UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
WILLIAM ERIC CHARLES
SUSANNA D. CHARLES
d/b/a C & C Auto Sales
DEBTORS CASE NO. 90-00307
JIM FANNIN MOTORS, INC.
d/b/a Fannin Motors PLAINTIFF
VS. ADV. NO. 92-1006
WILLIAM ERIC CHARLES
d/b/a C & C Auto Sales DEFENDANT
This matter is before the Court on the plaintiff's Motion for Summary Judgment. The defendant has not responded to the Motion. The plaintiff asks for Summary Judgment on its Adversary Complaint, deeming the debt in question non-dischargeable and awarding it its costs and attorney's fees. 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).
The plaintiff initiated this action by the filing of its Adversary Complaint on March 2, 1992. Therein it was alleged that the defendant had purchased certain motor vehicles from the plaintiff for the sum of $41,000.00, taking possession of all the vehicles. It was further alleged that the defendant tendered four checks in payment for these vehicles: check number 3424 for $7900.00; check number 3411 for $17,100.00; check number 3425 for $4100.00; and check number 3295 for $12,000.00. The first three checks were dishonored due to insufficient funds. The fourth check was dishonored because the account was closed. These sums have not been paid.
In his Answer, filed herein on March 30, 1992, the defendant admitted the allegations set out above. He denied that he refused to pay the sums owed to the plaintiff and denied that he obtained the possession of the vehicles, converted them, incurred the debt owed to the plaintiff, or tendered checks he knew would be dishonored by false pretenses, false representations or actual fraud. The plaintiff filed his Motion for Summary Judgment on May 12, 1992. The defendant was allotted time for a response but did not file one.
Pursuant to 11 U.S.C.'523(a)(2)(A), a debt for money, property, services or credit is not dischargeable to the extent it was obtained by false pretenses, false representation, or actual fraud. The standard of proof in an action pursuant to '523(a) is a preponderance of the evidence. See Grogan v. Garner, 111 S.Ct. 654 (1991).
A creditor who seeks to except a debt from discharge pursuant to'523(a)(2)(A) "must prove that the debtor obtained money through a material misrepresentation that at the time the debtor knew was false or made with gross recklessness as to its truth. The creditor must also prove that it reasonably relied on the false representation and that its reliance was the proximate cause of its loss." In re Phillips, 804 F.2d 930, 932 (6th Cir. 1986). The plaintiff maintains that by tendering checks on accounts in which were deposited insufficient funds or which were closed, the defendent acted so as to come within the purview of this section.
The plaintiff has offered into evidence the Affidavit of Gary Fannin, the plaintiff's president. Mr. Fannin states at&4 of his Affidavit:
When these checks were tendered to me, he represented to me that he would forthwith deposit sufficient funds in his accounts to cover the checks. I waited a couple of days before I deposited them. After they were returned, I talked to him and he said he would make them good, which he has not done. I never would have given him possession of the vehicles he purchased if I had known that the checks would be dishonored.
The question then becomes whether the plaintiff's reliance on the false representation was reasonable. Mr. Fannin's statement, in the absence of any other evidence, does not clearly establish reasonable reliance. In fact, what he seems to be saying is that he knew at the time the checks were tendered that the defendant did not have funds to cover them in his account. The plaintiff has not presented any evidence as to the reasonableness of allowing the defendant to take possession of the cars in light of this knowledge.
In consideration of all of the foregoing, it is therefore the opinion of this Court that the plaintiff has not carried forward his burden of establishing that there is no genuine issue as to any material fact and that he is entitled to judgment as a matter of law. This Court will therefore overrule the plaintiff's Motion for Summary Judgment by separate order.
By the Court -
Robert L. Woolery, II, Esq.
William Eric Charles
Bruce Levy, Esq., Trustee