Coleman v. Fields (In re Fields)

544 B.R. 156

In re: C.R. Fields, III, Debtor

Richard M. Coleman, Jr., Plaintiff

v.C.R. Fields, III a/k/a Randy Fields, III, Individually and Doing Business as Arkansas Windows & Siding, Defendant

CASE NO.: 4:14–bk–11088

AP NO.: 4:14–ap–01055

United States Bankruptcy Court, E.D. Arkansas, Little Rock Division .

Signed January 20, 2016

Jennifer M. Lancaster, The Lancaster Law Firm, Benton, AR, for Debtor.

MEMORANDUM OPINION AND ORDER

HONORABLE RICHARD D. TAYLOR, UNITED STATES BANKRUPTCY JUDGE

Richard M. Coleman, Jr. ("Coleman") filed his Complaint against the debtor/defendant, C.R. Fields, III ("debtor"), individually and doing business as Arkansas Windows & Siding, seeking to establish damages under Arkansas law for breach of contract, unjust enrichment, fraud, and violation of the Arkansas Deceptive Trade Practices Act. Commensurately, the Complaint alleges that any resulting indebtedness should be nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), (4), or (6). The Complaint and the debtor's Answer to Complaint came on for trial on October 28 and 29, 2015. The parties appeared personally and by and through their counsel. At the conclusion of trial, the court took this matter under advisement.

For the reasons stated below, the court awards Coleman damages in the amount of $35,000 for breach of contract and unjust enrichment. Coleman shall have fifteen days from the entry of this Memorandum Opinion and Order within which to submit a verified statement of his costs and attorney's fees incurred. The debtor shall have ten days thereafter within which to respond or otherwise object to the fee request. Without a hearing, the court will determine the appropriate costs and fee amount. Further, the damages, costs, and attorney's fees are nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), for false pretenses and false representations. A final order and separate judgment shall be entered after considering the costs and fee request as stated above.

I. Jurisdiction

This court has jurisdiction over this matter under 28 U.S.C. §§ 1334 and 157. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (I), and (J). The following opinion and order constitute findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.

II. Findings of Fact

A. The Contract

The debtor and his wife, Anna Fields, operated a business under the name Arkansas Windows & Siding ("AWS"). Coleman, seventy-seven years old at the time, owned a home in Searcy, Arkansas, and asked the debtor to give him a bid for home improvements.

On September 12, 2012, Coleman and AWS executed an agreement ("Contract") for construction work on Coleman's home in the amount of $67,114. (Ex. A.) The work scope included windows, siding, and roofing. Although termed a Proposal between Coleman and AWS, the parties conceded at trial that the Contract (1) was a binding contract and (2) individually obligated the debtor. Coleman testified that it was important to him that the debtor was a licensed contractor capable of timely and appropriately obtaining materials and labor for the project. The debtor conceded that he represented to Coleman that he was capable, had the ability to obtain labor and necessary materials, and could complete the job in a timely and professional manner. Further, the debtor admitted that Coleman entered into the Contract based on the debtor's representations.

The Contract called for a $35,000 down payment. (Ex. A.) On September 13, 2012, the day after the parties signed the Contract, Coleman delivered a cashier's check in the amount of $35,000 to Anna Fields. Anna Fields deposited the check that same day in the AWS business account with Arvest Bank. (Ex. B.)

The parties expected that work would begin immediately. On September 14, 2012, an AWS employee arrived at Coleman's home and measured for replacement windows; another employee came out to the house and did some preliminary concrete work. The next firm date referenced is September 27, 2012, when the debtor and John Redditt ("Redditt") came to Coleman's house to discuss tearing down the deck.

Although the exact timing is not entirely clear, Coleman asked the debtor to stop working on the project for a period of time while Coleman went on vacation. Coleman thought work was to recommence on October 15, 2012; the debtor concurred. According to Coleman, the debtor came to his house on October 16, 2012, and informed Coleman that there had been a theft by one of his employees, that his $35,000 down payment had been stolen, and that the employee had paid for other projects with company money.

Both sides agree that the debtor then essentially offered, either directly or through a former employee, to complete the project with Coleman paying for labor and materials. The debtor represented that he would attempt to oversee the project, would keep costs to a minimum, and could possibly complete the project for about the same amount as the original Contract. This effort failed completely within a few days. According to Coleman, the debtor basically disappeared.

Coleman spoke to the debtor for the last time on October 23, 2012. Coleman told the debtor he should continue as the contractor. The debtor was unwilling or unable. At the debtor's recommendation, Gary Montgomery ("Montgomery"), an individual who had worked for AWS, assisted Coleman in completing the project. Montgomery worked for AWS "until the very end" and had already worked on Coleman's project. But, he was no longer receiving direction from the debtor. Coleman paid Montgomery directly thereafter. No one else performed any work on behalf of the debtor, and Coleman completed the project with Montgomery's assistance. Around this time, AWS ceased doing business.

Of the $35,000 down payment, the debtor used no more than $1100 towards the Contract. He indicated that he may have paid Redditt anywhere from $600 to $1100 but could not be more specific. The debtor did not apply the balance of the down payment to the performance of his Contract with Coleman. Rather, he used the money to pay salesmen, operating expenses, employees, and vendors. Anna Fields, also the bookkeeper for AWS, acknowledged that a small percentage went to personal use. The debtor already knew he was behind financially and his business was having a difficult time when he took the down payment. He did not tell Coleman that he was going to use the down payment for purposes other than completion of the Contract.

The debtor conceded that (1) he wholly failed to perform under the terms of the Contract and is in breach, and (2) his inability to obtain materials and pay employees, both circumstances attendant to AWS closing its business, occasioned this default. The debtor testified, however, that he did not think he was going out of business at the time he executed the Contract in September of 2012 as he had ongoing projects that he was completing each week. Only thereafter, while he was working on two or three other projects plus Coleman's Contract, did he realize he could not get any more materials or pay his employees. The debtor assigned most of the blame for AWS's problems on a "bad month" resulting from a salesman who underbid projects, took kickbacks, and otherwise stole in an unspecified manner from the business.

B. AWS's and the Fields' Finances in Fall 2012

In his Complaint, Coleman alleges that the debtor "knew at the time that he entered into the Contract" that he "would not use the money for the purposes set forth in the [C]ontract," he "preyed upon Coleman for pecuniary gain with no intention of completing the work required by the [C]ontract or repaying any of the down payment," and he lacked the ability "to obtain the materials and labor necessary to complete the [C]ontract" in a timely and professional manner consistent with all applicable building codes. (Comp., June 2, 2014, ECF No. 1, at ¶¶ 17, 23, and 25.) These allegations, denied by the debtor, require scrutiny of the debtor's business and personal financial circumstances at the time he entered into the Contract and obtained the $35,000 down payment.

In 2012, the sole source of income for both the debtor and Anna Fields was AWS. The debtor could not precisely state when he closed AWS. He testified that he closed the doors in late October or early November 2012. He conversely characterized it as within a "few weeks" after receiving the $35,000 down payment from Coleman, which would indicate a closing in late September.

At trial, the debtor sought to isolate his financial problems to a "bad month" while Coleman was on vacation. The debtor testified that no one stole the $35,000 from him. Rather, he had a salesman that was under bidding jobs and taking kickbacks; the debtor did not file a police report or otherwise pursue the salesman. Anna Fields, however, testified that the problems with the salesman, Scott Williams ("Williams"), were long-standing. According to her, the problems started in October 2011 with Williams "selling a job short." That is, the first sign was in 2011 when AWS lost approximately $5500 on a job. AWS suffered additional losses in 2012: an approximate $17,000 loss in the spring of 2012 and losses on two sunrooms in the spring or summer of 2012. Notwithstanding those warning signs, Anna Fields testified that the losses came on them "suddenly" as jobs took a few months to complete with some good sales in between. Although Anna Fields knew things were going bad in the spring and summer of 2012, she insisted that the problems came to their attention after executing the Contract with Coleman.

In contrast to the testimony of Anna Fields and the debtor, Montgomery testified that he knew the debtor was trying to close up AWS about a month before it actually closed. He also confirmed issues with a salesman. Montgomery understood that the debtor was in a "bad way" at the end.

1. The Debtor's and Anna Fields's Bankruptcies

The debtor filed his Chapter 7 bankruptcy on February 26, 2014. (Ex. D.)...