Court Opinion

ID: 9644557
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:59:27.504955+00
Date Added: 2024-06-11T18:11:15.066667
License: Public Domain

HUTCHESON, Circuit Judge.
The suit was to enjoin the enforcement by garnishment against plaintiff of a state court judgment for debt. It was brought in the bankruptcy court on the ground that the debt had been discharged in bankruptcy, and because of the settled but erroneous state of the decisions in Georgia,1 ****plaintiff had been compelled to invoke the jurisdiction of the bankruptcy court.2 The de*190fendant contested the suit on the ground (1) that the matter was one for decision in the state courts and not for the invocation of the bankruptcy jurisdiction; (2) that the judgment it had obtained was a conclusive adjudication that the debt was not discharged in bankruptcy. The district judge maintaining his jurisdiction on Hunt v. Loan Company and determining the effect of the state court judgment on the pleadings in that court, concluded that the debt was dischargeable and had been discharged and granted the relief prayed. '
This appeal tests the correctness of that ruling. This is the record on which it rests.
On February 22, 1939, appellant here filed suit against appellee in the municipal court of Atlanta for $444.58 on account of merchandise purchased from it for the period from September, 1936, to December, 31, 1938, as per itemized statement attached to the petition. On March 2, 1939, she filed a plea to the jurisdiction of the state court based on her alleged non-residence, and on March 6, 1939, she filed her voluntary petition in bankruptcy scheduling defendant as one of her creditors and was duly adjudged bankrupt.
On March 24th, appellant filed in the state court suit an amendment alleging:
“1. That at the time the defendant purchased the merchandise listed on the itemized statement marked ‘Exhibit A’ and attached to the petition, defendant was insolvent and had no present intention to pay for same and concealed her insolvency and intention to pay for same, and concealed her insolvency and intentions with respect to said purchases from your petitioner.
“2. That your petitioner relied on the defendant’s promise to pay for same, and was damaged in that it lost merchandise of the value listed in the itemized statement marked ‘Exhibit A.’
“3. That the action of the defendant in purchasing said merchandise without a present intention to pay for same, and knowing her promise to pay for same was false, was deceitful and fraudulent.
“4. That your petitioner is damaged in the sum of $444.58, plus interest at 7% per annum from August 1, 1937 to date.”
Whereupon, on March 29th, appellee defendant in that suit filed a plea for a stay, setting out therein that the debt upon which the suit was predicated was dischargeable in bankruptcy. On April 3rd, the plea to the jurisdiction was overruled, as waived by defendant’s filing her plea for a stay in bankruptcy, and there was a judgment as follows:
“The within case coming on before me for trial after the petition was amended and facts introduced to support the amendment with reference to all allegations therein and the petition,
“It is considered, ordered and adjudged that the pltf. recover of the defendant in the sum of Three Hundred and Twenty and 88/100 ($320.88) Dollars and all costs of this action.”
Appellee was granted her discharge and it was ordered that she “be discharged from all debts and claims in bankruptcy which are made provable by said acts against her estate excepting such debts as are by law excepted from the operation of a discharge in bankruptcy.” In July, 1939, she filed in the bankruptcy court, an application for injunction, reciting these facts and that notwithstanding her discharge, Davison-Paxon, plaintiff in the state court suit, had sued out a garnishment against her employer to collect on the judgment debt which had been discharged in bankruptcy.
It was not denied below, it is not denied here, that the decisions of Georgia are to the effect that a debt contracted as, according to the amended petition this debt was, is, within the exception of Sec. 17, sub. a (2), of the Bankruptcy Act,3 “a liability for obtaining money or property by false pretenses or false representations.” What was in question below, what is in question here is whether a debt created as this one was, according to the allegations of the amended petition, is such a liability.
The district judge thought it was not. We agree. But for the Georgia decisions holding that the purchase of goods with no present intention to pay, results in a debt which is a liability for obtaining money or property by false pretenses and false representations, we should regard the question as admitting of only one answer. The amended petition carefully refrains from charging that the defendant represented anything or made any pretenses. It charges that she was insolvent, that she had no present intention to pay for the goods purchased and that *191she concealed her insolvency and intention to pay for the same from the plaintiff and that her conduct in purchasing the merchandise without present intention to pay for same and knowing that she was insolvent, was false, deceitful and fraudulent. We think it can hardly be doubted that her conduct in so doing was deceitful in the sense that she did not act in a straightforward and honest way in not making full disclosure of her financial condition, but such conduct is not within the exception. It does not except from discharge, debts created by obtaining credit through concealment of insolvency and present inability to pay. It excepts from discharge “Liabilities for obtaining money or property by false pretenses or false representations.” Within the meaning of that statute then, there were no false pretenses, no false representations here. There was merely the obtaining of credit without full disclosure with the knowledge that if full disclosure had been required, credit might well not have been given, but that was all. A remedial statute, like that of bankrutpcy intended for the relief of debtors, must, insofar as denial of discharges and therefore of relief, be construed strictly so that all debts except those coming exactly within the exception will stand discharged. Gleason v. Thaw, 236 U.S. 558, 35 S.Ct. 287, 59 L.Ed. 717.
Appellant, conceding of course that the judgment in the state court suit is not res judicata of the question whether the debt was dischargeable in bankruptcy, because the judgment was rendered before the discharge, insists that the judgment is conclusive, that the facts are as pleaded in the amendment, and that, though there was no overt statement or representation made, the purchase on credit was an implied representation that appellee intended to and could pay for the purchased goods.
In support of 'this view appellant in addition to its reliance on the Georgia cases puts its reliance on the generally settled rule of law that a purchase of the kind pleaded is deceitful and because of that deceit, the sale may be rescinded. This is certainly true but this is not the question before us. That question is, does the statute except from the discharge all obligations affected with deceit or fraud in their incurring whether the deceit or fraud is actual or implied, or does it except only those where there is actual overt false pretense or representation? We think it clear that only the latter are excepted. In Zimmern v. Blount, 5 Cir., 238 F. 740, 744, we have said so: “A fraud may be committed in ways other than by the making of false representations, and be actionable. In considering the third count, as an original cause of action, independent of the plea of discharge in bankruptcy, it would be unimportant whether the alleged fraud was committed by the making of false representations or otherwise. However, in considering the second replication to the plea of discharge in bankruptcy, as a sufficient answer to it, it is important to determine not only whether the replication sufficiently charges fraud, but fraud 'by obtaining property by false pretenses or false representations,’ which is the only kind of fraud that prevents the release of bankrupt from his provable debts. Section 17a (2), Bankruptcy Act of 1898 as amended.”
In re Nuttall, D.C., 201 F. 557, is to the same effect as are also the following state cases: Miller v. Sutliff, 241 Ill. 521, 89 N. E. 651, 24 L.R.A.,N.S., 735; J. M. Radford Grocery Company v. Halper, Tex.Civ.App., 274 S.W. 1023. No cases -are cited to us, we have found none, except the Georgia cases holding that debts, incurred as these were-, are excepted from the discharge.
Appellant does indeed cite texts and decisions holding that where the buyer at the time of the purchase is insolvent and intends not to pay for the goods, it is a fraud which will render his title voidable. It cites too, a Georgia Code Section, 96-206, providing: “Where one who is insolvent purchases goods, and, not intending to pay therefor, conceals his insolvency and intention not to pay, the vendor may disaffirm the contract and recover the goods, if no innocent third person has acquired an interest in them.” But it cites no cases from either federal or state courts construing the bankruptcy statute as excluding from the discharge cases of this kind, where, though it may be conceded that the debts were created by fraud, there were no false pretenses or representations. Indeed, it could not cite any, for it is settled law that debts created by the fraud of the bankrupt are not excepted by the operation of the discharge, unless so created while he was acting as an officer or in a fiduciary capacity. Crawford v. Burke, 195 U.S. 176, 25 S.Ct. 9, 49 L.Ed. 147; Bullis v. O’Beirne, 195 U.S. 606, 25 S.Ct. 118, 49 S.Ct. 340; Zimmern v. Blount; In re Nuttall, supra. The only kind of fraud which will prevent a discharge is that committed by fraudulent misrepresentations of fact or by such con*192duct - or artifice having a fraudulent purpose as will throw one off his guard and will,cause him to omit inquiry or examination which he would otherwise make. It is not claimed that there was such misrepresentation, artifice or trick. It is merely claimed that the application for credit coupled with plaintiff’s silence as to her insolvency and “present intention” constituted misrepresentation or pretense.
We do not think that this will do. The judgment was right. It is affirmed.

 Atlanta Skirt Mfg. Co. v. Jacobs, 8 Ga.App. 299 (2), 68 S.E. 1077; Levy v. M. C. Kiser Company, 31 Ga.App. 113, 120 S.E. 34; Crawford v. Davison-Paxon Co., 46 Ga.App. 161, 166 S.E. 872.

 Local Loan Company v. Hunt, 292 U. S. 234, 54 S.Ct. 695, 78 L.Ed. 1230, 93 A.L.R. 195.

 11 U.S.C.A. § 35, sub. a(2).