Martin v. Mowery (In re Mowery)

Citation591 B.R. 1
Decision Date20 September 2018
Docket NumberBankruptcy Case No. 17-01078-JMM, Adv. Proceeding No. 17-06025-JMM,Adv. Proceeding No. 17-06024-JMM
Parties IN RE: Andrew Shane MOWERY and Jena Marie Mowery, Debtors. Katrina Martin, Plaintiff, v. Andrew Shane Mowery, Defendant. Jamie Voit, Plaintiff, v. Andrew Shane Mowery, Defendant.
CourtUnited States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Idaho

Nolan Roy Sorensen, CAPSTONE LAW, Tempe, Arizona, Attorney for Defendant.

Kirk Houston, HOLLAND & HART LLP, Boise, Idaho, Attorney for Plaintiffs.

Daniel J. Cohn, BOWLES RICE, Charleston, West Virginia, Attorney for Plaintiffs.

MEMORANDUM OF DECISION

JOSEPH M. MEIER, U.S. BANKRUPTCY JUDGE

Introduction

Before the Court is a motion for partial summary judgment filed by Plaintiffs Jamie R. Voit and Katrina Martin (collectively "Plaintiffs") against defendant Andrew Shane Mowery ("Defendant"), who objected to the motion. The matter was set for hearing on August 8, 2018, at which time the parties argued their respective positions and following the hearing, the motion was taken under advisement.

The Court has considered the briefing, affidavits, and oral argument presented, as well as the applicable law, and now issues the following decision which resolves the motion. Fed. R. Bankr. P. 7052 ; 9014.

Undisputed Facts

In 2015, Defendant was doing business under the name "Mowery Scandinavian Concepts." Aff. of Katrina Martin, Dkt. No. 11-4 at ¶ 3. In the summer of that year, Plaintiff Katrina Martin ("Martin") hired Defendant to demolish an existing structure on her property in West Virginia, and to replace it with a log cabin. Id. They orally agreed that $90,008 would include the demolition and construction of the cabin with a deck. Id. Defendant began work on the project, and Martin paid him a total of $93,988. Id. at ¶ 4. Ultimately, Martin and Defendant ended their arrangement, leaving the cabin unfinished and some of the completed work not done to Martin's satisfaction. Id. at ¶¶ 11-13. On June 12, 2017, Martin filed a civil action against Defendant in West Virginia, alleging fraud and/or fraudulent inducement. Id. at ¶ 15.

In August 2015, Plaintiff Jamie R. Voit ("Voit") hired Defendant to construct a log home on property she owned according to plans she provided. Aff. of Jamie R. Voit, Dkt. No. 11-6 at ¶ 3. The agreed upon price was $250,000 to $265,000. Voit paid Defendant a total of $122,000 during the course of construction. Id. at ¶ 5. On September 8, 2016, a stop work order was issued by the county building authority because it was discovered that Defendant did not have a valid contractor's license. Id. at ¶ 10. Voit terminated the contract with Defendant on November 14, 2016, and unsuccessfully demanded return of the funds paid. Id. at ¶¶ 17-18. On March 28, 2017, Voit filed a civil action against Defendant in West Virginia, alleging fraud and/or fraudulent inducement. Id. at ¶¶ 19-20.

On August 16, 2017, Defendant and his wife, Jena Marie Mowery, filed a chapter 71 bankruptcy petition, staying the civil actions. BK Dkt. No. 1. Discharge was entered in favor of the debtors on December 6, 2017. BK Dkt. No. 56. On November 13, 2017, Martin and Voit commenced individual adversary proceedings against Defendant, alleging in Count I of each adversary complaint that he represented that he was a licensed contractor, knowing the same to be false, and that Voit and Martin each relied on that representation in entering into the respective agreements and paying him a sum to do the work. By accepting the money and failing to complete the project or return the money, Plaintiffs allege Debtor has committed fraud and they have been damaged. Both complaints seek to have Plaintiffs' respective debts declared nondischargeable under 11 U.S.C. § 523(a)(2)(A).

Sometime in 2017, Defendant was charged with two felonies2 in West Virginia for the crime of obtaining money or property by false pretenses, pursuant to West Virginia Code § 61-3-24. Dkt. No. 11-5, Ex. A. On March 7, 2018, Defendant plead guilty to two misdemeanors, one representing Voit's case, and the other Martin's. Id. at Ex. B.

On July 9, 2018, Plaintiffs filed their joint summary judgment motion, arguing that the guilty pleas involve the same conduct as alleged in the adversary proceedings before this Court, and therefore the doctrine of issue preclusion should bar Defendant from relitigating the fraudulent aspect of Defendant's conduct.

Summary Judgment Standard

Summary judgment is properly granted when no genuine and disputed issues of material fact exist, and, when viewing the evidence most favorably to the non-moving party, the movant is entitled to judgment as a matter of law. Civil Rule 56, incorporated by Rule 7056; Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Far Out Prods., Inc. v. Oskar , 247 F.3d 986, 992 (9th Cir. 2001). In resolving a motion for summary judgment, the Court does not weigh the evidence; rather it determines only whether a material factual dispute remains for trial. Covey v. Hollydale Mobilehome Estates , 116 F.3d 830, 834 (9th Cir. 1997). An issue is "genuine" if there is sufficient evidence for a reasonable finder of fact to find in favor of the non-moving party, and a fact is "material" if it might affect the outcome of the case. Far Out Prods ., 247 F.3d at 992 (citing Anderson v. Liberty Lobby, Inc ., 477 U.S. 242, 248–49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ).

The initial burden of showing there is no genuine issue of material fact rests on the moving party. Esposito v. Noyes (In re Lake Country Invs.) , 255 B.R. 588, 597 (Bankr. D. Idaho 2000) (citing Margolis v. Ryan , 140 F.3d 850, 852 (9th Cir. 1998) ). If the non-moving party bears the ultimate burden of proof on an element at trial, that party must make a showing sufficient to establish the existence of that element in order to survive a motion for summary judgment. Id. (citing Celotex, 477 U.S. at 322–23, 106 S.Ct. 2548 ).

Analysis and Disposition

In general, the Court construes exceptions to discharge strictly against the objecting creditor and in favor of the debtor. United States v. Tucker (In re Tucker), 539 B.R. 861, 865 (Bankr. D. Idaho 2015) (citing Spokane Ry. Credit Union v. Endicott (In re Endicott), 254 B.R. 471, 475 n.5, 00.4 I.B.C.R. 199, 200 (Bankr. D. Idaho 2000) (citing Snoke v. Riso (In re Riso) , 978 F.2d 1151, 1154 (9th Cir. 1992) ) ). Moreover, while a fresh start is a central purpose of bankruptcy, such belongs only to the honest but unfortunate debtor, and "a dishonest debtor, on the other hand, will not benefit from his wrongdoing." Apte v. Japra (In re Apte) , 96 F.3d 1319, 1322 (9th Cir. 1996) (citing Grogan v. Garner , 498 U.S. 279, 286–87, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) ).

Plaintiffs seek summary judgment on Count I of each complaint. In order to meet the required elements of § 523(a)(2)(A), Plaintiffs rely on the two guilty pleas entered into in West Virginia, in combination with the doctrine of issue preclusion. They contend that because Defendant pled guilty to obtaining the money by fraud and false pretenses in West Virginia, the issue of fraudulent conduct concerning the Voit and Martin construction projects has already been adjudicated, and seek summary judgment on their § 523(a)(2)(A) claims.

In response, Defendant contends first that Plaintiffs utilized Idaho preclusion law in their briefing rather than that of West Virginia, and second, that the elements of the larceny statute in West Virginia to which he pled included a property value of less than $1,000, and thus the pleas establish the value of the claims as less than $1,000 each for nondischargeability purposes in this Court. Defendant does not, apparently, argue that issue preclusion is not applicable here to establish fraud. Nevertheless, the Court will consider its applicability.

1. Applicability of Idaho preclusion law

Defendant is correct that the preclusion law of West Virginia is applicable here. This is because in determining the preclusive effect of a state court judgment, federal courts must look to the law of the state in which the judgment was entered. Pike v. Hester, 891 F.3d 1131, 1138 (9th Cir. 2018) ; Dials v. HSBC Bank USA, N.A. (In re Dials) , 575 B.R. 137, 147–48 (Bankr. S.D. W. Va. 2017) (citing Heckert v. Dotson (In re Heckert) , 272 F.3d 253, 257 (4th Cir. 2001) ("A federal court, as a matter of full faith and credit, under 28 U.S.C. § 1738, must give a state court judgment the same preclusive effect ‘as the courts of such State’ would give.") ). Thus, this Court must consider West Virginia law on issue preclusion.

2. Issue preclusion under West Virginia law

Issue preclusion, sometimes called collateral estoppel, is designed to foreclose relitigation of issues in a subsequent action when they have already been litigated in an earlier suit, even though there may be a difference in the cause of action between the parties of the first and second suit. Holloman v. Nationwide Mut. Ins. Co., 217 W.Va. 269, 617 S.E.2d 816, 821 (2005) (citing Conley v. Spillers , 171 W.Va. 584, 301 S.E.2d 216, 220 (1983) ). Using issue preclusion offensively is generally disfavored in West Virginia, and rests in the discretion of the trial court. Holloman , 617 S.E.2d at 822 (citing Tri-State Asphalt Prods., Inc. v. Dravo Corp. , 186 W.Va. 227, 412 S.E.2d 225, 228-29 (1991) ; Conley , 301 S.E.2d at 224 ) ).

In West Virginia, issue preclusion will bar litigation of an issue if four conditions are met: (1) The issue previously decided is identical to the one presented in the action in question; (2) there is a final adjudication on the merits of the prior action; (3) the party against whom the doctrine is invoked was a party or in privity with a party to a prior action; and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action. Holloman, 617 S.E.2d at 821 (quoting State v. Miller , 194 W.Va. 3, 459 S.E.2d 114, 120 (1995) ). The Court will...

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