Case No. 1-01-02703, Adv. No.: 1-01-00207United States Bankruptcy Court, M.D. Pennsylvania.
October 16, 2002
Thomas Miller, Esquire, for the Plaintiff.
Gary Imblum, Esquire, for the Defendant.
MEMORANDUM[1]
JOHN J. THOMAS, Bankruptcy Judge
Procedural History
Holly G. Deitrich (Debtor) filed a Petition in Chapter 7 on May 9, 2001. Miller Shultis, P.C. (Miller) filed the instant adversary Complaint on August 24, 2001. The Complaint cited 11 U.S.C. § 727(a)(3), under which a debtor may be denied a general discharge if he has concealed, destroyed or falsified records. However, the trial of the case revealed that Miller’s intent was to contest the dischargeability of an unsecured debt for legal services which Miller had rendered to Debtor in her divorce case. Section 523, not Section 727, is the proper Section to use to contest dischargeability of a debt. The Complaint was never amended to invoke Section 523.[2]
The Debtor did not move to dismiss the Complaint for failure to state a cause of action. The parties appear to have agreed that the case should proceed under Section 523(a)(2)(A), as both briefs focused solely on that Section. Therefore, the Court will not address any issues of the sufficiency of notice to the Debtor in this case, but will decide the matter under § 523(a)(2)(A) as if there had been no procedural irregularities.
Miller’s Complaint claimed that Debtor had made multiple representations, over the course of a several year period, to the effect that she would pay Miller’s fees through whatever proceeds she received from the division of marital property. Miller avers that he continued to represent her through numerous proceedings in reliance on those multiple representations. Miller avers that when Debtor finally did receive a liquidated sum from her ex-husband’s retirement account, Debtor did not pay Miller’s bill as promised, but instead used the money to buy a new car. A hearing was held on these allegations, and the matter is ripe for decision.
This Court has jurisdiction pursuant to 28 U.S.C. § 157 and 1334. This matter is core pursuant to 28 U.S.C. § 157(b)(2)(I).
Discussion
11 U.S.C. § 523(a)(2)(A) provides, in pertinent part, that a general discharge does not discharge an individual debtor from any debt for services to the extent obtained by false pretense, a false representation, or actual fraud. To exempt a debt from discharge based upon fraud, the creditor has the burden of proving, by a preponderance of evidence, that the debtor made a representation with the knowledge that it was false and with the intention and purpose of deceiving the creditor, that the creditor relied on such representation, and that the creditor sustained the alleged loss and damage as a proximate result of the representation having been made. In Re: Cirineo, 110 B.R. 754 (Bankr.E.D.Pa. 1990); In Re: Freeman, 68 B.R. 904 (Bankr.M.D. Pa. 1997); Grogan v. Garner, 498 L.Ed.2d 755 (1991). Exceptions to discharge are to be strictly construed in favor of dischargeability. In Re: Hudson, 107 F.3d 355 (5th Cir. 1997); In Re: Peters, 133 B.R. 291, affd, 964 F.2d 155 (2d Cir. 1992).
At the hearing of the instant case it was established that as of March of 1998, Debtor had been up-to-date in her payment obligations to Miller pursuant to their written fee agreement. Miller produced no addendums, novations, or other alterations to the fee agreement thereafter. Rather, Miller takes the position that each time thereafter that Debtor orally stated that she would pay the firm, she made a new agreement to pay, and that in at least one of those new agreements she falsely represented her intent.
The Court cannot find from the simple fact that Debtor did not pay Miller the remainder of her bill that Debtor knew, on one of the occasions when she uttered words to the effect that she would pay, that she would not in fact pay him. It was undisputed that Debtor signed a Power of Attorney form authorizing that the settlement check from her ex-husband’s retirement account be sent directly to Miller. Clearly, she would not have done so if she did not intend for Miller to be paid from those funds. The Court cannot take it on Miller’s unsupported allegation that Debtor emasculated that Power of Attorney by orally contacting the retirement account administrator and countermanding it. By all reasonable appearances, the fee dispute arose when the settlement check from the retirement account turned out to be smaller than the parties thought it would be. When Debtor received it she asked Miller to look into why the check was so small, but Miller would agree to do so only if she brought the check to him and he was paid. Debtor refused to comply, and Miller did not pursue the matter. By all appearances, Debtor decided, at that point in time, to refuse to pay Miller since she felt Miller had not obtained for her the entire amount to which she was entitled. While the basis for this choice by the Debtor is certainly questionable, the decision itself does not necessitate a finding that Debtor never intended to pay Miller even while she was repeatedly promising to do so.
Accordingly, an Order will be entered to grant judgment in favor of the Debtor.
An Order will follow.
ORDER
For those reasons indicated in the Opinion filed this date, IT ISHEREBY
ORDERED that judgment is hereby granted in favor of the Defendant, and the Complaint in the above-captioned adversary matter is hereby dismissed.