No. 78-B-453United States Bankruptcy Court, N.D. Illinois
April 29, 1980
Former Bankruptcy Act — Discharge of Debts — Nondischargeable Torts — Grain Sale
EISEN, Bankruptcy Judge
A debtor who previously survived market setbacks and fully anticipated that he could do so again, did not procure the creditor’s products by false pretenses under Section 17(a)(2) of the Bankruptcy Act although he accepted and attempted to sell the creditor’s shipments of grain. The court found that the bankrupt did not have the intent necessary to require non-dischargeability. See Sec. 17(a)(2) at ¶ 2146 and Sec.523(a)(2) at ¶ 9228.
[Digest of Opinion]
The issue determined in the instant case was whether the debtor continued to acquire grain from his creditor clients by false pretenses within the meaning of Section 17(a)(2) of the Bankruptcy Act.
The debtor was engaged in the business of purchasing various farm products, primarily soy beans and corn from farmers on contract. When the crops were harvested, the farmers would contact debtor and he would arrange to have the product trucked to market. Determinations of when to sell were made by the debtor based on market conditions. The instant controversy arose when certain shipments were taken to market for which the creditors were never paid, and at a time that the debtor decided upon bankruptcy.
The fraud which must be shown in a Section 17(a)(2) action must “in fact involve moral turpitude or intentional wrong; fraud implied in law, which may exist without imputation of bad faith or immorality, is insufficient. It must further affirmatively appear that such representations were knowingly and fraudulently made, and that they were relied upon by the other party.” A Collier on Bankruptcy, para. 17.16 at 1634-36 (14th Ed. 1978).
However, the court found, that the grain market is highly speculative. Pursuant to the debtor’s testimony he had survivied setbacks with market reversals and fully anticipated that he could do so again. Further, testimony adduced at trial indicated that the debtor neither directed nor urged the creditors to ship at any particular time. Accordingly, the court found that the facts of this case disclosed neither the positive fraud nor the actions accompanied by “reckless disregard for the truth tantamount to wilfull misrepresentation,” necessary to render an obligation non-dischargeable pursuant to Section 17(a)(2). Consequently, complaints to determine dischargeability were dismissed.