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In re Miller

United States District Court, C.D. Illinois, Urbana Division

December 8, 2014


For Carol Apperson, Robert Apperson, Appellants: Rochelle A Funderburg, LEAD ATTORNEY, MEYER CAPEL PC, Champaign, IL.

For Drew W Miller, Appellee: Brian D Pondenis, LEAD ATTORNEY, PONDENIS LAW OFFICE, Urbana, IL.



This is an appeal from an Order entered by the United States Bankruptcy Court for the Central District of Illinois, in Bankruptcy Case No. 13-90326, brought pursuant to 28 U.S.C. § 158(a). Following this court's careful review, this court affirms the Order of the Bankruptcy Court.


On March 19, 2013, Drew W. Miller and Angie Miller filed for Chapter 7 bankruptcy protection. On May 9, 2013, Plaintiffs Robert Apperson and Carol Apperson filed an adversary complaint against Defendant Drew W. Miller, individually and d/b/a DMC Custom Homes. Plaintiffs brought their action pursuant to 11 U.S.C. § 523(a)(2) and alleged that their claim against Defendant was not dischargeable in bankruptcy based upon fraud. Specifically, Plaintiffs alleged that, on or about February 19, 2010, Plaintiffs and Defendant entered into a contract wherein Defendant agreed to make repairs to a home owned by Plaintiffs in Savoy, Illinois, as a result of a fire that occurred there. Plaintiffs attached a copy of the contract to their adversary complaint. Plaintiffs alleged that Defendant undertook to make the repairs and, pursuant to the agreement, Plaintiffs signed over insurance proceeds for the fire damage received from their insurance carrier, Country Mutual. Plaintiffs alleged that Defendant took the money and used the money for other matters not connected with Plaintiffs' project and failed to complete Plaintiffs' project. Plaintiffs alleged that Defendant supplied figures to Plaintiffs indicating that Defendant required an additional $16, 605.29 before work would proceed due to problems with Country Mutual and Plaintiffs. Plaintiffs attached a copy of Defendant's statement. Plaintiffs alleged that Defendant then abandoned the project. Plaintiffs alleged that Defendant breached his agreement with Plaintiffs and committed fraud, setting out a lengthy list of things Defendant failed to do, including failing to pay subcontractors and suppliers, failing to supply and install doors and hardware for the doors, failing to supply and install trim work, and failing to repair the concrete driveway damaged by Defendant. Plaintiffs asked for a judgment against Defendant in the amount of $134, 134.44, representing damages due to Defendant's fraud.

On March 28, 2014, the parties filed a Consolidated Pretrial Order with the Bankruptcy Court. For their statement of the case, Plaintiffs stated that Defendant breached his agreement with Plaintiffs and committed fraud by failing to pay subcontractors and suppliers, failing to provide a Contractor's Affidavit when requested by Plaintiffs, failing to provide lien waivers and failing to supply and install various items at the project. Plaintiffs stated that they had been damaged in the amount of $150, 000. In his statement of the case, Defendant stated that he, along with other contractors, was hired to preform repairs on Plaintiffs' home. Defendant stated that he received some funds for the work and performed or contracted for completion of the work. Defendant stated that, unfortunately, Plaintiffs were unsatisfied with the work performed and ultimately refused to allow Defendant to complete the work. Defendant stated that he did not breach the agreement with Plaintiffs or, if he did, he was unilaterally prevented from mitigating such a breach by Plaintiffs. The Pretrial Order set out the following undisputed facts:

Plaintiffs entered a contract with the Defendant on or around February 19, 2010 for repairs to their home located at 308 Ellen, Savoy, Illinois. Defendant undertook to make the repairs. Plaintiffs signed over insurance proceeds for the repairs, received from their insurance carrier, Country Mutual. Defendant advised Plaintiffs that almost all funds had been spent and that the only funds remaining were retainage. Defendant told Plaintiffs that an additional $16, 605.29 was required before work would proceed. Defendant did not finish the project. Defendant did not provide [a] Contractor's Affidavit or lien waivers after Plaintiff requested them. Defendant failed to pay subcontractors and suppliers.

On March 31, 2014, a trial was held on Plaintiffs' adversary Complaint before United States Bankruptcy Judge Gerald A. Fines. Plaintiffs called Defendant as their first witness. Defendant testified that he agreed to finish the work at Plaintiff's house as proposed in the original contract, which required the repair of the fire damage to the house. Defendant also testified that, when Plaintiffs signed over the last check from Country Mutual, it resulted in an overpayment to him. Defendant testified that he wrote Plaintiffs a check for about $3, 800 for the difference. Defendant stated that, at that time, Plaintiffs still owed the subcontractors almost $46, 000. Defendant testified that Plaintiffs did not take the check he gave them to the bank for almost a year. Defendant stated that, by that time, he had been out of work for seven months, went bankrupt and lost everything, so the check did not clear. The exhibits introduced at trial show that Defendant wrote a check to Bob Apperson for $3, 870.12 on September 28, 2010. The check was not presented to the bank until September 2011 and did not clear the bank on September 26, 2011.

Defendant testified that it was Plaintiffs' obligation to pay the subcontractors because they would not work with any of the subcontractors he provided and wanted to pick their own subcontractors. Defendant testified that he, Country Mutual and Plaintiffs met " and everybody knew that their subcontractors were far more expensive than what Country was allowing to pay." Defendant said that he told Plaintiffs that he had not worked with the subcontractors they wanted and, if they wanted to use them, they could pay them directly. Defendant agreed that he never completed the job and testified that his portion of what needed to be done was the trim and doors, the staining of the windows, standard punch list items, and the closet shelving. He stated that the rest would have been covered under the allowances for the subcontractors, which he was not paid for. Defendant agreed that he told Carol Apperson when she signed the last check over to him that he would finish the job. Defendant testified that he did not consider himself the general contractor on the job because a general contractor has his own subcontractors that work for him and, on this job, he did not even know the subcontractors. Defendant testified that Robert Apperson was at the job site just about every day.

Defendant admitted that he received checks from Country Mutual and had no records related to this project. He stated that he paid his suppliers in cash and was not able to provide a contractor's affidavit or lien waivers. Defendant testified that he did not complete his portion of the job because, once Plaintiffs realized Country Mutual was not paying for all of the extras, they kicked him off the job and wouldn't let him finish. Defendant stated that he was more than willing to come back and finish the project, but he was not allowed to. He testified that he was never allowed to go back. Defendant testified that he purchased and stained doors and trim for the project, but they sat around in a storage unit for two years and got ruined. Defendant testified that he was not allowed to return, had an accident, then went bankrupt and lost everything. He testified that's why things were not done and stated, " It's not like I maliciously took their money. I never intended on deceiving these people." Defendant denied that he damaged the concrete driveway at the house. He admitted there were problems with the drywall but testified that he was not allowed to come back to correct it. Defendant admitted that he did not pay most of the subcontractors, but again stated that it was Plaintiffs' responsibility to pay them. Defendant admitted he sent Plaintiffs a letter stating that they owed him another $16, 605.29 and owed the subcontractors around $46, 000. Defendant testified, however, that it is his position that, if he were to return to the project, Plaintiffs would not owe him money, they would owe the subcontractors money.

Plaintiffs' next witness was Laura Earl, who had previously worked for Country Mutual. Earl testified that she took over claims adjustment for Plaintiffs after their file was assigned to her. Earl testified that she suggested Defendant as a possible contractor for Plaintiffs. She said she had worked with Defendant on prior projects for insureds through Country Mutual, with no complaints about Defendant. Earl testified that, on this project, most subcontractors were chosen by Plaintiffs, which is not typical. Earl testified that Plaintiffs made changes to the project. She stated that it was clearly made known to Plaintiffs " that it would be their responsibility for anything over and above what Country was authorizing." Earl testified that Country Mutual would issue a certain amount up front and then release additional amounts as job pieces were completed. Earl testified that she actually went to the project to see whether percentages of the work had been completed. Earl testified that she was no longer the adjuster on the project when the last checks were issued by Country Mutual. Earl stated that Country Mutual would not have issued checks for the project if it did not feel the work had been performed.

Plaintiff Carol Apperson (Carol) was the next witness. She testified that the home they owned in Savoy was rental property that was rented at the time of the fire. Carol stated that they selected Defendant as their contractor because he was highly recommended by Earl. Carol testified it was their understanding that their contract with Defendant would cover all the work that needed to be done on the project. She testified that they understood that anything that was over and above Country Mutual's allowances was their responsibility. She testified that she thought the subcontractors that were selected would be paid out of Country Mutual's checks and that Defendant, as contractor, would pay the subcontractors. She stated that she understood that they would pay the excess. Carol testified that they began to have problems with Defendant when he brought things out of the attic for them to go through and then threw everything in the dumpster. The next problem was that he took part of the roof off and then it rained for ten days, causing damage. Carol testified that they reported problems to Defendant and to Earl.

Carol testified that, when she signed portions of Country Mutual checks over to Defendant, it was her understanding that the money was to be used to pay the subcontractors and the suppliers. Carol testified that Defendant told them that, if they would sign the last check over to him, he would give them a check for $3800 and then he would be paid in full. She testified that her understanding was he was coming back to finish the project. She stated that he told her he would finish the job. Carol testified that Defendant's last day on the job was in mid-November 2010. Carol testified that she did not throw him off the job and he did not return to do the work. She testified that the work was never finished and they have been paying to keep the heat on in the house in order to maintain it the best they can. Carol testified that they have not finished the project because they do not have the money to do it. Carol testified that there are liens against the property filed by subcontractors who have not been paid. Carol testified about numerous problems with the project, including that the spindles on the deck were turned upside down so now water collects there. She also testified that the drywall has some gouges in it and the seams are busting loose and separating. Carol testified that there is no insulation under the floors and the concrete in the driveway was broken where the dumpster sat on it. Carol testified that Defendant never came back so they could talk to him about ...

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