Scott Soisson v. Hillebrandt
| Decision Date | 15 June 2011 |
| Docket Number | ADV. PROC. NO. 10-00068-NPO,CASE NO. 10-01437-NPO |
| Parties | In re: MICHELLE D. HILLEBRANDT, DEBTOR. SCOTT SOISSON PLAINTIFF v. MICHELLE D. HILLEBRANDT DEFENDANT |
| Court | U.S. Bankruptcy Court — Southern District of Mississippi |
TO DISCHARGEABILITY OF DEBT (11 U.S.C. § 523(a)(4) AND/OR (a)(6));
This matter came before the Court for trial on May 10, 2011, (the "Adversary Trial") on the Amended Complaint Objecting to Dischargeability of Debt (11 U.S.C. § 523(a)(4) and/or (a)(6)) (the "Amended Complaint") (Adv. Dkt. No. 3) filed by Scott Soisson ("Soisson") and the Debtor's Answer to Complaint Objecting to Dischargeability of Debt (the "Answer") (Adv. Dkt. No. 12) filed by Michelle D. Hillebrandt ("M. Hillebrandt") in the above-referenced adversary proceeding (the "Adversary"). At the Adversary Trial, Kenneth S. Womack represented Soisson, and L. Jackson Lazarus represented M. Hillebrandt.
Also before the Court were Debtor's Motion to Strike Complaint Objecting to Dischargeability of Debt (the "Motion to Strike") (Adv. Dkt. No. 14) filed by M. Hillebrandt and the Response in Opposition to Debtor's Motion to Strike Complaint (Adv. Dkt. No. 19) filed by Soisson. The Court also considered a number of evidentiary motions filed by M. Hillebrandt, including: (1) Debtor's Motion to Exclude Foreign Transcript (Adv. Dkt. No. 36); (2) Debtor's Motion to Exclude Documents Provided April 26, 2011 (Adv. Dkt. No. 37); and (3) Debtor's Motion under U.S. Bankruptcy Rule 7037(c)(1) to Exclude All Late Filed Discovery FR Civ P 26; Rule 7026 (Adv. Dkt. No. 47) (collectively, the "Motions to Exclude"). In response to the Motions to Exclude, Soisson filed Plaintiff's Response in Opposition to Debtor's Motion to Exclude Foreign Transcript (the "Response to Motion to Exclude Transcript") (Adv. Dkt. No. 38) and Plaintiff's Response in Opposition to Debtor's Motions to Exclude (the "Global Response to Motions to Exclude") (Adv. Dkt. No. 49). Also before the Court was Debtor's Motion to Exclude All Testimony of Chris McCall (Adv. Dkt. No. 44) filed by M. Hillebrandt.
After the Adversary Trial, M. Hillebrandt filed Debtor's Motion to Amend Answer (the "Motion to Amend Answer") (Adv. Dkt. No. 52) and the Debtor's Amended Answer to Complaint Objecting to Dischargeability of Debt (the "Amended Answer") (Adv. Dkt. No. 53). Soisson filed Plaintiff's Response in Opposition to Defendant's Motion for Leave to Amend Answer or, in the Alternative, Cross-Motion to Reopen Discovery Regarding Issues Raised by Amended Answer (the "Response to Motion to Amend Answer") (Adv. Dkt. No. 54). The Court will address the Motion to Amend Answer and the Response to Motion to Amend Answer in this opinion.
The Court, having heard the testimony of Soisson, M. Hillebrandt, and Ernest P. Hillebrandt ("E. Hillebrandt") at the Adversary Trial, and having considered the transcript and the exhibits fromthe state court lawsuit, and other exhibits that were admitted into evidence at the Adversary Trial, finds that the debt reflected in the state court judgment entered against M. Hillebrandt and in favor of Soisson in the principal amount of $383,621.751 is not excepted from discharge under either 11 U.S.C. § 523(a)(4) or 11 U.S.C. § 523(a)(6) for the reasons set forth below.2
This Court has jurisdiction over the parties and the subject matter of this Adversary pursuant to 28 U.S.C. § 1334. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I). Notice of the Adversary Trial was proper under the circumstances (Adv. Dkt. Nos. 34 & 42).
What follows below is an outline of not only those facts that resulted in the entry of a state court judgment against M. Hillebrandt but also other facts regarding the same matter that were presented at the Adversary Trial. The dischargeability vel non of the debt reflected in the state court judgment is the subject of this Adversary.
On July 31, 2006, Soisson filed a lawsuit against M. Hillebrandt and her then husband E. Hillebrandt3 (together, the "Hillebrandts") in Cause No. 27,535 (the "Texas Lawsuit") in theDistrict Court of Jasper County, Texas (the "Texas Court").4 Soisson alleged in Plaintiff's Original Petition (the "Texas Petition") that he and the Hillebrandts jointly owned Check Masters, Inc. ("Check Masters"), a payday loan business, and that he was entitled to 50% of the profits of the business.5 Although he received some profits from the business, Soisson claimed that the Hillebrandts secreted profits from him and converted them to their own personal use and benefit. 6They also secured debt in his name without his knowledge or consent.7 Soisson further maintained that in May, 2006, the Hillebrandts closed Check Masters and absconded with the remaining profits and assets of the business.8
Soisson claimed in the Texas Petition that the Hillebrandts engaged in the following wrongful conduct: (1) they "perpetrate[d] an actual fraud . . . by knowingly providing false financial information to the Plaintiff [Soisson]"; (2) they "secret[ed] and embezzl[ed] monies of the purported corporation to their own personal use and benefit"; (3) they "divest[ed] Check Master, Inc. [sic] of its assets to the detriment and exclusion of this Plaintiff [Soisson]"; (4) they "breached their fiduciary duty to Scott Soisson and Check Master, Inc. [sic] by converting and secreting corporate revenues for cash and payment of personal debts and obligations of said Defendants [the Hillebrandts]"; (5) they "have actively engaged in fraud and misrepresentation regarding the purported corporate nature of said business entity"; and (6) they breached an oral contract with Soisson "on or about May of 2006when Defendants [the Hillebrandts] unilaterally and arbitrarily ceased operations of Check Master, Inc., [sic] and have failed to pay and/or account to this Plaintiff [Soisson] for the corporate revenues . . . and his 50% of the profits."9
After the Hillebrandts became aware of the Texas Lawsuit, E. Hillebrandt hired an attorney to represent them. Their attorney filed an answer on their behalf but, according to the Hillebrandts, did little else to defend them. The Hillebrandts claim that the trial in Texas took place on October 31, 2007, without their knowledge and in the absence of the attorney that E. Hillebrandt had retained to represent them (the "Texas Trial").
To establish his claims of liability against the Hillebrandts at the Texas Trial, Soisson relied on his own testimony and the testimony of two former employees of Check Masters:10 Christopher McCall ("McCall") and Erica Simmons ("Simmons").
McCall testified that he worked as the general manager for Check Masters in Texas for six years from 1999 until 2006, when Check Masters ceased doing business there.11 McCall explained that Check Masters was in the business of making payday advance loans, which he described as small loans ranging in amount from $25.00 to $300.00, with maturity dates of no more than two weeks that usually encompassed the customer's next payday. Check Masters charged a fee for this check-cashingservice, the amount of which was based on the amount the customer borrowed. For example, a customer who received $300.00 in cash, repaid Check Masters $365.88, the difference of $65.88 being Check Masters's service fee. Because of the nature of the business, Check Masters generated hundreds of thousands of dollars.
In June 2002, E. Hillebrandt informed McCall that M. Hillebrandt had taken corporate funds from Check Masters and told McCall to notify him if McCall suspected her of stealing money in the future.12 Much later, in June 2004, McCall began receiving telephone calls from vendors complaining about overdue bills and soon discovered why they were not being paid: money was missing from Check Masters's bank account.13 Although McCall informed E. Hillebrandt, "[n]othing was done about it."14 Then, in June 2005, Soisson, who McCall identified as an "investor" in the company, asked McCall to investigate why a business check made payable to a day-care center had been returned for insufficient funds.15 McCall reported to Soisson that the Hillebrandts were using corporate funds to pay their personal debts, including payments on their car loan and credit card charges.16
Simmons testified that she worked in Check Masters's office in North Lufkin, Texas, from 2003 until 2006. At M. Hillebrandt's request, Simmons wrote several business checks made payableto "Cash."17 M. Hillebrandt herself also wrote checks drawn on Check Masters's bank account, including checks for payment of the Hillebrandts's American Express account.18 Simmons was aware of these checks because her job required her to reconcile Check Masters's bank statement at the end of each month.19
Soisson testified that he and E. Hillebrandt each invested $20,000.00 in return for 50% ownership of Check Masters.20 Although Soisson had received several cash disbursements from Check Masters, the Hillebrandts had spent $322,353.00, for which he had not received equal cash disbursements.21 Soisson arrived at $322,353.00 based on his review of certain bank records of Check Masters and the Hillebrandts. For example, there were several checks made payable to E. Hillebrandt's sister, who had worked for the Hillebrandts as their babysitter.22 He included the amounts of these checks in his calculation. Similarly, in March 2006, two checks made...
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