In re Montgomery
| Decision Date | 09 July 1999 |
| Docket Number | Bankruptcy No. 98-31995. Adversary No. 99-7007. |
| Citation | 236 BR 914 |
| Parties | In re Dennis Robert MONTGOMERY and Marlys Joan Montgomery, Debtors. E.W. Wylie Corporation, Plaintiff, v. Dennis Robert Montgomery, Defendant. |
| Court | U.S. Bankruptcy Court — District of North Dakota |
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Joseph A. Turman, Fargo, ND, for Debtors.
Kip M. Kaler, Fargo, ND, trustee.
This matter arises by Complaint filed on February 1, 1999, by Plaintiff E.W. Wylie Corporation ("Wylie" or "plaintiff," alternatively), against Debtor-Defendant Dennis Robert Montgomery ("Montgomery"), alleging, inter alia, that Montgomery obtained the use of Wylie's property and services by means of false pretenses, false representations, and actual fraud; that he breached his fiduciary duty to Wylie; and that he converted its property in a knowing, willful, and malicious manner. As relief, Wylie seeks a judgment against Montgomery in the amount of $37,668.46; along with treble damages under North Dakota's RICO Act; a determination that the indebtedness is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), (a)(4), and (a)(6); and its costs and disbursements incurred as a result of this action. Trial was conducted in this matter before the undersigned on May 26, 1999. From the evidence presented, the Court finds the following facts to be material to the issues raised, and makes the following conclusions of law:
I. FINDINGS OF FACT
Wylie is a corporation organized under the laws of the State of Minnesota, with its principal offices located in Fargo, North Dakota. It is involved in the business of transporting goods by truck in interstate commerce. In this connection, Wylie both owns and leases transport vehicles.
Wylie requires that all of the owner-operators from whom it leases vehicles, and all of its employees who operate its own trucks, possess a commercial driver's licence ("CDL"). In furtherance of this requirement, Wylie, with the help and supervision of Montgomery, established a drivers' training course to qualify potential vehicle lessor-operators and its own employees for such licensing.
Montgomery, age 59, resides in the City of West Fargo, North Dakota. He began his employment with Wylie in 1980 as an over-the-road truck driver. In 1981, Wylie promoted him to the position of Driver Supervisor. In 1984, he assisted Wylie in the organization and commencement of its driver training program and, thereafter, recruited candidates for, and supervised, the training program.
However, Montgomery performed little, if any, actual student training; rather, that function was assigned to Robert Miller ("Miller"), who was hired specifically for the job. Miller was also hired to provide the program's written training materials. Another individual, Robert Kerr ("Kerr"), served as Miller's assistant in training students.
The training program was comprised of two phases. The first entailed classroom training and driving practice in Wylie's training yard. After completing this stage of the program, students tested for their CDLs. In the second phase, trainees were assigned to a driver-trainer, with whom they would spend between four and five weeks in a practicum of actual on-the-road driving. Upon completion of the entire program, the trainees were typically hired by Wylie as drivers.
Program participants were not charged an initial, upfront fee for their training, but, upon gaining employment with Wylie, were required to gradually repay the company for its cost, that is, the sum of $2,500.00 apiece. Company policy prohibited the training of any individuals other than the vehicle lessor-operators, Wylie employees, or prospective Wylie employees.
In Spring 1995, WDAY-TV ("WDAY"), through its General Sales Manager, Mark Von Bank ("Von Bank"), approached Montgomery to help it secure CDLs for several of its employees. Although Montgomery knew that such training was expressly prohibited by company policy, he nonetheless admitted six WDAY employees into the Wylie program, concealing this fact from Wylie management. To formalize their agreement, WDAY and Montgomery executed a contract on June 2, 1995, the terms of which provided, as follows:
Montgomery and Von Bank both affixed their "authorized signatures" to the document. Thereafter, Montgomery provided Miller with a copy of the contract.
Pursuant to the contract, Montgomery understood that the WDAY employees would be using Wylie equipment for their training purposes. Moreover, he knew that Wylie would be liable in the event that a WDAY trainee became involved in an accident while driving Wylie equipment.
The training of the first four WDAY employees took place primarily between June 5, 1995 and August 29, 1995. The training of the remaining two WDAY employees took place between August 28, 1996 and September 10, 1996. In all then, unauthorized WDAY employee training was conducted over an aggregate span of three and one-half months.
Montgomery neither received compensation nor derived other financial benefit from this unauthorized training. Miller received a total of $4,605.00 from WDAY for his services, that is, 255 of his training hours.
Yet, the training of non-Wylie employees did not end with those from WDAY. After completing the training of the WDAY employees, other non-Wylie individuals received training through the program between July 1995 and September 1996, although at an increased hourly rate. At least nine other individuals received such training, for which Miller received a minimum of $9,257.50 in compensation. Kerr, who also participated in the unauthorized training, received his compensation for the same from Miller.
In all their dealings, Miller never discussed his training of non-WDAY, non-Wylie individuals with Montgomery. For his part, Montgomery had no knowledge of, did not facilitate, took no part in, and derived no benefit from such additional training at the time that it was conducted.
The use value of Wylie's property, and the loss it suffered, aggregated $15,700.00 with respect to the WDAY trainees, and $29,925.00 with respect to the non-WDAY, non-Wylie trainees.1 Wylie was not compensated for any unauthorized use of its property.
On November 24, 1998, Montgomery filed his voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. ("Code"). In his Schedule F, entitled "Creditors Holding Unsecured Nonpriority Claims," he lists Wylie as holding a claim against him for conversion, the amount of which is contingent and disputed.
On February 1, 1999, Wylie filed its Complaint to Determine Dischargeability of Debt, alleging, inter alia, that Montgomery: (1) represented to one or more third parties that he was authorized by Wylie to set the terms and conditions for training to be provided to said parties and/or their employees; (2) executed one or more contracts on behalf of Wylie whereby unauthorized individuals would receive driver's training instruction utilizing Wylie's facilities and property; (3) arranged and conspired with other employees of Wylie to permit unauthorized individuals to receive driver's training instruction; and (4) permitted unauthorized individuals to receive driver's training instruction from Wylie's employees and through the use of Wylie's facilities and property without advising Wylie's management. The Complaint further states that Montgomery, by the above-described conduct, violated, in a knowing, willful, and malicious manner, his fiduciary duty to Wylie and converted property from Wylie with a fair market value of $37,668.46. Upon these bases, Wylie seeks a judgment in the amount of $37,668.46, along with "treble damages as permitted under North Dakota's RICO Statute, together with interest and punitive damages," and a determination that such indebtedness is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), (a)(4), and (a)(6).
Montgomery filed his Answer on February 25, 1999. In it, he generally denied the allegations made in the Complaint; moved for its dismissal for failure to state a cause of action upon which relief can be granted; and moved for his costs, disbursements, and attorney fees incurred in connection with this matter.
II. CONCLUSIONS OF LAW
North Dakota's Racketeer Influenced and Corrupt Organizations Act ("RICO") is found at North Dakota Century Code ("N.D.C.C.") § 12.1-06.1 et seq. In its current form, it is, in essence, a "little RICO" statute, that is, one patterned largely after its federal analogue.2 See Burr v. Kulas, 564 N.W.2d 631, 635-36 (N.D.1997). While the federal RICO Act was codified in 1970, North Dakota enacted its version of the same in 1983.
Since this latter enactment, the North Dakota Supreme Court has had but few occasions to rule on the statute, having done so in only the following two cases: Burr, supra, and Rolin Manufacturing, Inc. v. Mosbrucker, 544 N.W.2d 132 (N.D. 1996). In both case opinions, the supreme court referred exclusively to the Federal Rules of Civil Procedure in defining the pleading requirements for RICO claims brought pursuant to the North Dakota Act, see Mosbrucker, 544 N.W.2d at 138, and referred almost...
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