In re Petersen

• Decision Date: 18 July 2003
• Docket Number: Adversary No. 01-8022.,Bankruptcy No. 00-83695.,Adversary No. 01-8021.
• Citation: 296 B.R. 766
• Parties: In re Julie R. PETERSEN, a/k/a Julie R. Boone, Debtor. Urological Group, Ltd., Plaintiff, v. Julie R. Petersen, a/k/a Julie R. Boone, Defendant.
• Court: U.S. Bankruptcy Court — Central District of Illinois

296 B.R. 766

In re Julie R. PETERSEN, a/k/a Julie R. Boone, Debtor Urological Group, Ltd., Plaintiff, v. Julie R. Petersen, a/k/a Julie R. Boone, Defendant.

Bankruptcy No. 00-83695.

Adversary No. 01-8021.

Adversary No. 01-8022.

United States Bankruptcy Court, C.D. Illinois.

July 18, 2003.

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Dale G. Haake, Jeffrey C. McDaniel, Rock Island, IL, for creditor.

Robert T. Park, Rock Island, IL, for debtor.

OPINION

THOMAS L. PERKINS, Bankruptcy Judge.

This matter having come before the Court for trial on complaints brought by the Urological Group, Ltd. ("GROUP"), the former employer of the Debtor, Julie R. Petersen ("DEBTOR"), against her, seeking to deny her discharge and a determination that the debt owing is nondischargeable. The trial spanned four days and the Court heard testimony from fifteen witnesses. Also taken with the adversary complaints is the DEBTOR'S objection to the proof of claim filed by the GROUP in the main case proceeding.

The DEBTOR was employed by the GROUP for nineteen years. David Petersen, the DEBTOR'S present husband, joined the GROUP as a physician in 1977. The DEBTOR began working for the GROUP in 1979, as a clerk and to assist with patients. In 1984, Dr. Petersen became president of the GROUP. Dr. Lubbers joined the GROUP in 1990. In the early 1990's, the DEBTOR was promoted to office manager. Prior to her promotion, she and Dr. Petersen became involved in a personal relationship. At that time, the GROUP was comprised of Dr. Petersen, Dr. Lubbers, Dr. Landrey, and Dr. Weimer. Dr. Weimer died in March, 1995, and Dr. Landrey left the GROUP in September of 1995. Dr. Prusa joined the GROUP in January, 1996 and Dr. Engebrecht joined six months later in July, 1996. With the addition of the new physicians, the GROUP had a very profitable year in 1996.

By then, the DEBTOR had become a highly valued and trusted employee. The DEBTOR'S responsibilities as office manager were extensive. She supervised the office employees and was responsible for obtaining replacements when employees left, conducting initial interviews of applicants. She was responsible for the computer system of the office, consisting of the mainframe and fifteen computers, as well as the other equipment including the phones and fax machines. She was in charge of credentialing all the physicians with state agencies, insurance companies and the hospitals. She also purchased all of the supplies for the office, including the supplies needed for the nurses, in addition to purchasing the supplies for the kitchen. The DEBTOR prepared and submitted the financial information to the outside accountant. She prepared the accounts payable, the payroll and made the requisite withholding tax deposits. In her role as office manager, the DEBTOR handled any problems that the office staff encountered.

In addition to those duties, the DEBTOR'S primary responsibility, from the GROUP'S perspective, was billing of hospital services, as well as complicated office billings. In order to receive payment from insurance companies, HMOs or other provider groups, and Medicare, physicians were required to designate "codes" for the medical services and procedures performed. The code identified determined the level of payment the physician was entitled to. The DEBTOR was responsible for properly coding the physicians' hospital services, and she was the only employee of the GROUP with the expertise necessary to perform this time-consuming task.

As office manager, the DEBTOR was given a GROUP charge card. According to the DEBTOR, she was advised by Dr. Weimer that the charge card could be used for personal purposes, as long as the charges incurred were paid back. Due to her increased responsibilities and workload, the DEBTOR could no longer complete her work during the day. In 1993 or 1994, Dr. Petersen authorized the DEBTOR to work from her home. The DEBTOR began working overtime. The GROUP authorized the DEBTOR to have a telephone installed for her computer to enable her to work at home, and agreed to pay the charges. The DEBTOR kept track of her own time records, jotting down the number of overtime hours she worked on a desk calendar. The GROUP'S payroll records reflect that the DEBTOR received substantial overtime pay, steadily increasing the number of hours she worked.

In 1997, the DEBTOR'S life began to unravel. Work-related pressures intensified when the GROUP terminated its receptionist in December, 1996, and its medical transcriber quit soon thereafter. The DEBTOR, having suffered from back pain for some time, had obtained Vicadin, a prescription analgesic, from Dr. Weimer, prior to his death in 1995, from his office supply. The DEBTOR had quickly become dependent upon the painkillers. After Dr. Weimer's death, the DEBTOR continued to obtain the narcotics without a prescription. When Dr. Petersen became aware of the DEBTOR'S illegal drug use in September, 1997, she began seeing a psychiatrist. A significant backlog developed in the hospital billings, and due to the decreased revenue, the GROUP'S physicians did not receive a bonus after the end of the first quarter. Dr. Lubbers began to pressure the DEBTOR to catch up on the billings.

The DEBTOR and her first husband, Daniel Boone, were divorced in December, 1997. Under the terms of their agreement, the DEBTOR was awarded the marital residence and was responsible for the mortgage and other expenses, holding her former husband harmless. The DEBTOR became obligated to make a lump sum payment of $30,000.00 to Mr. Boone within thirty days. Among the marital debts allocated to the DEBTOR were debts owed to Bank One, Choice Visa, Shell MasterCard, Mail Handlers MasterCard, JC Penney, Capital One, Leath Furniture, and Heilig-Meyers. The debts allocated to Mr. Boone included debts owed to Fleet Visa, Prime Option Visa, Sable's Jewelry Store, Amoco, Sears, Payless Cashways, Dr. Rhonda VanSpeybroeck, and GTE Mobile Phone. Each party agreed to indemnify the other.

The other physicians in the GROUP had been unaware of the relationship between Dr. Petersen and the DEBTOR until it was disclosed in late October, 1997. Due to their concern that the relationship might have an adverse effect upon other employees in the GROUP, Dr. Lubbers was named manager of personnel for the office in November, 1997.

On March 1, 1998, the GROUP hired Laura Bettenhausen, an accountant, on a part-time basis, to perform some of the accounting functions in order to permit the DEBTOR to devote more of her time to the billing work. Around that time, the police began an investigation and the DEBTOR was later arrested and charged with unlawful acquisition of controlled substances. After the GROUP agreed upon the conditions of the DEBTOR'S continued employment, Dr. Engebrecht met with and advised the DEBTOR that her responsibilities were being curtailed and her supervisory role was being eliminated. After returning to work for one day, the DEBTOR was placed on medical leave by her personal physician and she resigned her position in July, 1998.

When the DEBTOR sold her home in February, 1999, Dr. Petersen covered the shortfall between the sales proceeds and the first and second mortgages, issuing a check on February 17, 1999 to McGehee and Boling in the amount of $4,168.19, and a check to Bank One in the amount of $22,793.99. He also attempted to ease her financial woes by purchasing her garden tractor, appliances and personal effects on December 29, 1998, for $8,000.00. The DEBTOR executed a bill of sale listing the property as a John Deere garden tractor, with mower, snow blower and accessories. The DEBTOR also submitted a bill of sale dated February 17, 1999, evidencing Dr. Petersen's purchase of "furniture including bedroom set, living room sofa & chair & tables; Family room sofas and tables, curio cabinet, Dining Room table & chairs, clock, refrigerator, Precious Moments framed prints and accessories and personal items," for $26,962.18. Though not specifically itemized, the DEBTOR testified that the property sold to Dr. Petersen included the following items of jewelry: a gold chain and earrings purchased for $2,518.75; a gold necklace and diamond slide for over $1,000; a gold necklace for $612.25 and a diamond pendant for $1,013.60.

After the DEBTOR left the GROUP, rumors regarding her personal use of the GROUP'S credit card triggered an investigation. That investigation disclosed the DEBTOR'S personal use of the card, though the GROUP was not able to ascertain which purchases were for business purposes. Conflict escalated between Dr. Petersen and the other physicians and Dr. Petersen was voted out of office in March, 1999. He left the GROUP in June, 1999, to set up a practice of his own. Dr. Petersen and the DEBTOR were married in August, 1999. He sued the GROUP in state court, alleging claims for breach of employment agreement, conversion, breach of buy and sell agreement, injunction and accounting. The GROUP has asserted counterclaims against him, including breach of fiduciary duty, misappropriation of funds, civil conspiracy and accounting. In January, 2000, the GROUP sued the DEBTOR in state court, alleging civil conspiracy, breach of fiduciary duty, breach of the duty of loyalty, and misappropriation of funds.

Daniel Boone, the DEBTOR'S former spouse, filed a Chapter 7 bankruptcy on August 17, 2000, receiving a discharge in November, 2000. That filing precipitated the filing of a Chapter 7 petition by the DEBTOR on November 13, 2000. The DEBTOR listed the GROUP on her schedule of unsecured creditors as holding a claim in the amount of $100,000.00, arising from a "disputed lawsuit." She did not, however, disclose the pending lawsuit in the Statement of Affairs. The DEBTOR listed a checking account at IH Mississippi Valley Credit Union as having a balance of $25.00. The DEBTOR reported...