Chudzinski v. Hanif (In re Hanif), Case No. 13–61977–MBM
| Decision Date | 30 April 2015 |
| Docket Number | Case No. 13–61977–MBM,Adv. Pro. No. 14–4246 |
| Citation | 530 B.R. 655 |
| Parties | In re Muhammad Hanif, Debtor. Margaret Chudzinski, Plaintiff, v. Muhammad Hanif, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
In re Muhammad Hanif, Debtor.
Margaret Chudzinski, Plaintiff
v.
Muhammad Hanif, Defendant.
Case No. 13–61977–MBM
Adv. Pro. No. 14–4246
United States Bankruptcy Court, E.D. Michigan, Southern Division.
Signed April 30, 2015
Jamie Ryan Ryke, Southfield, MI, for Debtor.
OPINION GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Marci B. McIvor, United States Bankruptcy Judge
This matter is before the Court on the parties' cross-motions to dismiss and/or for summary judgment. Plaintiff/creditor Margaret Chudzinski seeks summary judgment on a three count complaint for nondischargeability. Plaintiff's claims arise from an unsuccessful business deal with defendant/debtor Muhammad Hanif. Defendant Muhammad Hanif's Motion asserts that Plaintiff's claims under § 523(a)(2) and (a)(4) (Counts I and II) should be dismissed pursuant to Fed.R.Civ.P. 12(b)(6), and requests that summary judgment be granted in favor of Defendant on Count III of the Complaint (brought under § 523(a)(6)). Both Plaintiff and Defendant argue that the doctrine of collateral estoppel precludes further litigation of matters already considered by a state court. For the reasons stated in this Opinion, Plaintiff's Motion for Summary Judgment is granted.
I. Facts
This case arises out of the formation and operation of Home Health Care Connections, LLC (hereinafter “HHCC”). HHCC was incorporated under Michigan law in 2009. Based on an affidavit filed by Plaintiff in her lawsuit in Washtenaw County Circuit Court, Plaintiff formed HHCC on April 21, 2009 to provide home health care services, including nursing, physical and occupational therapy, social work and home health aides. She obtained
an IRS employer I.D. number, applied for a National Provider Identifier number, executed a three-year commercial lease (expiring in June, 2012) at 2925 E. Michigan Avenue in Ypsilanti, retained an architect to build out the space and made the initial lease payments. (Plaintiff's Affidavit is filed in this case as Exhibit 1 to Docket No. 28, hereinafter “Pl. Aff. ¶ ––––”).
At some point in the spring of 2009, Plaintiff met with Defendant regarding joining together to operate HHCC. Generally, Plaintiff would be responsible for the day to day operations and Defendant would provide financial resources. (Pl.Aff.¶¶ 5, 6).
On December 15, 2009, Plaintiff and Defendant executed an Operating Agreement for HHCC (hereinafter “the Agreement,” attached to Defendant's Motion for Summary Judgment as Exhibit 5A). Generally, the Agreement provided that Defendant was to invest $50,000 “for initial form up and running expenditures of the company” and would “be sole owner of the company until this amount is paid in full by the company. After the payment is made to Mr. Hanif, then his ownership interest will be 50% in the company.” The rest of the ownership would transfer to the other members. “However, other members will be entitled to receive 50% of the profit of the company as and when it is running.” (Agreement section 3.5).
Pursuant to the Agreement, Plaintiff was to work “full time in directing the operation of the business” and be paid for that work. (Agreement section 7.4). Defendant was to assist “as managing employee” and would also be paid. (Agreement section 7.4).
Pursuant to the Agreement, Defendant was “responsible for depositing a sum of $70,000 to the Company's account pending certification of the Company by the Centers for Medicare and Medicaid services (“CMS”) as a home health care organization.” Those funds would be withdrawn when the application was approved and the certification process was complete. (Agreement section 3.5).
On December 15, 2009, Plaintiff introduced Defendant to a consultant who assisted HHCC with the certification process. That certification was expected to take 9 months. (Plaintiff's State Court Complaint ¶ 15, hereinafter “St.Ct.C. ¶ ––––”).
Initially, after the Agreement was signed, Plaintiff continued to manage the day to day operations of the business. “Soon thereafter,” Defendant informed her that his son was critically ill and that he could not, at that time, fulfill his obligations under the Agreement. HHCC's operations were put on hold. (St. Ct. C. ¶¶ 17; Pl. Aff. ¶¶ 11–12).
Plaintiff accepted a position as an administrator with Advance Home Health Care Services, Inc. and worked there throughout 2010. (St.Ct. C. ¶ 18). Plaintiff attempted to contact Defendant on several occasions during 2010 in an effort to determine when HHCC operations could recommence, but her calls were not accepted or returned. (St.Ct.C. ¶ 21; Pl. Aff. ¶ 14).
In February, 2011, Plaintiff received a letter from Tariq Hafeez, an attorney representing Defendant. That letter stated “that Ms. Chudzinski had failed to meet her obligations under the Operating Agreement” and that he and Defendant “consider the Operating Agreement as void and rescinded and do not recognize any ownership interest or any other proprietary interest, right to proceeds, [or] right to revenues on the part of Ms. Chudzinski.” (Pl.Aff.¶ 16)
In October, 2012, pursuant to the terms of the Agreement, Plaintiff sought to obtain copies of HHCC's financial statements and tax returns, board minutes, and records relating to distributions. Defendant refused to provide the information. (St.Ct.C. ¶¶ 24, 25; Pl.Aff.¶ 17).
On December 18, 2012, Plaintiff filed a five-count civil action against Defendant in state court (Chudzinski v. Home Health Care Connections, LLC and Muhammad Hanif, case no. 121328–CB, Washtenaw County Circuit Court). The gist of Plaintiff's complaint is that shortly after she agreed to enter into business with Defendant, he engaged in a deliberate pattern of conduct to cut her out of the business and keep all profits for himself. The facts as alleged by Plaintiff in her state court complaint are as follows:
(1) Plaintiff began the process of becoming a home health care provider in April, 2009. (St.Ct.C.¶ 6, 7).
(2) In August, 2009, unbeknownst to Plaintiff, the identity of HHCC's resident agent was changed to Defendant. The registered office was 2925 E. Michigan Avenue, Ypsilanti, Michigan, the space leased by Plaintiff in April, 2009. (St.Ct.C.¶ 10).
(3) On December 15, 2009, Plaintiff and Defendant executed an Operating Agreement for HHCC. (St.Ct.C.¶ 12). Soon thereafter, an application (the CMS 855–A application) was submitted to the CMS seeking certification of HHCC as a health care provider. The CMS 855–A application listed Defendant as the sole owner of HHCC with no mention of Plaintiff's 50% ownership.
(4) Early in 2010, Defendant contacted Plaintiff and stated that his son was ill and that Defendant was placing any development of HHCC on hold. (St.Ct.C.¶ 17)
(5) While Plaintiff was operating under the assumption that nothing was happening with HHCC, Defendant took the following actions:
(a) On April 15, 2010, Defendant, acting as “sole owner” of HHCC entered into a three-year commercial lease agreement covering the same commercial office space already occupied by HHCC (the new lease running from 1/1/10 through 12/31/13). The locks on the office were changed and Plaintiff no longer had access to the business premises. (St.Ct.C.¶ 23).
(b) Defendant held HHCC board meetings without any notice to her. In the meeting minutes, Plaintiff was identified as being “absent.” (Adv. P. Complaint ¶ 25).
(c) Minutes of the March 26, 2010 meeting state that Plaintiff was not fulfilling her obligations to HHCC and that Plaintiff had failed to perform her obligations under the Operating Agreement. (Adv.P.Complaint ¶¶ 25–27).
(6) Plaintiff attempted to contact Defendant throughout 2010 to obtain information about HHCC. Plaintiff did not return her calls. (St.Ct.C.¶ 21)
(7) In February 2011, Plaintiff received a letter from Defendant's counsel stating that the Operating Agreement was void and rescinded, and that HHCC did not recognize in Plaintiff any ownership interest or any proprietary right to proceeds or revenue. (St.Ct.C.¶ 22).
(8) Plaintiff attempted to obtain information about HHCC's operations. Defendant failed to provide any information sought. In a letter dated October 11, 2012, Defendant, through counsel, indicated that Plaintiff had “no ownership stake in Home Health Care Connections, is not a Member and is not entitled to any rights of a Member.” (St.Ct.C.¶¶ 24, 25).
Based on these allegations, Plaintiff's Complaint sought relief on five grounds: (1) fraud and/or willfully unfair conduct under the Michigan Limited Liability Act; (2) breach of contract; (3) breach of fiduciary duty; (4) conversion; and (5) unjust enrichment. The complaint sought damages in an unspecified amount.
Defendants were uncooperative in the state court litigation. On August 2, 2013, as a result of the Defendants' failure to respond to Plaintiff's first set...
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