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04/13/87 First Community Bank of v. Ohio Casualty Insurance

April 13, 1987

FIRST COMMUNITY BANK OF WEST FRANKFORT, PLAINTIFF

v.

OHIO CASUALTY INSURANCE COMPANY, DEFENDANT AND THIRD-PARTY, PLAINTIFF-APPELLEE (DEBRA BROWN, THIRD-PARTY, DEFENDANT-APPELLANT)



APPELLATE COURT OF ILLINOIS, FIFTH DISTRICT

506 N.E.2d 798, 154 Ill. App. 3d 133, 107 Ill. Dec. 55 1987.IL.495

Appeal from the Circuit Court of Franklin County; the Hon. Terrence Hopkins, Judge, presiding.

APPELLATE Judges:

PRESIDING JUSTICE KARNS delivered the opinion of the court. KASSERMAN and JONES, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE KARNS

Third-party defendant, Debra Brown (Brown), appeals from the entry of summary judgment against her by the circuit court of Franklin County in favor of third-party plaintiff, Ohio Casualty Insurance Company (Ohio).

Plaintiff, First Community Bank of West Frankfort, purchased an insurance policy from Ohio to insure against loss or damage by employee dishonesty. Because of the loss and damage suffered through the dishonesty of one of its employees, Brown, plaintiff filed a claim on its policy with Ohio. Ohio and plaintiff eventually settled on the claim for $5,750. Ohio, as the subrogee of the rights and claims of plaintiff, sought indemnification against Brown in the amount it was liable to plaintiff. After Brown admitted her dishonesty in a discovery deposition, Ohio filed a motion for summary judgment against Brown. Brown filed an affidavit in opposition to the motion for summary judgment indicating she has been discharged in bankruptcy and Ohio had knowledge of her bankruptcy proceedings prior to her discharge. The trial court granted summary judgment in favor of Ohio.

Brown argues the trial court erred in granting summary judgment against her in favor of Ohio. She argues that because Ohio had actual knowledge of her bankruptcy proceedings, under 11 U.S.C.A. sec. 523(a)(3) (West 1979), her debt was discharged whether or not it was correctly scheduled. Ohio counters Brown's debt is not dischargeable under 11 U.S.C.A. sec. 523(a)(2) (West Supp. 1987).

Section 523(a)(2) of the Bankruptcy Code, 11 U.S.C.A. sec. 523(a)(2) (West Supp. 1987), states in part:

"(a) A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt --

(2) 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;

use of a statement in writing --

(i) that is materially ...


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