Army Aviation Center Federal Credit Union v. Call (In re Call)
Docket: Bankruptcy No. 80-0375
Court: United States Bankruptcy Court, M.D. Alabama; January 29, 1981; Us Bankruptcy; United States Bankruptcy Court
On December 9, 1980, a Complaint was filed to determine the dischargeability of debts totaling $4,328.40 owed by the Debtor. The Plaintiff alleged that the Debtor secured two loans from the Credit Union—one for $3,164.40 on March 7, 1980, and another for $2,000.00 on September 8, 1980—through false pretenses, fraud, and misrepresentation. Specifically, the Debtor allegedly provided false financial statements to induce the Plaintiff to grant these loans. The Complaint noted that the Debtor filed for bankruptcy on September 30, 1980, shortly after receiving the second loan. A hearing was scheduled for January 14, 1981, with proper notice given to all parties involved.
The Defendant, who returned from the Canal Zone in November 1978, established residency in Dale County and initially borrowed $500.00 from the Plaintiff to establish credit. In early 1980, she planned to purchase a uniform shop and applied for a loan, omitting certain debts—specifically, a debt of $531.46 to Danley Furniture Company and $507.00 to Leon’s of Dothan—from her financial statement. After receiving a loan of $2,650.00 for the business acquisition, the Defendant later sought an additional loan to purchase rental uniforms as her business was struggling. She submitted another application listing some debts but did not disclose all existing liabilities.
A $2,000 loan was issued to the Defendant, which was later replaced after the original check was reportedly lost in the mail. By the time of the loan application on September 8, 1980, the Defendant had accumulated additional debts totaling $9,669.97, which she did not disclose to the lender. These debts included amounts owed to various companies between March and September 1980. The Defendant informed the lender, Mr. Blair, about the lost check on September 29, 1980, and requested a replacement, which was subsequently issued. On the same day, she endorsed the new check and used the funds to pay suppliers, including for rental uniforms, amidst rising costs and demands for payment from her suppliers.
The Defendant had consulted her attorney regarding her financial situation shortly before filing for bankruptcy on September 30, 1980. Although the Complaint alleged that the Defendant made materially false financial statements on March 7 and September 8, 1980, the court found no evidence of such false statements on those dates that would have influenced the loan approval. However, the court determined that the Defendant's request for a new check on September 29, 1980, knowing she was heading into bankruptcy, constituted fraud. Therefore, the $2,000 loan should not be discharged in bankruptcy, as it was obtained through false pretenses. The court also noted that the debts alleged in the Complaint were incurred after the March 7 statement and thus were not relevant for that date's financial disclosure. The Credit Union did not effectively utilize its guidelines to assess the Defendant's financial condition during the loan approvals.
Loans provided on the specified days were classified as personal loans, despite the Plaintiff's awareness of the Defendant's business operations and the loans' business purpose. The Plaintiff did not secure any collateral and relied solely on the Defendant's personal creditworthiness. Following a consultation with her attorney on September 22, 1980, Mrs. Call requested the Plaintiff to issue a new check for $2,000 on September 29, intending to replace a previous check issued on September 8. At that time, she was aware she would be unable to repay the debt and planned to file for bankruptcy shortly thereafter. This conduct is characterized as a deceptive scheme intended to defraud the Plaintiff of $2,000, irrespective of Mrs. Call's perception of her actions. Such behavior has been previously defined as false pretense, false representation, or actual fraud. The use of credit cards just before declaring bankruptcy constitutes fraud against the card issuer. Misrepresenting an intention to repay can demonstrate the necessary intent to deceive. An appropriate Order will be issued.
