Opinion
Case No. 10-37871 Adv. No. 11-3164
12-14-2012
In re: KERT S. ALEXAKIS, Debtor. DAVID CHANDLER ANNETTA CHANDLER, Plaintiffs, v. KERT S. ALEXAKIS, Defendant.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
____________
Lawrence S. Walter
United States Bankruptcy Judge
Judge L. S. Walter
Chapter 7
DECISION OF THE COURT DETERMINING DEBT NONDISCHARGEABLE
The court has jurisdiction over this matter pursuant to 28 U.S.C. Sections 157(a), 157 (b)(2)(I) and 1334 and the standing General Order of Reference in this District.
This matter is before the court on the amended complaint filed by David and Annetta Chandler (hereinafter "Chandlers") in which they request a state court judgment debt against Debtor-Defendant Kert Alexakis (hereinafter "Debtor") be determined nondischargeable pursuant to 11 U.S.C. 523(a)(2) and 523(a)(6). The Debtor filed an answer to the amended complaint and, subsequently, the Chandlers filed a motion for summary judgment arguing that the state court judgment had preclusive effect on the elements of nondischargeability and that they should be granted judgment as a matter of law. The court denied summary judgment to the Chandlers and the matter proceeded to trial on October 25, 2012. After careful consideration of the evidence, including the exhibits and the testimony of the witnesses, the court determines that the judgment debt constitutes "fraud" as that term is used in 11 U.S.C. § 523(a)(2)(A) and a "willful and malicious" injury pursuant to 11 U.S.C. § 523(a)(6). Consequently, the debt will not be discharged in Debtor's bankruptcy case.
Set forth below are the findings of fact and conclusions of law that support this determination.
FACTUAL AND PROCEDURAL BACKGROUND
This matter begins in 2006 when Debtor Kert Alexakis joined Foreclosure Alternatives, a business purporting to help individuals in the midst of a foreclosure proceeding save their home. The Debtor testified that he originally became involved in the business to help his stepfather and president of Foreclosure Alternatives, Ron Trester. The Debtor started out as a personal assistant to Ron Trester and would do small jobs and run errands. In January of 2006, Ron Trester was convicted of federal crimes and incarcerated. At that point, Ron Trester asked the Debtor to step in and help run the business. At trial and in an affidavit filed with the court on summary judgment [Pl. Ex. 1], the Debtor minimized his role in the company stating that while he was given a title as statutory agent and later president, at the request of his mother, he was never a paid employee and "had nothing to do with the running of the company's daily business" [Pl. Ex. 1, ¶¶ 1, 9-12]. However, the Debtor's testimony at trial was vague, full of memory gaps and, along with his statements in the affidavit filed with this court, contradicted prior sworn testimony the Debtor gave in other legal proceedings.
The Debtor was deposed on May 30, 2008 for a separate legal proceeding involving Foreclosure Alternatives as a plaintiff [Pl. Ex. 2] and on April 24, 2008 related to a matter before Ohio's Office of Disciplinary Council [Pl. Ex. 3]. During his May 30, 2008 deposition, the Debtor testified that he was one of the original directors or vice president of Foreclosure Alternatives [Pl. Ex. 2, p. 62, 64]. However, when Ron Trester was incarcerated in January of 2006, the Debtor "moved up" in rank to president of Foreclosure Alternatives [Id., p. 65] and was asked by Ron to "come onboard and maintain this company" [Id., p. 115]. At that point, the Debtor "fully committed myself as an employee to that company" rather than just running errands [Id., p. 128]. Although the Debtor denied receiving income from the company in his testimony at trial and in the affidavit he filed with this court, prior testimony of the Debtor reveals that he began to receive compensation or income of between $300- $500 a week for "putting time into the company" [Id., p. 107]. When confronted with his prior inconsistent testimony, the Debtor reluctantly admitted the prior statements while at the same time attempting to reinterpret them.
Foreclosure Alternatives' business model involved searching for potential clients, individuals in the midst of foreclosure proceedings, by sifting through public court dockets. The company began its communications by sending mailers to individuals against whom a foreclosure complaint had been filed. The flier stated that the company would help negotiate with the lender and take legal actions on the clients' behalf to help them save their home. Potential clients would then call Foreclosure Alternatives and representatives would present how the business could help. If the individuals chose to form a relationship with Foreclosure Alternatives, they would pay the company approximately $800 - $900 some of which would go to an attorney to file legal documents on their behalf. Representatives of Foreclosure Alternatives would then review the client's financial situation, discuss the options with the client and submit a package to the lender.
Foreclosure Alternatives' business model was really a scheme, a business that "a group of monkeys" could run according to the Debtor's testimony at trial and in a prior deposition [Pl. Ex. 2, p. 83]. While the fliers and documents provided to clients stated that Foreclosure Alternatives would negotiate on their behalf with the lenders, no real negotiations took place. Instead, Foreclosure Alternatives did nothing more than present a package to the lender in the form of a request for refinancing, forebearance, or loan modification. The lender was free to either accept or reject the package. If rejected, Foreclosure Alternatives offered no further aid. During testimony at a prior legal proceeding, the Debtor estimated that about 20% of the time, a sheriff's sale of the house occurred [Pl. Ex. 3, p. 19].
The Chandlers, who are the creditors in this case, formed a relationship with Foreclosure Alternatives after they fell behind on their mortgage and a foreclosure complaint was filed against them by their lender, Wells Fargo. They received Foreclosure Alternatives' mailer and called the company.
Initially, the Chandlers spoke with Ron Trester's son, Lance Trester who went by the alias, Lance Baker. Subsequently, on June 13, 2006, they met with another employee of Foreclosure Alternatives, Daniel Jones, to sign a mediation agreement and other documents allowing Foreclosure Alternatives to assist them in their foreclosure situation. As was typical of Foreclosure Alternatives business model, the mediation agreement made clear that the business would negotiate with the lender and advised the Chandlers not to contact the lender and, if contacted by the lender, to limit their communication to informing the lender that they are now represented by Foreclosure Alternatives [Pl. Ex. 6, batestamp 000028]. The mediation agreement also indicated that a bankruptcy filing was the "last alternative" to saving this property [Id.]. At that meeting, David Chandler paid half of what was owed to the company for their services, $450 with the remaining $450 paid by the Chandlers in September [Pl. Ex. 6, batestamp 000033 and 000034].
Following their initial meeting with Daniel Jones and their payment to the company, David Chandler received a letter in the mail from Foreclosure Alternatives, dated August 3, 2006 [Pl. Ex. 6, batestamp 000035]. The letter stated that an attorney had "filed a plea and answered the complaint" on his behalf in the foreclosure case to give him time to get his financial affairs in order and so that Foreclosure Alternatives could begin negotiations with the lender [Id.]. In fact, that letter contained false information because Mr. Chandler subsequently discovered that no answer was filed on their behalf in the foreclosure action nor were they ever contacted by an attorney. Furthermore, Mr. Chandler called his lender, Wells Fargo, and the representative he spoke with revealed that the lender had not heard of Foreclosure Alternatives.
The Chandlers' initial and primary contact at Foreclosure Alternatives had been Lance Baker. However, in the summer of 2006, Lance asked his father Ron for more money and to have complete control of Foreclosure Alternatives. At some point, Ron made an offer to Lance which was rejected. Lance then presented Ron with an ultimatum. The Debtor asserts that Lance knew he was going to be terminated so he resigned and left the company in or around the last week of September, 2006 taking many of Foreclosure Alternatives' clients with him.
The Debtor initially testified and stated in a prior affidavit filed with the court that he did not talk to the company's clients [Pl. Ex. 1, ¶ 13]. However, as the Debtor later testified, once Lance left the company, the phone began ringing off the hook. Ron and the Debtor developed a new game plan that required the Debtor to begin communicating with employees and clients to ensure their continued relationship with the company. The plan was to retain the clients, close the business at its current location leased from Lance Baker, and move the business elsewhere. Consequently, at least by late September of 2006, the Debtor did answer phones and talk to clients of Foreclosure Alternatives [Pl. Ex. 2, p. 68].
It is around this time, in early October of 2006, that David Chandler learned of an article in the Western Star newspaper announcing a sheriff's sale of his house scheduled for Monday October 23, 2006. After reading the article, Mr. Chandler tried to reach Lance Baker at Foreclosure Alternatives. Instead, Mr. Chandler testified that he reached the Debtor. The Debtor explained to Mr. Chandler that Lance Baker had been fired and that is why he could not be reached. Mr. Chandler proceeded to tell the Debtor about the newspaper article and his concern that a sheriff's sale was scheduled for the following Monday. According to Mr. Chandler, the Debtor informed him that he had taken over the Chandlers' case and the Chandlers were to ignore the sheriff's sale posting because it was a formality. The Debtor told Mr. Chandler that he would save the property and that everything was fine. The conversation allayed Mr. Chandler's worries and he went about his business.
The Debtor initially disputed that this telephone call with Mr. Chandler occurred and asserted that he did not recall ever speaking to Mr. Chandler. He later admitted, however, that he "called a lot of people" and might have made the call to Mr. Chandler. For several reasons, the court finds Mr. Chandler's testimony to be the more credible and believes it to be true. First, Mr. Chandler has made the same testimony under penalty of perjury in front of a state court judge. Also, if Mr. Chandler had not spoken to the Debtor and learned that Lance Baker had been fired, he undoubtedly would have continued to call Foreclosure Alternatives in an attempt to reach Mr. Baker or someone else who could give him advice on the impending sheriff's sale of his home. In addition, the Debtor's admitted voicemail message to the Chandlers just prior to the sheriff's sale makes much more sense if in fact he was familiar with their file and had prior contact with them on the subject. Furthermore, the Debtor's testimony throughout the trial was vague, evasive, contradictory, and not credible. Although the Debtor stated that he did not talk to clients, it is clear from his prior testimony that once Lance Baker left Foreclosure Alternatives in late September, the new "game plan" did include the Debtor contacting Foreclosure Alternatives' clients in an attempt to allay their fears and prevent them from being recruited by Lance Baker. For all of these reasons, the court concludes that Mr. Chandler and the Debtor did have the conversation to which Mr. Chandler has testified.
The parties do agree that later that week, on or about Friday, October 20, 2006, the Debtor called the Chandlers and left a voice message stating that they would have to pay $7,000.00 to the lender to prevent the imminent sheriff's sale from going forward that following Monday. The Chandlers, who work the night shift and sleep the early part of the day, did not hear the message until around 5:00 pm. While at one point, David Chandler had been saving up funds and even took out an $8,100 loan from his 401(k) retirement plan to attempt to pay back the arrearage, some of the money had been spent on his wife's medical bills and other expenses. Consequently, they were unable to provide the funds needed to stop the sheriff's sale on short notice and their house was sold the following Monday, October 23, 2006.
The Chandlers provide the videotaped testimony of Wayne Novick, an experienced consumer bankruptcy attorney in Dayton, Ohio. Mr. Novick reviewed the Chandlers' financial situation and concluded that based on their income, expenses, mortgage payment and arrearage, the Chandlers could have filed a Chapter 13 bankruptcy petition prior to October 23, 2006. It would have immediately stopped the foreclosure and sheriff's sale. According to Mr. Novick's review, the Chandlers were in a good financial position to use the Chapter 13 filing to present a feasible Chapter 13 plan through which they would keep making current payments on their mortgage along with monthly payments towards the arrearage over a three to five year period. It was Mr. Novick's conclusion that if the Chandlers had met with a bankruptcy attorney and filed a Chapter 13 bankruptcy petition and plan, they would have been able to save their home.
Subsequent to the loss of their home at the foreclosure sale, the Chandlers filed a lawsuit against the Debtor, Foreclosure Alternatives and other defendants in the Court of Common Pleas of Hamilton County, Ohio on April 4, 2007. The Chandlers' claims included: 1) unauthorized practice of law; 2) violations of the Consumer Sales Practices Act; 3) breach of contract; 4) negligent misrepresentation; 5) negligence; 6) fraud; 7) unjust enrichment; and 6) civil conspiracy. The Debtor participated in the state court matter by hiring an attorney and filing an answer to the Chandlers' complaint as well as cross-claims against his co-defendants. However, prior to trial, the Debtor's attorney withdrew from the case and the Debtor proceeded without representation. The trial went forward on October 12, 2010, but the Debtor decided not to attend.
Following the Chandlers' presentation of evidence to the state court judge, including the deposition testimony of Wayne Novick, the state court judge made oral findings on the record that are also encapsulated in the court's Order Regarding Damages and Attorney's Fees ("State Court Judgment") entered on October 12, 2010 [Pl. Ex. 5]. The Court granted default judgments against Defendants Foreclosure Alternatives and Daniel Jones and held them liable for violating the Ohio Consumer Sales Practices Act, negligent misrepresentation, fraud with willful and malicious conduct and civil conspiracy [Id.]. The Court also made findings against the Debtor which can be summarized as follows:
The Court finds that Defendant, Kert Alexakis, violated the terms of [ ] the Ohio Consumer Sales Practices Act (OCSPA); made a false statement to the Chandlers and/or he made [ ] statements that he did not have a reasonable basis to believe were true; acted knowingly; and caused damages to the Chandlers; so
therefore, Alexakis: (1) is liable to the Chandlers on the Ohio Consumer Sales Practices Act in the amount of $ 82,320.00 ; (2) and is liable in attorney's fees in the amount of $ 69,000.00.
* * *
The Court finds that Defendant, Kert Alexakis, violated the elements of negligent misrepresentation and caused damages to the Chandlers; so therefore, Alexakis is liable on the negligent misrepresentation claims in the amount of $82,320.00.
* * *
The Court finds that Defendant, Kert Alexakis violated the elements of fraud with willful and malicious conduct and caused damages to the Chandlers; so therefore Alexakis: (1) is liable to the Chandlers on the fraud claim in the amount of $ 82,320.00; (2) is liable for punitive damages in the amount of $ 50,000.00; and (3) is liable for attorney's fees in the amount of $ 69,000.00.
* * *
The Court finds that Kert Alexakis violated the elements of civil conspiracy and caused damages to the Chandlers; so therefore, Alexakis is liable to the Chandlers in the amount of $ 82,320.00.
The state court judge held the Debtor liable for a total of $201,320.00 in damages to the Chandlers and, along with his co-defendants, was ordered to pay costs [Id.]. The Debtor did not appeal the state court judgment.
Following entry of the state court judgment, the Debtor filed a Chapter 13 bankruptcy petition on December 15, 2010 and a notice converting the case to Chapter 7 on February 3, 2011. The Chandlers filed their adversary complaint in this action on May 9, 2011, and amended it on September 8, 2011, seeking to have the judgment debt determined nondischargeable in bankruptcy. Although this court denied the Chandlers' motion for summary judgment, it found that the state court judgment was conclusive pursuant to the doctrine of res judicata with respect to the Debtor's liability to the Chandlers, the amount of the damages awarded, and, under state law, all of the elements of fraud, willful and malicious conduct, and civil conspiracy. Summary judgment was denied only because the state court judgment was somewhat conclusory and it was unclear whether the state court had made findings sufficient to establish two elements necessary to a determination of nondischargeability under the relevant Bankruptcy Code sections: 1) under 11 U.S.C. § 523(a)(6), whether the Debtor intended the injury to the Chandlers, or was substantially certain that such harm would result; and 2) under 11 U.S.C. § 523(a)(2)(A), whether the Debtor induced the Chandlers to part with money, property or services. In addition, this court noted in its decision that the debt might be held nondischargeable under the theory of civil conspiracy, but that issue had not been argued on summary judgment. All that remained for trial was clarification of these subtle factual ambiguities underlying the state court judgment and development of the civil conspiracy theory if pursued by the Chandlers.
CONCLUSIONS OF LAW
In their amended complaint, the Chandlers raise two separate theories to hold the state court judgment debt nondischargeable under the provisions of 11 U.S.C. § 523. As this court has already noted in its decision on summary judgment, exceptions from discharge are to be narrowly construed in favor of the Debtor and the Chandlers carry the burden of proof on these claims by a preponderance of the evidence. Monsanto Co. v. Trantham (In re Trantham), 304 B.R. 298, 306 (6th Cir. B.A.P. 2004).
a. Willful and Malicious Injury
The court begins with the Chandlers' claims pursuant to 11 U.S.C. § 523(a)(6). Pursuant to this statutory provision, a debt is to be excepted from discharge when the debt is for a "willful and malicious injury by the debtor to another entity or property of another entity." 11 U.S.C. § 523(a)(6). In the case of Kawaauhau v. Geiger, 523 U.S. 57, 61-63 (1998), the Supreme Court clarified that it was not sufficient for a debtor's acts to be intentional but also that the acts be committed with the intent or desire to cause injury. The Sixth Circuit further defined the standard by holding that the debtor must be found to have subjectively desired to cause the harm or had knowledge that the harm was substantially certain to result from the debtor's actions. Markowitz v. Campbell (In re Markowitz), 190 F.3d 455, 464 (6th Cir. 1999). In addition, the plaintiffs must demonstrate that the injury was malicious, meaning that it arose out of a conscious disregard of one's duties or without just cause or excuse. In re Rapp, 375 B.R. 421, 436 (Bankr. S.D. Ohio 2007) (citing Gonzalez v. Moffitt (In re Moffitt), 252 B.R. 916, 923 (B.A.P. 6th Cir. 2000)).
Significantly, a debtor's knowing participation in a conspiracy or scheme to cause injury to another can be a basis for finding a debtor to have committed a willful and malicious injury under 11 U.S.C. § 523(a)(6). See Cottingham v. Cottingham (In re Cottingham), 473 B.R. 703, 710-11 (B.A.P. 6th Cir. 2012) (holding that a debtor's knowledge of his wife's embezzlement of funds from her employer and his spending of those funds to support his extravagant lifestyle was sufficient to infer a conspiracy to cause injury and hold the debtor's debt nondischargeable pursuant to § 523(a)(6)).
Even with the stringent standard described in Geiger and Markowitz, the court concludes that the Chandlers have met their burden of proof for nondischargeability of the debt pursuant to § 523(a)(6). As already determined by the state court, the Debtor was involved in a "civil conspiracy" with Daniel Jones and Foreclosure Alternatives, and one element of a civil conspiracy is knowledge of and participation in an illegal plan. See Youngstown Osteopathic Hosp. Assoc. v. Pathways Center for Geriatric Psychiatry, Inc. (In re Youngstown Osteopathic Hosp. Assoc.), 280 B.R. 400, 412-13 (Bankr. N.D. Ohio 2002) (Noting that under Ohio law, the first element of a civil conspiracy is a "malicious combination of two or more persons to injure another requiring a common understanding or design to commit an unlawful act). Consequently, it may be inferred from the state court judgment as well as the evidence presented at trial that when the Chandlers spoke with the Debtor over concerns that their house was scheduled for sheriff's sale, the Debtor was a knowing participant in Foreclosure Alternatives' scheme of leading customers to believe that the business would help them negotiate with lenders and take actions through attorneys to save the clients' homes from foreclosure even though no negotiations or other actions took place. The Debtor was president of the company, was fully apprised of its operations by Ron Trester, admitted to becoming "fully committed" to the company, and ultimately immersed himself in perpetuation of the scheme by phoning its clients to ensure that they remained customers.
With reference to the Chandlers, the Debtor did, in fact, perpetuate the scheme when he told the Mr. Chandler that he had taken over the matter from Lance Baker, the sheriff's sale was only a "formality" that could be ignored, and that he would save their house. Instead, the Debtor did nothing more than look at their file and leave a phone message for the Chandlers on the last business day before the sheriff's sale telling them that they needed to provide the lender with $7,000 in funds or the sale would go forward. As was typical of Foreclosure Alternative's scheme and business model, the Debtor provided the Chandlers with "false security" leading them to believe that he would take actions on their behalf to save their house even though he never took, and had no intention of taking, any actions on behalf of the Chandlers to stop the sale. The Debtor made these statements in perpetuation of the scheme knowing that the statements were not true and knowing with "substantial certainty" that the Chandlers would lose their home. Consequently, not only is the Debtor's conduct willful as was already determined by the state court judgment, but the injury was willful as required for a finding of nondischargeability under § 523(a)(6) as clarified by Geiger and Markowitz.
Furthermore, the Debtor has provided no just cause or excuse for the statements he made. Although he alternately denies or claims no memory of the phone call to the Chandlers and likewise denies then admits making client phone calls, his testimony is not credible. It is clear from his prior testimony and his reluctant admission at trial that he did handle customer calls after Lance Baker left the company. He provides no justification or excuse for telling the Chandlers that everything would be fine, the sheriff's sale was a mere formality, and that he would save their house. With that, the court concludes that the Debtor's statements and conduct constitute a "willful and malicious injury" to the Chandlers under 11 U.S.C. § 523(a)(6). As a consequence, the judgment debt, which has been set by the state court and cannot be revisited by this court under principles of res judicata and Rooker-Feldman, will be excepted from the Debtor's discharge.
b. Fraud
Alternatively, the Chandlers pursue the nondischargeability of the debt under the "fraud" provision, 11 U.S.C. § 523(a)(2)(A), for the alleged false statements that the Debtor made. This provision of the Bankruptcy Code excepts from discharge a debt:
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by-
1 U.S.C. § 523(a)(2)(A). Pursuant to this provision, the Chandlers must prove:(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition[.]
. . . (1) the debtor obtained money through a material misrepresentation 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).
On summary judgment, the Chandlers asked this court to consider the preclusive effect of the state court judgment on the elements of nondischargeability under § 523(a)(2)(A). While this court concluded that the judgment met the requirements for the application of collateral estoppel generally and was preclusive on some of the elements, the court could not determine that the state court judgment was preclusive on all of the elements. More specifically, the elements of Ohio's common law fraud are substantially equivalent to those required to establish a nondischargeable debt under § 523(a)(2)(A) based on false statements or representations. See Miller v. Grimsley (In re Grimsley), 449 B.R. 602, (Bankr. S.D. Ohio 2011). Consequently, the state court's determination that the Debtor knowingly made false statements to the Chandlers and "violated the elements of fraud" in a manner that damaged the Chandlers is sufficient to preclusively establish all but one element of § 523(a)(2)(A).
The one element left to determine at trial in this court, as noted in the court's decision on summary judgment, is that the Debtor's fraudulent act or misrepresentation induced the Chandlers to part with their money, property or services. Aslakson v. Freese (In re Freese), 472 B.R. 907, 917-18 (Bankr. D. N.D. 2012). Id. Misrepresentations made subsequent to the creation of the debt have no effect upon dischargeability of a debt, since the false representation did not cause the creditor to part with money, property or services. Id.
On summary judgment, the court concluded that the state court judgment lacked any specific finding that the Debtor's fraudulent acts and statements induced the Chandlers to part with money, property or services. However, although the point was not argued by the Chandlers, the court noted in its summary judgment decision that it may be relevant that the Debtor, Foreclosure Alternatives and Daniel Jones were found by the state court to have engaged in a "civil conspiracy." Indeed, "once it is determined that a conspiracy has been formed, all parties to the conspiracy are civilly liable for injuries caused by acts pursuant to or in furtherance of the conspiracy." Id. Furthermore, courts, including the Bankruptcy Appellate Panel for the First Circuit, have concluded that § 523(a)(2)(A) can include debts which arise from the wrongful acts of conspirators and co-conspirators. See Aetna Casualty and Surety Co. v. Markarian (In re Markarian), 228 B.R. 34, 39-40 (B.A.P. 1st Cir. 1998); Hayes v. Dangerfield (In re Dangerfield), 2009 WL 2192648 (Bankr. N.D. Ill. June 30, 2009). Consequently, the Debtor can be found to have committed fraud in the inducement if he was a willing participant in a civil conspiracy in which the acts of his co-conspirators induced the Chandlers to part with money, property and services as part of the scheme.
In this case, there has been ample evidence presented at trial that Foreclosure Alternatives, through its representatives Lance Baker and Daniel Jones, induced the Chandlers to pay $900 to Foreclosure Alternatives by promising them such services as negotiating with their lender and filing legal documents in their foreclosure case even though the services were not provided. The state court judgment establishes that Debtor was a co-conspirator with Foreclosure Alternatives making him a knowing participant in this scheme. Consequently, his willing participation in the conspiracy allows him to be held liable for the acts of his co-conspirators in fraudulently inducing the Chandlers to pay Foreclosure Alternatives for its alleged services.
Even if these co-conspirators' acts were not sufficient, the Debtor's own acts and fraudulent statements further induced the Chandlers into a false sense of security in the week before the sheriff's sale that ultimately led to the loss of their home. More specifically, the Debtor's fraudulent misrepresentations to the Chandlers that they should ignore the sheriff's sale because it was a formality and that he, the Debtor, would save the property caused the Chandlers to take no actions in the week before the sale. Testimony from Wayne Novick, a bankruptcy attorney, establishes that if the Chandlers had not been lulled into a false sense of security and had instead visited an attorney and filed a bankruptcy petition, the filing would have immediately stopped the sale from progressing. The Chandlers also would have been able to present a plan to bring the mortgage current and likely would have remained in their home. This evidence is sufficient to establish fraud in the inducement.
Based on the Debtor's willing participation in a civil conspiracy that induced the Chandlers to part with money as well as the Debtor's own fraudulent acts and statements that induced the Chandlers into a false sense of security that ultimately led to the loss of their home, the court concludes that the final element of § 523(a)(2)(A) is met. Consequently, the state court judgment debt owed by the Debtor to the Chandlers is excepted from the Debtor's discharge pursuant to § 523(a)(2)(A).
In conclusion, judgment is granted to Plaintiffs David and Annetta Chandler and against Debtor Kert Alexakis. As such, the Debtor's state court judgment debt encapsulated in the Hamilton County Common Pleas Court's Order Regarding Damages and Attorney's Fees and admitted in this proceeding as Pl. Ex. 5 is excepted from discharge pursuant to 11 U.S.C. §§ 523(a)(6) and (a)(2)(A). The court will enter a separate written order granting judgment to the Chandlers in conformance with this decision.
SO ORDERED. Ted L Wills
414 Walnut Street
Suite 707
Cincinnati, OH 45202-3913
Email: TedLWills@aol.com
Kerrie K. Matre
Matre & Beyke Co., LPA
11800 Conrey Road, Suite 200
Cincinnati, OH 45249
Email: kmatre@matrelaw.com
Jeremy Shane Flannery
Office of the United States Trustee
170 North High Street
Suite 200
Columbus, OH 43215
Email: Jeremy.S.Flannery@usdoj.gov