Owens v. Dyken

• Docket Number: Civil Action 1:20-00297-KD-B
• Decision Date: 14 June 2023
• Parties: TERRIE S. OWENS, Bankruptcy Trustee, et al., Plaintiffs, v. JASON DYKEN, et al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

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TERRIE S. OWENS, Bankruptcy Trustee, et al., Plaintiffs, v. JASON DYKEN, et al., Defendants.

Civil Action No. 1:20-00297-KD-B

United States District Court, S.D. Alabama, Southern Division

June 14, 2023

ORDER

KRISTI K. DuBOSE UNITED STATES DISTRICT JUDGE

This matter is before the Court on motions to dismiss filed by Defendant Renee Dyken "specially appearing as sole Trustee" of Defendant Sixth Sense Trust to dismiss Plaintiff SEPH's claims against the Trust (Doc. 223 224), SEPH's Response (Doc. 235), and Renee Dyken's Reply (Doc. 244); and all Defendants' Motion to Dismiss Count Seven of the Second Amended Complaint (Doc. 237) Plaintiffs' Response (Doc. 248), Plaintiff's Notice of Issue Regarding Foreign Law (Doc. 234), and Defendants' Reply (Docs. 249, 250).

I. Background

On November 20, 2019, SE Property Holdings, LLC (SEPH) (previously Vision Bank) obtained a $6,169,347.80 judgment in state court against Defendant Jason Dyken (Mobile County Circuit Court Case No. 2009-900085) in a breach of contract action based (in part) on his personal continuing guaranty of approximately $20 million in loans to certain entities which defaulted. Specifically, the contractual litigation focused on four (4) defaulted Vision Bank loans for which Defendant Jason Dyken was a guarantor: 1) a March 24, 2005 loan to Bama Bayou, LLC for $6 million -- Dyken guaranteed $315,000; 2) a June 12, 2006 loan to Bama Bayou, LLC for $5 million -- Dyken guaranteed $280,000; 3) a March 2, 2007 loan to Marine Park, LLC for $5 million -- Dyken guaranteed $280,000; and 4) a September 27, 2007 loan to Bama Bayou, LLC for $5 million -- Dyken guaranteed to pay accrued interest on the other three (3) loans. (State - Third Amended Complaint). Because Vision Bank merged with/into SEPH, SEPH was substituted for Vision Bank as the plaintiff. However, after that litigation commenced, SEPH assigned to First National Bank (FNB), the Marine Park Loan and related guaranties, as well as all claims arising out of the loan and guaranties. In the state case, FNB was then substituted for SEPH on the counts related to the Marine Park loan and that loan's guaranties. (State - Third Amended Complaint).

On June 1, 2020, SEPH initiated this federal litigation against the Defendants alleging that Jason Dyken was a principal in the Bama Bayou real estate project in Orange Beach, Alabama; between 2005-2007, Vision Bank loaned approximately $20 million to Bama Bayou; and Dyken personally guaranteed the loans. (Doc. 1). SEPH alleges the Bama Bayou project had financial difficulties and that fearful of his liability, Jason Dyken and his wife Renee Dyken devised a scheme in 2007 to protect his assets from SEPH, including the creation of the Sixth Sense Trust (in which they are trustees and beneficiaries) to defraud Jason Dyken's creditors (such as SEPH). (Id.) Per SEPH, the Dykens conducted a series of fraudulent transfers to avoid their debt obligations including: 1) a January 1, 2007 transfer of 100% of The Mortgage Doctor to Capital Mass. Limited Partnership (CMLP); 2) the January 3, 2007 creation of the Sixth Sense Trust whose settlors, trustees, and beneficiaries are Jason and Renee; 3) a February 14, 2007 transfer of 98% of the ownership of CMLP to the Trust; 4) a March 22, 2007 transfer of certain assets to the Trust (Bear Creek Drive Gulf Shores, AL residence (Residence) and a home at West Beach Boulevard Gulf Shores, AL (Beach House)); 5) a March 22, 2007 conveyance to The Mortgage Doctor of two (2) parcels of real property in Baldwin County, Alabama; and 6) at "various times" the transfer of money into accounts purporting to be life insurance policies (Cash Transfers). (Id.)

SEPH asserts further, that Jason Dyken submitted two (2) fraudulent financial statements to the bank: 1) a May 10, 2007 financial statement (which showed him as the owner of the residence and beach house when the Trust owned those properties, failed to disclose the Trust, and falsely stated that he owned other assets including an R/V Park and orthodontist building); and 2) April 23, 2008 financial statement (which failed to disclose the Trust). (Id.) Per SEPH, debtor Jason Dyken falsified these financial statements "so ... Vision would continue to fund the existing Marine Park Loan, continue to extend financing to Bama Bayou and Marine Park, and continue to work with Bama Bayou and Marine Park in connection with the Project." (Id. at 8-9).

II. Motion to Dismiss Standard of Review

As summarized in Ashcroft v. Iqbal, 556 U.S. 662, 677-679 (2009):

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” As the Court held in Twombly, 550 U.S. 544 ... the pleading standard Rule 8 announces does not require “detailed factual allegations,” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. Id., at 555 ... (citing Papasan v. Allain, 478 U.S. 265, 286 ... (1986)). A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” 550 U.S., at 555..... Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id., at 557, ....

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id., at 570, ..... A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id., at 556.... plausibility ... is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are “merely consistent with” a defendant's liability, it “stops short of the line between possibility and plausibility of ‘entitlement to relief.' ” Id., at 557 ... (brackets omitted)....

Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id., at 555, ... (Although for the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched as a factual allegation” (internal quotation marks omitted)). Rule 8 marks a notable and generous departure from the hypertechnical, codepleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id., at 556 .... Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. 490 F.3d at 157-158. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not “show[n]”- “that the pleader is entitled to relief.” Fed. Rule Civ. Proc. 8(a)(2).

Additionally, as to facial plausibility:

If there are “enough fact[s] to raise a reasonable expectation that discovery will reveal evidence” to support the claim, there are “plausible” grounds for recovery, and a motion to dismiss should be denied. Twombly, 550 U.S. at 556 .... The claim can proceed “even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Id. (citation and internal quotation marks omitted).

Gulf Coast Mineral, LLC v. Tryall Omega, Inc., 2016 WL 344960, *1 (M.D. Ala. Jan. 27, 2016).

III. Sixth Sense Trust (Sixth Sense or Trust)

As note supra, SEPH alleges that Jason Dyken and his wife Renee Dyken devised a scheme in 2007 to protect his assets from SEPH, including the creation of the Sixth Sense Trust (in which they are trustees and beneficiaries) to defraud SEPH (and other creditors). This Trust is alleged to be an "international wealth management trust" governed by the law of Nevada and/or Belize with Jason and Renee Dyken as its settlors, trustees, and beneficiaries. (Doc. 219; Doc. 234). The Sixth Sense Trust states that it is an irrevocable long-term trust, "domestic" per 26 U.S.C. § 7701(a)(30)(E), with primary supervision of its administration governed by and in accordance with the laws of the State of Nevada, and for "all other purposes" -- including jurisdiction to determine liability of the Trust -- it is to be construed, regulated, and governed by the laws of Belize. (Doc. 234-1 at 2). The alleged scheme includes the claim that the Dykens transferred their 98% ownership of Capital Mass, their residence, and their beach house, to the Sixth Sense Trust. Renee Dyken alleges now that she is the sole Trustee of the Trust.^[1]

In the Second Amended Complaint, the Trustee asserts the following claims against the Sixth Sense Trust:

- Count One: Actual Fraudulent Transfer pursuant to 11 USC § 544(b) and Ala. Code § 8-9A-4(a) demanding judgment against Sixth Sense Trust et al.;

- Count Two: Constructive Fraudulent Transfer pursuant to 11 USC § 544(b) and Ala. Code § 8-9A-4(c), demanding judgment against Sixth Sense Trust et al.;

- Count Three: Constructive Fraudulent Transfer pursuant to 11 USC § 544(b) and Ala. Code § 8-9A-5(a) demanding judgment against Sixth Sense Trust et al.;

- Count Four: Conspiracy to Defraud pursuant to 11 USC § 544(b) and

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