Sawyer v. Thompson (In re Thompson)
| Decision Date | 28 April 2020 |
| Docket Number | CASE NO. 18-69638-PMB,ADVERSARY PROCEEDING NO. 19-5119 |
| Parties | In re: DAVID ROGER THOMPSON, Debtor. BRIAN SAWYER, Plaintiff, v. DAVID ROGER THOMPSON, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
IT IS ORDERED as set forth below:
The above-styled Adversary Proceeding (the "Adversary Proceeding") was commenced on February 14, 2019 through the filing of a Complaint Objecting to Dischargeability of Indebtedness (11 U.S.C. § 523)(the "Complaint")(Docket No. 1), in which Brian Sawyer, Charles O'Kelley, and Martin Marshall are named as Plaintiffs (collectively, the "Original Plaintiffs"), against the Chapter 7 Debtor-Defendant, David Roger Thompson (the "Debtor"). In the Complaint, the Original Plaintiffs sought a determination of dischargeability of debt against the Debtor under 11 U.S.C. § 523(a)(4) and § 523(a)(11). In response, the Debtor filed the Defendant's Motion to Dismiss (Docket No. 5) and Brief in Support (Docket No. 6). Through the Order Granting Defendant's Motion for Partial Dismissal entered on August 1, 2019 (Docket No. 8), the Court dismissed the cause of action asserted under 11 U.S.C. § 523(a)(11) in its entirety and dismissed O'Kelley and Marshall as plaintiffs.
Currently before the Court is Defendant's Motion for Summary Judgment (Docket No. 19)(the "Motion"), filed by the Debtor along with Defendant's Statement of Material Facts as to Which There Is No Genuine Dispute (Docket No. 20)(the "Statement of Facts"), Brief in Support of Defendant's Motion for Summary Judgment (Docket No. 21)(the "Debtor's Brief"), and Unsworn Declaration of David Roger Thompson (Docket No. 18)(the 'Declaration") on January 29, 2020. In the Motion, the Debtor argues that he is entitled to summary judgment on the nondischargeability claim asserted by the Plaintiff under 11 U.S.C. § 523(a)(4) because there is no genuine issue of material fact relating to the presence of a trust relationship as required to support a finding of nondischargeability under Section 523(a)(4) for defalcation while acting in a fiduciary capacity. The Motion was served on the remaining Plaintiff Brian Sawyer (the "Plaintiff")(see Certificate of Service, Docket No. 22). No response to the Motion or the Statement of Facts has been filed to date by the Plaintiff. Pursuant to BLR 7007-1(c) and BLR 7056-1(a), respectively, the Motion is thus considered to be unopposed and the Statement of Facts admitted.
The following material facts of this case are undisputed. The Original Plaintiffs and the Debtor are former business associates. The Plaintiff was an owner of David Magazine, Inc. David Magazine was an asset of David Magazine Inc. and was managed by the Debtor. Statement of Facts, ¶¶ 1-3. After the business failed and the parties' relationship deteriorated, the Original Plaintiffs along with ASHC, LLC (the "Superior Court Plaintiffs") commenced litigation against the Debtor and other entities in the Superior Court of Fulton County, Georgia, which included an allegation of breach of fiduciary duty (Brian Sawyer, et al. v. DRT Media Group, Inc., et al., Civil Action No. 2014CV246720)(the "Superior Court Action"). Statement of Facts, ¶ 6. Prior to the filing of the Debtor's bankruptcy petition on November 21, 2018, the Superior Court Plaintiffs and the Debtor, among others, entered into a Final Order Consent Judgment in the Superior Court Action on April 23, 2018 (the "Consent Judgment"). Statement of Facts, ¶¶ 7-8.1
The Consent Judgment, a copy of which is attached to the Complaint,2 provides in part (on page 3), as follows:
Plaintiffs are entitled to judgment...for breach of fiduciary duty against [the Debtor]. [The Debtor] admits that, while managing the asset David Magazine, he misappropriated funds for his own benefit, rather than the benefit of [the Superior Court] Plaintiffs as the actual owners. As a result of [the Debtor's] defalcation,[the Superior Court] Plaintiffs are entitled to judgment against him, individually, in the amount of $150,000.
Consent Judgment, page 3. The Debtor asserts in the Declaration that although he "managed David Magazine for David Magazine, Inc., [he] never entered into any express trust agreement with David Magazine, Inc., or any of its owners."
Summary judgment may be granted pursuant to Fed.R.Civ.P. 56, which is made applicable herein by Fed.R.Bankr.P. 7056, "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). In deciding a motion for summary judgment, the court "is not . . . to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).
The initial burden of proving the absence of dispute as to any material fact rests with the moving party. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). In meeting this initial burden, the moving party must identify "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986)(internal quotations omitted).4 Once theparty moving for summary judgment has identified those materials demonstrating the absence of a genuine issue of material fact, the non-moving party cannot rest on mere denials or conclusory allegations, but must go beyond the pleadings and designate, through proper evidence such as by affidavits or personal knowledge or otherwise, specific facts showing the existence of a genuine issue for trial. See Fed.R.Civ.P. 56(c) & (e); see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Johnson v. Fleet Finance Inc., 4 F.3d 946, 948-49 (11th Cir. 1993); Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115-16 (11th Cir. 1993). Further, all reasonable doubts should be resolved in favor of the non-moving party, and "[i]f reasonable minds could differ on any inferences arising from undisputed facts, summary judgment should be denied." Twiss v. Kury, 25 F.3d 1551, 1555 (11th Cir. 1994)(citing Mercantile Bank & Trust v. Fidelity & Dep. Co., 750 F.2d 838, 841 (11th Cir. 1985)).
In the Complaint, the Plaintiff asserts that the $150,000 claim under the Consent Judgment is nondischargeable under 11 U.S.C. § 523.5 The Plaintiff relies on the Consent Judgment toestablish these allegations. Section 523(a)(4) excepts from discharge any obligation "for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny...."6 Analysis of a fiduciary relationship under Section 523(a)(4) requires an inquiry into the following: (1) whether the debtor held a fiduciary position in relation to the plaintiff under a technical, express, or statutory trust; (2) whether the trust existed at the time of the alleged wrongdoing; and (3) whether there was fraud or defalcation. White v. White (In re White), 550 B.R. 615, 621-22 (Bankr. N.D. Ga. 2016)(citations omitted). The fiduciary relationship required under the federal standard is narrowly construed and "must arise in connection with a technical trust, as opposed to a constructive or resulting trust, with a definite trust res and identified management duties and obligations, which exist apart from any wrongdoing." Invest Atlanta Regional Center, LLC v. Smith (In re Smith), 578 B.R. 866, 877 (Bankr. N.D. Ga. 2017), citing In re Watford, 374 B.R. 184, 189-91 (Bankr. M.D. N.C. 2007); see also Quaif v. Johnson (In re Quaif), 4 F.3d 950, 953 (11th Cir. 1993). Stated differently, the trust relationship must be in place prior to the act creating the liability at issue as distinguished from a trust arising from the alleged defalcation as a form ofremedy. See Guerra v. Fernandez-Rocha (In re Fernandez-Rocha), 451 F.3d 813, 816 (11th Cir. 2006).7
As the Debtor argues, under the above-stated test, the Plaintiff cannot establish the existence of a fiduciary relationship arising out of a technical trust as required by federal law. The undisputed facts show that the relationship between the Debtor and the Plaintiff is properly characterized as an ordinary business relationship whereby the Debtor was hired to manage the affairs of David Magazine, which was an asset of a company of which the Plaintiff was an owner. Under Georgia law:
[a] corporate officer or director owes to the corporation and its stockholders a fiduciary or quasi-fiduciary duty, which requires that they act in utmost good faith. Directors and officers in the management and use of corporate property in which they act as fiduciaries and are trustees are charged with serving the interests of the corporation as well as the stockholders.
Thunderbolt Harbour Phase II Condo. Ass'n, Inc. v. Ryan, 326 Ga. App. 580, 582, 757 S.E.2d 189, 191 (2014)(internal citation and punctuation omitted), quoting Enchanted Valley RV Park Resort, Ltd. v. Weese, 241 Ga.App. 415, 423(5), 526 S.E.2d 124 (1999).
In a bankruptcy action under Section 523(a)(4), however, "[a]lthough a corporate manager certainly owes the owners a duty of care, an ordinary business relationship does not establish the requisite fiduciary capacity to meet the federal test under Section 523(a)(4)." Hot Shot Kids Inc.and Pauley v. Pervis (In re Pervis), 497 B.R. 612, 640 (Bankr. N.D. Ga. 2013). In Pervis, supra, the court observed as follows:
A number of bankruptcy courts in Georgia have considered whether an officer or director of a Georgia corporation or a manager of a Georgia LLC or a partner in...
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