In re Lowery

• Decision Date: 16 December 2010
• Docket Number: Adversary No. 09-6771-WLH,Bankruptcy No. 09-86901-WLH
• Citation: 440 B.R. 914
• Parties: In re Bradley Eugene LOWERY, Jr. and Linda Kay Lowery, Debtors. Jamal Lewis, Plaintiff, v. Bradley Eugene Lowery, Jr., Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

440 B.R. 914

In re Bradley Eugene LOWERY, Jr. and Linda Kay Lowery, Debtors.

Jamal Lewis, Plaintiff,

v.Bradley Eugene Lowery, Jr., Defendant.

Bankruptcy No. 09-86901-WLH.

Adversary No. 09-6771-WLH.

United States Bankruptcy Court,

N.D. Georgia,

Atlanta Division.

Dec. 16, 2010.

S. Keith Eady, Keith Eady & Associates, LLC, Atlanta, GA, for Debtors.

Hal J. Leitman, Vania S. Allen, Macey, Wilensky, Kessler & Hennings, LLC, Atlanta, GA, for Plaintiff.

Richard K. Valldejuli, Jr., Valldejuli & Associates, LLC, Atlanta, GA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

WENDY L. HAGENAU, Bankruptcy Judge.

This adversary proceeding is before the Court on Plaintiff Jamal Lewis' Motion for Summary Judgment (the "Motion") (Docket No. 21) and Debtor Defendant Bradley Lowery's Response in Opposition thereto (Docket No. 28). Plaintiff's Motion seeks judgment on a Complaint to Determine the Dischargeability of Debt owed to Plaintiff by the Defendant pursuant to 11 U.S.C. § 523(a)(2)(A), 11 U.S.C. § 523(a)(4) and 11 U.S.C. § 523(a)(6) filed on December 30, 2009. The Complaint and Motion assert a prior Superior Court order collaterally estops re-litigation of the issues. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I) and the Court has jurisdiction over it pursuant to 28 U.S.C. § 157 and 28 U.S.C. § 1334.

The Court has considered the pleadings and supporting documents and briefs submitted by the parties. For the reasons stated below, the Court concludes that the Plaintiff's Motion for Summary Judgment is granted in part and denied in part.

FINDINGS OF FACT

Plaintiff Jamal Lewis ("Lewis") and Defendant Bradley Lowery ("Lowery") entered into a Cost of Work Plus a Fee Contract (the "Contract") for construction of a multilevel residence located at 568 Trabert Avenue, Atlanta, Georgia 30309 (the "Property") in July, 2006. (Pl.'s Statement of Undisputed Facts ¶ 1).¹ TheContract stated the total cost for construction of the Property would be $2,400,000.00 and was entered into by Lewis, as owner, and Lowery, as President of Lowery & Associates, Inc. Id. at ¶ 2. On September 9, 2007, Lewis entered into a Construction Loan Agreement and obtained a construction loan from Taylor, Bean & Whitaker Mortgage Corp. in the principal amount of $2,400,000.00. Id. at ¶ 3.

During the first six (6) months of construction, Lowery & Associates, Inc. received $681,000.00 in loan proceeds. (Pl.'s Statement of Undisputed Facts ¶ 4). Lowery & Associates, Inc. failed to provide weekly or monthly reports to Lewis showing the labor and materials furnished and ignored numerous telephone calls made by Lewis throughout the duration of the construction. Id. at ¶ 10.

After Lowery failed to respond, Lewis retained a construction expert, Mark Wilcox ("Mr. Wilcox"), to evaluate and inspect the property and to determine costs expended for the project including materials and labor as well as the percentage of completion. Id. at ¶ 11. Mr. Wilcox took numerous photographs of the Property, examined the condition of the interior and exterior walls and foundation, and made a determination as to the percentage of the work completed, cost to repair and expenses still owed to subcontractors who had performed work or who had provided material to the project. Id. at ¶ 12. Mr. Wilcox discovered rusted beams, water intrusion, standing water, stained walls, algae, mold, rust stained interior and exterior walls, exposed beams, incomplete stucco work, exposed foundation and an incomplete roof. Id. at ¶ 13. Mr. Wilcox testified that, based upon his experience, knowledge of costs and materials and inspection of the residence, the construction project was between 45% and 48% complete, not 80% complete as Lowery alleged. Id. at ¶ 14. As a result of the construction disputes, Lewis sued Lowery and Lowery & Associates, Inc. in the Superior Court of Fulton County. Id. at ¶ 15.²

Lewis' complaint in the Fulton County Superior Court asserted claims, against Lowery and Lowery & Associates, Inc. for breach of construction contract, fraud and deceit, and conversion. (Def.'s Brief in Supp. of Opp'n to Pl.'s Mot. for Summ. J., Ex. A, Superior Court Compl.). During the discovery phase of the Fulton County Superior Court action, the Fulton County Superior Court entered an order striking Lowery's and Lowery & Associates, Inc.'s answers for failing to comply with a previous Fulton County Superior Court discovery order. (Def.'s Brief in Supp. of Opp'n to Pl.'s Mot. for Summ. J., Ex. B, Superior Court Sanction Order.). Thereafter, the Fulton County Superior Court held a hearing to determine damages. (Compl., Ex. 3, Superior Court Order). The resulting Fulton County Superior Court order is the basis for Lewis' claim of nondischargeability in the present action.

The Superior Court of Fulton County Order ("Superior Court Order") entered on July 22, 2009, found in favor of Lewis and based its findings of fact on the testimony of Lewis, Mr. Wilcox and attorney William J. McKenney (as to reasonable attorney's fees) and admission of exhibits into evidence. (Compl., Ex. 3, Superior Court Order). The Superior Court Order concluded that Lowery and Lowery & Associates, Inc. breached the Contract and committed fraud and conversion. The Superior Court Order and subsequent judgment awarded Lewis $1,314,694 in actualdamages, $304,000 in consequential damages, $4,010 in attorney's fees and $250,000 in punitive damages. (Compl., Ex. 3, Superior Court Order). Lowery filed his petition under Chapter 7 of the United States Bankruptcy Code on October 9, 2009.

CONCLUSIONS OF LAW

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see Fed. R. Civ. Proc. 56(c) ³. The party moving for summary judgment has the burden of demonstrating that no dispute exists as to any material fact. Hairston v. Gainesville Sun Pub. Co., 9 F.3d 913, 918 (11th Cir.1993). Once this burden is met, the non-moving party cannot merely rely on allegations or denials in its own pleadings. Fed. R. Civ Pro. 56(e). Rather, the non-moving party must present specific facts that demonstrate there is a genuine dispute over material facts. Id. Lastly, when reviewing a motion for summary judgment, a court must examine the evidence in the light most favorable to the non-moving party and all reasonable doubts and inferences should be resolved in favor of the non-moving party. Hairston, 9 F.3d at 918.

The issue raised in this adversary proceeding is whether Lowery's debt to Lewis is excepted from discharge. Courts narrowly construe exceptions to discharge in favor of the debtor in order to give effect to the fresh start policy of the Bankruptcy Code. Hope v. Walker (In re Walker), 48 F.3d 1161, 1164-65 (11th Cir.1995). The creditor bears the burden of proving nondischargeability by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). In the instant action, Lewis contends that his entire claim against Lowery, evidenced by the Superior Court Order, satisfies the exceptions to discharge under § 523(a)(2)(A), (a)(4), and (a)(6). Lewis argues that applying the doctrine of collateral estoppel to the Superior Court Order establishes the elements of section 523.

Collateral Estoppel

The doctrine of collateral estoppel seeks to prevent the re-litigation of issues previously contested and determined by a valid and final judgment in another court. Newton v. Lemmons (In re Lemmons), 2005 WL 6487216 (Bankr.N.D.Ga.2005). The doctrine of collateral estoppel applies to nondischargeability proceedings. (In re Lemmons), 2005 WL 6487216 (citing Grogan, 498 U.S. at 284 n. 11, 111 S.Ct. 654). When reviewing a Superior Court judgment under the doctrine of collateral estoppel, a federal court must accord the judgment the same preclusive effect as it would be given under the law of the state in which the judgment was rendered. In re Lemmons, 2005 WL 6487216 (citations omitted).

This Court must, therefore, turn to Georgia law to determine the preclusive effect of the Superior Court Order against Lowery. Hebbard v. Camacho (In re Camacho), 411 B.R. 496, 501 (Bankr.S.D.Ga.2009). "While collateral estoppel may foreclose relitigation of issues decided in prior judicial proceedings, the ultimate issue of dischargeability is a legal question over which the bankruptcy court has exclusivejurisdiction." Id. (citations omitted). Under Georgia law, a party may only assert the doctrine of collateral estoppel when the following elements have been satisfied: (1) identity of the parties is the same; (2) identity of the issues is the same; (3) actual and final litigation of the issue in question occurred; (4) the adjudication was essential to the earlier action; and (5) the parties had a full and fair opportunity to litigate the issues in question. In re Lemmons, 2005 WL 6487216.

Identity of Parties

As to identity of the parties, Lowery concedes he was a party in the Fulton County Superior Court action and is a party in the instant action. However, Lowery notes the complaint in the Fulton County Superior Court action named other co-defendants not being pursued in the instant matter. Courts have concluded under the rules of issue preclusion, "the fact that the parties are not precisely identical is not necessarily fatal." See Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 402, 60 S.Ct. 907, 84 L.Ed. 1263 (1940). Despite Lowery's correct assertion that the instant action only involves Lowery individually while the Superior Court action included other parties, the final order and judgment in the Superior Court action named only Lowery individually and Lowery & Associates, Inc....