|DO NOT PUBLISH
This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
GEORGE and DORIS DRITSAS, No. 94-10759
v. A.P. No. 95-1069
GEORGE and DORIS DRITSAS,
Memorandum of Decision
Plaintiff Julian Cohen was a tenant in a commercial building in Marin County owned by
debtors and defendants George and Doris Dritsas. In June, 1993, Cohen entered into a contract
with George Dritsas to purchase the building. The agreement provided that Cohen would pay
Dritsas $24,000.00 at that time, outside of escrow, as a down payment. Their agreement
provided that if Cohen became entitled to refund of the deposit but Dritsas could not pay it, then
Cohen would have the right to set off the deposit against the rent he was obligated to pay.
Cohen was unable to obtain financing to consummate the purchase. On August 16, Dritsas
agreed to extend the contract in return for an additional $20,000.00 deposit, on essentially the
same terms as before, except that Dritsas also agreed to take back a $50,000.00 second deed of
trust to assist Cohen in obtaining financing.
Thereafter, Cohen did obtain financing but Dritsas was uncooperative in closing the sale.
Dritsas never closed the sale, and he and his wife filed a Chapter 7 bankruptcy petition. Cohen
set off $28,000.00 in rent as the parties agreed. By this adversary proceeding, Cohen seeks a
nondischargeable judgment in the amount of about $130,000.00. The court finds no merit in his
There is no doubt that Dritsas breached his contract with Cohen. However, even an
intentional breach of contract does not render a debt nondischargeable. In re Riso
, 978 F.2d 1151
(9th Cir.1992). This action is a nothing but a breach of contract action dressed up as an action
for fraud under section 523(a)(2) of the Bankruptcy Code. However, Cohen has proved no fraud.
The court begins by noting that among his other damages Cohen sought recovery of the full
$44,000.00 he paid in earnest money even though he recovered most of it by setting it off against
his rent. This disingenuous position did not help his case.
Cohen has no tenable argument whatsoever as to the initial $24,000.00 payment. Dritsas
clearly wanted to sell, and conducted himself in good faith. The sale was not consummated
pursuant to the original agreement only because Cohen was unable to obtain financing.
Cohen's argument as to the second payment of $20,000.00 is that Dritsas then agreed to take
back a $50,000.00 second. It later became apparent that because of a judgment lien and property
taxes against the property there would not be enough cash to close if Dritsas took back a
$50,000.00 note. While it appears in hindsight that the escrow could not be closed without some
modification to the agreement, Cohen has failed to prove that Dritsas acted with fraudulent
intent. It is more likely that Dritsas thought that he could consummate the sale even taking back
a second, either because he was not thinking about the liens or because he believed that a member
of his family would help by purchasing the second. Dritsas agreed to take back the second to
assist Cohen in making the purchase, not to defraud Cohen out of his money. In fact, Cohen had
a ready method of recouping his payments under the contract.
Having failed to prove fraud, Cohen shall recover nothing by his complaint which shall be
dismissed with prejudice. Dritsas shall recover his costs of suit.
This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a)
and FRBP 7052. Counsel for Dritsas shall submit an appropriate form of judgment forthwith.
Dated: February 28, 1996 _______________________