Court Opinion

ID: 9292313
Source: CourtListenerOpinion
Date Created: 2022-11-29 17:11:38.976873+00
Date Added: 2024-06-11T17:13:12.298218
License: Public Domain

Lewiton, C.J.
In this action of tort, the plaintiff seeks to recover for labor and materials furnished by it to the defendant under a written contract, in reliance upon alleged false representations by the defendant as to his financial condition. The defendant’s answer contains a general denial, and also sets up as a defense his discharge in subsequent bankruptcy proceedings.1 The trial court found for the defendant, after finding that the latter “made truthful representations as to his financial condition at all times and answered truthfully all questions asked him relative to his financial condition ’ ’.
The case is here on report of the plaintiff’s claims (a) that the findings are inconsistent with certain rulings made by the court, and *144(b) that the court erred in denying certain of the plaintiff’s requests for rulings hereinafter set forth.
At the trial there was evidence tending to show the following:
The defendant was the general contractor on a so-called “Mister DoNut job”. He sought to have the plaintiff perform certain paving work on that job under a sub-contract. The defendant first applied to the plaintiff for credit on this job in early June, 1970, at which time he submitted to the plaintiff written and oral statements relating to his financial condition. All of these statements were true. In reliance on these statements, the plaintiff decided to grant credit to the defendant and go forward with the requested work. In consequence, the agreement was signed on some date between June 8 and July 6, 1970. The plaintiff’s form of proposal and contract which was executed by the parties contains among its “terms and conditions” the following paragraph:
“We shall not become obligated to perform the work called for under this contract until your credit has been checked and approved by our Credit Department. If credit conditions become unsatisfactory at any time prior to our completion of the work hereunder, we shall be furnished adequate security upon our request.”
There was no evidence that the plaintiff became aware at any time prior to its perform*145anee of the work that the defendant’s credit situation had become unsatisfactory, nor any^ evidence that the plaintiff made any request for security.
Pursuant to the contract, the plaintiff did “fine grading” amounting to 10 percent or less of the work, on July 10, 1970; “paving” which was by far the bulk of such work, on July 15, 1970; and the installation of a “berm” on July 22, 1970, thereby completing the required work under the contract.
On July 8, 1970, the defendant met with an Attorney Kahn for the purpose of discussing the possible bankruptcy of the defendant this meeting having been arranged either by the defendant’s accountants or his regular attorney. The defendant first became aware that his financial condition was not as good as he thought it to be shortly before July 8, 1970. At some time between July 8 and July 23, 1970, the defendant decided to file a petition in bankruptcy and such a petition was in fact filed by him on or about July 23, 1970. This petition was dated July 21, 1970. At no time, before or after his meeting with Attorney Kahn on July 8, 1970, did the defendant inform the plaintiff that he was thinking of going into bankruptcy nor did he inform the plaintiff that his financial condition had deteriorated. When the petition in bankruptcy was filed, the “Mister DoNut job” was essentially complete, with the exception of a few very minor details.
*146The plaintiff performed all the work called for in the contract in a workmanlike manner, and submitted its invoice for the agreed price of $2,002.50, this being a fair and reasonable price for said work. The plaintiff filed no proof of claim in the defendant’s bankruptcy proceedings although it was listed by the defendant as a creditor, and was fully informed of the petition and subsequent proceedings. In due course, the defendant was adjudged a bankrupt and was granted a discharge in bankruptcy.
The trial judge granted several rulings requested by the plaintiff at the close of the trial, but denied plaintiff’s requests for rulings numbered 2, 3, 6, 7, 16 and 17, which are set forth below.2 Essentially, these requests were to the effect that as matter of law, there must be a finding for the plaintiff for the rea*147son that the defendant had a duty to inform the plaintiff, before the latter performed its work under the contract, of the deterioration of the defendant’s financial condition and of his contemplation of filing a bankruptcy petition, and that his failure so to inform the plaintiff amounted, as matter of law, to “false representations” within the meaining of Section 17(a) of the Bankruptcy Act.3
Insofar as the plaintiff claims to be aggrieved by any apparent inconsistency between the trial justice’s findings and the requested rulings granted by him, it is well settled that the appropriate remedy in such a case is not a report to the Appellate Division, but either a motion to correct the inconsistency or a motion for a new trial. Viera v. Balsamo, 328 Mass. 37, 39; Biggs v. Densmore, 323 Mass. 106, 108-9; National Shawmut Bank v. Johnson, 317 Mass. 485, 492. Since the plaintiff pursued neither of these permissible courses, the question of inconsistency is not open to it now. Raytheon Mfg. Co. v. Indemnity Insurance Co., 333 Mass. 746,749.
There was no error in the denial of the requested rulings, of which the plaintiff complains.
The ultimate decisive issue here involved is whether the debt for which the plaintiff seeks to recover is, as matter of law, one “for obtaining money or property by . . . false *148representations” within the meaning of § 17 of the Bankruptcy Act. 11 USC, § 35. In deciding this issue, we must be mindful of the rule that in determining whether a particular debt is subject to discharge in bankruptcy, the Bankruptcy Act must be construed strictly against the objecting creditor and liberally in favor of the bankrupt. Gleason v. Shaw, 236 US 558, 562; In re Zidoff, 309 F2d 417, 419; Shepherd v. McDonald, 157 F2d 467, 469; cert. den. 329 US 802; Sweet v. Ritter Finance Co., 263 F. Supp. 540, 543.
The creditor in a case, such as this, has the burden of proving that his claim has not been discharged (Sweet v. Ritter Finance Co., 263 F. Supp. 540; U. S. v. Syros, 254 F. Supp. 195; Horner v. Nerlinger, 304 Mich. 225, 233) and in so doing, he must prove that the debt resulted from fraudulent and intentionally false representations by the debtor. Davison-Paxon Co. v. Caldwell, 115 F2d 189, 191, cert. den. 313 US 564; Zimmern v. Blount, 238 Fed. 740, 745; U. S. v. Syros, 254 F. Supp. 195, 198; Swanson Petroleum Corp. v. Cumberland, 184 Neb. 323; Klatt v. Helming, 248 Wis. 139, 143; cf. Phinney v. Friedman, 224 Mass. 531, 533.
Admittedly, there were no overt or verbal false representations by the defendant in this case. The plaintiff does not dispute the finding that the defendant’s representations made to it prior to the execution of the contract were *149true. It contends, however, that when the defendant later learned that his financial condition had deteriorated and he contemplated filing a petition in bankruptcy, he owed a duty to disclose these facts to the plaintiff before the latter did its work under the contract, and that the defendant’s silence under these conditions amounted, as matter of law, to intentional and wilful misrepresentations. We do not agree.
While silence may in some circumstances be the equivalent of, and regarded as, a false representation, this is true only where there is a duty to speak. Wade v. Ford Motor Co., 341 Mass. 596, 597; Kannavos v. Annino, 356 Mass. 42, 46-48; Swinton v. Whitinsville Savings Bank, 311 Mass. 677, 678; Phinney v. Friedman, 224 Mass. 531, 533; Williston, Contracts (3rd Ed.) sec. 1497.
It is a general rule that a statement as to financial condition which was true when given will not constitute a false representation because of a subsequent change in the debtor’s affairs, unless the statement constitutes a continuing representation because of the debtor’s duty to inform the creditor of changes in the debtor’s financial condition. Monier v. Guaranty Trust Co., 82 F2d 252, 254; Collier on Bankruptcy (14th Ed.) § 17.16; Williston, Contracts (2d Ed.) § 1519.
There is nothing in the facts of this case to require the conclusion that the statements *150of the defendant prior to the execution of his contract with the plaintiff were to be regarded as continuing representations, requiring the defendant to inform the plaintiff of subsequent changes in the defendant’s affairs. While the “terms and conditions in the plaintiff’s printed proposal, which later became the contract between the parties, specifically gave the plaintiff the right to require security if “credit conditions” became unsatisfactory to it, they were silent as to any obligation of the defendant to furnish subsequent information pertaining to his “credit conditions”. Such a requirement could easily have been inserted, if intended, cf. Gerder v. Lustgarten, 266 US 321, 323; Monier v. Guaranty Trust Co., 82 F2d 252, 254; Fruit Dispatch Co. v. Wolman, 124 Maine 355; In re B & R Glove Corp., 279 Fed. 372, 377; See Hanley Co., Inc. v. Whitney, 279 Mass. 546, 554. Any ambiguity as to the meaning or scope of this aspect of the contract is to be resolved against the plaintiff, which drafted the contract. Wright v. Commonwealth, 351 Mass. 666, 673; Bowser v. Chalifour, 334 Mass. 348, 352. Cases which hold that nondisclosure of adverse changes in the face of such express undertakings by the debtor may be regarded as false representations are, therefore, inapposite here. Compare, for example : Gerder v. Lustgarten, 266 US 321; Fruit Dispatch Co. v. Wolman, 124 Me. 355; Ginsberg v. International Shoe Co. (Tex. Civ. *151App.) 299 SW 695, 699. See Collier on Bankruptcy (14th Ed.) $ 17.16. Similarly inapposite are cases in which the original statements concerning the financial condition of the debtor are made to the creditor with a view to a series of transactions, and further extensions of credit are subsequently requested and accepted by the debtor, without a disclosure of an intervening change in his circumstances. Hills Savings Bank v. Cress, 205 Iowa 306, 309. See Annotation, 104 ALR 921, 925. Unlike the facts in many of the cases cited above, where the debtor took affirmative action to procure additional loans or to order more merchandise on credit after becoming aware that' his financial condition had deteriorated since his original financial statement to the creditor, the defendant here took no action to procure materials or services from the plaintiff after becoming aware that his financial situation had become impaired. In fact, the report contains no reference to any evidence that the defendant had any personal contact with the “Mister DoNut job” or had any personal knowledge of the time-table of the plaintiff’s performance there of its work under the contract, with reference to the time he decided to file a petition in bankruptcy.
While there was evidence that the defendant conferred with an attorney as early as July 8, 1970 concerning possible bankruptcy proceedings, there is no evidence reported as *152to the date on which his decision was made to file such a petition. It is common knowledge that in many instances in which debtors consider the possibility of bankruptcy, they are ultimately able to resolve their financial problems without resort to bankruptcy. We are aware of no requirement under the Bankruptcy Act or the decided cases, in the absence of some special requirement of disclosure such as those discussed above, that a debtor considering the alternative of bankruptcy must give notice of such consideration to parties with whom he has pre-existing contracts for the furnishing of materials or goods. In the circumstances of this case, the trial judge was not required to rule as a matter of law that the failure of the defendant to disclose his consideration of possible bankruptcy prior to completion of the plaintiff’s performance of the contract was intentionally fraudulent (cf. Phinney v. Friedman, 224 Mass. 531, 533), and amounted to a false representation such as to exclude the plaintiff’s claim from the scope of the defendant’s discharge in bankruptcy.
It is hereby ordered that the report be dismissed.
Report dismissed.

 Section 17 of the United States Bankruptcy Act, as in force at the time of the transactions involved in this case, provided that “(a) A discharge in bankruptcy shall release a bankrupt from all of his provable debts . . . except such as ... (2) are liabilities for obtaining money or property by false pretenses or false representations. ...” 11 USC § 35.

 “2. The evidence requires a finding for the plaintiff. Court: Denied.
“3. The evidence does not warrant a finding for the defendant. Court: Denied.
“6. The defendant obtained money or property by credit from the plaintiff by use of false representations. Court: Denied.
“7. False representations need not be explicit, but may be made of obvious implication. Court: Denied as ambiguous.
“16. The defendant had a duty to inform the plaintiff of his impending bankruptcy. Court: Denied. See my findings of fact.
“17. That during the progress of the plaintiff’s work for the defendant, the defendant had a duty to inform .the plaintiff of his impending bankruptcy. Court: Denied. See my findings of fact.”

 See footnote 1, supra.