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In re:

Michael Joseph Dean,


Chapter 7

No. 92-41241-7

Carol Albritton,



Michael Joseph Dean,


Adv. No. 92-7153


This proceeding is before the court on the plaintiff's motion for summary judgment. The plaintiff is represented by counsel Steven M. Tilton and Donald R. Hoffman of Tilton & Hoffman of Topeka, Kansas. Defendant Michael Joseph Dean is represented by Stephen G. Bolton of Overland Park, Kansas. The court has reviewed the relevant pleadings and is now ready to rule.


The parties have agreed to the following facts.

On January 16, 1992, Clifford and Roma Coe agreed to sell Michael Joseph Dean (Debtor) a registered horse for $18,000. Dean gave the Coes a $7,000 downpayment and was to pay the remaining $11,000, plus 10% interest, on or before July 31, 1992. The Coes retained a security interest in the horse and any proceeds or products from it. Dean was not to transfer or encumber his interest in the horse without the Coes' prior written consent. The Coes also retained the horse's registration certificate until Dean paid for the horse. Dean has never paid the balance due. On March 12, 1992, Dean agreed to sell the horse to Carol Albritton, the plaintiff in this proceeding. She paid $25,000 down and was to pay the remaining $5,000, without interest, within one year.

To support her summary judgment motion, Albritton also relies on factual assertions drawn from an arbitrator's decision entered in a lawsuit the Coes filed against a "Gil Chavez, Jr., Inc." The parties in this adversary proceeding were not parties to that suit, and nothing presented to the Court indicates why that decision should be binding on them. Albritton apparently submitted the decision because the arbitrator declared that Dean had "stiffed all parties," and she believed this would show he defrauded her.

Certain additional facts are asserted in the course of Albritton's arguments rather than in her statement of uncontroverted facts. She asserts that before she paid him, Dean assured her that he would pay the Coes the balance he still owed them. This assurance was false, she contends, because Dean never intended to honor his contract with the Coes. In his response, Dean does not address his intent, but argues Albritton has admitted she knew he still owed the Coes money for the horse and should have "taken legal precautions" to protect her interest. He contends her failure to do so precludes her from contending she relied on his promise to satisfy his obligations to the Coes.

The facts presented do not indicate what has become of the horse. Presumably Albritton does not have it, but even if she does, she would not appear to have good title to it. The Court would normally assume the Coes had regained possession because of their security interest and Dean's failure to pay, but the arbitration decision raises some doubt on this point. Albritton seems to be claiming she has lost the entire $25,000 she paid to Dean. It is not clear whether Albritton could obtain clear title to the horse by paying the Coes the $11,000 plus interest they are still owed, and thus limit her loss under the contract to the amount she must pay the Coes minus the $5,000 she would have owed Dean if he had properly performed his obligations to her. Some remarks in the arbitrator's decision may mean she tried to pay the Coes and they refused to accept her money, but that is far from clear.


To prevent a claim from being discharged under 11 U.S.C. §523(a)(2)(A), the creditor must prove the following:

1) the debtor made a representation;

2) the debtor knew the representation was false when made;

3) the debtor made the representation with the purpose and intent of deceiving the plaintiff;

4) the plaintiff reasonably relied on the representation; and

5) the plaintiff suffered a loss as a proximate result of the representation.

In re Pressgrove, 147 B.R. 244, 246-47 (Bankr.D.Kan. 1992). The creditor has the burden of proving an exception to discharge under §523(a)(2)(A). In re Black, 787 F.2d 503, 505 (10th Cir. 1986). The creditor must meet this burden by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279 (1991).

Rule 56 of the Federal Rules of Civil Procedure, made applicable here by Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment is to be granted if the movant establishes "that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." As a leading treatise states, the rule "is a method for promptly disposing of actions in which there is no genuine issue of material fact or in which only a question of law is involved." 10 Wright, Miller & Kane, Fed. Prac. & Pro. Civil, §2712 at 563 (2d ed. 1983).

A. Representation

It appears that Albritton contends Dean's defrauded her by promising to pay the Coes when his actual intent was not to pay them. However, her statement of uncontroverted facts does not assert that Dean made such a promise, nor do the materials presented otherwise establish this as a fact. Dean argues she is precluded from relying on such a promise but does not admit he actually made the promise. Albritton's motion, therefore, fails to establish a representation was made and, consequently, also fails to establish the representation was false when made.

B. Intent to Deceive.

Fraud may consist of silence, concealment or non-disclosure of a material fact. In re Weihstein, 31 B.R. 804, 809 (Bankr. E.D. N.Y. 1983). If there is disclosure, a court can infer fraudulent intent from knowingly false statements. In re Brewood, 15 B.R. 211, 215 (Bankr. D. Kan. 1981). In addition, subsequent conduct may reflect a promisor's earlier state of mind and thus, be considered when deciding if there was fraudulent intent at a debt's inception. In re Haining, 119 B.R. 460, 464 (Bankr. D. Del. 1990). Albritton asserts that, by not paying the Coes after receiving her $25,000, Dean demonstrated his intent never to repay the Coes and give her proper title to the horse. She does not contend Dean hid the Coes' interest in the horse from her, although Dean's brief seems to assume this is the thrust of her complaint. Instead, as indicated above, she argues Dean's fraud consisted of his alleged promise to pay the Coes when his actual intent was not to pay them. Having failed to establish that Dean ever made this promise, Albritton has necessarily failed to show what his intent may have been if he ever made it.

The uncontroverted facts show only: (1) Dean owed money on the horse when he agreed to sell it to Albritton, (2) she paid him $25,000, (3) he has not paid off his debt on the horse, and (4) he filed bankruptcy some time later. These facts fall far short of establishing as a matter of law that when Dean took Albritton's money, he did not intend to pay the Coes and provide good title to the horse once Albritton completed her obligations under the contract. They might suffice, following trial, to support a finding that Dean intended to defraud Albritton, but not to justify a summary judgment.

Nothing presented indicates what Dean did with the $25,000, except that he did not pay the Coes. Perhaps he had every intention of fulfilling his contracts with Albritton and the Coes. Factors beyond his control might have prevented him from completing the transaction; for example, he might have deposited the money in a bank account and had some other creditor seize it through a garnishment. He may have some other innocent explanation. Nothing presented to the Court shows he has admitted he intended to defraud Albritton. At this point, this case falls within the general rule that questions of intent, which involve intangible factors, are best left to the consideration of the fact finder after a full trial. Buell Cabinet Company, Inc. v. Sudduth, 608 F.2d 431, 433 (10th Cir. 1979).

C. Reasonable Reliance.

Albritton also claims she relied to her detriment on Dean's representation that he would pay the Coes and transfer the horse's title to her. She argues that a creditor need only prove reliance, not reasonable reliance, on the debtor's fraudulent misrepresentations, citing In re Gering, 69 B.R. 686 (Bankr.D.Kan. 1987). In fact, however, Gering held just the opposite, that §523(a)(2)(A) does require proof that the creditor's reliance on the debtor's representations was reasonable. 69 B.R. at 692. Reliance must be reasonable because protecting the debtor's fresh start is more important than protecting creditors who act unreasonably. Id at 693. Furthermore, just a few months after Gering was decided, in a ruling that this Court is required to follow, the Tenth Circuit held that reasonable reliance is an element under §523(a)(2)(A). In re Mullet, 817 F.2d 677, 679-81 (1987).

The facts which were properly presented for summary judgment purposes say almost nothing about Albritton's reliance on Dean. The most the facts might show is that she probably relied on him to be able to give her good title to the horse. Even if they had been properly presented as summary judgment facts, her assertions in her arguments that she knew Dean owed the Coes some amount on the horse and that she relied on his promise to pay them would hardly suffice to show she reasonably relied on Dean's promise. While the Court would not go so far as to say such reliance could not have been reasonable under any circumstances, it would ordinarily expect other evidence to be presented to explain why a reasonable person would have relied on Dean's promise.

D. Loss Caused by the Representation

Albritton's motion also fails to establish that she has suffered any loss, much less the loss of her full $25,000. Certainly if Dean never pays the Coes, she would probably either lose the horse to them or be forced to pay them their $11,000 plus interest. However, she has not shown that Dean has lost all ability to obtain clear title to the horse; the fact he has filed for bankruptcy may mean it is unlikely he will do so, but does not establish he cannot. Furthermore, since the Coes apparently sued a third party to try to recover the money Dean owed them, it would appear they have not recovered the horse. Albritton would appear to lose all her money only if she loses all claim to the horse, and that situation has simply not been shown to exist. Obviously Albritton has shown she is in danger of losing some money, but she has not shown the loss has already occurred or how much she has lost.

E. Summary

For these reasons, Albritton has failed to establish any of the elements of her claim under §523(a)(2)(A) and her summary judgment motion must be denied.


Dated at Topeka, Kansas, this _____ day of February, 1994.




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