Pearson v. Suiter (In re Suiter), Case No. 15-00083

• Decision Date: 15 November 2016
• Docket Number: Case No. 15-00083,Adv. Pro. No. 15-90020
• Parties: In re MAX BRADFORD SUITER, Debtor. THOMAS C. PEARSON, Plaintiff, v. MAX BRADFORD SUITER, et al., Defendants.
• Court: United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Hawaii

In re MAX BRADFORD SUITER, Debtor.

THOMAS C. PEARSON, Plaintiff,
v.
MAX BRADFORD SUITER, et al., Defendants.

Case No. 15-00083
Adv. Pro. No. 15-90020

UNITED STATES BANKRUPTCY COURT DISTRICT OF HAWAII

November 15, 2016

Chapter 7

PROPOSED FINDINGS AND RECOMMENDED PARTIAL JUDGMENT

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TABLE OF CONTENTS

I. BACKGROUND FACTS ...................................... 2

II. JURISDICTION AND VENUE ................................. 3

III. STANDARDS OF REVIEW .................................... 7

IV. DISCUSSION ............................................... 9

A. Motions to Dismiss Second Amended Complaint ................ 9

1. Suiter's personal liability .............................. 9
2. Abstention ....................................... 10
3. Avoidance claims .................................. 13
4. Alter ego claims ................................... 14
5. Section 727(a)(3) .................................. 14
6. Section 523(a)(4) .................................. 17
7. Section 523(a)(2)(B) ................................ 18

B. Motions to Dismiss Third Amended Complaint ................ 21

1. Suiter's and Canaan Construction's Motions to Dismiss Third Amended Complaint .................... 21

(a) UDAP and fraud claims ........................ 22
(b) Section 523(a)(2)(A) claims ..................... 25
(c) Section 727(a)(3) claims ........................ 26

2. Canaan Builders' Motion to Dismiss Third Amended Complaint ....................................... 27

(a) No liability .................................. 27
(b) Alter ego claims .............................. 28
(c) Civil conspiracy .............................. 28

C. Counterclaim and Third Party Complaint Against The Pearsons ... 29

1. Motions to Dismiss ................................. 30

(a) Judicial estoppel .............................. 30
(b) Void contract ................................ 32
(c) Tortious interference .......................... 34

2. Motion for Partial Summary Judgment on Count 4 of Counterclaim (Intentional Interference with Contract And Business Relations) ................................. 35

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(a) Intentional Interference with Contract ............. 36
(b) Intentional Interference with Prospective Business Advantage ................................... 38

D. Pearson's Motion for Partial Summary Judgment on Counts 3-5 (UDAP under Haw. Rev. Stat. Ch. 444) ...................... 40

E. Pearson's Motion for Partial Summary Judgment on Counts 2 and 3 of Counterclaim (Change Order 9) ..................... 46

1. Canaan Construction's Equitable Claims under Hawaii Law . 48
2. Change Order 9 in General .......................... 49

(a) Procedural Noncompliance ...................... 49
(b) Nonacceptance ............................... 50

3. Pearson's Specific Objections to Change Order 9 .......... 52

(a) "Free" Work ................................. 52
(b) Plumbing Fixtures ............................ 53
(c) Incomplete Work ............................. 54
(d) Waiver pursuant to Pay App 12 .................. 54
(e) Retaining Wall Waterproofing ................... 55

F. Motion for Partial Summary Judgment on UDAP Claims ........ 56

G. Pearson's Motion for Partial Summary Judgment on Counts 127 and 128 (Sections 727(a)(2)(A) and (a)(4)(A)) ................. 58

1. Section 727(a)(2)(A) ................................ 59
2. Section 727(a)(4)(A) ................................ 62

H. Pearson's Motion for Summary Judgment on Count 129 (Section 727(a)(3)) ............................................. 70

I. Motion for Partial Summary Judgment on Counts 128 & 129 of Third Amended Complaint (Sections 727(a)(3) and (A)(4)(A)) .... 72

J. Pearson's Motion for Partial Summary Judgment on Count 21 (The Window Claims) ................................... 77

K. Pearson's Motion for Partial Summary Judgment on Count 35 (The Cabinet Claims) .................................... 84

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L. Motion for Partial Summary Judgment on Count 33 of Third Amended Complaint (The PV Claims) ............................... 87

M. Motion for Partial Summary Judgment on Counts 47, 54, & 59 of Third Amended Complaint (The T&G, Gypboard, and Finish Carpentry Claims) ...................................... 89

N. Motion for Partial Summary Judgment on Counts 12 and 19 (The Stone Claims) ...................................... 90

V. CONCLUSION ............................................... 92

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PROPOSED FINDINGS AND RECOMMENDED PARTIAL JUDGMENT

This adversary proceeding arises out of a construction contract between Plaintiff Thomas C. Pearson, as owner, and Defendant Canaan Construction, Ltd. ("Canaan Construction"). Defendant Max Bradford Suiter ("Suiter") is the owner of Canaan Construction. Defendants Canaan Builders, LLC ("Canaan Builders"), 1122 Makepono Street, LLC ("1122 Makepono"), and Raymond T. Suiter ("R.T. Suiter") are affiliated with Suiter. Suiter and R.T. Suiter are brothers.

There has been extensive litigation activity in this case. Pearson's third amended complaint¹ contains 1,380 numbered paragraphs divided into 171 counts. Canaan Construction has filed a five-count counterclaim against Pearson and a similar five-count third party complaint against Julia Lin Pearson, Pearson's wife.² Canaan Construction has demanded a jury trial on all issues so triable.³ Suiter has objected to the proof of claim filed by Pearson,⁴ and the trial of that objection has been consolidated with this adversary proceeding.⁵

The parties have filed twenty-four dispositive motions. As is explained in more

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detail below, some of the motions address core proceedings in which the bankruptcy court can enter final judgment, and others relate to noncore proceedings where the bankruptcy court can only provide recommendations for the district court's de novo review. Adding to the complexity, the core and noncore proceedings share common factual questions. Therefore, this recommendation will be unusually lengthy.

I. BACKGROUND FACTS

Suiter is the president, sole officer, and principal responsible managing employee of Canaan Construction.⁶

Pearson entered into a contract dated September 17, 2012, with Canaan Construction to remodel and reconstruct of Pearson's home for $1,200,000.⁷

After construction began, disputes arose between the parties. Pearson and Canaan Construction accused each other of breaching the contract. I discuss these disputes in more detail below. Pearson ceased making payments and Canaan Construction stopped work.

On May 27, 2014, Pearson received a letter from Suiter explaining that Canaan Construction was in "some serious financial difficulties," that his brother R.T. Suiter and father Raymond C. Suiter had started Canaan Builders, a new construction

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company for which Suiter was going to work, and that Canaan Builders wanted to complete Pearson's project-for an additional $682,883.⁸

On January 22, 2015, Suiter filed a chapter 7 bankruptcy petition. This is his second trip to the bankruptcy court; he filed a chapter 7 petition in 2003 and received a discharge.⁹

Pearson claims that Canaan Construction breached the construction contract and is liable to him for the cost of completion and other damages. Pearson also claims that the defendants committed fraud, unfair and deceptive trade acts and practices, and other wrongs. Suiter argues that, to the contrary, Pearson breached the contract and Canaan Construction is entitled to recover the unpaid contract price plus change orders and other damages from Pearson.

II. JURISDICTION AND VENUE

There is no dispute that the court has personal and subject matter jurisdiction and venue is proper in this district.

In a "core proceeding," the bankruptcy court can enter final judgment, subject to ordinary appellate review.¹⁰ The following counts in the third amended complaint are "core proceedings":

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Count	Description
12	Nondischargeability under § 523(a)(2)(A) as to the "stone floor" claims
19	Nondischargeability under § 523(a)(2)(A) as to the "other stone" claims
26	Nondischargeability under § 523(a)(2)(A) as to the "windows" claims
33	Nondischargeability under § 523(a)(2)(A) as to the "PV" claims
40	Nondischargeability under § 523(a)(2)(A) as to the "cabinets" claims
47	Nondischargeability under § 523(a)(2)(A) as to the "T&G" claims
54	Nondischargeability under § 523(a)(2)(A) as to the "gypboard" claims
59	Nondischargeability under § 523(a)(2)(A) as to the "finished carpentry"; claims
66	Nondischargeability under § 523(a)(2)(A) as to the "gutters" claims
73	Nondischargeability under § 523(a)(2)(A) as to the "wood doors" claims
80	Nondischargeability under § 523(a)(2)(A) as to the "garage door" claims
87	Nondischargeability under § 523(a)(2)(A) as to the "furniture" claims
94	Nondischargeability under § 523(a)(2)(A) as to the "lights" claims
101	Nondischargeability under § 523(a)(2)(A) as to the "concrete" claims
108	Nondischargeability under § 523(a)(2)(A) as to the "AC" claims
115	Nondischargeability under § 523(a)(2)(A) as to the "plumbing" claims
118	Nondischargeability under § 523(a)(2)(A) as to the "nondisclosure"; claims
124	Nondischargeability under § 523(a)(2)(A) as to the "UDAP" claims
127	Denial of discharge under § 727(a)(2)(A)
128	Denial of discharge under § 727(a)(4)(A)
129	Denial of discharge under § 727(a)(3)
136	Nondischargeability under § 523(a)(2)(A) as to the "mirrors" claims

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143	Nondischargeability under § 523(a)(2)(A) as to the "hardwood floors"; claims
150	Nondischargeability under § 523(a)(2)(A) as to the "glass railings" claims
157	Nondischargeability under § 523(a)(2)(A) as to the "electrical" claims
164	Nondischargeability under § 523(a)(2)(A) as to the "Change Order 7"; claims
167	Nondischargeability under § 523(a)(2)(A) as to the "initial deposit"; claims

In addition, all of Pearson's claims against Suiter are encompassed in the proof of claim that Pearson...