UniWyo Federal Credit Union v. Crowson

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF WYOMING
fure 	)
)
GENEVIEVE MURAN CROWSON, 	) 	Case No. 	09-20032
) 	Chapter 7
Debtor. 	)
)
UNIWYO FEDERAL CREDIT UNION, 	)
)
Plaintiff, 	)
)
v. 	) 	Adv. No. 09-2009
)
GEJ'ffiVIEVE MURAN CROWSON, 	)
)
Defendant. 	)
OPINION ON THE COMPLAINT TO DETERMINE EXCEPTION
TO DISCHARGE OF DEBT
On April 14, 2010, this matter came before the court for an evidentiary hearing on
the Complaint to Determine Exception to Discharge of Debt filed by UniWyo Federal
Credit Union ("Credit Union") and the Answer filed by the DebtorlDefendant, Genevieve
Muran Crowson, ("Debtor"). The Credit Union was represented by Michael Schilling.
Ms. Crowson was represented by Janet Tyler. The Court having reviewed the record, is
prepared to rule and based upon the following, denies the complaint.
This Court has jurisdiction over this matter under 28 U.S.C. §§ 1334 and
157(b)(2)(J).
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Facts:
1. 	The Debtor filed for Chapter 7 bankruptcy protection on January 21, 2009.
2. 	Her husband, Matthew Crowson, is not a debtor in the bankruptcy.
3. 	The Debtor listed the Credit Union's claim on Schedule "F" in the amount of
$17,211.20, and described it as: "car loan (no lien on title)."
4. 	The Debtor was not a member of the Credit Union when she received a promotion
in the mail advertising vehicle loans.
5. 	The Debtor completed a loan application to the Credit Union over the internet to
borrow $18,900.00.
6. 	The collateral for the loan was a 2004 Chevrolet Tahoe ("Tahoe").
7. 	The Debtor testified that the Tahoe was part of the property distribution from Mr.
Crowson's previous divorce. It was her understanding, that in order to get the ex
spouse's name off the title, Mr. Crowson's mother agreed to co-sign a loan at
Wells Fargo Bank.
8. 	The Debtor testified that the reason she responded to the Credit Union
advertisement was the interest rate was lower than the loan with Wells Fargo and
she and Mr. Crowson wanted to get Mr. Crowson's mother's name "off the loan."
9. 	The Debtor testified that she had never borrowed money for the purchase of a
vehicle prior to this transaction. She also testified that she did not know what a
lien was.
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10. 	During this time, the Crowson's baby was born with complications. The Debtor
was in Denver at the hospital with the infant for seven weeks.
11. 	The Debtor testified that actual conversations between the Debtor and the Credit
Union loan officer, Julie Schmidt ("Schmidt") consisted of three telephone calls
with a duration of two to three minutes each and one face-to-face meeting at the
closing on March 31, 2008.
12. 	The Debtor testified that she and her husband went to the Credit Union on March
31, 2008, for the loan closing, on their way home from the hospital with their
infant daughter. The Debtor signed the loan documents. A check was issued to
"Genevieve Muran Crowson or Matthew James Crowson." It was upon the
Debtor's request that the check was made to the order of the Debtor and her
husband.
13. 	Mr. Crowson was not a party or borrower on the loan.
14. 	The Debtor testified that the only discussion she remembered regarding the title to
the Tahoe during the loan application process, was at the March 31,2008 closing.
She remembers telling Ms. Schmidt that as soon as she got it, she would "bring it
in."
15. 	Ms. Schmidt testified that she processed the loan application from the information
provided by the Debtor via the internet. She obtained a credit report to check the
Debtor's credit history. Based on the credit report, there were no indications that
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further investigation into the Debtor's financial history was necessary. There was
no indication of a loan with Wells Fargo on the Debtor's credit report. Ms.
Schmidt confirmed that all communication with the Debtor was by telephone
regarding any questions while processing the loan.
16. 	Ms. Schmidt testified that it was her understanding that the Debtor was buying the
Tahoe from a relative.
17. 	Ms. Schmidt testified that she was not informed of any lien on the title.
18. 	Ms. Schmidt testified that although the Debtor was not a member of the Credit
Union, at the time of the loan application, she was eligible to join as the Debtor
was employed by the University of Wyoming.
19. 	Ms. Schmidt testified that it is the Credit Union's policy to have the title in its
possession at closing or an assurance from the party holding the title, that the title
would be turned over before any loan funds are disbursed.
20. 	Ms. Schmidt testified that she did not remember Mr. Crowson being at the closing
on March 31, 2008 when the Loan Application; Loan and Security Agreement and
Disclosure Statement; Loan Agreement Addendum; Credit Insurance document;
Payroll Deduction direct Deposit Authorization were executed.
21. 	The Debtor testified that she and her husband immediately took the check to Wells
Fargo to pay off the previous loan. She also testified that she understood that
Wells Fargo would mail the Tahoe's title to the Debtor and her husband.
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22. 	Leslie Johnson, Loan Officer/Title Clerk of Credit Union sent a letter to the
Debtor, dated August 18, 2008 requesting that the title be forwarded to the Credit
Union.
23. 	The Debtor testified that she attempted to contact Ms. Johnson or Ms. Schmidt, but
neither were available. She testified that she left a message. The Debtor testified
that at that time, her husband called Wells Fargo to determine the status of the title.
They were told that titles were held in a facility out of state and someone would
"look into it and mail the title."
24. 	Larry Dern, Title Clerk of the Credit Union sent a subsequent letter to the Debtor
dated October 16, 2008. The Debtor testified that she does not remember
receiving this letter.
25. 	The Debtor testified that she met with her bankruptcy attorney in October 2008.
She stated that at that meeting, she was informed by her husband that he had
received the Tahoe title and Lien Clearance from Wells Fargo. The documents
were in his possession. The Debtor testified that she was not aware that he had
received the title.
26. 	The Credit Union sent another request for the title by a letter dated February 25,
2009. The Debtor testified she received this after the bankruptcy was filed and she
did not respond.
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27. 	Larry Knopp testified that upon receiving notice of the Debtor's bankruptcy, an
investigation was initiated to determine why the Tahoe's title was not in the
member's file. 	Mr. Knopp testified that it was the Credit Union's policy that the
title be in the possession of the Credit Union before funds are disbursed.
28. 	The Certificate of Title for the Tahoe, issued January 17,2007 shows that the
owner is listed at Matthew J. Crowson. The Title also shows a first lien holder of
Wells Fargo Bank NA, filed on that same date. The Lien Clearance is dated April
15,2008 and filed at the Albany County Clerk's office on April 29, 2009.
Discussion:
A court may deny a discharge of a debtor for money ... obtained by false pretenses,
a false representation, or actual fraud ... l A creditor must show, by a preponderance of the
evidence, that a debtor made a misrepresentation; the debtor made the misrepresentation
with the intent to deceive; the creditor justifiably relied on the misrepresentation; and that
the misrepresentation cause the creditor to sustain damages. Discharge provisions will be
strictly construed against the creditor and liberally construed in favor of the debtor's
discharge.2
False pretenses or representations are representations knowingly and fraudulently
made that gives rise to the debt. 	Courts define "fraudulent misrepresentation" as one who
1 11 U.S.C. §523 (a)(2)(A).
2 In re Zolnosky, Case no. 7-07-11879; Adv. No. 07-1157, 2008 Bankr. LEXIS 3348
(Bankr. N.M. August 28, 2008).
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fraudulently makes a misrepresentation of fact, opinion, intention or law for the purpose
of inducing another to act or to refrain from action in reliance upon it, is subject to
liability to the other in deceit for pecuniary loss caused by him by his justifiable reliance
upon the misrepresentation.3
Intent to deceive is a question of fact which can be inferred based on the totality of
circumstance.4 A plaintiff can satisfy the element through circumstantial evidence from
which a court may infer the requisite intent to defraud. The court must consider the
totality of the circumstances as of the time the representation was made to determine
whether the debtor had a subjective intent to defraud the creditors.s The court may
logically infer an intent to deceive if the debtor knowingly or recklessly makes a false
representation that the debtor knew or should have known would induce another to act.6
The Credit Union alleges that the Debtor obtained the loan funds by false
pretenses, false representation or actual fraud. 	The Credit Union asserts that the Debtor
made false and misleading material misrepresentations concerning the vehicle that was to
become the collateral for the loan. The Credit Union further asserts that the Debtor
3 In re McGuire, 284 BR 481 (Bankr. D. Colo. 2002 (citing Restatement (Second) of
Torts §525 (1976).
4In re Baines, 337 BR 392 (Bankr. D.N.M. 2006).
5In re Young, 91 F 3d 1367 (1oth Cir. 1996).
6In re Horst, 151 BR 563 (Bankr. D.Kan. 1993).
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falsely represented that she would present the Tahoe title to allow the Credit Union to
perfect its security interest. The Credit Union relied upon the false representations;
loaned the funds to the Debtor; was not able to protect its security interest in the collateral
and was hanned upon Debtor filing for bankruptcy protection because it was an
unsecured creditor. The Debtor represented that she would use the loan proceeds to
purchase the vehicle. Debtor did not represent to the Credit Union that someone else had
an interest or claim against the collateraL Debtor represented that she would do all that
was necessary and requested by the Credit Union to protect the Credit's Unions security
interest in the Tahoe. The Credit Union alleges that it reasonably relied on the Debtor's
representation.
It appears to the Court that there was a total break-down of communication
between the Debtor and Ms. Schmidt. At the time the loan application was made and
completed, the Debtor appears to have been a financially unsophisticated individual. She
testified that she had not borrowed money prior to this transaction and did not understand
the process. It is also apparent to the court that she did not know or understand the facts
regarding the status of the Tahoe title and loan and the significance those facts would
have had on the loan application with the Credit Union. At that time she did not know or
understand what a "lien" was or have an understanding of the process of borrowing,
security interests or titles.
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The Debtor testified that during the time that she was undergoing the loan process
and talking to the Credit Union loan officer, Ms. Schmidt, she also was in Denver with an
infant child, born with complications. The telephone calls between the parties, were held
after the Debtor received a message from Ms. Schmidt, came out of the neonatal unit and
returned the call which lasted a minimal amount of time.
The Court does not doubt the credibility of either the Debtor or Ms. Schmidt. In
considering the totality of the circumstances, it does not appear to the Court that the
Debtor's statements were to misrepresent. She told the loan officer what she knew or
thought she knew about the circumstances of the Tahoe. Her representations to the Credit
Union were incomplete, based on unfamiliarity of the process and the circumstances of
her life at that time.
The Court also finds that in reviewing the totality of the circumstances, the
Debtor's statements do not show the requisite intent to deceive. The Debtor was
uninformed of the loan process and responded on that level. Her testimony and the
surrounding facts do not show she made statements with the intent to knowingly and
fraudulently induce the Credit Union to approve the loan. Additionally the Court finds
that her statements regarding providing the title to the Credit Union were not for the
purpose of preventing the Credit Union from securing its collateral for the loan. The
Debtor was not aware of the importance ofthe title being in the Credit Union's
possession or having its lien on the title for the purpose of protecting is security interest.
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Conclusion:
The Credit Union, having not met its burden of proving by a preponderance of
evidence that the that the Debtor intentionally obtained the loan funds by false pretenses,
false representations, or actual fraud is denied the requested relief. The Debtor's
discharge shall be aHowed. This opinion constitutes the Court's findings of fact and
conclusions oflaw. A separate order shall be entered pursuant to Fed. R. Bankr. P. 902l.
DATED this L 	day of June, 2010.
By the Court
Service to:
Michael Schilling
Janet Tyler
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