Billings v. Escalante

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	THEODORE ESCALANTE, JR. and 	No. 7-10-10837 JL
JULIE ESCALANTE,
Debtors.
KAREN BILLINGS,
Plaintiff,
v. 	Adversary No. 	10-1147 J
THEODORE G. ESCALANTE, d/b/a
ABBA MASONRY,
Defendants.
MEMORANDUM OPINION
THIS MATTER is before the Court on the Plaintiff’s Motion for Summary Judgment and
Memorandum in Support of Motion for Summary Judgment (together, “Motion for Summary
Judgment”). See Docket Nos. 11 and 12. 	Defendant, Theodore G. Escalante, d/b/a Abba
Masonry, who is representing himself in this adversary proceeding pro se, did not file a response
to the Motion for Summary Judgment. 	Plaintiff, Karen Billings, represented by Watson Law
Office, LLC (Matthew G. Watson), asserts that Defendant misrepresented to Plaintiff that he was
licensed to perform roofing work, that the roofing repairs Plaintiff contracted with Defendant to
complete on her home were improperly performed, and that the damages she incurred as a result
of Defendant’s misrepresentation are non-dischargeable under 11 U.S.C. § 523(a)(2)(A).
Plaintiff seeks a determination of non-dischargeability of a debt, but does not ask this Court to
liquidate the debt or to grant a money judgment.
The Court held a final hearing on the Motion for Summary Judgment on May 23, 2011, at
which the Defendant and counsel for the Plaintiff appeared, and took the matter under
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advisement. 	The Court has considered 1) the Motion for Summary Judgment; 2) the supporting
affidavits of Rudy Mendez and Karen Billings; and 3) and Mr. Escalante’s representations at the
final hearing which are consistent with the admissions contained in his deposition offered by
Plaintiff in support of the Motion for Summary Judgment. 	Upon review of the submissions now
before the Court and being otherwise sufficiently informed, the Court finds that a genuine issue
of material fact precludes the entry of summary judgment in favor of Plaintiff.
SUMMARY JUDGMENT STANDARDS
It is appropriate for the Court to grant summary judgment if the pleadings, discovery
materials, and any affidavits before the Court show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P.
56(c) made applicable to the adversary proceeding by Fed.R.Bankr.P. 7056. “[A] party seeking
summary judgment always bears the initial responsibility of informing the . . . court of the basis
for its motion, and . . . [must] demonstrate the absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Even when
a motion for summary judgment is unopposed, the Court must nevertheless satisfy itself that the
moving party is entitled to summary judgment. 1 In determining whether to grant a movant’s
request for summary judgment, the Court must view the facts in the light most favorable to the
party opposing summary judgment.2
1 See Reed v. Bennett, 312 F.3d 1190, 1195 (10 th Cir. 2002)(stating that “a party’s failure to file a response to a
summary judgment motion is not, by itself, a sufficient basis on which to enter judgment against the party.”).
2 Harris v. Beneficial Oklahoma, Inc., (In re Harris), 209 B.R. 990, 995 (10th Cir. BAP 2
007)(“When applying this standard, we are instructed to ‘examine the factual record and reasonable inferences
therefrom in the light most favorable to the party opposing summary judgment.’ “)); Wolf v. Prudential Ins. Co. of
America, 50 F.3d 793, 796 (quoting Applied Genetics Int’l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241
(10th Cir.1990)(internal quotation marks omitted); Henderson v. Inter-Chem Coal Co., 41 F.3d 567, 569 (10th Cir.
1994)(stating that the court must “view all facts and any reasonable inferences that might be drawn from them in the
light most favorable to the nonmoving party . . .”).
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FACTS NOT SUBJECT TO GENUINE DISPUTE
The following facts are not in genuine dispute:
1. 	Sometime in 2009, upon referral by Rudy Mendez, Plaintiff approached
Defendant about repairs she needed to be done on her roof.
2. 	Rudy Mendez is Defendant’s former father-in-law.
3. 	Defendant provided Plaintiff with a proposal to perform the roofing repair for
$24,000.00.
4. 	Plaintiff rejected this proposal because the price was too high.
5. 	Defendant later provided Plaintiff with a revised proposal to repair the roof for
$13,800.00.
6. 	Plaintiff accepted Defendant’s proposal to repair the roof for $13,800.00.
7. 	Defendant has a GS-16 license for masonry.
8. 	Defendant does not have a general contractor’s license.
9. 	Defendant did not have a general contractor’s license at the time the parties
entered into the agreement to repair Plaintiff’s roof and did not have a general contractor’s
license at the time the roof repairs were performed on Plaintiff’s roof.
10. 	Defendant does not have a license to perform roofing work or repairs.
11. 	Defendant did not have a roofing license at the time the parties entered into the
agreement to repair Plaintiff’s roof and did not have a roofing license at the time the roof repairs
were performed on Plaintiff’s roof.
12. 	Defendant did not personally perform any of the roof repairs on Plaintiff’s home.
13. 	Defendant claims to have subcontracted the roofing work and repairs on Plaintiff
home to Raul Tena.
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14. 	Defendant relied on Mr. Tena to perform the work and obtain any necessary
permits and inspections.
15. 	No permits were obtained for the work Mr. Tena performed on Plaintiff’s home.
16. 	Plaintiff paid Defendant $13,800.00 for the roofing work and repairs done to her
home.
17. 	Defendant paid Raul Tena $6,600.00 for the work he performed on Plaintiff’s
home and retained the remaining $7,200.00 from the $13,800.00 Plaintiff paid to Defendant.
18. 	Plaintiff’s roof leaked several times after the repairs were made to her roof under
her agreement with Defendant.
DISCUSSION
Plaintiff contends that her claim is non-dischargeable under 11 U.S.C. § 523(a)(2)(A).
That section provides:
A discharge under section 727 . . . of this title does not discharge an individual debtor
from any debt - -
(2) for money, property, services, or an extension, renewal or refinancing of
credit, to the extent obtained by ---
(A) false pretenses, a false representation, or actual fraud, other than a
statement respecting the debtors’ or an insider’s financial condition.
11 U.S.C. § 523(a)(2)(A).
To prevail under this section, a creditor must demonstrate by a preponderance of the evidence
that :1) the debtor made a false representation, the debtor made the representation with the intent
to deceive the creditor; 3) the creditor relied on the representation; 4) the creditor’s reliance was
justifiable; and 5) the debtor’s representation caused the creditor to sustain a loss.3 “False
3 See Fowler Bros v. Young (In re Young), 91 F.3d 1367, 1373 (10th Cir. 1996) (the required elements under 11
U.S.C. § 523(a)(2)(A) are: “1) [t]he debtor made a false representation; the debtor made the representation with the
intent to deceive the creditor; the creditor relied on the representation; the creditor’s reliance was [justifiable]; and
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representations are ‘representations knowingly and fraudulently made that give rise to the
debt.’”4 False pretenses, as distinguished from false representations, “involve[ ] an implied
misrepresentation that is meant to create and foster a false impression.”5 In other words, “a
‘false pretense’ is an ‘implied misrepresentation or conduct which creates and fosters a false
impression, as distinguished from a ‘false representation’ which is an express
misrepresentation.’”6 A misrepresentation of fact may be implied from silence. 7 The failure of a
contractor to disclose to an unsophisticated consumer that he was not licensed to perform the
work contracted for can constitute an implied misrepresentation for purposes of 11 U.S.C. §
523(a)(2)(A).8
Genuine issues of material fact preclude summary judgment on the elements of
misrepresentation and justifiable reliance. 	Plaintiff’s Affidavit states that Defendant never told
her that he was not licensed to do roofing work and did not tell her that he planned to subcontract
the work to someone else. See Affidavit of Karen Bilings – Exhibit A, ¶ 8. 	Plaintiff’s Affidavit
the debtor’s representation caused the creditor to sustain a loss.”); Field v. Mans, 516 U.S. 59, 116 S.Ct. 437, 133
L.Ed.2d. 351 (1995) (changing the standard of reliance under 11 U.S.C. § 523(a)(2)(A) from “reasonable” to
“justifiable.”). See also, In re Riebesell, 586 F.3d 782, 789 (10 th Cir. 2009)(same).
4Adams County Dept. of Soc. Services v. Sutherland-Minor (In re Sutherland-Minor), 345 B.R. 348, 354
(Bankr.D.Colo. 2006)(quoting Cobb v. Lewis (In re Lewis), 271 B.R. 877, 885 (10 th Cir. BAP 2002)).
5Gordon v. Bruce (In re Bruce), 262 B.R. 632, 636 (Bankr.W.D.Pa. 2001)(citing In re Scarlata, 127 B.R. 1004,
1009 (N.D. Ill. 1991)).
6See Stevens v. Antonious (In re Antonious), 358 B.R. 172, 182 (Bankr.E.D.Pa.2006)(quoting In re Haining, 119
B.R. 460, 463-464 (Bankr.D.Del. 1990)(remaining citations omitted). See also, Vaks v. Grenier (In re Grenier),
2009 WL 763352, *10 (Bankr.D.Mass. March 19, 2009).
7 See Parker v. Grant (In re Grant), 237 B.R. 97, 113 (Bankr.E.D.Va. 1999)(stating that “no overt misrepresentation
is required under § 523(a)(2)(A); a misrepresentation regarding a material fact may be implied from one’s
silence.”)(citing In re Kahler, 187 B.R. 508, 512 (Bankr.E.D.Va. 1995)(remaining citations omitted).
8See Peterson v. Bozzano (In re Bozzano), 173 B.R. 990, 994 (Bankr. M.D.N.C. 1994), abrogated on other grounds
by Cohen v. de la Cruz, 523 U.S. 213, 118 S.Ct. 1212, 140 L.Ed.2d 341 (1998)(a general contractor has a duty to
disclose that he does not hold a required contractor’s license; a failure to make such disclosure constitutes a
misrepresentation); Grenier, 2009 WL 763352 at *19 (finding that a contractor has a duty to disclose his lack of a
license during negotiations). See also, Sinha v. Clark (In re Clark), 330 B.R. 702, 707-708 (Bankr.C.D.Ill.
2005)(contractor’s false representation to creditor that he was licensed and insured was sufficient for purposes of 11
U.S.C. § 523(a)(2)(A)); McCain v. Fuselier (In re Fuselier), 211 B.R. 540, 545 (Bankr.W.D.La. 1997)(finding that
the debtor knowingly misrepresented to creditors that he had a general contractor’s license and holding that the debt
at issue was non-dischargeable under §523(a)(2)(A)); Coots v. Brooker (In re Coots), 1992 WL 77760, *3 (Bankr.
E.D.Pa. Apr. 9, 1992)(finding that defendant who was an unlicensed handyman “expressly and by clear implication,
represented that he was legally and physically able to perform the contract engagement in question.”).
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further states that at the time she accepted Defendant’s proposal, she understood that Defendant
would perform all the work and repairs, that he was capable of performing the work and repairs,
and that he met all the requirements, such as having the proper license to perform the roofing
work and repairs to her home. Id. at ¶ 7. 	The Affidavit of Rudy Mendez also states that
Defendant never told him that he did not have a roofing license. See Affidavit of Rudy Mendez
– Exhibit B, ¶ B. 	Despite the Affidavits of Plaintiff and Rudy Mendez, whether Plaintiff in fact
knew that Defendant was not properly licensed is not undisputed.
Defendant’s Answer to Karen Billings’ Complaint to Determine Non-Dischargeability of
Debt Pursuant to 11 U.S.C. § 523(a)(2)(A) (“Answer”) affirmatively states that Plaintiff was
aware that Defendant did not have a license. See Answer – Docket No. 5, ¶¶ 1 and 17. Under
Rule 56(c)(A), made applicable to adversary proceedings by Rule 7056, Fed.R.Bakr.P., a party
opposing summary judgment who asserts that a fact is genuinely disputed,
must support the assertion by citing to particular materials in the record, including
depositions . . . interrogatory answers or other materials . . .
Rule 56(c)(1)(A), Fed.R.Civ.P.
Defendant’s deposition testimony and answers to interrogatories also put at issue Plaintiff’s
knowledge of whether Defendant was not licensed. For example, in the Deposition of Theodoro
Escalante, Jr. (“Escalante Deposition”), attached as Exhibit C to Plaintiff’s Motion for Summary
Judgment, Defendant testified as follows:
Like I mentioned before, I had told Rudy [Mendez], I don’t have a license, you know, I
don’t want to do it.
Escalante Deposition, p. 23, lines 3 -4.
And I go, No, Rudy [Mendez], I don’t want to get into it due to the fact that I don’t have
a license. I guess Rudy [Mendez] told Mrs. Billings, and then that’s what . ..
Escalante Deposition, p. 25, lines 16 – 19.
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Similarly, Defendant responded as follows to Plaintiff’s Interrogatory No. 14 asking Defendant
to “describe in complete and specific details all representations you made to Plaintiff with regard
to your ability to perform roofing work/repairs on her home:
Told them I didn’t have license but would get work done. So I got a sub who had the
experience.
See Plaintiff’s First Set of Interrogatories, Requests for Production and Requests for
Admissions to Defendant attached as Exhibit F to Plaintiff’s Motion for Summary
Judgment.
At the final hearing on the Motion for Summary Judgment, Defendant consistently maintained
that he told Rudy Mendez that he did not have a license to do the roofing work, that he thought
he had also told Plaintiff that he did not have the proper license, but that if he hadn’t specifically
told Plaintiff, he assumed that Mr. Mendez would have informed her and had a reasonable basis
to make that assumption.
These statements are sufficient to create a genuine dispute of fact as to a material element
of Plaintiff’s non-dischargeability claim. In order to rely on Defendant’s alleged false pretenses
that he held the appropriate license to perform roofing work and repairs, Plaintiff necessarily
must not have known that he was unlicensed. “[A] person cannot rely on a representation if ‘he
knows that it is false or its falsity is obvious to him.’” In re Apte, 180 B.R. 223, 229 (9th Cir.
BAP 1995), aff’d, 96 F.3d 1319 (9th Cir. 1996)(quoting In re Kirsh, 973 F.2d 1454, 1458 (9th Cir.
1992)(per curiam)(quoting Restatement (Second) of Torts §§ 545A. 541 (1977)). 	Here, if
Plaintiff in fact knew that Defendant did not have a license to perform roofing work and repairs
but nevertheless chose to hire him, she could not have been deceived by any implied
misrepresentation. 	Similarly, if the Defendant disclosed the fact that he did not hold the
required license to perform the work, such disclosure tends to negate the intent to deceive
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element necessary to a determination of non-dichargeability. Whether Defendant disclosed the
fact that he did not hold the required license to perform the work and whether Plaintiff knew that
Defendant was not properly licensed are material facts. And because the affidavit testimony on
this fact issue offered in support of Plaintiff’s Motion for Summary Judgment is in direct conflict
with Defendant’s deposition testimony, the Court necessarily must weigh the credibility of the
witnesses to resolve this disputed material fact.9
Plaintiff’s Motion for Summary Judgment and supporting affidavit raise other alleged
misrepresentations or false pretenses not specifically raised in her Complaint. These additional
allegations include: 1) Defendant’s failure to inform Plaintiff that he intended to subcontract the
work to Raul Tena, who was not licensed to perform roofing work; 2) Defendant’s representation
to Plaintiff that Raul Tena is “the best roofer in town;” and 3) Defendant’s failure to inform
Plaintiff that he did not have the appropriate license to subcontract the work. 	Allegations 1) and
3) both relate to whether Defendant failed to inform Plaintiff that he was not licensed to perform
the work. Whether Defendant disclosed or Plaintiff knew that Defendant did not hold the
required license(s) is subject to a genuine issue of material fact.
Whether Defendant failed to inform Plaintiff that he intended to subcontract the work
might also constitute an implied misrepresentation to Plaintiff that he would do the work without
retention of a subcontractor. However, there is no evidence before the Court that it was
important to Plaintiff whether Mr. Tena was an employee or subcontractor or that she relied to
her detriment on a representation that Mr. Tena was an employee. The parties do not dispute that
9 See In re Rafter Seven Ranches, L.P., 414 B.R. 722, 737 (10 th Cir. BAP 2009)(noting that “[o]rdinarily in the
summary judgment context, a trial court ‘may not make credibility determinations or weigh evidence.’”)(quoting
Gossett v. Okla. ex rel. Bd. of Regents, 245 F.3d 1172, 1175 (10 th Cir. 2001)). See also, Grochocinski v. Rieger ( In
re KJK Const. Co., Inc.), 414 B.R. 416, 427 (Bankr.N.D.Ill. 2009)(stating that “the Court’s assessment of the
credibility of witness testimony is improper at the summary judgment stage[ ]” and noting further that the court
“cannot weigh conflicting evidence or decide which version of the facts is more credible” on a motion for summary
judgment)(citing Payne v. Pauley, 337 F.3d 767, 771 (7 th Cir. 2003)).
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Defendant did not do the work; Mr. Tena did. Plaintiff allowed Mr. Tena to perform the work on
her property.
Defendant’s representation that Mr. Tena was “the best roofer in town” is the type of
comment best characterized as puffing.10 Mere puffing is not generally sufficient to support a
claim of non-dischargeability under 11 U.S.C. § 523(a)(2)(A).11 In addition, it appears that the
comment regarding Defendant’s opinion of Mr. Tena’s reputation may have been made after
Plaintiff entered into the contract with Defendant; consequently, the statement could not have
induced Plaintiff to enter into the contract.
Because a genuine dispute exists as to whether Plaintiff knew that Defendant was not
properly licensed for the work Plaintiff entered into the contract with Defendant to perform,
Plaintiff is not entitled to summary judgment on her claim of non-dischargeability under 11
U.S.C. § 523(a)(2)(A). 	An order consistent with this memorandum will be entered.
_______________________________________
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
10 Puffing is defined as “[t]he expression of an exaggerated opinion – as opposed to a factual representation – with
the intent to sell a good or service. Puffing involves expressing opinions, not asserting something as fact. Although
there is some leeway in puffing goods, a seller may not misrepresent them or say that they have attributes that they
do not posses.” Black’s Law Dictionary (7th edition 1999), p. 1247.
11 See Brown v. Cozart (In re Cozart), 2009 WL 1259333, *4 (Bankr.W.D.Ark. 2009)(finding that defendant’s
statement regarding his ability as a ‘quality builder’ and other similar statements “could be considered to be nothing
more than ‘puffing’ or promotion” and were not, therefore, “false statements sufficient to meet the scienter
[defendant’s intent to deceive] required under § 523(a)(2)(A).”); Rezin v. Barr (In re Barr), 194 B.R. 1009, 1018
(Bankr.N.D.Ill. 1996)(finding that defendant’s representation that he was a builder of ‘custom homes’ was not a
misrepresentation, and that such assertions “were more marketing hyperbole . . . close to what has been called ‘mere
puffing’”); Alvine v. Keller (In re Keller), 72 B.R. 599, 602 (Bankr.M.D.Fla. 1987)(finding that defendants’
representation that they enjoyed an excellent reputation in the community for the construction of single-family
residences was mere puffing, not fraudulent; consequently such representation could not support a claim under 11
U.S.C. § 523(a)(2)). But see Kadlecek v. Ferguson (In re Ferguson), 222 B.R. 576, 585-587 (Bankr.N.D.Ill
1998)(finding that defendant-home builder’s representation to plaintiff-homeowner that her home would be built to
“Code Plus” standards was more than mere “puffing” and could support a non-dischargeability claim under 11
U.S.C. § 523(a)(2)(A)); Pruett v. Moon (In re Moon), 1997 WL 34625685, *16 (Bankr.E.D.Va. Dec. 17,
1997)(acknowledging that a defendant’s claim of “‘vast experience’ might be considered mere puffing in some
situations,” but concluding that such claim was actionable as a misrepresentation under 11 U.S.C. §523(a)(2)(A)
when considered under the totality of the circumstances, including the defendant’s statement that he was a “‘well-
qualified, bona fide contractor’” ).
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Date entered on docket: 	June 29, 2011
COPY TO:
Matthew Glenn Watson
Watson Law Office, LLC
Attorney for Plaintiff
PO Box 2183
Mesilla Park, NM 88047
Theodore G Escalante
5122 Answer Dr
Las Cruces, NM 88012
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