I recently read a bankruptcy court decision concerning a very serious matter: nondischargeability of a debt. While serious, there was also a bit of humor in it. The facts of this case were just too good not to share.
The Plaintiffs were homeowners who wanted to have a swimming pool. They lived in Texas, which I hear can get quite warm. The Plaintiffs presumably considered a number of pools before resting on what we can probably infer was the swimming pool of their dreams: “an in-ground swimming pool (with water fall and cave area), space, spa therapy chair, fire pit, covered patio, and outdoor kitchen.” It sounds sweet! In addition to the “drainage and irrigation work” they also wanted to install a rock façade on their home. In November of 2004, they hired the (soon to be) debtor for an agreed price of $100,000, and gave him a $250 deposit.
Apparently, the Plaintiffs were impressed with the (then soon to be) debtor because he “seemed serious about directly managing the project, with on-site supervision, until all work by the subcontractors was completed.” Work on the project began in January of 2005 and shortly after the excavation work, the plaintiff gave the (then soon to be) debtor a check for $40,000. About a week later, the Plaintiffs paid another $40,000 towards the contract price.
Plaintiffs were starting to get concerned about things and they drove out to the (soon to be) debtor’s shop. There, they were told he was not in the office. They were told he was on the lake “with his new boat.” They were told he purchased the boat within three weeks of receiving the $40,000 check. This news was followed by weeks and months of phone calls not being returned.
The pool man then became a debtor in bankruptcy. Plaintiffs’ brought an adversary proceeding claiming that the debt was nondischargeable and it eventually went to trial.
At the trial, the Plaintiffs demonstrated that in addition to the amounts they paid the Defendant, they spent an additional $50,527.87, and had additional estimates for another $17,000 in needed costs and repairs. Fortunately, they were able to get their pool finished.
The Defendant did not submit any documentary evidence. He claimed that he “lost most of his document in connection with this construction job, as a result of losing his home and having to make subsequent moves. He testified that he did not have records from his checking account, and that he was unable to obtain copies from his bank since he is involved in litigation with the bank over a dishonored check.”
Not an altogether impressive argument and the court ultimately agreed. “In failing to complete the job and in using the construction funds for his own benefit [was] willful in that they were done deliberately and intentionally. The Defendant’s actions were “done in conscious disregard of his obligations under the contract, and without just cause of excuse.” The Plaintiffs’ claims were deemed non dischargeable under Section 526(a)(6).
Hanson v. Kelly, Adversary No. 07-3001, US Bankruptcy Court for the Southern District of Texas at Houston
