IN RE WARD
Citation | 425 B.R. 507 |
Decision Date | 15 March 2010 |
Docket Number | Bankruptcy No. 08-26106-PP.,Adversary No. 08-2240-PP. |
Parties | In re Gordon WARD and Lisa Marie Ward, Debtor. Michael G. Levine and Jaime D. Levine, Plaintiffs, v. Gordon Ward, Defendant. |
Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Eastern District of Wisconsin |
COPYRIGHT MATERIAL OMITTED
Rollie R. Hanson, West Allis, WI, for Plaintiffs.
Robert K. Steuer, Milwaukee, WI, Robert M. Waud, Schober & Radtke, S.C., New Berlin, WI, for Defendant.
The plaintiffs, who purchased a home from the defendant in 2007, allege that the defendant incurred a $20,000 debt to them when he (a) induced them to give him the $20,000 through false representations that his company would use that money to perform post-purchase construction work on the property, and (2) committed fraud and defalcation in a fiduciary capacity when he used the money for something other than the construction work, in violation of Wisconsin's theft-by-contractor statute. The Court finds that while the plaintiffs did not prove that the defendant made false representations, they did prove that he committed defalcation in a fiduciary capacity when he used the $20,000 to pay the closing costs on the property. The Court therefore finds in favor of the plaintiffs, and finds that the defendant owes a $20,000 debt to the plaintiffs which is nondischargeable. It orders the parties to submit argument and support regarding the plaintiffs' request for punitive damages, costs and fees no later than the close of business on April 2, 2010.
On August 17, 2007, Michael and Jaime Levine filed suit in Ozaukee County Circuit Court, naming as defendants Ward Builders and its president, Gordon Ward. Michael Levine, et al. v. Gordon Ward, et al., docket no. 2007-CV-000428, Ozaukee County Circuit Court. The basis for the suit was a contract dispute.
Almost six months later, on February 2, 2008, Ward Builders, Inc. filed a Chapter 7 petition in the bankruptcy court for the Eastern District of Wisconsin. Docket no. 08-20906-PP. On June 4, 2008, the defendant (Ward Builders' president, Gordon Ward) followed suit, filing a joint Chapter 7 petition with his wife, Lisa Marie Ward, in the same district. Docket no. 08-26106-PP.
The plaintiffs subsequently filed this adversary proceeding, naming as the original defendants Ward Builders and Gordon Ward. Docket no. 1. At a hearing on March 25, 2009, the parties orally stipulated to the dismissal of defendant Ward Builders, docket no. 11, and the Court issued an order dismissing Ward Builders from the case on March 26, 2009, docket no. 12.
In the fall of 2006, plaintiffs Michael and Jamie Levine began negotiating with Ward Builders, Inc. to purchase a house that Ward Builders had constructed at 1420 W. Stillwater Court, Mequon, Wisconsin ("the Property"). Docket no. 14, Plaintiffs' Exhibit 1, Defendant's Exhibit 101. The negotiations were protracted, lasting through the fall of 2006 and into the winter of 2007. In particular, the plaintiffs wanted Ward Builders to make certain changes to the Property, including installing some egress windows on the lower level, building a formal dining room, and converting one of the garage stalls into a living space that would include a nursery for the baby the couple expected. Id. at Plaintiffs' Exhibit 1. Much of the back-and-forth that took place during the negotiations had to do with this additional work—how much it would cost, whether those costs would be part of the overall purchase price of the property, when Ward Builders could do the work, etc. Id. at Plaintiffs' Exhibits 1-3, Defendant's Exhibit 101.
In late November 2006, the plaintiffs made an offer on the Property. Ward, through its agent, responded that the plaintiffs would have to agree to close the sale before Ward would start the remodeling. Ward indicated that if the plaintiffs were not willing to agree to that requirement, the sale could not take place. Id. at Plaintiffs' Exhibit 4. The negotiations continued, with the parties discussing a separate contract for the remodeling. See, e.g., Id. at Plaintiffs' Exhibit 5.
On December 26, 2006, the plaintiffs signed an offer to purchase the Property for $731,500, with a $5,000 earnest money payment. Id. at Plaintiffs' Exhibit 8. The offer to purchase provided that the closing would take place no later than February 15, 2007. Id. There were addenda attached to the offer, one of which was a December 26, 2006 summary of the remodeling that was to take place. Id.
The summary described the conversion of the garage into a nursery, the installation of hardwood floors in various parts of the house, the installation of egress windows and the construction of the formal dining room. Id. At the end of the summary was a breakdown of costs. This breakdown reflected a "list price with no credit" of $709,900, along with additional costs of $17,000 for the construction of the nursery, $16,400 for the installation of the hardwood flooring, $6,000 for installation of the egress windows, and $25,000 for the construction of the dining room addition. Id. on page 3 of 3. If one adds up those amounts, one comes up with a total of $774,300. The cost summary on the addendum, however, listed the "home purchase with improvements contract price" as $731,500—$42,800 less than the sum of the listed costs. Id. The addendum said that the $731,500 was "due at closing." In addition, the addendum tacked on $25,000 for "construction (dining room w/crawl space) contract," for a "total of $756,500.00." Id.
At the end of the addendum, there was a paragraph indicating that the plaintiffs and Ward Builders would agree on the specific construction terms within ten (10) days of offer acceptance, that Ward Builders would begin construction upon the plaintiffs paying a nonrefundable $35,000 deposit, and that the $35,000 payment would be credited to the plaintiffs-buyers upon closing. Id.
The agent for Ward Builders signed the offer to purchase, indicating acceptance of the offer, on December 29, 2006. Id. On January 8, 2007, the plaintiffs wrote a $35,000 check payable to Ward Builders, Inc., with the words "earnest money 1420 W. Stillwater" on the "memo" line. Id. at Plaintiffs' Exhibit 9.
On February 20, 2007, the parties executed an amended offer to purchase. Id. at Plaintiffs' Exhibit 1. This amended offer changed the closing date from February 15, 2007 to February 28, 2007. It also changed the purchase price, from $731,500 to $706,044.00. The amended offer indicated that the $706,044.00 included "the base price of $692,100.00 without carpet plus $13,944.00 for maple hardwood flooring of the same caliber and quality as used in the existing dwelling," to be installed in various areas in the house. The amended offer also stipulated that Id.
On February 19, 2007, Ward Builders drafted a document entitled "Building Contract." Id. at Plaintiffs' Exhibit 12. This was a six-page document that called for the "construction of a New Formal Dining Room to be added onto an existing Single Family Residence," as well as the construction of "additional Living Space within an existing Garage Stall" and "installation of Egress Windows to an existing Lower Level Foundation." Id. at p. 1. For the most part, this new "Building Contract" provided for Ward Builders to do all of the things it had agreed to do in the original offer to purchase, but under separate contract.
The "Building Contract" provided that Ward Builders would complete all of the contracted-for work by June 30, 2007. Id. at p. 2. The price of the entire construction contract was $48,000, and the contract provided for the plaintiffs to pay $18,000 at the time of the signing of the contract "before construction begins as a deposit and part of the purchase price of this project." Id. Defendant Gordon Ward signed the "Building Contract;" there is no date next to his signature. The plaintiffs each signed the "Building Contract" on February 20, 2007. Id. at p. 6.
On the same date—February 20, 2007— defendant Gordon Ward and plaintiff Michael Levine signed a document entitled "Construction of New Formal Dining Room," which laid out in detail the specifications for the new dining room, and which indicated that Ward Builders would start construction around April 1, 2007 and would complete it with 90 days of the start. Id. at Plaintiffs' Exhibit 13. On that same date, defendant Gordon Ward signed a "Receipt of Payment," which indicated that the plaintiffs had provided Ward Builders with "a down payment in the amount of $20,000.00 (Twenty Thousand dollars) towards the construction of a Nursery Suite, Formal Dining Room and installation of Egress Windows located at 1420 W. Stillwater Court, Mequon, WI 53092, per Building Contract dated February 19, 2007."
Plaintiffs' Exhibit 15 shows that Michael Levine obtained a cashier's check dated February 28, 2007—the date of closing specified in the amended offer to purchase—in the amount of $20,000, made payable to Ward Builders, Inc. And Plaintiffs' Exhibit 16 shows that on that same date, the sum of $20,000 was deposited into Ward Builders' account at AnchorBank.
The parties closed the sale of the Property on February 28, 2007, as indicated in the Seller's Closing Statement and Rider. Id. at Plaintiffs' Exhibit 17. The closing statement shows, however, that while the plaintiffs owed the purchase price of $706,071.20 on the closing date, Ward Builders owed $733,439.99 to close the sale. Id. There were a number of closing costs for which Ward Builders was responsible—the seller's commission, some taxes and title...
To continue reading
Request your trial-
Handler v. Moore (In re Moore)
...constitute false representations for purpose of § 523(a)(2)(A) unless the debtors never intended to perform. Levine v. Ward (In re Ward ), 425 B.R. 507, 516 (Bankr. E.D. Wisc. 2010). ‘A promise constitutes a false representation under § 523(a)(2)(A) only if the debtor(s) made the promise wi......
-
In re Carlson
...with his reasoning in Ganther Constr., Inc. v. Ward (In re Ward), 417 B.R. 582, 592 (Bankr.E.D.Wis.2009), and Levine v. Ward (In re Ward), 425 B.R. 507, 526 (Bankr.E.D.Wis.2010). Judge Utschig was faced with the issue when the debtor argued he was merely a negligent member of the prime cont......
-
In Re Stuart M. Hanson, Bankruptcy No. 09 B 04820.
...to pay for another, without more, does not establish that a debtor acted with an intent to deceive). Relying on Levine v. Ward (In re Ward), 425 B.R. 507 (Bankr.E.D.Wis.2010), the Debtor argues that he acted at all times in furtherance of the goal of completing the construction project and ......
-
Szafron v. Wielogosinski (In re Wielogosinski)
...the time the proponent made it, he knew full well that he had no intention of performing the future act." Levine v. Ward (In re Ward) , 425 B.R. 507, 516 (Bankr. E.D. Wis. 2010). Szafron presented no such proof of any intent to deceive in March 2006.Moreover, Wielogosinski made monthly inte......