Opinion
Bankruptcy No.: 11-26993 Adversary Proc. No. 11-02569
03-22-2013
In re: RORY DEAN and KELLI DEAN, Debtors. GLEN BLODGETT and KENNY BOND, Plaintiff, v. KELLI DEAN aka KELLI RUNYAN and RORY DEAN, Defendants.
Justin R. Olsen (6014) OLSEN SKOUBYE & NIELSON, LLC Attorneys for Defendants
Justin R. Olsen (6014)
OLSEN SKOUBYE & NIELSON, LLC
Attorneys for Defendants
(Chapter 7)
Judge:
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' RULE 52(C)
MOTION AND PARTIAL JUDGMENT FOR DEFENDANTS
The above-captioned matter came before the Court for a bench trial on March 1, 2013 before the Honorable . Plaintiffs Glen Blodgett ("Blodgett") and Kenny Bond ("Bond") were present and were represented by their counsel Jeremy C. Sink of the law firm of McKay, Burton & Thurman, P.C. Defendants Kelli Dean ("Kelli") and Rory Dean ("Rory") were also present and were represented by their counsel Justin R. Olsen of the law firm of Olsen Skoubye & Nielson, LLC.
Plaintiffs Bond and Blodgett presented their case in chief, which included testimony from plaintiffs Bond and Blodgett, testimony from defendants Kelli Dean and Rory Dean, and admission of various exhibits. At the close of Plaintiffs' evidence, defendants Kelli Dean and Rory Dean, by and through their counsel, moved the Court for a judgment based upon partial findings of fact pursuant to Rule 52(c) of the Federal Rules of Civil Procedure ("FRCP"), which is made applicable to adversary proceedings pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure. After hearing argument from counsel for Plaintiffs and counsel for Defendants on such motion, the Court took the matter under advisement. On March 8, 2013, the Court held a hearing wherein the Court presented its ruling on Defendants' Rule 52(c) motion.
Rule 7052 of the Federal Rules of Bankruptcy Procedure makes Rule 52(c) of the FRCP applicable to Adversary Proceedings such as this one. Rule 52(c) provides that, "If a party has been fully heard on an issue during a nonjury trial and the court finds against that party on that issue, the court may enter judgment against the party on a claim or defense that, under controlling law, can be maintained or defeated only with a favorable finding on that issue. The court may, however, decline to render any judgment until the close of evidence. A judgment on partial findings must be supported by findings of fact and conclusions of law as required by Rule 52(a)."
Based upon the evidence presented at trial and upon facts that were stipulated to be uncontroverted and included in the Final Pretrial Order entered in this Adversary Proceeding on October 11, 2012, the Court read its findings of fact and conclusions of law onto the record at the March 8, 2013 hearing including, but not limited to, the following Findings of Fact and Conclusions of Law:
To the extent, if any, that this Order conflicts with the Court's digital record from the March 8, 2013 hearing, the digital record shall control.
FINDINGS OF FACT:
1. Notice of the trial and determination in this matter has been proper in all respects.
2. Jurisdiction and venue are proper in this Court pursuant to 28 U.S.C. §§ 157(b) and 1334.
3. Pursuant to 28 U.S.C. § 157(b), this Adversary Proceeding is a core proceeding under 11 U.S.C. § 523 pertaining to a determination as to dischargeability of a particular alleged debt and administration of the estate.
4. Venue is appropriate in this District.
5. On May 12, 2011, debtor defendants Rory Dean and Kellie Dean commenced the above-referenced bankruptcy case as a case under Chapter 13 of the United States Bankruptcy Code.
6. On May 23, 2011, plaintiff Glen Blodgett ("Blodgett") filed a proof of claim, designated by the Court as Claim 3-1.
7. On May 23, 2011, plaintiff Bond ("Bond") also filed a proof of claim designated by the Court as Claim 4-1.
8. On May 23, 2011, Bond also filed an additional proof of claim designated by the Court as Claim 5-1. In Proof of Claim 5-1, plaintiff Bond asserted an unsecured, priority claim for wages in the amount of $5,362.00 and attached in support of such Proof of Claim a copy of an Order for Payment entered by the State of Utah Labor Commission. The Labor Commission Order for Payment awards wages of $3,575.00 to Bond, plus an additional $1,787.50 as a statutory penalty if the $3,575.00 was not paid within twenty (20) days of the April 14, 2011 Order for Payment. The Labor Commission Order for Payment orders Rory Dean, Kelli Dean and HCU to pay the amount to Bond.
9. On July 2, 2011, Bond irrevocably assigned his rights in such Labor Commission Order to Blodgett.
10. On October 31, 2011, the Debtors' bankruptcy case was converted from a Chapter 13 case to a case under Chapter 7 of the Bankruptcy Code.
11. On August 9, 2011, plaintiffs Bond and Blodgett commenced this Adversary Proceeding by filing a Complaint for Nondischargeability alleging claims under to 11 U.S.C. 523 alleging that their claims are nondischargeable.
12. An Amended Complaint was filed on July 19, 2012 to clarify that Plaintiffs were seeking recovery under 11 U.S.C. § 523(a)(2)(A). The Amended Complaint stated that Plaintiffs were seeking $51,891.50 of monetary damages of monies "invested" by the Plaintiffs and $29,667.00 of damages for services provided by the Plaintiffs to the Defendants, for a total damages of $81,558.50.
13. Defendants timely filed Debtors' Answer to Amended Complaint on July 25, 2012.
14. At the close of Plaintiffs' case-in-chief at trial, Defendants made a motion pursuant to FRCP 52(c).
15. In November of 2007, Rory Dean was released from the Utah State Prison on parole after serving approximately eleven years on charges of theft by deception.
16. Rory Dean and Kelli Dean were married in February, 2008.
17. Heritage Custom Upholstery & Mfg. LLC ("HCU") is a Utah limited liability company that was organized and formed on January 25, 2008.
18. On August 8, 2011, Kenny Bond, Glen Blodgett and James Dant filed an involuntary chapter 7 bankruptcy petition against HCU--case number 11-31534--filed in the United States Bankruptcy Court for the District of Utah.
19. The Managers of HCU were defendants Kelli R. Dean and Rory S. Dean.
20. Meth Detector, Inc. ("MDI") is a Utah corporation that was formed on May 23, 2008. MDI failed to file a renewal with the State of Utah Division of Corporations and Commercial Code and, therefore, is listed as an expired entity as of August 30, 2011.
21. A few months prior to October of 2008, plaintiff Blodgett was introduced to Rory Dean by Kelli Dean.
22. At this initial meeting Glen Blodgett learned that Rory Dean operated HCU, an upholstering business. Glen Blodgett needed some work done on an automobile and subsequently brought in his Mustang to have carpeting replaced.
23. Still a few months prior to October of 2008, while Glen Blodgett's automobile was at HCU's shop, Blodgett and Rory Dean discussed some devices that Rory Dean was trying to develop for detection of methamphetamine.
24. While at HCU's shop, Mr. Dean showed Blodgett a prototype of one of the methamphetamine detection devices.
25. Blodgett introduced the Deans to his friend Kenny Bond and discussions were held regarding the need for additional capital to further the development of the methamphetamine detection devices.
26. At some point, the parties watched a video about the use of the device. The video contained defendants Rory and Kelli Dean along with Dean & Phillis Henriod and a Logan police officer in a hotel room. The video shows them using the device and the device functioning properly by identifying meth that was brought by the police officer.
27. Kenny Bond transferred $10,000 on October 3, 2008, which was deposited into HCU's checking account at First Utah Bank on October 6, 2008.
28. In exchange for the $10,000, Mr. Bond received a Promissory Note dated October 3, 2008, which states, "I, Kelli Dean promise to pay Kenny Bond for the value of $10,000.00 with the interest amount of $3,000.00 due in one lump sum payment of $13,000.00 on or before January 2, 2009." Plaintiffs' Ex. 2; Defendants' Exhibit I.
29. Having seen the Deans' upholstery business first hand, Bond and Blodgett and the Deans agreed that perhaps the best way to raise capital for further development and marketing of the methamphetamine detection device was to manufacture banana chairs through HCU to sell during the upcoming 2008 Christmas season and through HCU.
30. On or about October 15, 2008, Blodgett signed a Nondisclosure Agreement and a Continuing Confidentiality Agreement with MDI stating in pertinent part, "This nondisclosure agreement ("Agreement") is entered into as of 10/15/2008 by and between Meth Detector Corp (Principal) and Glen Blodgett, (as signed below)(Recipients). Principal and Recipient are engaged in discussions in contemplation of or in furtherance of a business relationship. In order to induce Principal to disclose its confidential information during such discussions, Recipient agrees to accept such information under the restrictions set forth in this Agreement." Plaintiffs, Exhibit 17 at BB-0041-43; Defendants' Exhibit K.
31. On or about January 29, 2009, Bond also signed a Nondisclosure Agreement and a Continuing Confidentiality Agreement with MDI with the same relevant language as is quoted in the immediately preceding paragraph. Defendants' Exhibits K, L and M.
32. Bond and Blodgett each spent time at HCU's shop and, at times, assisted in the production and distribution of the banana chairs.
33. On or about October 17, 2008, Bond allowed $10,000 to be charged against his American Express credit card by HCU. Such charge shows as a credit card deposit to HCU's checking account at First Utah Bank in the amount of $9,710.85 on October 23, 2008.
34. In exchange for this second $10,000 transfer, Mr. Bond and Kelli Dean signed on November 29, 2008 another agreement dated November 18, 2008 providing that Bond would receive 13,000 shares of stock in Meth Detector, Inc. ("MDI") as satisfaction for this $10,000 charge against his American Express card by HCU.
35. On or about December 29, 2008, Blodgett loaned $4,000 to be used for the general purpose of HCU's business. A 1994 Chevrolet Silverado pick-up was pledged as collateral for such loan. Such loan was repaid in full on or about August 31, 2009 and any security interest in the subject vehicle was released and a set of keys and the title were returned to Kelli Dean.
36. On or about October 30, 2009, HCU borrowed another $2,000 from Blodgett. The parties dispute whether: a) Blodgett loaned an additional $2,000 on November 2, 2009; or, b) whether the agreement dated November 2, 2009 is a memorialization and modification of the handwritten October 30, 2009 acknowledgement of the October 30, 2009 loan.
37. On or about December 9, 2008, Bond transferred a 1992 Ford Aerostar to Kelli Dean. The following services were provided to Bond through Rory Dean:
a. Stucco on one outside wall of the house (value disputed -- Bond claims worth $1,300; Defendants claim worth $2,000);
b. Sheet rocked the upstairs (theatre room) (value disputed - Bond claims worth $1,300; Defendants claim worth $1,500);
c. A separate individual sheet rocked a portion of the garage and a room above the garage was done and it was represented to Mr. Bond that the work and materials were worth approximately $500; and,
d. A finisher finalized some sheetrock in preparation for painting (the parties dispute the value; Bond claims value was $300; Defendants claim value was $2,000);
e. Defendants claim additional services and value were provided to Bond.
38. In addition to the transfers stated above, Bond provided permission for the use of a Wells Fargo Visa credit card.
39. Such Wells Fargo Visa Credit Card was charged $7,600.00 by Kelli Dean through HCU's credit card machine on the following dates in the amounts indicated:
November 19, 2008 $1,000.00
December 5, 2008 $1,000.00
December 26, 2008 $4,600.00
January 26, 2009 $1,000.00
40. In addition, charges of $291.50 were placed on the Wells Fargo Visa card by HCU through a November 19, 2008 purchase of materials from Galaxy Foam & Upholstery.
41. Thus, a total of $7,891.50 of charges were placed on the Wells Fargo Visa credit card.
42. Kelli Dean testified that she ran the Wells Fargo Visa card through the merchant account at HCU so that the charges would show as a deposit of funds that were available for HCU.
43. On or about January 27, 2009, Kelli Dean signed a document binding HCU to make the payments on the Wells Fargo Card.
44. In addition to the Wells Fargo Credit card, Bond agreed to allow Kelli Dean and/or HCU to use a Mastercard in Mr. Bond's personal name through Bank of America.
45. On or about January 30, 2009, a written agreement was signed with respect to use of this Bank of America credit card, stating in relevant part, "I, Kenny Bond, have given permission of the use of the above mentioned credit card to Kelli Dean/Heritage Customer Upholstery." Defendants' Exhibit W; Plaintiffs' Exhibit 12.
46. Between February 3, 2009 through March 19, 2009, such Bank of America credit card was charged $13,500.00 through HCU's credit card machine on various dates in the amounts indicated:
February 3, 2009 $5,000.00
February 3, 2009 $1,000.00
February 13, 2009 $3,000.00
February 20, 2009 $3,000.00
March 17, 2009 $1,500.00
47. One of the conditions of defendant Rory Dean's parole was that he not enter into any contract for greater than $2,500 without the consent of his parole officer.
48. On December 21, 2009, defendant Rory Dean was arrested and taken into custody on an alleged violation of his parole conditions for allegedly entering into a contract for an amount greater than $2,500.
49. A challenge to the probable cause for issuance of the warrant for Rory Dean's arrest was filed December 31, 2009.
50. On January 5, 2010, the Board of Pardons recalled the warrant and Rory Dean was released back onto parole.
51. Following Mr. Dean's release on January 5, 2010, the $3,186.80 balance that was owing on a $5,000 loan from Colene Hancock was paid in full on February 5, 2010.
52. A hearing was held February 9, 2010 at the Utah State Prison that was described by Board of Pardons and Parole hearing officer Jennifer Bartell as "an extraordinary event to actually determine probable cause," in which Mr. Dean was not allowed to present rebuttal testimony or cross-examine witnesses.
53. At that hearing, Jennifer Bartell found that there was probable cause for re-issuance of a warrant. Counsel for Rory Dean again challenged the probable cause finding based upon due process not being afforded at the "extraordinary hearing." Such challenge, however, was denied.
54. At such hearing on February 9, 2010, Rory Dean was taken back into custody and incarcerated.
55. Rory Dean remained incarcerated pending a hearing on the alleged parole violation that was delayed and not held until May 24, 2010.
56. Prior to the Parole Violation hearing set for May 24, 2010, Rory Dean entered into a Stipulation, Plea Agreement & Waiver of Evidentiary Hearing with the Utah Dept. of Corrections ("the Plea Agreement"). Defendants' Exhibit EE.
57. The Utah Board of Pardons and Parole reviewed the Plea Agreement and issued on order on June 28, 2010 that Rory Dean's parole would be revoked effective June 28, 2010; but, that he would be released back out on parole shortly thereafter on August 3, 2010.
58. Rory Dean was released on parole August 3, 2010. Thus, between his original arrest for the alleged parole violation on December 21, 2009 and his being released on parole on August 3, 2010 he was incarcerated from December 21, 2009 to January 5, 2010 and again from February 9, 2010 to August 3, 2010.
59. Plaintiffs' claims fall into essentially seven (7) categories, which are:
a. October 3, 2008 loan of $10,000 from Bond (claim $13,000);
b. November 18, 2008 loan of $10,000 from Bond from American Express Charge (claim $13,000);
c. December 2008 loans of $7,000 and transfer of Ford van from Plaintiff Bond and a $1,500 loan from plaintiff Blodgett;
d. Charges to plaintiff Bond's Wells Fargo Visa credit card in the amount of $7,891.50 based on the Agreement dated January 27, 2009;
e. Charges to plaintiff Bond's Bank of America Mastercard credit card in the amount of $13,500 based on the Agreement dated January 30, 2009;
f. Blodgett loan(s) of October 30, 2009/November 2, 2009 of $2,000 or $4,000;
g. Labor and services by Plaintiffs in aggregate value of $29,667.
60. Plaintiffs filed three (3) Proofs of Claim in defendant Deans' Chapter 7 bankruptcy case—Claims nos. 3-1, 4-1 and 5-1.
61. In Proof of Claim 5-1, plaintiff Bond asserted an unsecured, priority claim for wages in the amount of $5,362.00 and attached in support of such Proof of Claim a copy of an Order for Payment entered by the State of Utah Labor Commission.
62. Proofs of Claim 3-1 and 4-1 are each for $80,000.
63. Plaintiffs are seeking recovery of approximately $80,000 in damages in this Adversary Proceeding.
64. Proofs of Claim 3-1 and 4-1 appear to cover the same damages; but, are duplicate and are inconsistent with the damages sought in this Adversary Proceeding based upon the evidence received.
CONCLUSIONS OF LAW:
1. Rule 52(c) provides that, "If a party has been fully heard on an issue during a nonjury trial and the court finds against that party on that issue, the court may enter judgment against the party on a claim or defense that, under controlling law, can be maintained or defeated only with a favorable finding on that issue. The court may, however, decline to render any judgment until the close of the evidence. A judgment on partial findings must be supported by findings of fact and conclusions of law as required by Rule 52(a)."
2. Rule 7052 of the Federal Rules of Bankruptcy Procedure makes Rule 52(c) of the FRCP applicable to Adversary Proceedings such as this one.
3. Judgment on partial findings of fact may be entered against a plaintiff(s) where the plaintiff(s) have not established its/their prima facie case or where the court determines that the plaintiff's case is outweighed by a preponderance of the evidence presented at the time the Rule 52(c) motion is made.
4. "Upon a motion for judgment on partial findings under Rule 52(c), the trial court need not consider the evidence in a light favorable to the party with the burden of proof and may render judgment for the opposing party if the Court believes the evidence presented is insufficient to make out a case." In re Roper, 286 B.R. 693, 701 (Bankr. E.D. Ark. 2002)(citing Geddes v. Northwest Mo. State Univ., 49 F.3d 426, 429 n.7 (8th Cir. 1995)); see also, Roth v. American Hospital Supply Corp., 965 F.2d 862, 865 (10th Cir.1992).
5. When proceeding under 11 U.S.C. §523(a), a plaintiff has the burden to prove each element of a claim for non-discharge of a debt by a preponderance of the evidence. Grogan v Garner, 498 U.S. 279, 111 S.Ct. 654 (1991).
6. To establish that a claim is nondischargeable under 11 U.S.C. §523(a)(2)(A), a creditor must prove five (5) elements, which are:
a. that the debtor made a false representation;In re Riebesell, 586 F.3d 782, 789 (10th Cir. 2009)(citing Fowler Bros. v Young (In re Young), 91 F.3d 1367, 1373 (10th Cir. 1996)).
b. that the debtor made the representation with the intent to deceive the creditor;
c. that the creditor relied on the debtor's false representation;
d. that the creditor's reliance was justifiable; and,
e. that the debtor's false representation caused the creditor to sustain damages.
7. Whether an intent to deceive existed can be determined from a totality of circumstances. In re Riebesell, 586 F.3d at 791 (citing In reYoung, 91 F.3d at 1375.
8. "Justifiable" reliance is satisfied only "if the falsity of the representation relied upon is not patent from 'a cursory examination or investigation.'" In re Daviscourt, 353 B.R. 674, 686 (BAP 10th Cir. 2006)(citing Field v Mans, 516 U.S. 59, 71, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995)).
9. Applicable state law controls as to the determination of whether fraud has occurred, while applicable bankruptcy law controls as to the determination of nondischargeability. In re Lang, 293 B.R. 501, 513 (BAP 10th Cir. 2003)(citing Grogan v. Garner, 498 U.S. at 283-84).
10. "[U]nder the broad congressional grant of jurisdiction given to bankruptcy courts under 28 U.S.C. § 157, bankruptcy courts have the jurisdiction to award money damages in a Section 523(a) proceeding." In re Lang, 293 B.R. at 517.
11. Section 523(a)(2)(A) of the Bankruptcy Code excepts from discharge those debts incurred by the debtor to the extent the debt was incurred under false pretenses, a false representation or actual fraud.
12. The fraud referred to in section 523(a)(2)(A) is common law fraud. Field v. Mans, 516 U.S. at 69, 116 S.Ct. at 443(1995).
13. In Utah, a party attempting to demonstrate fraud must prove each of the following elements:
a. That a representation was made;Armed Forces Ins. Exchange v Harrison, 70 P.3d 35, 40, 2003 UT 14 ¶16. October 3, 2008 Loan from Plaintiff Bond for $10,000
b. That the representation was concerning a presently existing material fact;
c. That the representation was false;
d. That the person making the representation knew it to be false or that the person making the representation made it recklessly, knowing that there was insufficient knowledge upon which to base such a representation;
e. That the representation was made for the purpose of inducing the other party to act upon the representation;
f. That the other party acted reasonably and in ignorance of the falsity of the
representation;
g. That the other party did, in fact, rely upon the representation;
h. That the other party was induced to act upon the representation; and
i. That the other party was injured and damaged.
14. As to the October 3, 2008 loan from plaintiff Bond for $10,000, Plaintiffs presented sufficient evidence on this October 3, 2008 loan to support their case under section 523(a)(2)(A) in order to survive Defendants' Rule 52(c) motion.
a. Plaintiff Bond testified that he gave the first $10,000 transfer with the understanding that the money would be used for production of banana chairs through HCU.
b. Plaintiff Bond further testified that defendant Deans promised a $3,000 return on the initial $10,000 and that that entire amount would eventually be rolled over into MDI for production of the meth detector device.
c. The first $10,000 loan from plaintiff Bond was deposited directly into HCU and was used for the costs of manufacturing, producing and marketing banana chairs, but, Plaintiffs contend that not all of such $10,000 went toward HCU's manufacturing, production or marketing of banana chairs; but, that some of it went toward personal use of the Deans. Plaintiffs refer to Plaintiffs' Exhibit 5.
15. Therefore, as to the October 3, 2008 loan of $10,000 from plaintiff Bond, Defendants' Rule 52(c) motion is denied, since the Plaintiffs have presented a modicum of sufficient evidence to support a claim under Section 523(a)(2)(A).
16. Therefore, as to the October 3, 2008 loan of $10,000 from plaintiff Bond, the Court will hear Defendants' evidence on this claim; and, the Court is particularly interested to hear evidence of: a) false representations; b) intent to deceive; and, c) justifiable reliance. October 17, 2008 Loan from Plaintiff Bond for $10,000 - November 29, 2008 Agreement
17. On or about October 17, 2008, plaintiff Bond allowed $10,000 to be charged against his American Express credit card by HCU.
18. Such charge shows as a credit deposit to HCU's checking account at First Utah Bank in the amount of $9,710.85 on October 23, 2008.
19. In exchange for this second $10,000 transfer, plaintiff Bond and defendant Kelli Dean signed on November 29, 2008 an agreement dated November 18, 2008 providing that plaintiff Bond would receive 13,000 shares of stock in MDI as satisfaction of this $10,000 charge against his American Express card. Plaintiffs' Exhibit 4; Defendants' Exhibit P.
20. Defendants' Exhibit Q is a stock certificate for 13,000 shares of MDI certifying that Kenny Bond "is the registered holder of Thirteen Thousand Shares" in MDI. Such stock certificate is signed by Kelli Dean as CEO and Lee Giles as President. Defendants' Exhibit Q.
21. Defendant Kelli Dean testified that sometime after October 17, 2008 she attempted to give the stock certificate—Defendants' Exhibit Q—to plaintiff Bond; but, plaintiff Bond refused to accept the stock certificate.
22. Plaintiff Bond testified that he refused to accept the stock certificate—Defendants' Exhibit Q.
23. The Court finds the testimony of Kelli Dean to be more credible on this particular point.
24. Therefore, as to this second transfer of $10,000—the charge of $10,000 against plaintiff Bond's American Express credit card, plaintiff Bond has failed to prove a critical element to his claim—damages or injury related to or with causal connection to the alleged fraud.
25. The agreement dated November 18, 2008 provided that plaintiff Bond would receive 13,000 shares in MDI as satisfaction for this $10,000 charge against his American Express credit card by HCU.
26. The stock certificate for 13,000 was prepared and Kelli Dean attempted to and did, in fact, tender the stock certificate to plaintiff Bond; however, plaintiff Bond rejected such tender.
27. Therefore, as to this claim, the Court finds and concludes that Plaintiffs have failed to establish a prima facie case under 11 U.S.C. §523(a)(2)(A) and Defendants' Rule 52(c) motion is granted as to this claim.
28. Therefore, plaintiff Bond's claim relating to this second $10,000 transfer occurring on October 17, 2008 is dismissed with prejudice. December 2008 Loan by Bond of $7,000; Transfer of Ford Van; and, Blodgett Loan of $1,500
29. Plaintiff Bond is not seeking recovery of the $7,000 transfer and has withdrawn such claim. Therefore, the Court will not analyze such claim and it is dismissed with prejudice.
30. Although included in the undisputed facts in the Final Pretrial Order, no evidence was presented at trial regarding the transfer of a Ford Aerostar van from plaintiff Bond to defendant Kelli Dean and it is unclear whether plaintiff Bond is seeking recovery for the Ford Aerostar van at this point.
31. Since there was no testimony or argument regarding transfer of such van and since the burden is on a plaintiff to prove a claim by a preponderance of evidence, which is lacking, it is difficult, if not impossible, to rule in favor of Plaintiffs on this claim.
32. Therefore, Defendants' Rule 52(c) motion is granted with respect to the Ford Aerostar van because Plaintiffs have failed to present sufficient evidence to support an 11 U.S.C. § 523(a)(2)(A) claim on this possible claim and such claim is dismissed with prejudice.
33. Plaintiff Blodgett testified that defendant Rory Dean asked Blodgett to transfer $1,500 to HCU in December 2008.
34. Plaintiff Blodgett testified that defendant Rory Dean represented that the $1,500 was needed for MDI.
35. Plaintiffs presented insufficient evidence with respect to such $1,500 claim to establish a claim under 11 U.S.C. § 523(a)(2)(A) as the Plaintiffs failed to establish through the evidence that there was a false representation by the Defendants, with the intent to deceive, and that any reliance by plaintiff Blodgett on this claim was justifiable on this potential claim.
36. Accordingly, Defendants' Rule 52(c) motion with respect to this $1,500 claim is granted and such claim is dismissed with prejudice. Plaintiff Bond's Wells Fargo Credit Card Agreement dated January 27, 2009
37. Defendant Kelli Dean testified that plaintiff Bond gave her access to plaintiff Bond's Wells Fargo Visa credit card to help HCU develop capital for MDI.
38. The January 27, 2009 agreement relating to plaintiff Bond's Wells Fargo Visa credit card reads, in part, "I Kenny Bond have given permission of the use of the above mentioned credit card to Heritage Custom Upholstery."
39. Defendant Kelli Dean testified that she ran the Wells Fargo Visa credit card through the merchant account at HCU.
40. Any money that went into the HCU account from plaintiff Bond's Wells Fargo Visa credit card did not go directly to the MDI account.
41. Any money that was in HCU was used for the purposes of building banana chairs and helping HCU's business grow.
42. Accordingly, Defendants' Rule 52(c) motion with respect to plaintiff Bond's Wells Fargo Visa account is denied as the Court finds that Plaintiffs have presented a modicum of sufficient evidence to support a claim under 11 U.S.C. § 523(a)(2)(A).
43. The Court anticipates that it will hear evidence from Defendants on this claim; and, the Court is particularly interested to hear additional evidence of: a) false representations; b) intent to deceive by the Defendants; and, c) justifiable reliance by plaintiff Bond. Plaintiff Bond's Bank of America Credit Card Agreement dated January 30, 2009
44. Defendants Kelli Dean and Rory Dean testified that charges on plaintiff Bond's Bank of America credit card were deposited directly into HCU and were used for the cost to produce and market banana chairs and otherwise fund the operations of HCU.
45. Plaintiff Bond testified that he allowed Defendants to have access to the credit card because Defendants told him that defendant Rory Dean needed money for traveling, licensing and other items related to MDI and the meth detector device.
46. Plaintiff Bond further testified that he did not agree to allow the money drawn on the credit card to be used on the production of banana chairs by HCU.
47. Accordingly, Defendants' Rule 52(c) motion with respect to plaintiff Bond's Bank of America credit card is denied as the Court finds that Plaintiffs have presented a modicum of sufficient evidence to support a claim under 11 U.S.C. § 523(a)(2)(A).
48. The Court anticipates that it will hear evidence from Defendants on this claim; and, the Court is particularly interested to hear additional evidence of: a) false representations; b) intent to deceive by the Defendants; and, c) justifiable reliance by plaintiff Bond. Plaintiff Blodgett Loan(s) of October 30, 2009/November 2, 2009
49. The parties dispute whether plaintiff Blodgett made one (1) loan to Defendants of $2,000 or two (2) loans to Defendants of $2,000 each—in aggregate $4,000.
50. Plaintiff Blodgett testified that he loaned defendant Kelli Dean $2,000 on October 30, 2009 as evidenced by Plaintiffs' Exhibit 7 because defendant Rory Dean asked for more money to help HCU keep going and in getting materials for banana chairs.
51. Plaintiff Blodgett further testified that he again loaned money to Kelli Dean on November 2, 2009 because defendant Rory Dean had told plaintiff Blodgett that the company needed money again to put toward MDI.
52. Plaintiff Blodgett further testified he was to get the $4,000 paid back or two (2) vehicles in satisfaction of the transfer.
53. The evidence presented by Plaintiffs is insufficient to meet the elements required by 11 U.S.C. § 523(a)(2)(A), whether the loans were either $2,000 or $4,000.
54. Plaintiffs presented insufficient evidence that defendant Rory Dean's representation that he needed more money to produce more banana chairs was false, that defendant Deans made any such representations with intent to deceive plaintiffs Blodgett or Bond, or that any reliance by plaintiffs Bond or Blodgett on any such representations was justifiable.
55. Accordingly, Defendants' Rule 52(c) motion with respect to the alleged loans by plaintiff Blodgett is granted and such claims are dismissed with prejudice. Claims by Plaintiffs for Labor and Services
56. Plaintiffs Bond and Blodgett allege that they provided labor and services to Defendants in the aggregate amount of $29,667.
57. Of such $29,667 amount, the amount of $5,362.50 is encompassed in an Order for Payment awarded to plaintiff Bond by the Utah Labor Commission. Plaintiff Bond irrevocably assigned his rights under such Order for Payment to plaintiff Blodgett prior to trial.
58. The remaining $24,304.50 of Plaintiffs' labor and services claim asserted are for labor and services allegedly provided by plaintiff Blodgett.
59. Defendant Kelli Dean testified that plaintiff Bond provided labor and services to HCU to generate capital for MDI.
60. Defendant Kelli Dean further testified that plaintiff Bond was not an employee of HCU and that plaintiff Bond was to receive stock in MDI in exchange for his labor and services.
61. Defendant Kelli Dean also testified that plaintiff Blodgett provided labor and services to HCU to generate capital for MDI.
62. Defendant Kelli Dean further testified that plaintiff Blodgett would come to HCU to help with items such as electrical repair and deliveries of banana chairs.
63. Defendant Kelli Dean further testified that plaintiff Blodgett was not an employee of HCU and that plaintiff Blodgett was to be paid in stock in MDI in exchange for his labor and services.
64. Plaintiffs Bond's and Blodgett's testimony was consistent with the testimony of defendant Kelli Dean.
65. Plaintiff Blodgett testified that Defendants promised him shares in MDI in exchange for his services.
66. Plaintiff Blodgett testified that he never received the shares in MDI that he was promised in exchange for his services.
67. Accordingly, Defendants' Rule 52(c) motion with respect to Plaintiffs' claims against Defendants for labor and services is denied as the Court finds that Plaintiffs have presented a modicum of sufficient evidence to support a claim under 11 U.S.C. § 523(a)(2)(A) to survive Defendants' Rule 52(c) motion.
68. The Court anticipates that it will hear evidence from Defendants on this claim; and, the Court is particularly interested to hear additional evidence of: a) false representations; b) intent to deceive by the Defendants; and, c) justifiable reliance by plaintiff Bond.
IT IS THEREFORE ORDERED THAT:
1. Defendants' Rule 52(c) motion is granted as to the following claims and the same are dismissed with prejudice:
a. Plaintiff Bond's claims for $13,000 under the November 18, 2008 agreement relating to the $10,000 charge against his American Express credit card.
b. Plaintiff Blodgett's claims relating to the alleged loans of October 30, 2009 and November 2, 2009 in the amount of $2,000, or as alleged $4,000;
c. Plaintiff Bond's alleged loan of $7,000 in December 2008, which was withdrawn at trial;
d. Plaintiff Bond's claims relating to transfer to defendant Kelli Dean of a Ford Aerostar van; and,
e. Plaintiff Blodgett's alleged loan of $1,500 in December 2008.
2. Defendants' Rule 52(c) motion is denied as to the following claims and the same will go forward to trial to be held on May 7, 2013 at 8:00 a.m.
a. Plaintiff Bond's claim for $13,000.00 relating to the October 3, 2008 loan of
$10,000.00;
b. Plaintiff Bond's claims relating to the Wells Fargo Visa credit card in the amount of $7,891.50 and the agreement dated January 27, 2009 relating thereto;
c. Plaintiff Bond's claims relating to the Bank of America credit card in the amount of $13,500.00 and the agreement dated January 30, 2009 relating thereto.
d. Plaintiffs Bond's and Blodgett's claim relating to labor and services provided in the aggregate amounts of $29,667.00.