good morning good morning your honour's jeffrey foreman on behalf of the appellant michael marin nucci may please the court one of the most fundamental aspects of any case in which fraud is alleged is the element of reliance that is that a mere breach of contract claim in a bankruptcy proceeding has to have more than just the breach of contract in order to be viable as an allegation of a fraud which would then be non dischargeable because in order to have a fraud you not have to you know you not only have to show that there was a knowingly false representation which you had a right to a lie in but you don't have to show that you did were lying and you have to show that that reliance went to your detriment your on is this case is no one none of the elements of fraud but the most egregious one it's the undeniable showing that s g holmes did not rely on any of the representations which chesapeake contracting woman to marry nucci made about bonding because that your honor i would first of all remind you that the allegation of fraud in this bonding didn't even surface until after the motion on that deferred judgment on the pleadings because the only allegation for the for the adversary proceeding fernandas charge billy was a violation of the maryland construction trust fund statute which the law is clear does not give you a non dischargeable right so after and understand there was a suit filed among comrie county there was this then there was this adversary proceeding nothing about fraud other than violation of construction just one statute we filed a motion for judgment on the pleadings and then all of a sudden it gets amended and said oh well wait a minute we were but this bare allegation that we were defrauded by statements about bonding is accompanied by instance after instance where s g home showed that it did not rely specifically did not rely on so obviously bonding was not that critical then it permits the job to go on for months without the box then five months after the job distorted they finally come and give chesapeake  contract which they draft and what does it say bonds are excluded it then goes another four or five months and they get to the point where they want to terminate the contract again bonds are not in place they want to terminate the job they say well look you haven't been paying your so obsessed and where we're getting complaints and therefore we're terminating nothing about the bonds now i have to tell your honor it can show no one there is not a single instance where s g homes can say in this record that they relied on the fact that we bought a s g honda is going to say well but mr randall testified that if and they knew they weren't going to give me a bond i wouldn't give them the job so let's understand that says if i knew that they weren't going to give me a bond i wouldn't have given them a contract that said you don't have to give me a bond because that's what they did they gave him a contract that said bonds are excluded they let him work the entire job with no bond but just as importantly is the issue of when you want to convert this breach of contract claim into a fraud claim when was this wrong because as your honour's know this job started in january of that year it went on the court found that mr mar regionally didn't tend to make the get a bond and he made application for a bond and it wasn't till late march for the bonding company told mr ngugi that both he and his wife would have to sign personally for these and his wife said no so at that point m you no longer intended to get upon them and and then that's when all these these false statements were made ok let's assume they're false statements made the fact of the matter is that the law is that false representations fraudulent representations after the contract is made will not support a discharge for fraud rountree which is from this court and judge gregory jor case rountree says the fraud had to induce you to go yet something well chesapeake already had a contract they were already working they're working for months and then as i said once the frauds were made i mean they gave him a contract that said no bonds are necessary so the question of waiver and the question of reliance there is not a single instance in this record that shows reliance on this the bond so then the other instance of alleged fraud of these sort of occasions now s g homestretch a certification that must be signed on every page of every requisition and it says that you're going to use the funds for labor material and other other expenses everybody who testified said that's precisely what we did yeah but that's not really what we want we men and we intended and judge here said well you know this is what they intended they intended it to mean that you were only going to spend the money on the crips branch job  well i don't i don't think so your honor because because the certification issue didn't generate a contract it in no way generated the country the contract was already formed and so if the contract is already formed and the contract is ongoing again even for all certifications even even false statements will not will not be held to be fraudulent for purposes of a of a of of  a non discharge ability terminations so you know i would submit to you that the real issue though with those sort of occasions is that the court is not entitled to air the language only for this job it was it was s g holmes blank piece of paper it was s t holmes blank pen they could have insisted that chesapeake's sign whatever they wanted them to mr mary nucci testified and mr schwartz testified that the money was spent exactly as the certification said precisely nobody said they were as john said put on evidence to show that it wasn't as she home said well you can spend it on our job ok that's not what sort of patients are but let me get the damages real quickly because i want to get to that before i reserve some time you know are there is not a scintilla of evidence that s g homes suffered any damages whatsoever what they've said is we paid your subcontractors two hundred eight thousand dollars for work that we had already paid you for and you didn't take that money and you didn't pay the selves ok that's the breach of construction trust and such but even there you have to show damages the letter terminating chesapeake specifically said listen you haven't been paying yourselves now here's what's going to happen we're terminating you and we have already done  already done the calculations and we're going to pay these specific contractors of yours and when we're finished we don't owe you any more money that is precisely what it says it says in addition to and contact and i'm reading from appendix page one seventy nine it is our intent to pay these subcontractors and suppliers and possibly others directly with funds do chesapeake site contracting and then it calculations once all the subcontractors and suppliers are paid no money will be due to chesapeake site contracting for work performed so i gave an example in our brief which i think is right on the money if if you bill me one hundred dollars because you say j g did some work and you're the general contractor and i pay the hundred and you don't pay judge age and then judge comes to me as is where i hadn't been paid by judge gregory if  have to pay him that second hundred dollars we've got one hundred dollars a work and i've paid two hundred but of judge gregory if you build me a one hundred you don't pay judge a g and then you build me a second hundred nice a listen j to pay him so i want to take that second hundred iow you're not paying him now you've got two hundred dollars worth of work i've paid two hundred dollars i didn't pay j g twice i paid you you were supposed to pay him you didn't so why did using your money that's precisely what they said they were going to do now here's the deal in their exhibits it says and i i would refer your honour's to appendix  two to thirty three and to thirty four where the exhibit says listen we've build a million four hundred seven plus sixty seven thousand retainers we've only been paid a million one forty five that's their exhibit they didn't deny that so by that calculation is three hundred twenty thousand dollars that holmes is holding of chesapeake's money they say we paid your subs two hundred eight thousand dollars there's still one hundred twenty thousand unaccounted for and the fact of the matter is even if there was fraud you're on even if the if the bonding is frozen even if the certifications are fraudulent the fact of the matter is one of the elements of fraud is that you had to incur damages there is not a scintilla of evidence here's the questions your honor when they said we're going to use your money to pay you why how much did they pay you know the fine what how much did they owe you not can find that other then in this in this exhibit thirty two which says or fifty two which says essentially only three hundred twenty thousand dollars what did they do with the money that they said we're going to we're going to pay with your funds what would they do with that money well how much were they supposed to spend on this entire project for chesapeake and how much did they spend because let's say let's say they cut deals with people they ended up spending less than the contract price they haven't proven damages not one penny's worth of damage and i submit to the court your honor that not having may please the court excuse me my name is steve gould i represent the plaintiff and is this is a garden variety fraud case judge wilkinson counsel discussed the roundtree case he mentioned that in one of his first remarks rountree was  was not your typical fraud case and judge wilkinson in his concurring opinion said the following the more common occurrence will reflect the fact that frauds in m and she undertook some activities and no money changed hands as a result this is a different case and judge wilkinson said that that's really an exception most of the cases most of the fraud cases really fall within the purview of what this bankruptcy code is  intended to apply to and that's what we have in this case we have a situation where mr miller nucci finds himself in the midst of a recession he's fifty percent owner of a company his doubtful receivables went up he can't get financing for new jobs all of this is in the record he's personally on the hook for debts of six million dollars for the company his monthly exposure is two hundred thousand dollars a month that they have to pay to finance this that he draws one hundred fifty thousand dollars salary he testified at the operations of his company were dependent upon getting new jobs because financing he couldn't get financing banks were put in the reins on it so what he did he lied he lied  to my client he lied in order to get money that's what he did now let's i'm going to say to you there's that the record is replete with evidence of and in the court the lower court found very clearly a series of misrepresentations based in e mails we're getting the bond it already decided is not getting the bottom he was lying he was lying about his intent to get a bond there's a difference a fundamental difference ratified until may and what judge cure found it was based upon record evidence was that the agreement between the parties then prior to that time has to be gleaned from the parties communications we have an e mail from m depends we said it was now but i think the critical point let in let's concede for sake of argument let me can see it because i'd like to i'd like to explain to the court why it's irrelevant because  soon as the contract was ratified you go to may fourteenth two thousand and eight and this is at page one seventy of the extract this is right after it's ratified my client is saying where is the bond mr money chis and who is it was working under mr merrill nucci says other must be a miscommunication it's not in the contract my client says no we need we need the contract we need the bond you're wrong about that now the contract absolutely gives my client the right to demand a bond at its expense so whether whether the formal contract requires it in the first instance or not is irrelevant because what is critical is it allows my client to demand at its expense and it's precisely what my client did and in response in this is absolutely critical i paid for already and trying now and you're right you have an option you know laterally to demand correct but you're already in on crack ok but you've got the option also to stop all dealers until i get it right at that strip and you michael there's no question that my client knew that there was no bond that's not the basis of the fraud claim the fraud claim is not based upon a failure to get a bond the fraud claim is predicated on a intentional misrepresentation that paint judge gregory house on friday and didn't get to it but you intended to pay it on friday when you told me we won't pay it on friday that's a break your contract that you don't do it if you tell him you're going painted on friday and you knew good and well you were going pain on friday and you told him that to get him to pay you the money you have right then that's a fraud that's a fraud and i'm going to make it worse when this case in this case it's worse there's an if different country if i tell you your honor i'm going to paint your house on friday and in return you give me one hundred dollars intent not now not to paint on friday not to ever paint it yes we have a contract and yes i had to fraud and what evidence is there that there was there was no intention to get a bond when the promise was made to get a very clear evidence you have to have that to make it a fraud absolutely mr marron which i would ask the court to read in its entirety the direct exam my when i called mr nucci as an adverse witness in my direct of him and already had a contract but we had a contract that allowed us to request a bond and it's this is a really important point if i may pause because i see i see what your issue is at page one seventy this is right after the contract was entered my client said jay and this is to mr mayor new cheese employee i think there may have been in communication break break down we still need to have the bond issued please let me know the cost of the bond so that i can revise the contract schedule a how long do you will get on the bottom right away we apologize for the confusion and will advise you of the cost soon as we know what is going to be then he says on another subject do you know when we can expect payment for next billing judge here found based upon the evidence and it's he cites it very specifically deposition testimony and other testimony at that time when he said we're getting on the right to say that was a lie he was not getting on the bo promise with the out without the intent to perform it is fraud tossed the poor and i thought was another one i cite in my brief what about the fact that he tried to get it and his wife said no that's precisely what that's part of the evidence that he knew what he was saying was false because because of that because the bonding company was making him and his wife signed a personal guarantee he decided he is not going to get a bond you got to read the cross examined he absolutely decided he's not getting a bond and yet he is allowing his guy to go out and tell s g holmes in the process of getting a bond my client may have assumed in the contract a risk that mr merrill despite his best efforts may not succeed in getting  my client never assume the risk that he was being lied to that's the difference in this lie because the parting of money if you look at extract one seven this is the perfect example yes we're getting the bond we're on it  my money and that money that was sent was supposed to be paying subcontractors when in reality mr mayor nucci was financing his op he was financing other jobs he was financing his salary he was trying to keep his company afloat that mr f argument no damage what with the evidence your client we had a stipulation in the stipulation is very clear that my client paid and i'm going to be mr foreman used an example and i'm explain why his example is incorrect his example was judge gregory that you and i had a contract you billed me for one hundred dollars based upon the work that judge agee that i pronounced that right by the way th you do not pay it to judge age instead you pay your salary you pay keep other jobs going you do whatever you're supposed to do it than then judge favorite now i'm going to add to his hypothetical to actually make it on for as with what happened  faber did one hundred dollars work and you come to me and then i find out i get a lien notice from judge j g hey where's my money properties lien i get lien notices from other people i get a lien notice from judge paper where's my money and i said you judge gregory you know what i gave you one hundred dollars you're supposed to get a judge judge faber is really needs now is over one hundred dollars instead of you sending me a bill so that you can so i pay you when you pay judge faber i'm an unpaid judge gave now i've still the money that i'm using i still need to pay paid two hundred but in what really happened i paid three hundred and i was only supposed to pay it because i double paid judge a g and you know there is almost no i don't know you anything is that absolutely no off that there was no off that they never approved an offset the their documentation plaintiff's exhibit fifty two and with your indulgence  said the money i'm going to send to you i'm going to send to the subs and i'm withholding it because i have all these other claims out there it because if you look at plaintiff's exhibit fifty two even with the retain it over half a million dollars of unpaid invoices were on this job in my client testified equivocal unequivocal unequivocally both on cross and direct that that the money that was due that hundred dollars that was for that check that had been written to us to chesapeake that amount of money and liens out there far exceeded that there were there was no offset by the way offset is an affirmative defense up paying less even with the double payments than we expected to pay chesapeake somehow we're not damaged and the fallacy in that argument is he's looking at that contract on the contract and in the contract has a very specific schedules it actually itemizes out in the sketch the payments in the payment applications which are part of it were submitted in the record and you'll see if there are specific line items of task that have to get done on this project and there's a price assigned to each one my client defense case was through mr mayor in new g s testimony no documentary evidence and what so but there was proof and mr randall testified at length and showed how he got to the double pane is not only was it stipulated he actually walked the court through the records and how he arrived at that using one or two examples but going back to his contract that this contract price was not an immutable price the contract itself says you can change the scope of work if my client after discovering the fraud and by the way there's a very important point my client discovered that mr mayer ngugi never had an intention to get a bond notwithstanding his promises at the nov ninth deposition in two still sure because the certification itself is fraudulent i see my time is up should i wear it ok the certification was fraudulent the law is very clear that if you are under the circumstances this case and the circumstances of this industry and i laid it out very clear when i cross examined when i did my direct examination of mr merrill nucci that in this industry people it's when contractors expect when they get the money they have to turn around and pay their subs with that that's what that sort of the certification the representation that's what it meant that's what mr mayer knew she knew it meant and he testified he knew that the contract will provision require that maryland law required that when you receive your money you receive it you have to turn around and pay the certification the their argument is this is like well while she edwards is a case and i'm going to have to file that supplemental paper to make your on these cases while she had were it's a case where things exhibit fifty two which they introduced that is that appendix to thirty two fifty two which judge here relied on by the way so that they it's their exhibit not mine in fact just read everything in this case is there exhibit not ours i mean appendix two thirty two record it's exhibit fifty two and on page two thirty two thess is what they're relying on so let's look at the bottom and i pointed this out we have received we have received a total of a million one forty five eight ninety six eighty  parent company including a check written directly to one of our vendors we have build a total of one million four zero seven four forty five sixty four plus sixty seven four ninety four thirty nine this does not include the pending change orders they didn't they didn't dispute this letter they in fact they put it in this is their exhibit on mine so they put in an exhibit that they want judge here to rely on and he relies on it and it says you still owe us three hundred twenty thousand bucks on paid that does not say how much they paid them their they put in nothing that says how much they paid other people other than the stipulation and we had to stipulate ssion mr gould is trying to say well the mr gould made the set made that same argument saying well he stipulated to these damages no i didn't and mr he says mr foreman argues this was not stipulation of damages from the fraud and i totally agree with them because that was not the stipulation the stipulation was they paid two hundred thousand to ourselves that's the stipulation i want to make and put in you know invoice after invoice we agreed they paid two hundred thousand of our subs but they said and i told this to judge here they said they were going to do it with our money ok you did it with our money right now i would i would point was in their case and i was absolutely in their case in chief now you know this over five hundred thousand dollars in unpaid so i ask you a question your honor if i could that you know i see what's in a fifty two year he says but that ignores one other fact and that is without the bill paying because they never paid chesapeake did they have to pay material men and subs for work on those invoices in september and october that's his rhetorical question and he we i think they did there's no evidence of that judge here can't speculate on what else they did and that's where judge here said i mean after all when they say we're going to use your money to pay these subs and by the way the stipulation of the two hundred eight thousand it's the one hundred ninety seven of the two hundred eight are these very contractors where he says ferguson horizon contect they haven't been paid those those subs are one hundred ninety seven of the two hour wait he says you haven't paid ferguson horizon and contract and we're going to use your money to pay a now there's no testimony from them disputing that that's what they did there's no explanation of what you here's what here's the money that we owed them here's what we did with it here's why we're saying the full two hundred eight that we paid is our damages you just can't get there from here now i will say you're on it i think that gregory you hit it right on the head we're already under contract we're months into the contract and judge here i mean a judge quarrels actually in his firm and set out a timeline and the fact of the matter is that the timeline says it was in late march that mr merrill finally decided i'm not getting a bond and your honor i would like to say would you i'd like to read what you said greg in rountree on on page two nineteen it is clear from the structure of the phrase that quote to the extent obtained modifies the money property services or credit the const that a plane reading of this subsection demonstrates the congress accepted from discharge not simply and he did incurred as a result of fraud but only debts in which the debtor used fraudulent means to obtain money property services a credit structurally that subsection can have no other meaning so if they are already under contract and then they say mariucci where's the pani someone get it for you and he's lying there already under contract they didn't rely on that to give him a contract and that i submit your honor is what finally i would just if i could take two seconds here the issue with the certifications there is a huge difference sure as i see a man finish a sentence thank you there is a huge difference between what the law says you've got to do in the construction trust statute and what is what and the language that they ask this man the sought to sign this court has said in catalina it's in my brief you can't change the language and you can't add words to say well this is what i think they meant if the words are clear if they're unambiguous they mean what they say they say what they me know for the questions thank you so much you are going to