Griffith v. Barlich

SCHOTTKY, J. Henry Griffith and his wife, Velma L. Griffith, appeal from an adverse judgment in an action to recover on a note executed by Robert D. Barlich and his wife, Lonnie Barlich.

The evidence discloses that in August 1955 Robert Barlich and the Griffiths agreed to purchase as partners a hardware [290]business. The Griffiths contributed $11,400 and Barlich $3,600 which he borrowed toward the purchase of the business which was purchased for $30,000. It was also agreed that Henry Griffith would join Barlich in about a year to participate in the business. In September 1956 Henry Griffith commenced working in the store. He soon became dissatisfied, principally because he had no voice in the management of the business. After some negotiation it was agreed that the Barliches would purchase the Griffiths ’ interest. The Griffiths received $400 in cash and a note for $14,600. Approximately $1,651 was paid on the principal of the note before petitions in bankruptcy were filed by the Barliches. On February 18, 1959, the Barliches were discharged from all debts and claims which by law were made provable against their estates, except such debts which by law were excepted from the operation of discharge in bankruptcy.

In August 1959 the Griffiths filed this action. They alleged that the note was not discharged in the bankruptcy proceedings because the note was a liability for obtaining money by false pretenses or false representations.

The trial court found that there were no false representations or false pretenses made in entering the original oral agreement and that the debt was discharged in bankruptcy. This appeal followed.

Basically, appellants challenge the sufficiency of the evidence to support the decision of the trial court.

Section 17 of the Bankruptcy Act (11 U.S.C.A., § 35) provides in part: “(a) A discharge in bankruptcy shall release a bankrupt from all of his provable debts, . . ., except such as . . .; (2) are liabilities for obtaining money or property by false pretenses or false representations, ...”

It is appellants’ theory that the original agreement between the parties was fraudulent, or based on false representations, and that as a result the note given for appellants’ share of the business was also obtained by false representations and therefore could not be discharged. (United States Credit Bureau, Inc. v. Manning, 147 Cal.App.2d 558 [305 P.2d 970].) However, it was the burden of appellants to prove that the original agreement was based on fraudulent representations. (Morris v. Drubin, 165 Cal.App.2d 467 [332 P.2d 371], and cases cited therein.)