This matter is submitted, following trial, on the complaint of American General Finance of America, Inc. (hereinafter "AGF") requesting that a debt owed to AGF by the defendant debtor be excepted from discharge under title 11 U.S.C. § 523(a)(6) as a debt for willful and malicious injury to property of AGF.

On June 26, 1995 the debtor purchased a hot tub, cover and kit from L.A. Spas of Lexington for a cash sale price of $3,280.70. The sale is evidenced by a retail installment contract executed by the seller and buyer on that date.

Prior to the sale the seller, L.A. Spas of Lexington, had on August 5, 1994 entered into a Dealer Operating Agreement with AGF whereby AGF agreed to purchase from L.A. Spas retail installment contracts covering the sale of spas and gazebos. The retail installment contract executed by L.A. Spas and the debtor was assigned to AGF. The retail installment contract form evidencing the transaction was provided to the dealer by AGF and in completing the contract, including the financial disclosure information therein, L.A. Spas through its manager, Don Hart, was acting as an agent of AGF. After credit of a small down payment and addition of finance charges the contract called for the debtor to make 60 payments of $74.45 or total payments of $4,467 for purchase of the hot tub and accessories. The payments were to commence on June 26, 1995. The contract was executed on behalf of L.A. Spas of Lexington by Don Hart, Manager.

The seller delivered and installed the hot tub in the yard at the home of the debtors at 432 Patchen Drive, Lexington, Kentucky.

Soon after the purchase of the hot tub the debtor and his wife Teresa Faye Agee, who was unaware of the purchase before it was made, concluded they could not make the payments called for by the contract.

The defendant debtor made arrangements to return the hot tub to the dealer for resale. The dealer picked up the hot tub and placed it on sale on consignment at the dealer’s store. In December of 1995 the dealer sold the hot tub to a customer for $2,000. Mr. Hart allegedly charged the debtor $100 for L.A. Spa’s services in making the sale.

On December 8, 1995, $2,000 representing the proceeds of sale was deposited in a checking account maintained by the debtor Teresa Faye Agee at Commonwealth Credit Union. The debtors used the proceeds of sale to pay household bills and living expenses. After the sale they continued to make the $74.45 monthly payments to AGF on the retail installment contract.

They made payments by check issued on the wife’s checking account on January 11, 1996, February 15, 1996, March 5, 1996, April 12 1996, and May 16, 1996, prior to filing their joint petition for relief under chapter 7 of the Bankruptcy Code on August 13, 1996. The bank account records indicate the debtors made at least three payments to AGF prior to the December 1995 resale of the hot tub.

The defendant debtor is a graduate of Eastern Kentucky University. He works as an employment counselor for the Commonwealth of Kentucky. The debtor, Teresa F. Agee, is employed as an automobile title clerk by Joe Holland Chevrolet.

Both debtors acknowledged an understanding of lien laws, at least with respect to the mortgage on their home and liens on cars. They were somewhat equivocal with respect to liens on consumer goods which are perfected without recording.

Both the husband and the wife testified that Mrs. Agee had called AGF prior to the sale and were advised they could sell the hot tub as long as they continued to make the payments on the contract. They could not identify the employee of AGF who had given them this advice. Witnesses for AGF testified they had no record of such a call, which ordinarily would have been referred to the manager or to the particular office of AGF handling the account. Representatives of AGF testified they first learned of the sale of the hot tub from the testimony of the debtors at the § 341 meeting (meeting of creditors) in their bankruptcy case on September 12, 1996.

The Dealer Operating Agreement between AGF and L.A. Spas is silent on the issue of the authority of the dealer to act for AGF in repossessing and selling items covered by a retail installment contract assigned to AGF. The retail installment contract is likewise silent on this issue.

L.A. Spas of Lexington is now out of business and the parties were unable to locate Don Hart, the former manager, and obtain his testimony.

The court is unable to find that the sale of the hot tub by the defendant debtor under the facts of this case was malicious.

The debtor utilized the services of the dealer/seller who was authorized to and did act as an agent of AGF in completing the retail installment contract. Whether or not the dealer was authorized to act for AGF in repossessing and selling items covered by such a contract, the dealer obviously was aware that it had sold the hot tub and that it had assigned the retail installment contract to AGF.

The fact the debtor arranged for the sale of the hot tub by orally consigning it to the dealer for resale mitigates against the conclusion that the debtor acted maliciously. The fact the debtors continued making payments to AGF on the retail installment contract after the sale of the hot tub further mitigates against the conclusion the debtor acted maliciously.

The court believes the dealer who was an agent of AGF, at least in preparing the retail installment contract, was under a duty to notify AGF of the sale.

In order for the debt in question to be excepted from discharge the conduct of the debtor resulting in injury to AGF must have been both willful and malicious. Assuming the conduct of the debtor in arranging the sale was willful, his conduct was not malicious.

Accordingly, the court is of the opinion the complaint of AGF in this adversary proceeding should be dismissed.

Dated:

By the court –

________________________________
JOE LEE, U.S. BANKRUPTCY JUDGE

Copies to:

John T. Hamilton, Esq.

Barbara M. Griffin, Esq.

Stephen Palmer, Esq., Trustee

U.S. Trustee

In conformity with the memorandum opinion of the court this day entered, IT IS ORDERED that the complaint of American General Finance of America, Inc. in this adversary proceeding be and the same is hereby dismissed.

Dated:

By the court –

_______________________________
JOE LEE, U.S. BANKRUPTCY JUDGE

Copies to:

John T. Hamilton, Esq.

Barbara M. Griffin, Esq.

Stephen Palmer, Esq., Trustee

U.S. Trustee