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Metric Investment Inc. v. Patterson

Decided: June 11, 1968.

METRIC INVESTMENT, INC., PLAINTIFF-APPELLANT,
v.
CHARLES PATTERSON AND ROSE PATTERSON, DEFENDANTS-RESPONDENTS



Goldmann, Kilkenny and Carton. The opinion of the court was delivered by Kilkenny, J.A.D.

Kilkenny

By amended complaint, plaintiff sought a judgment against defendants based on a charge of fraud. Defendants defaulted in pleading. After default was entered, plaintiff submitted its proof. The trial court found its proof insufficient to warrant entry of a judgment for fraud because there was no showing that the allegedly false representations by defendants were made to plaintiff, or with the intent that it should rely on them. Concededly, the false representations were contained in a credit statement which defendants gave to a third party, a contractor who made home improvements for them. Accordingly, the requested judgment in fraud against defendants was denied and judgment was entered in favor of defendants.

Plaintiff appeals from the adverse judgment. It maintains that the trial court erred in determining that the false representation made by defendants to someone else other than plaintiff is not actionable in fraud in a suit by it.

Defendants contracted with Jalsco Construction Company for certain work on their home. They executed a credit statement on August 15, 1966. In listing therein their "fixed obligations, installment accounts, mortgages, LOANS and debts to banks, finance companies and Government agencies," defendants noted only "R. E. Scott, Westfield Ave., Eliz., N.J." as a debtor, and stated the debt was incurred in

1964, its present balance was $15,000 and the monthly payments were $118.

On September 1, 1966, defendants executed and delivered their negotiable promissory note payable to the order of "Jalsco Const. Co. Inc." in the amount of $1822.20. Presumably, the consideration for this note was the work done by Jalsco on defendants' home. This note was payable in 60 consecutive monthly installments of $30.37 each, the first payable on November 1, 1966 with interest. There were the usual provisions accelerating payment of the full balance on default, a 15% attorney's fee for collection of the debt, and the like.

Jalsco sold the note to plaintiff, transferring it by its endorsement "without recourse," except that it warranted that it furnished and installed the articles and materials and had fully completed all work which constituted the consideration for which the note was executed and delivered by the maker. Plaintiff endorsed it "with recourse" to First State Bank of Union. Subsequently, on March 28, 1967, this bank assigned the note back to plaintiff.

On April 5, 1967, plaintiff as holder sued defendants as makers of the note, alleging in its complaint that only $60.74 had been paid on account, leaving a balance of $1761.46. Recovery thereof was sought, plus $264.22 attorney's fees of 15%, together with late charges and costs of suit.

Thereafter, defendants filed a petition in bankruptcy, in which they scheduled many debts not listed in and antedating the credit statement given by them on August 15, 1966. On October 2, 1967, defendants received their discharge in bankruptcy.

To avoid the normal effect of a discharge in bankruptcy plaintiff filed an amended complaint on July 31, 1967, whereby it added a second count. Therein, it alleged as a separate cause that defendants made false representations in their credit statement "with intent to defraud the plaintiff," knowing that the representations were false when made because

of their indebtedness to other listed creditors. Plaintiff further asserted that it was induced to purchase defendants' note in reliance upon these false representations. It demanded judgment for the amount due on the note "and punitive damages." Obviously, plaintiff's purpose in adding the second count was to obtain a judgment against defendants based on fraud, a debt not dischargeable in bankruptcy.

As first noted above, defendants defaulted in pleading, a default was entered, but judgment in plaintiff's favor ...


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