Rahn v. Young

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Baltimore
In Re: *
DAVID C. RAHN * Case No. 08-17788DK
* Chapter 7
*
Debtor(s) *
************************************* *
DAVID C. RAHN *
*
*
Plaintiff/Movant(s) *
vs. * Adversary No. 08-00659DK
GEOFFREY YOUNG *
*
*
Defendant/Respondent(s) *
MEMORANDUM OF DECISION
Plaintiff, David C. Rahn, commenced this action seeking a determination by this court that
indebtednesses allegedly owed by the Debtor/Defendant, Geoffrey Young, are non-dischargeable
pursuant to 11 U.S.C. § 523(a)(2) and 11 U.S.C. §523(a)(6). The complaint was filed in proper person
by the Plaintiff and answered in proper person by the Defendant. The trial was held on March 5, 2009.
The Plaintiff’s first described basis for a determination of non-dischargeability asserts that a
final judgment has been entered by the Circuit Court for Anne Arundel County in an action commenced
by Plaintiff against the Debtor before the bankruptcy case was filed. The Plaintiff asserts that the final
Date signed March 10, 2009
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judgment forms a basis for preclusion by the doctrine of res judicata or collateral estoppel as to the
determination by this court of non-dischargeability. At trial, this court bifurcated the presentation of
evidence and first permitted Plaintiff to introduce evidence concerning the action before the state court.
For the reasons set forth on the record by this court at the conclusion of this initial presentation, the
court concludes that no “final judgment” was entered by the state court before the commencement of
the bankruptcy case and thus there is no basis for either matter preclusion or issue preclusion.
Before further evidence was presented the court informed the Plaintiff that as the complaint filed
in this adversary proceeding did not seek a determination of amounts due, or the entry of a money
judgment for any such amount, the Court would only decide the matter brought by the complaint, that
is the non-dischargeable character of any proven liability. For the reasons set forth on the record the
court denied an oral motion by the Plaintiff to amend the complaint before commencing evidence to
include a prayer for a money judgment, finding that such late amendment would work an unfair surprise
upon the Defendant.
Thereafter, evidence was taken from a number of witnesses as to the events upon which the
Plaintiff asserts that Defendant is liable to the Plaintiff and upon which Plaintiff asserts that such
liability is a non-dischargeable debt
After the conclusion of all the evidence, the court announced its findings of facts and
conclusions upon the record. This Memorandum summarizes those findings. The court finds that
Defendant made representations to Plaintiff as to the condition of the premises known as 4536
Owensville Sudley Road, Harwood, MD (“Premises”) both in speaking to Plaintiff and in a Maryland
Residential Property Disclosure Statement (Plaintiffs Exhibit 1) for the purchase of inducing Plaintiff
to purchase the Premises. Defendant knew at the time that the representations were made to Plaintiff
that there was serious rotted deterioration of wall studs which had been covered over by plywood and
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gypsum board. The deteriorated wall studs constitute a structural latent defect as defined in Section
10-702 of the Real Property Article of the Md. Ann. Code. Further Defendant knew that there was
defective foundation support below the area of wall containing the rotted wall studs resulting in
structural infirmities of that bearing wall (hereinafter after the “Deteriorated Wall and Support.” The
court further finds that the Defendant knew that work which the Defendant had done to restore,
reconfigure and enlarge the dwelling space was done to a substandard condition, not done by
professional contractors and not in accordance with building codes. Such work included the creation
or enlargement of apertures through studded walls for doors, pass through, windows, and recessed
mirrored cabinets. Such work also included electrical wiring in those areas of restoration and
enlargement, plumbing, roofing and roofing structure, as well as joist work supporting floors. This
work is hereinafter collectively referred to as the “Defective Restoration.”
As stated on the record the court finds that Defendant by omission and commission materially
misrepresented the condition of the Deteriorated Wall and Support and the Defective Restoration to the
Plaintiff in order to induce Plaintiff to purchase the Premises. Such misrepresentations included the
failure to disclose the defects as required by Section 10-702 of the Real Property Article of the
Annotated Code of Maryland, the lack of accurate disclosure on the disclosure form attached to the
contract of sale, and oral statements concerning that the work restoration was done by competent
professionals.
The court further finds that the misrepresentations were material and fraudulent and were
reasonably relied upon by the Plaintiff in deciding to purchase the Premises. The Plaintiff has been
damaged by the fraudulent inducement into contract as found by this court.
This court concludes that the causes of action which the Plaintiff has against the Defendant for
damages proximately caused by the misrepresentations constitute a non-dischargeable debt pursuant
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For the reasons set forth on the record, the court concludes that no factual basis exists to1
support a finding that any debt owed to Plaintiff by Defendant is non-dischargeable pursuant to
11 U.S.C. § 523(a)(6).
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to 11 U.S.C. § 523(a)(2).1
Finally, the court determines that the automatic stay imposed by 11 U.S.C. §362(a)(1), (5) and
(6) should be vacated to permit the Plaintiff to proceed in state court for a determination of the damages
caused by the described misrepresentations. However, the court does not grant relief from the automatic
stay imposed by 11 U.S.C. § 362(a)(3) and (4). The automatic stay will continue to stay any acts by the
Plaintiff to exercise control over any property in which an interest is held by the bankruptcy estate, or
to create perfect or enforce any lien against property in which the bankruptcy estate holds an interest.
As a result, any judgment obtained in state court by the Plaintiff and against the Defendant shall not
constitute a lien against property in which the bankruptcy estate holds an interest. An order
commensurate with these findings and conclusions shall be entered.
cc: All Counsel
All Parties
End Of Order
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