Piedmont Bank v. Wisner (In re Wisner)

608 B.R. 589

IN RE: James Daniel WISNER, Debtor.

The Piedmont Bank, Plaintiff,

v.James Daniel Wisner, Defendant.

CASE NO. 16-59003-BEM

ADVERSARY PROCEEDING NO. 16-5222-BEM

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

Signed October 18, 2019

Aaron M. Kappler, Thompson, O'Brien, Kemp & Nasuti, P.C., Peachtree Corners, GA, for Plaintiff.

G. Frank Nason, IV, Lamberth, Cifelli, Ellis & Nason, P.A., Atlanta, GA, for Defendant.

ORDER

Barbara Ellis-Monro, U.S. Bankruptcy Court Judge This matter comes before the Court on Defendant Daniel Wisner ("Defendant")'s Motion for Summary Judgment (the "Motion"), filed May 6, 2019 and amended on September 23, 2019. [Docs. 31, 43]. Plaintiff, The Piedmont Bank ("Plaintiff"), commenced this proceeding by filing its Complaint to Determine Dischargeability (the "Complaint") [Doc. 1] on September 15, 2016. In the Motion, Defendant seeks summary judgment on each of the three counts of the Complaint. Plaintiff asserts that the debt owed to it should be excepted from discharge in Counts I and II for "actual fraud" under 11 U.S.C. §§ 523(a)(2)(A) and (a)(2)(B) and in Count III under 11 U.S.C. § 523(a)(6).

Plaintiff alleges in the Complaint that Defendant fraudulently transferred $630,000 to an investment vehicle when Plaintiff had an outstanding judgment against him, and participated in the sale of the assets of a business thereby wasting the stock of the business and violating a court order.

This Court has jurisdiction pursuant to 28 U.S.C. § 157(b)(2)(I). For the reasons set forth below, the Motion will be granted in part and denied in part.

I. SUMMARY JUDGMENT STANDARD

Summary judgment is governed by Fed. R. Bankr. P. 7056 and Fed. R. Civ. P. 56, which provides that the "court shall grant summary judgment 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). The substantive law applicable to the case determines which facts are material. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

The moving party has the burden of establishing its entitlement to summary judgment. Clark v. Coats & Clark, Inc. , 929 F.2d 604, 608 (11th Cir. 1991). The moving party must identify the pleadings, discovery materials, or affidavits that show 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). Once this burden is met, the nonmoving party cannot merely rely on allegations or denials in its own pleadings to defeat summary judgment. Anderson , 477 U.S. at 249, 106 S. Ct. at 2510 (citations omitted); see Fed. R. Civ. P. 56(c)(1). Rather, the nonmoving party must present specific facts supported by evidence that demonstrate there is a genuine material dispute. Hairston v. Gainesville Sun Publ'g. Co. , 9 F.3d 913, 918 (11th Cir. 1993). When the material facts are not in dispute, the role of the Court is to determine whether the law supports a judgment in favor of the moving party. Anderson , 477 U.S. at 250, 106 S. Ct. at 2511.

In deciding a motion for summary judgment, the Court views the evidence and reasonable inferences in favor of the nonmoving party. Gray v. Manklow (In re Optical Tech., Inc.) , 246 F.3d 1332, 1334 (11th Cir. 2001). Accordingly, to prevail on the Motion, Defendant must identify the pleadings, discovery materials, or affidavits that show an absence of genuine issues of fact material to claims under §§ 523(a)(2) and (a)(6). Conversely, Defendant will not prevail if Plaintiff identifies facts, supported by evidence and reasonable inferences, that demonstrate a dispute as to a material fact.

II. FACTS

Bankruptcy Local Rule ("Local Rule") 7056-1 requires respondents to "attach to the response a separate and concise statement of material facts, numbered separately, as to which the respondent contends a genuine issue exists to be tried" and further provides that "[a]ll material facts contained in the moving party's statement that are not specifically controverted in respondent's statement are deemed admitted." Bankr. L.R. N.D. Ga. 7056-1(a)(2). Defendant filed his Statement of Material Facts That Are Not in Dispute (the "SMF") on May 6, 2019. [Doc. 33]. Plaintiff filed a response to the SMF ("Pl.'s Resp.") that admitted certain facts, denied others, and added additional alleged facts that it asserts are disputed. [Doc. 38]. The following facts are not in dispute if identified by a citation to the SMF and Pl.'s Resp. or to the Complaint and Answer. Additional facts alleged by Plaintiff are also included below and are followed solely by citation to Pl.'s Resp.; the additional facts are not necessarily undisputed.

On or about July 1, 1987, Defendant acquired 540 of the 600 total outstanding shares (90%) of stock in Atlanta Arms & Ammo, Inc. ("AA&A"). [SMF ¶ 1; Pl.'s Resp. ¶ 1]. On or about February 6, 2008, Big 5 Enterprises, LLC ("Big 5") executed and delivered that certain Real Estate Note in the original principal amount of $4,980,000 in favor of Plaintiff, as last modified by the Seventh Modification of Real Estate Note dated January 21, 2011 (as modified, the "Note"). [SMF 33 ¶ 2; Pl.'s Resp. ¶ 2]. Defendant executed an Unconditional Guaranty of Payment and Performance of the Note (the "Guaranty") on January 21, 2011. [SMF ¶ 3; Pl.'s Resp. ¶ 3; Declaration Pursuant to 28 U.S.C. § 1746 of James Daniel Wisner, Ex. 1 (Doc. 32)¹ ].

On March 28, 2012, Defendant, Dr. Jeffrey Curtis, and Charles Scott Seymour formed Caribou Investments, LLC ("Caribou") as an investment vehicle created under the laws of the State of Delaware. [SMF ¶ 4; Pl.'s Resp. ¶ 4]. Caribou is an investment vehicle for the purpose of enabling the members to invest in closely held operating companies and real estate investments. Id.

On June 22, 2012, Plaintiff filed a complaint for breach of contract (the "Superior Court Complaint") styled The Piedmont Bank v. Big 5 Enterprises, LLC, James D. Wisner, William Abbate, and Jeffrey V. Curtis , Case No. 12-1361-5, Superior Court of Walton County, later transferred to Newton County as Case No. 2013-CV-496-5 (the "Superior Court Contract Case"). [SMF ¶ 5; Pl.'s Resp. ¶ 5]. The Superior Court Complaint was filed to enforce the Note and Guaranty. [Complaint ¶ 6; Answer ¶ 6]. The Superior Court Complaint contained no allegation that the Note and Guaranty were procured by (i) fraud, false pretenses, or false representations, or (ii) an intentional misrepresentation respecting Defendant's financial condition on which Plaintiff relied. [SMF ¶ 6; Pl.'s Resp. ¶ 6].

On June 13, 2013, in the Superior Court Contract Case, Plaintiff submitted its "Plaintiff's Statement of Undisputed Facts and Theory of Recovery" (the "Statement"), in conjunction with a motion for summary judgment. [SMF ¶ 8; Pl.'s Resp. ¶ 8; see Def. Dec. Ex. 2]. The Statement contains no allegation that the Note and Guaranty were procured by (i) fraud, false pretenses, or false representations, or (ii) an intentional misrepresentation respecting Defendant's financial condition on which Plaintiff relied. [SMF ¶ 9; Pl.'s Resp. ¶ 9].

On July 1, 2013, the Operating Agreement for Caribou was amended and restated to admit a new member, W. David Everett. [SMF ¶ 7; Pl.'s Resp. ¶ 7]. Caribou remained an investment vehicle for the purpose of enabling the members to invest in closely held operating companies and real estate investments. Id.

On August 22, 2013, the Superior Court entered a "Final Order Granting Plaintiff's Motion for Summary Judgment" (the "Final Order") resolving the Superior Court Contract Case. [SMF ¶ 9; Pl.'s Resp. ¶ 9]. The Final Order contains no finding or determinations that the Note and Guaranty were procured by (i) fraud, false pretenses, or false representations, or (ii) an intentional misrepresentation respecting Defendant's financial condition on which Plaintiff relied. [SMF ¶ 10; Pl.'s Resp. ¶ 10]. Judgment was entered against Defendant and others for the principal amount of $4,793.670.81, plus interest, taxes paid by Plaintiff, late charges, and attorney fees. [Complaint ¶ 7; Answer ¶ 7].

On October 2, 2013, Plaintiff filed an action in the Superior Court of Newton County styled The Piedmont Bank v. James D. Wisner, Atlanta Arms & Ammo, Inc., and Atlanta Arms & Ammo, LLC , Case No. 2013CV1854-5 (the "AA&A Action") for the levy of shares Defendant owned in AA&A. [SMF ¶ 11; Pl.'s Resp. ¶ 11; Complaint ¶ 9; Answer ¶ 9]. In paragraph 9 of the petition in the AA&A Action, Plaintiff states that Defendant "has an ownership in Defendants AA&A, Inc. and AA&A, LLC." [Pl.'s Resp. ¶ 27; Affidavit of Chris Elsevier Ex. 1 (Doc. 37)² ]. On November 12, 2013, the defendants in the AA&A Action filed their answer to the petition. [Pl.'s Resp. ¶ 28; Pl. Dec. Ex. 2]. Plaintiff alleges that, in their answer, the defendants in the AA&A Action unequivocally denied that Defendant had an ownership interest in AA&A, Inc. and AA&A, LLC. [Pl.'s Resp. ¶ 29]. Plaintiff states that, on January 23, 2014, it served discovery on the AA&A Action defendants specifically inquiring about Defendant's ownership interest in AA&A and AA&A, LLC, as well as any other entity. [Pl.'s Resp. ¶ 30; Pl. Dec. Ex. 3].

On February 6, 2014 (the "Effective Date"), AA&A, as Seller, and Defendant, as Shareholder, executed an Equipment Purchase Agreement (the "Sale Agreement") pursuant to which AA&A sold certain equipment itemized on Exhibit "A" of the Sale Agreement ("Acquired Assets") to Hairy and Baxter, LLC ("H&B"), for a stated purchase price of $204,770 (the "Purchase Price"). [SMF ¶ 12; Pl.'s Resp. ¶ 12]. The parties dispute whether H&B was an insider of Defendant and whether the Purchase Price exceeded the appraised value of the Acquired Assets. [SMF ¶ 13-14; Pl.'s Resp. ¶ 13-14].

Section 2(c) of the Sale Agreement provides that the closing will take place on April 1, 2014. The Sales Agreement further provides: ...