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IN RE ELLIS

September 3, 1975

In re Hubert Lee ELLIS, Jr., a/k/a H. Lee Ellis, a/k/a Lee Ellis, Bankrupt. BENEFICIAL FINANCE COMPANY, Plaintiff,
v.
Hubert L. ELLIS, Jr., Defendant



The opinion of the court was delivered by: CARTER

CARTER, District Judge.

 This is an appeal by a creditor, Beneficial Finance Company ("Beneficial"), from a decision by Bankruptcy Judge Townsend, dated January 8, 1975, which determined the dischargeability of a debt owed by the above-named bankrupt to Beneficial.

 Facts and Proceedings to Date

 A voluntary petition was filed by the nonbusiness bankrupt pro se on July 1, 1974. On July 18, 1974, Beneficial filed a complaint, see Bankruptcy Rule 409(a) (1), pursuant to Section 17(a)(2) of the Bankruptcy Act, 11 U.S.C. § 35(a)(2), to have its debt declared nondischargeable and for judgment of $1,521.08.

 Hearings were held in September and October of 1974, which adduced the following facts: On April 24, 1974, the bankrupt, who had obtained two previous loans from Beneficial, sought and received a third loan for $1,521.08. The sum represented $618.35 owed on the second loan, various charges, and $431.73 in "new" money. Contemporaneous with the loan, the bankrupt filled out and signed a financial statement in which he represented that he had no debts and liabilities over $25, other than those listed on the statement, which totalled $1,013.70. In fact, the bankrupt was indebted to the tune of $12,000 to more than 15 other creditors.

 Beneficial urged two bases for nondischargeability of the entire amount of the April 24 loan. The first, apparently grounded upon the false pretenses portion of Section 17(a)(2), alleges that the bankrupt, on April 24, was insolvent, concealed this from Beneficial, and also had no present intention of repaying the loan. The second basis for the claim of nondischargeability tracks the language of the "materially false statement in writing" clause of Section 17(a)(2), that Beneficial granted the loan in reliance on the fraudulent financial statement of April 24. *fn1"

 Judge Townsend dismissed the first claim for failing to meet the particularity requirement of the new Bankruptcy Rules; he further found insufficient proof that the bankrupt contemplated bankruptcy on April 24 or that he had no present intention of repaying the loan. Regarding the second claim, Judge Townsend determined that Beneficial relied on the fraudulent financial statement only insofar as it advanced the new money, and held the debt nondischargeable to that extent.

 This appeal was heard on July 1, 1975, with the bankrupt again appearing pro se ; Beneficial did not enter a personal appearance but submitted an extensive brief. Decision was reserved pending a written opinion.

 Legal Issues and Their Disposition

 Essentially, two issues are raised by Beneficial on appeal. The first is whether the Bankruptcy Judge erred in dismissing the false pretenses claim; the second is whether Judge Townsend erred in limiting nondischargeability to the amount of new money advanced.

 Bankruptcy Rule 709 incorporates Rule 9, F.R.Civ.P., in adversary proceedings in bankruptcy. Rule 9(b), in pertinent part, provides that "[in] all averments of fraud . . . the circumstances constituting fraud . . . shall be stated with particularity." The Bankruptcy Judge determined that paragraphs 6 and 7 of the complaint, *fn2" at best, alleged the bankrupt's concealment of insolvency and his lack of intention to repay the loan at the time he filled out the financial statement. He then concluded that the allegations failed to survive the hurdle presented by Rule 709.

 In this determination the Judge was correct. The allegations here are "merely conclusory and clearly do not apprise the [bankrupt] of the claims made against [him]. . . . Some further explanation of the allegations is necessary to indicate how they constitute fraud." Felton v. Walston and Co., 508 F.2d 577, 581 (2d Cir. 1974). In Robertson v. NBA, 67 F.R.D. 691 S.D.N.Y. July 8, 1975), this court, in passing upon the sufficiency of a cross-claim, stated at 8:

 
"Because of the wide range of conduct which fraud encompasses 'a defendant needs a substantial amount of particularized information about [the] claim in order to enable him to understand it and effectively prepare his response.' Wright & Miller, Federal Practice and Procedure, § 1296, at 400 (1969). Sensitivity to the particularity requirement also reflects judicial awareness of the harm that comes to a defendant's reputation when he is charged with such wrongdoing. Segal v. Gordon, 467 F.2d 602, 607 (2d Cir. 1972); Lewis v. Varnes, 368 F. Supp. 45, 47 (S.D.N.Y.), aff'd, 505 F.2d 785 (2d Cir. 1974). Accordingly, conclusory allegations that conduct was fraudulent are insufficient, Shemtob v. Shearson, Hammill & Co., 448 F.2d 442, 444 (2d Cir. 1971), for such general assertions serve no informative function, Lynn v. Valentine, 19 F.R.D. 250, 254 (S.D.N.Y.1956). ...

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