UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
DEBTORS CASE NO. 96-60554
FIRST AND FARMERS BANK PLAINTIFF
VS. ADV. NO. 96-6038
CHARLES O. SEARS DEFENDANT
This matter is before the Court having been submitted for consideration on the record by an Agreed Order entered on June 23, 1997. The issue before the Court is whether a debt from the defendant to the plaintiff is excepted from discharge pursuant to 11 U.S.C.'523(a)(2)(B). 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 defendant/debtor, Charles O. Sears, filed his Chapter 7 petition in this Court on July 29, 1996. He was engaged in the business of buying and selling cattle, and in that regard had occasion to borrow money from the plaintiff. The documentary evidence submitted herein, as well as the stipulations entered into by the parties, indicate that the defendant borrowed funds on three different occasions. He executed promissory notes and security agreements on April 2, 1992, March 31, 1994, and April 4, 1995, granting security interests in 78, 32, and 50 head of "mixed beef cows" respectively. These security interests were properly perfected.
In addition to the plaintiff, the defendant was also indebted to the United States (Farmers Home Administration) and to Citizens National Bank. These creditors also took security interests in cattle owned by the defendant; the plaintiff was aware of this at the time the funds were loaned. The plaintiff does not claim to have the first and best lien among these creditors. The question of priority has not been put before the Court.
Over time, the defendant sold a total of 75 head of cattle, the proceeds of which were paid to all three creditors. Just before filing his bankruptcy petition, the defendant sold his remaining cattle. The proceeds of this sale are now in Certificates of Deposit totaling $7,393.81, and are currently being held by the case trustee pending determination of priority of interest.
In order to except a debt from discharge pursuant to 11 U.S.C.'523(a)(2)(B), the plaintiff must demonstrate that the defendant obtained money, property, services, or an extension, renewal, or refinancing of credit, by use of a statement in writing that is materially false respecting the debtor's financial condition, on which the creditor reasonably relied, and that the debtor caused to be made or published with intent to deceive. The party objecting to discharge must prove by a preponderance of the evidence that the discharge should be denied. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 660, 112 L.Ed.2d 755 (1991).
The main thrust of the plaintiff's argument is that the defendant sold cattle upon which it had liens, and did not pay over the proceeds. It has presented neither evidence nor argument concerning the elements of'523(a)(2)(B). Perhaps there is a '523(a)(6) or even a lien priority question lurking in this matter, but the plaintiff has not carried its burden of demonstrating that the defendant intentionally deceived it with a materially false financial statement. This Court will therefore dismiss the plaintiff's Complaint by separate order.
By the Court -
Charles J. McEnroe, Esq.
Bruce W. Singleton, Esq.
James R. Westenhoefer, Esq., Trustee