Dahar v. Foistner (In re Foistner)
| Docket Number | Bk 17-10796-BAH,Adv. 19-01033-BAH |
| Decision Date | 15 September 2023 |
| Parties | In re: Joseph A. Foistner, Debtor v. Joseph A. Foistner, Foistner Law Offices, P.C., American Corporate Tax Attorneys and Tax Accountants, P.C., Laurie J. Foistner, Jennifer Stanhope, a/k/a Jennifer Stanhope Prive Raymond Atkisson, JFL Nominee Trust, DCMV Trust, Red River Realty Trust, Jane and John Doe Defendants (1-10) Defendants Victor W. Dahar Trustee, Plaintiff |
| Court | United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of New Hampshire |
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In re: Joseph A. Foistner, Debtor
Victor W. Dahar Trustee, Plaintiff
v.
Joseph A. Foistner, Foistner Law Offices, P.C., American Corporate Tax Attorneys and Tax Accountants, P.C., Laurie J. Foistner, Jennifer Stanhope, a/k/a Jennifer Stanhope Prive Raymond Atkisson, JFL Nominee Trust, DCMV Trust, Red River Realty Trust, Jane and John Doe Defendants (1-10) Defendants
Bk No. 17-10796-BAH
Adv. No. 19-01033-BAH
United States Bankruptcy Court, D. New Hampshire
September 15, 2023
Chapter 7
Attorneys for Plaintiff William S. Gannon, Esq. William S. Gannon PLLC Manchester, New Hampshire Eleanor Wm Dahar, Esq. Victor W. Dahar, Esq. Victor W. Dahar Professional Association Manchester, New Hampshire
MEMORANDUM OPINION AND ORDER
Bruce A. Harwood Chief Bankruptcy Judge
I. Introduction
The Court has before it the Motion to Dismiss Plaintiff's Complaint filed by, among others, Joseph A. Foistner (the "Debtor") and his wife, Laurie J. Foistner ("Mrs. Foistner") (collectively, the "Defendants")[1] (Doc. No. 10) (the "Motion").[2] The chapter 7 Trustee filed an objection to the Motion (Doc. No. 83) (the "Objection"), which he supplemented twice. See Doc. Nos. 82 (the "First Supplemental Objection") and 229 (the "Second Supplemental Objection"). In relation to this Motion and certain actions taken by one or both Defendants, the Trustee has sought leave to amend the Complaint to add a party and/or assert additional claims against the Defendants and newly added defendants. See Doc. No. 263.[3] For the reasons discussed herein, the Motion is GRANTED in part, DENIED in part, and the Trustee is granted leave to file an amended Complaint.
II. Jurisdiction
This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a) and Local Rule 77.4(a) of the United States District Court for the District of New Hampshire. This is a core proceeding in accordance with 28 U.S.C. § 157(b).
III. Factual Background & Procedural History[4]
A. Pre-Petition Events
In 1998, the Debtor formed JFL, a Massachusetts revocable nominee trust (Complaint ¶ 12). On June 4, 2001, the Debtor filed Articles of Organization with the Secretary of the Commonwealth of Massachusetts Corporate Division to incorporate FLO as a professional corporation offering legal services.[5] FLO's Articles of Organization named the Debtor as the president, treasurer, clerk, director, sole shareholder, and registered agent. At the time of its incorporation, both FLO's principal office and the business address of its registered agent in Massachusetts were "100 State Street, Boston, MA 02109, 11th Floor." On December 2, 2011, the Debtor, acting in his capacity as FLO's registered agent, filed a Statement of Change of Registered Office Address, updating both FLO's registered business address (and thus his business address as FLO's registered agent) to "300 Brickstone Square, Suite 201, Andover, MA 01810." A year later, the Debtor filed a Statement of Change of Supplemental Information, indicating that the street address for FLO's president, treasurer, secretary, and director had changed to "Box 240 RT 13, New Boston, NH 03070 USA." From 2001 through 2016, FLO filed its annual reports as required by the Secretary of the Commonwealth.
On May 12, 2012, the Debtor formed Red River (Complaint ¶ 14), a Massachusetts revocable nominee trust (Complaint ¶ 14). The Debtor is the trustee and sole beneficiary of Red River while living, and Ms. Prive will become Red River's sole beneficiary upon his death (Complaint ¶ 14).
The Trustee alleges that the Debtor engaged in ("or pretended to engage in") various businesses, including the development of a residential subdivision in New Boston, New Hampshire (the "New Boston Development") (Complaint ¶ 20). The New Boston Development, which purported to include a "residence" or "offices" for FLO and other entities, was a scheme that was [funded] by loans obtained from federally insured lending institutions, lenders, and/or private investors (Complaint ¶ 20).[6] The New Boston Development scheme required the participation of the Debtor, Mrs. Foistner, Mr. Atkisson, Ms. Prive, the Trust Defendants and their respective trustees and beneficiaries, and one or more "Jane and John Doe Defendants" (Complaint ¶¶ 20-21).
In October of 2016, the Debtor completed a loan application and documents on behalf of FLO to secure a loan in the amount of $250,000 from Newtek (the "Newtek Loan") (Complaint ¶ 22). When applying for the Newtek Loan, the Debtor provided Newtek with a personal financial statement dated December 31, 2016, which listed his assets as "Notes . . . Mortgages Receivable" in the amount of $1,848,659; "104 Foxberry Drive Trust Property" with a value of $11,884,345, and "Equity and Assets" with a value of $11,884,345 (Complaint ¶ 92). The statement did not reflect any debts or liability owed by the Debtor to Mrs. Foistner, FLO, JFL, Red River, DCMV or any other "Foistner Entity" (Complaint ¶ 92).
On March 13, 2017, TD Bank issued a check for $25,000, which was made payable to FLO and allegedly referenced Mr. Atkisson, and which purported to be for the purchase of the Debtor's Ford F-350 and Mercedes Benz E-350 (Complaint ¶¶ 23, 175). The check contained a handwritten, undated and unsigned note stating, "Balance Vehicle Purchase 2013 F-350 Truck and 2006 E-350 Benz" and "Money from Ray" (Complaint ¶ 175).
At some point in April of 2017, Newtek wired $241,000 (the "Newtek Loan Proceeds") into FLO's bank account at Merrimack Valley Federal Credit Union ("Merrimack Federal") (Complaint ¶ 24), a federally insured depository institution (Complaint ¶ 25). The Debtor was the only person with signatory authority over FLO's account at Merrimack Federal. The account bears FLO's tax identification number and the Debtor's personal social security number (Complaint ¶ 94). The Debtor used the Merrimack Federal account to pay personal bills and expenses, including his personal credit card bills, cable bill, Amazon bill, and monthly mortgage payment (Complaint ¶ 95).
On May 1, 2017, Mrs. Foistner became the trustee of JFL via an amendment to JFL's Original Trust Declaration of 1998 (Complaint ¶ 12). On May 17, 2017, the Debtor withdrew $202,246.29 from FLO's Merrimack Federal account via a check made payable to himself, in his individual capacity and without any limitations or restrictions (Complaint ¶¶ 26, 97, 98).[7] The next day, the Debtor opened a bank account ending in "7561" at St. Mary's Bank in FLO's name (the "FLO St. Mary's Account") and deposited $202,246.29 into the FLO St. Mary's Account (Complaint ¶¶ 27; 99). The Debtor endorsed the check, signing his name as "Joseph Foistner" (Complaint ¶ 27). By depositing the check into the FLO St. Mary's Account, the Debtor allegedly made a pre-petition transfer in the amount of $202,206 to FLO (which the Trustee
contends is one of the Debtor's alter egos) (Complaint ¶ 100),[8] as part of a plan to divert some, but not all, of the Newtek Loan Proceeds to Mr. Atkisson, Mrs. Foistner, and JFL to benefit himself and Mrs. Foistner, and to further the New Boston Development scheme (Complaint ¶ 78).
The Debtor caused FLO to hold an "emergency" shareholder meeting on May 24, 2017 (the "Emergency Meeting") for FLO, at which various non-voting participants (including Mr. Atkisson and Ms. Prive) were present (Complaint ¶ 58). According to the Complaint, the non-voting participants encouraged or accepted parts of a concealment scheme outlined during the Emergency Meeting (the "Concealment Scheme") (Complaint ¶ 59),[9] and FLO acknowledged its own insolvency (Complaint ¶ 174). As a result of the meeting, the Debtor, Red River, and FLO would initiate civil lawsuits against various individuals, judges, and state entities (Complaint ¶ 59). The resolutions from the meeting also referenced a "$225 million dollar criminal and RICO Lawsuit" (Complaint ¶ 59).
The Debtor filed Articles of Voluntary Dissolution to dissolve FLO on May 24, 2017,[10]which were effective on May 30, 2017 (Complaint ¶ 33). At the time of FLO's dissolution, both the address of the registered agent and the location of FLO's principal office was "300 Brickstone Square, Suite 201, Andover, MA 01810 USA."[11] Prior to FLO's dissolution, the
Debtor worked at FLO's Boston law office, which was little more than a post office box with a shared conference room, and which had no other employees (except for Mrs. Foistner) (Complaint ¶ 57). FLO had few clients other than persons or entities owned, controlled, or managed by the Debtor (Complaint ¶ 57).
On May 25, 2017, the Debtor transferred his Mercedes Benz to Mr. Atkisson for the sum of $9,238.78 (the "Mercedes Benz Transfer") (Complaint ¶¶ 28, 29).[12] The same day, the Debtor withdrew $201,000 from the FLO St. Mary's Account (Complaint ¶¶ 30, 119) and opened a St. Mary's bank account ending in "9906" for JFL (the "JFL Account"), using his name and social security number, as well as the name and social security number of Mrs. Foistner (Complaint ¶¶ 31, 120). Mrs. Foistner was also a trustee and beneficiary of JFL (Complaint ¶ 9). The Debtor and Mrs. Foistner held the powers of application and withdrawal over the $201,000 in the JFL Account at all material times (Complaint ¶ 31). The same day, the Debtor allegedly transferred the $201,000 from the FLO St. Mary's Account to the JFL Account by wire transfer, wire number 192720 (Complaint ¶¶ 32, 122).[13] Neither the Debtor nor FLO was indebted to JFL on or before May 25, 2017 (Complaint ¶ 118). After the transfer was completed, the Debtor closed the JFL Account (Complaint ¶ 123).[14]
On or about May 25, 2017, JFL, while under the direction and control of the Debtor, transferred $210,000.00 to Mr. Atkisson (Complaint ¶ 141). Although both the Debtor and Mrs. Foistner always held the powers of application and withdrawal over the $201,000...
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