FOR THE NORTHERN DISTRICT OF CALIFORNIA In re DONALD A. HEYMAN and LEILA P. HEYMAN,                                                   No. 1-85-01494      Debtors. ________________________/ THUNDERBIRD PRODUCTS CORPORATION,      Plaintiff,    v.                                                                                  A.P. No. 1-87-0058 DONALD A. HEYMAN and LEILA P. HEYMAN,      Defendants. ________________________/ Memorandum of Decision      Before debtor Donald Heyman converted his bankruptcy proceedings to Chapter 7, he operated a pleasure boat dealership. Plaintiff in this adversary proceeding, Thunderbird Products Corporation, was a major supplier of boats to Heyman.      On September 9, 1983, a check given to Thunderbird by Heyman as payment for a boat, in the amount of $82,195.00, was returned by Heyman's bank. Since collection proceedings would have then driven Heyman into bankruptcy, he met with representatives of Thunderbird and they entered into an agreement whereby Thunderbird would forbear from collection if Heyman signed a note and pledged his real property as collateral. On September 29, 1983, Heyman signed a document representing that he owned three properties: a condominium in Florida, a residence on Bellam Boulevard in San Rafael, California, and his business premises on Canal Street in San Rafael. Heyman represented that the Florida property was free and clear and that the Bellam Blvd. property was encumbered only by a first deed of trust securing an obligation of $23,000.00.      The representations concerning the Florida property were true; it was subsequently sold and Thunderbird realized $25,289.21 which was applied to the debt. On November 17, 1983, Heyman paid $30,000.00 on account of the debt and on April 11, 1984, a further payment of $1,526.40 was applied to the debt, so that as of that date the total debt was reduced to $29,912.66, including interest.      The representations concerning the two San Rafael properties were not true. The Bellam Blvd. property was encumbered by two deeds of trust totalling about $42,000.00, and Heyman did not actually own the Canal Street property, but only an option to purchase it. Thunderbird argues that Heyman obtained an extension of credit by these false representations in writing, rendering the debt nondischargeable pursuant to Bankruptcy Code section 523(a)(2)(B).      Heyman admits that the representations were not true but states that he did not remember the junior encumbrance on Bellam Blvd. He is less clear about the facts surrounding Canal Street, but states that the September 29, 1983, document was prepared by Thunderbird's counsel and was only intended as a temporary document until title reports could be obtained, and that title reports were in fact obtained by December, 1983, and that Thunderbird continued to deal with him after that date even knowing that he did not actually own the Canal Street property. This testimony was substantially corroborated by Thunderbird's sole witness.      On July 10, 1984, Heyman's business bounced another check to Thunderbird in the amount of $58,548.00. This check had been written by one of Heyman's employees without Heyman's knowledge, as Heyman was out of the country at the time. Part of the shipment paid for by this check was returned for a credit of $32,205.00; Thunderbird claims the balance is nondischargeable based on the prior misrepresentations. This claim is easily dismissed, as by this time Thunderbird had obtained the title reports and knew at least that the representations as to the Canal Street property were not accurate. There is therefore no way that Thunderbird can show that it was then relying on the September 29 writing, or that any such reliance would have been reasonable.      Heyman's uncontroverted testimony was that the Bellam Blvd. property was worth at least $80,000.00, and that he actually received an offer at that figure. Thunderbird admitted that it allowed the property to go to foreclosure by the second without having it appraised. Since sale at $80,000.00 would have paid off the debt in full, the court cannot find that the misrepresentation concerning this property was material.      While fraudulent intent can be inferred from the circumstances of a case, the circumstances here do not justify such an inference. When the misrepresentations were made, Heyman already had Thunderbird's money and he knew that Thunderbird intended to have title searches made. His misrepresentations therefore neither benefitted him (aside from keeping him in business, which was also to Thunderbird's benefit) nor harmed Thunderbird, which was already out the money. In fact, the agreement appears to have allowed Heyman to make $31,500.00 in subsequent payments. Fraudulent intent cannot be found under these facts.      Most fundamentally, Thunderbird cannot prevail in this matter because it has not shown that Heyman obtained money, property, services, or an extension, renewal, or refinancing of credit by his misrepresentations. There has been no allegation that the mere dishonoring of the check gave rise to a nondischargeable debt; Thunderbird merely argues that its forbearance and the taking of Heyman's note based on the representations turned the debt nondischargeable. This is not the law.      Courts have been uniform in finding that inducing a creditor to forego enforcement of a claim is not a renewal or refinancing of credit within the meaning of section 523(a)(2). See, e.g., In re Preston (DC E.D.Va.1983) 47 B.R. 354, in which the district court held that the giving of a knowingly bad check to pay an honest prior debt did not render the debt nondischargeable; In re Schmidt (Bkrtcy.N.D.Ind.1986) 70 B.R. 634, to the same effect; and In re Hames (Bkrtcy.D.Minn.1985) 53 B.R. 868, in which the court held that the execution of a supplemental security agreement which resulted in the creditor taking additional valueless collateral for a pre-existing debt did not render the debt nondischargeable. See also In re Bacher (Bkrtcy.E.D.Pa.1985) 47 B.R. 825, and Matter of Grubbs (DC M.D.Ga.1981) 9 B.R. 499. The fact that Heyman replaced his returned check with a note does not change anything, where Heyman obtained nothing further except forbearance.      For the reasons stated above, the court must find the debt to Thunderbird dischargeable. Thunderbird shall therefore take nothing by its complaint, and this action shall be dismissed. This memorandum shall constitute findings and conclusions pursuant to Bankruptcy Rule 7052.
Dated: October 20, 1987                                                                                  _________________________                                                                                                                            ALAN JAROSLOVSKY                                                                                                                            U.S. BANKRUPTCY