Elliott v. Piazza (In re Piazza)

645 B.R. 724

IN RE: Vincent A. PIAZZA, III, Debtor,

Patricia Elliott, Plaintiff,

v.Vincent A. Piazza, III, Defendant.

CASE NO. 5:18-bk-02300-HWV

ADVERSARY NO. 5:18-ap-00101-HWV

United States Bankruptcy Court, M.D. Pennsylvania.

Signed November 4, 2022

J. Zac Christman, J. Zac Christman, Esquire, Stroudsburg, PA, C. Stephen Gurdin, Jr., Wilkes-Barre, PA, for Plaintiff.

Brian E. Manning, The Law Office of Brian E. Manning, Dickson City, PA, for Defendant.

Nature of Proceeding: 62 Dischargeability

OPINION

Henry W. Van Eck, Chief Bankruptcy Judge

This matter comes before the Court by way of an Amended Adversary Complaint filed by Plaintiff, Patricia Elliott ("Elliott") in which she seeks a determination that a debt owed to her by Debtor-Defendant Vincent A. Piazza, III ("Piazza") is non-dischargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(2)(B). For the reasons that follow, the Court rules against Elliott and finds that this debt is dischargeable.

I. JURISDICTION

This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(a) and 28 U.S.C. § 157(a). This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(J) (objections to discharge).

II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

In 2011, Elliott and Piazza resided in Ketchikan, Alaska. (Doc. 127, p. 4.)¹ Elliott was the cardholder of two Alaska Airlines credit cards. (Id. ) Piazza operated a flooring business and owned several properties. (Id. at 4, 8.) Sometime in 2011, the parties entered into an oral contract regarding the use of Elliott's Alaska Airlines credit cards ending in 6957 (the "6957 Card") and 4194 (the "4194 Card" and, collectively with the 6957 Card, the "Cards") whereby Piazza and his wife would each be added to the Cards as authorized users and be permitted to use them for both business and personal use. (Id. at 4.) Piazza agreed to make payments on the Cards for charges he and his wife incurred. (Id. ) The parties agreed to share the resulting airline miles as they accrued. (Id. )

At first, the arrangement worked as planned; Piazza made charges and timely payments on the Cards.² (Id. ) However, by March 2012, the statements for the Cards reflected a combined balance of $33,951.05 that Piazza had not paid. (Id. ) Around this time, Piazza asked Elliott to request a credit limit increase. (Elliott Ex. 16.) On April 2, 2012, Elliott agreed to ask for an increase but stated that she would like some sort of security that the Cards would be paid in case "something unforeseen should happen." (Id. ) Piazza responded by noting that his business had over $1.5 million worth of work over the next twelve months, and that he also had six properties with "a ton of equity" that he could sell to make payments on the Cards. (Id. ) He also offered to add Elliott as a first loss payee on a life insurance policy to guarantee payment on the Cards in the event that he was unable to repay them. (Id. ) Elliott never responded to this offer and it does not appear that the parties discussed the issue further or otherwise took any additional action regarding security for Elliott in the event that Piazza was unable to make payments on the Cards.³ (Trial Tr. pp. 41–42.)

Thereafter, the parties’ agreement continued as anticipated. The statements for the 6957 Card reflect that between the April 2012 and February 2013 statements, Piazza charged more than $644,000 and made payments totaling more than $595,000. (Elliott Ex. 10–11.) The statements for the 4194 Card reflect that Piazza charged more than $50,000 and made payments totaling more than $45,000 over the same period. (Elliott Ex. 12–13.) Thus, collectively, Piazza charged more than $694,000 and made payments of more than $640,000 between April 2012 and February 2013. (Elliott Ex. 10–13.) The Cards carried a combined balance of approximately $68,500 as of the February 2013 statements. (Id. )

During this time, Piazza's business began experiencing financial trouble due to non-payment on several large projects. As a result, Piazza began to fall behind on payments on the Cards. (Trial Tr. pp. 32, 11–12.) Indeed, by March 12, 2013, the 6957 Card carried an unpaid balance of $66,158.65.⁴ (Elliott Ex. 11.) Accordingly, on March 13, 2013, Elliott asked Piazza to make payments on the Cards to bring the accounts below their respective credit limits. (Elliott Ex. 20.) Piazza responded that he would make payments as soon as possible, and that he was waiting on receivables totaling $231,000 to completely pay off the balance. (Id. ) On April 10, 2013, Elliott once again asked Piazza to make payments on the accounts to bring them below their respective credit limits. (Elliott Ex. 18.) Piazza indicated that he would be able to make payments in the next week and that he would not exceed the Cards’ credit limits again. (Id. ) Following this exchange, Piazza continued to make charges and payments on the Cards when he was able.⁵ (Elliott Ex. 11.)

On July 23, 2013, Piazza emailed Elliott to inform her that he and his wife would no longer be using the Cards and that Elliott could cancel them. (Elliott Ex. 22.) He also indicated that he would pay off the balances on the Cards once he received payment from several summer projects, which he estimated to be worth $500,000. (Id. ) He anticipated being paid by the end of September. (Id. ) Following this email, the charges on the Cards largely stopped, decreasing from tens of thousands of dollars charged per month to zero within a matter of weeks. (Elliott Ex. 10–16.) The final charge on the 6957 Card was a $149 charge on September 27, 2013 and the final charge on 4194 Card was a $718.01 charge on December 29, 2013. (Elliott Ex. 11, 14.)

After he stopped using the Cards, it appears that Piazza attempted to pay down the debt by making small payments toward the accruing interest. (See Elliott Ex. 11, 14.) In total, Piazza made payments of $3,185 on the 6957 Card and at least $4,190 on the 4194 Card after the date of the last charge on each respective Card. (Elliott Ex. 11, 14.) During this time, the parties continued to communicate via email, wherein Piazza repeatedly acknowledged that he was behind on his Card payments due to unpaid sums owed to his flooring business, but that he would pay Elliott back when he was able. (Elliott Ex. 24–25.) However, substantial balances remained on both Cards.

On April 10, 2014, Elliott filed a breach of contract action against Piazza in the District Court for the State of Alaska First Judicial District at Ketchikan based on his failure to pay off the balances on the Cards (the "State Court Action"). (Elliott Ex. 4.) Elliott was awarded $82,766.06 across three judgments from the State Court Action (the "State Court Judgments"), which included attorney's fees and interest. (Elliott Ex. 7–9.)

On May 31, 2018, Piazza filed a Chapter 7 bankruptcy petition. Thereafter, on September 4, 2018, Elliott filed the instant adversary proceeding seeking a determination from this Court that the debt owed to her from the State Court Judgments is non-dischargeable. The Court conducted a trial on this issue on March 16, 2022. The parties submitted post-trial briefs on April 12, 2022, and May 12, 2022, respectively. (Docs. 127, 129.) After review of the trial testimony, exhibits, and post-trial briefs, the Court is prepared to rule.

III. ANALYSIS

Actions to determine the dischargeability of debt are governed by 11 U.S.C. § 523(a). In dischargeability proceedings, the creditor carries the burden to prove by a preponderance of the evidence that the debt is non-dischargeable. Grogan v. Garner , 498 U.S. 279, 285, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). As the Court has already noted in this case, "exceptions to discharge are strictly construed against creditors and liberally construed in favor of debtors." (Doc. 23, p. 4 (collecting cases).)⁶

In this case, Elliott asserts that the debt owed to her pursuant to the State Court Judgments should be declared non-dischargeable under either § 523(a)(2)(A) or § 523(a)(2)(B).⁷ In support of her position, Elliott argues that Piazza maintained "unfettered use of Elliott's credit to charge purchases for several years" by "making repeated false assurances to Elliott ... that he intended imminent payment, when the circumstances and timing of his repeated broken promises make it clear that he had no intention to do so at the time the promises were made." (Doc. 127, p. 14.) In response, Piazza generally states that there is no evidence to support the assertion that he never intended to repay his obligations to Elliott at the time they were incurred, and that without such evidence, the debt owed to Elliott is dischargeable. (Doc. 129, pp. 6–7.) The Court considers these arguments in turn.

A. 11 U.S.C. § 523(a)(2)(A)

Under § 523(a)(2)(A) of the Bankruptcy Code, a Chapter 7 discharge "does not discharge an individual debtor from any debt ... for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by ... false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition." 11 U.S.C. § 523(a)(2)(A). In other words, as stated in Piazza II , to prove that the State Court Judgments are non-dischargeable under § 523(a)(2)(A), Elliott must show that

(1) the debtor made a false representation; (2) the debtor knew the representation was false when it was made; (3) the debtor intended to deprive the creditor or to induce him to act upon the representation; (4) the creditor justifiably relied upon the representation; and, (5) the creditor sustained a loss as a proximate result of the representation.

(Doc. 23, p. 6 (citing In re Griffith , No. 1:13-bk-4362, 2014 WL 4385743, at *3 (Bankr. M.D. Pa. Sept. 4, 2014) ; In re Ritter , 404 B.R. 811, 822 (Bankr. E.D. Pa. 2009) ).)

To satisfy the above elements, Elliott must rely on a statement "other than a statement respecting the debtor's or an insider's financial condition." 11 U.S.C. § 523(a)(2)(...