Fleming Companies, Inc. v. Rich
| Decision Date | 30 September 1997 |
| Docket Number | No. 4:94CV838SNL.,4:94CV838SNL. |
| Citation | 978 F.Supp. 1281 |
| Parties | FLEMING COMPANIES, INC.<SMALL><SUP>1</SUP></SMALL>, Plaintiff, v. Max RICH, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
Jay A. Summerville, Armstrong and Teasdale, St. Louis, MO, for Malone & Hyde, Inc.
Michael J. McKitrick, Danna and McNary, St. Louis, MO, for Max Rich, Rose Rich.
Michael A. Gross, St. Louis, MO, for Sanford Rich.
John S. Metzger, Associate, Jay A. Summerville, Armstrong & Teasdale, St. Louis, MO, for Fleming Companies, Inc.
Plaintiff, a grocery wholesaler, has brought this action seeking to recover monies owed to it for goods bought and delivered. Specifically, plaintiff alleges that defendant Sanford Rich engaged in a fraudulent scheme to divert corporate monies from being utilized to pay creditors (of which plaintiff is one) for his personal use. The alleged scheme involved, but was not limited to, the transfer of corporate funds to defendants Max and Rose Rich as "rent" and as substitute collateral for their pledge of a certificate of deposit as collateral for Sanford Rich's personal debt. Plaintiff seeks to have the Court declare void and null the transfer of corporate monies to Max and Rose Rich as fraudulent conveyances under the Missouri Uniform Fraudulent Transfer Act; and hold defendant Sanford Rich personally liable for the default judgments entered in favor of plaintiff and against defendant Sanford Rich's grocery stores. The case was tried before the Court sitting without a jury from February 6-8, 1996. At the conclusion of trial, all parties made oral motions for judgment as a matter of law. These motions were taken with the case.
Before commencing with the Court's factual and legal findings, certain preliminary matters must first be addressed. Taken with the case are the defendants' motion in limine concerning the testimony of David Steimel; and the plaintiff's objections to the testimony of defendant's witness Jack Hunstein, and the defendants' post-trial submission of the affidavit of witness Jonathan Becker. As to the defendants' motion in limine regarding David Steimel, the Court will grant the motion only in so far as to the statement of this witness to plaintiff's counsel in August 1995. However, the motion is denied as to the live testimony of this witness, and such witness' testimony will be considered in the resolution of this case. Having considered the plaintiff's objections to the testimony of Jack Hunstein and the post-trial submission of Becker's affidavit, the Court will sustain the objections. Mr. Hunstein was never identified during discovery as an expert witness (on the subject of the appraisal of the Overland Dairy Market store in St. John, Missouri). Consequently, his testimony will be disregarded by the Court. Mr. Becker's affidavit is nothing more than a post-trial "offer of proof" regarding testimony that this Court had already sustained an objection to at trial. Consequently, the affidavit will not be considered in the resolution of this case.
After careful consideration of all other objections to exhibits taken with the case, all said objections are hereby overruled, and all exhibits offered into evidence at trial are received into evidence. Any remaining objections to the introduction into evidence of any party's discovery responses are hereby overruled. This Court, having now considered the pleadings, the testimony of witnesses, documents in evidence, and the joint stipulation of facts filed by the parties, and being fully advised in the premises, hereby makes the following findings of fact and conclusions of law as required by Rule 52, Federal Rules of Civil Procedure.
Overland Dairy Market, Union Thrift Market, Overland Dairy Thrift Market d/b/a/ Pennywise, and Overland Thrift Market are Missouri corporations. The corporations operated as a chain of grocery stores during the relevant time period. They are collectively referred to as the "Overland Dairy Stores".2
Defendants Max and Rose Rich are the elderly parents of defendant Sanford Rich. They began the family grocery business in 1954 by opening a store in Overland, Missouri which became to be known as the Overland Dairy Thrift Market d/b/a/ Pennywise.3 In the 1970s, their two sons defendant Sanford Rich and Ron Rich joined them in the grocery business and independently opened several more stores, including but not limited to the afore-mentioned stores. In 1981 Max and Rose turned over the entire grocery business to Sanford and Rich to operate. Max and Rose retained ownership of the physical premises of Pennywise, and in 1985 entered into a lease arrangement with Pennywise. Defendants' Exhibit W. This lease was signed by Ron Rich on behalf of Pennywise; however, there are no signatures on the lease by either Max or Rose Rich. The lease term was for five (5) years beginning on June 1, 1985 and ending on June 31, 1990. There was no evidence at trial that this lease was ever renewed upon its expiration. The monthly rental payments were $2500.00. However, no rent was ever paid to Max or Rose Rich from 1985 through 1992, although it appears that the rent obligations was noted monthly on the financial books for the Overland Dairy Stores.
In 1983, Sanford acquired a restaurant known as Koppermans which was incorporated as Daddy Rich, Inc. During the relevant time-period, Sanford Rich was the 100% owner and sole shareholder, director, and officer of Daddy Rich, Inc. During the relevant time-period, Koppermans operated independently of the Overland Dairy Stores.
In 1987, Sanford Rich became, and remained during the relevant time-period, the 100% owner and sole shareholder, director and officer of the Overland Dairy Stores. As chief executive officer, he was ultimately responsible for the operations of the various subject stores. His office was at the companies' headquarters at 8707 St. Charles Rock Rd; the same location of the Overland Dairy Market store. During the relevant time-period, he was compensated weekly for his services.
On August 15, 1988, a line of credit promissory note was purportedly executed by Overland Dairy Market in favor of Sanford Rich in the amount of $75,000. Plaintiff's Exhibit 474. The line of credit was allegedly secured by a second Deed of Trust on a farm owned by Overland Dairy Market in Audrain County, near Mexico, Missouri [hereinafter referred to as the "Mexico farm"]. Although the note was executed by defendant Sanford Rich on August 15, 1988, it was not recorded until March 26, 1991 due to a financing arrangement between Overland Dairy Market and the First National Bank of Mexico, Missouri which resulted in the Bank acquiring a first lien on the farm (i.e. the Bank held a first Deed of Trust on the farm). The line of credit funds were advanced in $5000.00 allotments (in August and September 1988) directly from Koppermans' bank account and deposited into the Overland Dairy Stores' accounts as follows:
8/17/88 $5000 Overland Dairy Market
8/17/88 $5000 Overland Dairy Market
8/17/88 $5000 Union Thrift Market
8/17/88 $5000 Union Thrift Market
9/27/88 $5000 Overland Dairy Bridgeton
9/27/88 $5000 Union Thrift Market
9/27/88 $5000 Union Thrift Market
9/27/88 $5000 Overland South County
9/27/88 $5000 Overland South County
9/27/88 $5000 Overland South County
Plaintiff's Exhibit 49. The monies deposited in the accounts of stores other than Overland Dairy Market were secured by a series of demand promissory notes in favor of Overland Dairy Market. Defendants' Exhibits D-1, D-2, D-3, E, and F. On September 1, 1992, pursuant to the August 15, 1988 Line of credit promissory note, Koppermans advanced $20,000.00 to Overland Dairy Market which was deposited into Overland Dairy Market's bank account.
Also, on August 15, 1988 and September 27, 1988, three demand promissory notes were executed by Sanford Rich in favor of Koppermans, in the amounts of $10,000.00; $30,000.00; and $10,000.00, respectively. Defendants' Exhibits C-1, C-2, and C-3. All of the promissory notes, including the line of credit note, executed by the various Overland Dairy Stores or defendant Sanford Rich are signed only by Sanford Rich. None of these notes are notarized as to signature or date of the note.
Associated Grocers, Inc. (Associated) served as the grocery wholesaler for Overland Dairy Market Union Thrift Market, Pennywise, and Overland Dairy Thrift Market until October 1991, when Malone & Hyde became their grocery wholesaler. Associated had a first UCC lien position in the inventory of these stores. Malone & Hyde has a second UCC lien position. At the time Associated stopped supplying groceries, Overland Dairy Market, Union Thrift Market, Pennywise, and Overland Thrift Market collectively owed money to Associated.
Malone & Hyde extended credit terms to Overland Dairy Market, Union Thrift Market, Pennywise, and Overland Dairy Thrift Market. Payment for the groceries delivered between Monday and Friday of a week was due on the Friday (or the last business day) of the following week. The grocery orders were normally transmitted by each store manager through a computerized hookup with the plaintiff. Plaintiff was also kept abreast of inventory levels at each store through a computer hook-up via the checkout scanners. The decision as to type of grocery items and amount of grocery items to order was generally left to the sole discretion of each store manager. However, "ad items" (groceries that would appear in newspaper advertisements or circulars during a given week) were ordered by Richard Jokerst, Vice-President of Operations for the Overland Dairy Stores. Defendant Sanford Rich, Jokerst, and Richard Eve,...
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