Madison Res. Funding Corp. v. Marsh (In re Marsh)

• Decision Date: 30 September 2020
• Docket Number: Adversary Proceeding No. 18-04198,Bankruptcy Case No. 18-43273
• Parties: In re: Robert Marsh, Debtor. Madison Resource Funding Corp., Plaintiff, v. Robert Marsh, Defendant.
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of Minnesota

In re: Robert Marsh, Debtor.

Madison Resource Funding Corp., Plaintiff, v. Robert Marsh, Defendant.

Bankruptcy Case No. 18-43273

Adversary Proceeding No. 18-04198

UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA

September 30, 2020

Chapter 7

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

At Saint Paul, Minnesota.

This adversary proceeding was commenced December 12, 2018, by Plaintiff Madison Resource Funding Corp. ("Madison") against Defendant Robert Marsh. Dkt. No. 1. Madison sought a determination that a debt owed to Madison in the amount of $1,679,629.63 plus attorney's fees and interest is non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). Dkt. No. 1. Madison alleged Jerry Marsh made misrepresentations and omitted material facts concerning the relationship between Synico Staffing, LLC ("Synico") and Syglo, LLC ("Syglo") to Madison in furtherance of a conspiracy and agreement with Robert Marsh to defraud Madison into advancing funds to pay Syglo's temporary employees. Dkt. No. 1.

The case was assigned to this Court on December 20, 2019. The case proceeded to trial on Count I of the Complaint on February 26-27, 2020. Counts II and III of the Complaint were dismissed by stipulation of the parties. Dkt. No. 64. Paul Ratelle and Alexander Conti appeared for the Plaintiff; Matthew Fling appeared for the Defendant. This trial was preceded by the trial in Madison Resource Funding Corp. v. Jerry Marsh, Adv. No. 16-03127 (Bankr. D. Minn. Feb. 25-26, 2020). All evidence admitted during the trial of Madison Resource Funding Corp. v. Jerry Marsh was admitted in this adversary proceeding. The evidence admitted included the following: testimony of Melody Smith; Amanda Naples; Mary (Molly) McQuillen; Robert Gilbert, Jr.; John Carney; Richard Chipman; and Jerry Marsh; exhibits 1-13; 15-28; 31-33; 38-42; 45-54; 56; 58; 60-61; 63-72; 74-81; 83-86; 89-94; 97-110 (101 as amended); 112-114; 117; 136; 146; 148; 150-158; and the deposition of Mark Anthony Sawicki. The Court also admitted facts 1 through 9 listed on Madison's request for "judicial notice" after no objection was made to the request. Dkt. No. 71.

Additional evidence was admitted in this adversary proceeding that was not admitted in Madison Resource Funding Corp. v. Jerry Marsh. That evidence includes the following: testimony of Robert Marsh and additional testimony of Jerry Marsh; and exhibits 121-128; 131; 133-135; 137-142; 144; 147; 149; 159. The Court also admitted facts 1 through 6 listed on Madison's request for judicial notice after no objection was made to the request. Dkt. No. 71. Closing arguments for both cases followed the close of evidence in this trial on February 27, 2020.

At the request of Madison, the Court permitted the parties to file post-trial submissions concerning the evidence presented at trial. Dkt. Nos. 82-83. Following these submissions on March 6, 2020 and March 20, 2020, the Court took Madison's motion in limine, Robert Marsh's motion to admit Provisional Exhibits A and B, and the merits of the case under advisement.

On May 12, 2020 the Court ordered Robert Marsh to show cause as to why the Court should not find he is in civil contempt of Court for violating the Court's discovery order. Dkt. No. 84. The parties agreed to continue mediation in both Marsh cases on May 26, 2020 at the show-causehearing, and the mediator requested that no action be taken by the Court during the mediation. An impasse was reported on September 30, 2020. The Court makes the following findings of fact and conclusions of law and holds the debt owed to Madison is not dischargeable.

Jurisdiction

The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(b)(1) and 1334, Fed. R. Bankr. P. 7001, and Local Rule 1070-1. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(I). Venue in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

Findings of Fact

1. The findings of fact in the Findings of Fact, Conclusions of Law, and Order in Madison Resource Funding Corp. v. Jerry Marsh, Adv. No. 16-03127, are adopted in their entirety and incorporated herein. The Court does not adopt in this case the requests for admission deemed admitted by Jerry Marsh.

2. Jerry Marsh's debt owed to Madison in the amount of $1,676,162.20, plus prejudgment interest and attorney's fees, for breach of contract and fraud is non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).

Computers belonging to Synico

3. Robert Marsh testified that he turned over the specific computers requested by the bankruptcy trustee in Synico's bankruptcy, but this was not all of Synico's computers and he does not recall what happened to the remaining computers. Ex. 146. Robert Marsh testified that he asked the trustee if he wanted the information stored on Synico's servers and was told that the trustee was not interested in the servers and only wanted the computers.

4. During trial, only in response to questioning by Madison's attorney, Robert Marsh testified that he had disks made of the Synico computers before they were handed over to the trustee, and those disks are in his possession. (All computer equipment of Synico was abandoned by the trustee in September 2017, prior to the commencement of this adversary proceeding. In re Synico Staffing, No. 16-4371 (Bankr. D. Minn. Aug. 16, 2017) Dkt. No. 153.) Robert Marsh did not provide the disks to Madison during discovery or at any time prior to his testimony.

Madison Makes A Request For Admissions

5. Madison sent requests for admission to Robert Marsh's address in February 2019 as part of this adversary proceeding. Ex. 149; test. of Robert Marsh. It is undisputed they was sent to the proper address.

6. Robert Marsh testified he did not recall receiving the requests for admission and he was pro se at the time they were sent. It is undisputed no responses were ever made. Dkt. No. 88.

7. Robert Marsh retained counsel who was aware of Robert Marsh's failure to respond to the requests for admission no later than February 18, 2020, but made no motion to amend (or allow responses to) the admissions.

Ultimate Facts Regarding Robert Marsh's Involvement In A Conspiracy

8. Robert Marsh conspired with Jerry Marsh to intentionally deceive Madison into providing funding to Syglo.

9. Robert Marsh and Jerry Marsh agreed that Jerry Marsh would conceal the subvendor agreement between Synico and Syglo and that Syglo did not have a direct contractual relationship with U.S. Bank/Bartech.10. Jerry Marsh, in furtherance of the conspiracy, did conceal the subvendor agreement and misrepresented to Madison that Syglo had a direct contractual relationship with U.S. Bank/Bartech.

11. As a result of actions taken in furtherance of the conspiracy, Madison was damaged in the amount of $1,676,162.20 in advances made on staffing services provided to U.S. Bank/Bartech and $3,467.00 in advances made on staffing services provided to Cargill/Ardent Mills.

Discussion

I. The Court Denies As Untimely Madison's Request For Sanctions Related To Spoliation Of Evidence.

On February 19, 2020, approximately one week before trial, Madison filed an expedited motion in limine seeking an adverse inference instruction for intentional spoliation of evidence intended to deprive Madison of information necessary for this adversary proceeding. Dkt. No. 72. Madison alleged that Synico owned 25 computers at the time it filed for bankruptcy, and that Robert Marsh failed to preserve the computers or intentionally removed information from the computers prior to turning the computers over to the trustee of Synico's bankruptcy estate. Madison argued that the Court should presume the destroyed information on the computers was "unfavorable" to Robert Marsh and "showed that [Robert Marsh] was indeed involved in . . . [Jerry Marsh's] scheme to defraud Madison out of $1.6 million." Dkt. No. 72 at 10. At trial, the Court took the motion under advisement and allowed Madison to present evidence concerning computers owned by Synico and Madison's attempt to extract electronically stored data from the computers.

For the same reasons cited in the Findings of Fact, Conclusions of Law, and Order in Madison Resource Funding v. Jerry Marsh, Adv. No. 16-03127, the Court denies the request for sanctions related to the computers owned by Synico.

II. The Court Will Not Admit Provisional Exhibit A and Provisional Exhibit B.

Robert Marsh provided two printed copies of emails to counsel for Madison after he was questioned on whether he had any documents proving communications between Synico and Madison employees regarding a paybill report of Syglo. Paybills are how Madison determined how much to pay to Syglo's temporary employees. Robert Marsh explained that disks were made of Synico's computers sent to the trustee and that the emails were on those disks. Robert Marsh possessed the disks at his home, but did not disclose them during discovery. He testified he had forgotten about the disks until the night before his second day of testimony. He sought to admit two printed emails that he testified were on those disks.

Madison objected to admission of the undisclosed emails and to any testimony regarding the documents on the grounds of failure to disclose, lack of foundation, relevance, the proposed exhibits were not included on the exhibit list and they were not offered for rehabilitation. Counsel for Robert Marsh responded that Madison was not prejudiced by the late disclosure and admission of the exhibits because the emails indicated Madison would have had access to the emails through their own employees. The Court took the objections to the admissibility of the proposed exhibits and any testimony regarding them under advisement. The exhibits were provisionally admitted as exhibits A and B pending the Court's ruling.

Federal Rule of Civil Procedure 37(b)(2)(A) permits the Court to sanction a party if the party "fails to obey an order to provide or permit discovery." Likewise, Fed. R. Civ. P. 16(f)(1)(C)...