In re Melcher

• Decision Date: 28 October 2004
• Docket Number: Adversary No. 02-10153.,Bankruptcy No. 02-01803.
• Citation: 319 B.R. 761
• Parties: In re Glenn J. MELCHER and Lynette B. Melcher, Debtors. Deborah Davis, Plaintiff, v. Glenn J. Melcher, et al., Defendants.
• Court: United States Bankruptcy Courts – District of Columbia Circuit

319 B.R. 761

In re Glenn J. MELCHER and Lynette B. Melcher, Debtors Deborah Davis, Plaintiff, v. Glenn J. Melcher, et al., Defendants.

Bankruptcy No. 02-01803.

Adversary No. 02-10153.

United States Bankruptcy Court, District of Columbia.

October 28, 2004.

COPYRIGHT MATERIAL OMITTED

Gregory P. Johnson, for plaintiff.

Madeline A. Trainor, Alexandria, VA, for defendant.

DECISION RE MOTION TO DISMISS COMPLAINT, OR IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT

S. MARTIN TEEL, JR., Bankruptcy Judge.

For the reasons that follow, the court will dismiss this nondischargeability proceeding pursuant to the defendants' Motion to Dismiss Complaint, or in the Alternative, for Summary Judgment. The defendants, Glenn J. Melcher and Lynette B. Melcher, each received a discharge under § 727 of the Bankruptcy Code (11 U.S.C.) as the debtors in the bankruptcy case in which this adversary proceeding is brought. The plaintiff, Deborah Davis, has failed to show that her damage claims against the Melchers are excepted from the effects of those discharges under either of the exceptions she relies upon, 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(6).¹

In her complaint, Davis alleges that the Melchers engaged in fraud in obtaining permits for the renovation of their home, after which the contractor undertook the renovations in a manner that resulted in physical damage to the Davis' adjacent home which shared a common party wall and had a common foundation, and an encroachment over her property line. (Davis alleges that the construction damaged her home's foundation and shared wall, and that the projection beyond the Melchers' existing building line resulted in encroachment of the Melchers' extended wall over her property line.) Davis' § 523(a)(2)(A) claim (that the debt owed her is for property obtained by fraud) fails because the Melchers obtained no property from Davis, because the proximate cause of the harm to Davis was not the fraudulent procurement of the building permits but failure of the Melchers' contractor to perform construction of the renovation in a proper manner to avoid damage to Davis, and because there was no justifiable reliance on certain representations relating to the permits. Her § 523(a)(6) claim (that the debt is one for willful and malicious injury by the Melchers to her property, based on the building applications having been procured by fraud) fails because Davis has failed to rebut the Melchers' affidavits which establish that they did not conduct any of the actual construction work that led to Davis' home being damaged, and that they were unaware of any fraud in the building permit applications submitted on their behalf by their contractor; moreover, even if they had known of the fraud, that is insufficient to establish that they knew that the injuries to Davis' property were substantially certain to occur because of that fraud. They thus did not intend to injure Davis' property.

I

The court first addresses the factual background.² Davis lived next door (in an attached townhouse) to a townhouse property owned and being renovated by the Melchers.³ The Melchers' renovations were done pursuant to building permits obtained by false representations, and the renovations caused extensive damage to Davis' home. Specifically, the Melchers hired Eric Frolia, a contractor who was not licensed in the District of Columbia, to rebuild and expand their home, and he performed the work in an incompetent fashion, causing the damage to Davis' property.

A.

The complaint points to three applications for building permits that were false.

1.

Although construction began in September of 1999, Frolia failed to apply on the Melchers' behalf for a construction permit for the renovation until November 5, 1999. This application contained a number of false statements and failed to disclose the true nature of the construction.

First, the work was described as "interior only" and disclosed the number of stories as "two," despite the fact that a new third floor was being constructed.⁴ However, the building permit itself stated:

Permission is hereby granted to

Glenn & Lynette Melcher

who [are] authorized to perform the work described herein at the address shown above in strict accordance with the conditions stated on BOTH sides of this permit[.] Authorized work and conditions of performance thereof[:]

INTERIOR ONLY! DEMOLITION ONLY!

. . .

No. Of stories[:]

Accordingly, by obtaining the building permit the Melchers did not obtain a right to construct a third story and to go beyond interior and demolition work.

Second, the application also said that no excavation was to be done, and the building permit, again, did not authorize excavation to be done. By indicating that no excavation was to be done, Frolia did not have to answer a number of questions regarding erosion control methods, drainage, and support columns. However, not being required to answer those questions did not obviate the necessity of a building permit for any excavation work. Accordingly, the "fraud" in the building permit application did not give rise to a right to excavate: the excavation was undertaken without a building permit authorizing the excavation, and once the excavation took place, the "fraud" was not the cause of the failure to proceed with a proper building permit and the failure to use proper excavation methods that would have avoided harm to Davis' property.

Third, the Melchers also failed to disclose that the construction would extend beyond the existing building wall. When that type of construction is done, a wall check survey is required.⁵ Obtaining building permits that did not authorize a projection beyond the existing building line did not shield the Melchers from that requirement, and, accordingly, the court rejects as a matter of law Davis' allegation (Complaint ¶ 41) that the Melchers avoided a wall check survey by falsely and fraudulently representing that they were not going to build beyond the existing building line. The "fraud" in the building permit did not authorize a wall extension without a wall examination, as the building permit only authorized interior and demolition work. (Nor did subsequent building permits authorize the wall extension.) Moreover, the requirement of a wall examination is not triggered by the building permit itself, but because District of Columbia law requires an owner to obtain a wall examination to assure that there is no encroachment beyond authorized limits whenever a building wall is extended. The complaint alleges that:

Had the Melchers informed the Department of Public Works that their addition would extend beyond the then, existing building wall, the District would have required the Melchers to obtain a wall check survey, to be certain that the new addition was properly located on the Melcher's [sic] property. See Exhibit 4.

Exhibit 4, the Office of the Surveyor's Wall Examination Instruction Sheet, makes clear that a wall survey occurs if the builder or property owner submits an application for a wall examination to be performed pursuant to the requirements of the D.C. Building Code to determine wall locations. Even if Frolia had disclosed the existence of a wall extension, and the building permit had authorized a wall extension, only by applying for a wall examination would one have occurred. The constructing of a wall extension without a building permit authorizing such, and the failure to request a wall examination, not the "fraud" in the application for a building permit, were the cause of the wall being extended without a wall examination.

Fourth, the application listed "EF Works" (Frolia's company) as the building contractor, and under "Lic. No." listed "VA. A" without a license number. The complaint does not allege that Frolia's company was unlicensed in Virginia. Accordingly, the application arguably was not false in this regard. However, the court will assume for purposes of decision that Frolia implicitly falsely represented that he was licensed to do business in the jurisdiction (the District of Columbia) in which the permit was being sought.

However, nothing would have prevented the Melchers from firing Frolia for lack of a license and proceeding with a new contractor. The cause of any harm to Davis arising from Frolia being unlicensed (and hence from his maybe being not a competent builder) arose from the Melchers' continuing to utilize Frolia's services even though he was unlicensed, not from the issuance of the building permit.

2.

On November 24, 1999, Frolia submitted a second application for a building permit. In addition to the misrepresentations made in the first application, this application falsely states that the existing number of stories on the house is "3." The building permit set 3 stories as a condition of authorized work, but did not authorize a basement. As will be seen, that falsehood was not the proximate cause of harm to Davis. (A later permit, which disclosed the true number of existing floors, authorized the construction of three stories; and the damage that Davis suffered did not arise from the inclusion of a third story but from negligent performance of the foundation and adjoining wall work, and from the encroachment in the Melchers' projection of their existing building line.)

The application also failed to disclose that an addition was being added whose construction was already underway, and the permit did not authorize the addition. However, Davis has failed to allege any facts showing that this falsehood led to any damage to her. Building the addition without a building permit may have resulted in damage to her, but that did not flow from the falsehood.

The application also listed a license number for EF Works as the contractor, but this was presumably EF Works' Virginia license number. The complaint views the application as falsely representing the number as a District of Columbia license number, and the court will accept that characterization for...