In re Roberti
| Decision Date | 30 June 1995 |
| Docket Number | Bankruptcy No. 93-52894. Adv. No. 93-5282. |
| Citation | 183 BR 991 |
| Court | U.S. Bankruptcy Court — District of Connecticut |
| Parties | In re Vincent A. ROBERTI, Debtor. RESOLUTION TRUST CORPORATION, as Receiver of Coastal Federal Savings Bank, FSB, Successor to Coastal Savings Bank, FSB, Substituted Plaintiff, v. Vincent A. ROBERTI, Defendant. |
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Leeland J. Cole-Chu, Cole-Chu & Cipparone, New London, CT, for plaintiff.
Kevin L. Burns, Owens, Schine, Nicola & Donahue, P.C., Trumbull, CT, for defendant.
ALAN H.W. SHIFF, Bankruptcy Judge.
The plaintiff in this nondischargeability action alleges that the defendant-debtor fraudulently induced the plaintiff into making a loan to a nonexistent corporation of which the debtor represented he was the president. Each party has moved for summary judgment: the plaintiff, on the ground that a state court default judgment collaterally estops the debtor from relitigating the factual issues that establish his alleged fraud; and the debtor, on the traditional ground that the undisputed facts cannot, as a matter of law, support a judgment of nondischargeability against him. For the reasons that follow, both of those motions are denied.
Plaintiff Resolution Trust Corporation ("RTC"), as successor in interest to Coastal Savings Bank, FSB ("Coastal Savings"), commenced this adversary proceeding on December 13, 1993. The complaint alleges that on or about December 1, 1989, Coastal Savings agreed to provide a $250,000 line of credit to a borrower which the debtor represented to be a Connecticut corporation named "Westledge/Boyer Realty II, Corp." ("Westledge/Boyer"). The debtor signed a note as "President Duly Authorized" of Westledge/Boyer. See Affidavit of W. Paul Kaminski, Jr., filed October 3, 1994 ("Kaminski Affidavit"), Exhibit A. A borrowing resolution given to Coastal Savings stated that Westledge/Boyer was an organized and existing Connecticut corporation and that the loan and the execution of the loan documents had been authorized at a meeting of the board of directors in accordance with the charter and by-laws of Westledge/Boyer. See Kaminski Affidavit, Exhibit C. That resolution was signed only by an individual purporting to be the secretary of Westledge/Boyer, but RTC claims that the debtor authorized its execution and delivery to Coastal Savings. The debtor also signed a personal guaranty of Westledge/Boyer's debt and a signature card under the Westledge/Boyer name. See Kaminski Affidavit, Exhibit B. The debtor allegedly represented that Westledge/Boyer was organized to purchase a real estate business known as Boyer Real Estate ("Boyer") and that that entity intended to open and maintain an escrow account at Coastal Savings with balances of up to $500,000.
It is undisputed that Westledge/Boyer did not exist at the time the loan documents were executed, or at any time before or after that date. RTC alleges that the debtor committed fraud and forgery when he signed the note, guaranty and signature card and authorized the execution and delivery of the borrowing resolution. RTC further alleges that the fraud and forgery were intended to induce the extension of credit by Coastal Savings and were made either knowingly or with reckless indifference to their truth or falsity. RTC further claims that the debtor failed to pursue the purchase of Boyer or establish an escrow account at Coastal Savings. RTC asserts that Westledge/Boyer never made any payments on the line of credit. The debtor as guarantor made some payments but defaulted in March of 1991.
On August 29, 1991, Coastal Savings sued the debtor for breach of contract, unjust enrichment, fraud, forgery, and theft in the Connecticut Superior Court. The debtor did not appear in that action and a default judgment entered against him on January 7, 1992 in the amount of $817,156.16 plus costs of $350.70 (the "Default Judgment"). See Kaminski Affidavit, Exhibit I. The Default Judgment included treble damages for theft, double damages for forgery, punitive damages for fraud, and contract damages. Coastal Savings presented limited evidence to the state court on the issue of damages, but no evidence was presented on the merits of the underlying action. Indeed, the state court judge stated at the hearing following which the Default Judgment entered: "You don't have to repeat anything that's in the affidavit of debt, so you can assume the Court has read that and finds it to be true, since there are no contradictions to it." Tr., Dec. 4, 1991, p. 5, Kaminski Affidavit, Exhibit G. Following the damages hearing, counsel for Coastal Savings prepared, and the state court judge signed, the Default Judgment, which found the material allegations of the complaint to be true.
While the debtor did not appear in the main action, on September 18, 1992, he moved to reopen the judgment based on improper service of process to a Connecticut address. See Kaminski Affidavit at ¶ 25. Specifically, the debtor alleged that "abode" service authorized by Conn.Gen.Stat. § 52-57, that is, service by leaving the summons and complaint at the debtor's "usual place of abode," was ineffective because the debtor resided in Florida on the date of service. See Motion to Open and Vacate Judgment, Kaminski Affidavit, Exhibit K. The motion to reopen alleged that the debtor "had no knowledge of the pendency of this action at the time judgment was entered, nor within four months thereafter," Motion at ¶ 4, and an affidavit of the debtor purported to verify that allegation.1
An evidentiary hearing on the motion to reopen was held on November 23, 1992. See Tr., Kaminski Affidavit, Exhibit L. The debtor offered testimony that he had moved to Florida in late May or early June of 1991, and continued to reside there at the time of purported abode service in October of 1991. He presented a variety of corroborative evidence, including a Florida driver's license and a Florida voter's registration card issued in June of 1991. Coastal Savings presented evidence indicating that the debtor did reside at the abode service address, including the receipt of collect telephone calls by the debtor in Connecticut in September of 1991, and the sheriff's testimony that a boy at the abode service address had stated to the sheriff that the debtor and the debtor's wife were out to dinner at the time service was attempted. On January 4, 1993, the state court issued a memorandum of decision denying the motion to reopen. Kaminski Affidavit, Exhibit M. After holding that the debtor bore the burden of proof on the motion to reopen, Memorandum at p. 4, the state court reviewed the facts, which it found to "cast grave doubt on the defendant's credibility," and concluded that the debtor did not satisfy his burden. Id. at p. 10. After receiving that adverse ruling, the debtor commenced a new action seeking to have the Default Judgment set aside, but proceedings in that action were stayed when the debtor commenced this case on September 3, 1993. Kaminski Affidavit, ¶¶ 29-30.
The First Count of the instant adversary proceeding seeks to have the full amount of the Default Judgment declared nondischargeable under § 523(a)(2)(A). The Second Count alleges that the debtor submitted to Coastal Savings Bank materially false financial data and projections for the business of Westledge/Boyer, and seeks a determination that the debt is nondischargeable under § 523(a)(2)(B). The Third Count seeks a determination that the debt is nondischargeable under § 523(a)(4). On October 3, 1994, RTC filed a motion for summary judgment on all counts on the ground that the Default Judgment is entitled to collateral estoppel effect in this court.
On September 14, 1994, the debtor filed a motion for summary judgment on all counts, supported by a Statement of Facts Pursuant to Local District Court Rule 9(c) (the "Debtor's Statement"). The Debtor's Statement alleges that an entity known as "The Roberti Group II, Inc." was incorporated under the laws of Delaware on August 23, 1989. That entity changed its name to "Westledge Real Estate II Corporation" ("Westledge") on September 5, 1989 and became authorized to do business in Connecticut. The debtor was the president of Westledge. In August of 1989, Westledge acquired the business of Boyer, and proceeded to do business in Southeastern Connecticut under a variety of names, including "Westledge/Boyer Real Estate," "Westledge Real Estate/Boyer Real Estate," "George Boyer Residential Agency," "Boyer Agency," and "Westledge Real Estate." Debtor's Statement at ¶ 6.2 The debtor acknowledges executing the note, guaranty, and signature card, and that he knew of the borrowing resolution, all of which contained the name of Westledge/Boyer. The debtor claims, however, that those documents were prepared by Coastal Savings employees who simply made a mistake as to the corporate name. The debtor allegedly never misrepresented that name to any Coastal Savings employee either before or after the transaction and never realized that the name was incorrect as typed. Debtor's Statement at ¶¶ 13-16. The debtor states that the two names — i.e. "Westledge/Boyer Realty II, Corp." as typed on the loan documents, and "Westledge Real Estate II Corporation" — "can honestly be read as one in the same." Affidavit of Vincent A. Roberti in Support of Defendant's Motion for Summary Judgment, filed September 14, 1994 ("Debtor's Affidavit"), ¶ 12. Westledge used all of the proceeds of the loan in its real estate business, which made payments on the loan throughout 1990 and for part of 1991. Debtor's Statement at ¶¶ 18, 20. However, the debtor acknowledges that $155,000 of the proceeds was deposited in his personal...
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