Hill v. Lucas (In re Lucas)

• Docket Number: 20-12664-SAH,Adv. Pro. 20-01075-SAH
• Decision Date: 02 June 2022
• Parties: In re: AARON K. LUCAS and JESSICA B. LUCAS, Debtors. v. AARON K. LUCAS and JESSICA B. LUCAS, Defendants. FRANK HILL; KARI HILL; FLIPPIN OK V, LLC; and FLIPPIN OK VI, LLC, Plaintiffs,
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Western District of Oklahoma

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In re: AARON K. LUCAS and JESSICA B. LUCAS, Debtors.

FRANK HILL; KARI HILL; FLIPPIN OK V, LLC; and FLIPPIN OK VI, LLC, Plaintiffs,
v.
AARON K. LUCAS and JESSICA B. LUCAS, Defendants.

No. 20-12664-SAH

Adv. Pro. 20-01075-SAH

United States Bankruptcy Court, W.D. Oklahoma

June 2, 2022

Chapter 7

FINDINGS OF FACT AND CONCLUSIONS OF LAW

SARAH A. HALL UNITED STATES BANKRUPTCY JUDGE

On January 5, and February 14, and 15, 2022, a video-conference trial was conducted in the above-captioned adversary proceeding. The issues before the Court are set forth in the Final Pretrial Order [Doc. 56], entered on November 19, 2021. Plaintiffs Frank Hill ("Dr. Hill") and

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Kari Hill ("Mrs. Hill"; Dr. and Mrs. Hill collectively, the "Hills") appeared in person and through their attorney Julie M. Ezzell. Defendants Aaron Lucas ("Aaron") and Jessica Lucas ("Jessica"; Aaron and Jessica collectively, "Debtors") appeared in person and through their attorney Gary D. Hammond.

JURISDICTION

The Court has jurisdiction to conduct the trial of this matter pursuant to 28 U.S.C. § 1334(b), and venue is proper pursuant to 28 U.S.C. § 1409. Reference to the Court of this matter is proper pursuant to 28 U.S.C. § 157(a), and this is a core proceeding as contemplated by 28 U.S.C. § 157(b)(2)(I) and (J). Additionally, the parties have consented to this Court's entry of final orders and judgments pursuant to Federal Rules of Bankruptcy Procedure 7008 and 7012.

BACKGROUND

"Unfortunately, this case presents the all too common circumstance of a 'home remodel gone wrong' that resulted in the contractor filing for bankruptcy protection and the homeowners seeking to hold the contractor responsible for broken promises and unsatisfactory results. The outcome is not surprising given the lack of customary business formalities ordinarily employed in projects of this magnitude." Pino v. Jensen (In re Jensen), No. AP 17-01078, 2019 WL 2403105, at *1 (10^th Cir. BAP June 7, 2019). Moreover, the home in question contained a series of latent defects unknown to either the Hills or Aaron at the time of contracting; the defects were of such magnitude they wreaked havoc with the planned time line and budget negotiated by the Hills and Aaron. Eighteen months into the 6 month project, the Hills terminated Aaron and began a long journey of seeking recompense from Aaron and his company, Lucas Roofing and Construction Inc. As could be expected, that action ultimately lead to this Court.

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FINDINGS OF FACT^[1]

Parties

1. The Hills are husband and wife and are residents of Edmond, Oklahoma. Stipulation ¶ I.F.1. Dr. Hill is a chiropractor, and Mrs. Hill is a stay-at-home mother.

2. Aaron is a building contractor who started doing roofing and remodeling in 2007, eventually moving into new construction as well. While acting as the general contractor, Aaron also performed labor on his projects.

3. Lucas Roofing and Construction Inc. ("Roofing") is an Oklahoma corporation owned by Debtors. Bankruptcy Case Doc. 29-1, p. 12.^[2]

The Dream Home and the Project

4. In 2018, the Hills located a home and land at 8700 E. Covell in Edmond, Oklahoma (the "Home") that, with substantial remodeling, could be developed into their "million dollar" dream home.

5. The Hills paid for a third party inspection of the Home.

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6. The Hills purchased the Home in early 2018. Unfortunately, before the Hills could move in, a pipe burst in the Home in March 2018, causing a water leak and substantial damage. The damage was repaired using insurance proceeds before the Hills' remodel began.

7. The Hills had a total budget of $200, 000 for the remodeling and construction project on the Home.

8. The Hills reached out to Aaron to have him look at the Home and submit a bid for the remodel of and addition to the Home (the "Project")^[3] in March 2018.^[4]

9. The Hills asked Aaron about his qualifications. Aaron advised the Hills the Project did not present anything new for Aaron and Roofing. He provided the Hills with proof of insurance and pictures of his past work. Aaron also represented he was a licensed, experienced, insured, and bonded roofer, which was true at the time.^[5] Aaron further advised the Hills all of Roofing's subcontractors were licensed.

10. The Hills did little else to check into Aaron or Roofing, accepting his representations, pictures of his past work, and friends' recommendations at face value.

11. In preparing his bid for the Project, Aaron reviewed the inspector's report and was able to access the Home once but was denied access to the Home on several occasions by the prior owners.

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12. The Hills obtained other bids for the Project but selected Roofing because Aaron was personable, understood them, and his bid came in near their $200, 000 budget after reducing the scope of the Project.

The Contract

13. The Hills and Aaron, on behalf of Roofing, signed a contract for turnkey completion of all items originally bid for the Project for $207, 973.98 (the "Contract") in March 2018. Stipulation ¶ I.F.1.

14. The Contract specifically provides "any items added to this scope of work may result in additional pricing." (Defendants Ex. 5, p. D-000242.)

15. Attached to the Contract are "Extras and Options," signed by Dr. Hill and Aaron, for items the Hills wanted but were not sure about given the cost. (Defendants Ex. 5, p. D-000250.)

16. The Contract states the estimated time to complete the Project is 6 months "but may take longer due to weather, special orders, and scheduling delays." (Defendants Ex. 5, p. D-000246.)

17. The Contract provides: "All permits, inspections, and certifications are at the responsibility of all lisc. Sub-contractors. Building permits are at the responsibility of [Roofing]." (Defendants Ex. 5, p. D-000246.) The Contract also provides (i) all subcontractors will be licensed and insured and will provide proof of such before work commences and (ii) all permits and inspections will be completed in full to ensure proper documentation and code enforcement. (Defendants Ex. 5, p. D-000251.)

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18. The Contract contains a Roofing Warranty Certificate for 5 years and a Construction Warranty Certificate for 2 years, both signed by Aaron as managing partner of Roofing. (Plaintiffs Ex. 34, pp. 12-13.) The warranties played a role in the Hills executing the Contract because they wanted someone willing to stand behind their work.

19. When Roofing entered into the Contract, Aaron intended Roofing would perform the work required thereunder, and Aaron believes Roofing completed the work as promised and then some.

20. The Hills paid Roofing an initial deposit of $51, 993.50 for the Project. (Defendants Ex. 5, p. D-000252; Defendants Ex. 1, p. D-000177.)

The Project Work

21. Dr. Hill considers himself pretty handy and is not afraid of doing projects around the Home. Dr. Hill resided in the Home throughout the Project, and so he saw the work being done there on a daily basis. He, in fact, assisted on the Project as the "Latent Defects" (defined below) were discovered and threatened to derail the Project given their severity.

22. Mrs. Hill, in contrast, is more knowledgeable as to the business and financial side of the Project as she handled the bills and payments. Mrs. Hill was largely present at the Home during the remodel.

23. During the course of the Project, serious latent defects in the Home came to light which required at least $130, 000.00 to correct separate and apart from the Project (the "Latent Defects"). (Plaintiffs Ex. 47, ¶¶ 12 and 16.) The Latent Defects were neither identified in the inspector's report nor disclosed by the Hills or the prior owners.

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24. Dr. Hill was unable to articulate the extent of the Latent Defects in the Home. He claimed Aaron would tell him about a defect and the cost to fix it, sometimes fixing it without discussion. Dr. Hill apparently never asked for written or visual identification of any of the Latent Defects while Aaron and Roofing were working on the Project. In an effort to stay on budget given the Latent Defects, Dr. Hill offered to do what work he could, such as hanging boards, painting, and master bathroom work; he was advised by Aaron they would be reimbursed for his work on invoices. Dr. Hill estimates he worked 10-15 hours a week for at least one year on the Project. However, the Hills provided no specific details of Dr. Hill's work, no documentary evidence thereof, no accounting of his time, the value thereof, nor did they explain with any specificity the credits they believe they should have received, but did not, on the Project invoices submitted by Roofing.

25. The Hills directly paid for some Project expenses themselves, such as the new heating and air conditioning unit downstairs, granite for the kitchen and bathroom, light fixtures, and paint. (Plaintiffs Ex. 42.) The amount directly paid by the Hills for materials for the Project total $24, 176.48 based on the record. There was no evidence Roofing or Aaron charged the Hills for any items purchased directly by the Hills.

26. During the course of his work on the Project, Aaron had daily conversations with Mrs. Hill and spoke and texted with Dr. Hill often with updates.

27. The Hills became concerned about the Project's lengthiness and quality of the work in late 2018. Nevertheless, the Hills continued to allow Aaron and Roofing to work on the Project for almost another year.

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28. The Hills discovered water in the Home in February 2019 due to improper grading of their Home site for which they blame Aaron and Roofing. Nevertheless, Aaron and Roofing were allowed to continue their work on the Project with nary a complaint.

29. On February 12, 2019, Roofing sent a letter to the Hills providing "an itemized and detailed report of repairs completed by" Roofing and "is to be considered 'In Addition to' initial agreed on bid." (Plaintiffs Ex. 39) (emphasis added.) The...