Knaub v. Rollison (In re Rollison)

Summarized by Steven Mulligan , Coan, Payton & Payne, LLC
12 years 4 months ago

Citation:

Knaub, et al. v. Rollison, Case No. CO-13-028 (B.A.P. 10th Cir. October 29, 2013) (unpublished)

Tag(s):

Ruling:

Under § 523(a)(2)(A), Plaintiff must prove that Debtor’s promise to build a new house – the misrepresentation - caused Plaintiff’s damages and any such damages are limited to those incurred after the promise was made.

Procedural context:

The trial in Bankruptcy Court was bifurcated with the nondischargeability issue proceeding first to be followed by the issue of damages. The Bankruptcy Court found the debt to be nondischargeable under § 523(a)(2)(A). Prior to the damages trial, the Debtor filed a motion in limine to limit evidence to damages incurred after Debtor’s promise to rebuild which motion was denied. Debtor stipulated that the difference between the defective house’s value on the date of its purchase and the amount the Plaintiffs actually paid for it, believing it to be without defect, was $162,000 which amount was held to be non-dischargeable. Debtor appealed on the issue of damages only which is reviewed de novo. The BAP, finding that the Bankruptcy Court misapplied the benefit of the bargain rule, reversed and remanded for reconsideration of the amount of damages.

Facts:

In 2003, Plaintiffs purchased home built by Debtor’s company which proved to have numerous defects. For some time, Debtor’s company attempted but failed to fix the problems and it was determined that the problems could not be fixed. In 2007, Debtor promised Plaintiffs to build Plaintiffs a new house on a different lot. Debtor was unable to fulfill that promise and Plaintiffs sued in state court leading to Debtor filing bankruptcy.

Judge(s):

Thurman, Cornish, Karlin

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