VS. ADV. NO. 98-5046






This matter is before the Court on the plaintiff=s Motion for Judgment on the Pleadings or for Summary Judgment. The plaintiff seeks a ruling that two claims against the debtors/defendants are nondischargeable pursuant to 11 U.S.C. ''523(a)(2)(A) and (a)(6). This Court has jurisdiction of this matter pursuant to 28 U.S.C. '1334(b); it is a core proceeding pursuant to 28 U.S.C. '157(b)(2)(I). For the reasons set our below, this Court finds that the plaintiff is entitled to judgment as a matter of law.

The plaintiff initiated this matter by filing its Complaint on June 26, 1998. The Complaint alleged that the plaintiff was the holder of two claims against the defendants in the amounts of $15,038.07 and $9,343.76. The debts were incurred on July 8, 1997. For its '523(a)(2)(A) cause of action the plaintiff alleged that the defendants had secured credit from it by false pretenses, including representations that the defendants would close certain accounts being paid in full by loan proceeds from the Plaintiff. The defendants reopened some of these accounts, however, and incurred additional indebtedness. The Complaint further alleged that the written statement submitted by the defendants concerning their financial condition was materially false in that it failed to include certain debts which the defendants owed at the time. The Complaint alleged that the written statement was made with the intent to deceive the plaintiff, and that the plaintiff reasonably relied on it and on the defendants= promises to close paid-off accounts.

For its '523(a)(6) cause of action the plaintiff alleged that the defendants engaged in conduct constituting willful and malicious injury to the property of the plaintiff by knowingly failing and refusing to take steps necessary for the perfection of the plaintiff=s security interest in collateral. The collateral, a 1997 Chevrolet Cavalier, was encumbered by two liens at the time the defendants sought credit from the plaintiff. The Complaint alleged that the defendants failed to obtain a release of lien, sought further credit from the lienholder shortly after obtaining credit from the plaintiff, and delivered the title to the subject vehicle to the lienholder for the purpose of granting it a security interest therein.

The defendants= Answer, filed on July 7, 1998, asked the Court to dismiss this matter based on the fact that the Complaint was filed twenty days after the Order of Discharge had been entered in the defendants= case. The Order of Discharge was entered on June 3, 1998. The plaintiff then filed a Motion for Judgment on the Pleadings or for Summary Judgment. Attached to the Motion was a copy of an Order Extending Time for Filing Dischargeability Complaint which had been entered on May 8, 1998. Therein the time in which the plaintiff could file a Complaint under 11 U.S.C. '523 or '727 was extended up to and including sixty days from the date of entry of the Order. The plaintiff therefore had until July 7, 1998, to file its Complaint.

As pointed out by the plaintiff in its Motion, the defendant=s Answer failed to respond to the allegations of the Complaint. Pursuant to FRBP 7008, which makes FRCP 8 applicable in bankruptcy, the effect of failure to deny the allegations of a complaint is that they are admitted. Therefore, the plaintiff argued that considering the pleadings as a whole, it was entitled to the judgment sought in its Complaint. The plaintiff further argued that even if the defendant=s Answer raised an affirmative defense, it was entitled to summary judgment because the Court had clearly granted the plaintiff an extension of time in which to file its Complaint. The defendants filed a Response to the plaintiff=s Motion on September 10, 1998, which consisted of a general denial of the allegations of the Complaint and a request that the Complaint be dismissed.

At the hearing on the plaintiff=s Motion, counsel for the defendants did not appear. Counsel for the plaintiff was directed to submit a proposed judgment and affidavits for the Court=s review. On October 13, 1998, the defendants moved the Court to set aside any action taken at the hearing on the grounds that defendants= counsel became ill and was unable to appear at the hearing. This motion was filed again on October 26, 1998. The plaintiff filed a Response on November 3, 1998, directing the Court=s attention to the fact that the defendants had not responded to its Motion in such a way as to prevent entry of a Summary Judgment. The plaintiff set out FRBP 7056(e) which provides:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party=s pleading, but the adverse party=s response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

Simultaneously with its Response, the plaintiff filed supporting affidavits. One was provided by a loan officer for the plaintiff and the other by plaintiff=s counsel.

The affidavit of plaintiff=s counsel stated that he had attended the first meeting of creditors in the defendants= bankruptcy case, and that they testified that they began using check cashing entities before they obtained loans from the plaintiff. He stated that they also testified that they did not remember whether they advised employees of the plaintiff of their dealings with check cashing entities. He finally stated that according to the NADA Guide for December 1997, the retail value of the vehicle serving as collateral for the secured loan was $11,325.00.

The affidavit of the loan officer stated that the plaintiff had attempted to verify the financial status of the defendants by requesting a credit report on each of them. Copies of these reports were attached. Based on the information contained there, and on the information provided on their financial statement the plaintiff determined that it would grant both a loan secured by the 1997 Chevrolet Cavalier and a consolidation. The loan officer further stated that if the plaintiff had been aware that the defendants were indebted to various check cashing entities (these transactions did not show up on the credit reports), that it would not have granted the defendants a consolidation loan.

Counsel for the defendants failed to appear for the hearing he had noticed for hearing on November 12, 1998, and, on November 17, 1998, this Court entered an Order Overruling Motion to Set Aside Action. Now, after considering the pleadings and the arguments advanced by the plaintiff, and the failure of the defendants to file any responsive pleading or bring forth any facts showing that there is a genuine issue for trial, this Court has concluded that the plaintiff is entitled to judgment as a matter of law that the debts owed to it are nondischargeable. Further, on its 11 U.S.C. '523(a)(6) cause of action it would be entitled to judgment in an amount equal to the value of the collateral securing its loan. On its 11 U.S.C. '523(a)(2)(A) cause of action (which includes both loans) it is entitled to judgment in an amount equal to the sums due on the loans, $9,627.89 and $14,269.00, plus interest thereon from October 15, 1997 as provided in the notes to the date of entry of judgment with interest thereafter at the federal judgment rate. A judgment in conformity with this opinion will be entered separately.



By the Court -





Copies to:


Dean A. Langdon, Esq.

Mark Fitzgerald, Esq.