In re Ferguson
| Decision Date | 24 July 1998 |
| Docket Number | Adversary No. 96 A 00677.,Bankruptcy No. 96 B 04422 |
| Citation | 222 BR 576 |
| Parties | In re Richard Scott FERGUSON, Debtor. Barbara KADLECEK, Plaintiff, v. Richard Scott FERGUSON, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
Timothy P. Whelan, Wheaton, IL, for Plaintiff.
William A. Lester, Lombard, IL, for Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This Adversary proceeding relates to the bankruptcy case filed by debtor Richard Scott Ferguson ("Debtor" or "Defendant" or "Ferguson") under Chapter 7 of the Bankruptcy Code, Title 11 U.S.C. It was brought by plaintiff Barbara Kadlecek ("Plaintiff" or "Kadlecek") to bar dischargeability of Debtor's asserted debt to Plaintiff under 11 U.S.C. § 523(a)(2)(A) in Count I and also under § 523(c)(6) in Count II. Trial was held. At the close of Plaintiff's proofs, Count II was dismissed with prejudice on Plaintiff's motion. Trial concluded, and both sides rested. All pleadings by both parties were then ordered amended under Fed.R.Bankr.P. 7015 to conform to the evidence. Final argument was taken on Count I through written submissions.
Pursuant to evidence taken and argument considered, the Court now makes and enters the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
Barbara Kadlecek purchased a lot for home construction on May 24, 1994, at a location now known as 11419 South Heggs Road in Plainfield, Illinois ("the premises"). The lot was purchased from the developer of the subdivision known as Sunny Farm Acres. She negotiated with a number of builders to construct a home based upon her design ideas. Kadlecek is and was at that time a registered nurse employed at Central DuPage Hospital in administration, and she has had no home construction experience or background.
Richard Scott Ferguson was one of the builders she contacted for residential home building services. Ferguson testified that he operated Ferguson Custom Homes as a sole proprietorship; it was not incorporated.
At one of his early meetings with Kadlecek, Ferguson explained that he was experienced in home construction as a general contractor and had been in the home building business for twelve years. (At trial, he testified he had no formal training in any trade or by education; his background consisted of going to the library and talking to architects.) He told Kadlecek that he could prepare a design based upon the general ideas presented by her. He also informed her that he was a signatory to a "Code Plus" building agreement, one of the few such quality builders in the area.
A brochure for a "Code Plus" home was provided by Ferguson to Kadlecek at an early meeting between them. He told her that floors in a "Code Plus" home would feel stiffer and more solid and would not "give" when walked across. He also told Kadlecek during their negotiations that his homes would exceed minimum building code requirements. Ferguson further represented to Kadlecek that his plans and specifications would be approved by an architect to enable construction of a "Code Plus" custom home.
Based upon these representations, Kadlecek deposited $2,000.00 with Ferguson and continued to meet with him to develop the design and floor plan she wanted for her home. All meetings were held in Ferguson's home office where the "Code Plus" brochure was framed and prominently displayed on the wall. Once the design concept was agreed upon, Kadlecek was presented with and signed a home construction contract on May 14, 1994, making an additional cash deposit of $14,000.00. Kadlecek stated she began the process of obtaining financing for the project with a company recommended to her by Ferguson.
Thereafter, Ferguson produced blue prints for construction of the home. He drew the plans. The first set of plans were incomplete as to the type of wood to be used in the floors and ceilings as well as other items.
Kadlecek reviewed a copy of the plans and submitted them to a building inspector of the City of Woodridge, a friend of her brother. Upon getting them back from that inspector, she informed Ferguson she had two concerns, one of which was that the span for the floor joists was quite large. She was informed by Ferguson that would not be a concern because he was going to use a stronger wood called "hem-fir" that would resolve any problems with the span. The plans were returned to Ferguson to complete them for construction. It was agreed a stronger wood, hem-fir, was necessary and would be used for the floors and ceilings due to the span of the foundation, and which would provide stability for the floors.
The plans were redone by Ferguson to incorporate the use of hem-fir in all the rooms as well as the ceilings and roof. The next set of plans Kadlecek saw had the designation "H/F" in drawings for floors in each of the rooms, thereby indicating that hem-fir lumber would be used throughout the construction. P.R.x12.1
Ferguson testified that the prior twenty-three homes he had built were all done with architect certification. But the plans in question were submitted to the Will County Building Department for approval. The home site in issue here is in an unincorporated area in which the applicable construction code does not require an architect's certification. Each building inspector approved his plans without any changes prior to construction. The approved plans had the "H/F" designation shown for the floor joists. At no time during construction were any change orders to those plans requested or suggested by Ferguson. The plans did not specify the type of flooring or decking for in the home although architect Peterson, who testified as Ferguson's witness, stated it was normal to include that detail in such plans. Ferguson was under the impression he had placed that material item on the plans, but could not locate it when asked to do so during an in-court examination of the blueprints.
Construction was undertaken by Ferguson on the single-family, full basement design on or about July 6, 1994. Ferguson testified that the lumber was the first thing delivered to the site to be able to frame the house. He knew the builder delivered SPF rather than the hem-fir called for on the plans. His own architect witness Petersen and Kadlecek's expert witness Marcotte both indicated that, if the lumber yard provides the wrong lumber, a builder should not accept it unless there is an appropriate change order with consent of the customer.
Ferguson presented a list of subcontractors and costs for each trade as well as his own fees to the finance company to fund the construction. The house was completed in early November 1994, and was inspected by the Will County Building Department for occupancy and, during construction, by the finance company. Kadlecek stated it was made clear to her the finance company inspection was to make certain the work was performed, not to inspect the quality of the workmanship or compliance with the plans.
A closing, or what was called at trial a "settlement conference" to finalize details under the contract, was held on November 11, 1994. At the November 11 conference, Ferguson presented Kadlecek with a certificate identifying the house as a home of "Code Plus" construction. He further advised Kadlecek of construction warranties in writing. In that document, he clearly confirmed to Kadlecek that "the plans for your customized home were adjusted, reviewed, and approved by a professional architect experienced in single-family residential design." However, Ferguson has now acknowledged that those plans were never approved by an architect. Various punch list items remained to be completed which Ferguson indicated would be done as warranty work. The final paperwork was signed, and Ferguson then received his final payout. It was unclear from the evidence what the net amount was of his final payment. (According to the contract, Ferguson was to receive interim payments of $56,000, $48,000, and $24,000, and the amount to be received at settlement was plus or minus extras or credits.)
Kadlecek did not occupy the premises immediately, but first moved her furniture into it in early December. Immediately upon moving the furniture into the property, Kadlecek observed an unusual amount of give and bounce in her floors. She noted that her glass and china would shake loudly with the slightest pressure on the flooring. When the dog walked across the floor, the shaking occurred. She could feel the bounce while walking or just standing in place, moving up and down.
Kadlecek called Ferguson and requested him to investigate the problem in compliance with the warranties. She was requesting other warranty work be performed at the same time according to the punch list items.
Ferguson investigated the condition and issued a written response to Ms. Kadlecek. He attributed the bounce to "harmonic joist deflection vibration." In the letter, he reaffirmed that he had used "a material (Hem-Fir) stronger than required" for the joists. He dismissed the problem as a normal condition in the type of home she had. He concluded that Ms. Kadlecek's complaint concerning the flooring was not a problem. Attached to the letter was a copy of the floor joist plan confirming the use of hem-fir ("HF") in the construction.
Kadlecek continued to complain to Ferguson. He placed metal cross joists under the floor, but that action did not correct the problem. At that point Ferguson was unwilling to do more in response to Kadlecek's continuing complaint about the floors.
Kadlecek then made a tracing of the watermark on the lumber used in the house. After that point, she determined that those markings indicate the wood used was not "hem-fir" but a wood designated as "SPF." She learned at this time that SPF was not as strong as the hem-fir wood Ferguson had undertaken to use and then represented he had used for the construction. Upon learning...
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