Hogan v. George (In re George)
| Decision Date | 11 January 2013 |
| Docket Number | No. 12–8013.,12–8013. |
| Citation | 485 B.R. 478 |
| Parties | In re Brian Keith GEORGE and Olga George, Debtors. Michael Hogan and Anette Hogan, Appellants, v. Brian Keith George and Olga George, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Sixth Circuit |
OPINION TEXT STARTS HERE
Appeal from the United States Bankruptcy Court for the Eastern District of Kentucky, Case No. 09–50847, Adv. Case No. 09–05065.
ARGUED:Thomas L. Canary, Jr., Mapother & Mapother, P.S.C., Lexington, Kentucky, for Appellants. John E. Davis, Davis Law Office, Lexington, Kentucky, for Appellees. BRIEFED:Thomas L. Canary, Jr., Mapother & Mapother, P.S.C., Lexington, Kentucky, for Appellants. John E. Davis, Davis Law Office, Lexington, Kentucky, for Appellees.
Before: EMERSON, McIVOR, and PRESTON Bankruptcy Appellate Panel Judges.
Michael Hogan and Anette Hogan (“Appellants”) filed an adversary complaint seeking to have a $513,000 debt owed to them by Brian Keith George and Olga George (“Debtors”), declared nondischargeable pursuant to 11 U.S.C. § 523(a)(2) and (a)(6). The Appellants' appeal the bankruptcy court's order court granting partial summary judgment and excepting from discharge for fraud under 11 U.S.C. § 523(a)(2)(A), damages in the amount $171,000. For the reasons that follow, the Panel affirms the bankruptcy court's order.
The issue presented in this appeal is whether the bankruptcy court erred in determining that $171,000, a portion of the $513,000 in total damages awarded in a Colorado state court judgment, was nondischargeable.
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Eastern District of Kentucky has authorized appeals to the Panel, and a final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, a final order “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989) (citations omitted). An order granting summary judgment is a final order. Buckeye Ret. Co., LLC v. Swegan (In re Swegan,) 383 B.R. 646, 649 (B.A.P. 6th Cir.2008). “A bankruptcy court's judgment determining dischargeability is a final and appealable order.” Cash Am. Fin. Servs., Inc. v. Fox (In re Fox,) 370 B.R. 104, 109 (B.A.P. 6th Cir.2007) ).
The bankruptcy court's final order granting the Appellants' motion for summary judgment is reviewed de novo. See Int'l Dairy Foods Ass'n v. Boggs, 622 F.3d 628, 635 (6th Cir.2010). De novo review requires the “appellate court [to determine] the law independently of the trial court's determination.” O'Brien v. Ravenswood Apartments, Ltd. ( In re Ravenswood Apartments, Ltd.), 338 B.R. 307, 310 (B.A.P. 6th Cir.2006).
Determinations of dischargeability under 11 U.S.C. § 523 are conclusions of law reviewed de novo. Ewers v. Cottingham (In re Cottingham,) 473 B.R. 703, 705 (B.A.P. 6th Cir.2012) (citation omitted). “Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination.” Gen. Elec. Credit Equities v. Brice Rd. Develops., LLC (In re Brice Rd. Develops., LLC,) 392 B.R. 274, 278 (B.A.P. 6th Cir.2008). However, the factual findings underlying the ruling on dischargeability are upheld on appeal unless they are clearly erroneous. In re Cottingham, 473 B.R. at 705 (citations omitted); see also Van Aken v. Van Aken (In re Van Aken,) 320 B.R. 620, 622 (B.A.P. 6th Cir.2005) (). “A finding of fact is clearly erroneous ‘when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.’ “ In re Brice Rd. Develops., LLC, 392 B.R. at 278 ).
The Appellants commenced a suit against the Debtors and other defendants 1 in the first District Court of Jefferson County, Colorado (Case No. 07 CV 6520) (“Colorado litigation”). The State Court complaint was later amended and included the following claims: (1) Misrepresentation/Fraud in the Inducement; (2) Breach of Contract; (3) Negligent Misrepresentation; and (4) Breach of Statutory Duty; (5) Civil Conspiracy; (6) Bad Faith Violation of the Colorado Consumer Protection Act; and (7) Exemplary Damages (Adv. Case Dkt. # 1, Exhibit A, Complaint). Subsequent to the filing of the amended State Court complaint, the Debtors' filed a case under chapter 13. The chapter 13 case was voluntarily dismissed by an order entered on September 12, 2008. After the chapter 13 case was dismissed, the Appellants resumed the Colorado litigation. As summarized by the bankruptcy court, the facts leading to the commencement of the Colorado litigation include:
[T]he Defendants were the owners of property in Colorado.... In December 2005, they listed the property for sale, completing a Seller's Property Disclosure Form (“the Disclosure Form”) as part of the process. The Defendants had been involved in prior litigation concerning numerous defects in the construction of the Property, and received a settlement in that regard. None of those proceeds were used to effect repairs on the Property.
In February 2006, the Plaintiffs began negotiating for the purchase of the Property. In the course of the negotiations, the Plaintiffs asked the Defendants about structural defects or issues in regard to the Property and were told there were none. In July 2006, the Plaintiffs entered into a real estate contract to purchase the Property from the Defendants. Prior to the execution of the contract, the Defendants tendered the Disclosure Form to the Plaintiffs; the Disclosure Form was incorporated into and made part of the contract. The Defendants became aware of additional defects in the Property after their execution of the Disclosure Form. In the summer of 2006, they contracted for repairs to the Property's sewer/septic system, but did not reveal this to the Plaintiffs.
The Plaintiffs and Defendants closed on the sale of the Property on August 31, 2006, and the Plaintiffs took possession of it. Thereafter, the Plaintiffs discovered multiple additional defects involving the sewer/septic system, a retaining wall, flashing under logs and around the deck, the deck foundation, foundation walls, and French drains.
(Adv. Case Dkt. # 34, Memorandum Opinion, pp. 1–2).
These allegations were tried before a jury and a verdict and judgment were entered in the Appellants' favor on the First (Misrepresentation/Fraud in the Inducement), Second (Breach of Contract), Third (Negligent Misrepresentation), and Seventh (Exemplary Damages) claims. As required under Colorado law in civil liability cases with multiple parties, the jury completed a separate special verdict form for each claim included in the complaint. On the claim of fraud, the special verdict form (“Special Verdict form”) asks the jury, the following questions:
1. Do you find that the plaintiffs, Michael Hogan and Anette Hogan, are entitled to recover damages from the defendant, Brian George and Olga George, on the plaintiffs' claim of fraud....
...
4. Taking as 100 percent the combined negligence or fault that caused the Plaintiffs' damages, what percentage of the Plaintiffs' damages was caused by the negligence or fault, if any, of each of the Defendants from whom you have found the Plaintiffs is entitled to recover.
...
+-----------------------------------------------------------+
¦Percentage, if any charged to Defendant, Brian George:¦50 ¦
+------------------------------------------------------+----¦
¦Percentage, if any charged to Defendant, Olga George: ¦50 ¦
+-----------------------------------------------------------+
...
State the total amount of Plaintiff's damages ... caused by the combined negligence or fault of all the parties and the designated nonparties.
ANSWER: $171,000.00
(Adv. Case Dkt. # 11, Exhibit 3).
The jury also completed a Jury Inquiry and Response form (“Jury Inquiry form”), which states as follows:
You have awarded actual damages against the Georges and in favor of the Hogans on more than one claim. Your actual damage awards were $171,000 on the breach of contract claim, $171,000 on the negligent misrepresentation or concealment claim, and $171,000 on the deceit based on fraud claim.
...
What is the total amount of actual damages suffered by Hogans because of the conduct of the Georges? $513,000.00.
(Adv. Case Dkt. # 5, Answer to Complaint, Exhibit 1).
Finally, an Order for Entry of Judgment (“Colorado Judgment”) was entered by the Jefferson District Court Judge, Christopher J. Munch, sustaining the jury verdict. The Colorado Judgment avers:
THIS MATTER having come before the Court for Trial to a Jury of Six, the Jury having rendered its verdicts on Feb. 12.2009 and the Court having reviewed the verdicts rendered by the Jury does hereby enter Judgment pursuant to C.R.C.P. 58(a) in favor of the Plaintiffs Michael Hogan and Anette Hogan and against the Defendants Brian George and Olga George as follows:
1. On Plaintiffs' First Claim for Relief—Misrepresentation in the Inducement, on Plaintiffs' Second Claim for Relief–Breach of Contract and on Plaintiffs' Third Claim for Relief—Negligent Misrepresentation judgments in favor of the Plaintiffs Michael Hogan and Anette Hogan and against the Defendants Brian George and Olga George jointly and severally...
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...the Jordans’ assertion of structural work that was "not up to code" and compromised by rot. Cf. In re George , 485 B.R. 478, 2013 WL 135274, at *2 (B.A.P. 6th Cir. 2013) (table case) (judgment debt of $171,000 exempted from discharge under Section 523(a)(2)(A), where sellers of property fra......