In Re: Richard H. Pleasants IV, 99-2257

• Decision Date: 03 May 2000
• Docket Number: No. 99-2257,99-2257
• Citation: 219 F.3d 372
• Parties: (4th Cir. 2000) In Re: RICHARD H. PLEASANTS, IV, Debtor. RICHARD H. PLEASANTS, IV, Appellant, v. E. G. KENDRICK, JR.; RANDY P. KENDRICK, Appellees. . Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 372

219 F.3d 372 (4th Cir. 2000)

In Re: RICHARD H. PLEASANTS,

IV, Debtor.

RICHARD H. PLEASANTS, IV, Appellant, v. E. G. KENDRICK, JR.; RANDY P. KENDRICK, Appellees.

No. 99-2257.

UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT.

Argued: May 3, 2000.

Decided: July 12, 2000.

Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria.

Claude M. Hilton, Chief District Judge. (CA-99-802, BK-97-12702, BK-97-1313)

COUNSEL ARGUED: Kenneth C. Bass, III, VENABLE, BAETJER & HOWARD, L.L.P., McLean, Virginia, for Appellant. Jill Marie Dennis,

HUNTON & WILLIAMS, McLean, Virginia, for Appellees. ON BRIEF: Damon W.D. Wright, VENABLE, BAETJER & HOWARD, L.L.P., McLean, Virginia, for Appellant. Stephen M. Sayers, HUNTON & WILLIAMS, McLean, Virginia, for Appellees.

Before WILKINSON, Chief Judge, and WILKINS and WILLIAMS, Circuit Judges.

Affirmed by published opinion. Chief Judge Wilkinson wrote the opinion, in which Judge Wilkins and Judge Williams joined.

OPINION

WILKINSON, Chief Judge:

E.G. and Randy Kendrick filed this adversary complaint in bankruptcy court, claiming that the debt Richard Pleasants owed them was nondischargeable. The bankruptcy court found that the debt arose from Pleasants' fraud and thus disallowed discharge pursuant to 11 U.S.C. § 523(a)(2)(A). See Kendrick v. Pleasants (In re Pleasants), 231 B.R. 893 (Bankr. E.D. Va. 1999). The district court affirmed, and Pleasants appeals. Finding no error, we affirm.

I.

In the late 1980s, the Kendricks met Pleasants, the president and sole shareholder of Pleasants & Associates (P&A). The Kendricks were planning an addition to their home. In the course of discussions, Pleasants erroneously represented that he was an architect who was educated at the University of Virginia School of Architecture. Over the next five years, the Kendricks paid Pleasants to prepare drawings outlining architectural options for their home. In 1993, the Kendricks hired P&A to prepare detailed architectural plans and to perform construction estimates. In 1994, the Kendricks entered into a construction contract with P&A.

When the project suffered from serious delays, the Kendricks hired Frank Reifsnyder, a licensed architect and independent consultant, to evaluate the project's status. The Kendricks discovered that Pleasants was not a licensed architect and had not attended the University of Virginia School of Architecture. The Kendricks confronted Pleasants. Pleasants apologized and asked for a second chance. The Kendricks agreed and entered into a Forbearance Agreement with P&A and Pleasants. Under this agreement, the Kendricks would not declare P&A in default, terminate the construction contract, or pursue legal remedies so long as P&A met nine milestones. When P&A failed to meet a single milestone, the Kendricks fired Pleasants and P&A.

The Kendricks brought suit in Fairfax County Circuit Court seeking $1,262,296 in damages for fraud, breach of contract, and negligence. Three days before trial, Pleasants and P&A filed for bankruptcy. The Kendricks then filed this adversary complaint, seeking to have their claim against Pleasants deemed nondischargeable pursuant to 11 U.S.C. § 523(a)(6). Section 523(a)(6) provides for denial of a discharge "from any debt for willful and malicious injury by the debtor to another entity or to the property of another entity."

At trial before the bankruptcy court, numerous witnesses, in addition to the Kendricks, testified about the fraud perpetrated by Pleasants. One of them reported having had a "very long discussion" with Pleasants about his "going to architectural college at UVA." Pleasants' own administrative assistant testified that she had believed Pleasants to be an architect because of the degrees hanging on his office wall. And five witnesses reported that when Pleasants was introduced as an architect, he made no effort to correct the introduction. The court also learned that P&A's letterhead, business cards, advertisements, and signs stated, "Pleasants & Associates, Architectural Design and Construction." Indeed, Pleasants had even listed P&A in the phone book under "Architects." There was also testimony about the deplorable condition in which Pleasants' delays and faulty designs had left the Kendrick home. For example, water had been found "in every single room." Frank Reifsnyder pointed out numerous structural problems and building code violations. He noted that the master bedroom roof could have collapsed when loaded with snow. He added that a gas-fired mechanical unit had been improperly placed below a wood stairway -- a stairway which served as the only means of egress from the carriage house's second floor.

After the trial had ended, the Kendricks filed a motion to amend their complaint to include a reference to 11 U.S.C.§ 523(a)(2)(A). Section 523(a)(2)(A) provides for a denial of a discharge "from any debt for money, property, services . . . to the extent obtained by false pretenses, a false representation, or actual fraud." The bankruptcy court granted the Kendricks' motion to amend and found their $1,262,296 claim nondischargeable pursuant to § 523(a)(2)(A). See In re Pleasants, 231 B.R. at 897-901. The court did not address the applicability of § 523(a)(6). The district court affirmed the bankruptcy court's judgment. Pleasants now appeals.

II.

Pleasants raises two contentions with respect to the bankruptcy court's judgment on the merits of the Kendricks'§ 523(a)(2)(A) claim. Pleasants first argues that § 523(a)(2)(A)'s "obtained by" language requires that some portion of a creditor's claim must have been directly transferred from the creditor to the debtor. And Pleasants notes that none of the Kendricks' claim was for consideration directly transferred to Pleasants. Rather, the Kendricks' claim included only amounts paid by the Kendricks to third parties, such as payments to the architect and builder hired to correct and complete the project.

Pleasants' argument is misplaced. In Cohen v. de la Cruz, a group of tenants filed an adversary proceeding against their bankrupt landlord, seeking to have their claim for excess rents, treble damages, and attorney's fees deemed nondischargeable pursuant to§ 523(a)(2)(A). 523 U.S. 213, 215 (1998). The Supreme Court found that the tenants' entire claim was nondischargeable, not simply the portion of the claim that was transferred to the fraudulent debtor. The Court stated, "We hold that § 523(a)(2)(A) prevents the discharge of all liability arising from fraud." Id. (emphasis added); see also id. at 218 (Section 523(a)(2)(A) bars "discharge of debts `resulting from' or `traceable to' fraud." (quoting Field v. Mans, 516 U.S. 59, 61, 64 (1995)). This language is broad...