Webb v. Isaacson (In re Isaacson)

• Decision Date: 22 August 2012
• Docket Number: Adversary No. 11–05044–SCS.,Bankruptcy No. 11–51273–SCS.
• Citation: 478 B.R. 763
• Court: U.S. Bankruptcy Court — Eastern District of Virginia
• Parties: In re Steven ISAACSON, Sr., Michelle Isaacson, Debtors. Regina Webb, Plaintiff v. Steven Isaacson, Sr., Michelle Isaacson, Defendants.

478 B.R. 763

In re Steven ISAACSON, Sr., Michelle Isaacson, Debtors.

Regina Webb, Plaintiff

v.Steven Isaacson, Sr., Michelle Isaacson, Defendants.

Bankruptcy No. 11–51273–SCS.

Adversary No. 11–05044–SCS.

United States Bankruptcy Court,

E.D. Virginia,

Newport News Division.

Aug. 22, 2012.

Shanna C. Harris, John W. Lee, P.C., Kim A. Lewis, Hampton, VA, for Steven Isaacson, Sr., and Michelle Isaacson.

MEMORANDUM OPINION

STEPHEN C. ST. JOHN, Bankruptcy Judge.

This matter came on for trial upon the Complaint filed on October 11, 2011, by the Plaintiff, Regina Webb (“Ms. Webb”), an unrepresented creditor, against the Defendants, Steven Isaacson, Sr., and Michelle Isaacson (“Mr. Isaacson” and “Mrs. Isaacson,” respectively, who are sometimes collectively referred to as “the Debtors” or “the Isaacsons”), who are also unrepresented in this adversary proceeding. At the conclusion of the trial held on March 23, 2012, the Court took this matter under advisement. The Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 157(b) and 1334(b). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409(a). This Memorandum Opinion constitutes the findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52, as incorporated into the Federal Rules of Bankruptcy Procedure by Rule 7052.

I. The Complaint

In the Complaint, Ms. Webb recites numerous allegations and attaches various exhibits in support of her assertions that the Court should deny the dischargeability of the indebtedness owed to her by Mr. Isaacson (“Steven Isaacson Debt”) and deny the Debtors' discharge. This adversary proceeding has been highly contentious, pitting an unrepresented creditor against unrepresented debtors.¹ The dispute arises out of a contract whereby Mr. Isaacson was to construct several cabinets for Ms. Webb's residence. See Compl. ¶ 14. Ms. Webb terminated the contract after Mr. Isaacson failed to perform according to its terms and demanded return of the contract price to no avail. Id.; see also id. ¶ 47. She subsequently obtained a judgment against Mr. Isaacson in state court. See Compl. Exh. 4, Warrant in Debt.

The Complaint expressly sets forth two counts. Count I of the Complaint alleges that the Steven Isaacson Debt is non-dischargeable due to “Defalcation, Deceit, Misconduct, and Dishonesty While Acting in a Fiduciary Capacity.” Although the Plaintiff does not cite the relevant statutory section in the title or body of Count I, this count arises under 11 U.S.C. § 523(a)(4). Count II of the Complaint alleges that the Steven Isaacson Debt is non-dischargeable due to “Fraud,” pursuant to 11 U.S.C. § 523(a)(2)(A).

In Count I, Ms. Webb alleges she placed “complete confidence and trust” in the Debtors, which she contends renders them fiduciaries.² Compl. ¶ 43. As to Mr. Isaacson specifically, Ms. Webb asserts that he had the “power and obligation” to act for or on her behalf. Id. at ¶ 44. She further alleges that Mr. Isaacson, while acting as a fiduciary, received $4,105.00 from her and retained such funds for his benefit and to her detriment. Id. ¶¶ 47–48. Ms. Webb makes similar allegations elsewhere in the Complaint. See id. ¶¶ 7, 10–11, 60.

In Count II, Ms. Webb makes numerous vague assertions but offers no factual allegations in support of her claim for relief pursuant to Section 523(a)(2)(A). However, Ms. Webb includes the following general allegations elsewhere in the Complaint, which appear to relate to Count II: 1) Mr. Isaacson “would not honor the contract nor would he complete the work which is a violation of § 523(a)(2)(A),” id. ¶ 8; 2) Mr. Isaacson exceeded the thirty day period to complete the bathroom and kitchen cabinets she ordered and ninety days later, on October 6, 2007, delivered three partially finished bathroom cabinets, id. ¶ 14; 3) the work performed by Mr. Isaacson was substandard because he used nails instead of screws and one cabinet was not square, id.; and 4) that “[Mr. Isaacson] promised good work but intended all along to do defective work ... [he] took the job planning to abandon it unfinished, and ... intended not to finish the work or purchase the materials when he took the money.” Id. ¶ 16.

In addition to the two counts expressly plead, allegations contained in both counts and elsewhere in the Complaint suggest that Ms. Webb seeks relief under other subsections of Section 523(a) and also seeks to deny the Debtors' discharge pursuant to Section 727. The Court's obligation to liberally construe pleadings filed by unrepresented parties is well-established throughout the case law of the Fourth Circuit Court of Appeals and the United States District Court for the Eastern District of Virginia. See, e.g., Beaudett v. City of Hampton, 775 F.2d 1274, 1277–78 (4th Cir.1985); Taylor v. First Premier Bank, 841 F.Supp.2d 931, 933 (E.D.Va.2012); McCain v. Educ. Credit Mgmt. Corp. (In re McCain), 353 B.R. 452, 464–65 (Bankr.E.D.Va.2006). As Judge Francis has aptly noted, “a pro se complaint ... must be construed ... with sufficient sensitivity ‘so as to do justice’ as required by Rule 8(e) of the Federal Rules of Civil Procedure....” Carvel v. Ross, No. 09 Civ. 0722, 2011 WL 856283, at *6 (S.D.N.Y. Feb. 16, 2011) (Report & Recommendation), adopted by2011 WL 867568 (S.D.N.Y. Mar. 11, 2011) (unreported decision). There are, however, limitations on the Court's ability to liberally construe complaints filed by pro se plaintiffs, as a complaint must still provide the defendants with sufficient notice of the nature and grounds for the plaintiff's claims. See Beaudett, 775 F.2d at 1278. Any complaint, regardless of the status of its proponent, must allege facts sufficient to “raise a right to relief above the speculative level.” Murphy v. Goff, No. 6:10–CV–00026, 2010 WL 2292130, at *4 (W.D.Va. June 7, 2010) (unreported decision) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Thus, based upon Ms. Webb's allegations and the introduction and prayer of the Complaint, the Court will infer additional counts within her Complaint pursuant to Sections 523(a) and 727(a).

The general tenor of many of Ms. Webb's allegations is that Mr. Isaacson accepted funds from Ms. Webb without any intent to perform according to the terms of the contract she entered into with Mr. Isaacson. See Compl. ¶¶ 15–16, 47–48. The Court will imply from these a claim for relief pursuant to Section 523(a)(6) and consider whether Mr. Isaacson intended to cause injury to Ms. Webb by his alleged nonperformance.

A claim for relief pursuant to Section 727(a)(4)(A) may be implied from Ms. Webb's allegations that the Debtors made false statements in their bankruptcy schedules regarding 1) a debt owed to the Hampton Roads Sanitation District, id. ¶¶ 21–23; 2) their intention to surrender a 2004 Jeep Grand Cherokee (“Jeep”), id. ¶¶ 24–25; and 3) their failure to list any businesses in response to Question 18 of the Statement of Financial Affairs, id. ¶¶ 26–29. She further alleges that the Debtors offered false testimony concerning the Jeep at their Section 341 Meeting of Creditors. Id. ¶ 24. Finally, Ms. Webb generally asserts that the Debtors never intended to 1) “disclose their true income,” id. ¶ 53; 2) “disclose their true estate value,” id. ¶ 54; or 3) “make true statements in their bankruptcy papers,” id. ¶ 56. At trial, Ms. Webb specifically contended that the Debtors did not disclose the true value and extent of Mr. Isaacson's tools in their bankruptcy schedules and had undisclosed income.

While not delineated as such, Ms. Webb also appears to allege that the Debtors have violated Section 727(a)(4)(B), which prohibits the granting of a discharge to a debtor who “knowingly and fraudulently, in or in connection with the case presented or used a false claim” with respect to the indebtedness to Deborah Viviani listed on Schedule F. See id. ¶ 19.

Finally, Ms. Webb offers vague general allegations that the Debtors “fraudulently transferred, concealed, or destroyed property that should have been property of the estate,” id. ¶ 57, which appear to indicate a claim for the denial of the Debtors' discharge pursuant to Section 727(a)(2) or Section 727(a)(5). Ms. Webb's allegations at trial that the Debtors undervalued and failed to disclose the extent of Mr. Isaacson's tools and their income also appear to relate to a claim for relief under these subsections.

Thus, although the Complaint expressly sets forth only two counts, in light of the factual allegations set forth in the Complaint and Ms. Webb's broad requests in the introductory paragraph and prayer for relief under Sections 523(a) and 727(a) of the Bankruptcy Code, the Court will consider whether relief may be granted pursuantto additional subsections of Section 523(a) or Section 727(a).³

Finally, at trial, Ms. Webb contended for the first time that, pursuant to 11 U.S.C. § 707(b), the Debtors are ineligible to file a case under Chapter 7 on the basis that their annualized current monthly income exceeds the median family income for households of similar size in the Commonwealth of Virginia. The Complaint, however, does not set forth any allegations with respect to this claim.⁴

The Isaacsons filed a hand-written answer to the Complaint, denying most of Ms. Webb's allegations and her entitlement to have this Court deny the dischargeability of the Steven Isaacson Debt or their discharge.

II. Findings of Fact

Ms. Webb's evidence at trial consisted of the introduction of a number of documents and an audio recording of the Section 341 Meeting of Creditors held on August 10, 2011 (“Meeting of Creditors”).⁵ Principal among these exhibits was the “Contract for Cabinet Work” entered into between Ms. Webb and Mr. Isaacson, which is dated July 21, 2007 (“Cabinet Contract”). Plaintiff's Exh. 1. The Cabinet Contract provided for Mr. Isaacson to build various bathroom and kitchen cabinets for Ms. Webb's residence. Id. The Cabinet Contract...