In re Hilsman (Ch. 7 Case No. 15-31022, Adv. No. 16-03009)

The plaintiffs, through their “family trust”, contracted with a construction company owned solely by the debtor to build a custom home.  The plaintiffs made a down payment and a number of requested draws.  Although the house was not completed by the date expected, the plaintiffs gave additional draws on the debtor’s promise to complete the house by certain dates.  The debtor had financial problems and was unable to complete the house.  The plaintiffs learned that the debtor had failed to apply $164,000 of the draws to the cost of their house.  The plaintiffs’ family trust sought to have that amount declared non-dischargeable under 11 U.S.C. § 523(a)(2)(A).

The court held that the debtor had not made a false representation by failing to voluntarily disclose his financial difficulties when the construction contract was signed.  Furthermore, the debtor’s alleged promises about how money paid by the family trust would be used and that the house would be finished by certain dates if additional payments were made were not false representations.  Finally, the Court refused to pierce the construction company’s corporate veil and hold the debtor personally liable for the corporate debt.

Wednesday, August 9, 2017