IN RE DURREL, JR., (W.D.La. 1979)

BERNARD, Bankruptcy Judge

A creditor's testimony that had he known of debts which were not listed on the financial statement submitted by a bankrupt he probably would not have made the loan falls short of proving reliance for purposes of denying discharge under Section 14c(3), or declaring the debt to be nondischargeable under Section 17a(2) in light of the circumstances in which the loan was secured.

Prior to obtaining the loan, the bankrupt had written to the bank advising it of his corporation's plans for growth adn expansion. Bankrupt explained that the first step in this direction was to be the execution of a contract to provide interior furnishings for a new residence. Bankrupt had stated that the size of the contract was approximately $22,400.00 and that the corporation would need funds in the amount of $11,000.00 on a 90-day note in order to complete the contract. Later the bank was provided with the false financial statement which failed to list almost $8,000.00 in debts. However, subsequent to that, a letter reached the bank from bankrupt's client for whom the interior furnishings were being provided stating that client knew of the loan that bankrupt was attempting to secure from the bank and that any payment client made for merchandise from bankrupt would be made in the form of a check payable to both bankrupt's corporation and the creditor bank. This letter arrived the day before the loan was made.

Despite the bank president's testimony that had he known of the debts which were not listed on the financial statement he probably would not have made the loan, the facts indicate that the bank was relying upon repayment of the loan from the proceeds of the client's contract and not from the financial resources of the corporation as reflected in the false financial statement. Therefore, the court held this debt to be dischargeable. See Secs. 14c(3) at ¶ 2131 and Sec. 17a(2) [§ 523(a)(2)] at ¶ 9228.