Chosnek v. Rolley
| Decision Date | 19 November 1997 |
| Docket Number | No. 79A02-9612-CV-764,79A02-9612-CV-764 |
| Citation | 688 N.E.2d 202 |
| Parties | Edward CHOSNEK, as Receiver for the Estate of Steven Whaley, Teddi Whaley, P & M Price Data, Inc., and Commodity Management Plus, and Donald E. Funk, Appellants-Plaintiffs, v. Ronald T. ROLLEY, Josette Rolley, Jocelyn Rolley, Daryl Rolley, and Larissa Rolley, Appellees-Defendants. |
| Court | Indiana Appellate Court |
A Ponzi scheme is a type of fraud involving a series of investors in which the resources of the later investors are used to fund obligations to the earlier investors, resulting in a pyramiding of the liabilities of the investment enterprise. This action essentially involves a dispute between two victims of such a scheme. The entities and individuals to which the investments were entrusted were Steven Whaley and his wife Teddi Whaley, P & M Price Data, Inc. (P & M) and Commodity Management Plus, Inc., (CMP) (unless otherwise specified, we will henceforth refer to CMP, P & M, Steven Whaley, and Teddi Whaley as "the Whaley Entities"). Donald E. Funk, one of the appellants in this action, was a later investor. The other appellant, Edward Chosnek (also referred to herein as the Receiver), was the receiver appointed by the court to marshal the assets of the Whaley Entities for the purpose of distributing the remainder to creditors after paying the costs of administrating the receivership. The appellees, Ronald, Josette, Jocelyn, Daryl, and Larissa Rolley (the Rolleys), were earlier investors. The lawsuit filed by Chosnek and Funk was an effort by those parties to recover moneys in the hands of the Rolleys which allegedly came from Funk's investment. The appellants appeal a grant of summary judgment in favor of the appellees, presenting as the sole issue for review the correctness of that ruling. That issue, in turn, presents the following questions:
1. Did Chosnek have standing to file suit on behalf of Funk?
2. Was the trial court correct in granting summary judgment in favor of the Rolleys on the theory of election of remedies?
3. Is the appellants' suit barred by the doctrine of collateral estoppel?
4. Did the trial court err in concluding that money paid to a pension fund did not constitute payment to the Rolleys?
5. Did the trial court err in concluding that the Rolleys should not be compelled to return the money paid to them by the Whaley Entities?
6. Did the trial court erroneously base summary judgment upon defenses which it had previously forbidden the Rolleys from asserting?
We affirm.
The facts favorable to the nonmoving parties are as follows. In 1986, Steven Whaley and Vernon Everton formed CMP and P & M for the purpose of trading commodities. By November, 1986, the Rolleys had invested $610,267.94 with the Whaley Entities. Sometime in 1986, Steven Whaley began siphoning money from CMP and P & M for his personal use. During this time, the Rolleys received periodic account statements that reflected substantial gains from their investments. The Rolleys were unaware that the account statements were false.
By July 1987, the total balance of CMP's and P & M's accounts had dropped to between a negative and positive $20,000. Before then, the Whaley Entities had distributed to the Rolleys a total of $87,500. On July 23, 1987, Funk made his initial investment with the Whaley Entities in the amount of $250,000. Between July 1987 and March 1988, Funk delivered a total of $3,170,199.18 to invest in the commodities market. This amount represented 55% of the total funds invested with the Whaley Entities during that period of time. Also between July 1987 and March 1988, the Whaley Entities distributed funds totaling $701,286.82 to various accounts associated with the Rolleys, including a pension fund for which Ronald Rolley served as trustee. Nevertheless, the Rolleys suffered a net loss from their investments with the Whaley Entities. 1
On April 19, 1988, Everton filed suit against the Whaley Entities, seeking an accounting, damages, and the appointment of a receiver. Chosnek was appointed receiver of the Whaley Entities. Chosnek's mandate on behalf of the damaged investors was to marshal the assets of the Whaley Entities and assist in providing an accounting of all funds received and disbursed by the receivership defendants. Funk filed a claim against the Whaley Entities for $3,170,199.18. Jocelyn, Daryl, and Larissa Rolley also filed claims, but Ronald and Josette did not. On June 12, 1992, the Whaley Entities entered into an Agreed Judgment with the Receiver for $4,072,328.38, an amount representing the total of all claims filed with the Receiver against the Whaley Entities. The receivership court found that the Receiver had collected all non-exempt assets of the Whaley Entities and the court authorized a proportional distribution of those assets among the creditors. Funk received $158,945.30, while Jocelyn, Daryl, and Larissa received a combined total of $7,712.12.
On July 22, 1993, the Receiver and Funk filed a complaint for unjust enrichment and constructive trust against numerous individuals, including the Rolleys, all of whom had invested funds with the Whaley Entities. The complaint alleged that each of the named defendants had invested money with the Whaley Entities and had received a return on their investment. The complaint further alleged that "some or all of the monies the defendants received had been transferred from the Funk Account with CMP." Record at 67.
On July 14, 1995, the Rolleys filed a motion for summary judgment on the following theories: (1) Election of remedies- by opting to participate in the receivership action and by pursuing that remedy to its conclusion and collecting an award, Funk was foreclosed from pursuing the Rolleys on a different theory; (2) standing- the Receiver lacked standing to pursue Funk's property; (3) collateral estoppel- by participating in the receivership action, which culminated in a settlement and an order stating that the Receiver had "fully pursued and collected all non-exempt assets of Defendants", Record at 207, the Receiver was estopped from alleging the existence of additional, non-exempt assets; and (4) failure to receive permission from the receivership court to pursue Funk's complaint. On August 8, 1995, the appellants filed a motion for summary judgment and the Rolleys thereafter responded with their own summary judgment motion.
On August 7, 1996, the trial court granted the Rolleys' motion for summary judgment, issuing the following conclusions of law:
2. Whaley Entities operated a "Ponzi Scheme", which scheme began at the time the first investor invested in Whaley Entities scheme and Whaley Entities began siphoning off funds from the investors;
3. Funk has the burden to prove that the Rolley defendants either profited by the scheme of Whaley Entities or that they were a party to that scheme;
4. Funk has failed in his burden of proof as to his claims herein;
5. The Rolley defendants did not profit by their deposits or withdrawals with Whaley Entities;
6. The Rolley defendants suffered a pecuniary loss by reason of their deposits and withdrawals with Whaley Entities;
7. The Rolley defendants received monies from Whaley Entities, but Funk has failed to prove that said monies were received at the detriment of Funk, and has failed to prove the Rolley defendants had and received monies from Whaley Entities belonging to Funk;
8. The Rolley defendants received monies from Whaley Entities, but the same were less than the monies they had deposited in Whaley Entities;
9. The Rolley Trust is a separate and distinct legal entity from the Rolley defendants, and is not a party to this lawsuit, and the $117,086.82 received by said Trust from Whaley Entities and deposited by said Trust in its account was not received by the Rolley defendants and is excluded from this proceeding as a matter of law;
10. If Funk claims that the Rolley Trust is not a separate legal entity and that the receipt of said monies by the Trust was in effect the receipt of monies by the Rolley defendants, he has failed to prove said claim herein;
11. Funk claims as a matter of law that inasmuch as some of the monies deposited by the Rolley defendants were invested in the commodities market by Whaley Entities, the Rolley defendants received what they had bargained for, and that fact alone altered [the] character of the scheme employed by Whaley Entities from that of a Ponzi Scheme so far as it related to the Rolley defendants, but there are no facts nor law giving merit to such claim, and the law is against Funk as to said claim;
12. Funk has failed to prove a constructive trust existed in law or fact in favor of Funk as to any monies received by the Rolley defendants from Whaley Entities;
13. The Motion for Summary Judgment of the Rolley defendants should be sustained and the Motion for Summary Judgment of Funk should be denied.
Record at 1539-40. This appeal ensued..
We note that the trial court entered findings of fact and conclusions of law. Although findings and conclusions aid appellate review, they are not binding on this court. Yater v. Coy, 681 N.E.2d 232 (Ind.Ct.App.1997). Our task when reviewing a summary judgment ruling is well settled.
As a reviewing court, we are bound by the same standard as the trial court. The standard is that summary judgment is warranted only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Just as the trial court, we may only consider those parts of the pleading, depositions, answers to interrogatories, admissions, matters of judicial notice, and other matters which have been designated by the parties to the trial court for consideration. "Any...
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