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United Supply Co. v. Crivaro

United States District Court, D. New Jersey

April 2, 2018





          NOEL L. HILLMAN, U.S.D.J.

         This appeal arises from the Bankruptcy Court's order and judgment in favor of Appellee Richard Crivaro ("Appellee" or "Crivaro"), which rejected Appellant United Supply Company's ("Appellant" or "United Supply") argument that its claim is not dischargeable under 11 U.S.C. § 523(a)(2). For the reasons that follow, the Court will affirm.


         As the Court owes deference to the factual findings of the Bankruptcy Court, the Court takes its facts from the Bankruptcy Court's April 24, 2017 opinion. RC Heating and Air Conditioning ("RC") sold and installed heating and air conditioning equipment to residential customers. As part of this enterprise, RC bought supplies from certain vendors, including United Supply. Crivaro owned and operated RC. In 2006, Crivaro executed a corporate Credit Application and Personal Guarantee to United Supply which stated, in part: "This is to certify that the undersigned is a principal in the above-named business. In consideration for the extension of credit by [United Supply] and its divisions and any affiliates the undersigned jointly and severally do personally guarantee payment of all monies owed." Throughout 2013 and 2014, RC fell overdue on payments. On June 9, 2014, RC filed a Chapter 11 petition, which was eventually converted to Chapter 7.

         Crivaro made no payments to United Supply, maintaining that there was no personal guaranty. Consequently, United Supply filed a lawsuit in the Superior Court of New Jersey, Law Division ("Law Division"), which proceeded to trial. The Court briefly summarizes the Law Division's June 2, 2015 decision here. The issue before the Law Division was whether Crivaro personally guaranteed the debt of $132, 500.[1] The Law Division considered this issue in accordance with "the principles of contract law." The Law Division found a binding contract was created between United Supply and Crivaro and that there was "credible evidence [to] support[] the proposition that the document was intended to be Richard M. Crivaro's guaranty of the corporate debt of 'RC Heating' to [United Supply]."

         In reaching this conclusion, the Law Division considered Crivaro's argument that "he signed the document only for the purpose of allowing 'RC Heating' to be qualified for and to be enabled to obtain more favorable 'dealer pricing'" and that he "did not believe the document to be an agreement to provide a guarantee of the monies owed by 'RC Heating.'" Crivaro argued before the Law Division that this was evidenced by his handwriting of "Pres" next to his signature on the agreement, his writing "N/A" on the line requesting his social security number, and his leaving the signature line for "Principle's Spouse" blank.

         The Law Division relied on the fact that Crivaro "executed the document directly below the section that indicate[d] that it was being signed as a 'personal guarantee'" and that Crivaro "did not 'cross out' or 'redact' the language in the agreement which is a 'personal guaranty.'" The Law Division entered judgment for United Supply in the amount of $132, 500.

         On July 10, 2015, Crivaro filed his bankruptcy petition. United Supply's October 5, 2015 Adversary Complaint before the Bankruptcy Court alleged that United Supply's claim should be non-dischargeable under 11 U.S.C. § 523(a)(2)(A)-(B).[2] The Bankruptcy Court conducted a trial on September 14, 2016. The Court briefly summarizes the Bankruptcy Court's decision. The Bankruptcy Court first considered the findings of the Law Division:

[T]he Debtor's previous testimony did not persuade the Superior Court. Rather, the Superior Court explicitly determined that the Debtor's testimony, which United Supply is now seeking to use against the Debtor, was not credible. The Superior Court found that the Debtor intended to enter into the Guaranty and to guarantee RC's debt to United Supply.

         The Court determined that, "[i]n light of the Superior Court's factual determination of the Debtor's intent to guarantee RC s debt to United Supply, the doctrine of collateral estoppel appl[ied]":

Because the Superior Court found that the Debtor did intend to personally guarantee RC's debt, the elements of fraud necessary to prove § 523(a) (2) (A) & (B) cannot be present here. Specifically, the Debtor did not make a fraudulent statement because he knew he was entering into the Guaranty, and intended to enter into the Guaranty, at the time he signed it, despite his later testimony to the contrary before the Superior Court and this Court.

(Pa 10) .

         The Opinion below did not rest solely on the doctrine of collateral estoppel to determinate that Appellant had failed to prove its case of fraud. More specifically, the Court concluded that even it collateral estoppel did not apply, the result would be the same. After hearing the evidence in the case, the court made the following factual determination: "The Court finds that the Debtor knew he was agreeing to guarantee RCs debt to United Supply and that he intended to be bound by it at the time of signing." (Pa 10). Relying on these alternative analyses, the Bankruptcy Court entered judgment in favor of Crivaro. United Supply filed this bankruptcy appeal on May 9, 2017.


         This Court has jurisdiction pursuant to 28 U.S.C. § 158(a), which provides: "The district courts of the United States shall have jurisdiction to hear appeals . . . from final judgments, orders, and decrees ... of bankruptcy judges entered in cases and proceedings referred to bankruptcy judges under section 157 of this title." "An appeal under this subsection shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving." Id.


         In reviewing a determination of the bankruptcy court, the district courts "review the bankruptcy court's legal determinations de novo, its factual findings for clear error and its exercise of discretion for abuse thereof." Reconstituted Comm. of Unsecured Creditors of the United Healthcare Sys., Inc. v. State of N.J. Dep't of Labor (In re United Healthcare Sys.), 396 F.3d 247, 249 ...

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