In re:Kerri Lee Wallis
| Decision Date | 31 March 2011 |
| Docket Number | Case No.: 09-06669-BGC-7,A. P. No.: 10-00010-BGC-7 |
| Parties | In re:Kerri Lee Wallis, Debtor. Bettye Ann Anglin and Forrest Anglin, Plaintiffs, vs. Kerri Lee Wallis, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Alabama |
OPINION TEXT STARTS HERE
The matter before the Court is the Complaint and Objection to Discharge Pursuant to 11 U.S.C. § 523 and § 727 filed by Betty and Forrest Anglin against Kerri Lee Wallis, the debtor. The plaintiffs contend that the debtor-defendant's debt to the plaintiffs should not be discharged in this Chapter 7 case because it is excepted under either section 523(a)(2)(A) or section 523(a)(6) of the Bankruptcy Code or that the debtor's discharge should be denied in total under section 727 of the Bankruptcy Code.
A trial on the merits was held on May 06, 2010. Appearing were Mr. Andre' M. Toffel and Mr. James Walsh, attorneys for the plaintiffs; Mr. Ted R. Pearson, attorney for the defendant; Mr. James Estes, the debtor's stepfather; and Mr. Dorris M. Samsil, an attorney. The matter was submitted on the testimony of Ms. Wallis, Mr. Estes and Mr. Samsil; the pleadings; exhibits; and arguments.
This over ten-year dispute between these parties is well documented. See this Court's decisions in Anglin v. Estes (In re Estes), Adversary Proceeding No. 07-00235, 2009 WL 3082623 (Bankr. N.D. Ala. September 10, 2009); In re Estes, 415 B.R. 568, (Bankr. N.D. Ala., 2009); and Anglin v. Estes (In re Estes), Memorandum Opinion on Complaint and Objection to Discharge Pursuant to 11 U.S.C. §§ 523 and 727, entered March 22, 2005, Adversary Proceeding No. 02-00209, Docket No. 33.1
This latest part began when the plaintiffs sued Ms. Wallis, and the corporation Karson Enterprises, LLC, d/b/a/ Print South, a sole proprietorship, in the state court of Jefferson County, Alabama in December 2003.2 Plaintiffs' Exhibit 3.3 When the case was called for trial in April 2006, the defendant Karson, "announced in open court it consents to the granting of entry of judgment against Karson Enterprises, LLC in the amount of One Million Dollars ($1,000,000)." Plaintiffs' Exhibit 6. The state Court entered an order finalizing that judgment on April 17, 2006. Plaintiffs' Exhibit 6. The action against the debtor-defendant Kerri Wallis remained open. The plaintiffs later asked the state court to pierce the corporate veil of Karson and hold Ms. Wallis responsible for the judgment.
The state court held a hearing on December 15, 2006, on the plaintiffs' motion to pierce the corporate veil. Plaintiffs' Exhibit 7. All parties were represented by counsel. Id. After hearing the evidence, the state court found Kerri Wallis to be the alter ego of Karson Enterprises, LLC and pierced the corporate veil. Plaintiffs' Exhibit 7.
In support of their complaint to determine dischargeability, the plaintiffs rely almost exclusively on the doctrine of collateral estoppel as it applies to the state court's corporate-veil-piercing order imposing liability on Ms. Wallis. Consequently, this Court has reproduced most of that order here. The state court's order includes:
Karson Enterprises is the legal successor to two prior companies, Print Solutions, Inc. and Print South, LLC. Both prior entities, and their owners, Jaime [sic] and Debbie Estes [FN 1], have previously been sued by the Plaintiffs, starting back in 2001. Plaintiffs' prior suits against Print Solutions and Print South resulted in monetary judgments for the Plaintiffs, as did Mrs. Anglin's suit against Mr. Estes personally [FN 2]. Plaintiffs' inability to collect any of the monies outstanding from those judgments necessitated this suit. In addition to the prior suits against Defendants' predecessor entities and Mr. Estes, Plaintiffs are currently suing Mrs. Estes personally. The cases against Mrs. Estes are currently pending before Judge Vance. All prior and current cases including this one are based upon a common nucleus of operative facts.
FN 1. Mr. and Mrs. Estes are Defendant Wallis' mother and stepfather.
FN 2. During the litigation, the Esteses' filed personal bankruptcies and a business bankruptcy on behalf of Print Solutions. The Print Solutions bankruptcy was dismissed for failure to file a valid plan. The Esteses' personal bankruptcy petition was denied for a discharge because Judge Cohen concluded they committed fraud in their bankruptcy filings.
The mass of litigation described above between Plaintiffs, Defendants and Defendants' predecessors in interest stemmed from the failure of Print Solutions, which was owned by Plaintiffs and Jaime [sic] and Debbie Estes. After the parties severed their relationship and Print Solutions filed for bankruptcy, the Esteses moved all of Print Solutions' client lists, equipment, supplies and other assets' [sic] to their new successor company, Print South, which was incorporated on November 9, 2001. The Esteses listed Debbie's son and Jaime's [sic] step-son, Cal Wallis, as the registered agent and sole member of Print South. After the Plaintiffs received judgments against Print Solutions and Mr. Estes, but could not collect any of the judgment monies, they sued Print South and Cal Wallis to recover the outstanding judgments, resulting in a judgment against Print South [FN 3].
FN 3. After suit was filed against Cal Wallis, he voluntarily dissolved Print South.
Cal Wallis testified in the Esteses' Adversary Proceeding in Bankruptcy Court regarding their business practices. Among other things, he testified that the Esteses made payments out of Print Solutions and Print South funds for personal items, such as the mortgage on their house and various luxury car payments. Mr. Estes also testified that he made personal payments out of company funds at both Print Solutions and Print South. He further stated that no corporate meetings of Print Solutions ever took place and no one made business decisions about Print Solutions except him.
Cal Wallis testified that after he dissolved Print South, Mr. Estes continued his printing business by establishing Karson Enterprises. Jamie Estes is listed as Defendant Karson Enterprises' Registered Agent and Defendant Kerri Wallis is listed as the sole member [FN 4]. Ms. Wallis has testified that she does not work for Karson Enterprises and plays no part in its operation. Nevertheless, she receives substantial remuneration from Karson Enterprises in the form of monthly financial support from Mr. and Mrs. Estes. Specifically, Ms. Wallis has testified that she receives substantial monthly compensation from the Esteses in the form of payments on her condominium, car insurance, automobile, and to her personally, in the form of several hundred dollars a month to assist her with living expenses.
FN 4. On April 21, 2006, Plaintiffs received a $1,000,000.00 judgment against Defendant Karson Enterprises from this Court.
Mr. Estes has previously testified that his sole form of income is through Karson Enterprises. Defendant Wallis further testified that Mr. and Mrs. Estes [sic] comfortable standard of living throughout the entirety of this case and the prior cases involving Print Solutions and Print South has remained steady and constant. As such, Ms. Wallis' [sic] is indirectly compensated through Karson Enterprises on a monthly basis.
In light of the facts of this case, the Court rules that Karson Enterprises was "set up as a subterfuge" and as a result, piercing the corporate veil to reach Defendant Wallis is appropriate. See Simmons v. Clark Equipment Credit Corporation, 554 So.2d 398, 400 (Ala. 1989). The Court further holds that Karson Enterprises was conceived and/or operated for fraudulent purposes and was operated as "an instrumentality or alter ego of an individual or entity with corporate control." See Messick v. Morning, 514 So.2d 892, 894 (Ala. 1987); see also Gilbert v. James Russell Motors, Inc., 812 So.2d 1269, 1273 (Ala.Civ.App. 2001). Accordingly the Court does not recognize a separate corporate existence of Karson Enterprises because it is "organized and controlled and its business conducted in such a manner as to make it merely an instrumentality of another." Forest Hill Corp. v. Latter & Blum, 29 So.2d 298, 302 (Ala. 1947). In such instances, the corporation exists merely to evade its legal liabilities.
The evidence before the Court indicates Defendant Wallis had more than an ample opportunity to discover that Defendant Karson Enterprises was being used as a conduit to avoid valid judgments against its predecessor entities and Mr. Estes, yet she nevertheless remained the sole member and continued to receive income generated from the business rather than repudiate her ownership and dissolve the company. Through a combination of illegal methods and wrongful means, this Court has concluded that Defendant Wallis has participated in a shell game to continually elude Plaintiffs and avoid paying any of the judgments previously entered against Karson Enterprises, its predecessors and Jaime [sic] Estes. As a result, it is proper to pierce the corporate veil of Defendant Karson Enterprises to reach Defendant Wallis personally.
Therefore, it is hereby ORDERED, ADJUDGED and DECREED that Plaintiff's Motion to Pierce the Corporate Veil of Karson Enterprises, LLC, as to the $1,000,000.00 judgment against Karson Enterprises, is hereby GRANTED, and judgment equal to the amount of all Karson Enterprises' assets plus all monies and compensation in kind paid to Ms. Wallis directly or indirectly from Karson Enterprises through Mr. and Mrs. Estes or their agents since its inception, including interest, is hereby entered in favor of Plaintiffs, Forrest Anglin and Bettye Ann Anglin, against the Defendant, Kerri Wallis.
Order entered January 12, 2007, Case No. CV-03-7637. Plaintiffs' Exhibit 7.4
That order did not determine the amount of Ms. Wallis's personal liability and the judge hearing the case retired on...
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