Gazzola v. Brandt (In re Brandt)
| Decision Date | 20 March 2017 |
| Docket Number | Adv. P. No. 15–1166,Case No. 15–12457–JNF |
| Citation | 565 B.R. 472 |
| Parties | IN RE Peter L. BRANDT, Debtor William Gazzola, Plaintiff, v. Peter L. Brandt, Defendant |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Jason M. Rawlins, The Law Offices of Jason M. Rawlins, Bridgewater, MA, for Plaintiff.
J. Alexander Watt, Barnstable, MA, for Defendant.
The matter before the Court is the two-count First Amended Complaint filed by William Gazzola ("Gazzola")1 against the Chapter 13 debtor, Peter L. Brandt ("Brandt" or the "Debtor"), through which Gazzola seeks a determination that the debt owed to him by Brandt should be excepted from discharge pursuant to 11 U.S.C. § 523(a)(2)(A) (Count I) and (a)(4) (Count II). The dispute between the parties arose from Gazzola's delivery, in 2001, of two vintage automobiles to Brandt who agreed to perform restoration work on one of them in exchange for title to the other, plus an additional cash payment.
The parties filed a Joint Pretrial Memorandum on May 6, 2016, in which they agreed to certain facts and listed the Debtor as a witness to be called at trial. The Court conducted a trial on January 11, 2017, at which only one witness, Gazzola, testified and 14 agreed upon exhibits were introduced into evidence. The Debtor was present at trial but did not testify in his own defense, nor was he called by Gazzola. Following the trial, the Court took the matter under advisement, and both parties submitted Requests for Findings of Fact and Conclusions of Law on January 31, 2017.
The Court has jurisdiction in this proceeding pursuant to 28 U.S.C. § 1334(a) and (b) and the order of reference from the United States District Court for the District of Massachusetts. See LR, D. Mass. 201. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I). The Court now makes the following findings of fact and conclusions of law pursuant to Fed. R. Bankr. P. 7052. For the reasons set forth below, the Court finds that Gazzola has sustained his burden of proving an exception to discharge for the debt owed to him by the Debtor pursuant to 11 U.S.C. § 523(a)(4) and shall enter judgment in his favor.
The Debtor filed a petition under Chapter 13 of the Bankruptcy Code on June 22, 2015, listing his address as 217 Underpass Road, Brewster, Massachusetts ("217 Underpass Road"). One month later, on July 22, 2015, the Debtor filed his Schedules and Statement of Financial Affairs. On Schedule A—Real Property, the Debtor listed no real property. On Schedule B—Personal Property, in response to Question 19 "[e]quitable or future interest[s]," he stated that Grosse Scheisse Realty Trust is the owner of the property located at 217 Underpass Road. On Schedule F—Creditors Holding Unsecured Nonpriority Claims, he listed Gazzola as the holder of a claim in the amount of $45,000 arising from a judgment; he failed to list the claim as either contingent or disputed. On his Schedule I—Your Income, the Debtor listed his occupation as "Auto repair and restoration" d/b/a Euro Classics in Brewster, Massachusetts. On his Statement of Financial Affairs ("SOFA"), the Debtor listed Euro Classics, with an address of 217 Underpass Road, as his business in response to Question 18. In response to Question 4 regarding suits and administrative proceedings, the Debtor listed a supplementary process proceeding entitled [Gazzola ] v. Brandt , 1326 SP 00104, pending in the Orleans District Court, Department of the Massachusetts Trial Court. In response to Question 5 on the SOFA entitled, "Repossessions, foreclosures and returns," the Debtor listed Gazzola as having effected a sheriff's sale of 215 Underpass Road, Brewster, Massachusetts ("215 Underpass Road") on November 18, 2014, at which time that property was sold to Kevin Benger, as trustee, for $6,000. According to the SOFA, the value of 215 Underpass Road at the time of sale was $200,000, and the property was encumbered by two mortgages totaling $195,000.
On September 22, 2015, Gazzola timely filed a one count complaint against the Debtor through which he sought an exception to the Debtor's discharge pursuant to 11 U.S.C. § 523(a)(6). On October 16, 2015, Gazzola filed a proof of claim asserting an amount owed of $52,627.97, based upon "Judgment (Fraud, Embezzlement, Willful PI)" (the "Claim"). In support of the Claim, Gazzola attached to it a complaint filed on August 17, 2010 in the Orleans District Court in a matter entitled William Gazzola v. Peter L. Brandt d/b/a Euro Classics Automobiles , Docket 1026–CV–0481 (the "state court action") and a Memorandum of Decision and Order for Judgment issued by the District Court (Merrick, J.) on September 13, 2012 (the "Memorandum and Judgment") through which the District Court, inter alia , entered judgment in favor of Gazzola against Brandt d/b/a/ Euro–Classics Automobiles "in the amount of $8,000.00, trebled to $24,000.00 plus interest from the date of this action, attorney's fees in the amount of $12,600 and costs." Gazzola also attached to the Claim an "Execution on Money Judgment" issued in the state court action on September 27, 2012, in the amount of $42,971.06 (the "execution").2 Lastly, Gazzola attached an "Itemization of Interest, Charges and Credits" to the Claim which reflects how he arrived at the Claim amount by adjusting the execution for accrued postjudgment interest through the date of the filing of the Claim (+$15,738) and for receipt of the "Sheriff's Sale Credit" (-$6,000).3 No party objected to Gazzola's Claim.
On November 12, 2015, Gazzola filed the First Amended Complaint (hereinafter, the "Complaint"). As discussed above, the Complaint contained two counts through which Gazzola seeks an exception to the Debtor's discharge for the debt owed to him in the amount of $52,627.97, the face amount of the Claim, pursuant to 11 U.S.C. § 523(a)(2)(A) and (a)(4). Gazzola omitted the previously asserted count under § 523(a)(6) as debts of the kind set forth in 11 U.S.C. § 523(a)(6) are discharged in Chapter 13. See 11 U.S.C. § 1328(a)(2).4 The Debtor answered the Complaint on November 17, 2015 and asserted no counterclaims. The Court issued a Pretrial Order two days later, on November 19, 2015.
On April 15, 2016, Gazzola filed a motion for summary judgment with respect to both counts in the Complaint. Relying on principles of collateral estoppel, he argued that the Memorandum and Judgment warranted summary judgment in his favor. The Debtor opposed the motion. The Court held a hearing on the motion for summary judgment on June 17, 2016. In denying the motion for summary judgment, the Court ruled that the Memorandum and Judgment did not establish all the elements of the exceptions to discharge set forth in 11 U.S.C. § 523(a)(2)(A) and (a)(4).
On July 11, 2016, the Court confirmed the Debtor's Second Amended Chapter 13 Plan which provides for a dividend of not less than 2% to holders of general unsecured claims, which total $283,094.84, over the 57 month term of the plan.
Gazzola, a retired public school teacher who resides in Connecticut, has had a lifelong interest in repairing and maintaining vintage automobiles. He testified that he has purchased numerous used autos, including six Porsches, and has developed an expertise in performing work on them over a period of 50 years. He would bring the cars into good working order, register them and drive them for a period of time before selling them for "something a little better." He described Porsches as exotic cars requiring very expensive parts that are difficult to obtain. He testified that he researched various publications and internet resources to learn how to repair and maintain Porsches. In 1984, he purchased, for approximately $6,000, a 1959 Porsche, Convertible D (the " '59 Porsche"), which was in need of restoration. He purchased numerous parts for that car and conservatively ascribed a $15,000 current value for them. He insured that car, from 2001 through 2012, at a value of $30,000. In 2014, he sold the '59 Porsche for $38,500.
In 1992, Gazzola purchased his sixth Porsche, a 1962 Porsche 356B coupe (the " '62 Porsche") for $6,000, which he insured for $10,000. He testified that he purchased numerous parts for the '62 Porsche for approximately $2,500, which have a current value of between $6,000 and $8,000.
Gazzola testified that in 2001 he placed an advertisement in the Cape Cod Times newspaper offering the '62 Porsche for a sale price of $8,000. According to Gazzola, Brandt responded to the ad in February 2001. Gazzola testified that he discussed with Brandt his reason for selling the '62 Porsche, namely that he was trying to raise funds to restore the '59 Porsche. Gazzola stated that Brandt visited him in Connecticut a few weeks later to inspect both vehicles and produced a number of photographs of a car Brandt had restored which, Gazzola concluded, "demonstrated a pretty complete restoration process." During the meeting, Gazzola testified that the two agreed that Brandt would restore the '59 Porsche in exchange for title to the '62 Porsche, plus an additional sum of $4,000 to $5,000 "to cover any parts or expenses that [Brandt] might have had while working on the car."
On May 6, 2001, the parties executed a two page letter agreement on the letterhead of Brandt's sole proprietorship, Euro–Classics Automobiles ("ECA").5 The agreement contained vague and ambiguous terms. It is unclear from Gazzola's testimony which party drafted the final agreement. Gazzola testified, however, that both parties agreed on the final language after exchanging drafts with each other. The agreement provided a detailed list of the work to be performed by ECA on the '59 Porsche which was to be "restored mechanically and visually to approximate an original vehicle and will be in condition to drive." It also provided that Gazzola would transfer ownership of the '62 Porsche to ECA when "$8,000 has been expended in the...
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