In re Baiata

• Decision Date: 16 July 1981
• Docket Number: Bankruptcy No. 880-04049-18,Adv. No. 880-0866-18.
• Citation: 12 BR 813
• Parties: In re Rosario Francis BAIATA, Debtor. Linda de BOTTARI, Plaintiff, v. Rosario Francis BAIATA, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of New York

12 B.R. 813 (1981)

In re Rosario Francis BAIATA, Debtor Linda de BOTTARI, Plaintiff, v. Rosario Francis BAIATA, Defendant.

Bankruptcy No. 880-04049-18, Adv. No. 880-0866-18.

United States Bankruptcy Court, E.D. New York.

July 16, 1981.

COPYRIGHT MATERIAL OMITTED

Linda de Bottari, plaintiff pro se.

Jules H. Rosenberg, Smithtown, N.Y., for debtor.

DECISION

C. ALBERT PARENTE, Bankruptcy Judge.

The captioned adversary proceeding was instituted by Linda de Bottari (hereinafter "plaintiff"), seeking a judgment adjudging her claim in the sum of $8,614 against Rosario Francis Baiata (hereinafter "debtor"), nondischargeable pursuant to §§ 523(a)(2) (A), 523(a)(2)(B), 523(a)(4), and 523(a)(6) of the Bankruptcy Code. In supplement, plaintiff prays for judgment in the sum of $2,000 for her time and costs in pursuit of this action.

The evidence adduced at trial held on April 6, 1981, disclosed the following facts:

(1) The debtor operated AAA Islander Construction Corporation, a home improvement business, which was engaged in heavy construction and architectural work. As stated by the debtor, he was the sole corporate officer of said company.

(2) On October 25, 1978, the plaintiff and Ms. Marjorie Kellogg, (who lived with the plaintiff at the time) contracted with the debtor to build an extension to plaintiff's home in Smithtown, New York. The work to be performed was based on plans drawn by Jerry Kronovet, the plaintiff's architect.

(3) According to the contract, work was to begin as soon as practicable, but in any event, no later than November 1, 1978. The work was to be completed within two weeks, at a total price of $9,800.

(4) At the time of the contract, neither the debtor nor AAA was licensed to perform contracting work in Suffolk County.

(5) On September 6, 1978, the Suffolk County Department of Consumer Affairs mailed debtor a notice of hearing for the purpose of license revocation. This notice was sent to the address he had provided on his license application.

(6) After a hearing which the debtor did not attend, his Suffolk County Home Improvement License, No. 4108-HI, was revoked by the Suffolk County Department of Consumer Affairs on September 19, 1978. Notice of revocation was also mailed to the address provided by the debtor on his license application.

(7) The debtor testified that he did not receive notice of the hearing or of the actual revocation of his Suffolk County Home Improvement License because he moved and left no forwarding address while running a business from his home. He provided no explanation for his failure to inform the Suffolk County Department of Consumer Affairs of his move, which was expressly required by the license application.

(8) The debtor did not apply for a Suffolk County Home Improvement license for AAA until December 11, 1978, more than six weeks after contracting with Ms. de Bottari.

(9) Furthermore, the debtor's license, which was revoked on September 19, 1978, covered his activities as a salesman while associated with BB&R Custom Kitchens and Baths (hereinafter "BB&R"). BB&R was a partnership run by the debtor and three other individuals, exclusively engaged in renovating kitchens and bathrooms. The debtor, by his own testimony disassociated himself completely from said entity in June 1978.

(10) Although the debtor testified that neither the plaintiff nor Ms. Kellogg ever inquired if he was a licensed contractor, Ms. Kellogg testified at trial that she did in fact inquire whether the debtor was a licensed contractor. Ms. Kellogg further stated that the debtor told her and the plaintiff that he was licensed in Suffolk County.

(11) Plaintiff tendered the down payment required by the contract, in the sum of $2,500, on the date of the signing of the contract.

(12) It is not disputed that work under the contract was delayed until November 10, 1978, at which time the debtor commenced excavating the job site. In the course of said work, one of the defendant's employees caused damage to the bushes and shrubs in plaintiff's driveway with a cement truck. Two days later, the roof and one end wall of the plaintiff's residence were opened, preparatory to the construction of an extension of the dining room. This opening was covered with plastic sheeting. When work was interrupted over the Thanksgiving weekend, storm damage resulted, part of which the debtor repaired. Further damage to plaintiff's premises was caused by operation of a backhoe machine, which severed an electrical cable located beneath a window.

(13) On December 7, 1978, the plaintiff tendered a second payment in the sum of $2,500 despite the fact that the debtor had not performed any work at the construction site over the previous three days, and still had not delivered any of the materials necessary to finish the job.

(14) On December 15, 1978, more than a month after the specified completion date, less than fifty percent of the contract work had been performed. Mr. Kronovet requested the debtor to furnish copies of orders placed for contract materials, wood samples, and a schedule of work already completed.

(15) On December 21, 1978, the plaintiff, Mr. Kronovet, and the debtor agreed on a revised schedule for completion of the contract.

(16) No further work on the contract was completed.

(17) The debtor testified that he became disabled in an accident on another job on December 27, and ceased doing business. However, no medical evidence was submitted by the debtor to support his allegation.

(18) On January 16, 1979, plaintiff mailed debtor a letter ordering him to complete the job within seven days or she would deem the contract terminated, pursuant to section twenty-four of their contract.

(19) By letter of January 26, 1979, plaintiff exercised her option to declare the debtor in default, and terminated the contract.

(20) Sometime thereafter, the plaintiff commenced an action against the debtor in New York Supreme Court, Suffolk County.

(21) On June 5, 1980, the plaintiff and the debtor executed a settlement, terminating plaintiff's action. Pursuant to this settlement, the debtor was to remit the sum of $350 per month to the plaintiff.

(22) Upon the debtor's default under the stipulation, plaintiff obtained a judgment in the sum of $8,614 against the debtor.

(23) On July 16, 1980, the debtor filed a voluntary petition in bankruptcy under Chapter 7 of the Bankruptcy Code. In the petition, the debtor listed plaintiff as the holder of an unsecured claim in the amount of $8,614.

Based on the foregoing factual summary, the following issues are raised:

(I) Is the debt owed to the plaintiff nondischargeable pursuant to § 523(a)(2)(B) of the Bankruptcy Code?

(II) Is the debt owed to the plaintiff nondischargeable pursuant to § 523(a)(4) of the Bankruptcy Code?

(III) Is the debt owed to the plaintiff nondischargeable pursuant to § 523(a)(6) of the Bankruptcy Code?

(IV) Is the debt owed to the plaintiff nondischargeable pursuant to § 523(a)(2)(A) of the Bankruptcy Code?

I

As a preliminary matter, the Court must determine the requisite burden of proof for actions commenced under § 523(a). Plaintiff contends that she need only prove the elements set forth in § 523(a) by a fair preponderance of the evidence, citing Steadman v. SEC, 448 U.S. ___, 101 S.Ct. 999, 67 L.Ed.2d 69 (1981).

The Court finds this particular case inapposite, inasmuch as it concerns the standard of proof in an administrative proceeding before the Securities Exchange Commission, governed by the Administrative Procedure Act.

While not unmindful of the Bankruptcy Code's broad remedial purposes, which are meant to provide the honest debtor with a fresh start, H.R. No. 595, 95th Cong., 1st Sess. (1977) 125, reprinted in U.S. Code Cong. & Ad. News 1978, 5787, 6086; cf. Lines v. Frederick, 400 U.S. 18, 19, 91 S.Ct. 113, 27 L.Ed.2d 124 (1970); Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934); Williams v. United States Fidelity & Guaranty Co., 236 U.S. 549, 554-55, 35 S.Ct. 289, 290, 59 L.Ed. 713 (1915), the Court concludes that the correct standard of proof in § 523 dischargeability proceedings in this district is a fair preponderance of the evidence. In the Matter of Vincent, 75-B-1930 (E.D.N.Y. Nov. 9, 1976); In the Matter of Breslau, 74-B-620 (E.D.N.Y. Feb. 26, 1976); In the Matter of Tobin Tobin I, 74-B-88 (E.D.N.Y. Apr. 24, 1975); In the Matter of Tobin Tobin II, 74-B-88 (E.D.N.Y. Feb. 20, 1975); accord, In re Weiler, 1 B.C.D. 1521 (S.D.N.Y.1975); Sweet v. Ritter Finance Co., 263 F.Supp. 540 (W.D.Va.1967); cf. In the Matter of Calabrese, CCH ¶ 65,389 (E.D.N.Y.1974).

II

Plaintiff contends that her claim is nondischargeable under § 523(a)(2)(B) of the Bankruptcy Code, which provides as follows:

(a) A discharge under § 727 . . . of this title does not discharge an individual debtor from any debt —

(2) for obtaining money, property, services, or an extension, renewal, or refinance of credit, by —

(B) use of a statement in writing —

(i) that is materially false;

(ii) respecting the debtor\'s or an insider\'s financial condition;

(iii) on which the creditor to whom the debtor is liable for obtaining such money, property, services, or credit reasonably relied, and

(iv) that the debtor caused to be made or published with intent to deceive. (Emphasis added).

It is beyond dispute that to satisfy § 523(a)(2)(B), there must exist a written statement which represents the debtor's financial condition. In re Youssef, CCH ¶ 66,032 (Dist.Ct.D. of C. 1976); In re Gonzalez, 287 F.Supp. 281 (S.D.N.Y.1968).

In the case at bar, the plaintiff contends that the home improvement license application dated December 11, 1978, and the contract between the parties constitute such writings. The Court finds upon examination of the documents in question that the writing requirement of subsection (2) has not been met. Neither document discloses any statement respecting the debtor's financial condition. See 3 Collier...