Opinion
No. 05-51161, Adversary No. 06-4044.
March 8, 2007
MEMORANDUM RE DEFAULT
Nationwide Northwest Limited Partnership filed this adversary proceeding against defendant debtor Raymond D. Andersen, seeking a determination that his obligation under the installment sale contract is nondischargeable under § 523(a)(2)(A) of the Bankruptcy Code (11 U.S.C.). Mr. Andersen purchased a Jeep Cherokee from a car dealer whose position Nationwide apparently took over.
Absent contrary indication, all "Code," chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101- 1330 prior to its amendment by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. 109-8, 119 Stat. 23, as the case from which the adversary proceeding arises was filed before its effective date (generally 17 October 2005).
Andersen did not answer, and I entered an Order of Default (docket no. 6). Nationwide thereafter sought entry of a judgment of nondischargeability. I declined to enter that judgment, indicating by letter (docket no. 13) that the proof appeared insufficient, and inviting further briefing or a prove-up hearing.
Nationwide chose the latter, and that hearing was held 6 February 2007. James Whitman, Nationwide's General Manager, testified by telephone. Exhibits A and B to his previous declaration (docket no. 17), defendant Andersen's credit application and the retail installment contract, were admitted. Because they are already in the record of this adversary proceeding, no physical copies were marked or kept.
To establish nondischargeability under § 523(a)(2)(A), Nationwide Northwest must prove:
the creditor must establish (1) that the debtor made a representation; (2) the debtor knew at the time the representation was false; (3) the debtor made the representation with the intention and purpose of deceiving the creditor; (4) the creditor relied on the representation; and (5) the creditor sustained damage as the proximate result of the representation.
In re Apte, 96 F.3d 1319, 1322 (9th Cir. 1996) (citations omitted).
Having considered the evidence and the argument of counsel, including Nationwide's post-hearing memorandum (docket no. 22), and even overlooking disconnects, such as:
1. The fact that whatever representations Mr. Andersen made were to the car dealer, not Nationwide — he could be liable to Nationwide if he knew or had reason to believe Nationwide was going to rely on his representations, Restatement (Second) of Torts § 533 (1977); In re Maldonado, 228 B.R. 735, 738-39 (9th Cir. BAP 1999), but there is no evidence one way or the other;
2. It is not clear that Nationwide advanced any credit pre-bankruptcy (the application was made on 11 October 2006, the bankruptcy was filed on 12 October 2006); and
3. Nationwide itself characterizes its transaction as the purchase of the loan made by the car dealer (paragraph 3, Whitman Declaration);
Nationwide's case fails.
There is no evidence of any oral representations of any sort (no one who took part in the initial transaction between Andersen and the car dealer testified), and there are no written representations in Exhibit A except those respecting his employment. Notably, there is no information about his credit history or financial status, and the questions about bankruptcy, judgments, etc., are unanswered. Nationwide relied on a credit report it obtained, and made its credit decision on that information.
Nationwide argues from the timing that at the time of his purchase of the Jeep Cherokee Mr. Andersen must have known he intended to file for bankruptcy, and impliedly represented his intention to continue to be legally bound by the contract, which representation he breached by failing to reaffirm. In fact, his statement of intention (Official Form 8 filed with his petition in the main case, of which I take judicial notice) indicates "debtor will retain collateral and continue to make regular payments." Of course, as Mr. Andersen filed his bankruptcy case before the effective date of BAPCPA, that "third option" was available in this Circuit. In re Parker, 139 F.3d 668 (9th Cir. 1998).
Review of the docket in the main case also discloses first, that Mr. Andersen did not seek to exempt the Jeep, and second, that Nationwide evidently failed to perfect its security interest, as the trustee's motion to sell the vehicle (docket no. 11) indicates the trustee was not aware of any liens, and the docket discloses no objection from Nationwide. I ultimately entered an order authorizing the auction of the vehicle (docket no. 23).
But even the cases Nationwide cites in its post-hearing brief do not support its position: the two cases quoted (In re Green, 296 B.R. 173, 180 (Bankr. C.D. Ill. 2003) and In re Schnore, 13 B.R. 249 (Bankr. W.D. Wis. 1981) speak in terms of intent to pay, rather than intent to be bound, and the third case, In re Wright, 8 B.R. 625 (Bankr. S.D. Ohio 1981) was decided on the basis of the debtor's knowing "at the time she made the subject purchases that she was not able to pay for the items in the future . . . (and) without any sincere intention to pay for them." None of these cases, credit card cases all, holds that a debtor impliedly represents an intent to continue to be bound under the contractual arrangement. And Ninth Circuit law is that the debtor makes an implied representation of an intent to perform the contract by repaying the amount charged. In re Anastas, 94 F.3d 1280, 1285 (9th Cir. 1996) (also a credit card case).
In this case there is simply no evidence that, at the time he purchased the Jeep, Mr. Andersen did not intend to pay for it. Because it was not exempt, and because Nationwide had not perfected its security interest, the trustee sold the Jeep, a fact which would obviously have some impact on Mr. Andersen's willingness to continue paying for it. In short, I cannot find that Nationwide has proven that, at the time Mr. Andersen purchased the Jeep, he did not intend to pay for it in accordance with the terms of the retail installment contract.
Nor is it evident that Nationwide's reliance on any implied representation was justified. It went ahead with the transaction, notwithstanding Mr. Andersen's failure even to answer the questions respecting bankruptcy, judgments, etc., on his credit application (Exhibit B).
Accordingly, the debt is not excepted from discharge, and I will enter judgment for Defendant Raymond D. Andersen.