Falcone v. Ragonese

Summarized by Michael Sugar , Commonwealth of Massachusetts
12 years 3 days ago

Citation:

Falcone v. Ragonese (In re Ragonese) BAP NO. MW 13-036

Tag(s):

Ruling:

The Bankruptcy Appellate Panel affirmed the Bankruptcy Court's ruling that $100,000 of the Falcones' claim against Mr. Ragonese (the "Debtor") was excepted from discharge under 11 U.S.C. 523(a)(2)(A). The BAP upheld the finding that the Falcones had justifiably relied on Mr. Ragonese's promises that he would devote all efforts to building the Falcones' house. The B.A.P.'s determination turned on the fact that the Falcones' reliance only needed to be justifiable, not reasonable. The court reasoned that the Falcones' reliance had been justifiable because they had invested a significant amount of money in the project by the time that Mr. Ragonese promised to only work on the Falcones' project and the Falcones were desperate to weatherproof the house. The B.A.P. reasoned that the Falcones did not need to conduct an extensive inquiry into Mr. Ragonese's promises.

Procedural context:

The case is an appeal from a bankruptcy court decision determining, after trial, that a portion of the Falcones' claim was excepted from discharge under Section 523(a)(2)(A).

Facts:

The Falcones, residents of Texas, hired a company owned by Mr. Ragonese to build a home on property that they owned in New Hampshire. The parties agreed to an informal building contract but did not agree to a formal budget. Construction costs increased and Mr. Ragonese continued to request money from the Falcones to complete the house. The Falcones requested that the home be made weather tight by winter. After the Falcones had paid $435,000 to Mr. Ragonese's company, the Falcones received a notice that a sub-contractor had not been paid. The Falcones expressed concern about continuing with Ragonese's company. In November of 2007, Mr Ragonese requested an additional $100,000 with the promise that he would devote all time to the Falcones' project and he would only use the funds for their project and that no liens would be recorded against the house. The funds however were co-mingled with funds from other projects and Mr. Ragonese did not devote all of his time of the project. The Bankruptcy Court determined that the final $100,000 was excepted from discharge under Section 523(a)(2)(A) because Mr. Ragonese had fraudulently induced the Falcones to pay the money with his promises to devote all time to the project and that the Falcones' money would be used only for the project.

Judge(s):

Kornreich, Tester, Finkle

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