24-90001
Bankr. D. AlaskaMar 12, 2025Background
- Luis Cosme, II contracted with Christopher Taylor for remodeling work on his home and paid Taylor $6,410 in deposits for two bathroom projects.
- Taylor never began the remodeling work, failed to provide promised contracts or start dates, and ultimately did not refund Cosme’s deposits despite repeated requests.
- Cosme obtained a default judgment in state court for the deposits and, after Taylor filed for Chapter 7 bankruptcy, filed an adversary proceeding to except this debt from discharge under 11 U.S.C. § 523(a)(2)(A) (fraud exception).
- The only genuine factual dispute was Taylor’s intent at the time he accepted the deposits—whether he intended to perform the contractual work.
- Additional customers testified that Taylor had followed a similar pattern with them, taking deposits and failing to perform any or substantial work on their projects.
- At trial, the Bankruptcy Court found that Cosme proved by a preponderance of the evidence that Taylor never intended to perform the remodeling work and took the deposits through fraudulent misrepresentation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the debt owed to Cosme is excepted from discharge under § 523(a)(2)(A) | Taylor never intended to perform or refund; induced deposits by fraud | Taylor intended to perform at time of deposit | Debt is nondischargeable due to Taylor's fraudulent intent |
| Whether Taylor’s intent at deposit was fraudulent | Circumstantial and testimonial evidence shows intent not to perform | Claimed intent to perform as agreed | Taylor had no intent to perform; intent was fraudulent |
| Reliability of witness testimony regarding Taylor’s conduct with other customers | Other customer testimony supports fraud | Argues character evidence is improper | Other acts admissible to show intent, not just character |
| Whether Cosme relied justifiably and suffered damages as a result | Relied on promises, paid and lost $6,410 | Did not contest these elements | Reliance and damages elements met |
Key Cases Cited
- In re Weinberg, 410 B.R. 19 (B.A.P. 9th Cir. 2009) (outlining elements for nondischargeability under § 523(a)(2)(A))
- In re Slyman, 234 F.3d 1081 (9th Cir. 2000) (setting forth standard for nondischargeable fraud)
- In re Su, 290 F.3d 1140 (9th Cir. 2002) (intent to deceive can be inferred from circumstantial evidence)
- In re Kennedy, 108 F.3d 1015 (9th Cir. 1997) (subjective fraudulent intent may be proven by objective factors)