Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnb-2_04-ap-00125/USCOURTS-alnb-2_04-ap-00125-0/pdf.json

Parties Involved:
Acceptance Loan Company
Plaintiff
Jeanne Merea Bowers
Defendant

Document Text:

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

In re: )

)

David Allen Bowers and )

Jeanne Merea Bowers, ) Case No.: 04-03413-BGC-7

)

Debtors. )

Acceptance Loan Company, )

)

Plaintiff, )

)

vs. ) A. P. No.: 04-00125

)

Jeanne Merea Bowers, )

)

Defendant. )

MEMORANDUM OPINION

The matters before the Court are a Complaint filed on July 16, 2004, by the

plaintiff, and a Motion to Dismiss filed on August 17, 2004, by the defendant. After

notice, a hearing was held on September 1, 2004. Appearing were William Barnes for

the plaintiff, and Robert Keller for the defendant. The matter was submitted on the

arguments of counsel and the pleadings.

I. Background

The debtor contends that the complaint does not state a cause of action. 

Specifically, the debtor contends that the fraud complained of in the complaint was not

specifically plead as required.

The opinion of the Court of Appeals for the Eleventh Circuit in U.S. v. Baxter

Intern., Inc., 345 F.3d 866 (11 Cir. 2003) is helpful in addressing the pending issues. th

Several parts of the opinion explain the competing positions and competing interests in

circumstances such as the pending one.

In Baxter some of the defendants raised issues similar to the ones raised by the

debtor here. In commenting on those issue, the court agreed with the debtor’s position

that fraud allegations must be specifically plead. The opinion offers these comments:

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The pleading standards urged by the RSP Defendants are akin to the

heightened requirements of Fed.R.Civ.P. 9, which apply to claims of

fraud, mistake, duress and other "special matters." Where Rule 9 is

implicated, plaintiffs must plead not only the general nature of their

injuries but also the specifics of how and when they were injured. See,

e.g., Brooks v. Blue Cross & Blue Shield of Florida, Inc., 116 F.3d 1364,

1380-81 (11th Cir.1997) (under Rule 9(b), plaintiff alleging fraud must

plead "(1) the precise statements, documents, or misrepresentations

made; (2) the time, place, and person responsible for the statement; (3)

the content and manner in which these statements misled the Plaintiffs;

and (4) what the defendants gained by the alleged fraud"); Coffey v.

Foamex L.P., 2 F.3d 157, 161-62 (6th Cir.1993) (Rule 9(b) requires

plaintiff in fraud case "at a minimum, to allege the time, place, and content

of the alleged misrepresentation on which he or she relied; the fraudulent

scheme; the fraudulent intent of the defendants; and the injury resulting

from the fraud").

Id. at 883,

The competing interest is of course the liberalized "notice pleading” allowed by

the Federal Rules of Civil Procedure. On that point the court recognized:

Because the Federal Rules embody the concept of liberalized "notice

pleading," a complaint need contain only a statement calculated to "give

the defendant fair notice of what the plaintiff's claim is and the grounds

upon which it rests." Conley, 355 U.S. at 47, 78 S.Ct. at 103; see also

Caribbean Broad. Sys., Ltd. v. Cable & Wireless PLC, 148 F.3d 1080,

1086 (D.C.Cir.1998) ("[A] plaintiff need not allege all the facts necessary

to prove its claim."). We have observed that the threshold of sufficiency to

which a complaint is held at the motion-to-dismiss stage is "exceedingly

low." See In re Southeast Banking Corp., 69 F.3d 1539, 1551 (11th

Cir.1995) ( "[F]or better or for worse, the Federal Rules of Civil Procedure

do not permit district courts to impose upon plaintiffs the burden to plead

with the greatest specificity they can.").

Id. at 881.

To resolve the conflict, this Court should apply the standard suggested by the

court in Baxter. That standard is:

In applying Rule 12(b)(6), "a complaint should not be dismissed for failure

to state a claim unless it appears beyond a doubt that the [complainant]

can prove no set of facts in support of his claim which would entitle him to

relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d

80 (1957).

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Id. at 880.

That standard is further defined by the same court in Roe v. Aware Woman

Center for Choice, Inc., 253 F.3d 678 (11 Cir. 2001) where the court explained: th

A complaint cannot be dismissed unless "it is clear that no relief could be

granted under any set of facts that could be proved consistent with the

allegations." Shands Teaching Hosp. and Clinics, Inc. v. Beech St. Corp.,

208 F.3d 1308, 1310 (11th Cir.2000) (citation omitted). And that is true

even where "it may appear on the face of the pleadings that a recovery is

very remote and unlikely." Scheuer v. Rhodes, 416 U.S. 232, 236, 94

S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974) (citations and quotations omitted). 

II. Applicable Statutes

The plaintiff’s complaint alleges that the debtor committed fraud and that based

on that action, the debt owed to the plaintiff is not dischargeable. The plaintiff contends

that the debt is not dischargeable pursuant to section 523(a) of the bankruptcy code. 

The specific subsections that apply are 523(a)(2)((A) and 523(a)(2)(B) of the

Bankruptcy Code.

A. Section 523(a)(2)(A)

Pursuant to section 523(a)(2)(A) of the Bankruptcy Code, debts are

nondischargeable for, “money, property, services or an extension, renewal, or

refinancing of credit, to the extent obtained by false pretenses, a false representation,

or actual fraud, other than a statement respecting the debtor's or an insider's financial

condition...." 11 U.S.C. § 523(a)(2)(A)(emphasis added).

For a debt to be declared nondischargeable pursuant to 523(a)(2)(A), a creditor

must prove, “the debtor made a false statement with the purpose and intention of

deceiving the creditor; the creditor relied on such false statement; the creditor's

reliance on the false statement was justifiably founded; and the creditor sustained

damage as a result of the false statement.” Fuller v. Johannessen (In re Johannessen),

76 F.3d 347, 350 (11 Cir. 1996). 

th

B. Section 523(a)(2)(B)

Pursuant to section 523(a)(2)(B) of the Bankruptcy Code, debts are

nondischargeable for:

money, property, services or an extension, renewal, or refinancing of

credit, to the extent obtained by use of a statement in writing that is

materially false; respecting the debtor's or an insider's financial condition;

on which the creditor to whom the debtor is liable for such money,

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property, services, or credit reasonably relied; and that the debtor caused

to be made or published with intent to deceive ....

11 U.S.C. § 523(a)(2)(B)(emphasis added). 

C. Interplay between Sections 523(a)(2)(A) and 523(a)(2)(B)

Section 523(a)(2)(A) makes nondischargeable a debt for money, property,

services, or an extension, renewal or refinancing of credit, to the extent obtained by

"false pretenses, a false representation, or actual fraud, other than a statement

respecting the debtor's or an insider's financial condition." 11 U.S.C. § 523(a)(2)(A)

(emphasis added). Section 523(a)(2)(B) makes nondischargeable a debt for money,

property, services, or an extension, renewal or refinancing of credit, to the extent

obtained by, “use of a statement in writing (I) that is materially false; (ii) respecting the

debtor's or an insider's financial condition; (iii) on which the creditor to whom the debtor

is liable for such money, property, services, or credit reasonably relied; and (iv) that the

debtor caused to made or published with the intent to deceive.” 11 U.S.C.

§ 523(a)(2)(B) (emphasis added).

Expressly excluded from the operation of Section 523(a)(2)(A) are statements

respecting a debtor's financial condition. And section 523(a)(2)(B) expressly relates

only to written statements respecting a debtor's financial condition. Consequently, a

false oral statement made by a debtor about his financial condition cannot create or

result in a debt which is not dischargeable under either section. And a false written

statement not respecting the debtor’s or an insider’s financial condition cannot create or

result in a debt which is nondischargeable under section 523(a)(2)(B).

III. The Complaint

In its complaint, the plaintiff alleges that the debtor contracted with the plaintiff to

purchase a vehicle but at the time of the purchase the debtor did not have the ability to

pay for the vehicle. From the pleading, it is clear that the transaction occurred. 

Subsequently, the complaint alleges that the debtor failed to pay for the vehicle and that

the plaintiff has been harmed.

IV. Conclusions

Based on the standards in this Circuit, the Court finds that the pending complaint

survives the debtor’s 12(b)(6) motion. Notwithstanding the requirement that “fraud”

must be specifically plead, the Court finds that the complaint gives the debtor fair notice

that the plaintiff is objecting to the debt between the parties relating to their transaction

in regard to the sale of a 1996 Jeep. The complaint contains sufficient information to

state a claim on which relief could be granted under section 523(a)(2), subsection (A) or

(B).

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Whether the plaintiff can ultimately prove fraud that causes the debt to be nondischargeable, is of course another issue, but for now, there are sufficient allegations. 

In contrast, the plaintiff should amend its complaint to specifically identify the

facts and law on which it relies. If such an amendment is not filed within 20 days of the

date of this order, the Court will reconsider the motion to dismiss at a status conference

to be held on October 27, 2004, (as set in the accompanying order). If an amended

complaint is filed, the debtor should answer within 20 days of the filing.

A separate order will be entered contemporaneously with this Memorandum

Opinion.

Dated: September 14, 2004 /s/Benjamin Cohen 

BENJAMIN COHEN

United States Bankruptcy Judge

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