Dynomite Mktg., LLC v. Dowd (In re Dowd), Case No. 17-60610-WLH

Decision Date17 April 2020
Docket NumberAdversary Proceeding No. 18-05006-WLH,Case No. 17-60610-WLH
Citation616 B.R. 212
Parties IN RE: Roger Lewis DOWD, Debtor. Dynomite Marketing, LLC, Plaintiff, v. Roger Lewis Dowd, Defendant.
CourtU.S. Bankruptcy Court — Northern District of Georgia

Douglas H. Dean, Lawson, Reid & Dean, LLC, Cordele, GA, Albert F. Nasuti, Michael Brian Pugh, Thompson, O'Brien, Kemp & Nasuti, PC, Peachtree Corners, GA, for Plaintiff.

W. Jeremy Salter, Law Office of W. Jeremy Salter, Rome, GA, for Defendant.

ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT

Wendy L. Hagenau, U.S. Bankruptcy Court Judge This matter is before the Court on the Plaintiff's Motion for Partial Summary Judgment on its §§ 523(a)(2) & 523(a)(6) Claims [Doc. No. 67] ("Motion"). The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334, and this proceeding is a core matter pursuant to 28 U.S.C. § 157(b)(2)(I).

Dynomite Marketing, LLC ("Dynomite") alleges that Debtor Roger Dowd ("Dowd" or "Debtor") engaged in a pattern of actual fraud to prevent Dynomite from recovering on a judgment against Reach Media, LLC, ("Reach") a company owned and controlled by Dowd. Dowd's acts allegedly create a claim against Dowd personally, and Dynomite alleges that claim is nondischargeable. Moreover, Dynomite argues Dowd is estopped from relitigating the issue of his fraud by the principles of collateral estoppel.

For the reasons given below, the Court denies Dynomite's Motion.

Procedural Background

Dowd filed bankruptcy under Chapter 7 of the United States Bankruptcy Code on June 15, 2017. Dynomite filed this complaint on January 5, 2018, objecting to the dischargeability of its claim under 11 U.S.C. §§ 523(a)(2) and 523(a)(6) and objecting to the Debtor's discharge in total under 11 U.S.C. §§ 727(a)(2)(A) and (a)(4). In connection with this Motion, Dynomite filed a Statement of Undisputed Facts, the Affidavit of Douglas Dean, as Amended, the Depositions of Roger Dowd, James Dowd and Stacie D. Seamann, the transcript of Roger Dowd's 341 meeting, a SunTrust Bank subpoena, Wells Fargo Bank Dowd Fuller accounts, Wells Fargo Bank PMC accounts, Defendant's Response to Plaintiff's Request for Production of Documents, and Defendant's Response to Interrogatories. Dynomite contends it is entitled to summary judgment that its claims are nondischargeable under Section 523 either on the basis of collateral estoppel and the Fulton County Default Judgment (as defined below) or because all the facts as demonstrated by the filed materials are undisputed and demonstrate that Dynomite is entitled to judgment as a matter of law.

Dowd submitted a response to Dynomite's Statement of Undisputed Material Facts [Doc. No. 93-1]. Dowd contends generally that collateral estoppel does not apply and no claim has been established against him. He also contends that any liquidation of Reach's assets generated minimal if any funds which were used to pay Reach's obligations so no fraudulent conveyance claim can be asserted against him. Finally, he contends the liquidation of his personal assets should not be in issue since Dynomite does not have a claim against him and in any event, he liquidated his personal assets because he lacked income and to deal with a divorce.

Undisputed Facts

Dowd was at all pertinent times the sole member and owner of Reach which was formed in 2011. On February 10, 2014, Dynomite obtained a default judgment against Reach in the Superior Court of Crisp County, Georgia, in the amount of $39,070.67 plus interest ("Reach Judgment"). At the time, Reach was a defendant in other suits including a class action and subject to other judgments.

In November 2013, Dowd filed a UCC-1 asserting a security interest in Reach's assets. Dowd contends this was to evidence his capital contributions to Reach, but prior to the filing of the UCC-1, Reach and Dowd had never executed a loan agreement or a security agreement granting Dowd a security interest in Reach's property. Dowd acknowledges the UCC-1 was filed to allow him to recoup his investments in Reach before Reach paid other creditors. In late 2013, Dowd liquidated Reach's assets. Dowd describes this process as a "foreclosure" of his interest in Reach. Though Dowd disputes that the money came from the foreclosure of Reach, Dowd transferred $50,000 to a joint account he owned with Marie Fuller (his girlfriend) on February 25, 2014 (only two weeks after the Reach Judgment). He transferred $13,000.00 to the same joint account on February 27, 2014. In the five months following these transfers, Dowd made multiple large cash and check deposits to the joint account totaling $138,200.88.

Dowd also owned and controlled Performance Management Consultants, LLC ("PMC"). PMC was formed in August 2013. On February 26, 2014 (only 2 weeks after the Reach Judgment), PMC deposited $39,312.00 into its account with Wells Fargo. Until Wells Fargo closed the account in August 2014, $69,800.41 was deposited in the account after the Reach Judgment. All checks deposited into the PMC account were made out to Reach Prime or to PMC doing business as Reach Prime.

In September 2015, Dowd gave $35,000.00 to his sister, Stacie D. Seamann. Seamann wired money to Dowd as he requested. By New Year's Day 2016, Dowd had withdrawn all the $35,000.00 he had given to Seamann to hold on his behalf.

In 2007, Dowd purchased an approximately 130-acre property on Garr Road in Jackson, Georgia. The purchase price for the property was $1.2 million. Dowd paid approximately $800,000.00 in cash and financed the remainder of the transaction. In June 2012, after a fire destroyed the home on the property, Dowd used $800,000.00 in insurance proceeds he received as a result of the fire to pay the balance of the mortgage on the home. Afterward, Dowd owned the Garr Road property free and clear of any encumbrances and Dowd retained approximately $500,000.00 in insurance proceeds. In October 2014, Dowd transferred his interest in the Garr Road property to an entity called Garr Road, LLC which Dowd owned and controlled. On December 17, 2015, Dowd sold the Garr Road property for $162,000.00. Dowd paid his ex-wife $80,000.00 of the proceeds in accordance with his divorce decree and retained the balance of the proceeds.

James Dowd (Debtor's stepfather) bought property in Griffin, Georgia on July 31, 2009. On the same day, James Dowd executed a warranty deed to himself and the Debtor as joint tenants. On January 12, 2016, the Debtor executed a Quitclaim Deed re-conveying his interest in the Griffin Property to James Dowd for no consideration.1

Beginning in 2015, Dowd engaged an auction company, Ahlers & Ogletree, to sell his personal assets, including valuable pieces of artwork, antiques, and collectibles. Between March 2015 and March 2018, Dowd liquidated over 200 pieces for approximately $125,500.00. Those pieces include signed Andy Warhol prints, Peter Max originals, Roy Lichtenstein lithographs, a "French serpentine commode", Anthony Thieme originals, Robert Henri originals, and World War II German antiques. Dowd, through Ahlers & Ogletree, sold nearly $40,000 in assets in the year prior to Dowd filing his bankruptcy petition, including one sale that took place the day before Dowd filed his petition. His liquidation continued even after the petition was filed, since he auctioned $5,000.00 in art and antiques between August 2017 and March 2018.

In June 2015, Dowd deposited $359,417.40 into a SunTrust account he owned and controlled. In 2016, prior to closing the account in July, Dowd made $49,007.52 in deposits into that account. Throughout this time, Dowd made large cash withdrawals and large purchases from eBay.

On October 22, 2015, Dynomite filed an action against Dowd and other defendants in the Superior Court of Fulton County ("Fulton County State Court Litigation"). In the complaint, Dynomite sought, as to Dowd, to pierce Reach's corporate veil and assign personal liability to Dowd on account of the Reach Judgment, and to avoid the transfer of various items of property of Reach and/or Dowd both as a constructive fraudulent conveyance and as an actual fraudulent conveyance under the Georgia Uniform Fraudulent Transfers Act, O.C.G.A. § 18-2-70. Dynomite also sought punitive damages and attorney's fees pursuant to O.C.G.A. § 9-15-14 and/or O.C.G.A. § 13-6-11.

Dowd filed an answer in the Fulton County State Court Litigation. Dynomite later filed a motion to compel discovery pursuant to which the court entered an order on November 18, 2016, awarding Dynomite $8,142.00 in attorney's fees and $26.66 in expenses. The court ordered the production of certain documents and other discovery responses. Dowd failed to respond to the discovery requests or otherwise comply with the court's order. The court therefore entered an order on April 14, 2017 sanctioning Dowd for his continued lack of responsiveness, striking Dowd's answer and entering a default judgment against Dowd (the "Fulton County Default Judgment"). The Fulton County Default Judgment awarded damages to Reach in the liquidated amount of $46,302.75 based on sums pled in the complaint, and awarded punitive damages and attorney's fees, in amounts to be determined by the court at a subsequent hearing. The Fulton County Default Judgment stated that it would become final within seven days of its entry unless Dowd or the other defendants requested a hearing in writing. No allegations have been made that such a hearing was requested.

Although Dowd filed bankruptcy on June 15, 2017, the Fulton County court proceeded with a hearing on June 16, apparently unaware of the bankruptcy filing. The court awarded Dynomite $94,407.17 in attorney's fees and expenses (which included the $8,142.00 in attorney's fees awarded in the first discovery sanction) and $250,000.00 in punitive damages.

Disputed Facts

While the foregoing facts are undisputed, Dowd points to evidence, including his own affidavit submitted in connection with his response which disputes...

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