Leon Garberg and Barbara Garberg

In 	the 	United 	States 	Bankruptcy 	Court
For 	the 	Eastern 	District 	of 	Pennsylvania
In re 	: Chapter 13
:
Leon Garberg and Barbara Garberg 	:
Debtor(s) 	: Bankruptcy No. 05-19589 SR
Opinion
By: Stephen Raslavich, United States Bankruptcy Judge.
Introduction.
Before the Court are the debtors’ objections to three claims
filed by American Express Travel Related Services Co., Inc.
(“AMEX”). AMEX filed a response to the objections and a hearing
was held on April 28, 2006. At the hearing, counsel for the
parties advised the Court of their agreement to have a certain
affidavit and related documentation which had been submitted with
AMEX’s response comprise the evidentiary record, together with a
separate Stipulation of Facts the parties intended to file
thereafter. The Stipulation of Facts was filed on May 10, 2006.
By consent, the parties agreed to the filing of supplemental
supportive briefs. The Debtors filed a brief on May 15, 2006.
Conversely, on May 12, 2006, AMEX filed a “Statement in Lieu of
Brief,” which recited that in support of its position AMEX would
rest on its response, the accompanying exhibits thereto, and the
parties’ Stipulation of Facts. This contested matter is thus ripe
for disposition. For the reasons set forth herein, the objections
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1 The Objection characterizes the claims as “secured,” but this is
a mistake, as the claims assert general unsecured status.
2
will be dismissed and the claims allowed. 1
Background.
The claims at issue relate to credit card charges. The
claims are numbers 18 ($679.31); 19 ($682.20) and 20
($19,897.44). The essence of the dispute goes to the Debtors’
contention that the charges in question, admittedly made by Mr.
Garberg using a card bearing his name, are the liability of Mrs.
Garberg only, because she applied for the card, and because she
alone signed the account application. AMEX holds the contrary
view that, notwithstanding the foregoing facts, the couple’s
liability for Mr. Garberg’s charges is joint and several. The
parties’ brief Stipulation of Facts elaborates on the controversy
as set forth below.
1. 	Debtors filed a Chapter 13 bankruptcy on July 13,
2005.
2. 	Debtors’ took the State exemptions and exempted all
joint assets held by Husband and Wife as tenants by the
entireties as exempt from non-joint creditors;
3. 	Debtors’ Chapter 13 Plan proposes to pay all joint
unsecured creditors at 100% and all non-joint unsecured
creditors pro-rata from remaining funds if any.
4. 	Debtors have listed the Claims of American Express
Travel Related Service Co., Inc.(Hereinafter Claimant)
claim numbers 18, 19, and 20 as claims against Wife
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2 As discussed, infra, this is not, in fact, the case, as
substantial credit card debt to AMEX on the part of Mr. Garberg is
reflected on the couple’s amended bankruptcy schedules.
3
only. 2
5. 	Claimant asserts that the majority of its claims
are the legal responsibility of both debtors and it is
stipulated as follows:
A. 	Barbara Garberg applied to American
Express for the American Express Cards which
consists of the claims made in claim numbers
18, 19, and 20. 	Barbara Garberg applied for
each as the Basic Cardmember. 	Cards were
issued on each account, per her request, to
Leon Garberg as Additional Cardmember.
Debtor husband was authorized to use the
credit cards per the request of debtor wife.
B. 	At the time the American Express cards
were issued the envelope contained a separate
document that claimant called an “account
agreement” and it stated as follows:
“Welcome to American Express
Cardmembership:
When you keep, sign or use the Card
issued to you (includingany renewal
or replacement cards), or you use
the accountassociated with this
Agreement (your “Account”), you
agreeto the term of this Agreement.
Promise to Pay:
You promise to pay all Charges,
including Charges incurred by
Additional Cardmembers, on your
Account. 	This promise includes any
Charge for which you or an
Additional Cardmember indicated an
intent to incur the Charge, even if
you or the Additional Cardmember
have not signed a charge form or
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4
presented the Card. You also
promise to pay any Charge incurred
by anyone that you or an Additional
Cardmember let use the Card, even
though You have agreed not to let
anyone else use the Card.
Status of and Responsibility for
Additional Cardmembers:
An Additional Cardmember is not
liable for Charges incurred by the
Basic Cardmember or by other
Additional Cardmembers. 	However,
by each use of the Additional Card
to incur Charges, the Additional
Cardmember indicates his or her
agreement to pay us for the Charge
if you fail to or refuse to pay it,
and we may, at our discretion,
pursue Additional Cardmembers for
payment of Charges they incur or
authorize.”
6. 	Claim number 18, 19 and 20 consist of three (3)
credit cards issued to debtor BarbaraGarberg as the
“Basic Cardmember” and cards issued per debtor Barbara
Garberg’s request to debtor Leon Garberg as an
“additional card member”.
7. 	Debtor husband did use the credit cards.
8. 	The charges attributable to debtor husband’s
authorized user card are $19,564.56(claim #20), $657.49
(claim #19), and $679.31 (claim #18)
The issue before the Court accordingly is straightforward.
Is Mr. Garberg liable for his charges, along with Mrs. Garber, or
is he not? 	Having evaluated the evidence against applicable law,
the Court concludes that AMEX has the better part of the
argument.
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5
Discussion.
At the outset, the Court notes that the burden of proof
shifts throughout the course of a claims objection. 	Initially,
the claimant must allege sufficient facts to support its claim
and once done, the claim becomes prima facie valid. 	See 11
U.S.C. § 502(a); B.R. 3001(f). 	Thereafter, the burden of going
forward shifts to the party objecting to the claim—here, the
Debtors— to produce evidence to negate the prima facie validity
of the claim. 	If the Debtors produce sufficient evidence to
negate one or more of the sworn facts in the claim, the ultimate
burden of persuasion reverts to the claimant, AMEX, to prove the
validity of its claim by a preponderance of the evidence. 	In re
Allegheny Intern., Inc., 954 F.2d 167, 173 (3d Cir.1992); In re
Chiro Plus, Inc. 339 B.R. 111, 113 (D.N.J.2006); In re United
Companies Fin. Corp., 267 B.R 524, 527 (Bankr.D.Del.2000).
In this instance, the claims in question clearly warrant an
initial finding of prima facie validity. The Bankruptcy Code
broadly defines a “claim” as a “right to payment, whether or not
such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured …” 11 U.S.C. § 101(5)(A).
All three of the present claims state as their basis “credit card
debt.” 	See Claim ## 18-20. 	And all three assert that both
husband and wife are liable. 	Attached to each claim is an
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3 Copies of neither the statements of account nor the credit card
contract are attached as both are described as too lengthy. 	The
attachment goes on to say that such documentation is available upon
request. 	That is permitted by the Official Form. 	The agreements and
statements, in any event, are attachments to the AMEX response.
6
itemization of which charges were made by which spouse. 3 	See
generally Claim ## 18-20. 	For purposes of establishing that its
claims are self-sustaining, the Court accordingly finds all three
to be sufficient. 	The burden of proof as to disallowance thus
shifted to the Debtors.
At this juncture, however, the Court finds the Debtors’
threshold argument as to Mr. Garberg’s having never signed an
account application sufficient to “burst the bubble” of the prima
facie validity of the AMEX claims and return the burden of proof
to AMEX. 	In the end, though, the Court finds that AMEX has
clearly carried its burden of persuasion and its claims will
therefore be allowed.
There is surprisingly sparse case law covering this
seemingly commonplace fact pattern.
The Debtors’ argument is a fairly straightforward one. 	They
contend that there was never any contractual relationship between
Mr. Garberg and AMEX; hence there can be no debtor/creditor
relationship between the two. 	The only contractual relationship
here, say the Debtors, was between Mrs. Garberg and AMEX.
Accordingly, they insist, she and she alone is liable for the
charges in question. 	On this score, the Court takes note of the
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authorities proffered by the Debtors, which speak to well
established principals of Pennsylvania common law with respect to
the elements of an enforceable contract, including, in
particular, those which emphasize the need for the parties to
have a “meeting of the minds” and “manifest their intention to be
bound,” to “a contract whose terms are sufficiently definite to
be enforced.” 	(Citations omitted.) Although none of the
decisions cited by the Debtors arose in a factual context similar
to the instant one, the legal propositions the debtors urge are
undoubtedly sound. 	Unfortunately, however, the few cases which
have involved somewhat similar fact patterns, together with the
evidentiary record in this particular proceeding, militate
against the Debtors’ cause.
AMEX argues that mutuality and assent to a contract can be
found even absent a signature. 	The Court agrees. 	See Merrill
Lynch, Pierce, Fenner & Smith, Inc. vs. Kilgore, 751 So.2d 8, 11
(Ala. 1999) (citations omitted) (“the object of a signature on a
contarct is to show mutuality and assent, and that mutuality and
assent can be manifested in ways other than a signature. . . .
Conduct of one party to a contract from which the other may
reasonably draw an inference of assent to an agreement is
effective as acceptance).
AMEX argues that, since the Agreement at issue herein
explicitly provides that Mr. Garberg is liable for any charges he
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incurred should Mrs. Garberg refuse to pay, by using the card he
assented to the terms of the Agreement. 	See also Perry v.
FleetBoston Financial Corp., 2004 U.S. Dist. LEXIS 12616, at *16
(E.D. Pa. July 6, 2004) (use of credit card manifested assent to
the contract terms).
AMEX relies also on Baker v. American Express Travel Related
Services Co. Inc., 2002 WL 1205065 (W.D. Ky. May 28, 2002) for
the proposition that Mr. Garberg is charged with knowledge and
acceptance of the terms that he could have read in the exercise
of ordinary care and therefore, whether he read the Agreement or
not, Mr. Garberg is liable along with Mrs. Garberg for the
charges. 	In Baker, the plaintiff employee was issued an American
Express corporate credit card by his former employer. 	Id. at *1.
He was told, or given the impression, that he would not be
personally liable for repayment of any charges placed on the card
so long as the charges were incurred for business purposes only.
Id. 	He did not recall whether he received a copy of the
Cardmember Agreement but it was undisputed that the reverse side
of his credit card read “Use of the Corporate Card constitutes
acceptance of the terms and conditions of the Cardmember
Agreement accompanying this Card when issued . . . .” 	Id. 	The
reverse side of the card also directed him to a toll-free
telephone number if he had any questions regarding use of the
card or wanted to obtain a copy of the Cardmember Agreement. 	Id.
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Needless to say, the Cardholder Agreement stated that AMEX
reserved the right to collect the amount of any charges directly
form the corporate cardmember. 	Id.
The plaintiff in Baker used the card to pay for business
travel expenses for several years without incident and had no
contact with AMEX during this period. 	Id. 	at *2. 	AMEX at some
point obtained a copy of the plaintiff’s credit report from Trans
Union. 	Subsequently, the plaintiff left his employment and
returned his corporate card to his former employer. 	Id. 	A while
thereafter, the plaintiff filed suit claiming, inter alia, that
the defendants violated the Fair Credit Reporting Act and invaded
his privacy rights by obtaining a copy of his credit report. 	Id.
In its defense, AMEX argued that it permissibly obtained a copy
of the plaintiff’s credit report because it extended credit to
him by virtue of the corporate credit card. 	Id.
The Baker court agreed with AMEX. 	The court held that, even
assuming that the plaintiff did not receive a copy of the
cardmember agreement, he nevertheless had an opportunity to
ascertain its terms by contacting the toll-free telephone number
on the back of his card. 	Id. 	The court found that the back of
the card stated unambiguously that use of the card constituted
acceptance of the terms of the cardmember agreement. 	Id. 	It
also provided a telephone number that he could have called in
order to obtain a copy of the agreement. 	Id. 	Stating that if he
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4 In a footnote, the court also stated that the fact that the
plaintiff’s liability to the defendant was only secondary or
contingent is immaterial; the cardmember agreement shows that the
defendant was nevertheless extending credit to the plaintiff.
Id. at *2, n.3.
10
had called that number, he could have learned that the agreement
subjected him to personal liability for any charges placed on the
card, 4 the court found that he is “charged with knowledge and
acceptance of the terms that he could have read in the exercise
of ordinary care, including whether he assumed personal liability
for use of the card.” 	Id. 	(citations omitted).
Another decision which provides helpful guidance is American
Express Travel Related Services Co., Inc. v. Seidenfeld, 2003 WL
23148835 (N.Y. Sup. Dec. 8, 2003); 781 N.Y.S.2d 622 (N.Y. Sup.
2003). 	In that case, a Ms. Rochelle Seidenfeld entered into an
agreement with AMEX to obtain a credit card. 	Id. at *1.
Rochelle also requested and was issued an additional card to one
Shaya Seidenfeld (presumably her husband or other family member,
although the relationship is not disclosed in the opinion). 	Id.
AMEX contended that both Rochelle and Shaya agreed to the terms
and conditions set forth in the cardmember agreement and that the
written agreement was sent to each defendant at the time they
were given their respective credit cards. 	Id. 	AMEX further
argued that by using the card, they accepted the terms of the
agreement. 	Relying on the express terms of the agreement, AMEX
contended that Rochelle was liable for her own purchases and
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those made by Shaya and that in addition, AMEX could also pursue
Shaya for all charges made by him. 	Id. 	Thus, AMEX sued both
cardholders for breach of contract and unjust enrichment and
moved for summary judgment on all counts.
Defendant Rochelle did not oppose the plaintiff’s motion for
summary judgment on the breach of contract claim but contended
that the amount due was in dispute. 	Shaya, on the other hand,
disputed AMEX’S claim that he was given a copy of the card
member’s agreement with the credit card, and claims that there is
no contract between himself and AMEX, and therefore he has no
liability to plaintiff for any charges he made. 	Id. at *2.
The court held that the primary cardholder, Rochelle
Seidenfeld, clearly was liable on the account. 	As for Shaya
Seidenfeld, the court denied cross motions for summary judgment
on the breach of contract and unjust enrichment claims against
Shaya, stating that “[t]he issue of fact to be resolved is
whether Shaya Seidenfeld received an agreement explaining his
obligations under the account and whether use of the additional
card made him personally liable for his own charges.” 	Id. at *3.
The Court notes that copies of the AMEX credit cards at
issue herein have not been made a part of the present record. 	It
is not possible, therefore, for the Court to determine, what, if
anything, the cards reflected concerning the implications of
using the card, or whether it reflected a telephone number that
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the cardholder might have called to ascertain the consequences of
using the card. 	There is, however, other evidence in the record
form which the court may reasonably infer that Mr.Garberg knew
that his usage of the card created joint liability on his part.
First, the Court notes that a part of the record before it
consists of the affidavit of Paul V. Carey, an American Express
employee. 	This affidavit, at paragraph 2 thereof, recites, as
follows:
2. 	At the time the American Express
cards were issued, the Debtors were also
issued account agreements. 	These account
agreements, admissible under Fed. R.Evid.
902(11) (as certified infra per 28 U.S.C. §
1746(2)), alternatively under Fed. R. Evid.
803(6), as certified domestic records of
regularly conducted activity, were entered
into at the time of agreement with the
cardmembers upon the extension of credit
facilities to them, have been kept in the
course of American Express’ regularly
conducted lending activities, and were made
in the course of American Express’ regularly
conducted lending activities as a regular
practice. 	The account agreements outline the
terms of the Debtors’ liabilities on the
Accounts. 	(Emphasis added by the Court)
Mr. Carey’s affidavit is uncontroverted and nothing in the
parties’ stipulation of facts refutes his sworn assertion that
“the Debtors” (plural) were issued account agreements. 	From
this, the Court concludes that both Mrs. Garberg and Mr. Garberg
were provided with a copy of the account agreement, and that Mr.
Garberg therefore had reason to know that his usage of the AMEX
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13
cards would occasion personal liability.
The Court also notes the contents of the Debtors’ bankruptcy
schedules. 	In the original schedules filed by the Debtors when
they commenced their case, on Schedule F, (Creditors Holding
Unsecured Non-Priority Claims) the Debtors listed approximately
$99,000.00 in credit card debt. 	Of this, a single claim for
“American Express” was scheduled in the amount of $20,053.00,
which claim was listed as the debt of Mrs. Garberg.
Approximately 5½ months later, on January 3, 2006, the Debtors
filed an amended Schedule F. 	On this Schedule, the couple’s
credit card debt had risen to approximately $160,000.00. 	27
separate credit card debts are scheduled, and in each instance
the Debtors carefully delineated whether the liability was that
of husband or wife. 	A total of six separate claims for American
Express are listed. 	None of these claims is listed as
contingent, unliquidated, or disputed, and two of the claims -
one in the amount of $682.00 and the other in the amount of
$19,897.00 - are listed as the debts of Mr. Garberg.
The amendment thus establishes the very point that the
objection contests: i.e., Mr. Garberg’s liability. 	That is to
say that information contained in one’s bankruptcy schedules may
be considered as an admission. 	The Court, accordingly, accords
the 	Garberg’s amendment to Schedule F probative weight. 	See
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5 Made applicable to bankruptcy cases by B.R. 9017.
6 As to the AMEX claims, there can be no dispute that if Mr.
Garberg is liable, Mrs. Garberg is also liable; for the Debtors
acknowledge that Mrs. Garberg applied for all of the cards and
accepted the terms of the account agreements.
14
F.R.E. 801(d)(2) 5 ; see also Russell, Bankruptcy Evidence Manual,
2005, Ed. § 801.13; In re Campbell, 336 B.R. 430, 436 (9 th
Cir.BAP 2005); Larson v. Groos Bank, 204 B.R. 500, 502
(W.D.Tex.1992) (statements in schedules constitute admissions);
In re Musgrove, 187 B.R. 808, 816 (Bankr.N.D.Ga.1995) (same); 4
Collier on Bankruptcy ¶ 521.08[2] (schedules may be considered as
judicial admissions); In re Arcella-Coffman, 318 B.R. 463, 475,
476 (Bankr.N.D.Ind.2004) (recognizing that information in
schedules may constitute an admission explaining that “[t]he
debtor is of course in the best position to initially evaluate
and state the nature, amount and categorization of his/her debts
and property.”) The Debtors’ own Amended Schedule F, accordingly,
corroborates AMEX’s claim that its claims are jointly held
against Mrs. and Mr. Garberg. 6
In sum, the Court finds that even if Mr. Garberg’s use of
the cards alone were insufficient to infer his assent to
contractual liability for his charges, which is a proposition
that courts have rejected. 	Mr. Garberg’s mutual liability may
reasonably be inferred from his usage of the cards, together with
the contents of the Carey affidavit and the couple’s own
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15
bankruptcy schedules. 	The Garbergs’ objections will accordingly
be dismissed and the AMEX claims will be allowed as filed.
An appropriate Order follows.
By the Court:
_________________________________
Stephen Raslavich
United States Bankruptcy Judge
Dated: 	June 7, 2006
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In 	the 	United 	States 	Bankruptcy 	Court
For 	the 	Eastern 	District 	of 	Pennsylvania
In re 	: Chapter 13
:
Leon Garberg and Barbara Garberg 	:
Debtor(s) 	: Bankruptcy No. 05-19589 SR
Order
And now, upon consideration of the 	debtors’ Objection to
Allowance of Claims of American Express Travel Related Services
Co., Inc. 	(“AMEX”), all responses thereto, and the stipulated
evidentiary record, it is hereby:
Ordered, that the Debtors’ Objection to Allowance of Claims
of AMEX are dismissed. 	The Claims are allowed in the amount
filed.
By the Court:
Stephen Raslavich
Dated: 	June 7, 2006 	United States Bankruptcy Judge
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2
Michael P. Kelly, Esquire
Cowan & Kelly
202 Penns Square
Langhorne, PA 19047
NATALIE M. MCGHEE, Esquire
Becket & Lee LLP
16 General Warren Blvd
PO Box 3001
Malvern, PA 19355
George Conway, Esquire
Office Of The U.S. Trustee
833 Chestnut Street
Suite 500
Philadelphia PA 	19106
Frederick L. Reigle, Esquire
Chapter 13 Trustee
2901 St. Lawrence Avenue
P.O. Box 4010
Reading PA 19606
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