In re Flooring America, Inc.
| Decision Date | 19 February 2003 |
| Docket Number | Adversary No. 00-6793.,Bankruptcy No. 00-68370. |
| Citation | 302 B.R. 389 |
| Parties | In re FLOORING AMERICA, INC., Debtor. Morton P. Levine, as Chapter 11 Trustee for the Estate of Flooring America, Inc., f/k/a the Maxim Group, Inc., Plaintiff, v. David E. Cicchinelli, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
Louis G. McBryan, Macey, Wilensky, Cohen, Wittner & Kessler, Atlanta, GA, for Plaintiff.
Andrew B. David, Sugar, Friedberg & Felsenthal, Chicago, IL, for Defendant.
Morton P. Levine, Levine & Block, Atlanta, GA, Chapter 11 Trustee.
This adversary proceeding is before the Court on cross-motions for summary judgment. Plaintiff Morton P. Levine in his capacity as the Chapter 11 Trustee seeks to recover $100,000.00 plus interest and attorney's fees from defendant David E. Cicchinelli ("Cicchinelli") on a demand note dated September 1, 1998. Defendant argues that there was no consideration for the note and that the $100,000.00 he received from the debtor was a bonus, not a loan. Defendant filed a counterclaim for unpaid bonuses and the value of some stock in the debtor which defendant alleges is owed pursuant to an alleged employment agreement between the debtor and defendant. The parties agree that this is a core proceeding as defined by 28 U.S.C. § 157.1 The parties each request a summary judgment on the note claim, and plaintiff seeks a summary judgment in his favor on defendant's counterclaim. After carefully considering the parties' motions, briefs and the supporting material submitted, the Court concludes that plaintiff's summary judgment motion should be granted and defendant's motion for summary judgment should be denied.
A court will enter summary judgment only upon a showing that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). Courts must review all evidence in the light most favorable to the non-moving party. Samples on Behalf of Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir.1988). "Genuine disputes are those by which the evidence is such that a reasonable jury could return a verdict for the non-movant, [and][i]n order for factual issues to be `genuine' they must have a real basis in the record." Szomjassy v. OHM Corp., 132 F.Supp.2d 1041, 1046 (N.D.Ga.2001). If the nonmoving party's evidence is merely colorable or is not significantly probative summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmoving party "must do more than show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indust. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Rather, the non-movant must present specific, significant, probative evidence supporting its case sufficient to require the trier of fact to resolve the different versions of the truth at trial. Ellenberg v. Bouldin (In re Bouldin), 196 B.R. 202, 207 (Bankr.N.D.Ga.1996). Summary judgment is proper "if the party opposing summary judgment fails to indicate that he can produce the requisite quantum of evidence to enable him to reach the jury with his claim." Williams v. Obstfeld, 314 F.3d 1270, 1277 (11th Cir.2002) (quoting Smith v. First Nat'l Bank of Atlanta, 837 F.2d 1575, 1580 (11th Cir.1988)). "Where the judge is also the ultimate trier of fact, and where a trial would not enhance the court's ability to draw inferences and conclusions from the undisputed facts, then the court is free to draw such inferences and conclusions within the context of a motion for summary judgment." Lanting v. Lanting (In re Lanting), 198 B.R. 817, 821 (Bankr.N.D.Ala.1996) (quoting In re Communications Management & Info. Inc., 172 B.R. 136, 141 (Bankr.N.D.Ga.1994)).
The material facts are undisputed. Debtor Flooring America, Inc. was formerly known as The Maxim Group, Inc. The Maxim Group, Inc. operated one of the largest networks of specialty floor covering stores in North America. Debtor filed for relief under Chapter 11 of the Bankruptcy Code on June 15, 2000, and plaintiff Morton P. Levine was appointed as a Chapter 11 Trustee in the case on February 25, 2001.
Defendant Cicchinelli was employed by the debtor from May of 1998 until April of 1999. On or about August 24, 1998, debtor issued two checks to Mr. Cicchinelli totaling $250,000.00. One check was check number 026489 in the amount of $100,000.00 payable to defendant David Cicchinelli; check 024689 was not accompanied by a check request form indicating the check's purpose. The second check, check number 026490, was in the amount of $150,000.00, but this check was accompanied by a check request form indicating that the reason for the check was for a bonus payment. (Dep. of David Cicchinelli, Exhibits 7, 11 and 12).
It is undisputed that Mr. Cicchinelli signed a demand note ("the Note") for $100,000.00. The Note was dated September 1, 1998, one week after he received the check for $100,000.00. The Note provided for interest at eight and one-half percent (8.5%) per annum and included a provision increasing the interest rate upon Mr. Cicchinelli's default. The Note also contained a standard provision for attorney's fees.
The Note's language begins with the phrase "[f]or value received, the undersigned, DAVID E. CICCHINELLI, ... promises to pay to the order of THE MAXIM GROUP, INC., ... the principal sum of ONE HUNDRED THOUSAND AND NO/100TH DOLLARS ($100,000.00) ...." The Note also contains the following language: Plaintiff made a proper demand for payment of principal and interest and informed defendant of his intent to seek attorney's fees under the Note's terms. The Note remains unpaid to this date.
In Mr. Cicchinelli's affidavit, he admits receiving the $100,000.00, he admits signing the Note one week later, and he admits that he has made no payments under the Note. Nonetheless, he argues that he cannot be liable under the Note, because he contends that the $100,000.00 given to him was not intended as a loan, but was intended as a bonus. This argument is not supported by the evidence in the record.
In support of his motion for summary judgment, plaintiff presents evidence of several instances where debtor memorialized having made a $100,000.00 loan to Mr. Cicchinelli in September of 1998. On page 9 of its Proxy Statement dated November 18, 1998, debtor states that:
In September 1998, the [debtor] loaned $100,000.00 to David E. Cicchinelli, the [debtor]'s Chief Operating Officer and a director. This loan bears interest at an annual rate of 8.5%, payable monthly, with principal due on demand. The loan was made to Mr. Cicchinelli to fund certain of his personal expenses.
Again, on page 9 of its Proxy Statement dated November 12, 1999, debtor states that:
In September 1998, the [debtor] loaned $100,000 to David E. Cicchinelli, who at the time was serving as the [debtor]'s Chief Operating Officer and a director. This loan bears interest at an annual rate of 8.5%, payable monthly, with principal due on demand. The loan was made to Mr. Cicchinelli to fund certain of his personal expenses. As of October 1, 1999, $109,000, including accrued interest, remained outstanding on this loan.
In its Annual Report for the fiscal year ending February 5, 2000, debtor reaffirms that it had loaned $100,000.00 to Mr. Cicchinelli, stating that:
In September 1998, we loaned $100,000 to David E. Cicchinelli, who at the time was serving as our Chief Operating Officer and a director. This loan bears interest at an annual rate of 8.5%, payable monthly, with principal due on demand. The loan was made to Mr. Cicchinelli to fund certain of his personal expenses. The highest amount owed to us by Mr. Cicchinelli during fiscal 2000 was $112,000. As of February 5, 2000, $112,000, including accrued interest, remained outstanding on this loan.
There are two additional documents which Mr. Cicchinelli signed in which he confirms the loan of $100,000.00. At the time he signed the Note, he also signed an amendment to certain stock option agreements in which he admitted signing the Note for $100,000.00. In this document, he agreed that the stock option would terminate upon any default under the Note and that furthermore, he could not exercise any option as long as any amounts remained outstanding under the Note. Significantly, on March 20, 1999, Mr. Cicchinelli signed a confirmation as part of an audit performed by Arthur Andersen, agreeing that the debtor held a demand note from Mr. Cicchinelli dated September 1, 1998, that the unpaid principal on the Note was $100,000.00, that the interest rate on the Note was 8.5%, and that no interest had been paid to date. In regard to this confirmation letter to the auditors, defendant argues, somewhat remarkably, that this letter does not indicate any money is owed. To the contrary, the letter is captioned "Note Receivable — $100,000" and it clearly shows that defendant...
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