Indus. Dev. Auth. of the Town of Front Royal & the Cnty. of Warren v. Poe (In re Poe)
| Docket Number | 21-10048-KHK,AP 21-01032-KHK |
| Decision Date | 03 July 2023 |
| Parties | In re: Jesse Forrest Poe Debtor v. Jesse Forrest Poe Defendant Industrial Development Authority of the Town of Front Royal and the County of Warren, Virginia A/K/A Economic Development Authority of the Town of Front Royal and County of Warren, Virginia Plaintiff |
| Court | U.S. Bankruptcy Court — Eastern District of Virginia |
This matter commenced when the Industrial Development Authority of the Town of Front Royal and the County of Warren, Virginia a/k/a Economic Development Authority of the Town of Front Royal and the County of Warren, Virginia (the "EDA" or the "Agency") filed a complaint (as amended) against the debtor, Jesse Forrest Poe, (the "Debtor") seeking a judgment on behalf of the EDA in the amount of $285,000 in damages. The Amended Complaint[1] also seeks a finding that any amounts owed are nondischargable under 11 U.S.C §§ 523 (a)(2)(A), 523 (a)(4) and 523(a)(6).
The EDA is a small public agency formed by Warren County and the Town of Front Royal to attract new business to their communities. The Agency alleges that the Defendant engaged in a scheme with Jennifer McDonald ("McDonald") former executive director of the EDA, to convert the property of the Agency to Poe's use without the consent of McDonald's employer.
The Court conducted a trial on April 17, 2023. The following constitutes the Court's findings of fact and conclusions of law under Rule 52 of the Federal Rules of Civil Procedure, Fed.R.Civ.P. 52, made applicable by Rule 7052 of the Federal Rules of Bankruptcy Procedure Fed.R.Bankr.P. 7052.
The Court has subject matter jurisdiction over this Adversary Proceeding under 28 U.S.C. §§ 157(a) and 1334 and the General Order of Reference from the United States District Court for the Eastern District of Virginia dated August 15, 1984. The counts set forth in the Complaint seeking a determination of the dischargeability of debts constitute core proceedings under 28 U.S.C. § 157(b)(2)(I).
Jennifer McDonald served as the executive director of the EDA from 2008 until 2018.[2]Daniel Whitten served as the assistant attorney for Warren County between 2010 and 2016 and was the County attorney and the EDA's attorney from 2016 to 2019.[3] He attended all EDA board meetings during those periods.[4] At the trial, he explained how the EDA was structured and how it managed the funds at its disposal. He testified the EDA was controlled by Virginia statute, the Agency bylaws and a written Financial Management Policy.[5] He also testified that the bylaws and the Financial Management Policy dictated that capital expenditures exceeding $50,000 required approval by a majority vote of the seven-member board of directors in open board meetings.[6]
Jesse Poe met Jennifer McDonald in 2010.[7] McDonald was the aunt of Poe's high school girlfriend, Morgan Butler.[8] Poe and Ms. Butler socialized with McDonald frequently.[9] The couple house sat for her from time to time and had dinners with McDonald in her home.[10] Poe knew McDonald had a good job and that she was trusted in her community.[11] He believed she was wealthy and experienced in real estate transactions.[12] She previously prepared his tax returns and had access to his checking account information.[13] Poe came to trust McDonald.[14] At trial Poe testified, [15]
At age 17, Poe was convicted of vandalism as a juvenile and was ordered to perform 500 hours of community service.[16] McDonald arranged for him to perform much of his community service working for the EDA doing odd jobs on properties owned by the Agency.[17] Those jobs included weed eating, cutting grass, removing barbed wire and picking up trash, chores which a 17-year-old could do.[18] After graduating from high school, Poe and his stepfather rented a townhouse from McDonald for $800 a month for five years.[19] In addition to his community service Poe also performed odd jobs for McDonald on other properties for which he was paid in cash or by check, and occasionally, McDonald would apply his pay for services rendered to the rent that was due on the townhouse he rented from her.[20]
Sometime during the summer of 2015 Poe told McDonald that he would like to own his own home someday.[21] Knowing she was a real estate agent, he asked her to keep an eye out for a property that he could afford.[22] Around the same time, unbeknownst to Poe, Everett B. Loughry and Linda C. Loughry entered into a residential sales contract for the purchase of property identified as 118 Jutland Court in Stephens City, Virginia.[23] Although the contract purports to bear the signature of Jesse Poe, he denies having entered the contract or signing the document, and his signature on this contract appears visibly different from his signatures on other documents presented at trial that he admitted signing.
Sometime thereafter, Jennifer McDonald arranged the electronic transfer of $285,000 of Agency money into an EDA account at United Bank. A few days later, a cashier's check was issued from that EDA account and was delivered to Service Title of Front Royal, LLC for the purchase of the Jutland Court property.[24] Mr. Whitten testified that a proposal to purchase the Jutland Court property was never brought before the board of directors and the board never voted to approve the purchase of the property in accordance with its normal business operations.[25]
In furtherance of his desire to someday buy a home, Poe testified that he attended a meeting with McDonald at the Service Title office.[26] When asked what he was told about the purpose of the meeting Poe stated, "Jennifer told me before we walked in that I would just have to walk in, sign here, sign here, sign here, and I will be done."[27] He thought he was signing a credit check application.[28] Prior to this meeting, he had not signed documents engaging McDonald as his real estate agent, nor had he identified a property he wanted to buy. He believed he was signing documents ostensibly to begin the process of qualifying for a zero percent home loan as a first-time buyer.[29] He did not think he was borrowing money to purchase a specific property.[30] He made no attempt to read the documents he signed. He simply trusted McDonald to guide him through the process of ultimately buying a home and blindly followed her instructions when she indicated where he should endorse the documents she placed before him.[31]
Poe did not know the meeting was actually the closing on the sale of the Jutland Court property or that the house was being conveyed to him. He did not know that EDA money was used to purchase the property.[32] Poe never received copies of the settlement documents and never moved into the house or received any mail at that residence.[33] He did not receive a check that was made payable to him for $2,475.60 at the closing or anytime thereafter.[34] Prior to the closing, his only experience with borrowing money was limited to the purchase of a truck for $6,500. In his own words, "I walked into the dealership, I signed some papers, and I had a loan."[35]
In the Fall of 2015, Poe was also employed by B&B Signal Company, LLC as a shop hand.[36] When he was told the company might be moving its headquarters to Richmond, Virginia, and that if he wanted to keep his job he might have to move too, Poe gave McDonald, his landlord, notice that he might be moving.[37] He also told her there was no longer a need to search for a property he might buy. Upon hearing this, McDonald told Poe he already owned a home - that she had purchased a house for him.[38] He was surprised to learn that the property was titled in his name and dismayed because he knew he could not afford to pay for a house and rent a place in a new location.[39] He told McDonald he wanted to sell the Jutland Court property and asked her for advice on how to "get rid of it."[40] She assured him that it would be easy to sell the house and that she would help him do so.[41] She explained that when the property was sold, the proceeds of sale would have to go into his checking account and that she would give him instructions on how to repay the unnamed parties who had loaned him the money to purchase the property.[42] Poe maintained McDonald made all the arrangements for the sale. He admitted signing the residential sales contract as well as the settlement documents at the closing without reading or reviewing them. The ALTA Settlement Statement he signed indicates the entities listed below were paid directly from the sale proceeds:
Poe admitted receiving a check for the balance of the sale proceeds in the amount of $131,640.44 at settlement and that he deposited that check into his Wells Fargo personal checking account.[44] At McDonald's direction, to pay off the entities who had loaned him the money to buy the house originally, Poe wrote a check made payable to Little Rugratz Daycare for $6,500 and a check to McDonald in the amount of $868.00.[45] Under her instruction, he also wrote 15 additional checks made payable to McDonald for $5,000 each. On check numbers 105 and 106, Poe wrote on the memo line that the payments were for rent, even though he knew this was false because he paid his rent to McDonald in cash.[46] He testified that McDonald told him it didn't matter if the information on the memo line was correct because it was not important.[47] He also admitted writing check numbers 107 through 120 made payable to McDonald but denied filling in the...
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