In re Meador

• Decision Date: 04 October 2006
• Docket Number: Bankruptcy No. 05-35414.,Adversary No. 06-3034.
• Citation: 352 B.R. 832
• Parties: In re Steven Eric MEADOR d/b/a Accurate Concrete Construction, Debbie Ann Meador, Debtors. Family Home Construction, Inc., Plaintiff, v. Steven Eric Meador, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Tennessee

352 B.R. 832

In re Steven Eric MEADOR d/b/a Accurate Concrete Construction, Debbie Ann Meador, Debtors.

Family Home Construction, Inc., Plaintiff, v. Steven Eric Meador, Defendant.

Bankruptcy No. 05-35414.

Adversary No. 06-3034.

United States Bankruptcy Court, E.D. Tennessee.

October 4, 2006.

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Edward J. Shultz, Esq., Jenkins & Jenkins Attys., PLLC, Knoxville, TN, for Plaintiff.

Charles T. Webber, Jr., Esq., Ault, Webber, Brasfield & Looper, Knoxville, TN, for Defendant/Debtor.

MEMORANDUM ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

RICHARD STAIR, JR., Bankruptcy Judge.

This adversary proceeding is before the court upon the Complaint filed by the Plaintiff on January 26, 2006, asking the court to award it a judgment against the Defendant/Debtor in the amount of $17,769.00, plus pre-judgment and post-judgment interest, and attorneys' fees, and to determine that the judgment is nondischargeable under 11 U.S.C. § 523(a)(2)(A), (4), and/or (6) (2005). The Debtor filed an Answer on March 7, 2006, denying the Plaintiffs allegations of fraud and misrepresentation and arguing that he is entitled to a discharge of the debt owed to the Plaintiff.

Presently before the court is the Plaintiffs Motion for Summary Judgment (Motion for Summary Judgment) filed by the Plaintiff on August 1, 2006, arguing that no genuine issues of material fact exist and that it is entitled to a judgment as a matter of law. Accompanying the Motion for Summary Judgment are the Plaintiffs Statement of Undisputed Facts and the Plaintiffs Brief in Support of Motion for Summary Judgment. The Plaintiff also relies upon the Affidavit of Robin A. Minnis, an attorney representing the Plaintiff in a lawsuit against the Debtor in the Circuit Court for the Fifteenth Judicial Circuit in Ogle County, Illinois.

On September 1, 2006, the Debtor filed the Defendant's Answer to Plaintiffs Motion for. Summary Judgment (Response) arguing that the Plaintiff is not entitled to summary judgment based upon the facts and applicable law.

This is a core proceeding. 28 U.S.C.A. § 157(b)(2)(I) (West 2006).

I

The following facts are not in dispute. On February 2, 2005, the Plaintiff filed a lawsuit against the Debtor and his company, Accurate Concrete Construction, Inc. (Accurate Concrete), in the Circuit Court for the Fifteenth Judicial Circuit, County of Ogle, Illinois, alleging breach of contract and fraud based upon the Debtor's statements in lien waivers on a construction contract (State Court Lawsuit). MINNIS AFF. AT ¶ 2; Ex. A. The Debtor entered an appearance in the State Court Lawsuit through his attorney and requested additional time to file an answer, which was granted by the court. MINNIS AFF. AT ¶ 3; Ex. A. The Debtor did not, however, file an answer in the State Court Lawsuit. MINNIS AFF. AT ¶ 2. Thereafter, a status hearing was held on August 17, 2005, at which time the Debtor's attorney represented that the Debtor was not going to defend the action and agreed to a judgment in the amount of $18,969.21 plus attorney's fees of $1,358.00, with respect to Accurate Concrete, but that the Debtor, individually, objected to entry of an order finding that he committed fraud. MINNIS AFF. AT ¶ 4; Ex. B. Nevertheless, the judge held from the bench that the Debtor's failure to file an answer constituted an admission, and she was required to enter judgment on both the breach of contract and fraud counts against the Debtor. MINNIS AFF. AT ¶ 4; Ex. B.

On September 23, 2005, the Debtor filed the Voluntary Petition commencing his Chapter 7 bankruptcy case. At that time, the judgment rendered from the bench in the State Court Lawsuit had not been memorialized in writing or entered by the court. MINNIS AFF. AT ¶ 5. After the Debtor filed his bankruptcy case, the Plaintiff obtained relief from the automatic stay to have the judgment entered. MINNIS AFF. AT ¶ 5. On June 15, 2006, the state court judge entered `a Nunc Pro Tunct [sic] Judgment Order (Judgment), memorializing the following findings:

THIS . MATTER coming before the Court for status on the Plaintiffs Two-Count Complaint filed on February 2, 2005, and Plaintiff being present with Attorney Rachel Minnis, Defendants being present by Attorney Thomas Meyer, and the Court's finding that the Defendant has never filed an Answer or responsive pleading to the Complaint and the Defendants stipulating to the same, therefore, the Court finds that the facts as alleged in the Complaint shall be taken as true and the Court grants the entry of Judgment on both counts over the objection of the Defendant.

MINNIS AFF. AT ¶ 1; Ex. C. The Judgment was entered nunc pro tune to August 17, 2005.

In its Motion for Summary Judgment, the Plaintiff argues that there are no genuine issues `of material fact and that, under the requirements of the statute and the doctrine of collateral estoppel, the Judgment is nondischargeable under § 523(a)(2)(A).

II

Summary judgment is appropriate "if 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." FED. R. Cry. P. 56(c) (applicable in adversary proceedings by virtue of Rule 7056 of the Federal Rules of Bankruptcy Procedure). When considering a motion for summary judgment, the court does not weigh the evidence to determine the truth of the matter asserted, but simply determines whether a genuine issue for trial exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

The party seeking summary judgment bears the initial burden of proving that there are no genuine issues of material fact, thus entitling it to judgment as a matter of law. Owens Corning v. Nat'l Union Fire Ins. Co., 257 F.3d 484, 491 (6th Cir.2001). The burden then shifts to the non-moving party to produce specific facts showing a genuine issue for trial, Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986), by citing specific evidence and not merely relying upon allegations contained in the pleadings. Harris v. Gen. Motors Corp., 201 F.3d 800, 802 (6th Cir.2000). The facts and all resulting inferences are viewed in a light most favorable to the non-moving party, Matsushita, 106 S.Ct. at 1356, and the court will decide whether "the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 106 S.Ct. at 2512. "[O]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 106 S.Ct. at 2510.

Based upon the facts and record presented in the Motion for Summary Judgment, the Response, the Statement of Undisputed Material Facts, and the Affidavit of Ms. Minnis along with the exhibits thereto, the court finds that there are genuine issues of material fact, and that the Plaintiff is not, therefore, entitled to judgment as a matter of law.

III

Nondischargeability of debts is governed by 11 U.S.C.A. § 523, which provides, in material part:

(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt —

. . . .

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by —

(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition[.]

11 U.S.C.A. § 523(a)(2)(A). As the party seeking a determination of nondischargeability, the Plaintiff bears the burden of proving the necessary elements by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 661, 112 L.Ed.2d 755 (1991). Furthermore, § 523(a) is strictly construed against the Plaintiff but liberally in favor of the Debtor. Rembert v. AT & T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277, 281 (6th Cir.1998); Haney v. Copeland (In re Copeland), 291 B.R. 740, 759 (Bankr. E.D.Tenn.2003).

To satisfy § 523(a)(2)(A), the Plaintiff must prove that the Debtor obtained money, property, or services through material misrepresentations that he knew were false or that he made with gross recklessness, that the Debtor intended to deceive the Plaintiff, that the Plaintiff justifiably relied on the Debtor's false representations, and that the Plaintiffs reliance was the proximate cause of its losses. See Copeland, 291 B.R. at 760 (citing Rembert, 141. F.3d at 280).

First, the Plaintiff must prove that the Debtor engaged in conduct that was somewhat "blameworthy," and his fraudulent intent may be "inferred as a matter of fact" based on the totality of the circumstances. Copeland, 291 B.R. at 759 (citing Commercial Bank & Trust Co. v. McCoy (In re McCoy), 269 B.R. 193, 198 (Bankr.W.D.Tenn.2001)). Material misrepresentations, omissions, and actual fraud fall within the scope of § 523(a)(2)(A). Copeland, 291 B.R. at 759; see also Mellon Bank, N.A. v. Vitanovich (In re Vitanovich), 259 B.R. 873, 877 (6th Cir. BAP 2001) ("Actual fraud as used in 11 U.S.C. § 523(a)(2)(A) is not limited to misrepresentations and misleading omissions.").

"[F]alse pretense" involves implied misrepresentation or conduct intended to create and foster a false impression, as distinguished from a "false representation" which is an express misrepresentation[, while a]ctual fraud "consists of any deceit, artifice, trick, or design involving direct and active operation of the mind, used to circumvent and cheat another — something said, done or omitted with the design of perpetrating what is known to be a cheat or deception."

Copeland, 291 B.R. at 760 (quoting Ozburn v. Moore (In re Moore), 277 B.R. 141, 148 (Bankr.M.D.Ga.2002), and First Centennial Title Co. v. Bailey (In...