VENN v. GRIZZLE

Filing 25

ORDER granting 22 Motion for Summary Judgment. Signed by JUDGE M CASEY RODGERS on 3/31/2019. (aow)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF FLORIDA
PENSACOLA DIVISION
JOHN E VENN, JR,
Plaintiff,
v.

CASE NO. 3:17cv818-MCR/EMT

MARION D GRIZZLE,
Defendant.
_________________________________/
ORDER
Plaintiff John E. Venn, Jr. (“Trustee”) filed this action to recover allegedly
preferential and fraudulent transfers pursuant to 11 U.S.C. §§ 547 & 548, as an
adversary proceeding, John E. Venn, Jr. v. Marion D. Grizzle, Adv. Proc. No. 1603020-KKS (Bankr. N.D. Fla.), within the Chapter 7 bankruptcy proceeding titled
In re Charlie M. Hamrick, Case No. 15-31137-KKS (Bankr. N.D. Fla.). The
reference was withdrawn by stipulation of the parties, and now pending is the
Trustee’s Motion for Summary Judgment on Counts I and IV of the Second
Amended Complaint. ECF No. 22. In Count I, the Trustee seeks to avoid an alleged
preferential transfer to Defendant Marion D. Grizzle in the amount of $1,000,000,
pursuant to 11 U.S.C. § 547(b), and in Count IV, the Trustee seeks to recover the
funds, if the transfer is avoided, from any immediate or mediate transferee of

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Grizzle. Having fully reviewed the record and the parties’ arguments, the Court
finds that the motion is due to be granted.
Background
A.

Procedural Posture

In November 2015, three creditors of Charlie M. Hamrick (“Debtor”)––
namely, James Evans Rice, Jr., Scott P. Lowry, and Austin Laverne Enfinger––filed
an involuntary Chapter 7 petition against Hamrick to adjudicate him bankrupt.
During the bankruptcy proceedings, the Trustee filed several adversary proceedings,
including the present action against Grizzle, to avoid preferential transfers that
resulted from the Debtor’s conduct, which allegedly amounted to a Ponzi scheme. 1
The Trustee alleged in the adversary proceedings that the Debtor had persuaded
investors (the three petitioning creditors, Grizzle, and others), to invest in phony real
estate deals based on the Debtor’s misrepresentation that he would invest their
money by purchasing and reselling certain parcels of real property, which would
provide the investors a substantial profit in return. The Trustee also alleged that in
1

As explained by the Eleventh Circuit, “[t]he essence of a Ponzi Scheme is to use newly
invested money to pay off old investors and convince them that they are earning profits rather than
losing their shirts.” Perkins v. Haines, 661 F.3d 623, 625 n.1 (11th Cir. 2011). The scheme is
named after “the notorious swindler, Charles Ponzi, who, starting in 1919, received $9,582,000
within a period of eight months by inducing investors to give him $100 for the promised repayment
of $150.” United States v. Orton, 73 F.3d 331, 332 (11th Cir. 1996) (internal quotation marks
omitted).
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carrying out the schemes, the Debtor used his corporation, H&H Construction of
NW Fla. Inc. (“H&H”), to open bank accounts into which the investors’ money was
deposited and transferred in H&H’s name. However, the real estate transactions
were fabricated and never closed. Instead, the Debtor used the escrowed investor
money of new investors to pay “profits” to prior investors and for his own personal
benefit.
In addition to filing actions to avoid preferential transfers to certain investors,
the Trustee filed an adversary proceeding against H&H and the Debtor, as President,
seeking a declaration that H&H was the alter ego of the Debtor, thus allowing the
Trustee to consolidate H&H’s assets with the Debtor’s property to be used for the
benefit of all creditors. See Venn, Jr. v. H&H Constr., Adv. Proc. Case No. 1603018-KKS (N.D. Fla. Bankr.). H&H and the Debtor defaulted, and on August 2,
2016, while the Grizzle adversary proceeding was pending, the Bankruptcy Judge
entered a default final judgment against the Debtor and H&H, with fact findings
supporting a conclusion that H&H was the Debtor’s alter ego and was used for an

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improper purpose. The Bankruptcy Court authorized the Trustee to consolidate the
corporate assets with those of the Debtor as “property of the estate.”2
In this adversary proceeding against Grizzle, the Trustee seeks to avoid a
transfer in the amount of $1,000,000 from H&H to Grizzle, asserting that the transfer
was preferential and the money therefore constitutes property of the bankruptcy
estate, which should be made available for the benefit of all creditors. The Trustee
moved for summary judgment in Bankruptcy Court, arguing that the Debtor was in
control of the funds so return of the payment could be considered property of the
Debtor and alternatively that H&H was the Debtor’s alter ego. The Bankruptcy
Court denied the summary judgment motion, finding that, although the Trustee had
proven the Debtor had control over the money in H&H’s account, this was
insufficient to deem the funds property of the Debtor because the account was owned
solely by H&H. On the alternative alter ego theory, the Bankruptcy Court
determined it was unclear whether the Trustee was still pursuing the theory, and in
any event, the evidence in the record fell short of establishing it. 3 Venn, Jr. v.

2

The Trustee concedes that the default judgment is not binding on Grizzle in this case.
However, the relevant documentary evidence, including bank records, wire transfers, and
depositions, are now included in the record of the instant case.
3

The Bankruptcy Court acknowledged that there was evidence in the adversary proceeding
against H&H to show that the Debtor had operated it for an improper purpose but that evidence
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Grizzle, Adv. Proc. No. 16-03020-KKS, ECF No. 142, at 16 n.49 (N.D. Fla. Bankr.
Oct. 2, 2017). Grizzle had also argued he was not on notice of the alter ego theory
during discovery because it was not alleged in the complaint, and thus, the
Bankruptcy Court permitted the Trustee to amend the complaint to expressly assert
the alter ego theory and extended discovery. The Trustee filed a four-count Second
Amended Complaint plainly alleging alter ego in its fraudulent and preferential
transfer claims. 4
The parties stipulated to withdrawal of the reference on grounds that Grizzle
had demanded a jury trial and did not consent to have the case tried in Bankruptcy
Court, and the Bankruptcy Judge recommended that the motion be granted.5 This
Court approved the stipulation, entered a Final Scheduling Order, and granted the
Trustee’s request to extend the dispositive motions deadline. The Trustee then filed

was not included in the summary judgment record before the Bankruptcy Court in the Grizzle
adversary proceeding. Adv. Proc. No. 16-03020-KKS, ECF No. 142, at 16 n.49.
4

In Count I, the Trustee seeks to avoid a $1 million preferential transfer to Grizzle under
§ 547(b); in Count II the Trustee seeks to avoid the $1 million transfer and a $20,000 transfer as
fraudulent transfers under § 548(a)(1)(A); in Count III, the Trustee seeks to avoid both transfers
as constructive fraudulent transfers, under § 548(a)(1)(B); and in Count IV, the Trustee seeks
recovery of any avoided transfer from any immediate or mediate transferee of Grizzle. The Trustee
also seeks pre and post-judgment interest on any transfer avoided.
5

See 28 U.S.C. § 157(e) (“[T]he bankruptcy judge may conduct the jury trial if specially
designated to exercise such jurisdiction by the district court and with the express consent of all the
parties.”).
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the pending dispositive motion asserting the undisputed record shows that H&H is
the Debtor’s alter ego. Grizzle argues in response that a trial is necessary because
genuine issues of fact remain.
B.

Undisputed Facts

The undisputed facts include the following. Grizzle testified by deposition
that he was introduced to the Debtor through a friend, and the Debtor offered him an
opportunity to invest in the acquisition of an apartment complex in Tuscaloosa,
Alabama. The Debtor showed him pictures of the complex. Grizzle said the Debtor
explained the transaction would be run through H&H, his construction company,
which would be the purchasing agent if he chose to invest. The Debtor told him that
H&H had a relationship with several banks (Chase, Bank of America, and Wells
Fargo), which gave it the first opportunity to proceed on short sales. Grizzle said
the Debtor told him that he already had a buyer lined up, an investment group in
California, so the transactions would occur on the same day. The Debtor explained
that they would acquire the apartment complex through H&H for $1,350,000, and
the California group would purchase it for $2,150,000. The Debtor presented
Grizzle with contracts to sign, showing the seller as Chase Home Finance RIO
Division and showing H&H as the seller for the resale, as agent for Debtor and
Grizzle. Grizzle partially funded the acquisition with an investment of $1,000,000,
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and understood that in return, he would receive $1,750,000 when the transaction
closed. The Debtor assured Grizzle that his $1,000,000 would be placed in escrow
and only disbursed at the closing. Grizzle never authorized its use for any other
purpose.
Grizzle signed the contracts and paid the money by two separate $500,000
transfers on April 8 and 9, 2015. The closing was to be in May. On April 28, 2015,
the Debtor transferred $20,000 to Grizzle from H&H’s Wells Fargo Account,6
saying it was a payment to extend the closing date. But the transaction had been
fabricated, so no real estate closing ever occurred. On October 13, 2015, the Debtor
paid Grizzle $1,000,000 from a SunTrust account in H&H’s name, which was four
days after another investor (one of the petitioning creditors 7) had transferred
$1,500,000 to H&H’s SunTrust account on similar representations of a real estate
investment deal with the promise of a large return on the investment. 8 Grizzle then

6

The record reflects that on October 2, 2009, the Debtor opened a bank account in the
name of H&H at Wachovia Bank, N.A., now known as Wells Fargo Bank, N.A., as the account’s
sole authorized signatory (the “Wells Fargo Account”). Wells Fargo closed the Wells Fargo
Account in September 2015 because it was overdrawn by the amount of $17,275.23.
7

The record includes the evidence pertaining to this investor, Jim Rice, which is also
undisputed and shows that Rice had transferred $1,650,000 to the H&H account in October 2015.
8

On August 28, 2015, shortly before Wells Fargo closed the Wells Fargo Account, the
Debtor established an account in the name of H&H at SunTrust Bank (the “SunTrust Account”)
with Debtor listed as the account’s sole authorized signatory and an initial deposit of $100.
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deposited the $1,000,000 into his own account. Also, on October 27, 2015, the
Debtor issued Grizzle a check for $750,000 from the SunTrust account, but this
check did not clear when Grizzle attempted to deposit it. Grizzle testified that he
transferred the funds to H&H based on the Debtor’s representation of the deal and
based on the contracts he signed. ECF No. 22-34, at 72. The contracts show he was
aware of H&H’s involvement and thought that the transaction would be completed
through H&H.
Bank records show that on April 7, 2015—the day before Grizzle transferred
his first $500,000 to H&H—the Wells Fargo Account had a balance of only
$3,649.85. Immediately after receiving Grizzle’s money, the Debtor—with sole
signatory authority over the Wells Fargo Account—transferred hundreds of
thousands of dollars to various third parties who were not affiliated with the
purported bank, Chase Home Finance, or the transaction involving Grizzle. The
Trustee presented evidence showing that some of the investors were repaid with
funds directly traceable to Grizzle’s $1,000,000 payment. See ECF No. 22-10
(investor summary). On April 10, 2015—the day after Grizzle transferred his second
$500,000 installment to the H&H Wells Fargo Account—the Wells Fargo Account
balance was $79,104.66, due to the Debtror’s unauthorized transfers of money to
various third parties.

In addition, the record shows transactions that raise a

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reasonable inference that funds from the H&H account were transferred to the
Debtor’s personal use, with transactions for ATM cash withdrawals, transfers to
personal accounts, and transactions with Publix, Best Buy, Google Play, Troy
University, restaurants, etc.
The Trustee presented undisputed evidence that the Debtor persuaded other
investors to participate in the phony real estate scheme as well, using similar
misrepresentations, i.e., that money invested and transferred to accounts in the name
of H&H would be used to acquire real estate and would generate a profitable return.
The record reflects that during the years 2013-2015, leading up to the involuntary
bankruptcy, the Debtor fraudulently induced over a dozen different individuals to
collectively transfer millions of dollars to accounts that the Debtor maintained in the
name of H&H, which he used to pay some investors and also for his personal benefit.
Bank records and other documents are voluminous but are summarized by the
Trustee. The Court will not recite the facts of the entire scheme but will incorporate
by reference the investor summary, ECF No. 22-10, which establishes the
undisputed details of the scheme. 9

9

Grizzle has not presented evidence to challenge the Trustee’s evidence regarding the
scheme itself as it pertained to him or any other victim investor.
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At issue is whether H&H, a Florida corporation, is the alter ego of the Debtor.
H&H’s Articles of Incorporation identify the Debtor as the sole incorporator, officer,
and registered agent and lists the Debtor’s residence as H&H’s principal place of
business and corporate mailing address. H&H filed annual reports each year, the
Debtor opened bank accounts in its name, and the Debtor and H&H were issued a
general contractor’s license. In July 2014, the Debtor applied to register H&H
Construction, Inc. as a fictitious entity with the Florida Secretary of State,
designating the Debtor and H&H as the owners. However, the company kept no
formal corporate business records and did not pay the Debtor a regular salary. The
Debtor represented in his sworn bankruptcy schedules that he operated H&H as an
individual and sole proprietor, not as a separate legal entity. See Bankr. Proc. No.
15-31137, 224, at 4 (Bankr. N.D. Fla.) (Chapter 7 Petition). The Trustee issued a
comprehensive document production subpoena to H&H, seeking a host of
documents related to its “General Contractor” business and observance of corporate
formalities, including building permits, financial records pertaining to construction
jobs performed, tax returns, original share certificates, and minutes from any
meeting of H&H directors/shareholders. H&H responded to the H&H Production

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Subpoena stating that it was not in possession of any responsive documents.10 At
the first meeting of creditors, the Debtor asserted his Fifth Amendment right
regarding questions about the revenue that H&H generated from lawful business
activity in the years 2013-2015. Also, at the Debtor’s deposition, in his individual
capacity and as the designated corporate representative of H&H, he asserted his Fifth
Amendment right not to incriminate himself in response to every question asked.
From April 2014 through April 2016, H&H had one salaried employee, the
Debtor’s son-in-law, William Bagwell. Bagwell worked for H&H as a construction
foreman and earned $59,800 annually and received W-2s. Bagwell testified by
deposition that he applied for the position after his discharge from military service
(but had no copy of the application or an employment contract), the Debtor was his
boss, there were no other employees, and he reported to work each morning at the
Debtor’s house for assignments, and from there, he would do whatever the Debtor
needed him to do at job sites all around Pensacola, Florida, and Cantonment, Florida.
Bagwell testified that he left this job in April 2016 because he did not like the work
of residential remodeling, “framing, drywall, electrical, everything.” ECF No. 234, at 17. Bagwell later explained that the work was actually performed by
10

In response to the summary judgment motion, Grizzle presented H&H’s S corporate tax
returns for 2013 and 2014.
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subcontractors, stating “everything was subbed out.” ECF No. 23-4, at 39. Bagwell
could not recall the names of any subcontractors or individuals who worked for
H&H or any construction sites in particular. Bagwell remembered only one H&H
project with any detail––building a porch for someone named Boyd in 2016. The
record includes three building permits issued for H&H projects in 2011, one permit
in 2012, two permits in 2014, and one in 2015.
Discussion
Summary judgment is appropriate when “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 moving party bears the burden of establishing on the record that there
is no genuine dispute of fact and that the plaintiff has failed to establish an element
essential of the claim. See Allen v. Bd. of Pub. Educ., 495 F.3d 1306, 1313 (11th
Cir. 2007); see also Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If this
burden is satisfied, then the nonmoving party must go beyond the pleadings and
“designate specific facts showing that there is a genuine issue for trial.” Celotex,
477 U.S. at 324. The Court views all evidence in the light most favorable to the
party opposing the motion and draws all reasonable inferences in favor of the nonmovant “to the extent supportable by the record.” Garczynski v. Bradshaw, 573 F.3d
1158, 1165 (11th Cir. 2009) (quoting Scott v. Harris, 550 U.S. 372, 381 n.8 (2007)).
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Moreover, “credibility determinations, the weighing of evidence, and the drawing of
inferences from the facts” are matters left to the jury. Graham v. State Farm Mut.
Ins. Co., 193 F.3d 1274, 1282 (11th Cir. 1999). The non-moving party must
demonstrate more than the existence of “some metaphysical doubt” regarding the
material facts, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986), and “the mere existence of a scintilla of evidence” or conclusory allegations
are insufficient to create a genuine issue of fact, Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 252 (1986). Summary judgment is proper if “the record taken as a
whole could not lead a rational trier of fact to find for the non-moving party.”
Matsushita Elec., 475 U.S. at 587.
A bankruptcy trustee “may avoid any transfer of an interest of the debtor in
property” (1) to or for the benefit of a creditor; (2) on account of an antecedent debt
owed by the debtor; (3) made while the debtor was solvent; and (4) made within 90
days before the date of the filing of the petition; and (5) the transfer enabled the
creditor to receive more than it would have pursuant to a chapter 7 bankruptcy. 11
U.S.C. § 547(b). In the prior summary judgment proceedings before the Bankruptcy
Judge, it was determined that the elements listed in subsections (1) through (5) had
been proven, and thus they are not at issue here. See ECF No. 22-54 at 5-6; Adv.
Proc. No. 16-03020-KKS, ECF No. 142, at 4-5 (“Grizzle does not contest that he
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received the $1 million check from H&H within 90 days pre-petition” and it is
undisputed that Grizzle “was a ‘creditor’ of the Debtor with a claim as of the date of
the petition”); Adv. Proc. No. 16-03020-KKS, ECF No. 156, at 2 (“Trustee has
sustained his burden to prove that the subject transfer enabled the Defendant Grizzle
to receive more than he would in a hypothetical Chapter 7 liquidation had the transfer
never been made as contemplated by section 547(b)(5)”). This is the law of the case
but also remains true on the undisputed facts before this Court. Therefore, the only
issue to be decided is whether H&H is the Debtor’s alter ego, such that its bank
accounts constitute “an interest of the debtor in property.” § 547(b).
The Bankruptcy Code does not define property rights; instead, “[p]roperty
interests are created and defined by state law.” Butner v. United States, 440 U.S. 48,
55 (1979); see also Title Max v. Wilber, 876 F.3d 1302, 1310 (11th Cir. 2017) (while
federal law governs whether a debtor’s property interest is property of the estate,
state law determines the nature and existence of the debtor’s property right or
interest). Under Florida law, “[i]t is black-letter law that a corporation is a ‘separate
entity, a legal being having an existence separate and distinct from that of its
owners.’” Lort v. Ferguson Enters. (In re Lort), 347 B.R. 909, 910 (M.D. Fla. 2006)
(quoting Krivo Indus. Supply Co. v. Nat’l Distillers & Chem. Corp., 483 F.2d 1098,

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1102 (5th Cir. 197311)); see also Gasparini v. Pordomingo, 972 So. 2d 1053, 1055
(Fla. 3d DCA 2008) (“a corporation is a separate legal entity”). A corporation’s
property is not property of the shareholder, even if it has only one shareholder. Lort,
347 B.R. at 910. Nonetheless, that separate identity “will be disregarded on proof
that it is a ‘mere instrumentality’ of, that is to say, it is completely dominated by,
another corporation or individual, and that it is a device or sham to mislead creditors
or exists for some other fraudulent purpose.” In re Gherman, 103 B.R. 326, 330-31
(Bankr. S.D. Fla. 1989) (applying Florida law); see also Dania Jai-Alai Palace, Inc.
v. Sykes, 450 So. 2d 1114, 1121 (Fla. 1984) (“[T]he corporate veil may not be pierced
absent a showing of improper conduct.”).
Although the concept of alter ego remains flexible and equitable in nature, see
In re Checiek, 492 B.R. 918, 920-21 (Bankr. M.D. Fla. 2013), the party seeking to
overcome a corporation’s separate existence and pierce the corporate veil faces “a
very heavy burden,” Hillsbury Holdings Corp. v. The Celotex Corp. (In re
Hillsborough Holdings Corp.), 166 B.R. 461, 468 (M.D. Fla. 1994). Courts may
disregard the corporate form only in “extraordinary cases.” In re Checiek, 492 B.R.
at 920-21. When alter ego is proven, “a judgment debtor and an alter ego are treated
11

See Bonner v. City of Prichard, 661 F.2d1206, 1209 (11th Cir. 1981) (en banc) (adopting
case law of the former Fifth Circuit developed before October 1, 1981, as precedent in this Circuit).
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as the same entity.” Longo v. Associated Limousine Servs., Inc., 236 So. 3d 1115,
1121 (Fla. 4th DCA 2018) (also stating in proceedings supplementary under Florida
law, the statutory phrase, “any property of the judgment debtor,” includes property
of an alter ego).
To pierce the corporate veil and justify disregarding the separateness of the
corporate form, Florida law requires proof of the following:
(1) the shareholder dominated and controlled the corporation to such
an extent that its separate existence was in fact non-existent but only an
alter ego of the shareholder;
(2) the corporate form was used fraudulently or for an improper
purpose; and
(3) the fraudulent or improper use of the corporate form caused
injury to the claimant.
See Gasparini, 972 So. 2d at 1055; In re Pearlman, 462 B.R. 849, 855 (Bankr. M.D.
Fla. 2012) (citing Dania Jai–Alai Palace, Inc. v. Sykes, 450 So. 2d 1114 (Fla.1984)).
Grizzle argues that the first and second elements are inherently factual and not
appropriate for determination on summary judgment. Without question, these
elements are highly fact specific, but courts have determined that, “[w]hile the alter
ego inquiry is ‘heavily fact-specific,’ it may be decided on summary judgment.”
United States v. Peeler, No. 613cv1152-ORL-40-GJK, 2016 WL 7668485, at *4

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(M.D. Fla. July 13, 2016). The Court finds this to be the extraordinary case in which
each element is established by the undisputed record.
First, the record demonstrates that the Debtor dominated H&H to the extent
that it lost its independent corporate existence. The Debtor was not only the sole
officer and shareholder of H&H and the sole signatory on the H&H bank accounts,
he considered himself a sole proprietor, as shown on his sworn bankruptcy schedule.
He observed only the most basic corporate formalities necessary to keep the
corporation in existence, such as filing its articles of incorporation and annual
reports, filing tax returns (at least for 2013 and 2014), and opening bank accounts in
H&H’s name.

No other formalities were observed in H&H’s management,

operation, and record keeping. In response to a subpoena requesting records that
would show the corporate existence, such as financial books, building permits issued
to the corporation, meeting minutes, documents relating to H&H’s financial
condition or purchase or real estate and salaries paid to employees, the corporation’s
response was that no such documents existed. The record reflects only 2 building
permits issued to H&H in 2014 and only one in 2015, the year of Grizzle’s
investment. And the Debtor “took the Fifth” when questioned about anything related
to the formation, management, operation, or profitability of H&H.

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Grizzle argues that a question of fact exists because the bank records, the
building permits issued, and the testimony of Bagwell show that H&H conducted
some legitimate construction business as a general contractor. The Trustee does not
deny that H&H performed some amount of legitimate work but contends that any
legitimate business and income was de minimis in comparison to the Ponzi scheme
that the Debtor operated using H&H. The Court agrees and finds no material dispute
of fact on this issue. The building permits in evidence are few (three building
permits in 2011, one permit in 2012, two permits in 2014, and one in 2015).
Bagwell’s testimony, even if true, adds little because of his inability to recall any
details.12 His testimony confirms that H&H had one employee––Bagwell, who was
the Debtor’s son-in-law––and that H&H had some legitimate construction work. But
Bagwell’s testimony also confirms the Debtor’s complete domination over the
company in that Bagwell acknowledged the Debtor was solely in charge of the
business and all decisions.13 Moreover, the same bank records that reflect some
12

The Court does not find it appropriate to deem Bagwell’s testimony a sham and will not
engage in credibility calls on summary judgment. Notwithstanding and without considering issues
of credibility, the Court finds his testimony insufficient to create a material issue of fact as to alter
ego.
13

Bagwell testified that he showed up at the Debtor’s house and did whatever the Debtor
asked him to do and that the Debtor subcontracted out all of the work. Taking his testimony as
true, Bagwell remembered only one project with any detail and could not name even one
subcontractor, and thus, his testimony adds little except to confirm that the Debtor indeed
controlled every detail of the business.
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legitimate income from H&H’s construction business also clearly reflect that the
lion’s share of income shown in H&H’s accounts originated not from construction
services as described by Bagwell but from the investors who paid for real estate
transactions that never occurred.14
The Trustee also presented evidence that the Debtor conducted H&H’s
business and dealt with the corporation’s assets as if it were his personal property,
transferring or withdrawing money from the H&H accounts at his discretion and for
his personal use and benefit, which, according to the Trustee, supported a “lavish
lifestyle.” The bank records and summaries confirm this.15 Grizzle takes issue with
what he contends is a “speculative” assertion that the Debtor lived a “lavish lifestyle”
and argues that there is a reasonable inference that some of the expenditures deemed
personal by the Trustee in fact could have been legitimate business expenses, such
as purchases for supplies or for entertaining clients. Grizzle cites no evidence to
support this other than the fact that the Debtor had personal bank accounts and the

14

This is not to say that no victim had contact with H&H as a construction business. John
L. Hybart, M.D., testified that he helped the Debtor start the company by loaning him money to
obtain a general contractor’s license. ECF No. 22-21, at 19-20. Also, he was aware of a job at
Eglin Air Force Base where the Debtor was the general contractor through H&H and was aware
of some home construction projects of H&H.
15

The Court agrees with the Trustee that its summaries of evidence are admissible. See
Fed. R. Civ. P. 1006; see also In re Int'l Mgmt. Assocs., LLC, 781 F.3d 1262, 1267 (11th Cir. 2015)
(discussing the admissibility of summaries).
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Debtor’s ex-wife’s affidavit statement that their personal credit union account was
used for household expenses during her marriage to the Debtor.
Regardless of whether the Debtor’s lifestyle could be considered “lavish,”
which is mere argument, the Trustee has shown by sufficient evidence that the
legitimate income of H&H was not sufficient to support the Debtor’s personal
expenditures, and the account summaries reflect unexplained cash withdrawals and
transfers from H&H’s account to Debtor’s and his ex-wife’s personal accounts. The
Debtor’s ex-wife was not an H&H employee, and the Debtor had no formal salary
from the corporation. Even assuming, in the light most favorable to the non-movant,
that some of the “personal-sounding” transactions noted in bank records (such as
payments to restaurants, Home Depot, or Lowe’s) could be construed as legitimate
business expenses, as Grizzle suggests, those expenditures still do not account for
the fact that the Debtor’s personal spending was well above his legitimate, nonPonzi, income. Nor does it rebut the fact that the vast majority of the non-Ponzi
transactions reflected in H&H account records consist of unexplained ATM cash
withdrawals, transfers to the Debtor’s personal accounts or to his ex-wife, and
personal expenses such as home loan payments and other charges reflecting personal
use (such as grocery stores, Troy University, Walgreens, etc.). The bank records
reflect that transfers to these personal accounts occurred when the personal account
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balances were low and also close in time to a deposit of money from a victim
investor. As a whole, the evidence demonstrates that the Debtor treated H&H’s
accounts as his own with no regard for the corporation’s separate existence. Thus,
the Court finds no material question of fact on alter ego.
Second, the Debtor used H&H for the fraudulent and improper purpose of his
Ponzi scheme. The evidence of this is not in dispute. The record, including Grizzle’s
testimony, shows that the Debtor enticed several individuals to transfer money to the
H&H bank accounts based on the Debtor’s misrepresentations that the funds would
be held in escrow and/or used exclusively for real estate investment in return for
profit. The undisputed evidence establishes that H&H played an integral role in the
Debtor’s fraudulent scheme—acting as the “agent” for the Debtor and the particular
investor in the particular “buy-and-sell” transaction, and also purportedly serving as
the escrow agent. Without exception, the Debtor fabricated these transactions and
did not use the investor funds as promised. In sum, the Debtor deliberately used
H&H’s accounts and its name on fraudulent real estate contracts and escrow agent
for the purpose of completing the fraudulent transactions. No doubt, the corporate
name leant an air of legitimacy to the scheme as he pitched it to investors. While
alter ego and improper purpose ordinarily present questions for the jury, the record

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of the Ponzi scheme and the Debtor’s indiscriminate use of H&H to accomplish it is
undisputed in this case.
Finally, the Court agrees with the Trustee that the Debtor caused injury, the
third element necessary to pierce the corporate veil under Florida law.

See

Gasparini, 972 So. 2d at 1055. The transfer of funds to Grizzle using money from
the fraud perpetrated on investors left the Trustee with less property in the
bankruptcy estate from which to ameliorate the losses to all other creditors. The
Trustee’s statutory power to avoid a preferential transfer depends in part on its ability
to show that the transfer enabled one creditor to receive more than it otherwise would
have under bankruptcy, see 11 U.S.C. § 547(b)(5) (an element already established
in this case), which necessarily results in injury to all other creditors who will receive
less from the estate. See generally In re Ortega T., 562 B.R. 538, 542 (Bankr. S.D.
Fla. 2016) (noting that “the focus of veil piercing . . . is the injury to creditors” based
on “the abuse of the corporate structure” and that a trustee has authority to bring an
alter ego claim). Here, the Debtor’s pre-petition transfer to Grizzle took money
invested by other victims and decreased the property that would otherwise have been
available to the bankruptcy estate by paying it to Grizzle. Thus, the preferential
transfer resulted in harm to all other creditors.

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Grizzle further argues two affirmative defenses, that is, that the Trustee lacks
standing to bring an alter ego claim (Fifth Affirmative Defense) and that questions
of fact exist as to the application of the doctrine of in pari delicto (Fourth Affirmative
Defense).16 The Bankruptcy Court summarily but expressly rejected both of these
defenses at the summary judgment hearing, ECF No. 22-1, at 3-4, and to the extent
there is any basis for revisiting them under the Second Amended Complaint, this
Court reaches the same conclusion. Grizzle’s arguments regarding standing and in
pari delicto are based on the same flawed premise that because the Trustee stands in
the Debtor’s shoes, he cannot not sue H&H to pierce its corporate veil because of
the Debtor’s own bad acts. First, the Trustee does not stand in the shoes of the debtor
for purposes of avoiding a preferential transfer under § 547(b); instead, as noted
above, the Trustee represents the interests of all creditors. Furthermore, the Trustee
is expressly authorized by the statute to maximize the potential return to creditors by
bringing an action to avoid a preferential transfer.

16

Grizzle also argues that H&H must be joined as an indispensable party, which was his
Sixth Affirmative Defense, but the Court rejects this out of hand. As noted supra, the Trustee has
established alter ego status against H&H in a separate proceeding against H&H. Additionally,
Grizzle did not move to dismiss the Second Amended Complaint for failure to state a claim (First
and Seventh Affirmative Defenses) and his Second and Third Affirmative Defenses apply
expressly to claims under § 548 (Counts II and III), which are not the subject of this summary
judgment motion.
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Similarly without merit is Grizzle’s argument that the in pari delicto defense
applies to a preference action, because, again, the Trustee does not bring a preference
action as the Debtor’s successor in interest. Although “the equitable defense of in
pari delicto is available against any claim presented by the estate as a result of the
estate obtaining rights of the debtor under section 541[,] . . . the in pari delicto
defense may not be raised in response to an action brought by the estate
representative under the provisions of the Bankruptcy Code itself, including
fraudulent transfer and preference actions.” In re D.I.T., Inc., 575 B.R. 534, 536
(Bankr. S.D. Fla. 2017); see also In re Int'l Mgmt. Assocs., LLC, No. 06-62966PWB, 2016 WL 552491, at *14 (Bankr. N.D. Ga. Feb. 10, 2016) (“[T]he in pari
delicto defense cannot be used to bar a trustee’s fraudulent transfer and preference
actions under 11 U.S.C. §§ 544, 547, and 548.”); In re Fin. Res. Mortg., Inc., 454
B.R. 6, 24 (D.N.H. 2011) (holding the defense of in pari delicto not applicable in
avoidance actions); Kipperman v. Onex Corp., 411 B.R. 805, 882 (N.D. Ga. 2009)
(“[s]ince the trustee’s claims are for the benefit of the creditors, the fraud of the
bankrupt does not require them to be forfeited” (quoting In re Davis, 785 F.2d 926
(11th Cir.1986)).
The Court concludes that on the undisputed record in this case the alter ego
theory has been proved by the Trustee, which justifies piercing the corporate veil.
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Therefore, the Debtor and H&H are considered one in the same, and H&H’s account
is properly considered the Debtor’s property. The Trustee is thereby allowed to
avoid the $1,000,000 payment to Grizzle from H&H as a preferential transfer of an
“interest of the debtor in property” under § 547(b). And having established liability
on Count I, the Trustee is also entitled to judgment on Count IV in the event Grizzle
has transferred the property to another.
Accordingly, the Plaintiff’s Motion for Summary Judgment on Counts I and
IV, ECF No. 22, is GRANTED. The Trustee is directed to advise the Court within
fourteen (14) days as to whether it intends to proceed on Counts II and III or whether
those Counts are moot or abandoned. 17
DONE AND ORDERED this 31st day of March 2019.

M. Casey Rodgers

M. CASEY RODGERS
UNITED STATES DISTRICT JUDGE

17

The Court notes that before the Bankruptcy Court there was a request for a Rule 54(b)
executable money judgment and abatement of the remaining claims subject to appellate court
review, after which, if affirmed on the preference claims, the Trustee would abandon the remaining
Counts. ECF No. 22-1, at 25-26. If this is intended, the Trustee should submit a proposed final
judgment within fourteen (14) days to [e-mail].
CASE NO. 3:17cv818-MCR/EMT