Court: Contractor can’t get rid of theft-by-contractor judgment in bankruptcy

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A federal court has found that a bankruptcy declaration won’t prevent a Chippewa Falls contractor from having to pay back nearly $24,000 owed to two ex-customers.

The contractor, Michael Hall, was hired in 2014 by two residents of Bloomer, Rita and Kevin Lenfant, to remodel their property in Osseo. Hall, who was then doing business under the name M&A Home Improvements, received $25,000 for the work.

He later entered into another contract with the Lenfants calling on him to remodel a property in Rice Lake. He received $15,000 as a down payment and was to proceed with the understanding that the contract price would not exceed $25,000.

Both agreements called on Hall to pay for all costs exceeding the contract price. If the price were less, the difference would be returned to the Lenfants. If, on the contrary, the properties sold for a profit, Hall was to share his gains with the Lenfants.

But before the work could be completed, Hall and the Lenfants had decided to break their contracts. Although the rupture was ostensibly the result of a mutually agreed-upon decision, Hall nonetheless ended up finding himself under a court order to pay back nearly $24,000 to the Lenfants.

Rather than comply, Hall and his wife filed in March 2017 for Chapter 7 bankruptcy protection.

The Lenfants responded roughly three months later by filing a complaint tin the Western District of Wisconsin Bankruptcy Court asking for a declaration that Hall could not discharge the debt through the bankruptcy.

U.S. Bankruptcy Judge Catherine Furay, in a memorandum decision handed down Feb. 23, sided with the Lenfants, ordering Hall to pay the $23,835 still owed the couple. In handing down the decision, Furay found that Hall had knowingly violated Wisconsin’s theft by contractor statute. His debt was not dischargeable, she ruled, because Hall had breached his fiduciary duty to the Lenfants.

Furay noted that Hall had been in the construction industry for more than 20 years, had acknowledged the Lenfants’ money was being held in a trust fund and had nonetheless failed to provide any record to either the circuit court or the bankruptcy court showing how he had used the funds received from the Lenfants.

At their heart, the parties’ disagreements were mostly about how much of the Lenfants’ original down payments should be returned by Hall once their contracts had been broken. The Lenfants sued Hall in Chippewa County Circuit Court in 2016, seeking damages over allegations of breach of contract, theft by contractor, conversion and theft by fraud.

The Lenfants contended that Hall had pledged to return any unused money that they had put down for the two projects and that Hall later refused to fulfill his promise. Hall, on the other hand, contended that the Lenfants had authorized him to use money from the Rice Lake project to pay for expenses incurred on the Osseo project.

The Enfants also contended that they had repeatedly asked for accounts of Hall’s work and expenditures on each project. They said that Hall, save for providing a stack of unorganized receipts, had failed to fulfill those requests.

Hall contended that he had an account on a computer showing his expenses related to the projects and estimated that the receipts added up to between $15,000 to $20,000. He also contended that he had another $33,000 worth of invoices that he had never given the Lenfants and that he had spent $36,000 on the project in Osseo and $12,000 on the project in Rice Lake and that all the expenses related to those projects had been duly paid.

In January 2017, Judge Steven Gibbs awarded the Lenfants $23,825 for the unused part of their contract payments, $800 for a possible credit for a return of some windows on one of the projects and $1,433.91 in costs.

Yet Hall, even with the court order finding that bankruptcy protection does not discharge his debts, has still to pay those amounts, according to court records. Follow @erikastrebel