In re Grenier, Case No. 06-14825 (Bankr.Mass. 3/19/2009)

• Decision Date: 19 March 2009
• Docket Number: Adv. P. No. 07-1131.,Case No. 06-14825.
• Parties: In re PETER E. GRENIER, Chapter 7, Debtor. RIMMA VAKS and STEVEN MANGANO, Plaintiffs, v. PETER E. GRENIER, Defendant.
• Court: U.S. Bankruptcy Court — District of Massachusetts

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In re PETER E. GRENIER, Chapter 7, Debtor RIMMA VAKS and STEVEN MANGANO, Plaintiffs, v. PETER E. GRENIER, Defendant.

Case No. 06-14825.

Adv. P. No. 07-1131.

United States Bankruptcy Court, D. Massachusetts.

March 19, 2009.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge

I. INTRODUCTION

The matter before the Court is the Amended Complaint filed by the Plaintiffs, Rimma Vaks ("Vaks") and Steven P. Mangano ("Mangano")(collectively, the "Plaintiffs"). Through their Amended Complaint, the Plaintiffs, who represented themselves in the above-captioned adversary proceeding, seek a determination that the Debtor, Peter E Grenier ("Grenier" or the "Debtor"), is liable to them for damages arising out of a home construction contract and that those damages are excepted from discharge pursuant to 11 U.S.C. §§ 523(a)(2)(A) or (a)(6).

In their Amended Complaint, the Plaintiffs set forth three causes of action. In Count I, they assert that the Debtor made numerous false representations to them in connection with their home construction contract. In Count II, they assert that the Debtor wrongfully converted their money and deliberately and intentionally breached their contract with him, causing willful and malicious injuries to them and their property. Finally, in Count III, the Plaintiffs seek damages under Mass. Gen. Laws, ch. 93A, §§ 1-11 based upon the allegation that the Debtor engaged in unfair and deceptive practices, including violations of state laws and regulations applicable to home improvement contractors.

The Debtor answered the Amended Complaint. He specifically denied the material allegations made by the Plaintiffs and asserted numerous affirmative defenses in his answer.

The parties filed a Joint Pretrial Memorandum on December 28, 2007 in accordance with the Court's pretrial order. In their Joint Pretrial Memorandum, the Plaintiffs and the Debtor stipulated to certain facts. In particular, the parties stipulated that the Plaintiffs paid the Debtor $86,800 as a deposit for construction work on their home and that from October 7, 2005 to December 24, 2005, they made eight payments to the Debtor after his presentation of documents captioned "Application and Certification for Payment," as well as two additional oral requests for funds.

The Court conducted a trial on November 25, 2008 and December 8, 2008, at which three witnesses testified. The Plaintiffs introduced twelve exhibits into evidence. During pretrial proceedings, the Debtor invoked his Fifth Amendment privilege against self-incrimination. During the trial, he neither testified nor introduced any documents into evidence.¹

The issues presented include whether the Plaintiffs sustained their burden of establishing that the Debtor's obligations to them are nondischargeable and whether they established the amount of damages they sustained as a result of the Debtor's conduct.

Based upon the stipulated facts, trial testimony, and documentary evidence, the Court now makes the following findings of fact and conclusions of law as required by Fed. R. Bankr. P. 7052.

II. FINDINGS OF FACT

In the fall of 2005, the Plaintiffs hired an architect, David S. Jaquith, to design and draft plans for substantial renovations to a house they owned at 103 Puritan Lane, Swampscott, Massachusetts (the "property"). Jaquith had been employed by the prior owners of the property, and they recommended him to the Plaintiffs. The Plaintiffs solicited bids for a general contractor but received no offers. Jaquith then recommended Grenier as a general contractor, giving him an excellent reference. Jaquith reported to the Plaintiffs that he had recently worked with Grenier on a project in Beverly, Massachusetts, and he advised them that he would have hired Grenier for construction work on his own project if he had not already employed a general contractor.

As a result of Jaquith's recommendation, the Plaintiffs interviewed Grenier. Vaks advised him that she and her spouse insisted on three conditions to his employment: 1) that he be registered as a Home Improvement Contractor under Massachusetts law; 2) that he work only on their job during the term of the contract; and 3) that she and her spouse be added as insureds under his liability insurance policy. Grenier agreed to the Plaintiffs' conditions.

Vaks testified that the reason why she and her spouse insisted on Grenier's registration as a Home Improvement Contractor ("HIC") was because, in the event they sustained damages, they could make a claim against the Commonwealth's Home Improvement Guaranty Fund.² In September 2005, Grenier falsely represented to the Plaintiffs that he was currently registered as a HIC. According to the Plaintiffs, he explained to them that a building permit would not be issued without such a registration. At the time the parties entered into the contract, however, Grenier was unlicensed with the Board of Building Regulations and Standards as his license had expired on July 5, 2005. Although Grenier obtained a new HIC license in February of 2006, when he applied for the Plaintiffs' building permit from the Town of Swampscott on October 3, 2005, he provided false information on the application for the building permit. Additionally, when he worked on the Plaintiff's project, contrary to his representation, he did not possess a valid HIC registration.

Vaks also insisted that Grenier act as general contractor on only their project because of its size and scope. She testified that Grenier verbally agreed to that condition and assured her that their project would be his only job. Grenier's business records indicate, however, that he had several other pending jobs. Plaintiffs' Exhibit 8 establishes that between September 1, 2005 and November 21, 2007 Grenier had fifteen other clients and projects from which his contracting business generated income and expenses.

The Plaintiffs both testified that Jaquith's recommendation was an important factor in their decision to engage the Debtor as their general contractor. Based upon Jaquith's recommendation, as well as Grenier's representations that he held a current HIC registration and would work only on their project, the Plaintiffs and the Debtor entered into a "Contractor Agreement" on September 24, 2005. The Debtor executed the contract both individually and in his capacity as owner of Grenier Contracting and Construction, LLC. Below his signature on the contract, the Debtor set forth his "Contractor's State License No." as CS 072411.

The parties, in the contract, described the scope of the work with reference to attached architectural drawings and specifications for the renovation of the property prepared by David S. Jaquith Architects. The parties contemplated that the work was to commence on or before September 30, 2005 and was to be substantially completed by April 7, 2006. The Plaintiffs agreed to pay Grenier $508,600 for materials and labor in connection with the contract. In summary, Grenier was to perform all necessary exterior and interior work, including demolition, excavation of the site, pouring the foundation, framing, roofing, siding and installing windows, as well as completing all interior finish work. The interior work included all finish carpentry, electrical, plumbing, heating and cooling work, as well as painting, for the foyer, dining room, living room, family room, kitchen, bathrooms, bedrooms, hallways, garage, office and attic. The Plaintiffs agreed to make payments in accordance with a "Schedule of Values," which, after the required deposit in the sum of $86,800, would be payable in "Progress Payments."

Pursuant to the contract, Grenier agreed to purchase, and keep in force for the duration of the job, insurance that would protect the Plaintiffs as owners. Additionally, he agreed he would obtain workers' compensation insurance and general liability and automobile insurance within certain limits and name the Plaintiffs as additional insureds under the policies. The Debtor purchased the requisite insurance under the contract as evidence by his agent's certificate of liability insurance. It is unclear whether the insurance was terminated or canceled prior to its expiration date. Vaks made a claim under one of the policies, but the insurance company sent her a letter denying coverage of a claim of injury, stating that the policy was no longer in effect.

The Plaintiffs paid Grenier a deposit in the sum of $86,800 on September 24, 2005. During their discussions about the deposit, Grenier told the Plaintiffs that it would be used to order lumber, to obtain a building permit, and to hire a framer. The Town of Swampscott issued a building permit in early October of 2005, and Grenier commenced work on October 3, 2005. Unbeknownst to the Plaintiffs, the check given by the Debtor to the Town of Swampscott for the building permit bounced.

In early October, 2005, Grenier's bank account was overdrawn in the approximate sum of $34,500. His bank account statements reveal that he did not use any of the Plaintiffs' deposit to purchase materials for their job. Rather, he used the deposit for purposes other than renovations to the property. Although the contract documents did not earmark the Plaintiffs' funds to their project, Grenier had agreed that he would not perform work on any other projects while he was working on the Plaintiffs' renovation project. Thus, Grenier made false representations to the Plaintiffs when he told them he would use their deposit for purchasing lumber, for obtaining a building permit, and for engaging a framing contractor.

The Debtor and the Plaintiffs agreed on a procedure for the submission of requisitions for payment. Grenier was to submit the requisitions to the Plaintiffs at weekly meetings. Grenier submitted numerous requisitions each captioned "Application and Certification for Payment." The document consisted of two parts. The Contractor's Application for Payment (the "Applications for Payment") and the...