Opinion
Case No. 19-33971 Adv. No.20-3015
06-15-2021
In re: BRIAN K. BATES, Debtor. Classic Comfort Heating & Supply Co., Plaintiff, v. Brian K. Bates, Defendant.
Chapter 7
DECISION GRANTING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (DOC. 27) AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (DOC. 25)
I. Procedural Background
Brian K. Bates filed a petition for relief under Chapter 7 of the Bankruptcy Code. Estate Doc. 1. Creditor Classic Comfort Heating & Supply, LLC ("Classic Comfort") commenced a timely adversary proceeding seeking an order denying Bates his discharge pursuant to 11 U.S.C. § 727(a)(2) and (4)(A), and finding any debt owed to Classic Comfort non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) and (C), to which Bates timely answered. Docs. 1 and 4.
The United States Trustee (the "UST") commenced a separate adversary proceeding seeking to deny Bates his discharge. Doc. 1 - Adv. No 20-3036. Bates and the UST later entered into a stipulation and agreed order through which Bates waived his discharge pursuant to 11 U.S.C. § 727(a)(10). Estate Doc. 29.
"The court shall grant the debtor a discharge, unless . . . the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter[.]" 11 U.S.C. § 727(a)(10).
Classic Comfort has filed a proof of claim [8-1] in the amount of $20,495.57. The Chapter 7 Trustee's most recent interim report, filed on January 26, 2021, indicates that he is pursuing "possible preferential transfers." (Estate Doc. 31). Nevertheless, it does not appear that the bankruptcy estate currently has any funds. Id.
Classic Comfort has moved for summary judgment, seeking a finding it is owed a debt in the amount of $20,495.57, and that this debt is non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). Doc 27 at 20. Based upon his waiver of discharge, Bates also has moved for summary judgment, or, in the alternative, dismissal of the complaint. Doc. 25. Bates did not contest the proposed factual findings of Classic Comfort as to the liquidation of the asserted debt.
In the Darke County (Ohio) Court of Common Pleas, Case No. 20-CV-00200, Classic Comfort is also litigating the same transaction at issue in this adversary proceeding. Bates Affidavit at ¶ 7 (Doc. 29). Classic Comfort filed the state court complaint on April 29, 2020, six days after this adversary proceeding was filed. Bates Affidavit (Exhibit B). In the state court action, Classic Comfort alleges breach of contract, unjust enrichment, and fraudulent inducement against Bates' apparent girlfriend, Sandra Miller ("Miller"). Id. Bates has taken the position in this adversary proceeding that the only party to any contract with Classic Comfort was Miller. Doc. 7 at 3.
Bates argues in his summary judgment filing that the dischargeability complaint is "simply unnecessary" because he has waived his discharge, and will stipulate that any debt in question is non-dischargeable. Doc. 25 at 6. However, Bates has not agreed to stipulate that he owes a debt to Classic Comfort and the amount of any such debt - only that if he owes a debt, it is nondischargeable as a result of his waiver of his discharge. Classic Comfort argues that since Bates has not agreed he owes Classic Comfort a pre-petition debt, and such a debt is a pre-condition of a finding of non-dischargeability, this court has jurisdiction to determine this adversary proceeding, and particularly, whether a debt exists and, if so, the amount of the debt.
II. Summary Judgment Standard
Federal Rule of Civil Procedure 56(a), made applicable to this adversary proceeding through Federal Rule of Bankruptcy Procedure 7056, sets forth the standard to address the parties' filings. It states, in part, that a court must grant summary judgment to the moving party "if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). All inferences drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). Once the moving party has met its burden, the non-moving party must put forth specific facts showing a genuine need for a trial. Id. at 588.
III. Subject Matter Jurisdiction, Constitutional Authority, and Mootness
Although these summary judgment motions come to this court in an unusual procedural posture, some legal principles are clear, at least in the Sixth Circuit. The bankruptcy court has jurisdiction to determine the dischargeability of a debt, and dischargeability actions are core proceedings of the bankruptcy court. 28 U.S.C §§ 1334 and 157(b)(2)(I). Indeed, dischargeability complaints based on fraud, which include 11 U.S.C. § 523(a)(2), (4) or (6), are exclusively for the bankruptcy court to determine. 11 U.S.C. § 523(c); Schafer v. Rapp (In re Rapp), 375 B.R. 421, 430 (Bankr. S.D. Ohio 2007) (citing Dollar Corp. v. Zebedee (In re Dollar Corp.), 25 F.3d 1320, 1325 (6th Cir. 1994)). Bankruptcy courts also have jurisdiction to liquidate a debt as part of a non-dischargeability proceeding. Longo v. McLaren (In re McLaren), 3 F.3d 958, 966 (6th Cir. 1993). In addition, bankruptcy courts have constitutional authority to liquidate a debt when determining dischargeability and may enter final judgment on such debt. Hart v. S. Heritage Bank (In re Hart), 564 Fed. Appx. 773, 777 (6th Cir. 2014). Also, it is a fundamental principle that a dischargeability proceeding requires the creditor to show a debt is owed by the debtor. Weidle Corp. v. Leist (In re Leist), 398 B.R. 595, 601 (Bankr. S.D. Ohio 2008); Lawson v. Conley (In re Conley), 482 B.R. 192, 207 (Bankr. S.D. Ohio 2012). Although a bankruptcy court may liquidate a debt in a non-dischargeability proceeding, the court is not required to do so. Leonard v. RDLG, LLC (In re Leonard), 644 Fed. Appx. 612, 620 (6th Cir. 2016) (citing Hart, 564 Fed. Appx. at 776)).
In addition, subject matter jurisdiction, at least in most circumstances, is established at the time an adversary proceeding is commenced. Holmes Fin. Assocs., Inc. v. Resolution Trust Corp., 33 F.3d 561, 565 (6th Cir. 1994) ("Ordinarily, the subject matter jurisdiction of a court is tested as of the time the action is filed and subsequent changes will not operate to divest a court of its jurisdiction once it has been properly evoked."); Spradlin v. Pikeville Energy Group, LLC, Civil No. 12-111-ART, 2012 WL 6706188, at *5 (E.D. Ky. Dec. 26, 2012) (similar, citing Holmes). "Like most general principles, this one is susceptible to exceptions[.]" Newman Green, Inc. v. Alfonso-Larrain, 490 U.S. 826, 830 (1989). Bates conceded in his answer the court had jurisdiction. Compare Doc. 1 at ¶ 1, and Doc. 4 at ¶ 1.
One exception is a case in which a court has jurisdiction can become moot. League of Women Voters of Ohio v. Brunner, 548 F.3d 463, 473 (6th Cir. 2008). A case is moot "when the issues presented are no longer 'live' or the parties lack a legally cognizable interest in the outcome." Brunner, 548 F.3d at 473 (quoting L.A. County v. Davis, 440 U.S. 625, 631 (1979)). Mootness concerns the requirement that a "case or controversy" exists. Brunner, 548 F.3d at 473. In re Hake, 398 B.R. 892, 899 (B.A.P. 6th Cir. 2008) (similar). Mootness can be raised at any time because it is "a jurisdictional requirement[.]" Brunner, 548 F.3d at 473.
The question before the court is a narrow one. When an individual debtor is no longer eligible for a statutory discharge, can the court liquidate a disputed debt in a dischargeability proceeding? If Bates conceded the debt in question, the parties agree that this adversary proceeding would be moot.
The relevant case law is, unsurprisingly, limited. In Markwood Invs. Ltd. v. Neves (In re Neves), 500 B.R. 651 (Bankr. S.D. Fla. 2013), the debtor waived his discharge, and, as in this adversary proceeding, a creditor was pursuing a dischargeability proceeding, including the liquidation of the underlying debt. The debtor suggested that the court no longer had jurisdiction after the discharge was waived. Id. at 660. The court disagreed:
The determination [of] whether a claim is non-dischargeable is a core matter. Thus, the filing of this adversary proceeding invoked this Court's core jurisdiction. And, the Debtor admitted, indeed, affirmatively alleged, that this Court's jurisdiction over the entire dispute was core, in his original answer. "It has long been the rule that bankruptcy courts sit as courts of equity ... and once a court sitting in equity has jurisdiction over the parties to a controversy brought before it,
the court can decide all disputed matters and decree complete relief." In re Porges, 44 F.3d at 165 (citations omitted); In re Riebesell, 586 F.3d at 793; In re Hallahan, 936 F.2d at 1508; In re Beck Indus., 605 F.2d 624, 634 (2d Cir.1979); Abramowitz v. Palmer, 999 F.2d 1274, 1279 (8th Cir.1993); cf. Alexander v. Hillman, 296 U.S. 222, 242, 56 S.Ct. 204, 80 L.Ed. 192 (1935) (equity receivership case emphasizing the general rule of courts of equity that "having jurisdiction of the parties to controversies brought before them, they will decide all matters in dispute and decree complete relief"). Because liquidation of a claim is, most times, integral to the determination of non-dischargeability of that claim, as well as determination of the debtor-creditor relationship in the bankruptcy case, the liquidation of the claim is tied to the core jurisdiction of the bankruptcy court as well because the dispute and its complete resolution invoke the court's equitable jurisdiction. See Dragisic v. Boricich, 464 B.R. 335 (Bankr.N.D.Ill.2011); In re Carroll, 464 B.R. 293 (Bankr.N.D.Tex.2011); see also Stern, 131 S.Ct. at 2618 (the bankruptcy court's jurisdiction extends to actions that "would necessarily be resolved in the claims allowance process").Id. at 659-60 (footnote omitted and emphasis added).
The Debtor counters that this Court's core jurisdiction is no longer implicated because once the discharge was waived, and the Claim Objection was withdrawn, there is no impact on the bankruptcy estate. The Debtor is wrong for several reasons. In a complaint to determine dischargeability of a debt there are always two issues—one is a determination of what is the debt (although sometimes this has already been resolved by a state court) and the other is the determination whether that debt is non-dischargeable. See In re Riebesell, 586 F.3d at 793; RTC v. McKendry (In re McKendry), 40 F.3d 331, 336-37 (10th Cir.1994). The Debtor's waiver of his discharge no more divested this Court of jurisdiction to liquidate the claim than would have a determination by this Court that the debt was non-dischargeable before actually liquidating the claim—the two issues are intertwined, no matter in which order and however resolved, whether through consent or final adjudication.
A similar issue arose in Hanks v. Owens (In re Owens), Adv. No. 13-2036, 2015 WL 1093105 (Bankr. W.D. Mo. Mar. 9, 2015). In Owens, after a dischargeability trial occurred, the debtor waived his discharge. Id. at *2. The court found the issue of dischargeability moot, but citing Neves, concluded that "because the court had already fully litigated the issue regarding dischargeability of the claim and damages it is proper for it to determine the amount of debt owed . . . ." Id. The court also noted that neither party objected to the liquidation of the plaintiff's claim. Id. at *1 n.1.
In Jacobsen v. Sramek, No. 4-11-cv-822, 2013 WL 694045 (E.D. Tex. Feb. 26, 2013) aff'd, 561 Fed. Appx. 375 (5th Cir. 2014), the creditor filed a complaint concerning the dischargeability of its debt, and to deny the debtor his discharge. Id. at *1. During the trial, the debtor decided to waive his discharge, and his waiver was approved by the court. Id. The court found the dischargeability claim moot, but ordered the creditor to complete a filing requesting entry of judgment. Id. The debtor objected, arguing that the creditor has not proven dischargeability, and the amount of damage was a state law issue. Id. The court overruled that objection, and entered final judgment against the debtor. Id. However, in that decision, the allowed amount of the creditor's claim previously had been determined by a California state court, and the bankruptcy court did not liquidate the claim in order to enter judgment. Id. at *4. The district court affirmed on appeal. Id.
In re Ferri concerned the standard for a waiver of discharge. Case No. 13-08-12399 JA, 2011 WL 3962117 (Bankr. D.N.M. Sept. 7, 2011), In dicta, the decision noted that the plaintiff was not seeking a monetary judgment as part of the non-dischargeability action, and would not allow the adversary proceeding to proceed only to provide the plaintiff findings for subsequent litigation, or to make a criminal referral to the Department of Justice. Id. at *3. The court noted that a waiver of discharge "would not moot a claim for a monetary judgment, and therefore would not create a potential for expensive duplicative litigation or forum shopping by the [debtor]." Id.
In Humphrey v. Morgan (In re Morgan), Adv. No. 12-1006, 2012 WL 1390246 (Bankr. E.D. Tenn. Apr. 20, 2012), one of the joint debtors waived discharge. The court found the dischargeability action against that debtor moot, and dismissed that count. Id. at *1. The court provides little analysis, although it appears that the underlying debt may have been liquidated, or at least that there was no dispute that a debt existed. See id. at *4 ("The Debtor Christi Morgan has already waived her discharge in her bankruptcy case; therefore, the debt that Mrs. Morgan owes to the Plaintiff will not be discharged."). See also In re Eliscu, 163 B.R. 335, 338 (Bankr. N.D. Ill. 1994) (in decision denying the debtor's request to vacate a prior waiver of discharge, the court mentions, without discussion, that adversary proceedings brought under 11 U.S.C. §§ 523 and 727 are moot after a waiver of discharge).
In considering the Sixth Circuit jurisdictional standards generally, and the case law in this narrow area, the court determines that it retains subject matter jurisdiction to liquidate the judgment in question. The Sixth Circuit has been clear that liquidating a judgment in a dischargeability proceeding is within this court's equitable jurisdiction. McLaren, 3 F.3d at 966 (quoting In re Devitt, 122 B.R. 212, 215 (Bankr. D. Md. 1991) ("If it is acknowledged as beyond question that a complaint to determine dischargeability of a debt is exclusively within the equitable jurisdiction of the bankruptcy court, then it must follow that the bankruptcy court may also render a money judgment in an amount certain without the assistance of a jury. This is true not merely because equitable jurisdiction attaches to the entire cause of action but more importantly because it is impossible to separate the determination of dischargeability function from the function of fixing the amount of the nondischargeable debt.")). Of course, with dischargeability no longer at issue for any of Bates' pre-petition debts, this court could choose not to liquidate this specific debt, and leave this for a state court to resolve. Leonard, 644 Fed. Appx. at 620 (clarifying that sometimes a dischargeability proceeding can be separate from the liquidation of the judgment). But, in these specific circumstances, the court finds it is appropriate to do so to "decide all matters in dispute and decree complete relief," even when a court of law could decide the issue as well. Id. (quoting Alexander v. Hillman, 296 U.S. 222, 242 (1935)).
When Bates filed his bankruptcy petition, he submitted himself to this court's equitable jurisdiction, including this court's jurisdiction over the issuance of his discharge and over the determination of the dischargeability of particular debts. Bates was in bankruptcy for approximately a year before stipulating to a waiver of his discharge. Estate Doc. 29. By that point, the adversary proceeding and the state court litigation had both been pending for eight months. While the court is mindful of the legal action pending in the Darke County Court of Common Pleas, Bates pursued bankruptcy and submitted himself to this court's jurisdiction. Once the UST litigation was filed, Bates ultimately chose to waive his discharge. And upon Classic Comfort's pursuit of this dischargeability proceeding invoking this court's equitable jurisdiction, Bates admitted such jurisdiction in his answer, entitling Classic Comfort to complete relief. See Complaint and Answer, Doc. 1 at ¶ 1, 2, and Doc. 4 at ¶ 1. That complete relief includes whether Bates owes Classic Comfort a pre-petition debt post-bankruptcy, and, if so, what amount is owed.
The determination that a nondischargeable debt exists requires first that a debt owed by the debtor to the creditor be established and only then does the issue of whether that debt is nondischargeable under any of the grounds provided by § 523(a) arise. Hatfield v. Thompson (In re Thompson), 555 B.R. 1, 8 (B.A.P. 10th Cir. 2016) ("Dischargeability actions require a two-part analysis; first the bankruptcy court must determine the validity of the debt under applicable law (the claim on the debt); and second, the bankruptcy court must determine the dischargeability of that debt under § 523 (the dischargeability claim).") (footnotes omitted); NextGear Capital, Inc. v. Nozary (In re Nozary), Adv. No. 15-0092-NVA, 2017 Bankr. LEXIS 3298, at *6 (Bankr. D. Md. Sept. 29, 2017) (similar). Thus, while Bates' waiver of his discharge mooted the second part of the § 523 analysis—the need to establish grounds under § 523(a) for declaring a debt nondischargeable; the first part of the analysis - the issue of whether Bates owed a debt to Classic Comfort was not resolved, and this court maintained jurisdiction to determine that part of the nondischargeability proceeding. Those questions may be answered in this tribunal without Classic Comfort having to begin again in another forum that Bates may now prefer.
IV. Classic Comfort's Proof of Claim is Not Relevant to the Jurisdictional Analysis.
Although referenced by Bates, Classic Comfort's proof of claim is not relevant to this determination. Classic Comfort has filed a proof of claim, and it appears executed properly and therefore is entitled to prima facie validity. Fed. R. Bankr. P. 3001(f). See Bates Affidavit (Exhibit A). Bates cites the Supreme Court's decision in Bank of America, N.A. v. Caulkett in support of his argument that Classic Comfort's filing of the proof of claim negates the need to determine its debt in this proceeding, but that decision is inapposite for the issue before this court. 575 U.S. 790 (2015) (holding that a Chapter 7 debtor could not strip off a wholly unsecured mortgage lien pursuant to 11 U.S.C. § 506(d)). Nothing in Caulkett suggests that having an "allowed claim" pursuant to 11 U.S.C. § 502 and Rule 3001(f) can be a substitute for the liquidation of a disputed debt in a dischargeability adversary proceeding. Put another way, the mere filing of a proof of claim does not establish the existence of a claim under state law, even if no objection to that proof of claim is filed. See Pursley v. eCAST Settlement Corp. (In re Pursley), 451 B.R. 213 (Bankr. M.D. Ga. 2011) (Proofs of claim filed by assignee of credit card debt, while presumed prima facie valid pursuant to Rule 3001, did not establish that the assignee was a proper party in interest under state law.). The filing of a proof of claim under 11 U.S.C. § 501 and the allowance of that claim under § 502 merely allows the creditor to participate in the bankruptcy and to receive payments from the bankruptcy estate. See Grynberg v. United States (In re Grynberg), 986 F.2d 367, 372 (10th Cir. 1993) (Failure to file a proof of claim in a bankruptcy case only prevented the creditor's receipt of payments under the debtor's bankruptcy plan; it did not prevent the creditor's collection of a nondischargeable debt outside the bankruptcy.). The filing of a proof of claim in a bankruptcy case does not establish the creditor's claim in proceedings outside the bankruptcy court. Absent the debtor conceding the debt in his schedules or otherwise, or the debt being liquidated pre-petition by a court of appropriate jurisdiction, the burden is on the creditor to prove a debt exists in a dischargeability proceeding. Classic Comfort could not establish its debt for future execution by, in lieu of a judgment, using the existence of an allowed proof of claim in a bankruptcy case. The court is unaware of any authority supporting that legal theory.
V. Adequacy of Classic Comfort's Complaint to Establish the Debt
Bates also argues that Classic Comfort's seeking summary judgment to establish the debt constitutes "litigation by ambush" because Classic Comfort did not provide notice in its complaint or in any other manner that it was seeking to liquidate the debt it is owed. Doc. 29 at 6. Although the court prefers the liquidation of a debt to be pled as a separate count, the relief sought by Classic Comfort in its complaint was not unclear, and Bates was on fair notice. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007); Fed. R. Civ. P. 8(a)(2) (applicable by Fed. R. Bankr. P. 7008). The court does not believe this complaint, merely by not listing a separate contract cause of action under Ohio law, is sufficient to label it a "shotgun pleading." See Lee v. Ohio Educ. Ass'n, 951 F.3d 386, 392 (6th Cir. 2020) (complaint listed seven state-law causes of action in a single sentence); Cincinnati Life Ins. Co. v. Breyer, 722 F.2d 939, 947 (7th Cir. 2013) (first claim of the complaint five separate causes of action); Weiland v. Palm Beach Sheriff's Office, 792 F.3d 1313, 1323 (11th Cir. 2015) ("[A] type of shotgun pleading is one that commits the sin of not separating into a different count each cause of action or claim for relief."). See also Fed. R. Civ. P. 10(b) (applicable by Fed. R. Bankr. P. 7010) ("each claim founded on a separate transaction or occurrence . . . must be stated in a separate count or defense.").
At the end of the complaint in the prayer for relief, Classic Comfort states that it seeks an order of the court "[d]eclaring the debts owed to [Classic Comfort] in the amount of $20,495.57 to be non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) and §523(a)(2)(C)." Doc. 1 at 19. See also Doc. 1 at ¶¶ 37-38, and ¶ 39 ("Classic Comfort made repeated demands for payment of its unpaid invoices, totaling $20,495.57, at which time Bates repeatedly represented to Classic Comfort that it would be paid in full."). Classic Comfort's pretrial statement was consistent with the relief sought in the complaint. Doc. 8 at 4 ("Plaintiff justifiably relied upon Bates' false representations and suffered a loss in the amount of $20,495.57 as a result."). Further, Classic Comfort's affidavits submitted in support of its motion for summary judgment, including the documents attached and incorporated into the affidavits, detail the basis for receiving a monetary judgment, and the evidence was not refuted by Bates.
Bates refers to and attaches email communications between counsel. Detling Affidavit at ¶¶ 6-8 and Exhibit A (Doc. 29). Whether Classic Comfort counsel ultimately decided to pursue this summary judgment motion rather than join Bates to the state court litigation is not relevant if the pleadings provided fair notice. Further, Bates chose not to respond to the merits of the summary judgment motion even when it was clear Classic Comfort was seeking a monetary judgment in this court.
For these reasons, the court finds that Classic Comfort is entitled to liquidate its asserted debt to judgment based upon the complaint filed in this adversary proceeding.
VI. Findings of Fact
Bates chose to not file any substantive response to Classic Comfort's summary judgment motion, except for raising the issues previously outlined concerning the court's subject matter jurisdiction, and whether this litigation was moot. Having determined the court has subject matter jurisdiction, and this litigation is not moot, the court proceeds to determine the cross-motions for summary judgment based on the record the parties presented.
Bates, along with Miller, decided to construct a building at 8183 U.S. Route 127, Greenville, Ohio 45331 (the "Property"). Aaron Kruckeberg ("A. Kruckeberg") Affidavit at ¶ 11 (Doc. 27 - Exhibit A). Bates was interested in purchasing a radiant heating system for the Property. Id. at ¶ 8. On March 14, 2019, Bates left a phone message with Classic Comfort about a radiant heating system which, at that time, Bates planned to install himself. Id. David Kruckeberg ("David") of Classic Comfort returned Bates' call and arranged a meeting for the next day. Id. at ¶ 9; David Kruckeberg ("D. Kruckeberg") Affidavit at ¶ 7 (Doc. 27 - Exhibit B). David is Aaron's father, and founded Classic Comfort. D. Kruckeberg Affidavit at ¶ 3. Aaron is the current owner. Id.
On March 15, 2019, Bates and Miller met David at Classic Comfort's shop. Id. at ¶ 8. Bates, who is a contractor, explained that he intended to install the system himself to save on costs. Id. David explained generally how installation would work, and showed Bates and Miller various furnace options. Id. Bates and Miller told David that the building to be constructed would be 80 by 30 feet, but only planned to heat a portion that was 50 by 30 feet. Id. Based on this, David told Bates and Miller that the cost would be approximately $25,000, but would vary based on the model or options chosen. Id. The parties did not reach a contractual agreement on March 15, 2019. Id. at ¶ 9.
On or about July 1 or 2, 2019, Bates left a phone message with Classic Comfort, which David returned the next day. Id. at ¶ 10. Bates told David that he wanted to proceed with the under-slab work for the radiant heating system. Id. David gave this information to Aaron and Aaron prepared a detailed proposal. Id. The proposal was sent by Aaron to Bates by text message on July 8, 2019. A. Kruckeberg Affidavit at ¶ 10. Based on Bates indicating earlier he intended to install the system himself, the proposal did not include labor, but only parts and components. Id. at ¶ 12. Bates texted back, asking "[i]s that installed." Id. at ¶ 13; Exhibit A-1 (Doc. 27). Aaron responded that "[a]ll materials, no labor. I can provide labor/install price if you would like." Id. Bates asked Aaron for an itemization of certain costs, and for the price for labor. Id. Aaron provided the detail requested, and the labor for installation, which was an additional $1,950. Id. Bates was nervous about installing it, and texted Aaron to let him know he was agreeing to have Classic Comfort do the installation. Id. The under-slab work was completed by Classic Comfort in July 2019. A. Kruckeberg Affidavit at ¶ 14, 15.
On July 24, 2019 Classic Comfort submitted an invoice to Bates in the amount of $11,013.27. Id. at ¶ 15. Bates told Aaron that Miller would provide a check the next day to pay the invoice, and Miller did. Id. at ¶ 16.
On September 1, 2019 Bates contacted Aaron about the specifications for the concrete slab for the furnace, the water lines, electrical work, and trenching. Id. at ¶ 19; Exhibit A-1. Aaron provides these specifications on September 2, 2019 by email. A. Kruckeberg Affidavit at ¶ 20; Exhibit A-3.
On October 7, 2019 Bates told Classic Comfort that he was digging for a "heat pipe" and needed to purchase additional "PEX" to complete the work. A. Kruckeberg Affidavit at ¶ 22; Exhibit A-1. PEX is a type of "[p]lastic tubing or pipes." Id. He also asked Classic Comfort if it was interested in installing the "internal stuff." Id. By "internal stuff," Bates was referring to the central control panel that runs the radiant heating system. A. Kruckeberg Affidavit at ¶ 22. As such work is done by David, Aaron told Bates to contact David. Id. Bates did contact David, and David told him the work could be done for an additional $400. D. Kruckeberg Affidavit at ¶ 12. See Exhibit B-2 (Doc. 27) (photo of the central control panel). Bates agreed. Id. On October 9, 2019 Bates told Aaron he was ready for the furnace, and other needed parts and components. A. Kruckeberg Affidavit at ¶ 23. The most expensive item was the furnace itself, which cost nearly $10,000. Id. Bates told Aaron he wanted the furnace he had been shown during his March 15, 2019 visit to Classic Comfort, but also wanted an upgrade to include a duel fuel LP burner. Id. The upgrade was not part of the original estimate, and cost an additional $1,545. Id.
On or about November 7, 2019 Bates asked Classic Comfort to sell him additional components and parts needed to complete the installation. Id. at ¶ 24. Classic Comfort did deliver these parts to Bates on or about November 7th. Id. In the middle of November, Bates also asked for anti-freeze liquid to be added to the system, and yet another upgrade, the Viega Outdoor Reset, which is a more sophisticated system for controlling the delivery of heat throughout the system. Id. at ¶ 25. The radiant heating system was fully installed by November 24, 2019. Id. at ¶ 26.
Bates asked for the total amount owed. Id. at ¶ 27; Exhibit A-1. Aaron prepared invoices for all the parts, components, and labor provided in October and November 2019. Id. at ¶ 29. The total cost of those invoices was $20,495.57. Classic Comfort believed these invoices would be promptly paid, similar to what occurred with the July invoice. Id. at ¶ 31. On December 14, 2019 Aaron contacted Bates about final payment, but Bates did not return the message. Id. at ¶ 30.
David finally met with Bates on March 18, 2020, and presented the October and November invoices again. D. Kruckeberg Affidavit at ¶ 13. Bates told David he would pay it on either March 20 or 21, 2020. Id. Instead, Classic Comfort received a letter from Bates' bankruptcy counsel informing it that Bates filed a Chapter 7 bankruptcy petition on December 30, 2019. Id. at ¶ 17. Prior to this letter, Classic Comfort was not aware of the bankruptcy petition, or that Bates had any financial difficulty.
VII. Analysis
A. Under Ohio Law, Bates Owes a Debt to Classic Comfort in the Amount of 20,495.57.
A promise, or a series of promises, providing a legal remedy upon breach, constitutes a contract. Kostelnik v. Helper, 770 N.E.2d 58, 61 (Ohio 2002). A "meeting of the minds" as to essential terms is necessary to enforce a contract. Id. (citing Episcopal Retirement Homes, Inc. v. Ohio Dept. of Indus. Relations, 575 N.E.2d 134, 137 (Ohio 1991)). A contract requires "an offer, acceptance, contractual capacity, consideration (the bargained for legal benefit and/or detriment), a manifestation of mutual assent and legality of object and of consideration." Id. (quoting Perlmuter Printing Co. v. Strome, Inc., 436 F. Supp. 409, 414 (N.D. Ohio 1976)).
While written agreements are preferred, oral agreements are enforceable "if there is sufficient particularity to form a binding contract." Kostelnik, 770 N.E.2d at 61. The terms may be established from "words, deeds, acts, and silence of the parties." Id. (quoting Rutledge v. Hoffman, 75 N.E.2d 608, syllabus ¶ 1 (Ohio 1947). See also A N Bros. Corp. v. Total Quality Logistics, LLC, 59 N.E.3d 758, 767 (Ohio Ct. App. 2016) (same). "Seldom, if ever, does the evidence in proof of an oral agreement present its terms in the exact words of offer and acceptance found in formal written contracts." Id. When an agreement includes labor or materials provided upon request of a party, it implies an agreement to pay the value of such labor or materials. Dixon v. Kittle, 164 N.E.2d 806, 807 (Ohio Ct. App. 1959); A N Bros. Corp., 59 N.E.3d at 767-68. See also Culp v. City of Lancaster, 779 N.E.2d 827, 830-31 (Ohio Ct. App. 2002) ("When a price term is missing from a contract, particularly a service contract, the amount of compensation is ordinarily a reasonable amount since the exact amount cannot ordinarily be determined until the services are performed.").
The record shows that Bates consistently held himself out as a counter-party to the contract with Classic Comfort. From the various phone calls and meetings with Classic Comfort as the various stages of the work were discussed, the only reasonable conclusion Classic Comfort could have reached from Bates' statements and actions was that he was contracting with Bates for a radiant heating system. Classic Comfort offered to do the work for a certain price, and Bates accepted. Classic Comfort did additional work that Bates requested that added to the cost. Whether Miller is also liable is an issue for another court, but the evidence is unequivocal that Bates contracted with Classic Comfort for the installation of the radiant heating system.
The record also shows there is no material issue of fact as to the appropriate amount of the debt. The evidence shows the charges were reasonable for the labor and materials provided. The figure of $20,495.57 is supported by specific invoices, as outlined in the Kruckeberg affidavits attached to and submitted in support of Classic Comfort's motion for summary judgment. Bates has not provided any evidence to dispute the figures of Classic Comfort or the services and materials provided by Classic Comfort.
B. The Debt Owed by Bates to Classic Comfort is Non-Dischargeable.
Having waived his discharge pursuant to § 727(a)(10), the debt owed by Bates to Classic Comfort is non-dischargeable. The court does not need to determine the dischargeability of the debt under 11 U.S.C. § 523 as that issue is moot. Neves, 500 B.R. at 659-60; Markwood Invs. Ltd. v. Neves, Adv. No. 10-2122, 2013 WL 7070938, at *1 (Bankr. S.D. Fla. Dec. 11, 2014). Therefore, the court declines to enter summary judgment finding the debt non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).
VIII. Conclusion
The court grants, in part, Classic Comfort's motion for summary judgment. Bates' motion for summary judgment is denied. Although the issue of dischargeability is moot, the court determines that Bates owes Classic Comfort a $20,495.57 non-dischargeable debt. By separate order, the court will enter judgment in favor of Classic Comfort for $20,495.57, plus post-judgment interest pursuant to 28 U.S.C. § 1961.
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.
/s/ _________
Guy R. Humphrey
United States Bankruptcy Judge
Dated: June 15, 2021
Copies to: Counsel for the Plaintiff Counsel for the Defendant