Global Fin. & Leasing Servs., LLC v. Tello (In re Tello)
| Decision Date | 14 March 2022 |
| Docket Number | Bankruptcy No.: 20-30330,Adversary No.: 20-7031 |
| Parties | IN RE: Francisco Antonio TELLO and Nataliya Tello, Debtors. Global Financial & Leasing Services, LLC, Plaintiff, v. Francisco Antonio Tello and Nataliya Tello, Defendants. |
| Court | U.S. Bankruptcy Court — District of North Dakota |
Quinn P. Fylling, Pearce & Durick, Bismarck, ND, Jacob A. Hecker, Payne & Jones, Chartered, Overland Park, KS, for Plaintiff.
Ross H. Espeseth, Bormann, Myerchin, Espeseth & Edison LLP, Bismarck, ND, for Defendants.
GFRS Equipment Leasing Fund, I, LLC (GFRS) filed an Adversary Complaint, alleging Debtors/Defendants Dr. Francisco Antonio Tello and Nataliya Tello exhibited a pattern of willful and deliberate concealment of assets, omitted assets from their bankruptcy schedules and fraudulently transferred assets with intent to hinder, delay and defraud GFRS. It sought an order denying Debtors their bankruptcy discharge under 11 U.S.C. § 727(a)(2), (3) and (4). In their Answer, Debtors denied GFRS was entitled to the relief it sought.
Before trial of this adversary proceeding in January 2022, GFRS assigned its claim to Global Financial & Leasing Services, LLC (GFLS). GFRS filed a motion to substitute GFLS as Plaintiff. The Court granted the motion. Doc. 56. GFLS pursued all of the claims in the Adversary Complaint at trial. Debtors offered evidence supporting their defenses.
This adversary action is a core proceeding under 28 U.S.C. § 157(b)(2)(I). The Court has jurisdiction under 28 U.S.C. §§ 1334 and 157, and it has authority to enter a final order in this matter. This opinion constitutes findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.
Debtors Francisco and Nataliya are married and live in Bismarck, North Dakota. Francisco and Nataliya met in Ukraine, Nataliya's native country. Nataliya and her son from a previous marriage, Bogdan Nechepurenko, moved to the United States 14 years ago when Francisco and Nataliya married. Bogdan is now 31 years old.
Francisco worked for 18 years as a podiatrist for medical providers in Bismarck. In 2015, he formed North Dakota Foot and Ankle Institute, P.C. Francisco was the sole owner of this professional corporation. Initially, North Dakota Foot and Ankle operated out of a clinic in Bismarck. Later, Francisco moved the practice to Mandan, North Dakota. North Dakota Foot and Ankle closed on June 30, 2021.
North Dakota Foot and Ankle entered into a lease agreement with GFLS on April 18, 2015, for the use of an Orthoscan Mobile DI Mini C System, a device used for taking x-ray images. Ex. 282 at 4.1 Francisco signed a personal guaranty for the lease agreement. Nataliya is not listed as a lessee or guarantor.
Within a few months after leasing the equipment, North Dakota Foot and Ankle struggled to make payments. At Francisco's request, GFLS agreed to modify the lease to lower the monthly payment for several months. Id. at 29. North Dakota Foot and Ankle's financial difficulties continued, prompting three more modifications. Id. at 29-32. Even after amending the terms of the lease agreement four times, North Dakota Foot and Ankle failed to make the payments when due. Dakota Foot and Ankle made its last voluntary payment in December 2016.
On March 24, 2017, GFLS sent Francisco a letter notifying him that North Dakota Foot and Ankle was in default, demanding cure payments and requesting Francisco to "peacefully relinquish" the equipment. Several weeks later, Francisco signed and sent a North Dakota Foot and Ankle check for $2,880 to GFLS. North Dakota Foot and Ankle's bank dishonored the check due to insufficient funds. Reportedly, Francisco promised to deliver a $2,880 cashier's check to replace the dishonored check, but this did not occur. After sending Francisco several more email demands and a notice of lease default, GFRS (which received the lease assignment from GFLS) filed a lawsuit in June 2017 with the Superior Court for the State of Arizona seeking damages for breach of contract and an order for specific performance requiring the delivery of the leased equipment. GFRS named "Jane Doe Tello" as a defendant in its complaint even though her name does not appear on the lease or lease guaranty and it alleged no facts suggesting she was a member of North Dakota Foot and Ankle. The only allegation pertaining to "Jane Doe Tello" was: "Defendant Doctor Francisco Antonio Tello (Dr. Tello), and upon information and belief, his wife Jane Doe Tello ..., at all times material to the claims asserted in the Complaint, were acting for the benefit of Doctor Francisco Antonio Tello and their marital community and caused events to occur in Maricopa County, Arizona, which give rise to this complaint." Ex. 282 at 2.
On August 31, 2017, the Arizona state court entered an Order of Default Judgment in favor of GFRS and against North Dakota Foot and Ankle, Francisco and Jane Doe Tello a/k/a "Natalya" (sic) Tello, jointly and severally. Ex. 211. In the judgment, the Arizona state court ordered Defendants to return the Orthoscan to GFRS and entered a monetary judgment in favor of GFRS in the principal amount of $124,746.05, plus post-judgment attorneys’ fees, interest and other costs, totaling $132,827.61. On October 20, 2017, GFRS filed an authenticated copy of the judgment in Burleigh County, North Dakota.
After obtaining the judgment, GFRS began aggressive efforts to collect the debt. In late 2017 or early 2018, it applied for an order with the North Dakota District Court, South Central Judicial District, County of Burleigh, requiring Debtors to appear for a debtor's examination. The North Dakota state court issued a summons for a debtor's examination of Francisco and Nataliya on January 9, 2018. Debtors failed to appear at the debtor's examination scheduled for January 30, 2018, prompting the North Dakota state court to issue a bench warrant for Debtors’ arrest. Francisco was arrested and briefly incarcerated. The North Dakota state court rescheduled the examination.
On March 22, 2018, Francisco and Nataliya both appeared for the rescheduled debtor's examination, which the North Dakota court supervised. Ex. 213. During the examination, GFRS asked about the location of the Orthoscan equipment. Francisco explained that he moved the equipment from the Bismarck clinic where North Dakota Foot and Ankle took possession of it to the Mandan address where North Dakota Foot and Ankle relocated. Prior to the rescheduled examination, GFLS/GFRS attempted to repossess the equipment from the Bismarck location without success. Although the lease terms required written consent from GFLS prior to moving the equipment, Francisco did not obtain GFLS's or GFRS's written consent or inform either entity of the move.2 During the examination, GFRS obtained Francisco's assurance that he would not move the equipment without GFRS's consent, and he would make it available to GFRS if it elected to repossess it. Consistent with this assurance, Francisco never restricted access to the equipment. GFRS eventually recovered the equipment from the Mandan clinic location. It sold the equipment for approximately $11,600 and applied the proceeds to Debtors’ debt.
During the March 2018 debtor's examination, GFRS also collected information about Debtors’ income, personal bank accounts and North Dakota Foot and Ankle business accounts. Ex. 213. Francisco testified that he deposited insurance and other health care benefit reimbursements into North Dakota Foot and Ankle's account at U.S. Bank.3 GFRS used this information to garnish $2,896.71 from this account on March 30, 2018. Ex. 213 at 11; Ex. 237 at 13. The following month, Francisco withdrew $3,000.00 in six $500.00 cash increments from this account, leaving only $218.48 subject to GFRS's second garnishment on April 27, 2018. Ex. 237 at 19-20.
Review of U.S. Bank accounts ending in 4167 and 4159 from January 2018 to June 2020 reveals that Francisco routinely withdrew cash from these North Dakota Foot and Ankle business accounts. In fact, he withdrew cash on more than 150 occasions totaling more than $55,000, nearly $25,000 within one year of the petition date. From 2018 to 2020, GFRS garnished only $4,933.58 from these business accounts. Francisco claims he withdrew the cash to pay bills or living expenses, not to avoid garnishments.4 Other than information included on the bank statements and rudimentary "Profit and Loss" statements for 2019 and 2020 showing business expenses, he provided no documentation showing how he spent this cash.5
At the March 2018 debtor's examination, GFRS also learned that Francisco received $3,300 per month from a pension fund. GFRS garnished the Wells Fargo account where the pension fund deposited the pension payments. Following the garnishment, either Francisco or Wells Fargo closed the account,6 and Francisco arranged for the pension payments to be sent by check to his home address. According to Sean Duffy, the CEO/CFO for GFRS and GFLS, Francisco was always "one step ahead."
In April 2018, GFRS served interrogatories on Debtors and North Dakota Foot and Ankle seeking financial information, including a list of all checking, savings and investment accounts. Debtors failed to respond, leading GFRS to file a motion to compel answers. The North Dakota state court issued an order requiring Debtors to answer the interrogatories within 21 days. Ex. 216 at 3-4. Debtors failed to comply. GFRS sought contempt sanctions, prompting the North Dakota state court to schedule a hearing on GFRS's motion for contempt sanctions on October 26, 2018.
The day before the hearing, Debtors filed an unsigned response to the interrogatories dated April 28, 2018. Ex. 215; Ex. 216 at 3. Despite the last-minute interrogatory responses, the state court granted GFRS's motion for contempt for failure to...
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