GE Money Bank v. Riccardi

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
ROBERT RICCARDI
DEBTOR
CASE NO.
05-03316-5-ATS
GE MONEY BANK
Plaintiff
v.
ROBERT RICCARDI
Defendant.
ADVERSARY PROCEEDING NO.
S-05-00154-5-AP
MEMORANDUM OPINION
The trial of this adversary proceeding to determine, pursuant to
11 U.S.C. § 523(a)(2), the dischargeability of a debt owed by the
chapter 7 debtor, Robert Riccardi, to the plaintiff, GE Money Bank, was
held in Raleigh, North Carolina on June 13, 2006. For the reasons that
follow, the debt is nondischargeable in the amount of $1,621.62, and
the balance of the debt is dischargeable.
SO ORDERED.
SIGNED this 20 day of June, 2006.
________________________________________
A. Thomas Small
United States Bankruptcy Judge
____________________________________________________________
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Robert Riccardi filed a petition for relief under chapter 7 of the
Bankruptcy Code on August 10, 2005. Prior to filing, Mr. Riccardi used
his Lowe’s credit card, issued by GE Money Bank, to purchase items at
Lowe’s Home Improvement. GE Money Bank contends that those items
purchased within 60 days prior to the petition date are luxury goods in
excess of $1,225 or that the extension of credit was obtained by false
pretenses, a false representation, or actual fraud.
This bankruptcy court has jurisdiction over the parties and the
subject matter of this proceeding pursuant to 28 U.S.C. §§ 151, 157,
and 1334, and the General Order of Reference entered by the United
States District Court for the Eastern District of North Carolina on
August 3, 1984. This is a "core proceeding" within the meaning of 28
U.S.C. § 157(b)(2)(I), which this court may hear and determine.
Section 523(a)(2) excepts from discharge any debt
(2) for money, property, services, or an extension, renewal,
or refinancing of credit, to the extent obtained, by--
(A) false pretenses, a false representation, or actual
fraud, other than a statement respecting the debtor's or
an insider's financial condition;
* * *
(C) for purposes of subparagraph (A) of this paragraph,
consumer debts owed to a single creditor and aggregating
more than $1,225 for "luxury goods or services" incurred
by an individual debtor on or within 60 days before the
order for relief under this title . . . are presumed to be
nondischargeable; "luxury goods or services" do not
include goods or services reasonably acquired for the
support or maintenance of the debtor or a dependent of the
debtor . . . .
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11 U.S.C. § 523(a)(2).
Mr. Riccardi's purchases at Lowe’s included fencing, tools, nails,
caulk, siding accessories, outdoor lighting, grass and pool chemicals,
roof flashing, locks, and patio furniture. Lowe’s contends that these
are consumer debts for luxury goods. While Mr. Riccardi admitted that
the patio furniture was purchased as a gift for his son, he testified
that the remaining items, possibly with the exception of the lawn and
pool chemicals, were purchased in connection with his home improvement
business.
In determining whether items meet the definition of "luxury
goods," this court has previously considered whether the items are
"extravagant, indulgent or nonessential" and "whether the items
purchased served any important family function and evidenced some
fiscal responsibility." Hudson Belk Co. v. Williams (In re Williams),
106 B.R. 87, 89 (Bankr. E.D.N.C. 1989) (citations omitted). In
Williams the court also considered that the items in question were
purchased as gifts. Williams, 106 B.R. at 89.
The patio furniture purchased by Mr. Riccardi as a gift for his
son serves no important family function and may be considered indulgent
and nonessential. It was purchased on June 26, 2005, within 60 days of
the petition date, and its purchase price exceeded $1,225. The court
finds that GE Money Bank met its burden of proving that the patio
furniture is presumptively nondischargeable under § 523(a)(2)(C) in the
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amount of $1,621.62. The court further finds that GE Money Bank did
not meet its burden of proving that the other items were "luxury
goods," and now turns to § 523(a)(2)(A) to determine whether the
balance of the debt is otherwise nondischargeable.
GE Money Bank contends that the remainder of the debt was incurred
by the debtor when he had no intent to repay. In support of its
argument, GE Money Bank showed that no purchases were made on the
account in the months of February, March, April, or May, but in the
month of June, Mr. Riccardi charged over $8,000 to the Lowe’s account.
GE Money Bank contends that Mr. Riccardi knew as early as June 9, 2005,
that he intended to file bankruptcy (based on Mr. Riccardi's Statement
of Financial Affairs, which shows that he paid $500 to his bankruptcy
attorney on June 9, 2005), and that all of the charges were made after
the meeting with the attorney. GE Money Bank noted that Mr. Riccardi
made several charges on the same day, that Mr. Riccardi was in poor
financial condition when he made the charges, and that he charged just
up to his credit limit. GE Money Bank contends that these facts
establish that the debt is nondischargeable using the factors set
forth in First Card Services, Inc. v. Koop (In re Koop), 212 B.R. 106,
109 n.1 (Bankr. E.D.N.C. 1997) (citing In re Eashai, 87 F.3d 1082 (9th
Cir. 1996)).
Mr. Riccardi explained the situation differently. Mr. Riccardi
worked as a home improvement subcontractor. He was working on a job in
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Charleston, South Carolina, on which Norandex/Reynolds was his
supplier. The general contractor on the project failed to pay Mr.
Riccardi, and Mr. Riccardi was unable to pay Norandex. Norandex filed
suit against Mr. Riccardi and his company and cut off one of Mr.
Riccardi's supply sources. Mr. Riccardi hoped that he would be able to
resolve the lawsuit by recovering some payment from the general
contractor and settling with Norandex, but all hopes of settlement
failed during the summer of 2005, prompting Mr. Riccardi to file his
bankruptcy petition. Mr. Riccardi testified that his consultation with
his attorney on June 9, 2005, was related to the pending litigation and
not to filing bankruptcy.
Mr. Riccardi also testified that he often purchased supplies
somewhere other than Lowe’s, using a Chase Visa credit card. In fact,
Mr. Riccardi paid the Chase Visa card in full in June 2005. In June,
the supplies he needed were available at Lowe’s, and he made the
purchases there on the account at issue. He also noted that he made a
partial payment on the account to Lowe’s. Mr. Riccardi contends that
both the payment to Visa and the partial payment to Lowe’s are
inconsistent with a present intention to file bankruptcy and discharge
unsecured debts.
The court finds that GE Money Bank failed to carry its burden of
proof of showing that Mr. Riccardi obtained the credit by false
pretenses, false representation or fraud. The purchases made were
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consistent with Mr. Riccardi's ongoing business and the sudden change
in suppliers was explained by the cancellation of his Norandex account.
Though Mr. Riccardi contacted his attorney prior to incurring the
charges, he testified that he consulted with the attorney about matters
other than bankruptcy, and that no decision to file was made until it
was apparent that the Norandex litigation would not be resolved.
Based on the foregoing, the debt incurred for the purchase of
patio furniture is nondischargeable pursuant to § 523(a)(2)(C) in the
amount of $1,621.62, and the remaining debts owed by the debtor to GE
Money Bank are not nondischargeable pursuant to § 523(a)(2)(A).
A separate judgment will be entered.
END OF DOCUMENT
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