Michael N. Macris and Macris Enterprises, LLC v. Jerry Dean (In Re Jerry Dean ), Case No. 10-44412-RFN

• Decision Date: 08 June 2011
• Docket Number: Case No. 10-44417-DML-11,Under Case No. 10-44412-RFN-11,Adversary Case No. 10-04204,Case No. 10-44412-RFN
• Parties: In re: Jerry Dean Saxton Katie Elizabeth Saxton American Equities Management, LLC Debtors. Michael N. Macris and Macris Enterprises, LLC Plaintiffs, v. Jerry Dean Saxton and Katie Elizabeth Saxton Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Texas

In Re: Jerry Dean Saxton Katie Elizabeth SaxtonAmerican Equities Management, LLCDebtorsMichael N. Macris and Macris Enterprises, LLCPlaintiffs, v.Jerry Dean Saxton and Katie Elizabeth SaxtonDefendants.

Case No. 10-44412-RFN

Case No. 10-44417-DML-11

Under Case No. 10-44412-RFN-11

Adversary Case No. 10-04204

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION

Dated: June 8, 2011

U.S. Bankruptcy Judge

Jointly Administered

FINDINGS OF FACT AND CONCLUSIONS OF LAW IN SUPPORT OF FINAL

SUMMARY JUDGMENT EXCEPTING DEBTS FROM DISCHARGE

Plaintiffs, Michael N. Macris("Macris") and Macris Enterprises, LLC("Macris Enterprises")(collectively "Macris") moved the Court for summary judgment that debts owed by Macris by Debtor, Jerry Saxton and Katie Saxton(collectively the "Debtors") are excepted from discharge pursuant to 11 U.S.C. §§ 523(a)(4) and (a)(6)(the "Motion").The Motion was supported by Brief (the "Brief) and Exhibit Appendix (the "Appendix"), filed contemporaneously with the Motion.The Motion, Brief, and Appendix were filed and duly served on May 6, 2011, along with a Notice of Hearing.The Debtors filed a timely Response, Response Brief, and Response Appendix in opposition to the Motion.

On June 6, 2011, this Court heard the Motion on regular notice.Macris and the Debtors appeared through their respective counsel and presented summary judgment evidence and argument.Based upon the undisputed evidence and arguments of counsel, the Court determined that the Motion had merit and should be granted, on the terms and conditions set forth in a Final Judgment (the "Final Judgment") to be submitted contemporaneously with these findings of fact and conclusions of conclusion of law ("Findings of Fact and Conclusions of Law"), which are undisputed.

I.FINDINGS OF FACT

1.This is an adversary proceeding filed by Macris against the Debtors to determine the dischargeability of debts owed to him by the Debtors.The amount of the debt owed to Macris by Debtor, Jerry Dean Saxton, is $1,643,136, plus pre-judgment interest on $1,343,136, at the Utah statutory judgment rate, retroactive to December 4, 2009.The amount of the debt owed to Macris byDebtor, Katie Elizabeth Saxton, is $1,543,136, plus pre-judgment interest on $1,243,136, at the Utah statutory judgment rate, retroactive to December 4, 2009.

2.This is a core proceeding pursuant to 11 U.S.C. § 157(b).

3.The Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§1334 and 157 and 11 U.S.C §523(a).This is a core proceeding pursuant to 11 U.S.C. § 157(b)

4.The Debtors are Chapter 11 debtors in Case No. 10-44412-rfn-11 (the "Bankruptcy Case"), now pending in this Court.Thus, venue is proper in this Court.

5.Macris is judgment creditors in the Bankruptcy Case.A Certified Copy of the Final Judgment against DefendantsJerry Saxton, Katie Saxton, et al, dated April 1, 2011(the "Final Judgment"), is included in the Exhibit Appendix as Exhibit "F," and is incorporated herein by this reference.(Appendix, pages 131-35).Before the entry of the Final Judgment, Macris filed a timely proof of claim, which was amended on September 21, 2010.The Court takes judicial notice of the Proofs of Claim.

6.Macris is a judgment creditor in the Bankruptcy Case as a result of wrongful acts committed by the Debtors beginning in December 2006.As a result of those wrongful acts and resulting injuries, Plaintiffs sued the Debtors in the Third Judicial District Court, Salt Lake County, State of Utah(the "Utah Court"), in a case styled, "Michael N Macris, et al., Plaintiffs, v. Sevea International, Inc., Jerry and Katie Saxton, et al, Defendants," in Civil No. 070903010, before the Honorable Paul G. Maughan(the "Utah Lawsuit").The Debtors' wrongful acts and the damages they caused are set forth in the Amended Verified Complaint, dated March 20, 2008(the "Verified Complaint")(Exhibit "A,"Appendix, pages 1-44); in the Utah Court's Findings of Fact, Conclusions of Law. and Preliminary Injunction, dated May 4, 2007(the "Preliminary Injunction")(Exhibit "B,"Appendix, pages 45-64); in the Utah Court's Findings of Fact, Conclusions of Law, and Entry of Final Judgment, dated August 13, 2009("Findings and Conclusions")(Exhibit "D,"Appendix, pages 78-117), the Utah Court's Memorandum Decision on damages, dated December 4, 2009(-'Memorandum Decision")(Exhibit "E,"Appendix, pages 118-130), and the Utah Court's Final Judgment.(Exhibit "F,"Appendix, pages 129-33).Certified copies of Exhibits A, B, C, D, E, and F, are included in the Appendix and incorporated herein by reference

7.The Debtors filed an Answer to the Amended Verified Complaint in the Utah lawsuit ("Defendants" Answer"), denying liability to Plaintiffs.See Exhibit "C."(Appendix, pages 64-75).On August 13, 2009, the Utah Court struck Defendants' Answer as a sanction for on-going contempt and repeated acts of discovery abuse.(Appendix, pages 101-113).When the Debtors' pleadings were stricken, the Utah Court entered a default judgment against them on factual allegations in the Verified Complaint, except for the allegations regarding the amount of Plaintiff's damages, which were resolved through a separate evidentiary hearing and specific findings.(Appendix, pages 113-15, 118-30, 132).The Utah Court also made other specific findings, which are set forth in its Orders and incorporated into the Final Judgment (Appendix, page 132).

8.Sevea International, Inc.("Sevea") is a Nevada corporation that was formed on or about February 10, 2006.Sevea made custom-fitting, reusable, mass-produced thermoplastic finger nails under the trademark, "Simply Perfect" Nails by Sevea and sold "Flowering Scents" personalized face and body treatments.Sevea used certain inventions, discoveries, and specialized equipment to manufacture the artificial nails.Michael Macris and the Debtors were co-owners of Sevea international, Inc.("Sevea").Macris owned 6,000,000 shares, as did the Debtors.Macris was the Secretary and Treasurer.The Debtors were both Directors of Sevea, and Debtor, Jerry Saxtonwas the Chief Executive Officer.Katie Saxton was the Director of Marketing.(Appendix, pages 58, 46-48, 79-80, 132).

9.Sevea's products were sold through the development of a multi-level marketing plan utilizing distributors (the "Distributors"), who not only sold Sevea's products to the public, but also recruited and developed other Distributors who sold under them.On or about June 12, 2006, Sevea and Macris Enterprises, LLC entered into a Master Distributor Agreement, which was subsequently modified by a First Addendum to Master Distributor Agreement, dated September 12, 2006(collectively, the "Distributor Agreement").Macris Enterprises actively recruited Distributors, and by December 2006, there were more than 200 Distributors who had executed Distributor Agreements with Sevea.(Appendix, pages 5-8, 51-53, 80, 132)

10 Sevea was a start-up venture Gross revenue for October 2006 was $ 15,000.Gross revenue for November 2006 was approximately $45,000.Gross revenue for the first twenty (20) days of December 2006 was $30,000.(Appendix, pages 8, 53, 80, 132).

11.Debtor, Jerry Saxton, as a Director and Chief Executive Officer, and Katie Saxton, as a Director and employed as the Director of Marketing, had a fiduciary relationship to Sevea and owed the company duties of good faith, loyalty, and care.They were required to exercise their corporate powers solely for the benefit of Sevea and its shareholders.(Appendix, pages 8, 59, 114, 132).

12.The Debtors breached those duties.On or about December 29, 2006, the Debtors unilaterally, and without vote of the Board of Directors or a Board meeting declared that the "[h]ouse of Sevea is closed."(Appendix, pages 9, 54, 80, 132).Between January 9, 2007 and January 16, 2007, the Debtors terminated all employees of Sevea and shut down all business operations.(Appendix, pages 9, 52-54, 79-80, 132).The Debtors removed Sevea's inventory, equipment, sales materials, accounting books and records, distributor files and customer files from its former principal place of business at 2550 South Decker Lake Boulevard, West Valley City, Utah and began running the same business under a new corporation, in a new location, an office and manufacturing facility located at 2826 South Redwood Road, West Valley City, Utah.(Appendix, pages 9-10, 54-55, 7980, 132).The Debtors continued to call "their" product "Simply Perfect" Nails.Debtors had help in misappropriating the assets of Sevea.The Debtors conspired with certain individuals, in particular Craig Gifford, Meridee Anderson, and Michael Connor, to continue the business of Sevea elsewhere in their new corporation.(Appendix, pages 8-12, 54-55, 80, 132).

13.On May 4, 2007, the Utah Court issued the Preliminary Injunction, ordering the Debtors to return the assets of Sevea, which they did not do.(Appendix, pages 60-64).After a full evidentiary hearing, the Utah Court found that the Debtors willfully defied the Preliminary Injunction.Instead of returning Sevea's assets, and ceasing to use them for those own benefit, the Debtors removed Sevea's assets from Utah and moved them to a new location in Southlake, Texas, where they continued to do business under the name "Sevea International Productions, LLC" and continued to call their product "Simply Perfect" Nails by Sevea.(Appendix, pages 12, 80-86, 10709, 132).The Debtors continued to disobey the Utah Court's injunctions regarding the use of Sevea's property and the prohibition on developing and delivering artificial nails.(Appendix, pages 80-86, 96-98, 107-115, 132).

14.The Debtors' actions destroyed Sevea's business, to the detriment of the corporation and its shareholders, including Macris.(Appendix, pages 106-07)That destruction was intentional.Id.Macris suffered damages as a consequence of that destruction.(Appendix, pages 13-16, 106-07, 132).

15.The...