UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
|DO NOT PUBLISH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.
JERRY and KATARINA GULLETT, CASE NO.: 97-12859
DANIEL and GAIL IGOU,
v. A.P. No. 97-1297
JERRY and KATARINA GULLETT,
Memorandum of Decision
In May, 1996, plaintiffs Daniel and Gail Igou purchased a residence in Oroville, California,
from debtors and defendants Jerry and Katarina Gullett. The Igous paid only $100.00 down, with the
remainder financed through the Veteran's Administration. After the Igous took possession, they
experienced several problems with the condition of the property. In this adversary proceeding, they
allege that the Gulletts were aware of the problems and misrepresented the condition of the property,
so that they have a nondischargeable claim for fraud pursuant to §523(a)(2) of the Bankruptcy Code.
Both Gulletts are real estate brokers. Because of the greater responsibility of brokers to make
sure that persons who purchase property from them are treated fairly, the court was initially solicitous
of the Igous' position. However, their case quickly became a tangle of vague complaints,
contradictory testimony, unsubstantiated allegations and inadmissible hearsay. The Igous were unable
to set forth a clear case of fraud, let alone prove it.
The only allegation the court can identify with any kind of certainty is that the Gulletts
supposedly told the Igous that repairs and additions to the residence were all done with proper permits.
However, the Igous did not prove that a permit was required for the work, or that there was a failure to
obtain such a permit, or that the Gulletts knew that a permit was required and not obtained. In order to
prove fraud, a plaintiff must show both false statement or nondisclosure and that the defendant made
the false statement or withheld information with intent to defraud. The Igous did not establish a single
element of fraud.
The evidence showed that the property was carefully inspected before the sale according to
Veterans Administration requirements, as the Igous were financing the entire purchase price. The
evidence also showed that the Gulletts agreed to and did make substantial repairs to the septic system
on the property which were known to them at the time of sale. These repairs related to the condition
of the septic tank. There is no evidence that the Gulletts had any knowledge of a problem with the
leach field which surfaced after the tank was repaired.
The Igous allege that instead of obtaining a new termite report on the property, the Gulletts
altered the date on an older report. This allegation was vigorously contested. There is insufficient
evidence for the court to make such a finding. The Igous' case is not helped by the allegation of
Daniel Igou that his signatures on the termite report and other documents are forgeries, as the court did
not find this testimony convincing.
Most fatally, the Igous failed to introduce any evidence whatsoever as to damages. Instead,
they argued that this court should decide only whether or not there was fraud and then allow the issue
of damages to be decided in state court. Such procedural notions have long since been abandoned
, In re McLaren
, 990 F.2d 850, 853 (6th
Cir. 1993); In re Choi
, 135 B.R. 649
(Bkrtcy.N.D.Cal. 1991)), and the court never gave the Igous any suggestion that it would abandon its
responsibility to determine damages. The court notes that the amount suggested by the Igous in their
proposed findings is almost the entire amount of the purchase price. The court can see absolutely no
justification for such a large amount. The property was clearly worth a substantial percentage of the
purchase price, even with the defects the Igous allege.
The court finds that the Igous have failed badly to prove their case against the Gulletts.
Accordingly, the Igous will take nothing and their complaint shall be dismissed with prejudice. The
Gulletts shall recover their costs of suit.
This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a) and
FRBP 7052. Counsel for the prevailing party shall submit an appropriate form of judgment forthwith.
Dated: August 27, 1998 ________________________________