Silvestri Homes Wny, LLC v. Jones (In re Jones)
| Decision Date | 19 August 2019 |
| Docket Number | Case No. 17-11233-TPA,Adversary No. 18-01011-TPA |
| Citation | 604 B.R. 443 |
| Parties | IN RE: Christopher JONES, Debtor Silvestri Homes WNY, LLC, Plaintiff v. Christopher Jones, Defendant |
| Court | U.S. Bankruptcy Court — Western District of Pennsylvania |
Helen Ward, Esq., Pittsburgh, Counsel for Silvestri Homes WNY, LLC
Lawrence Willis, Esq., Pittsburgh, Counsel for Christopher Jones, Debtor
This is an action by Plaintiff Silvestri Homes WNY, LLC ("Silvestri Homes") seeking to have its claim against the Debtor, Christopher Jones ("Jones") found to be excepted from discharge in this bankruptcy. The claim in question arises from an ill-fated home improvement contract that was entered into by Silvestri Homes and Jones Contracting, LLC ("Jones Contracting"), an entity owned by and formerly operated by Jones, its principal.
Silvestri Homes takes the position that its claim is non-dischargeable under 11 U.S.C. §§ 523(a)(2), (4) , or (6) . The case was tried on February 26, 2019. Post trial briefs have been filed, final arguments presented and the time for filing post argument supplemental briefs has concluded, therefore the matter is ripe for decision. For the reasons that follow, the Court will find in favor of Silvestri Homes and hold that Silvestri Homes has a claim against Jones in the amount of $23,157.91 that is excepted from discharge pursuant to 11 U.S.C. § 523(a)(4) .1
Silvestri Homes is a Nevada limited liability company that is owned by an individual named Jonathan Silvestri ("Silvestri") who resides in the Buffalo, New York area. Silvestri had been a banker for about ten years but was laid off from his job. Looking for an alternative way to make a living, Silvestri and his wife formed Silvestri Homes in late 2016 for the purpose of "flipping" homes. As will be familiar to viewers of many reality-based cable television shows, flipping involves buying a home, repairing or remodeling it, and then re-selling it with the hope of making a profit. Silvestri's plan was to engage the services of contractors to do the bulk of the work on the houses that Silvestri Homes would be purchasing to flip and thereby realize a worthwhile profit on the transaction.
Defendant/Debtor Christopher Jones is a resident of Erie, Pennsylvania, which is located approximately 90 miles from Buffalo. Jones, who has been in the home contracting business for over 20 years in various capacities, formed Jones Contracting in August 2016 as a Pennsylvania limited liability company and is the sole member and manager thereof. Jones Contracting was in the business of providing home improvement services as a general contractor. Simultaneously with the formation of Jones Contracting, Jones also registered "Michael Jones" as a fictitious name for himself and used that pseudonym in forming Jones Contracting.
Silvestri Homes began operations in late 2016, with Silvestri scouting for prospective properties that would be good flipping opportunities. During that process, Silvestri Homes and Jones Contracting, and the two principals, Silvestri and Jones individually, became acquainted with each other through a web site utilized by Silvestri to locate contractors to do work for Silvestri Homes. Silvestri and Jones met and discussed two properties that Silvestri had in mind for the first flipping project for Silvestri Homes.
Jones toured both properties and gave Silvestri proposals as to both. As a result of this meeting and discussion, Silvestri settled on a residential dwelling located at 185 LeHavre Drive, Buffalo, N.Y. (hereinafter, "the Property") as the initial house to be purchased by Silvestri Homes. The Property was in need of considerable work, and Silvestri inquired about Jones Contracting's experience and capabilities to determine whether it would be able to do the job. He also raised concerns about Jones Contracting being able to undertake the work given the distance involved, and about how he could be assured that Jones Contracting would not just "run off" with any money it was paid and not perform the work. Jones informed Silvestri that Pennsylvania law required home contractors such as Jones Contracting to be bonded.
Silvestri was apparently satisfied with the responses to his questions because on January 26, 2017, Silvestri Homes and Jones Contracting entered into a fixed price contract for "whole home renovation" work on the Property. The contract was prepared by Jones using software he had acquired about a decade earlier. Attached to the main contract agreement were a number of schedules setting forth the work that was to be done, which was extensive, including new siding, new roof, new windows, basement remodel with new bathroom, removal of an addition, concrete driveway, and other things.
The contract provided for a total price of $32,895, to be paid via an initial deposit of $10,899 due at signing, a "special order deposit" of $10,000 due upon commencement of the work, six separate progress payments of $1,496 due weekly after the commencement of the work, and a final payment of $3,020 due upon completion of the work. The contract provided for an approximate start date of February 9, 2017, and an approximate completion date of March 29, 2017, with an outside date of two months from the start date to complete. The contract also acknowledged, however, that change orders, unusual weather, or owner-related delays could delay completion. Silvestri Homes made the required initial $10,899 deposit at the time the contract was signed.
There was an initial impediment to starting the work due to a death in Jones' family, and with the consent of Silvestri, the first day of work was extended to February 15, 2017, at which time Silvestri Homes paid Jones Contracting an additional $10,000 per the contract. Jones Contracting had a 3-man crew doing work on the project, consisting of Jones himself and employees Jeremy Jones and Chris Slater.
The demolition of the addition was among the first items of work performed. In the course of doing so it was discovered that there was suspected asbestos siding on the house underneath the outer layer of siding. Under the terms of the contract it was the responsibility of Silvestri Homes to address asbestos removal. Despite the suspected asbestos, the demolition of the addition was completed, but whereas previously the plan by Jones Contracting had been to first do the outside work on the Property, it was jointly decided to shift to doing inside work first to allow the asbestos siding on the remainder of the house to first be removed.
Jones Contracting worked on the project through April 6, 2017. Throughout this period it never worked a full-time schedule on the project, instead generally working 2 or 3 days per week. Throughout this time period Silvestri Homes made all of the required progress payments to Jones Contracting. On April 17, 2017, after not having shown up to work on the project for 11 days, Jones sent an e-mail to Silvestri explaining that he was "double-booked" and had another job that had to be completed before he could return to do any further work on the Property. Silvestri responded with an e-mail of his own expressing dissatisfaction with the slow pace of work and proposing that either the contract be revised to implement a strict schedule for completion of the remaining work or that the Parties reach an agreement to end the contract so Silvestri Homes could hire someone else to complete the work. Jones did not respond to that proposal, but on April 18th he returned to the Property and retrieved many of his tools for use on the other job.
During the next several weeks Silvestri made numerous attempts to contact Jones through e-mail and phone calls or texts, but Jones did not respond. On May 8th Silvestri sent an e-mail to Jones indicating that he would be making a demand for arbitration pursuant to the contract. That finally drew a response from Jones in which he admitted being responsible for delay on the project, but also blamed Silvestri for some of the delay, a contention to which Silvestri vigorously responded in disagreement. Silvestri Homes filed and served a "Statement of Claim" against both Jones Contracting and Jones individually on May 23, 2017, with the American Arbitration Association, alleging claims of breach of contract, breach of the covenant of good faith and fair dealing, and fraudulent misrepresentation. Upon completion of the arbitration, an arbitration award was entered in favor of Silvestri Homes, as discussed further below.
Photographic and other evidence presented at the trial showed that the work on the Property was very far from being completed at the time Jones Contracting ceased work on April 6th. Aside from the demolition of the addition, none of the outside work such as roofing and siding was performed. Considerable work was done inside by Jones Contracting, but a significant portion of the work remained unfinished. The record is clear that in order to complete the work on the Property, Silvestri Homes would have had to incur additional expense.
Before turning to the main issues raised in the case, the Court will first revisit a matter previously addressed, that being the effect in this case, if any, of the arbitration proceeding that Silvestri Homes initiated in May, 2017. Earlier in this adversary Silvestri Homes filed a motion for summary judgment based on the purported collateral estoppel effect of the arbitration award. In an order dated December 20, 2018 denying that motion for summary judgment the Court explained why it would not give such effect to the award. See , Doc. No. 59. Rather than just incorporate that prior order here, the Court believes it will be more helpful to briefly recap in this Memorandum Opinion the relevant procedural history of the arbitration proceeding and reiterate its reasoning for rejecting Silvestri Homes' argument that collateral estoppel applies.
Following the filing of the...
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