Sloan Development, LLC v. Gill

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re:
Colin J. Gill,
Debtor.
Sloan Development, LLC
Plaintiff,
v.
Colin J. Gill
Defendant.
) 	Case No.: 11-30002
)
) 	Chapter 11
)
) 	Adv. Pro. No. 11-3067
)
) 	Hon. Mary Ann Whipple
)
)
)
)
)
)
)
MEMORANDUM OF DECISION AND ORDER
GRANTING MOTION FOR SUMMARY JUDGMENT
This adversary proceeding is before the court on Plaintiff’s unopposed Motion for Summary
Judgment [Doc. #14]. Defendant is the debtor in the underlying Chapter 7 case. Plaintiff alleges in its
complaint that a judgment debt owed to it by Defendant should be excepted from his discharge under 11
U.S.C. § 523(a)(2)(A).
The court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §1334(b) and the
the record of the United States Bankruptcy Court for the Northern District of Ohio.
of this court the document set forth below. This document has been entered electronically in
The court incorporates by reference in this paragraph and adopts as the findings and orders
Dated: March 15 2012
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general order of reference entered in this district. 	Proceedings to determine dischargeability of
particular debts are core proceedings that the court may hear and decide. 	28 U.S.C. § 157(b)(1) and
(b)(2)(I). 	Having considered the motion and supporting briefs, for the reasons that follow, Plaintiff’s
motion will be granted.
FACTUAL BACKGROUND
Plaintiff, Sloan Development, LLC (“Sloan”), timely filed an adversary complaint against
Defendant, Colin J. Gill (“Debtor”), to have a state court judgment debt owed to it determined
nondischargeable under 11 U.S.C. § 523(a)(2). [Doc. # 1.] On July 25, 2008, Sloan sued Debtor in the
Common Pleas Court of Lucas County, Ohio, Case No. CI08-5735, asserting a claim for fraud. [Id. at ¶
6; Doc. # 9, Answer, ¶ 6]. A certified copy of the state court docket shows that Debtor was represented
by counsel in the state court action. [Doc. # 15, Pl. Ex. D].
On June 12, 2009, the state court entered an Opinion and Judgment Entry granting a motion for
partial summary judgment filed by Sloan. [Doc. # 15, Pl. Ex. A]. Although Debtor had been granted an
extension of time to respond to the motion, no response was filed. [Id. at 1 (p. 11/35)]. The state court
found that Debtor is the “owner, President, and Secretary of Snowden Construction Co., Inc.
(“Snowden”)” and that Sloan contracted with Snowden for the installation of certain infrastructure on
Sloan’s property. [Id. at 2 (p. 12/35)]. The state court also found that the contract included a payment
procedure providing in material part as follows:
Each application (for payment) shall be accompanied by (i) an affidavit in a form
reasonably acceptable to the owner setting forth the names and addresses of all
subcontractors, 	sub-subcontractors, 	and 	material 	suppliers 	who 	furnished 	labor 	or
materials for the project and (ii) full and unconditional lien waivers from each of the
foregoing through the last date for which payment was made to the contractor.
[Id. at 2-3 (pp.12-13/35)]. The state court found that Debtor had provided Sloan with an “Affidavit of
Contractor” representing that all subcontractors and materialmen had been paid in full. [Id. at 3 (pp.
13/35)]. The state court further found as follows:
1. 	On 	or 	after 	January 	5, 	2007 	and 	thereafter, 	defendant 	Colin 	J. 	Gill, 	as
President...induced plaintiff to tender $70,000.00 to Snowden Construction Co., Inc.,
upon the false pretense that all materialmen providing materials to the job site prior to
January 18, 2007 had been paid in full.
2. 	In fact, on January 18, 2007, when defendants tendered a false written statement to
plaintiff, Snowden owed Kuhlman Corporation a minimum of $70,000.00 for materials
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delivered to the job site between July 24, 2006 and November 20, 2006 which fact was
knowingly and intentionally concealed from plaintiff by defendants.
3. 	Acting in reliance upon defendants’ false representation, on January 31, 2007,
plaintiff tendered $70,000.00 to Snowden. 	Had plaintiff been aware of the debt to
Kuhlman, it would not have tendered the $70,000.00 to Snowden.
4. Snowden accepted the $70,000.00 payment from plaintiff and never paid Kuhlman.
5. As a result of these actions, Kuhlman filed a Mechanic’s Lien on plaintiff’s property
and plaintiff was forced to pay Kuhlman $70,000.00 in order to obtain release of its lien.
Thus, plaintiff has paid twice for the same materials.
. . . .
8) When, on January 5, 2007 defendant Gill personally signed the invoice to plaintiff
requesting payment from plaintiff in the amount of $85,854.80, and subsequently
tendered the false document titled “Affidavit of Contractor” to plaintiff, he knew that
Snowden owed Kuhlman no less than $70,000.00 for materials delivered to the job site
and intentionally concealed that fact from plaintiff in order to obtain the $70,000.00
payment from plaintiff. 	Thus, defendant Gill is personally liable to plaintiff for
Snowden’s fraud.”
[Id. at 5-6 (pp. 15-16/35)].
Based upon these findings, and after a hearing on damages that both Debtor and his attorney
attended, a final judgment was entered by the state court against Debtor and in favor of Sloan in the
amount of $90,712.50. [Doc. # 15, Pl. Exs. B and C].
LAW AND ANALYSIS
I. Summary Judgment Standard
Under Rule 56 of the Federal Rules of Civil Procedure, made applicable to this proceeding by
Federal Rule of Bankruptcy Procedure 7056, summary judgment is proper only where there is no
genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(a). In reviewing a motion for summary judgment, however, all inferences “must be
viewed in the light most favorable to the party opposing the motion.” 	Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586-88 (1986). 	The party moving for summary judgment always
bears the initial responsibility of informing the court of the basis for its motion, “and identifying those
portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with
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the affidavits if any’ which it believes demonstrate the absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the moving party has met its initial burden,
the adverse party “may not rest upon the mere allegations or denials of his 	pleading but . . . must set
forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). A genuine issue for trial exists if the evidence is such that a reasonable factfinder
could find in favor of the nonmoving party. 	Id. 	Although a party fails to respond to a motion for
summary judgment, the court must nevertheless satisfy itself that the moving party has met the demands
of Fed. R. Civ. P. 56 before granting the motion. 	See Guarino v. Brookfield Twp. Trustees, 980 F.2d
399, 407 (6th Cir. 1992).
II. 11 U.S.C. § 523(a)(2)(A)
Sloan seeks a nondischargeability determination under § 523(a)(2)(A) with respect to the debt
owed by Debtor pursuant to the state court judgment. 	It relies on the collateral estoppel effect of the
state court judgment in arguing that it is entitled to judgment as a matter of law on its complaint in this
case.
Under § 523(a)(2)(A), a debt is excepted from discharge to the extent it was obtained by “false
pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an
insider’s financial condition.” 	In order to except a debt from discharge under this section due to false
pretense or false representation, a plaintiff must prove the following elements by a preponderance of the
evidence: (1) the debtor obtained money or services through a material misrepresentation, either express
or implied, 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) its reliance was the proximate cause of loss. Rembert v. AT&T Universal Card
Services, Inc. (In re Rembert), 141 F.3d 277, 280-81 (6th Cir. 1998). 	A debtor’s intent to defraud a
creditor is measured by a subjective standard and 	must 	be 	ascertained 	by the totality of the
circumstances of the case at hand. Id. at 281-82. “If there is room for an inference of honest intent, the
question of nondischargeability must be resolved in favor of the debtor.” 	ITT Final Servs. v.
Szczepanski (In re Szczepanski), 139 B.R. 842, 844 (Bankr. N.D. Ohio 1991).
Under § 28 U.S.C. 1738, federal courts are directed to give the same “full faith and credit” to
state court judgments as would a court of the issuing state and are precluded from re-litigating a decided
issue. Corzin v. Fordu (In re Fordu), 201 F.3d 693, 703 (6th Cir. 1999). Under Ohio law, there are four
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prerequisites to the application of the doctrine of collateral estoppel:
1) A final judgment on the merits in the previous case after a full and fair opportunity to
litigate the issue; 2) The issue must have been actually and directly litigated in the prior
suit and must have been necessary to the final judgment; 3) The issue in the present suit
must be identical to the issue in the prior suit; 4) The party against whom estoppel is
sought was a party or in privity with a party to the prior action.”
Sill v. Sweeney ( In re Sweeney), 276 B.R. 186, 189 (B.A.P. 6th Cir. 2002).
It is undisputed that Debtor was a party in the prior state court action. There is also no dispute
that a final judgment was entered in the state court action and that Debtor had a full and fair opportunity
to respond to Sloan’s motion for partial summary judgment and to litigate the issue of damages. 	The
fact that Debtor filed no response to the motion for partial summary judgment after being granted an
extension of time to do so is of no consequence. 	It is only necessary that the opportunity to fully and
fairly litigate an issue be available; it is not required that the party have exercised that opportunity.
Thus, the first and fourth elements under Sweeney are satisfied.
As to the second and third elements, it is clear that the same issues presented in this adversary
proceeding were litigated and decided in the state court action – namely, that Debtor obtained money
from Sloan through his fraudulent misrepresentation justifiably relied upon by Sloan. The elements of a
fraudulent misrepresentation claim under Ohio law mirror the elements that must be shown in order to
prevail under § 523(a)(2)(A). 	Compare Deutsche Bank Nat’l Trust Co. v. Pevarski, 187 Ohio App.3d
455, 470-471 (2010) (setting forth the elements of a claim of fraudulent misrepresentation under Ohio
law) with Rembert, 141 F.3d at 280-81 (setting forth the elements of a § 523(a)(2)(A) claim).
Specifically, the state court found that (1) Debtor induced Sloan to tender $70,000 to Snowden by
falsely representing in the Affidavit of Contractor that all materialmen had been paid that had supplied
material to the job site on Sloan’s property, (2) Debtor knew that his representation was false, (3) Debtor
intentionally concealed the fact that Snowden owed Kuhlman Corporation $70,000 for materials
delivered to the job site, (4) Sloan relied upon Debtor’s representation, and (5) as a result, Kuhlman
filed a mechanic’s lien on Sloan’s property and Sloan was forced to pay another $70,000 in order to
obtain a release of the lien.
Although the state court opinion does not include an express finding that Sloan’s reliance was
justifiable, as justifiable reliance is an element of a fraudulent misrepresentation claim under Ohio law,
Pevarski, 187 Ohio App.3d at 471, such a finding can be inferred given the state court’s determination
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that Debtor is personally liable to Sloan for Snowden’s fraud. 	Moreover, the payment procedure set
forth in the contract between Snowden and Sloan requiring that an affidavit be provided to Sloan before
any payment was to be made also demonstrates the parties’ intent that such an affidavit be relied upon
by Sloan in making payments under the contract. 	As a reasonable factfinder could not conclude
otherwise, there is no genuine dispute that Sloan’s reliance on Debtor’s misrepresentation was justified.
Debtor’s 	liability 	on 	the 	debt 	for 	fraudulent 	misrepresentation 	having 	been 	preclusively
determined by the state court, and there being no genuine dispute as to any material fact in this
proceeding, the court finds that Sloan is entitled to judgment as a matter of law in its favor on its
dischargeability claim under § 523(a)(2)(A).
THEREFORE, for the foregoing reasons, good cause appearing,
IT IS ORDERED that Plaintiff’s Motion for Summary Judgment [Doc. # 15] be, and hereby is,
GRANTED.
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