Risk v. Hunter (In re Hunter)Risk v. Hunter (In re Hunter)
MEMORANDUM OF DECISION AND ORDER REGARDING CROSS-MOTIONS FOR SUMMARY JUDGMENT
Plaintiff James Risk (“Plaintiff’) is an unsecured creditor in the underlying Chapter 7 case. On October 16, 2014, Plaintiff commenced this adversary proceeding, seeking a determination of the dischargeability of a debt owed to him by Defendant Piaj E. Hunter (“Defendant” or “Debtor”), the Chapter 7 debtor. Plaintiff asserts that the debt should be excepted from discharge under
•Plaintiff obtained a judgment against Defendant in a breach of contract action, based upon an agreement wherein Plaintiff was to sell a house to Defendant and move the structure to lots owned by Defendant (collectively “the Property”). The breach of this contract created a debt in the amount of $16,458.07 that Plaintiff contends should be excepted from Defendant’s discharge. Plaintiff further maintains that Defendant’s actions, including the transferring of the title of the Property to his father, which his father then transferred back to the Defendant five days before the filing of his petition, and statements made by Defendant regarding his residing within the property, should prevent Defendant from being granted a discharge. [Doc. # 1, ¶¶ 29-32],
This proceeding is now before the court on Defendant’s Motion for Summary Judgment Including Affidavit in Support (“Defendant’s Motion”) [Doc. # 13], Plaintiffs Motion for Summary Judgment and Memorandum in Support (“Plaintiffs Motion”) [Doc. # 16], Defendant’s Response to Plaintiffs Motion (“Defendant’s Response”) [Doc. # 19], and Plaintiffs Reply to Defendant’s Response (“Plaintiffs Reply”) [Doc. # 21].
Having considered the parties’ respective arguments, for the reasons that follow, Plaintiffs Motion will be denied, and Defendant’s Motion will be granted in part and denied in part.
FACTUAL BACKGROUND
Unless otherwise noted, the following facts are not in dispute. On March 3,
Pursuant to the signed hand-written contract, the survey work and building permits were to be obtained by Plaintiff. [Doc. 13-1, Def. Ex. A]. The contract also set forth a payment schedule, in which Defendant was to pay Plaintiff a cash deposit of $4,000.00 on March 11, 2009, and an additional $6,000.00 by May 30, 2009. Defendant would then pay Plaintiff $500.00 per month at a 0% interest rate until the balance of the $25,000 was paid off. [Id].
According to Defendant’s Affidavit, Plaintiff did not obtain the necessary permits to move the house to Defendant’s land, so Defendant was forced to obtain the permits from the Erie County Engineer by paying $2,000.00 for them on his own. [Doc. # 13, p. 9, ¶ 7; Doc. # 13-1, Def. Ex. B], Defendant also averred that he paid $280.00 for Plaintiffs insurance. [Doc. # 13, p. 9, ¶ 7]. After the house was moved to Defendant’s property, Defendant alleges that Plaintiff did not complete the work set forth in the contract. Defendant claims, and the state court appears to have found, that Defendant had to pay a third party to lower the house and to move it to the foundation. [Doc. 13-1, Def. Ex. C, p. 10, ¶¶'8 & 9]. Additionally, he asserts that Plaintiff failed to build the foundation walls, forcing Defendant to pay a third party to build the walls. [Doc. # 13, p. 9, ¶ 8]. These alleged breaches of the contract by Plaintiff were what Defendant claims caused him to stop making payments. [Id].
Defendant’s payments to Plaintiff totaled $7,000.00. [Doc. 14, p. 16, ¶ 4]. Plaintiff states in his Complaint that Defendant also cut up and sold steel beams belonging to Plaintiff that had a value of $4,000.00 [Doc. # 1, ¶ 14]. The state court held that the beams were cut up and sold by Defendant, and that “the Plaintiff is entitled to compensation for those beams in the amount of $4,000....” [Doc. # 14, p 16, ¶¶ 5-7; Id at p. 17]. However, Defendant contends that he himself paid $1,200.00 to obtain the steel beams. [Doc. # 13, p. 9, ¶¶ 6, 9].
On October 27, 2009, Plaintiff filed suit against Defendant for monetary damages in Erie County Common Pleas Court (Case No.2009 CV 910) alleging breach of contract. [Id at ¶ 10; Doc. # 13-1, Def. Ex. C, p. 9]. In the Erie County Common Pleas Court’s Findings of Fact and Conclusions of Law, the court ruled that it appeared “clear from the testimony as well as the numerous exhibits provided by both parties that both parties [were] in breach of contract.” [Doc. # 13-1, Def. Ex. C, p. 11]. The court ordered, based upon the amount of work completed by
During the pendency of the civil case in the Erie County Common Pleas Court, Defendant quitclaimed title of the property to his father, Ozeal Hunter, Sr. (or “his Father”) on December 11, 2012. [Doc. # 16]. The deed was recorded on December 12, 2012. Defendant states that the transfer “was made to protect any new investment of labor and materials by [his Father] that would potentially create new equity in the property.” [Doc. # 13, p. 3]. As the judgment lien was against Defendant, the April 22, 2013 lien did not attach to the property that had already been transferred to his Father.
Plaintiff filed suit against Defendant on January 7, 2014, again in the Erie County Court of Common Pleas, seeking to void the transfer of the property from Defendant to his Father. [Doc. # 13-1, Def. Ex. E]. On June 20, 2014, his Father transferred title to the property back to Defendant and five days later, on June 25, Defendant filed his Chapter 7 bankruptcy petition in this court. [Doc. # 1, ¶¶ 19-20].
Plaintiff filed his Complaint in this court on October 16, 2014. In his Complaint, Plaintiff contends that Defendant quit-claimed the property to his Father and then back to him “in order to allegedly gain protection under the Bankruptcy code.” [Doc. # 1, ¶ 21]. Defendant contends that his Father transferred the property back to him in an effort to comply with Plaintiffs January 2014 lawsuit that sought to void the alleged fraudulent transfer. [Doc. # 13, p. 10, ¶ 15].
LAW AND ANALYSIS
I. Summary Judgment Standard
Under
The party moving for summary judgment always bears the initial responsibility of informing the court of the basis for its motion, “and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits if any’ which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett,
A genuine issue for trial exists if the evidence is such that a reasonable factfin-der could find in favor of the nonmoving party. Id. “The non-moving party, however, must provide more than mere allega
Where the parties have filed cross-motions for summary judgment, the court must consider each motion separately on its merits, since each party, as a movant for summary judgment, bears the burden to establish both the nonexistence of genuine issues of material fact and that party’s entitlement to judgment as a matter of law. Lansing Dairy v. Espy,
The fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate. “When parties file cross-motions for summary judgment, ‘the making of such inherently contradictory claims does not constitute an agreement that if one is rejected the other is necessarily justified or that the losing party waives judicial consideration and determination whether genuine issues of material fact exist.’ ” Parks v. LaFace Records,
II. Plaintiff’s Claims and Motion for Summary Judgment
Plaintiffs Motion seeks summary judgment on two of the claims stated in the Complaint, specifically
A. Plaintiffs Objection to Claim of Exemption Pursuant to
In the underlying Chapter 7, De-fendani/Debtor’s 341 meeting was held and concluded on August 19, 2014. [Case No. 14-32350, Doc. # 9], and no amended schedules were filed. Neither the Chapter 7 Trustee, Plaintiff (who was properly listed as a creditor on Defendant’s petition), nor any other creditors filed an objection to any of Defendant/Debtor’s claims of exemptions by the September 18, 2014 deadline. The above captioned adversary proceeding
B. Claim One: Exception to Discharge pursuant to
Plaintiff seeks a determination that the debt owed to him by Defendant in connection with the breach of contract and the events leading up to and following the sale and moving of the house is nondis-chargeable for fraud under
Under
Fraud is a generic term, which embraces all the multifarious means which human ingenuity can devise and which are resorted to by one individual to gain an advantage over another by false suggestions or by the suppression of truth. No definite and invariable rule can be laid down as a general proposition defining fraud, and it includes all surprise, trick, cunning, dissembling, and any unfair way by which another is cheated.”
Id. (quoting, Stapleton v. Holt,
Actual fraud has been defined as intentional fraud, consisting in deception intentionally practiced to induce another to part with property or to surrender some legal right, and which accomplishes the end designed. It requires intent to deceive or defraud.
Gerad v. Cole (In re Cole),
In Vitanovich, the Sixth Circuit Bankruptcy Appellate Panel adopted the Court of Appeals for the Seventh Circuit’s position in McClellan,
This is consistent with the Rem-bert decision, which held that a debtor’s intent to defraud a creditor is measured by a subjective standard and must be ascertained by the totality of the circumstances of the case at hand. Rembert,
A broken promise alone will not establish the existence of any intent to deceive. In re Harrison,
Plaintiff alleges in his Complaint and Motion that the debt cannot be discharged, because Defendant obtained the home and the services to move the home “under false
However, Plaintiff has not provided the court with any evidénce or proof (beyond mere allegations) that satisfy the first requirement of Rembert; that 1) the debtor obtained money, property, services or credit through a material misrepresentation, either express or implied, that, at the time, the debtor knew was false or made with gross recklessness as to its truth.
Unquestionably, Defendant obtained property and services from Plaintiff, but there is no evidence contained within the pleadings or the Motion, that Defendant obtained them through either an express or implied material misrepresentation. Also, when looking at Defendant’s subsequent conduct, it does not appear that Defendant did not intend to fulfill his duties under the contract, as he paid Plaintiff a sum of $7,000.00, in addition to purchasing $5,541.93 worth of permits' and services from third-parties.
For the foregoing reasons, viewing the evidence in the light most favorable to Defendant, the court will deny summary judgment on Plaintiffs
C. Claim Two: Exception to Discharge pursuant to
Plaintiffs second claim seeks a determination that the debt owed to him by Defendant in connection with the breach of contract and the events leading up to and following the sale and moving of the house should be held nondischargeable under
This provision excepts from discharge any debt caused by a debtor’s willful and malicious conduct, providing:
(a) A discharge undersection 727 , 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
$ $ ‡ ‡ ‡ $
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity[.]
In order to be entitled to a judgment that the debt is excepted from discharge, Plaintiff must prove by a preponderance of the evidence that the injury from which the debt arises was both willful and malicious. Markowitz v. Campbell (In re Markowitz),
In meeting this burden, the terms “willful” and “malicious” as used in
The requirement of maliciousness is met when a party demonstrates that (1) the defendant-debtor has committed a wrongful act, (2) the defendant-debtor undertook the act intentionally, (3) the act necessarily causes injury, and (4) there is no just cause or excuse for the action. Vulcan Coals, Inc. v. Howard,
In Count Two of Plaintiffs Complaint, Plaintiff incorporates paragraphs 1-22 “by reference herein” and contends that Defendant committed the acts detailed in the aforementioned paragraphs “willfully and/or maliciously in order to injure [Plaintiff] and convert his . property.” [Doc. # 1, ¶¶ 23-24], In his Motion, Plaintiff focuses his
Defendant contends that he paid for the steel beams “and could therefore do whatever he wanted with them.” [Doc. # 13]. To evidence that he owned the steel beams, Defendant swears in his affidavit that the Erie County grand jury did not indict him, because the steel beams were his. [Doc. # 13, p. 10, ¶ 11], The Erie County grand jury’s failure to indict is not persuasive on the issue of the ownership of the steel beams because Defendant is collaterally estopped from contesting ownership based upon the Erie County Common Pleas Court’s Findings of Fact and Conclusions of Law.
Collateral estoppel, otherwise known as issue preclusion, “precludes relit-igation of issues of fact or law actually litigated and decided in a prior action between the same parties and necessary to the judgment, even if decided as part of a different claim or cause of action.” Markowitz,
Issue preclusion applies in the context of dischargeability litigation. See,
The United States Constitution’s Full Faith and Credit clause,
Under Ohio law, four elements must be met in order to apply the doctrine of issue preclusion: “(1) The party against whom estoppel is sought was a party or in privity with a party to the prior action; (2) There was a final judgment on the merits in the previous case after a full and fair opportunity to litigate the issue; (3) The issue must have been admitted or actually tried and decided and must be necessary to the final judgment; and (4) The issue must have been identical to the issue involved in the prior suit.” Cashelmara Villas Ltd. P’ship v. DiBenedetto,
In the case at hand, the court finds that with regards to ownership of the steel beams, each of the four elements of collateral estoppel is met. Defendant was a party in the start court action, and there was a final judgment on the merits after a trial was held. [Doc. # 3, p. 5], It is clear that the issue of ownership of the beams was actually decided and was necessary to the final judgment, as the state court found that “both parties acknowledge^] that there were beams that belonged] to
However, Defendant’s ownership of the steel beams is not dispositive with regards to Plaintiffs
Therefore, the court will deny summary judgment on Plaintiffs
III. Defendant’s Motion for Summary Judgment on Plaintiffs Claims
Defendant’s Motion seeks summary judgment on each of the claims made in Plaintiffs Complaint.
A. Claim One: Exception to Discharge Pursuant to
Defendant states in his Motion that “[t]here are no allegations in the Complaint involving any acts by the Defendant in obtaining Plaintiffs services ... via fraudulent actions. In fact, the Complaint acknowledges that payments were made by Defendant. Payments ceased only when Defendant believed Plaintiff ha[d] failed to fully perform his contractual duties.” [Doc. # 13, p. 4].
As stated previously in the discussion on Plaintiffs Motion, exceptions to the discharge are to be strictly construed against the creditor and liberally in favor of the debtor. Rembert v. AT & T Universal Card Servs. (In re Rembert),
A bare promise to be fulfilled in the future, which is not carried out, does not render a consequent debt nondischargeable under§ 523(a)(2)(A) . Schwalbe v. Gans (In re Gans),75 B.R. 474 , 486 (Bankr.S.D.N.Y.1987). An unfulfilled promise to perform in the future is actionable only in contract. It is insufficient under§ 523(a)(2)(A) simply to show that debtor left unfulfilled a prior oral representation or promise. Were this showing sufficient, virtually every oral obligation would give rise to a non-dischargeable debt under§ 523(a)(2)(A) . A' fraudulent promise under§ 523(a)(2)(A) requires proof that at the time the debtor made it, he or she did not intend to perform as required. Seepes v. Schwartz (In re Schwartz),45 B.R. 354 , 357 (S.D.N.Y.1985). In other words, Plaintiff herein must establish that Defendant had no intention of repaying when he obtained the loan and she has failed to do so. We recognize that fraudulent intent, intent to deceive or scienter can be inferred, since direct proof of state of mind is rarely available. Plaintiff, however, errs in assuming fraudulent intent can be presumed. Fraudulent intent may be inferred; it cannot be presumed.
In re Balzano,
In this case, Defendant’s actions show, at the time the parties entered into the agreement, an intent to perform under the contract. Defendant paid Plaintiff a $4,000 down payment, and later an additional $3,000 was paid. The state court’s Findings of Fact and Conclusions of Law also show that Defendant spent $5,541.93 in charges that “were part of the original contract and were not completed by the Plaintiff.” [Doc. # 16, p. 17].
In contrast, Plaintiff (who would bear the'burden of proof at trial) has not set forth specific facts showing that there is a genuine issue for trial through any significant probative evidence to support the allegation of fraud. Celotex Corp. v. Catrett,
It is for the foregoing reasons that the court will grant summary judgment in favor of Defendant on Plaintiffs claim under
B. Claim Two: Exception to Discharge Pursuant to
As previously set forth in this decision, in the discussion on Plaintiffs Motion for Summary Judgment on this claim, Plaintiff asserts that Defendant committed the acts detailed in paragraphs 1-22 of the Complaint “willfully and/or maliciously in order to injure [Plaintiff] and convert his property.” [Doc. # 1, ¶¶ 23-24]. In his Motion, Plaintiff focuses his
Defendant contends that he paid for the steel beams “and could therefore do whatever he wanted with them.” [Doc%# 13]. To evidence that he owned the steel beams, Defendant avers in his affidavit that the Erie County grand jury did not indict him, because the steel beams were his. [Doc. # 13, p. 10, ¶ 11]. As previously stated, the Erie Country grand jury’s failure to indict is not persuasive on the issue of the ownership of the steel beams, because Defendant is collaterally estopped from contesting ownership based upon the Erie County Common Pleas Court’s Findings of Fact and Conclusions of Law.
The record before the court establishes that Plaintiff owned the steel beams, and pursuant to the state court’s findings, Defendant is collaterally estopped from arguing otherwise. Therefore, the court cannot grant summary judgment in favor of Defendant, as his only argument in favor of summary judgment on this claim is that he owned the steel beams and “could therefore do whatever he wanted with them.” [Doc. # 13, p. 4]. Moreover, Defendant’s contention that the failure of the grand jury to indict him with theft being indicative of a lack of willful and malicious conduct is not well-taken, because there has been no evidence presented regarding the reasons that the criminal grand jury decided not to indict
For the foregoing reasons, the court will deny Defendant’s Motion for Summary Judgment on Plaintiffs
C. Claim Three: Exception to Discharge Pursuant to
Plaintiff asserts in the Complaint that the debt owed to him by Defendant should be excepted from Defendant’s discharge because it is “provided in a final judgment, unreviewable order, or consent order or decree entered in any court of the United States.... ” [Doc. # 1, ¶ 27].
(a) A discharge undersection 727 , 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt-
(11) provided in any final judgment, unreviewable order, or consent order or decree entered in any court of the United States or of any State, issued by a Federal depository institutions regulatory agency, or contained in any settlement agreement entered into by the debtor, arising from any act of fraud or defalcation while acting in a fiduciary capacity committed with respect to any depository institution or insured credit union[.]
The phrase “fraud or defalcation while acting in a fiduciary capacity” is also found in
As a basis for excepting the debt from Defendant’s discharge pursuant to
Accordingly, the court will grant summary judgment in favor of Defendant on Plaintiffs
D. Claim Four: Exception to Discharge Pursuant to
Finally, Defendant moves for summary judgment on the allegations made under Claim Four of Plaintiffs Complaint. A plaintiff must prove exceptions to dischargeability and the elements of a
(a) The court shall grant the debtor a discharge unless-
(2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated or concealed—
(A) property of the debtor, within one year before the date of the filing of the petition; or
(B) property of the estate, after the date of the filing of the petition.
Plaintiff does not state in his Complaint which specific transfer of property he refers when he references
Defendant contends that the transfer of the property in question, from himself to his Father, occurred “significantly more than [one] year prior to the Debtor’s bankruptcy filing of June 25, 2014.” [Doc. # 13, p. 5], If Plaintiff is referring to the steel beams that Defendant sold, the record shows that the sale of the beams oc
There is no evidence before the court that Defendant/Debtor “transferred, removed or concealed, or permitted such acts, property of the Debtor within one (1) year before the filing of the petition” on June 25, 2014 [Doc. # 1, ¶ 30]. Thus, Plaintiff has failed to “set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc.,
Finally, if Plaintiff were seeking to deny discharge based upon the transfer of property back to the Debtor
Accordingly, for all of the reasons stated above, the court will grant Summary Judgment in favor of Defendant on Plaintiffs
Plaintiffs
A prerequisite to the privilege of discharge is complete financial disclosure. Keeney,
1) the debtor made a statement under oath; 2) the statement was false; 3) the debtor knew the statement was false; 4) the debtor made the statement with fraudulent intent; and (5) the statement related materially to the bankruptcy case.
Id. at 685. The Sixth Circuit explained fraudulent intent as contemplated under this section as follows:
[IJntent to defraud “involves a material representation that you know to be false, or, what amounts to the same thing, an omission that you know will create an erroneous impression.” In re Chavin, 150 F.3d 726 , 728 (7th Cir.1998). A reckless disregard as to whether a representation is true will also satisfy the intent requirement. See id.
“ ‘[CJourts may deduce fraudulent intent from all the facts and circumstances of a case.’ ” Williamson v. Fireman’s Fund Ins. Co., 828 F.2d 249, 252 (4th Cir.1987). However, a debtor is entitled to discharge if false information is the result of mistake or inadvertence.
Id. at 685-86. A false oath is material if it “ ‘bears a relationship to the bankrupt’s business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and disposition of his property.’ ” Id. at 686 (quoting Beaubouef v. Beaubouef (In re Beaubouef),
A debtor is under an affirmative duty to “surrender to the trustee all property of the estate and any recorded information, including books, documents, records, and papers, relating to property of the estate....”
The intent required under [Section 727(a)(4)(D) ] must be actual, as distinguished from constructive, intent. Bank of Pa. v. Adlman (In re Adlman),541 F.2d 999 , 1003 (2d Cir.1976). Because actual intent is difficult to prove directly, it may be established from circumstantial evidence or inferred from the debt- or’s conduct.
Gold v. Guttman (In re Guttman),
In his Complaint, Plaintiff combines the language of
Therefore, the court will grant summary judgment in favor of Defendant on Plaintiffs
Lastly, Plaintiff posits that Defendant has “failed to explain satisfactorily the loss or deficiency of his assets,” and as such, should be denied a discharge under
Accordingly, summary judgment in favor of Defendant on Plaintiffs
CONCLUSION
For the foregoing reasons, good cause appearing,
IT IS FURTHER ORDERED that Defendant’s Combined Motion for Summary Judgment and Memorandum Contra to Plaintiffs’ Motion [Doc. # 24] be, and hereby is, GRANTED in part as to Plaintiffs claims brought pursuant to
IT IS FINALLY ORDERED that a further pretrial conference will be set by separate scheduling order of the court.
Notes
. Plaintiff later filed criminal charges against Defendant, regarding Plaintiff's allegations that Defendant stole the steel beams. The charge was theft, a fifth-degree felony. An Erie County Grand Jury heard testimony on the matter and did not indict Defendant in the matter. Defendant states that this was because “the steel beams were mine,” [Doc. # 13, pp. 9-10, ¶ 11; Doc. 13-1, Def. Ex. D],
. Although
. Plaintiffs Complaint [Doc. # 1] cites only to
. Recent case law has continued the split on this issue. Compare, In re Ritz,
. See supra, note 3.
. The court also notes that a criminal conviction would require proof beyond a reasonable doubt, while this civil action only requires proof by a preponderance of the evidence.
. As there has been no alleged transfer of property after the date Defendant filed his petition, the court will focus on a claim under
. There is nothing in the pleadings, nor in Plaintiff's proffered evidence, regarding how a transfer of property to the Debtor could fit within
. Compare, In re Adeeb,