In re Youngblood, Case No. 07-70072 (Bankr. S.D. Tex. 4/29/2009)
| Decision Date | 29 April 2009 |
| Docket Number | No. 07-07014.,Case No. 07-70072.,07-07014. |
| Parties | IN RE: SHAWNA YOUNGBLOOD, CHAPTER 7, Debtor(s). MONTE BRETT MARSHALL, et al Plaintiff(s) v. SHAWNA YOUNGBLOOD Defendant(s). |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
On June 19, 2007, plaintiffs Monte Brett Marshall, James Curtis Herring (Independent Executor of the Estate of Rowena Sawyer), and the Estate of Rowena Sawyer ("Plaintiffs") filed an adversary proceeding against defendant Shawna Youngblood. Ms. Sawyer was Ms. Youngblood's grandmother. During an approximately six-month period, over $20,000.00 was transferred from Ms. Sawyer's bank account. During the same time period, a separate $20,000.00 certificate of deposit was transferred from an account and pledged as collateral for a vehicle purchased by Ms. Youngblood. After Ms. Youngblood defaulted on the payments, the bank used the CD to pay off the loan. Ms. Youngblood contends that all transfers were gifts from Ms. Sawyer intended to help Ms. Youngblood stabilize her life after a series of personal issues.
Plaintiffs allege that Ms. Youngblood defrauded her grandmother by forging Ms. Sawyer's name on checks and other financial documents. Plaintiffs assert the following causes of action: conversion, theft, common law fraud, and breach of fiduciary duty. Plaintiffs seek actual damages in the amount of $48,285.91, exemplary damages, and attorneys' fees. Additionally, Plaintiffs seek a finding that any judgment issued against Ms. Youngblood is non-dischargeable pursuant to 11 U.S.C. § 523(a)(4).
The Court held a trial on July 22, 2008 and August 18, 2008. Based on the evidence presented and for the reasons set forth below, the Court finds that Plaintiffs have not met their evidentiary burden with respect to most allegations. After the evidentiary record is pared of discredited testimony,1 there is little evidence to controvert Ms. Youngblood's testimony that the transfers were made with Ms. Sawyer's consent and based on Ms. Sawyer's undisputed desire to help her granddaughter meet her basic necessities.
However, the Court finds that Ms. Youngblood is liable for breach of a fiduciary duty for a portion of the withdrawals from Ms. Sawyer's accounts. Ms. Youngblood owed Ms. Sawyer a fiduciary duty based on their close personal relationship. Ms. Youngblood breached that duty by expending funds in an amount exceeding what was reasonably necessary for the support of herself, her daughters, and Ms. Sawyer. However, the debt arising from the breach of fiduciary duty is not a non-dischargeable debt under 11 U.S.C. § 523(a)(4) because Ms. Youngblood's fiduciary duty did not arise from an express or technical trust as required by § 523(a)(4).
The Court also finds that Ms. Youngblood is liable for fraud for obtaining the $20,000.00 CD by a material misrepresentation. This amount of the Court's judgment is excepted from discharge under § 523(a)(2).
The Court has jurisdiction of this matter under 28 U.S.C. § 1334. Venue is proper in this District pursuant to 28 U.S.C. § 1409. This is a core proceeding under § 157(b)(2)(I).
The Texas Civil Practice & Remedies Code authorizes civil causes of actions for conduct that constitutes a violation of the theft provisions of the Texas Penal Code. TEX. CIV. PRAC. & REM. CODE § 134.004 (Vernon's 2007). The Texas Penal Code does not have a conversion provision, but rather, a general "theft" chapter that incorporates the various methods of unlawful acquisition of property. Section 134.003(a) provides that "[a] person who commits theft is liable for damages resulting from the theft." Section 134.002(2) defines "theft" as conduct constituting a violation of §§ 31.03, 31.04, 31.05, 31.06, 31.07, 31.11, 31.12, 31.13, or 31.14 of the Penal Code. Section 31.03(a)-(b)(1) defines theft as acquiring property of the another without the owner's effective consent and with the intent to deprive the true owner of that property. The remaining Penal Code provisions incorporated by § 134.002(2) are inapplicable to this case.
"The elements of fraud are: (1) a material misrepresentation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made the statement recklessly without any knowledge of the truth; (4) the speaker made the representation with the intent that the other party should act on it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury." Cooper v. Cochran, ___ S.W.3d ___, 2009 WL 944394 () (citing Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998)).
Plaintiffs' seek damages based on four allegations: improper withdrawals from Ms. Sawyer's accounts; a vehicle purchased through false representations; stolen cattle, and unauthorized use of a debit card. The Court considers the four allegations separately below.
To support their allegations with respect to alleged improper withdrawals, Plaintiffs submitted extensive documentary and testimonial evidence. Plaintiffs submitted bank statements showing account balances and numerous checks. Plaintiffs also offered the testimony of Darlene Holdridge, Ms. Youngblood's mother, and Linda James, a forensic document examiner. The Court considers the evidence separately below.
Approximately $20,000.002 was withdrawn over an approximately 5-month period. Plaintiffs introduced abundant evidence that Ms. Sawyer's bank accounts were systematically depleted from May to November of 2002 through personal checks bearing Ms. Sawyer's signature.3 During May through June, Ms. Sawyer's Wells Fargo account balance went from $10,434.20 to $2,166.31. From June to September, Ms. Sawyer's Texas Champion Bank account balance went from $4,748.16 to $409.31. From September to October, Ms. Sawyer's First State Bank account balance went from to $2,353.20 to $3.57. Numerous withdrawals were for large amounts of cash taken, sometimes taken the same day or only a day apart. However numerous withdrawals also appeared to have been used to cover reasonable and necessary living expenses for Ms. Sawyer, Ms. Youngblood, and Ms. Youngblood's daughters.
The Court documents the account activity below.
Ms. Sawyer's May 6, 2002 balance was $10,434.20. Ms. Sawyer's June 6 balance was $2,166.31. By October 4, the account was overdrawn in the amount of $1,320.32. By November 6, the account was overdrawn in the amount of $2,779.50. Plaintiffs included copies of the following three withdrawals:
• May 22, for $3,158.00
• May 22, for $4,000.00
The $4,000.00 withdrawal was signed by Ms. Sawyer. The other two withdrawals were signed by Ms. Youngblood through power of attorney. The Court has no evidence indicating the nature of other withdrawals.
Ms. Sawyer's June 25, 2002 Texas Champion Bank balance was $ 4,748.16. Ms. Sawyer's September 25 balance was $409.31. By October 27, Ms. Sawyer's account was overdrawn in the amount of $257.98. By November 25, Ms. Sawyer's account was overdrawn in the amount of $375.98.
Many of the checks appeared to have been written for cash. Between July 14 and August 22, checks in the amount of $2,870.00 were written to a bank or Ms. Youngblood. Moreover, some large cash withdrawals were made only three days apart.
However, some checks appear to have been written for necessary living expenditures. Checks were written to grocery stores and a carpet cleaning service. Some checks written for cash were characterized as reasonable and necessary expenses. The "memo" line in a check written to Megan Wieding, Ms. Youngblood's daughter, stated that it was for "school shopping." Other "memo" lines indicated that the checks were written for repairs and Home Depot purchases. On July 21, 2002, a $195.00 check was written to the "Royal Inn" and characterized as "flood out assistance."4
The record does not include documents indicating account balances for a Northwest Account. The record includes the following checks written from the Northwest account for cash:
• May 22, for $800.00, to Wells Fargo
• June 2, for $1,300.00, to Wells Fargo
• August 18, for $200.00, to Ms. Youngblood
• August 18, for $380.00, to First National Bank.
• (date unidentifiable), for $265.00, to First National Bank
Some of the checks were described as expenditures for reasonable and necessary living expenditures. The $380.00, and $265.00 checks, in addition to another August 18 check for $200.00, were described as reimbursements to Ms. Youngblood for water-well repairs. Withdrawals also included checks written to a Farmer's Co-Op, a grocery store, and to unidentified individuals for establishing an unidentified escrow account. The $800.00 check was "for" a The $1,300.00 check was for a "tuition reimbursement."
On, September 18, a check for $1,293.18 was written to Wells Fargo from a Nations Bank of Texas account in Ms. Sawyer's name. There is no evidence indicating how these funds were used.
Ms. Sawyer's September 30, 2002 First State Bank balance was $2,353.20. Ms. Sawyer's October 31, 2002 balance was $3.57. The November 30, 2002 ending balance was negative $4.43. As with the other accounts, some checks were described as expenditures for ordinary living expenditures while others appear to have been cash withdrawals or questionable expenses. A check in the amount of $625.00 was written to a grocery store. A check in the amount of $70.00 was written to an unidentified individual, bearing Ms. Sawyer's signature. A check in the amount of $64.94 was written to a Best Western. Checks in the amount of $1,850.00 were written to a...
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