Where a home contractor defrauded a homeowner, she was awarded almost $13,000 in damages that are nondischargeable.
This matter came before the court for trial on Feb. 16, 2022, upon the complaint to determine dischargeability of debt filed by Tina Espy and the answer filed by Michael A. Stevens Jr.
Conversion and VCPA
While conversion can constitute a basis for an exception to discharge under 11 U.S.C. § 523(a), the complaint here failed to plead such cause of action adequately and properly. Therefore, to the extent Ms. Espy has attempted to seek a determination of nondischargeability on the basis of conversion, the court declines to consider such cause of action for insufficient pleading and inadequate due process provided to Mr. Stevens.
Ms. Espy alleged in her complaint that Mr. Stevens’s actions violated certain subsections of the Virginia Consumer Protection Act, or VCPA. Ms. Espy’s scant mention of the VCPA in the complaint does not adequately plead a separate, specific cause of action under that act; additionally, she made no prayer for judgment in this regard so as to provide sufficient and proper notice to Mr. Stevens of this claim.
Though not raised by the parties, the court must nonetheless address the issue of collateral estoppel and whether this court is bound by the decision of the state court, as Ms. Espy’s damage request references the default judgment award of the state court.
On questioning from the court, counsel for Ms. Espy readily conceded that there was no evidence in the record that the issues central to the complaint were actually litigated in the state court. Accordingly, this court is not bound by the state court decision or the judgment amount awarded and will proceed to decide the issues in this case.
A plaintiff seeking a determination of nondischargeability due to fraud pursuant to § 523(a)(2)(A) must prove five elements by a preponderance of the evidence in order to succeed on their claim: (1) the debtor made a representation; (2) the debtor knew the representation was false when he made the representation; (3) the debtor made the false representation with the intent to deceive the creditor; (4) the creditor relied on the representation and (5) the creditor sustained the alleged loss and damages as a proximate result of the debtor making the representation.
In the instant case, Ms. Espy alleges that Mr. Stevens’s misrepresentation regarding his status as a licensed contractor fraudulently induced her into contracting with him. Therefore, the court will examine the above-enumerated elements as they relate to the alleged representation by Mr. Stevens that he was a licensed contractor. The court finds that Ms. Espy has proven all five elements. Therefore, having found that Ms. Espy has proven both causation in fact and legal causation of the damages she suffered as a result of Mr. Stevens’s misrepresentation, Ms. Espy is entitled to judgment for her damages and have the total sum declared nondischargeable in this matter.
As discussed earlier, the court is not bound by the state court judgment amount because the requirements of collateral estoppel have not been sufficiently demonstrated. Thus, the court must decide the amount necessary to compensate Ms. Espy for her loss. The court concludes that Ms. Espy directly paid Mr. Stevens deposits totaling $11,365.00, representing actual damages proximately caused by Mr. Stevens’s misrepresentation. The court additionally awards Ms. Espy $1,300, for flooring that she purchased and that Mr. Stevens took with him.
However, without any evidence as to the damages sustained for removing and disposing of Mr. Stevens’s work, the court declines to award any sum for the additional expenditure by the homeowner to correct the work. Nor has Ms. Espy shown she is entitled to punitive or treble damages. Finally, no statutory basis exists, under either Virginia state law or the Bankruptcy Code, to award attorney’s fees. Further, there is no demonstrated contractual basis present for such award in the current context.
Judgment for plaintiff.
Espy v. Stevens, Case No. 21-05003, Oct. 25, 2022. EDVA Bankr. at Newport News (St-John). VLW No. 022-4-027. 58 pp.