Opinion
Case No. 11-11434 Adversary No. 11-1107
05-09-2013
In re: John Pieratt Sheryl J. Pieratt Debtors, Lindsey A. Nelson Plaintiff, v. John Pieratt Defendant.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
_________________
Burton Perlman
United States Bankruptcy Judge
Chapter 7
Judge Burton Perlman
DECISION ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
I. Background.
This adversary proceeding arises in a chapter 7 bankruptcy case in which John Pieratt and Sheryl J. Pieratt are joint debtors. In this adversary proceeding, debtor John Pieratt only is named defendant, while Lindsey Allan Nelson is the plaintiff. Plaintiff and his wife contracted with Defendant who was a building contractor, to build a home for them, and a construction contract was entered into between them. The present controversy arises from the allegations by Plaintiff as to misconduct by Defendant in carrying out the construction contract.
II. Jurisdiction.
This Court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334(b) and the General Order of Reference entered in this district. This is a core proceeding arising under 28 U.S.C. §157.
III. Motions by the Parties.
The parties have filed cross-motions for summary judgment. Plaintiff's motion is supported by Exhibit 1, Final Judgment Entry entered January 21, 2011 in the Court of Common Pleas for Clermont County, Ohio; Exhibit 2, Decision/Entry dated September 24, 2010 in the same court; Exhibit 3, Jury Verdict Forms; and Exhibit 4 Jury Interrogatories.
Defendant supports his cross-motion for summary judgment with Exhibit A, Final Judgment Entry entered January 21, 2011 in the Court of Common Pleas for Clermont County, Ohio; Exhibit B, Jury Verdicts and Interrogatories; Exhibit C, Decision/Entry dated September 24, 2010 in the same court; Affidavit of Defendant John Pieratt; Affidavit of Sheryl J. Pieratt.
IV. Facts.
Plaintiff and his wife brought suit against Defendant and his wife (neither spouse is a party to this adversary proceeding) in the Clermont County Court of Common Pleas. In that action, Plaintiffs sued for breach of contract and violation of Ohio Revised Code § 1345.01 et seq., the Ohio Consumer Sales Practices Act. The state court case was tried to a jury. At the conclusion of the trial, Plaintiff was awarded damages by the jury in the amount of $60,000.00 on Plaintiffs' claim of breach of contract, and $20,100.00 on their claim for violations of the Consumer Sales Practices Act.
V. Summary Judgment.
Motions for summary judgment are governed by Fed. R. Civ. P. 56 which is incorporated into bankruptcy practice by Fed. R. B.P. 7056. That rule provides:
Rule 56. Summary Judgment (a) Motion for Summary Judgment or Partial Summary Judgment. A party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought. The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The court should state on the record the reasons for granting or denying the motion.The moving party bears the initial burden of showing that there is no issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-324 (1986). The nonmoving party, however, bears the ultimate burden of showing that a genuine issue of material fact exists. In doing so, the nonmoving party cannot rest on its pleadings, but must, in response, offer some evidence which demonstrates a genuine issue of material fact for trial. Id.
PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
In his Motion for Summary Judgment, Plaintiff asserts that he is entitled to summary judgment because the state court judgment must be given collateral estoppel effect, and if collateral estoppel applies, the debt owed him is non-dischargeable pursuant to § 523(a)(2)(A).
In the state court, Plaintiff was awarded damages by the jury in the amount of $60,000.00 on his claim for breach of contract, and $20,100.00 on his claim for violations of the Consumer Sales Practices Act. The Court notes that on his present Motion for Summary Judgment, Plaintiff seeks only $20,100.00 so that he has not put in issue the $60,000.00 awarded for breach of contract.
A. Collateral Estoppel
A state court judgment may be given collateral estoppel effect if the elements of the state court judgment coincide with the elements of non-dischargeability under 11 U.S.C. § 523(a)(2)(A). Because the prior decision was entered in an Ohio court, the collateral estoppel law of Ohio must be applied to determine the preclusive effect of the state court judgment. Marrese v. American Academy of Orthopedic Surgery, 470 U.S. 373, 105 S.Ct. 1327, 84 L. Ed. 2d. 274 (1985); Migra v. Warren City School District Board of Education, 465 U.S. 75, 104 S. Ct. 892, 79 L. Ed. 2d. 56 (1984); Ed Schory & Sons, Inc. v. Francis (In re Francis), 226 B.R. 385, 388 (B.A.P. 6th Cir. 1998) (citation omitted).
To assert collateral estoppel under Ohio law, a party must plead and prove the following: (1) the party against whom collateral estoppel is sought was a party, or in privity with a party, in the previous action; (2) there was a final judgment on the merits in the previous action after a full and fair opportunity to litigate the issue; (3) the issue was actually and directly litigated in the previous action and was necessary to the final judgment; and (4) the issue in the present action is identical to the issue involved in the previous action. Sill v. Sweeney (In re Sweeney), 276 B.R. 186, 189 (B.A.P. 6th Cir. 2002) (citations omitted).
Plaintiffs' Motion for Summary Judgment on grounds of collateral estoppel fails. The record does not show that all of the requirements to make out a collateral estoppel claim are to be found here. In his present motion, Plaintiff argues that the debt owed him is non-dischargeable pursuant to § 523(a)(2)(A). The law is well settled in the Sixth Circuit that the required elements to establish non-dischargeability under § 523(a)(2)(A) are that: (1) the debtor obtained money through a material misrepresentation that, at the time, the debtor knew was false or made with gross recklessness as to its truth; (2) the debtor intended to deceive the creditor; (3) the creditor justifiably relied on the false representation and (4) the creditor's reliance was the proximate cause of loss. See Owen v. Angst (In re Angst), 428 B.R. 776 (Bankr. N.D. Ohio 2010); Rembert v. AT&T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277, 280-21 (6th Cir. 1998)
In his memorandum in support of the Motion for Summary Judgment by Plaintiff, it is stated that ". . . the Plaintiff admits that no actual showing of the supplier's wrongful intent is required; instead, the consumer must simply show that the supplier did or said something that has the 'likelihood of inducing in the mind of the consumer a belief that is not in accord with the facts.' Richards v. Beechmont Volvo, 127 Ohio App. 3d 188, 190, 711 N.E. 2d 1088 (1988)." This statement of the CSPA shows that its requirements are quite different from those required to make a showing under § 523(a)(2)(A). That section of the Bankruptcy Code requires an affirmative showing of an intention to deceive the creditor. That section further requires a showing that the creditor justifiably relied on the false representation alleged. In the record before the Court, there is no evidence that there was an intent to deceive by Defendant or of justifiable reliance by Plaintiff.
B. § 523(a)(2)(A)
Plaintiff makes no showing other than the state court record which would support a conclusion that Plaintiff is entitled to summary judgement on its claim that there was a violation by Defendant of § 523(a)(2)(A). Because that record presents no evidence that Defendant intended to deceive Plaintiff, or that Plaintiff justifiably relied on claimed false representations, there are genuine disputes as to material facts.
Plaintiff's Motion for Summary Judgment must be denied.
DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
In his memorandum in support of his Motion for Summary Judgment, Defendant uses the following headings: (1) Collateral Estoppel/Issue-Claim Preclusion; (2) The Debt/Judgment for Plaintiffs against Defendants is dischargeable, with the following subheads: (A) 523(a)(6); (B) Breach of Contract; (C) 523(a)(2)(A).
A. Collateral Estoppel/Issue-Claim Preclusion
Under this heading Defendant argues that Plaintiff could have made a case for "actual fraud" in the state court litigation, but failed to do so. Its case for non-dischargeability for fraud is therefore, says Defendant, barred by res judicata. Defendant's claim in this respect is without merit. Notwithstanding the state court judgment and the proceedings therein, they provide no bar to a plaintiff making a case under § 523(a)(2) of the Bankruptcy Code. The Sixth Circuit has held otherwise:
The Supreme Court in Brown, supra, recognizing the exclusive jurisdiction of the bankruptcy courts, held that a bankruptcy court was not precluded by res judicata from considering extrinsic evidence on an issue which would have been litigated in the prior state court proceeding but was not.Defendant's Motion for Summary Judgment on this score fails.
B. § 523(a)(6)
In this section of his memorandum in support of motion for summary judgment, Defendant discusses cases and materials at length. But what is before the Court is Defendant's Motion for Summary Judgment. All that can be said on this motion is that on the record before the Court issues of fact remain as to whether Plaintiff can prove a claim under § 523(a)(6). On this score, then, Defendant's Motion for Summary Judgment will be denied.
C. Breach of Contract
Of the total judgment in the state court, $60,000.00 was expressly awarded by the jury to the Plaintiff for breach of contract. Claims for breach of contract are dischargeable in bankruptcy. Ubriaco v. Martion, (In re Martino), 429 B.R. 66, 72 (Bankr. E.D.N.Y. 2010). It appears that Plaintiff does not dispute this fact, for his Motion for Summary Judgment limits itself to the amount above and beyond the award for breach of contract.
Because there is no dispute as to material fact, and that Defendant is entitled to summary judgment on the issue of breach of contract, the Court so holds.
D. § 523(a)(2)(A)
Defendant points out that Plaintiff made no mention of this statutory provision in his Complaint. Defendant does then, however, proceed to discuss this claim. Defendant discusses at length case precedents in the area of such a claim and argues that since the record contains no evidence of the necessary elements to establish a claim for non-dischargeability under 523(a)(2)(A), he is entitled to summary judgment.
To remedy the absence of such evidence, Defendant has filed affidavits of John Pieratt and Sheryl J. Pieratt in support of his Motion for Summary Judgment. Those affidavits contain statements denying any intent to misstate or misrepresent any fact to Plaintiff in connection with the construction project. John Pieratt also states that he did not intend to mislead or deceive Plaintiff in the same respect. The affidavit of Sheryl J. Pieratt contains the same statements. According to Defendant's memorandum in support of his Motion for Summary Judgment he depends upon these affidavits to show that there is evidence that Defendant did not intend to injure Plaintiff. Defendant's reliance upon these affidavits for this purpose cannot play a part on a Motion for Summary Judgment. Eastwood Construction, LLC v. The McAlpine Group, LLC (In re The McAlpine Group, LLC), 2013 W.L. 594314 At *5 (W.D.N.C. 2013) ("Affidavits filed in support of a Motion for Summary Judgment are to be used to determine whether issues of fact exist, not to decide the issues themselves. . . .When resolution of issues of fact depends upon a determination of credibility, summary judgment is improper.") (citations omitted).
Because questions of fact remain in regard to § 523(a)(2)(A), Defendant's Motion for Summary Judgment in this respect must be denied.
VI. Conclusion.
Plaintiff's Motion for Summary Judgment will be denied. Defendant's Motion for Summary Judgment on Plaintiff's claim for non-dischargeability of his breach of contract claim is granted. Otherwise Defendant's Motion for Summary Judgment is denied. Copies to: Mark Smith
905 Ohio Pike
Cincinnati, OH 45245
Patricia J. Downing
1248 Nilles Road
Fairfield, OH 45014
Thomas G. Eagle
3386 N. State Rt. 123
Lebanon, OH 45036