Phillips 66 Co. v. Miltenberger (In re Hudson-Miltenberger), Case No. 14–45118–659

583 B.R. 485

IN RE: Jason McFall HUDSON–MILTENBERGER, Debtor.

Phillips 66 Company, Plaintiff,

v.Jason Miltenberger, Defendant.

Case No. 14–45118–659

Adversary No. 14–4262–659

United States Bankruptcy Court, E.D. Missouri, Eastern Division.

Signed January 26, 2018

Filed January 29, 2018

Darin Lee Brooks, John Gregory George, Jr., Gray Reed & McGraw, P.C., Houston, TX, Mark A. Ludolph, Heyl, Royster, Voelker & Allen, Peoria, IL, for Plaintiff.

Leonard Komen, Chesterfield, MO, for Defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

KATHY A. SURRATT–STATES, Chief United States Bankruptcy Judge

The matter before the Court is Plaintiff's Second Amended Complaint, Answer to Second Amended Complaint of Plaintiff Phillips 66 Company, Defendant's Trial Brief, Phillips 66 Company's Trial Brief, Joint Statement of Stipulated Facts, and Phillips 66 Company's Post–Trial Brief on Assignment of Guaranty. A trial was held on October 18, 2016, at which Plaintiff appeared by counsel and Debtor appeared in person and by counsel. The parties presented oral argument and witnesses provided testimony. The matter was taken under submission. Upon consideration of the record as a whole, the Court issues the following FINDINGS OF FACT :

The parties in this case have stipulated to the following uncontested facts. Steven A. Miltenberger (hereinafter "Steven") was the President and Corporate Secretary of Jump Oil., Inc. (hereinafter "Jump Oil"), a marketer of gasoline and petroleum-based distillate products from its inception in 2003 through December 31, 2013. Joint Statement of Stipulated Facts, ¶ 1. Prior to a name change to Jump Oil in 2003, Jump Oil was known as Northstar Dynamics. Joint Statement of Stipulated Facts, ¶ 2. In or about 2004, ConocoPhillips Company (hereinafter "ConocoPhillips") and Miltenberger Oil Co. Inc. (hereinafter "Miltenberger Oil") executed a Branded Marketer Agreement (hereinafter "2004 BMA"). Joint Statement of Stipulated Facts, ¶ 3. Steven signed the 2004 BMA on behalf of Miltenberger Oil as its President. Joint Statement of Stipulated Facts, ¶ 4. In July 2004, the 2004 BMA was assigned to Jump Oil., Inc. (hereinafter "Jump Oil"). Joint Statement of Stipulated Facts, ¶ 5. Steven signed the 2004 Assignment on behalf of Jump Oil. Joint Statement of Stipulated Facts, ¶ 6. Jump Oil executed Brand Marketer Agreements in 2007 and 2010 (hereinafter "2007 BMA" and "2010 BMA", respectively). Joint Statement of Stipulated Facts, ¶ 7. Steven signed the 2007 and 2010 BMAs on behalf of Jump Oil. Joint Statement of Stipulated Facts, ¶ 8. In 2009, Jump Oil executed a Brand Incentive Program Agreement (hereinafter "BIP") with ConocoPhillips. Joint Statement of Stipulated Facts, ¶ 9. Under the BIP, among other things, ConocoPhillips provided monetary incentive payments to Jump Oil. Joint Statement of Stipulated Facts, ¶ 10. Under the BIP, among other things, Jump Oil agreed to remain current on ConocoPhillips brand and image standards and to purchase a minimum volume of gasoline and distillates from ConocoPhillips. Joint Statement of Stipulated Facts, ¶ 11. The BIP provided that in the event the 2010 BMA is terminated, Jump Oil would be responsible for repaying a certain percentage of the incentive payments based on the number of years Jump Oil has been enrolled in the program. Joint Statement of Stipulated Facts, ¶ 12. The BIP also provided that Jump Oil would be responsible for repaying certain incentive payments in the event it failed to purchase the required minimum amount of gasoline and distillates from ConocoPhillips. Joint Statement of Stipulated Facts, ¶ 13.

In 2004, the owners of Jump Oil were Debtor, Jason M. Miltenberger (hereinafter "Debtor"), Steven, David A. Miltenberger (hereinafter "David"), Melissa Moore Miltenberger (hereinafter "Melissa"), and Sondra Miltenberger (hereinafter "Sondra"). Joint Statement of Stipulated Facts, ¶ 14. In 2004, Steven, Sondra and David executed a guaranty agreement that guaranteed Jump Oil's then existing and future indebtedness to ConocoPhillips, successor in interest to Phillips 66. Joint Statement of Stipulated Facts, ¶ 15. In 2004, Debtor executed a guaranty agreement (hereinafter "Guaranty") that guaranteed Jump Oil's then existing and future indebtedness to ConocoPhillips, successor in interest to Phillips 66. Joint Statement of Stipulated Facts, ¶ 16. The Guaranty signed by Debtor, and purportedly signed by Melissa, was notarized by Steven's secretary, Becky Bledsoe (hereinafter "Becky"), on March 24, 2004. Joint Statement of Stipulated Facts, ¶ 17. Subsequent information verified that Melissa did not sign the Guaranty with Debtor. The signature that appears on the Guaranty is not Melissa's signature. Joint Statement of Stipulated Facts, ¶ 18.

Debtor's Guaranty, as well as the other guaranties, contain language indicating that they were continuing guaranties applicable to Jump Oil's future agreements, leases and other obligations unless and until the guarantor or his or her legal representative gave notice in writing not to enter into further agreements, leases, or other obligations, nor to extend credit on the security of the guaranty. Joint Statement of Stipulated Facts, ¶ 19. Neither Debtor nor his legal representative gave notice in writing to ConocoPhillips under Debtor's Guaranty not to enter into further agreements, leases or other obligations, nor to extend further credit on the security of the Guaranty. Joint Statement of Stipulated Facts, ¶ 20.

The terms of the Guaranty, as well as the other guaranties, state: "[Guarantor] hereby guarantees unconditionally the full and prompt payment of all present and future indebtedness of Jump Oil ... to ConocoPhillips Company ...." Joint Statement of Stipulated Facts, ¶ 21. The terms of the Guaranty, as well as the other guaranties, state: "Guarantor's obligation under this guaranty is a guaranty of payment and not of collection. Should any present or future indebtedness incurred by [Jump Oil] not be paid when due, ConocoPhillips may proceed against guarantor for such indebtedness at any time ...." Joint Statement of Stipulated Facts, ¶ 22. The terms of the Guaranty, as well as the other guaranties state: "THIS IS TO BE A CONTINUING GUARANTY, and any such extension or acceptance of any sum or sums on account, or of any note or draft of [Jump Oil] ...or security [ ] from [Jump Oil] shall not effect this Guaranty." Joint Statement of Stipulated Facts, ¶ 23. The terms of the Guaranty as well as the other guaranties, state: "This Guaranty shall continue until Guarantor ... shall have given written notice ... to ConocoPhillips ... to make no further advances on the security hereof." Joint Statement of Stipulated Facts, ¶ 24. The Guaranty, as well as the other guaranties, contain language indicating that they apply to "CONOCOPHILLIPS COMPANY, ITS SUCCESSORS AND ASSIGNS, AND ANY OF ITS SUBSIDIARIES OR AFFILIATES." Joint Statement of Stipulated Facts, ¶ 25. The Guaranty, as well as the other guaranties, contain language indicating that they "shall inure to and be binding on the parties, their representatives, successors and assigns." Joint Statement of Stipulated Facts, ¶ 26. The Guaranty, as well as the other guaranties, provide they are to be interpreted under Texas law. Joint Statement of Stipulated Facts, ¶ 27.

Under the 2004, 2007, and 2010 BMAs, ConocoPhillips agreed, among other things, to allow Jump Oil to use licensed ConocoPhillips brands and to supply Jump Oil with marketing materials and motor fuels. Joint Statement of Stipulated Facts, ¶ 28. Under the 2004, 2007, 2010 BMAs, Jump Oil agreed, among other things, to purchase a minimum amount of motor fuels, to participate in ConocoPhillips marketing programs and to follow ConocoPhillips guidelines regarding image standards, product identification, price and payment terms, credit cards, and network access. Joint Statement of Stipulated Facts, ¶ 29.

Jump Oil failed to pay all amounts due under the 2010 BMA and the BIP, breaching those agreements. Joint Statement of Stipulated Facts, ¶ 30. On or about December 15, 2011, ConocoPhillips sent a written demand to Jump Oil which demanded that Jump Oil pay all amounts due, which at that time totaled $5,887,130.99, exclusive of any applicable interest and attorney's fees under the 2010 BMA and the BIP. Joint Statement of Stipulated Facts, ¶ 31. Jump Oil continues to be in default under the 2010 BMA and the BIP, and filed Chapter 11 bankruptcy on February 13, 2013. Joint Statement of Stipulated Facts, ¶ 32. On or about December 15, 2011, ConocoPhillips sent a written demand to Debtor requesting that he pay all amounts Jump Oil owed to ConocoPhillips. Joint Statement of Stipulated Facts, ¶ 33. To date Debtor has not paid any amounts that Jump Oil owes to Phillips 66 under his Guaranty. Joint Statement of Stipulated Facts, ¶ 34. To date, neither Steven, Sondra, nor David have paid any amounts that Jump Oil owes to Phillips 66 under their respective guaranty agreements. Joint Statement of Stipulated Facts, ¶ 35.

Debtor filed his Voluntary Petition for relief under Chapter 7 of the Bankruptcy Code on June 25, 2014. Joint Statement of Stipulated Facts, ¶ 36. On September 19, 2014, Phillips 66 Company filed this Adversary Proceeding objecting to dischargeability under section 523(a)(2)(A) of the Bankruptcy Code. Plaintiff argues that the debt owed by Debtor should be excepted from discharge because the debt was obtained fraudulently. Debtor denies Plaintiff's allegations and argues that the debt should be dischargeable.

Plaintiff contends that Debtor knew, at Steven's direction that Becky would notarize documents without the signatory being present. Plaintiff argues that with the forged signature on the Guaranty, Debtor remained silent and knowingly presented or participated in the decision to present the Guaranty to Plaintiff. Plaintiff argues that Debtor demonstrated a reckless disregard for the truth or falsity of the representation made by forging...