In re First Financial Associates, Inc.
| Decision Date | 20 July 2007 |
| Docket Number | Adversary No. 01-6148.,Bankruptcy No. 99-62270 JPK; |
| Citation | 371 B.R. 877 |
| Parties | In re FIRST FINANCIAL ASSOCIATES, INC., Debtor. Kenneth A. Manning, Trustee, Plaintiff, v. Dorothy Wallace, First Financial Mortgage, Inc., Elmer Shults, Dorothy L. Wallace, Personal Representative of the Estate of Darrell E. Shults, deceased and Sole Heir, and First Financial Business Group, Inc., Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Indiana |
Kenneth A. Manning, Esq., James, James & Manning, P.C., Dyer, IN, for the Plaintiff/Chapter 7 Trustee.
Dorothy Wallace, pro se.
Elmer Shults, pro se.
MEMORANDUM AND DECISION OF FINAL JUDGMENT/FINDINGS OF FACT AND CONCLUSIONS OF LAW
This adversary proceeding was initiated by the complaint of Kenneth A. Manning, Chapter 7 Trustee ("Trustee") of First Financial Associates, Inc. ("Debtor") filed on June 29, 2001. The complaint designated five (5) defendants: Dorothy L. Wallace personally; Dorothy L. Wallace as the Personal Representative of the Estate of Darrell E. Shults, deceased; Elmer Shults; First National Business Group, Inc.; and First Financial Mortgage, Inc.
Following a tortured and twisted path toward resolution — which is not material to the Court's determination of its final judgment and will not be recited here — the Court issued its Memorandum of Decision on Cross-Motions for Summary Judgment on October 13, 2005. On pages 4-6 of that document, the Court stated the issues which were deemed to have been placed before it by the parties for the purposes of disposition under Fed.R.Bankr.P. 7056/ Fed.R.Civ.P. 56. As stated in the October 13, 2005 order, certain issues were determined in that order pursuant to the provisions for summary judgment under the foregoing Rules; certain issues presented for summary judgment by the parties were not deemed by the Court to be susceptible of determination by summary judgment, and were thus reserved for determination by trial; and certain issues presented by the pleadings were not deemed by the Court to be submitted for the purposes of summary judgment and thus remained for determination at a later date.1
As stated, the October 13, 2005 order specifically delineated issues deemed by the Court to be presented to it by the pleadings, and that order carved out certain of those issues for disposition other than by means of the summary judgment mechanism. Subsequently, pursuant to direction of the Court, on May 5, 2006, the Trustee filed his Plaintiffs Statement of Claims — Issues for Trial, by which the Trustee — again, pursuant to the Court's direction — limited the focus of the issues presented in his pleadings to those which he intended to pursue in' arriving at a final determination of this adversary proceeding. Without delineation of every possible issue arising in the Trustee's pleadings which may have been sought to be asserted, or was in fact asserted, the issues presented to the Court for final determination, and for final judgment, in this adversary proceeding are those designated in the October 13, 2005 order and in the Plaintiff's Statement of Claims — Issues for Trial. The Court determines that any and all other issues arising under the Trustee's pleadings have been effectively withdrawn by the Trustee from this adversary proceeding, and that no further determination of any of those issues need be made by the Court. Included among those issues are any and all claims asserted by the Trustee against the defendants Dorothy L. Wallace in her capacity as Personal Representative of the Estate of Darrell E. Shults, deceased and as his sole heir; any and all claims asserted against First National Business Group, Inc.; and any and all claims asserted against First Financial Mortgage, Inc. The Trustee shall take nothing by way of his complaint against these designated party defendants.
The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334(b), 28 U.S.C. § 157, and N.D.Ind. L.R. 200.1(a) of the Rules of the United States District Court for the Northern District of Indiana. This adversary proceeding is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(F) and (H).
This Memorandum and Decision constitutes the findings of fact and conclusions of law required by Fed.R.Bankr.P. 7052/ Fed.R.Civ.P. 52(a). The record before the Court for the purposes of final determination is comprised of the summary judgment record designated by the Court on pages 12-19 of its Memorandum of Decision on Cross-Motions for Summary Judgment entered on October 13, 2005, and the additional record provided by means of the trial to the bench held on August 16 and 17, 2006.
In view of the convoluted nature of the issues presented to the Court and the manner of their presentation over six years of litigation, the format adopted by this memorandum with respect to Fed. R.Bankr.P. 7052/Fed.R.Civ.P. 52(a) will be to specifically designate each issue submitted to the Court for determination, and under that issue separately state the factual determinations and legal conclusions deemed necessary by the Court to resolve each issue. This will inevitably generate a lengthy decision, and parts of it will be redundant of the determinations made in the October 13, 2005 order; however, in order to effectively state a final judgment, that redundancy is deemed by the Court to be necessary. The format of this determination will essentially follow the outline of issues addressed to specific items of property/ transactions utilized by the Court in the October 13, 2005 order, with the addition of issues presented to the Court which were not determined by that order.
The issues arising under the October 13, 2005 order are the following:
1. 11 U.S.C. § 548(a)(1)(A) [actual fraud];
2. 11 U.S.C. § 548(a)(1)(B) [constructive fraud];
3. 11 U.S.C. § 544(b)(1):
a. Under §§ 14 and 15 of the Indiana Uniform Fraudulent Transfers Act b. Breach of fiduciary responsibility owed by a corporate officer to the corporation;
c. Piercing the corporate veil to impose personal liability on an officer of the corporation, or upon a third person;
d. Personal liability of a corporate officer for acts engaged in by that person in the context of the business of a corporation.
with respect to the following "items":
1. $151,273.90 proceeds received by Dorothy Wallace as the beneficiary of Kemper Zurich policy "644";
2. $795 of premiums paid by the Debtor with respect to Kemper Zurich policy "646";12
3. $1024 of premiums paid by the Debtor with respect to "New York Life" policy;
4. $8068.97 of premiums paid by the Debtor with respect to Valley Forge Policy "ARC";
5. 068.97 of premiums paid by the Debtor with respect to Valley Forge Policy "TR C";
6. $1200 of premiums paid by the Debtor with respect to Mutual Group Life Insurance;
7. $1023.86 of expenses charged by Wallace for an alleged personal vacation to the Debtor's GE Capital credit card account;
With respect to $305,000 of unpaid investments made in the debtor by persons to whom the Debtor made unfulfillable promises to repay, the Trustee asserts the following theories of recovery under 11 U.S.C. § 544(b)(1):
1. Breach of fiduciary responsibility owed by a corporate officer to the corporation;
2. Piercing the corporate veil to impose personal liability on an officer of the corporation, or upon a third person;
3. Personal liability of a corporate officer for acts engaged in by that person in the context of the business of a corporation.
In addition to the foregoing issues, the following issues were presented to the Court and are hereby determined pursuant to the Plaintiffs Statement of Claims — Issues for Trial:
A. Trustee's Claim v. Dorothy Wallace for Contribution; Liability for Investment Note Holders, as stated on pages 2-5 of the foregoing document;
B. Preference Payments, as stated on pages 5-6 of the foregoing document;2
C. Claim against Elmer Shults for transferee liability, as designated on page 6 of the foregoing document; and
D. Claim for pre-judgment interest, as designated on page 7 of the foregoing document.
For the purposes of the final judgment determination effected by this document, the record includes the factual determinations made by the Court in its October 13, 2005 order, as follows:
1. The Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on June 30, 1999 [Court's record].
2. Kenneth A. Manning is the duly appointed and acting Chapter 7 Trustee of Debtor's Chapter 7 bankruptcy estate [Court's record].
3. Debtor was an Indiana corporation; Darrell was its 100% shareholder, a director, and its President. [Plaintiff's Statement of Material Facts ¶ 3; complaint ¶¶ 6 & 7; Wallace's answer ¶¶ 6 & 7; Elmer's answer ¶¶ 6 & 7].
4. Debtor was established to conduct transactions relating to finance and financial consulting. [Trustee's exhibit 8 — Articles of Incorporation].
5. Debtor solicited monies and funds for investment opportunities from individuals by way of telemarketing/advertisements. Responding individuals received Investment Note Certificates; .
6. Between the years of 1996 and 1999, a total of 33 Investment Note Certificates were issued by the Debtor; the Debtor received a total of $310,000.00 from the persons to whom it issued Investment Note Certificates. Investors responding to the advertisements received Investment Note Certificates, and a Prospectus dated either July 8, 1996 or August 1, 1997. .
7. Each of the Investment Note Certificates was signed by Darrell E....
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