Household Finance Corp. v. Hamer

Hammond, C. J., delivered the opinion of the Court. Household Finance Corporation of Suitland (Household) sued Henry Hamer to recover $943.60 of $990.00 it had lent him in 1965, alleging that he had obtained the money by reason of “a materially false statement in writing [his own handwriting over his signature] respecting his financial condition,” the statement that his existing debts totalled $60.00, whereas in fact they totalled $2,325.29. Hamer pleaded that he had not promised and was not indebted as alleged and that he had been adjudicated a bankrupt by the District Court for the District of Maryland in 1966, having been discharged on May 11, 1966, and that Household “was duly listed on the Bankruptcy Schedules * * * for the same debt on which this action is now brought.” Household filed a replication in which it alleged that the discharge did not release the debt sued on since that debt constituted “a liability for obtaining money or property by false pretenses or false representations, or for obtaining money or property on credit, or obtaining an extension or renewal of credit within the meaning of § 17 a (2) ( 11 USC § 35 ) of the Bankruptcy Act, in that ⁵⁶⁹ the loan obtained * * * was secured through the making and the publishing of a materially false financial statement which the plaintiff relied upon in making the said loan * * At the trial Household proved the allegations of fact on which it grounded its case and Hamer moved for a dismissal, a motion which Judge Meloy, sitting without a jury, granted, holding that Household and Hamer had dealt at arms’ length and that “fraud may not be predicated on a bare non-disclosure of facts where the information regarding them is just as accessible to the one party * * * as to the other party.” We think that, contrary to Judge Meloy’s decision, the controlling law is that set out in Household’s replication. In Slacum v. Trust Co., 163 Md. 350 , the trust company sued Slacum for the balance on a promissory note purportedly signed by him and his wife, the declaration charging that the wife’s signature had been forged by Slacum.

Slacum pleaded his discharge in bankruptcy and the trust company demurred to the plea and the trial court sustained the demurrer. This Court said (at page 352) : “The appellant contends that his discharge in bankruptcy relieves him of the obligation, while the appellee contends that the debt of the appellant was based on his fraudulent representation that his wife signed the note, and that but for this the appellee would not have purchased the note, and that, under section 17 of the Bankruptcy Act of the United States (11 U. S. C. A., sec. 35), the obligation of the appellant is a debt ‘not affected by a discharge,’ the second clause of the section excepting, from the debts for which a bankrupt may be discharged, ‘liabilities for obtaining property by false pretenses or false representations.’ ‘As to the character of the pretenses or representations intended by the statute it may be said that a representation as to a fact made knowingly, falsely, and fraudulently for the purpose of obtaining money or property from another and by means of which such money or prop ⁵⁷⁰ erty is obtained, is a legal fraud within the statute.’ Black on Bankruptcy, sec. 744.” See also Levin v. Singer, 227 Md. 47 . In 1960 Congress amended Section 17 of the Bankruptcy Act to insert in 11 U. S. C. § 35 (a) (2) the provision that a discharge in bankruptcy does not make uncollectible a provable debt which is a liability “for obtaining money or property by false pretenses or false representations, or for obtaining money or property on credit or obtaining an extension or renewal of credit in reliance upon a materially false statement in writing respecting his financial condition made or published or caused to