In re Sestito
| Decision Date | 30 January 1992 |
| Docket Number | Bankruptcy No. 90-14860-JNG,Adv. No. 90-1388. |
| Citation | 136 BR 602 |
| Parties | In re Vincent J. SESTITO, Debtor. Rose EPPARD, Plaintiff, v. Vincent J. SESTITO, Defendant. |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Andrew M. Fischer, Jason & Fischer, Boston, Mass., for plaintiff.
Richard Hackel, Monheimer and Hackel, Boston, Mass., for defendant.
On October 12, 1990, Rose Eppard ("Eppard") filed an adversary complaint against Vincent J. Sestito ("Sestito" or the "Debtor"), seeking a determination from this Court that a debt owed to her by Sestito is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) and (a)(6) of the Bankruptcy Code.1 The complaint and Eppard's Motion for Summary Judgment are predicated upon a judgment Eppard received against Sestito from the Essex Superior Court, after a trial on the merits of a complaint Eppard filed against Sestito and another individual, Lars Sevland, for breach of contract, fraudulent misrepresentations, and unfair and deceptive practices.
Eppard filed a complaint in Essex Superior Court against Sevland and Sestito on April 24, 1986. After sending a demand letter pursuant to M.G.L. ch. 93A, she amended her complaint to include a count for unfair and deceptive trade practices. The Superior Court conducted a trial and made detailed findings of fact. In summary, the Superior Court determined that Eppard entered into an eight-page contract with Tradewinds Construction ("Tradewinds") in which that entity agreed to make substantial renovations to a house Eppard owned on High Street in Newburyport, Massachusetts. The contract was signed by Sevland and Sestito. Both had visited Eppard's property prior to signing the contract and had assured Eppard that the renovation and restoration work would take six weeks. The contract called for a total payment of $19,231; one quarter of that sum was payable upon the commencement of the work, one half was payable when the stairs were installed and other defined work completed, and the balance was due upon completion of the entire project.
Work commenced in early January 1986, and Eppard paid Tradewinds $4,808. Shortly after receiving the first payment, Sevland advised Eppard that he needed more money to purchase supplies and materials, specifically a circular staircase. On or around January 11, 1986, Eppard gave Sevland a check for $9,616. That check, like Eppard's first check, was payable to Tradewinds Construction. After Eppard's second payment, work on the house stopped. Eppard eventually terminated the contract for failure to perform.
According to the Superior Court, Sevland and Sestito shared a phone number and an answering machine. The Tradewinds account was held by both Sevland and Sestito, and they both executed signature cards. Eppard's second check in the amount of $9,616 was deposited in the bank account of Alize Investment Corporation at the Newburyport Five Cents Savings Bank. Seven thousand dollars remained in the account after an immediate $2,616 cash withdrawal. Of the $7,000 remaining, $4,200 was withdrawn in cash by Sevland and $2,761.02 by Sestito. Eppard's second check was never used by either Sevland or Sestito to purchase materials or supplies for Eppard's home, except for some plywood. The Superior Court specifically found that:
Eppard v. Sevland, No. 86-1111, slip op. at 2 and 5 (Superior Court August 26, 1987) (emphasis supplied).
The Superior Court also made findings as to the damages suffered by Eppard. Additionally, in its rulings of law, the Superior Court noted: "three factors place the defendant's sic statements in the misrepresentation category: (1) the statements were, according to Eppard's testimony, responsive to a specific inquiry about the need for the advance; (2) the statements stated need for $9,616.00 to continue and finish this portion of the contract were false for the defendant virtually stopped work after the payment; and (3) . . . the money did not go to purchase materials and/or supplies as defendant said it would." Id. at 8-9.
On appeal, and upon consideration of a petition for rehearing, the Appeals Court affirmed in part and reversed in part the decision of the lower court. Specifically, the Appeals Court found "ample, if not overwhelming, evidentiary support and legal authority for most of the judge's detailed findings of fact and conclusions of law." Eppard v. Sevland, No. 89-P-338, slip op. at 1 (Appeals Court July 2, 1990), 28 Mass.App.Ct. 1124, 556 N.E.2d 1066 (table). However, the Appeals Court determined that the damages were erroneously calculated.
The issue before this Court is whether Eppard's state court judgment should be given preclusive effect in Sestito's bankruptcy proceeding. Courts will deny relitigation of a particular issue if the following four conditions are met: "1) the issue sought to be precluded must be the same as that involved in the prior action; 2) that issue must have been actually litigated; 3) it must have been determined by a valid and final judgment; and 4) the determination must have been essential to the judgment." In re Picard, 133 B.R. 1 (Bankr.D.Me.1991), quoting In re Ross, 602 F.2d 604, 608 (3d Cir.1979). See also, In re Dubian, 77 B.R. 332, 337 (Bankr.D.Mass. 1987).
The Court must compare the state and bankruptcy law requirements to sustain a claim for misrepresentation in order to determine whether the four conditions set forth above have been established. The burden of proof, however, is the same in both the state and bankruptcy courts, namely preponderance of the evidence. See Grogan v. Garner, ___ U.S. ___, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
Under Massachusetts law, "to sustain a claim of misrepresentation, a plaintiff must show a false statement of material fact made to induce the plaintiff to act, together with reliance on the false statement by the plaintiff to the plaintiff's detriment." Zimmerman v. Kent, 31 Mass.App.Ct. 72, 77, 575 N.E.2d 70 (1991). See e.g., Danca v. Taunton Savings Bank, 385 Mass. 1, 8, 429 N.E.2d 1129 (1982); Powell v. Rasmussen, 355 Mass. 117, 118-19, 243 N.E.2d 167 (1969); Acushnet Federal Credit Union v. Roderick, 26 Mass.App.Ct. 604, 605 and n. 1, 530 N.E.2d 1243 (1988). Under state law, "where the plaintiff proves `a statement made, as of the party's own knowledge, which is false, provided the thing stated is not merely a matter of opinion, estimate, or judgment, but is susceptible of actual knowledge . . . it is not necessary to make any further proof of actual intent to deceive.'" Kent, supra, at 77, 575 N.E.2d 70, quoting Snyder v. Sperry & Hutchinson Co., 368 Mass. 433, 444, 333 N.E.2d 421 (1975).
Section 523(a)(2)(A) of the Bankruptcy Code provides in pertinent part:
11 U.S.C. § 523(a)(2)(A). In order to establish the nondischargeability of a debt under 523(a)(2)(A) of the Bankruptcy Code, a plaintiff must prove the following five elements: 1) a false statement made by the debtor; 2) such representation was known to be false at the time it was made; 3) such representation was made with the intention and purpose of deceiving the creditor; 4) such representation was reasonably relied on by the creditor; and 5) the creditor sustained loss or damage as a proximal result of such false representation....
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