Park v. Son

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-1-	MEMORANDUM DECISION
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re
KI O. SON,
Debtor.
HEUNG SER PARK,
Plaintiff,
vs.
KI O. SON, dba SON GENERAL
CONSTRUCTION,
Defendant.
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Case No. 07-31429 TEC
Chapter 7
Adv. Proc. No. 08-3011 TC
MEMORANDUM DECISION
Debtor Ki O. Son (Debtor) is a licensed general contractor.
In 2004, Debtor contracted to build a single-family residence for
Creditor Heung Ser Park (Creditor) at 22810 Mercedes Road,
Cupertino, California.
A dispute arose regarding the contract, leading Debtor to file
suit against Creditor in the Santa Clara County Superior Court, and
Creditor to file a counterclaim against Debtor. 	On October 3,
Signed and Filed: December 15, 2009
________________________________________
THOMAS E. CARLSON
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
December 16, 2009
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-03011 Doc# 29 Filed: 12/15/09 Entered: 12/16/09 16:04:03 Page 1 of 5

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-2-	MEMORANDUM DECISION
2007, the suit was settled before trial on terms stated on the
record before the Honorable Leslie C. Nichols (the Settlement).
The Settlement provided that if Debtor did not
pay Creditor $380,000 by a specified date, judgment would be
entered against Debtor in the amount of $480,000. 	Debtor also
stipulated that he intentionally misrepresented certain material
facts, that Creditor justifiably relied upon Debtor’s
misrepresentations, and that the judgment and stipulations were to
have binding effect in any subsequent bankruptcy that Debtor might
file.
Debtor failed to perform the Settlement and instead filed a
petition under chapter 11 of the Bankruptcy Code on November 1,
2007. 	On February 6, 2008, Creditor filed an action seeking a
determination that Debtor’s liability under the Settlement was non-
dischargeable under section 523(a)(2). 	On May 23, 2008, this court
granted relief from stay to permit Creditor to obtain a judgment
enforcing the Settlement from the Superior Court. 	The parties
would then return to this court to determine whether that judgement
should be excepted from discharge.
On June 19, 2008, Judge Nichols entered judgment against
Debtor in the amount of $480,000 plus prejudgment interest of
$25,644 (the Judgment). 	In granting the Judgment, Judge Nichols
made the following findings.
(2) The court finds that Son committed actual fraud
against Park based upon the facts admitted to by Son at
the Hearing. 	The Court makes the following legal and
factual findings: (a) that Son willfully deceived and
made material misrepresentations to Park, including that
he had obtained the necessary permits and approvals from
the City of Cupertino for the foundation work and the
excavation work he performed at Park’s real property; (b)
Son made the misrepresentations set forth above in
paragraph 2(a) with knowledge of their falsity, with
intent to induce Park to tender payments pursuant to the
Case: 08-03011 Doc# 29 Filed: 12/15/09 Entered: 12/16/09 16:04:03 Page 2 of 5

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-3-	MEMORANDUM DECISION
construction contract; (c) Park justifiably relied on
Son’s misrepresentations set forth above in paragraph
2(a); and (d) as a proximate and direct result of Son’s
misrepresentations set forth above in paragraph 2(a),
Park has been damaged in an amount substantially more
than the amount agreed upon by the parties.
Debtor brought a motion in the Superior Court to set aside the
Judgment, which motion Judge Nichols denied on January 8, 2009.
Debtor filed a notice of appeal from the Judgment, but failed to
follow through and the appeal was dismissed. 	Creditor brought a
motion for summary judgment seeking to have this court determine
that all the elements of non-dischargeablility under section
523(a)(2) had been established in Judge Nichols’ decision. 	This
court granted the motion in part, determining that the Judgment
established all issues related to non-dischargeability except one.
This court determined that Judge Nichols’ findings were somewhat
vague as to how Debtor’s misrepresentations caused the damages
awarded and, out of an abundance of caution, set that matter for
trial.
This court held a trial on October 21, 2009 and November 18,
2009, to determine whether the damages awarded in the Judgment were
properly attributable to the misconduct described in the Judgment.
Arthur Chambers appeared for Creditor. 	Iain A. Macdonald appeared
for Debtor. 	Upon due consideration of the evidence presented at
trial, the court now makes the following findings of fact and
conclusions of law.
FINDINGS OF FACT
(1) 	In December 2004, Debtor poured the foundation for the
house without obtaining the necessary prior inspection of the metal
reinforcing to be covered by the poured concrete.
Case: 08-03011 Doc# 29 Filed: 12/15/09 Entered: 12/16/09 16:04:03 Page 3 of 5

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-4-	MEMORANDUM DECISION
(2) 	Debtor was not able by alternate means to prove to the
satisfaction of the City of Cupertino (the City) that the
foundation was reinforced in the manner required by law.
(3) 	Debtor went on to erect the wooden framing for the house
before obtaining approval of the foundation from the City.
(4) 	As a result of Debtor’s failure to obtain the necessary
prior inspection of the foundation reinforcement, the City would
not permit the house to be completed without removing the existing
foundation and building a new foundation.
(5) 	Debtor did not remove the defective foundation and
replace it with a properly constructed foundation.
(6) 	Creditor did not have sufficient funds both to pay
another contractor to rebuild the foundation and to make payments
on the mortgage on the lot. 	Creditor lost the lot and improvements
to foreclosure.
(7) 	As a result of Debtor’s conduct, Creditor lost the value
of the entire amount he paid Debtor (at least $328,790), and the
down payment on the lot ($280,000).
(8) 	The loss of the amounts paid to Debtor and the loss of
the down payment on the lot were foreseeable results of Debtor’s
misrepresentations regarding construction of the foundation.
CONCLUSIONS OF LAW
(1) 	The damages awarded in the Judgment were foreseeable and
proximately caused by Debtor’s misrepresentations.
(2) 	The entire amount of the Judgment should be excepted
from discharge, because the entire amount of the Judgment
arose out of Debtor’s fraudulent conduct. 	Cohen v. De La
Cruz, 523 U.S. 213 (1998).
**END OF MEMORANDUM DECISION**
Case: 08-03011 Doc# 29 Filed: 12/15/09 Entered: 12/16/09 16:04:03 Page 4 of 5

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Court Service List
Arthur Chambers, Esq.
Joong Im, Esq.
Law Offices of Arthur C. Chambers
2095 Van Ness Avenue
San Francisco, CA 94109
Iain A. Macdonald, Esq.
Macdonald & Associates
221 Sansome Street, Third Floor
San Francisco, CA 94104
Todd M. Arnold, Esq.
Levene, Neale, Bender, Rankin, and Brill
10250 Constellation Blvd. Suite 1700
Los Angeles, CA 90067
Case: 08-03011 Doc# 29 Filed: 12/15/09 Entered: 12/16/09 16:04:03 Page 5 of 5