to May 19, 1961. He was employed as a chef at the Heublein Hotel, in Hartford, where he also maintained his residence. He and his wife were perennial borrowers of the finance company, having singly or jointly over the years received twenty prior loans which were either paid in full in due course or by renewal note as the balance was reduced from time to time. On May 19, 1961, having arranged with the manager of the finance company by telephone for an additional loan, the defendant signed and delivered to the finance company the note which is the subject matter of this suit, in the sum of $600, which covered a balance of $460.42 in discharge of a former loan and $5 for life insurance, thus making available to the defendant $134.58 in cash. His purpose in requesting the loan was to buy clothes for his children. When he went to the office of the finance company to arrange for the additional loan, he was asked to furnish it with a financial statement which was a single sheet of paper containing on its face 'more than 100 rectangles indicating different areas of information' and was 'calculated to assist [the finance company] in determining an applicant's ability to repay the loan.' The manager of the finance company, who was familiar with the defendant's 'previous accounts,' filled in and completed the printed form, showing the indebtedness of the defendant to the finance company as well as two other loans he had received. The statement of May 19, 1961, corresponded closely to and was substantially the same as a written statement which the defendant had given the finance company on December 13, 1960, except for relatively minor variations in amounts. The printed form also contained a rectangular section in the lower right-hand side within which appeared this caveat: 'NOTE: If the applicant did not personally fill out this statement in his/her handwriting, he/she must write at (x) 'I have no other debts than stated above." The defendant did not write the words quoted above on the line designated as (x) nor was he directed to do so by the manager. The discharge order, dated March 26, 1962, recited that the defendant was discharged from all debts and claims provable under the Bankruptcy Act, 'except such debts as are by said Act, excepted from the operation of a discharge in bankruptcy.' In his bankruptcy schedules, the plaintiff was duly listed as a creditor. We agree with the plaintiff that an examination of the schedules which were received in evidence showed that in addition to those debts disclosed in the financial statement the defendant was indebted to other creditors in rather substantial amounts.

The trial court found that the defendant, while he executed the financial statement, did not at any time make a materially false statement in writing respecting his financial condition; and it further found that the finance company did not rely upon the statement in making the loan.

The Bankruptcy Act, § 17, sub. a (2), as amended in 1960, provides in part: '(a) A discharge in bankruptcy shall release a bankrupt from all of his provable debts, whether allowable in full or in part, except such as * * * (2) are liabilities for obtaining money or property by false pretenses or false representations, or for obtaining * * * an extension or renewal of credit in reliance upon a materially false statement in writing respecting his financial condition made or published or caused to be made or published in any manner whatsoever with intent to deceive * * *.' 52 Stat. 851, as amended, 11 U.S.C. § 35, sub. a(2) (Sup. 2, 1960); see Consolidated Plan of Connecticut, Inc. v. Bonitatibus, 130 Conn. 199, 33 A.2d 140; Fidelity & Casualty Co. v. Golombosky, 133 Conn. 317, 50 A.2d 817, 170 A.L.R. 361. 'Loans secured by means of false financial statements come within this classification if it can be proved that the representations as to the debtor's financial condition were in fact false and were made with the intention of defrauding the creditor who relied thereon and was misled by them, and that the loan was in fact based upon such representation.' Personal Finance Corporation v. Robinson, Sup., 27 N.Y.S.2d 6, 8; see 8B C.J.S. Bankruptcy § 573; Family Small Loan Co. v. Mason, 67 F.2d 207 (4th Cir.); In re Day, 11 F.Supp. 400 (D.Mass.). 'To bring a claim within the exception, from discharge, of money or property obtained by false pretenses or false representations, it must appear that the particular acts or statements were relied upon by the creditor in making the sale or loan, and it must further appear that such reliance was justified under the circumstances.' 9 Am.Jur.2d 586, Bankruptcy, § 783. 'It must * * * affirmatively appear that such representations were knowingly and fraudulently made, and that they were relied upon by the other party.' 1 Collier, Bankruptcy (14th Ed.) p17.16; see 7 Remington, Bankruptcy (6th Ed.) § 3143; notes, 133 A.L.R. 440, 17 A.L.R.2d 1208.

'Let us take one aspect of the case: reliance. * * * [R]eliance in the end is to a considerable degree a matter of one's opinion.' Wylie v. Ward, 292 F.2d 590, 592 (9th Cir.). 'It is clear that failure to list standing alone, unless relied upon by the creditor, is insufficient to upset the bankruptcy discharge.' Public Finance Corporation v. Callopy, Ohio Mun., 164 N.E.2d 205. That the loan in the instant case was hurriedly made and hastily given is borne out by the finding that '[t]he entire conference between the defendant and the plaintiff's...