528 B.R. 517
Bankr. N.D.N.Y.2015Background
- Defendant Matthew Glod, a licensed electrician, contracted to perform plumbing/heating work for Plaintiff A.J. Bosman under two written home-improvement proposals (2002 and 2005). Disputed sums arose over materials (notably a Weil-McLain boiler) and extra "add-on" work.
- Defendant stored an owner-purchased boiler for several years; Plaintiff says he later sold it without permission and she paid the difference for a replacement boiler. Defendant says he sold the old boiler earlier and Plaintiff agreed to purchase a newer, more efficient boiler.
- Construction was paused for several years; after restart, disputes arose about workmanship, used parts, and additional draws on Plaintiff’s construction loan (January and April 2006 invoices for $3,000 and $2,500). Parties disagree on whether the January draw was represented as "final."
- Defendant previously filed a Chapter 13 in 2005 (dismissed for nonpayment; no discharge). He did not list Bosman in that filing. Plaintiff later filed this adversary in Defendant’s 2013 bankruptcy seeking nondischargeability under 11 U.S.C. §§ 523(a)(2), (a)(3), and (a)(4) for fraud, failure to schedule, and larceny/embezzlement.
- At bench trial the court found testimonial evidence conflicted, documentary proof was limited, and Plaintiff failed to meet the burden of proving false representation, actual fraud, or wrongful conversion with the requisite intent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| §523(a)(2)(A) — false pretenses/false representation/actual fraud | Bosman: Glod made false representations (boiler would be provided at no charge; materials/new parts used; January draw was final) and obtained money by fraud | Glod: Disputes false statements; work actually performed; parties made verbal changes; add‑ons increased price; no intent to deceive | Court: Claim dismissed — Plaintiff failed to prove false representations or intent to deceive; evidence showed at most negligence/breach of contract, not actionable fraud |
| §523(a)(3) — unscheduled creditor excepted from discharge | Bosman: Glod failed to list her in his 2005 bankruptcy, so he waived dischargeability of the debt | Glod: 2005 case was dismissed and no discharge entered; §523(a)(3) protects creditors who missed a discharge proceeding after a discharge was entered | Court: Claim dismissed — §523(a)(3) inapplicable because no discharge was granted in the 2005 case |
| §523(a)(4) — larceny or embezzlement | Bosman: Glod sold/stole the stored boiler and converted proceeds; charged for new materials while using old ones | Glod: Payments were lawful under contracts/proposals; boiler sale credited/offset and add‑ons justified extra charges; no fraudulent appropriation | Court: Claim dismissed — no evidence of unlawful original taking or intent to convert; at most contract dispute/possible negligence |
| Ability to continue state court action (stay/liquidation) | Bosman: Seeks exception and permission to continue State Court Action to liquidate claim | Glod: Opposes nondischargeability; bankruptcy court adjudicates dischargeability | Held: Because nondischargeability not proven, Plaintiff cannot pursue liquidation in state court while bankruptcy protects discharge resolution |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (1991) (plaintiff bears burden by preponderance to except a debt from discharge)
- Denton v. Hyman (In re Hyman), 502 F.3d 61 (2d Cir.) (discussing narrow construction of discharge exceptions)
- State Bank of India v. Chalasani (In re Chalasani), 92 F.3d 1300 (2d Cir. 1996) (denial of discharge is an extreme penalty; exceptions construed narrowly)
- Field v. Mans, 516 U.S. 59 (1995) (justifiable reliance standard is fact-specific)
- In re Medaglia, 52 F.3d 451 (2d Cir. 1995) (unscheduled debt nondischargeable where creditor lacked notice and could not file claim)
- Bethpage Fed. Credit Union v. Furio (In re Furio), 77 F.3d 622 (2d Cir. 1996) (intent to defraud may be inferred from totality of circumstances)