Court: United States Bankruptcy Court, S.D. Ohio; January 29, 2015; Us Bankruptcy; United States Bankruptcy Court
Judge Caldwell issued a Memorandum Opinion and Order regarding the adversary complaint filed by Michael Traban against Georgia A. Draise. Traban alleges that Draise misled him into believing they were jointly purchasing a home, resulting in his substantial financial contributions, including a down payment and home improvements. He seeks compensation for his investment in the property, which is solely titled in Draise’s name. The Court determined that the willful and malicious injury provision under 11 U.S.C. § 523(a)(6) does not apply, but concluded that Draise is barred from discharging her obligations due to false pretenses as outlined in 11 U.S.C. § 523(a)(2)(A).
The relationship between Traban and Draise began in 2004, leading to shared living arrangements and plans to build a home on Draise's family farmland. They remodeled Traban's former marital residence to facilitate their plans and Traban co-signed a loan for Draise's vehicle. In April 2008, Traban obtained a $50,000 mortgage on his home, using part of the funds to pay off debts and set aside $30,000 for a down payment on a new home. They opened a joint checking account and began viewing modular homes together.
However, their relationship deteriorated, prompting Draise to transfer approximately $29,000 from the joint account to her personal account in May 2008. After some reconciliation, she returned $27,000 to the joint account, and they subsequently made a $5,000 down payment on a modular home. While waiting for the home’s construction, they considered different parcels of land for placement, ultimately selecting a location closer to the road for utility access.
Plaintiff believed he was purchasing a modular home with the Defendant to be located on farmland in Chillicothe, intending for them to jointly own it. On September 5, 2008, he deposited $45,523.92 from the sale of his previous home into their joint account, and both moved into a temporary apartment with a third party, Lauren. However, Lauren witnessed ongoing tension between Plaintiff and Defendant, including an argument in which Defendant asserted ownership of the land and control over payments. On September 24, 2008, Defendant received a transfer of 1.051 acres from her parents, solely in her name. They closed on the modular home on November 5, 2008, with Plaintiff and Defendant collectively signing a sales contract for $141,451.50 and making a $57,000 down payment from their joint account. They both signed a mortgage obligating them to repay Vanderbilt Mortgage $83,644.19 with monthly payments of $806.12 at an interest rate of 8.14%. The mortgage referenced the September 24 deed as the basis for their interest in the property.
Defendant claimed Plaintiff was aware he had no legal interest in the home and asserted she contributed about $24,000 to the down payment, though she did not provide asset or employment information on the mortgage application. Her financial records showed significant overdraft charges and minimal income, with tax returns indicating earnings of $5,633 in 2007 and $7,899 in 2008. They moved into the new home in March 2009, and after two years of living together, the couple separated in May 2011. Plaintiff discovered the deed was solely in Defendant's name while reviewing online property records, despite his fear of confronting her. Defendant later became engaged to Mr. Draise, who now resides in the home with her and Lauren. Plaintiff remains liable for the mortgage on a property that is not legally his. In late 2012, Plaintiff initiated a civil case against Defendant, followed by her bankruptcy filing two months later.
Plaintiff included the home in her bankruptcy schedules, asserting an 'equitable' interest. She initiated an adversary proceeding on December 20, 2012, seeking a declaration that her $62,000 down payment and $64,800 in improvements to the home are non-dischargeable. Additionally, on January 17, 2013, she filed an unsecured claim for $74,157. The Plaintiff and Defendant, both previously divorced with children, lived together, became engaged, and decided to buy a home. The Court must determine how to allocate the burdens of their failed relationship, particularly whether the Defendant acted willfully and maliciously to injure the Plaintiff as defined under 11 U.S.C. § 523(a)(6). The Plaintiff needs to demonstrate by a preponderance of the evidence that the Defendant intended to deprive her of property interest or was aware that this would likely result.
The Court would also need to evaluate whether their relationship was insincere, aimed at constructing a manufactured home on the Defendant's family farm solely for her ownership. However, the Court found insufficient evidence for this claim. Alternatively, the Plaintiff contends that her investments should be non-dischargeable because the Defendant misled her into believing they would jointly own the manufactured home and property, as per 11 U.S.C. § 523(a)(2)(A). The Plaintiff must prove that her loss was a direct result of her reasonable reliance on the Defendant’s false representations.
The Court concluded that the Plaintiff met her burden of proof. Initially, the Defendant expressed a desire to build a home on her family’s farm, which the Plaintiff accepted as their joint goal. They lived together in three different locations during this process, including temporary housing after selling the Plaintiff's former marital home. The Plaintiff used proceeds from this sale to invest in the manufactured home placed on the Defendant's family farm. The Defendant claimed to have invested significant funds in the home, but documentation did not support this assertion.
The Defendant did not disclose any employment income or assets on the mortgage application. The Plaintiff assisted in qualifying for the mortgage by paying off the Defendant's truck debt, where he was a co-signatory. The Defendant was aware of the Plaintiff's significant investment in the home and their plans to live together as a family before and after marriage. An overheard argument confirmed the Plaintiff's belief that he would have a stake in the property, which the Defendant was aware of but intended to prevent. Closing documents indicated that both the Plaintiff and Defendant were supposed to share ownership, supported by the 'Derivation Clause' referencing joint ownership. These circumstances led the Court to determine that the Defendant intentionally misled the Plaintiff regarding his investment and rights in the home. The length of their cohabitation further justified the Plaintiff's reliance on this misrepresentation. Consequently, the Defendant is liable for the $64,800.00 debt to the Plaintiff, which is deemed non-dischargeable.
