In re Grocki
| Decision Date | 12 March 1992 |
| Docket Number | Adv. No. 91-1204-BKC-RAM-A.,Bankruptcy No. 91-32455-BKC-RAM |
| Citation | 147 BR 274 |
| Parties | In re Stanley J. GROCKI, Debtor. FIDELITY SERVICE COMPANY, a Division of F.M.R. Corp., Plaintiff, v. Stanley J. GROCKI, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
Jeffrey H. Rosenthal, Boca Raton, Fla., for debtor.
Keith J. Merrill, Coral Gables, Fla., for plaintiff Fidelity Service Co.
FINDINGS OF FACT, CONCLUSIONS OF LAW, JUDGMENT
This matter came on for trial before the Court on March 3, 1992. The Court heard testimony of the parties and witnesses and observed their demeanor and candor. Voluminous documentary evidence was received and reviewed by the Court. The Court also reviewed the written opening statements filed by counsel, heard their arguments and reviewed the cases cited by them. Based upon the testimony, exhibits and what the Court understands the law to be, the Court makes the following Findings of Fact and Conclusions of Law:
This Adversary Proceeding was brought by the Plaintiff, Fidelity Service Company, a Division of F.M.R. Corp. ("Fidelity"), pursuant to Bankruptcy Rule 7001(6) alleging a cause of action under 11 U.S.C. § 523(a)(2)(A). Jurisdiction is vested in this Court by 28 U.S.C. 1334(b) and by general order of the United States District Court for the Southern District of Florida. It is a core proceeding under 28 U.S.C. § 157(b)(2)(I).
The Defendant, Stanley J. Grocki ("Grocki"), filed a Chapter 7 bankruptcy petition on August 21, 1991 in the Southern District of Florida. A year prior to that time, Grocki was a resident of New Hampshire.
While the testimony of Grocki at trial was not consistent in many respects with his deposition testimony of January 23, 1992, the evidence establishes that Grocki is a middle aged single man with a high school education. He attended a junior college around 1966 for about two years and while there studied business administration. After college he worked for several years as a telemarketing supervisor and later as an insurance salesman. His last employer in New Hampshire, IDS, hired him as a financial planner. His title was perhaps benevolent, however, as he was still primarily an insurance salesman. He did admit in his deposition that he sometimes advised customers concerning their dealings with banks and financial institutions. During the twelve (12) months prior to filing for bankruptcy, Grocki maintained savings, checking and brokerage accounts with several financial institutions in at least two states. He owned and managed rental property, had previously earned over $50,000.00 per year and in his application to open accounts with Fidelity in March 1990, he claimed to have a net worth of $625,000.00. Grocki was unemployed for much of 1990, having worked only briefly for IDS.
Based upon Grocki's education, experiences and background, as well as the Court's over all assessment of his demeanor and testimony at trial, the Court concludes that he was a man who was capable of, and who did know, the extent and value of his assets and liabilities at all times.
On February 15, 1990, Grocki opened a Daily Income Trust (USA Account) with Fidelity, which was essentially a checking account. It was opened with a balance of $5,011.65 and on February 16, 1990, he deposited an additional $45,000.00 to that account. The first statement issued by Fidelity on the account covered a period of time beginning with the opening of the account through February 23, 1990. It reflected a transfer of $2,121.25 on February 23 for the purchase of securities (Wang Labs). The balance in the USA account was $47,890.40.
The next month, on March 6, Grocki opened an account called Spartan Money Market Fund with Fidelity. The Spartan Money Market Fund was an investment account and it was opened by a transfer of $40,000.00 from the USA account. During the month of March, Grocki wrote thirty-two (32) checks totalling $10,159.58 on his USA account and made deposits to his USA account of $12,100.10. Less than $100.00 of income was earned on his accounts. His March 30, 1990 statement reflected balances of $9,929.76 in the USA account, $2,875.00 in the securities and $40,000.00 in the Spartan Money Market Fund, for a grand total of $52,804.76.
For the entire six month period prior to the events which give rise to this litigation, his high monthly closing balance for the combined accounts was $52,804.76 and the low monthly closing balance was $49,781.21. There was no activity in his Spartan Money Market Account other than the posting of interest income for a four month period of time prior to August 1990. Grocki admits he did not make additional deposits to the Spartan Money Market Account during that four months.
All of the events herein complained of under 11 U.S.C. § 523(a)(2)(A) took place over a span of time of less than three weeks. Chronologically the events are as follows:
a. In August 1990, Grocki opened a line of credit with First Savings & Loan Association of New Hampshire and pledged his residence as collateral. The amount of this line of credit was approximately $24,000.00. Since it was secured by his home, the federal right of rescission period required him to wait three days before drawing on the money. He instructed Judy Provine, his account executive at First Savings to issue a cashier's check for the full proceeds as soon as possible and send the same to his Spartan Money Market Fund.
b. On August 24, 1990, First Savings issued and mailed its cashier's check for $23,796.70 payable to the Spartan Money Market Account.
c. On August 29, 1990 Grocki telephoned Fidelity and talked with Lisa Pearson, who told him that the cashier's check had not yet been received by Fidelity.
d. The business records of Fidelity reflect that on Friday, August 31, 1990 at 11:37 A.M., Ms. Pearson spoke to Grocki by telephone and informed him that the check still had not arrived. She told him to check in the next week and if it had not arrived by then, he should stop payment on the check.
e. Instead of waiting until the next week, Grocki went to First Savings on August 31, 1990, stopped payment on the first cashier's check and obtained a second cashier's check payable to his "Fidelity USA Account XXXXXXXXXXXXX" in the sum of $23,796.70. He mailed this check to Fidelity within a few minutes after obtaining it.
f. On August 31, 1990, the first cashier's check arrived at Fidelity and was deposited and posted to Grocki's Spartan Money Market Account.
g. On August 31, 1990, Fidelity issued its regular monthly USA statement to Grocki. It reflected the USA balance of $7,305.17 and the Spartan Money Market Account balance of $71,884.10. This statement was mailed on Tuesday, September 4, 1990, and it clearly reflected the August 31, 1990 deposit to the Spartan Money Market Account of $23,796.70.
h. On September 5, 1990 the second cashier's check was posted to the USA account.
i. On September 7, 1990 Grocki redeemed the entire balance of his Spartan Money Market Account and transferred the money to the USA account. The total amount transferred was $64,974.79.
j. On September 10, 1990 Grocki issued a $67,000.00 check to cash drawn on the USA account and deposited the funds in his account maintained at the Bank of Boston.
k. On September 11, 1990 Grocki deposited a $23,000.00 check, payable to cash, into his Bank of Boston account. This check was dated September 12, 1990 and his USA account was debited for this amount on September 12, 1990.
It is clearly reflected above that Grocki's statements from Fidelity established that his Spartan Money Market Account was opened with $40,000.00 and no additional deposits were made other than interest. Grocki directed Ms. Pearson to forward the $23,796.70 cashier's check payable to the Spartan Money Market Account to Fidelity. Grocki testified he stopped payment on that cashier's check. Yet, on September 7, when he transferred his Spartan Money Market Account to the USA Account, it contained $64,974.79. Although Grocki denies knowing that the cashier's check upon which he had stopped payment had, in fact, been deposited to this account, he offered no plausible explanation as to how he could possibly have had that much money in the account without the benefit of the cashier's check. He clearly knew that the difference represented the proceeds from the first cashier's check. The Court simply does not believe Grocki's feeble attempt to justify his actions by his explanation that he was confused as to approximately $10,000.00 of checks that he thought he had written on another account.
11 U.S.C. §...
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