In re Lyle

• Decision Date: 23 May 2005
• Docket Number: Adversary No. 03-01166.,Bankruptcy No. 03-10446-WCH.
• Citation: 334 B.R. 324
• Parties: In re Leonard S. LYLE, d/b/a Northstar Construction, Debtor. Robert F. Lucas, Jr., and Rachel F. Lucas, Plaintiff, v. Leonard S. Lyle, d/b/a Northstar Construction, Defendant.
• Court: U.S. Bankruptcy Court — District of Massachusetts

334 B.R. 324

In re Leonard S. LYLE, d/b/a Northstar Construction, Debtor Robert F. Lucas, Jr., and Rachel F. Lucas, Plaintiff, v. Leonard S. Lyle, d/b/a Northstar Construction, Defendant.

Bankruptcy No. 03-10446-WCH.

Adversary No. 03-01166.

United States Bankruptcy Court, D. Massachusetts, Eastern Division.

May 23, 2005.

COPYRIGHT MATERIAL OMITTED

Thomas J. Raftery, Carlisle, MA, for Debtor.

MEMORANDUM OF DECISION

WILLIAM C. HILLMAN, Bankruptcy Judge.

I. Introduction

This adversary proceeding is before the Court pursuant to an order of remand. I previously entered judgment for Leonard S. Lyle (the "Debtor") on the complaint which Robert F. Lucas and Rachel F. Lucas ("Mr. Lucas" and "Mrs. Lucas," respectively, the "Plaintiffs" collectively) brought under 11 U.S.C. § 523(a)(2)(A) (the "Complaint"). Specifically, I ruled that the Plaintiffs had failed to establish a required element of the test outlined in Palmacci v. Umpierrez, 121 F.3d 781 (1st Cir.1997), namely that their reliance upon an alleged false representation by the Debtor caused them damages. The Plaintiffs appealed to the United States District Court for the District of Massachusetts and that court remanded the matter for further consideration of the Palmacci elements.

Upon remand, I held a hearing and took the matter under advisement. For the reasons set forth herein, I will enter judgment for the Debtor. The following constitute my findings of fact and conclusions of law.

II. Background

A. Factual Background

The chronology of events which led to this proceeding is straightforward and not disputed. In the early spring of 2000, the Plaintiffs were searching for a contractor build an addition to their home. John M. Gregorio ("Gregorio"), a family friend of the Plaintiffs (who at the time was the Building Commissioner of the City of Melrose, Massachusetts) recommended the Debtor to the Plaintiffs.¹ After Gregorio's recommendation, Mrs. Lucas telephoned the Debtor to arrange a meeting concerning the Plaintiffs' project.²

At their first meeting with the Debtor, the Plaintiffs discussed their preliminary drawings and various details of their project to build an addition and make renovations to their home.³ During the meeting, Mrs. Lucas testified the Debtor presented the Plaintiffs with his business card.⁴ The Northstar Construction Company business card names the Debtor as "Project Manager" and recites the following: "BLDR Lic. # 046646[;]" "Contractors # 110571[;]" and, "DOE Cerificate # 267513."⁵ The Debtor admitted that Exhibit A2 is the business card he had at the time, but did not recall presenting it to the Plaintiffs.⁶

Both Plaintiffs testified that during the first meeting Mr. Lucas inquired of the Debtor whether he was licensed, to which the Debtor responded that he was.⁷ The Plaintiffs testified that they used licensure as a "standard" for the contractors they interviewed for their project⁸ and relied upon the Debtor's representation in deciding to contract with him.⁹ The Debtor testified that his response to whether he was licensed was "that I hadn't been licensed, that it had lapsed, but yet I had taken a test in 1987 to receive my license, and I hadn't forgot the material because I was teaching at the high school at the time."¹⁰

Following the first meeting, Mrs. Lucas had several phone conversations with the Debtor and arranged for a second meeting to discuss new drawings and a cost estimate for the project.¹¹ Pursuant to a prior request from the Plaintiffs, the Debtor presented his various licensing papers at the second meeting.¹² The document provided by the Debtor included copies of:

(1) Massachusetts Department of Education Certificate for the field of Industrial Arts, # 267513; (2) American Red Cross Standard and Personal Safety course certification; (3) Massachusetts Department of Public Safety Construction Supervisor License, License Number 046646, effective date 10/31/1992; (4) City of Lynn, Board of Examiners Class 4 Construction License, License Number 2082, License Expiration July 1, 1987; and (5) United States Department of Labor, Occupational Safety and Health Administration Training Course certification.¹³ The Debtor testified that upon presentation of these documents, he told the Plaintiffs that the Massachusetts Department of Public Safety Construction Supervisor License was "my last license, and that my [19]97 license had run out in '97, but I had lost it and didn't have a copy of it."¹⁴

After the second meeting, the Debtor proposed a five-page contract outlining the work to be performed, setting a contract price of $106,000, and including a payment schedule.¹⁵ Mrs. Lucas supplemented the Debtor's proposal with a payment schedule worksheet and two drawings,¹⁶ and Mr. Lucas' father, Robert F. Lucas, Esq., provided a "Construction Agreement Addendum."¹⁷ These three documents constituted the complete contract (the "Contract") which the parties signed on April 29, 2000.¹⁸

No part of the Contract recites that the Debtor is a licensed contractor or a construction supervisor.¹⁹ The Debtor does not dispute that he was not licensed as either a home improvement contractor or a construction supervisor at the time he contracted with or worked for the Plaintiffs.²⁰ Furthermore, the Debtor admits that at the time of the Contract he was doing business as Northstar Construction Company and was engaged in trade or commerce within the meaning of Massachusetts General Laws, Chapter 93A, § 2.²¹

After the Debtor and the Plaintiffs executed the Contract, they agreed that the Plaintiffs would pay $33,500 of the Contract price in cash.²² In return, the Debtor agreed to sign a receipt, prepared by Robert F. Lucas, Esq., which read,²³ "I further acknowledge that such payment was made in cash at my express request, and did not constitute an attempt by Bob or Rachel Lucas to effectuate a failure to make any required reportings [sic] under § 6050 of the Internal Revenue Code."²⁴

Subsequent to the execution of the Contract and receipt of the cash payment, the Debtor prepared an Application for Building Permit for the Melrose Building Department (the "Application").²⁵ The Debtor had a conversation with Gregorio, the Building Commissioner of Melrose, regarding how to prepare the Application.²⁶ Gregorio testified that at the time the Debtor was seeking the permit, he was under the impression that the Debtor was a licensed contractor and that the format of the Application used by the Debtor was for a licensed contractor.²⁷ The Debtor testified that he informed Gregorio "[t]hat I didn't have one [a license], and that I didn't have the numbers with me, that I had my license at home."²⁸ Subsequently, the Debtor retrieved his license which had expired in 1997, and returned to input his license information for the permit.²⁹

In Section 3 of the Application, the Debtor included his Construction Supervisor License Number 046646 with an expiration date of August 5, 1997, and Northstar Construction Company's Registration Number 110571 with an expiration date of November 3, 1997.³⁰ In order to complete the Application for Building Permit, the Debtor had to obtain the Plaintiffs' signature.³¹ The Debtor testified that he left the Application with the Plaintiffs overnight, picked it up the next day, and completed the permit process by paying a fee to the Melrose Building Department.³² Mrs. Lucas signed the Application, but denied reading or having had the document overnight.³³ Mrs. Lucas further testified that the Debtor presented her "with a very large clipboard, box of papers rolled over behind the clipboard, pointed to one page and said, `Mrs. Lucas, I need you to sign right here so I can get your building permit.' "³⁴

On June 29, 2000, Gregorio approved the Application, and Building Permit Number 37105 was issued on June 30, 2000.³⁵ Gregorio testified that as building inspector he could only issue a building permit to a contractor, licensed or not, with the homeowner's signature.³⁶ Gregorio noted that the significant difference in hiring an unlicensed contractor is that a homeowner would not have recourse to a state guarantee fund if the contractor performed faulty workmanship.³⁷ On cross examination, Gregorio testified he had read the Application closely, but "slipped on that page" which included the Debtor's expired license and registration information.³⁸

Gregorio further testified on cross examination that the Debtor had previously done work for Gregorio's relatives, including his mother, sister and sister-in-law.³⁹ As to the Debtor's skills, Gregorio testified that the Debtor was "a decent carpenter" and Gregorio would not have recommended him to the Plaintiffs "if I didn't think he was a decent carpenter."⁴⁰

In describing the work he performed on the Plaintiffs' home, the Debtor testified that he "[c]ompleted a 14 by 24 addition with all the extras they asked of me to do and renovated half their house."⁴¹ The Debtor also testified that he had received $100,000 in payment from the Plaintiffs for the work, but that he had spent more than $110,000.⁴² On cross examination, the Debtor testified that he had employed 18 to 20 subcontractors for the Plaintiffs' job because the Debtor does not do electrical or plumbing work.⁴³ The Debtor further explained that between the mid 1990s and his work on the Plaintiffs' home, he was not engaged in the construction business because he was "considered disabled" as a result of fusion surgery on his spine.⁴⁴ At the time Debtor was negotiating the Contract, the Debtor testified he was a high school teacher.⁴⁵

Following the Debtor's completion of the work on Plaintiffs' residence, the Plaintiffs made a demand for relief under Massachusetts General Laws Chapter 93A,⁴⁶ by letter dated March 27, 2001 (the "Demand Letter").⁴⁷ The Demand Letter detailed various alleged defects in the work performed by the Debtor, including: water leaks in the roof and basement; defects in the installation and operation of the...