In re Mills, Bankruptcy No. 86-62184

CourtUnited States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Indiana
Writing for the CourtKENT LINDQUIST
Citation111 BR 186
PartiesIn re Robin Richard MILLS, Debtor. SHAVER MOTORS, INC., Plaintiff, v. Robin Richard MILLS, Defendant.
Docket NumberAdv. No. 87-6027.,Bankruptcy No. 86-62184
Decision Date29 December 1988

111 B.R. 186 (1988)

In re Robin Richard MILLS, Debtor.
SHAVER MOTORS, INC., Plaintiff,
v.
Robin Richard MILLS, Defendant.

Bankruptcy No. 86-62184, Adv. No. 87-6027.

United States Bankruptcy Court, N.D. Indiana, Hammond Division at Gary.

December 29, 1988.


111 BR 187

Steve Tokarski, Merrillville, Ind., for plaintiff.

William Hill, Lansing, Ill., for defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND JUDGEMENT

KENT LINDQUIST, Chief Judge.

I

Statement of Proceedings

This adversary proceeding came on for a bench trial on September 27, 1988 pursuant to Order of Court of August 10, 1988.

A Pre-Trial Order was entered on January 19, 1988, and pre-trial statements were filed by the Defendant on February 8, 1988, and by the Plaintiff on March 15, 1988, as amended September 19, 1988.

Shaver Motors, Inc.'s (hereinafter: "Plaintiff") complaint filed February 23, 1987 alleges that the Debtor, Robin Richard Mills (hereinafter: "Defendant") is indebted to it in the sum of $31,000 based on a state court default judgment versus the Debtor, and that said debt is nondischargeable in the Defendant's Chapter 7 Bankruptcy pursuant to § 523(a)(4) and (6), in that the Defendant willfully and maliciously converted the Plaintiff's 1981 Replica Auburn Convertible Automobile to his own use by having it shipped outside of the United States to the State of Bahrain, sold the same and converted the proceeds thereof to his own use.

Submitted. Evidence and arguments heard.

At the conclusion of the trial, the Plaintiff was ordered to file its verified statement of any and all payments received by it relating to the lease of the Auburn to the Defendant from all sources, and the Defendant was granted 10 days from the date of service thereof to object thereto.

On October 21, 1988, pursuant to Order of this Court, the Plaintiff filed its post-trial affidavit averring that the total gross amount of monies received by the Plaintiff from the Defendant as to the vehicle in question was $8,131.74.

II

Findings of Fact

Ronald Shaver (hereinafter: "Shaver"), President of the Plaintiff, testified that he was introduced to the Defendant who advised Shaver that he wanted to manufacture replicas of Auburns, and ship the same to potential customers in the Middle East for sale.

Shaver further related that the Defendant advised that Automotive Legends, Inc. (hereinafter: "Automotive"), of which the Defendant was President, owned two prototype Auburns which were security for a loan to the Automotive by a Bank.

Shaver stated that he agreed on behalf of the Plaintiff to pay off the Bank, take title to the two Auburns and in turn lease them back to Automotive. The certificates of origin were assigned by Automotive to the Plaintiff, but for some unknown reason they were never actually titled in the name of the Plaintiff (Plaintiff's Group Exhibit No. 2). The only vehicle in dispute is the Auburn, Serial No. 813305 (hereinafter: "Auburn 305")

111 BR 188

The Plaintiff physically inspected both Auburns, paid off in full the liens on both Auburns held by the Bank, and in turn leased both vehicles as lessor to Automotive as lessee with the Defendant as signatory therein as President of Automotive. The Defendant did not sign the lease in his individual capacity. No option to purchase was given by the Plaintiff in the leases.

The Lease as to the Auburn 305 was executed on November 2, 1982 ("lease"), and provided, among other things as follows:

1. That the Auburn 305 would be used for business or commercial purposes as a "show car" and that the lessee was a corporation.
2. That the lessee would use or permit use of the Auburn only within the continental limits of the United States. (Clause 5)
3. That lessee would return the Auburn at the end of the lease term or upon termination of the lease. (Clauses 7 and 9)
4. Automotive acknowledged that during the lease term it had no title, equity, property right or interest in the Auburn. (Clause 12)
5. Automotive agreed not to assign, transfer, sublet, or lease its rights under the lease and to not pledge, mortgage, or otherwise encumber the vehicle. (Clause 13)

The lease was for a 36 month term ending November 2, 1985 with monthly installments of $948.10, the total lease payments being $34,131.60.

In preparing the lease, Shaver related he used a car invoice/data worksheet dated November 2, 1982, which had attached thereto a handwritten invoice which he received from the Defendant showing dealer cost to be $43,711.23 and the manufacturer's listed price to be $52,500.00 (Plaintiff's Group Exhibit No. 3).

Shaver showed the acquisition cost to the Plaintiff as $22,500.00 as this was the amount paid to the Bank by the Plaintiff for the release of the lien thereon, and the transfer of the vehicle from Automotive to it.

Shaver stated he had no discussions or arrangements with Automotive through the Defendant as to any sale of the Auburn 305, that he never received any request by Automotive or the Defendant to remove the vehicle from the United States and/or sell it, and never expressly or impliedly consented to such a transaction.

Shaver declared that early in the lease term, Automotive went in default on the lease, and in August of 1983, a formal demand was made for the Auburn 305, but the same was never returned. Although the Defendant advised Shaver the vehicle was in various places in Indiana, the Plaintiff could never locate the same. Finally, the Defendant was located in Illinois, and on September 27, 1983, the Plaintiff filed suit in Illinois for replevin of the Auburn 305 and damages. Shaver never got the Auburn 305 back, and the Defendant advised Plaintiff's counsel that it had been sold in the State of Bahrain.

Shaver stated that through inquiries by his Illinois counsel with the U.S. Department of Commerce, the U.S. Consular Service, and the shipper of the vehicle, his counsel around October, 1984, received a copy of a commercial invoice dated March 4, 1983, which stated that the vehicle had been sold to one Khalil Hijris (hereinafter: "Hijris") for 15,000 Derum. According to Shaver, the invoice was received with a cover letter from the Department of Commerce, and other supporting documents from the Consular Service, which were not admitted into evidence. The invoice is purportedly signed by the Defendant as President of Automotive, and as seller of the vehicle. (Plaintiff's Exhibit no. 4). The document was purportedly witnessed by one W.K. Glynn.

The Defendant objected to the admission of said invoice copy into evidence on the grounds it was a forgery and not authentic. The Court reserved its ruling on the objection.

Shaver was of the opinion that the Defendant's signature was annexed to the invoice having seen his signatures previously on the lease.

111 BR 189

Shaver declared that depreciation as to the vehicle over the lease term would be 70% of the acquisition cost of the vehicle of $22,500.00 and, with normal wear and tear, that the residual value thereof at the end of the lease would be $6,675.00. Based on the Plaintiff's depreciation schedule, the book value of the Auburn 305 based on $22,500.00 acquisition cost was approximately $19,157.00 when allegedly sold to Hijris March 4, 1983, in that since the vehicle was a replica rather than a true antique it did not increase in market value, but rather was subject to depreciation. He stated the Plaintiff's portion cash flow generated by the lease was $153.86 per month based on a monthly payment of $794.24 made by the Plaintiff.

The Defendant testified he was the President as well as a stockholder and Director of Automotive from June of 1982 until December of 1983 when it ceased all operations.

The Defendant stated that at the suggestion of some officials of the City of Anderson Economic Development Commission, from whom Automotive obtained a loan for $184,000 to set up a plant, there was an "informal" director's meeting of Automotive held, and it was decided without objection by any Director to ship the Auburn 305 to United Arab Emirates (hereinafter: "U.A.E.") late in January, 1983 in order to generate sales to potential customers in the Middle East. The Defendant flew separately to U.A.E. and was in U.A.E. when the vehicle arrived there. Glynn handled all the shipping arrangements per the Defendant.

According to the Defendant, the vehicle was shown at two car shows in U.A.E., and put in storage pending shipment back to the U.S.A. At this time, the Defendant avers he met Hijris, and after obtaining references favorable to him, the Defendant entered into an agency agreement with Hijris for him to represent Automotive in the Middle East by showing (not selling) the Auburn 305 in the hopes of generating sales to Middle East customers by Automotive. No evidence was submitted as to whether this agency agreement was oral or in writing.

The Defendant stated that he gave the physical possession of the vehicle, a copy of the Bill of Lading as to the vehicle which reflected the vehicle I.D. Number and the equipment on the vehicle, and the key to Hijris, returned to the United States around February 18, 1983, and never saw the vehicle again. He further asserts he was in the United States on March 4, 1983, the date of the invoice purporting to sell the Auburn, which purportedly contains his signature as President of Automotive as seller. Although the Defendant asserts he made many efforts to obtain the vehicle back between April of 1983 and December of 1983, he was unsuccessful, and Hijris has consistently refused to respond to inquiries or provide information regarding the disposition of the vehicle.

The Defendant freely admits that the signature on the invoice could well be his, but that the invoice itself that contains the signature is not authentic, had to have been "doctored" by Hijris and was "lifted" by using other blank Automotive stationary he had given Hijris combined with copies made of his signature from some other document. He...

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