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Tower Finance Corp. v. Winemiller

SEPTEMBER 10, 1963.

TOWER FINANCE CORPORATION, AN ILLINOIS CORPORATION, PLAINTIFF-APPELLANT,

v.

CHARLES N. WINEMILLER AND MABEL G. WINEMILLER, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Kane County; the Hon. JOHN S. PETERSEN, Judge, presiding. Judgment order reversed.

DOVE, J.

On January 14, 1960, Charles N. Winemiller and his wife, Mabel G. Winemiller, refinanced a previous obligation to Tower Finance Corporation of Aurora, Illinois, and received from the Finance Corporation some additional money. Evidencing the transaction, Mr. and Mrs. Winemiller executed their judgment note for $702.04, payable in twenty-four monthly installments.

On September 29, 1960, a judgment by confession was rendered by the Circuit Court of Kane County, in favor of the Tower Finance Corporation and against the makers of this note for $740.15. Thereafter, upon the petition of the judgment debtors, this judgment was, on November 19, 1962, vacated and a judgment rendered in their favor in bar of the action and for costs against Tower Finance Corporation. It is to reverse this judgment that the Tower Finance Corporation appeals.

The record discloses that at the time the note sued on was executed, Mr. and Mrs. Winemiller signed and delivered to appellant a financial statement disclosing a total monthly income of $505. This statement recited that it was given to the Finance Corporation for "the specific purpose of obtaining a loan from the Tower Finance Corporation, and showing ability to repay such loan." Under the heading, "All debts must be listed," appears the following items: (It is apparent that the total amount of monthly payments did not include the $32 indicated as a monthly payment to the Finance Corporation).

Creditors Name Monthly Amount Payment Owed -------------- ------- -------- Decorators Mart $ 5.00 $ 50.00 Coopers Furniture Store 5.00 10.00 Libby Furniture Co. 28.00 180.00 Associate Discount Corp. 60.00 800.00 Loan Balance with Tower Finance Corporation 32.00 580.00 ______ ________ Totals ................ $98.00 $1620.00

Between January 14, 1960, and May 5, 1960, appellees paid appellant, upon this note, $79.38. On May 5, 1960, Charles N. Winemiller filed his petition in bankruptcy, and on Schedule A-2 which accompanied his petition, listed his obligation to appellant. He was duly adjudicated a bankrupt and on June 20, 1960, an order of discharge was entered.

In his bankruptcy schedules, Charles N. Winemiller listed the following indebtedness:

Internal Revenue Service ................ $ 35.50 Kendall County ........................... 175.50 Libby Furniture Co. ...................... 900.00 Decorators Mart .......................... 175.00 Woodward Memorial Hosp. .................. 300.00 Harley Hill .............................. 30.00 Peoples Store ............................ 45.00 May Electric Co. ......................... 72.41 Greenwald's .............................. 75.00 Dr. Keller ............................... 20.00 Robert A. Meyer .......................... 10.00 Dr. Wajtowycz ............................ 4.00 Dr. Gillette ............................. 15.00 Ridge Jewelers ........................... 2.00 Plano Super Mart ......................... 27.00 Swisher Ace Store ........................ 20.00 Aschida Jewelers ......................... 26.00 Freezo Center Corp. ...................... 76.28 Associated Discount Corp. ................ 1,258.00 _________ Total ................................. $3,266.69

It is the contention of counsel for appellant that the record discloses that Charles N. Winemiller was guilty of false representations in obtaining the loan evidenced by the note, upon which judgment was confessed and which forms the basis of this action, and that his discharge in bankruptcy, as to this obligation, is ineffective and does not bar the enforcement of appellant's judgment.

The Federal Bankruptcy Act, Title 11 USCA Sec 35, states: "(a) A discharge in bankruptcy shall release a bankrupt from all his provable debts, whether allowable in full or in part, except such as (1) are due as a tax levied by the United States, or any state, county, district, or municipality; (2) are liabilities for obtaining money or property by false pretenses or false representations. . . ."

Household Finance Corporation v. McComas, 112 Ohio App. 296, 175 N.E.2d 861, was an appeal from the Municipal Court of the City of Lorain, Ohio, from an order dismissing the petition of Household Finance Corporation and holding that the petition did not state a cause of action. The petition alleged that the plaintiff was licensed to conduct a small loan business and that there was due it $310.27 from defendant on a past-due loan obtained from plaintiff by defendant. The petition further alleged that the loan was made pursuant to a representation made by the defendant in the form of a written financial statement that his debts amounted to $1116.07, whereas the actual amount owed by defendant, at the time the statement was made, was $2532.67; that the unscheduled debts on the financial statement made by defendant to the plaintiff amounted to $1460.80; that this indebtedness to various creditors was unknown to plaintiff; that plaintiff relied upon the financial statement made by defendant to it and that it had no knowledge of the fraud, deceit and misrepresentation practiced by defendant at the time he obtained the loan from the plaintiff. The petition further alleged that the schedule which the defendant filed in the United States District Court listed the creditors which defendant had not listed in the financial statement which he executed and delivered to the plaintiff at the time the loan was made.

In reversing the judgment of the Municipal Court, the Ohio Court of Appeals held that the Municipal Court was the proper forum to determine whether or not, under the facts, the claim of the plaintiff was barred by defendant's discharge in bankruptcy, or if the claim had not been discharged, whether it was dischargeable. In its opinion, the court referred to the applicable provisions of the Bankruptcy Act and stated that one of the purposes of that Act is to relieve an honest debtor from the weight of oppressive indebtedness, and to permit him to start afresh, free from the obligations and responsibilities consequent upon business misfortunes, and to give him a clear field for future effort, unhampered by the pressures and discouragement of pre-existing debt.

The Ohio Appeals Court held that the right to a discharge in bankruptcy is determined in the Bankruptcy Court, but that the effect of the discharge, may be determined whenever and wherever the enforcement of a debt is attempted against a bankrupt. In support of this pronouncement, the court cited 6 Am Jur Bankruptcy, Sec 744 and 8 CJS Bankruptcy, Sec 562. The opinion then continued:

"We declare the rule to be, in accord with the weight of authority, that a liability for obtaining money by false and fraudulent representations is not barred by the filing of the claim in the Bankruptcy Court or even by a discharge of the bankrupt in a proceeding in which the claim was filed. When it is alleged in a petition in a state or municipal court of competent jurisdiction that a liability is based upon obtaining a loan of money by a false statement of the borrower's indebtedness to others, such petition is sufficient to disclose a liability for ...


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