Duley v. Thompson (In re Thompson), Case No. 12–56857
| Decision Date | 31 March 2015 |
| Docket Number | Adv. Pro. No. 12–2474,Case No. 12–56857 |
| Citation | 528 B.R. 721 |
| Parties | In re: Jason Allen Thompson and Wendy Sue Thompson, Debtors. William Duley, et al., Plaintiffs, v. Jason Allen Thompson, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Ernest D. Ducey, Toledo, OH, Patrick D. Hendershott, Law Office of Patrick D. Hendershott LLC, Perrysburg, OH, for Plaintiffs.
Michael A. Cox, Matthew T. Schaeffer, Columbus, OH, for Debtors.
The plaintiffs, William Duley and Jack Lilley, are co-executors of the probate estate of Laura May Debolt. They allege that Wendy and Jason Thompson, the defendants and the debtors in the underlying Chapter 7 case,1 unlawfully disposed of assets of, and embezzled funds from, Ms. Debolt's trust, and wrongfully converted property belonging to Ms. Debolt to their own use. They sued the Debtors in state court, seeking an order removing Wendy as a co-trustee of the trust and requiring the Debtors to provide an accounting of all trust funds collected, deposited, withdrawn or expended for any purpose. The Plaintiffs also sought a judgment for the total amount of assets of the trust that were wrongfully withheld, transferred or expended. The state court granted default judgment, enjoined the Debtors from disposing of certain property, and removed Wendy as a cotrustee of the trust. Later, following a damages hearing, the state court granted a money judgment against the Debtors, jointly and severally, for $107,271.76 plus interest. After the Debtors filed their Chapter 7 bankruptcy case, the Plaintiffs commenced this adversary proceeding, in which they seek a judgment denying the Debtors' discharge and finding the debt arising from the state court judgment to be non-dischargeable.2 Asserting the collateral-estoppel effect of the state court's judgment, the Plaintiffs filed a motion for partial summary judgment against the Debtors (“Motion”) (Doc. 28), seeking judgment only as to the claims asserted under § 523. The Debtors filed a response in opposition to the Motion (“Response”) (Doc. 29), and the Plaintiffs filed a reply (“Reply”) (Doc. 30). For the reasons set forth below, the Court concludes that the state court's judgment on which the Plaintiffs rely lacks the detailed findings necessary to support the application of the doctrine of issue preclusion in this adversary proceeding. Accordingly, Plaintiffs are not entitled to partial summary judgment.
The Court has jurisdiction to hear and determine this adversary proceeding pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. This is a core proceeding. 28 U.S.C. § 157(b)(2)(I).
Ms. Debolt, Wendy's great aunt, was in her late 80s in 2006 when the series of events giving rise to this dispute began to unfold. At some unknown point, but presumably in 2006, the Debtors went to live with Ms. Debolt at her property in rural Union County, Ohio. On February 22, 2006, Ms. Debolt executed a power of attorney naming Wendy as her attorney in fact.3 The power of attorney gave Wendy broad authority to, among other things, dispose of property, collect debts, endorse and cash checks, deposit money, open and close accounts and certificates of deposit, transfer assets into or out of any living trust established in Ms. Debolt's name, manage investment accounts, prepare tax returns, register or transfer automobile titles, seek government financial assistance and make gifts, provided that all business transacted under the power of attorney was transacted in Ms. Debolt's name. Compl., Ex. F.
On September 28, 2006, Ms. Debolt executed a quitclaim deed to the Debtors transferring her home and adjacent property to them. Ms. Debolt reserved a life estate in the property for herself. Less than two months later, on November 16, 2006, Ms. Debolt executed a declaration of trust and certificate of trustee authority and power, thereby creating the Laura May Debolt Trust (“Trust”). Compl., Ex. A. At the same time, she executed a last will and testament (“Will”). Compl., Ex. D.
Ms. Debolt was the primary trustee and beneficiary of the Trust, with exclusive rights to the use and benefit of the income and assets of the Trust during her lifetime. Compl., Ex. A at 1–2. She had sole power to exercise dominion and control over the Trust assets. Id. at 1. She named Wendy and William, the husband of another of her nieces, as successor co-trustees, to assume the duties as trustee in the event of Ms. Debolt's resignation, death, disappearance or incompetency. Id. The Will named William and Jack—the husband of Wendy's aunt, Audra Lilley—as co-personal representatives of her estate.4 The Will provided that, upon her death, Ms. Debolt's assets were to pass to the Trust. Compl., Ex. D at 1. The Trust provided that the Debtors, William and his wife, the Lilleys and others were to be distributees of the Trust's assets. Compl., Ex. A–1b.
In the nearly three years that elapsed between the time that Ms. Debolt executed the power of attorney and her death in January 2009, Wendy used her authority under the power of attorney to make purchases, pay bills, write checks and engage in various banking transactions. The Debtors assert that at all times prior to her death, Ms. Debolt was of sound mind, stayed informed of her financial affairs through constant review of financial statements, and acted under the advice of experienced estate planning counsel. Am. Answer, Doc. 22, ¶ 59–60. According to the Debtors, they “at all times acted under the authority of [Ms.] Debolt and with [her] informed consent....” Id. ¶ 60.
In March 2009, William and Wendy accepted their appointments as successor co-trustees of the Trust. Compl., Ex. E. Less than a year later, William and Jack filed a complaint (“State Court Complaint”) (Mot., Ex. 5) in the Union County, Ohio, Court of Common Pleas, initiating the state court lawsuit (“State Court Action”). In the State Court Complaint's prayer for relief the Plaintiffs requested an order requiring the Debtors to provide an accounting, along with all supporting documentation, of all Trust funds that had been collected, deposited, withdrawn or expended for any and all purposes under Wendy's power of attorney; for an order removing Wendy as co-trustee of the Trust; and for judgment in the total amount of assets that the Defendants wrongfully withheld, transferred or expended.
On March 24, 2010, Plaintiffs filed a motion for default judgment. Less than a month later the state court granted the motion by way of a judgment entry and order (“Default Judgment Order”)5 that stated, in its entirety, as follows:
Compl., Ex. R.
Following the May 27 hearing, the state court entered the following two-paragraph Judgment Order and Entry (“Injunction Entry”):
Compl., Ex. U. The Injunction Entry included no factual findings. No copy of a motion for injunction and temporary restraining order has been provided to this Court, nor have the Plaintiffs supplied a copy of the transcript (if one exists) recording the oral amendment to the motion for default judgment. The only references to an injunction in the State Court Complaint were in the title, i.e., “Complaint for Accounting, Injunction for Removal of Co–Trustee, and for Damages,” and in paragraph 2 under the heading “Jurisdiction and Venue,” which reads “[t]his is also an action for the removal of the Defendant Wendy S. Thompson as the Successor Co–Trustee of the Laura May Debolt Trust, as the Defendant must be enjoined from further acts as a fiduciary of the Laura May Debolt Trust, based upon the facts that reveal fraud and that are alleged with particularity herein.” State Ct. Compl. at 2.
On September 14, 2010, the Union County Court of Common Pleas issued the second judgment entry (“Final Judgment Entry”) (Compl., Ex. V) that followed from the May 27 damages hearing. The Final Judgment Entry recited that the Plaintiffs had appeared and presented evidence through counsel; that Jason had appeared pro se, but had presented no evidence;6 and that Wendy had not appeared. Final J. Entry at 1. The Final Judgment Entry recites that the Plaintiffs and Wendy each filed written closing arguments. Id. Under the Final Judgment Entry, the state court granted judgment against the...
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