In re Maurer

• Decision Date: 22 December 2000
• Docket Number: 00-6060 WM.,No. 00-6056 WM,00-6056 WM
• Citation: 256 BR 495
• Parties: In re Kristy Ann MAURER and John Philip Maurer, Debtors. Linda R. Burt, Plaintiff-Appellee, v. Kristy Ann Maurer, Defendant-Appellant, Linda R. Burt, Cross-Appellant, v. Kristy Ann Maurer, Cross-Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Eighth Circuit

256 B.R. 495 (2000)

In re Kristy Ann MAURER and John Philip Maurer, Debtors.

Linda R. Burt, Plaintiff-Appellee, v. Kristy Ann Maurer, Defendant-Appellant, Linda R. Burt, Cross-Appellant, v. Kristy Ann Maurer, Cross-Appellee.

Nos. 00-6056 WM, 00-6060 WM.

United States Bankruptcy Appellate Panel of the Eighth Circuit.

Submitted November 9, 2000.

Decided December 22, 2000.

COPYRIGHT MATERIAL OMITTED

Charles L. House, Kansas City, MO, for appellant.

John B. Gage, Overland Park, KS, for appellee.

Before WILLIAM A. HILL, SCHERMER, and DREHER, Bankruptcy Judges.

HILL, Bankruptcy Judge.

Debtor Maurer appeals from the bankruptcy court's determination that the state court fraud judgment against her is nondischargeable. Burt cross-appeals from the bankruptcy court's refusal to award her the attorney fees she incurred in prosecuting the dischargeability proceeding below. We have jurisdiction over this appeal from the final order of the bankruptcy court. See 28 U.S.C. § 158(b). For the reasons set forth below, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

BACKGROUND

In 1983, Burt entered into a purchase agreement with Stenograph Corporation for the purchase of a Stenograph Cimarron I Editing Station ("Cimarron I"). The purchase agreement provided for 84 monthly payments of $285.00 and specifically stated that "upon default, Purchaser shall be liable for all costs, including attorneys' fees, incurred in collection and enforcement of Purchaser's obligations and duties hereunder . . ." The purchase agreement was subsequently assigned to Sanwa Business Credit Corporation ("Sanwa") for collection.

In mid-1987, Burt and Maurer were both working independently as court reporters in the Kansas City area. At that time, Maurer purchased the Cimarron I from Burt by orally agreeing to assume the remaining payments that were owed to Sanwa. Subsequently, Maurer made the payments for August and September of 1987 but thereafter defaulted on her monthly payment obligation. Sanwa looked to Burt for payment, and beginning with the payment for January 1988, Burt once again began making payments on the Cimarron I.

In February 1988, Burt and Maurer entered into a new written agreement. The agreement was signed by Maurer and provides as follows:

I hereby agree that I am responsible for and am assuming all payments to Sanwa Leasing Corporation (including late charges, if applicable) on the Stenograph Cimarron I Editing Station currently under a lease-to-own agreement between Sanwa Leasing Corporation and Linda R. Burt. I further understand that there is a balloon payment due at the end of the existing lease agreement in the approximate amount of $1,225.00, which will buy out said lease, and I agree to make said payment at the end of the lease period if I wish to have possession of said editing station at the end of the lease period. If I do not pay the balloon payment at the end of the lease period, possession of said editing station shall revert to Sanwa Leasing Corporation, pursuant the existing lease agreement. At the time that all payments are made, I will assume ownership of said editing station and Linda R. Burt will relinquish all ownership interest in said editing station, and no further payments shall be due to Linda R. Burt and/or Sanwa Leasing Corporation.

The above agreement was backdated to October 1, 1987, based on the fact that Maurer had already made the monthly payments for August and September of 1987 pursuant to the parties' prior oral agreement. After signing the written agreement, however, Maurer continued to default on her monthly payment obligation.

On June 18, 1993, Burt filed a breach of contract action against Maurer in Johnson County District Court for the State of Kansas, and a court trial was conducted on February 13 and 14, 1995. In her testimony at trial, Maurer admitted that she had no intention of performing under the written agreement of February 1988 at the time she signed it. Burt then moved to amend her complaint to allege fraud, and the motion was granted. On June 8, 1995, the state trial court issued its Journal Entry of Judgment which contained the following findings:

15. Effective August 1, 1987, defendant Kristy Maurer orally agreed to assume the responsibility of plaintiff Linda R. Burt for payments on the Stenograph Cimarron I Editing Station, thereby purchasing that editing station from plaintiff Linda R. Burt by agreeing to reimburse Linda R. Burt for any payments, late charges or other expenses incurred by her in fulfilling her contract with Sanwa Business Credit Corporation. Defendant transported that machine from its location at the Obermaier Office to her home on Wallace in Kansas City, Missouri, and eventually to her business office at 1870 City Center Square, 1100 Main, Kansas City, Missouri.

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18. In February, 1988, the parties entered into a new written agreement to the effect that Kristy Maurer would assume Linda Burt\'s liability to Sanwa, which agreement is attached as Exhibit "A" to plaintiff\'s petition, which was drafted by plaintiff Linda R. Burt on her computer as defendant Kristy Maurer stood behind her over her right shoulder and agreed with plaintiff Linda R. Burt with respect to the precise wording of the document in question. The document in question was backdated to October 1, 1987, based upon the fact that defendant had paid only for the months of August and September pursuant to the parties oral agreement. After the parties agreed to the wording of the document in question, plaintiff Linda R. Burt printed two originals of that document off on Burt, Burmeister & Associates stationery and provided them to defendant Kristy Maurer, who affixed her signature to the document on top of the printer while plaintiff Linda R. Burt watched her sign it, thereafter leaving the documents with Ms. Burt.

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20. The agreement in question is adequately supported by consideration. Since the parties before the Court reduced their agreement to a written contract, consideration is presumed as a matter of law, and it is defendant\'s burden to prove lack of consideration, . . . a burden which defendant has failed to carry.

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21. Linda R. Burt, despite not having signed the agreement in question, was a party to the agreement by virtue of the fact that it concerned assumption of a debt she owed and the fact that she performed her obligation under the agreement by providing the equipment in question to defendant Kristy Maurer, who thereby assented to the agreement. A valid written contract, signed by one party only, but fully recognized and acted upon by both parties, is binding in the sate of Kansas. Doman Hunting & Fishing Association v. Doman, 159 Kan. 439, 446, 155 P.2d 438 (1945); Sentney v. Hutchinson Interurban Ry. Co., 90 Kan. 610, 612-13, 135 P. 678 (1913).

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25. . . . By agreeing to assume the contract of Linda Burt with stenograph which was subsequently assigned for collection purposes to Sanwa Business Credit Corporation, plaintiff (sic) Kristy Maurer adopted that written contract by expressly referring to it in Exhibit "A," rendering the five-year statute of limitations provided in K.S.A. 60-511 applicable.

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29. This Court hereby finds and holds that plaintiff has proven a case of fraud by clear and convincing evidence. . . . Maurer\'s testimony that she did not inform Linda Burt that she did not intend to perform the agreement when made and that she fully expected Linda Burt to rely upon her promise to Ms. Burt\'s detriment, lead the Court to conclude that her implied statement of present intent to inform (sic) was made with "intent to deceive or recklessly . . . with disregard for the truth." Finally, Linda R. Burt\'s testimony that she relied upon Ms. Maurer\'s promise in purchasing expensive new equipment while continuing to make payments on that which was subject to the parties\' agreement provides clear and convincing evidence supporting justifiable, detrimental reliance upon the part of plaintiff.

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32. As a direct and proximate result of defendant Kristy Maurer\'s fraud, plaintiff Linda R. Burt was damaged in the form of continued payments of principal and late charges to Sanwa in connection with the Stenograph Cimarron I Editing Station in question commencing with the January 1, 1988, payment of $285.00 made by Ms. Burt on December 30, 1987, less $32.05 received from defendant and $143.00 received from Amy Blosser as defendant\'s agent or assignee, in total amount of $10,156.70, which when reduced by the $300.00 she received upon sale of the machine leaves plaintiff with actual damages of $9,856.70.

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34. Pursuant to K.S.A. 60-3702(b), this Court is allowed to consider a variety of factors in determining the amount of punitive damages to be imposed upon defendant Maurer as damages in connection with plaintiff\'s action for fraud. . . . Defendant\'s misconduct was clearly profitable to her; it would have relieved her from the obligation to pay nearly $10,000.00 absent this lawsuit. K.S.A. 60-3702(b)(3). . . .

Maurer appealed the trial court's judgment to the Kansas Court of Appeals, alleging, inter alia, that there was insufficient evidence to support a finding of fraud. However, the trial court's finding of fraud was affirmed by the state appellate court. Maurer then filed a chapter 7 bankruptcy petition, and Burt commenced an adversary proceeding seeking a determination that the state court fraud judgment was nondischargeable. After a hearing on the issue of dischargeability, the bankruptcy court issued a memorandum opinion and order detailing its findings of fact and conclusions of law on May 4, 2000. Specifically, the bankruptcy court determined that collateral estoppel precluded relitigation of Maurer's fraud and that the state court fraud judgment was nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).

Maurer appeals from the...