Bankruptcy: Home contractor prevails on former customer’s claims

Where a woman sued her former home contractor (the debtor) for fraud and under the Virginia Consumer Protection Act, the Bankruptcy Court did not err in finding for the contractor on her claims.

Background

In early 2019, Anne Defot-Sido contracted with James Carr for home renovations. By May 9, 2019, while the work was ongoing, Defot-Sido had “learned that [Carr] was not a licensed Virginia contractor.” Five days later, Carr “pulled his crew from the job site and sent [Defot-Sido] a text message suggesting that they ‘part ways,’ thereby effectively terminating the Contracts.”

Defot-Sido alleges that Carr’s termination of the contracts caused “damages in the form of materials that she paid for that were not delivered, and the costs of hiring a new contractor to complete the work and to correct any defective work installed by [Carr].” She also alleges that she “suffered personal injuries as a result of accidentally stepping into” a vent that Carr’s subcontractors had left exposed but covered with paper.

After Defot-Sido filed a lawsuit against Carr in the circuit court, Carr filed a petition under chapter 7 of the Bankruptcy Code. Defot-Sido then filed a seven-count amended complaint against Mr. and Mrs. Carr. The Bankruptcy Court dismissed six of the counts and found for Carr at trial on the remaining count. Defot-Sido appeals.

Fraud

The Bankruptcy Court did not clearly err in finding that Defot-Sido had failed to prove that Carr misrepresented that he had a contractor’s license. Defot-Sido testified on direct examination that while her “impression” was that he was “a licensed contractor,” she was “not 100% sure” whether Carr ever stated that he was licensed.

When asked how it was “implied that [Carr] was licensed,” Defot-Sido stated that “if you call yourself a contractor, you are licensed.” But she could not recall whether Carr ever used the word licensed. Defot-Sido also stated that her eight- or nine-year-old daughter told her Carr was licensed, which she “remember[s] … because that was unusual for this – for this age.” Based on this submission of evidence, and without even reaching the counter evidence provided by the Carrs, the Bankruptcy Court’s finding that Carr did not misrepresent that he was licensed was not clearly erroneous.

VCPA

Defot-Sido brought claims under various provisions of the Virginia Consumer Protection Act, or VCPA, which set forth requirements for “suppliers” for the benefit of consumers. The Bankruptcy Court dismissed Counts One, Two and Three because, in its view, Defot-Sido had not alleged that Carr made “a knowingly false representation,” which is required to establish that a claim is nondischargeable under § 523(a)(2)(A).

Even assuming that Carr was a “supplier” for purposes of the VCPA and that he was bound by its requirements, Defot-Sido failed to state a violation of Va. Code § 59.1-200(A)(9)-(10) because she did not allege a misrepresentation by Carr concerning “price reductions” or the “services [that] have been performed.” And even if the Bankruptcy Court erred by dismissing counts One and Three before trial, that error was ultimately harmless because the Bankruptcy Court did not clearly err in finding at trial that Carr did not make a fraudulent misrepresentation to Defot-Sido, which is required to establish that the damages associated with the violations were nondischargeable.

House transfer

Counts Five, Six and Seven seek to establish that the Carrs’ home, which in 2017 was transferred to Mr. Carr and his wife as tenants by the entirety, and in 2019 was transferred to Mrs. Carr individually, is part of Mr. Carr’s bankruptcy estate. The Bankruptcy Court held, as to Counts Five and Six, that Defot-Sido “has not alleged that she held a joint debt of Mr. and Mrs. Carr at the time of the transfer” of the Carrs’ home as tenants by the entirety to Mrs. Carr individually, and therefore she could not state a claim under Va. Code §§ 55.1-400, 55.1-401.

Rather than challenging that conclusion, Defot-Sido now argues that the Bankruptcy Court erred because it failed to consider whether the Carrs’ 2017 transfer was valid. But this argument does not save Defot-Sido’s claim because the 2017 transfer was valid. Nor has Defot-Sido stated a claim in Count Seven that would establish the home is a part of Mr. Carr’s bankruptcy estate.

Appeal denied.

Defot-Sido v. Carr, Case No. 1:23-cv-01476, Aug. 14, 2024. EDVA at Alexandria (Nachmanoff). VLW 024-3-419. 12 pp.