In re Premium Motor Cars, Inc.

• Decision Date: 17 April 2009
• Docket Number: Bankruptcy No. 07-24294 TPA.,Adversary No. 07-2411 TPA.
• Citation: 404 B.R. 128
• Parties: In re PREMIUM MOTOR CARS, INC., Debtor. Premium Motor Cars, Inc. and Ronald W. Wobb, Plaintiffs v. Cheryl L. Theisen, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Pennsylvania

Page 128

404 B.R. 128

In re PREMIUM MOTOR CARS, INC., Debtor Premium Motor Cars, Inc. and Ronald W. Wobb, Plaintiffs v. Cheryl L. Theisen, Defendant.

Bankruptcy No. 07-24294 TPA.

Adversary No. 07-2411 TPA.

United States Bankruptcy Court, W.D. Pennsylvania.

April 17, 2009.

COPYRIGHT MATERIAL OMITTED

William R. Lauer, Esq., Sewickley, PA, James R. Cooney, Esq., for Plaintiffs.

William Weiler, Jr., Esq. for Defendant.

MEMORANDUM OPINION AND ORDER

THOMAS P. AGRESTI, Bankruptcy Judge.

Defendant, Cheryl L. Theisen ("Theisen") has filed a Motion for Summary Judgment ("Motion") at Document No. 202, together with an accompanying brief. Plaintiffs Premium Motor Cars, Inc. and Ronald W. Wobb (collectively "Plaintiffs", and individually "Premium" or "Wobb") have filed their Plaintiffs' Response to Motion for Summary Judgment ("Response"), as well as a brief in opposition to the Motion. See Document Nos. 205, 206. Arguments on the Motion were heard on April 13, 2009.¹

DISCUSSION

For purposes of resolving a summary judgment motion, Fed.R. Civ.P. 56 is made applicable to adversary proceedings through Fed.R.Bankr.P. 7056. Summary judgment is appropriate if the pleadings, depositions, supporting affidavits, answers to interrogatories and admissions that are part of the record demonstrate that there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Bankr.P. 56(c), Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is appropriate if no material factual issue exists and the only issue before the court is a legal issue. EarthData Int'l of N.C., L.L.C. v. STV, Inc., 159 F.Supp.2d 844 (E.D.Pa.2001); In re Air Nail Co., 329 B.R. 512 (Bankr. W.D.Pa.2005). The test under Fed.R. Civ.P. 56 is "whether the moving party is entitled to judgment as a matter of law." Med. Protective Co. v. Watkins, 198 F.3d 100, 103 (quoting Armbruster v. Unisys Corp., 32 F.3d 768, 777 (3d Cir.1994)).

In deciding a motion for summary judgment, the Court must construe the facts in a light most favorable to the non-moving party. United States v. Isley, 356 F.Supp.2d 391 (D.N.J.2004). The moving party, moreover, bears the initial responsibility of stating the basis for its motions and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 325, 106 S.Ct. 2548. If this showing is made, no factual issue exists for trial unless the non-moving party identifies sufficient evidence favoring it in regards to the alleged factual dispute such that a reasonable jury could return a verdict in its favor. See Celotex, 477 U.S. at 322, 106 S.Ct. 2548. Applying the above standards, the Court finds that the Motion must be denied. Before giving an explanation for the denial, it is important to establish exactly where this case stands.

Where once there were ten, Theisen is now the sole remaining defendant in the case. Also, although the Second Amended Complaint (Document No. 66) sets forth ten different counts, through the combination of the dismissal of the other defendants and the voluntary narrowing of the claims by the Plaintiffs, the case has seemingly been reduced to two basic claims requiring turnover of monies to the estate pursuant to 11 U.S.C. § 542:(1) conversion² as to certain payments allegedly received by Theisen without the knowledge or consent of the Plaintiffs (totaling approximately $285,000); and, (2) constructive/resulting trust as to certain payments allegedly received by her with the knowledge of the Plaintiffs (totaling approximately $378,000). See Plaintiffs' Supplemental Transfer Chart (Document No. 213) at ¶ 7.³

Wobb is the owner of Premium, a retail car dealer specializing in the sale of used luxury and high-performance vehicles.⁴ Wobb and Theisen met sometime during the 1990s and began a romantic relationship. Theisen moved in with Wobb and the two resided together for a number of years, ending in 2007 when apparently, a somewhat acrimonious break-up took place. During much of the time that the two were residing together, Theisen was employed by Premium as the finance/insurance manager. This adversary proceeding concerns various payments that allegedly were made to Theisen from the funds of Wobb or Premium prior to the breakup, with the Plaintiffs claiming the payments are recoverable for the benefit of the bankruptcy estates. With this background in mind, the Court turns to a serial discussion of the arguments for summary judgment made by Theisen and the reasons why the arguments are rejected.

Theisen first argues that summary judgment should be granted as to the conversion claims because: (1) once the allegedly converted funds became commingled with her own money they lost their character as converted funds; and, (2) she obtained the funds with the consent of the Plaintiffs.

As to the first point, Theisen has cited no support for the proposition that a conversion claim must fail if the converted funds have been commingled with legitimate funds. At most, the commingling of converted and legitimate funds might limit the relief that a court could provide to remedy the conversion by eliminating the possibility of the imposition of a trust on the converted funds because they cannot be sufficiently traced. See, e.g., In re Bogan, 302 B.R. 517, 523 (Bankr.W.D.Pa. 2003). The Court makes no finding on that issue at this time. However, assuming this scenario to exist, the Court could nevertheless provide relief in the form of a money judgment. Since there are material factual disputes involved and the Court would be able to provide relief if the Plaintiffs prove their case, Theisen's Motion must therefore fail on this argument.

As to the second point, Theisen argues that she received some of the funds at issue in the conversion claim with the consent of the Plaintiffs (i.e., her wages from Premium)⁵ and that such cannot therefore be the subject of an action for conversion. It is true that under Pennsylvania law money voluntarily paid, in the absence of fraud, duress, or mistake of fact, cannot be recovered. See, e.g., Kline v. Morrison, 353 Pa. 79, 44 A.2d 267, 269 (1945). Nevertheless, Pennsylvania law also provides that a taking of a person's property, with consent, while originally intending to use the property for one purpose but then using it for another purpose, may be a conversion. See Knuth v. Erie-Crawford Dairy Co-op. Ass'n., 463 F.2d 470, 478 (3d Cir.1972), cert. denied 410 U.S. 913, 93 S.Ct. 966, 35 L.Ed.2d 278, on remand 58 F.R.D. 646, affirmed 487 F.2d 1394.

In this case Plaintiff contends that there was an "understanding" between Wobb and Theisen whereby the latter would be paid more in salary then her position actually merited while the "excess" was to be used by her as part of a common fund to jointly benefit the Parties. Plaintiffs further contend that Theisen took the payments with that understanding but then instead kept the "excess" for her own benefit. Taking these allegations as true, which the Court must do for purposes of the Motion, it is possible that a conversion could be established even if the payment was voluntarily made to her. Thus, summary judgment cannot be granted on this ground either.

Theisen next argues that the conversion claims are barred by the applicable two-year Pennsylvania statute of limitations (42 Pa. C. S.A. § 5524) because the adversary proceeding was not filed until August 23, 2007, even though Plaintiffs have acknowledged engaging an accounting firm in 2005 to "examine and trace" Premium funds (citing the Second Amended Complaint at ¶ 38). Theisen does not specify any date in 2005 when the accounting firm was retained. Plaintiffs respond by claiming that, although they hired the accountant in "the summer of 2005" they did not learn the results of the accountant's analysis until June 28, 2007. Plaintiffs also contend that Theisen's job duties at Premium prior to her termination in late June 2007 included receipt and review of all company checking records, which effectively shielded Plaintiffs from acquiring any knowledge as to the unauthorized payments being made to her. Because of the foregoing factual record, the applicability of the statute of limitations to bar any claims in this case will necessarily implicate the discovery rule which provides that the statute does not begin running until the plaintiff knows or reasonably should know that he has been injured by the conduct of another. Many of the allegedly converted payments to Theisen pre-date August 23, 2005, and would thus be barred unless "saved" by operation of the discovery rule.

The Third Circuit has instructed that courts must be very cautious before granting summary judgment on statute of limitations grounds when there is a discovery rule issue and the alleged wrongdoer was in a fiduciary position with respect to the plaintiff, to the point of requiring that there was a "smoking gun" that should have alerted the plaintiff to the defendant's behavior. See In re Mushroom Transp. Co., 382 F.3d 325, 341-42 (3d Cir. 2004). Theisen has not pointed to the existence of any such smoking gun in this case. Instead, the Parties in the present matter have posited reasonable but competing versions of the "facts" as to whether the discovery rule should be found to have tolled the running of the statute of limitations. The Court finds this to be a material factual dispute which must be resolved only after trial and not by way of summary judgment.

Theisen next argues that summary judgment should be granted with respect to the constructive/resulting trust claims because: (1) the Debtors cannot show the existence of a "confidential relationship" or "undue influence" between the Parties; (2) she gave "value" in exchange for all the funds she received; and, (3) the allegation that there was a verbal agreement between the Parties with respect to the disposition...