Meyer v. Bayles et al

Filing 60

RULING re 45 MOTION for Summary Judgment filed by Joanne Caldwell Bayles. Signed by Judge Robert G James on 4/16/13. (crt,DickersonSld, D)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
MONROE DIVISION
ROSE MEYER

CIVIL ACTION NO. 12-0043

VERSUS

JUDGE ROBERT G. JAMES

FRED BAYLES, ET AL.

MAG. JUDGE KAREN L. HAYES
RULING

Pending before the Court is Defendant Joanne Caldwell Bayles’ (“Caldwell”) Motion to
Dismiss [Doc. No. 45], which this Court converted to a Motion for Summary Judgment [Doc. No.
53] on March 12, 2013.
For the following reasons, the motion for summary judgment is GRANTED, and Plaintiff
Rose Meyer’s (“Meyer”) claims against Caldwell are DISMISSED WITH PREJUDICE.
I.

FACTS AND PROCEDURAL HISTORY
This suit arises from Meyer’s efforts to collect a judgment from a previous action. In the first

suit, captioned Meyer v. The Arbor and Terrace Senior Center of Ruston, LLC, Civil Action No.
3:08-0268, Meyer sued The Arbor and Terrace Senior Center of Ruston, LLC (“the LLC”) for
discriminatory termination. The LLC failed to appear in the action, and Meyer obtained a default
judgment in the amount of $82,333.00 on September 2, 2010.
Since then, Meyer has been unable to collect her judgment against the LLC. Meyer now
brings this action against Defendants Fred M. Bayles (“Bayles”), Susan Swinea, Caldwell, and Arbor
Terrace of Louisiana, Inc. (“the INC”). She seeks to hold these Defendants liable for the LLC’s
debts, alleging that the Defendants created the INC as a shell to avoid paying this judgment. Meyer
alleges that Caldwell and Bayles intentionally misused the corporate privilege to protect themselves

and the LLC from liability. She further alleges that Caldwell and Bayles transferred all assets of the
LLC to the INC, knowing that the transfer would deplete the LLC of the assets necessary to cover
its debts.
Independent of this litigation, Caldwell filed a Petition for relief with the United States
Bankruptcy Court, Western District of Louisiana under Chapter 7 of the Bankruptcy Code on April
28, 2011. See In re Caldwell, Case No. 11-30726 (B.W.D. La. April 5, 2012). The bankruptcy was
a no-asset case and was discharged by Judge Stephen Callaway on April 5, 2012. Caldwell did not
list Meyer as a creditor during her bankruptcy proceedings.
After Meyer filed this action, Caldwell moved to dismiss the Complaint on February 8, 2013.
The Court converted the Motion to Dismiss to a motion for summary judgment. Meyer filed an
Opposition to Motion to Dismiss [Doc. No. 47] on February 15, 2013. Caldwell filed a Reply [Doc.
No. 50] on February 22, 2013. After conversion to a Motion for Summary Judgment, the Court gave
the parties an opportunity to supplement their previously submitted materials. On April 2, 2013,
Meyer filed a Supplemental Opposition to Motion to Dismiss [Doc. No. 58].
II.

LAW AND ANALYSIS
A.

Summary Judgment Standard

Summary judgment “should be rendered if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.” FED . R. CIV . P. 56(c)(2). The moving
party bears the initial burden of informing the court of the basis for its motion by identifying portions
of the record which highlight the absence of genuine issues of material fact. Topalian v. Ehrmann,
954 F.2d 1125, 1132 (5th Cir. 1992). A fact is “material” if proof of its existence or nonexistence

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would affect the outcome of the lawsuit under applicable law in the case. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is “genuine” if the evidence
is such that a reasonable fact finder could render a verdict for the nonmoving party. Id.
The moving party bears the initial burden of demonstrating the absence of a genuine issue
of material fact, but does not need to negate the elements of the nonmovants’ case. Duffie v. United
States, 600 F.3d 362, 371 (5th Cir. 2010). A fact is “material” if proof of its existence or
nonexistence would affect the outcome of the lawsuit under applicable law in the case. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is “genuine” if the
evidence is such that a reasonable fact finder could render a verdict for the nonmoving party. Id.
Unless the moving party meets this burden, the court may not grant the unopposed motion, regardless
of whether a response was filed. Hetzel v. Bethlehem Steel Corp., 50 F.3d 360, 362 (5th Cir. 1995).
B.

Meyer’s Claims and Caldwell’s Bankruptcy Discharge

Caldwell contends that any claim Meyer had against her was discharged by the Bankruptcy
Court, even though Caldwell did not list Meyer’s claims on her original schedules and has not
amended her schedules to include the claims. Meyer counters that claims incurred through fraud by
a fiduciary are not discharged.
In no-asset Chapter 7 cases, pre-petition debts are discharged even if they are not listed in the
debtor’s original schedules. In re Egleston, 448 F.3d 803, 814 fn. 12 (5th Cir. 2006). Caldwell’s
bankruptcy was a no-asset Chapter 7, and any claim that Meyer had against her would have arisen
prior to Caldwell filing her bankruptcy petition on April 28, 2011. Thus, Meyer’s claim would
normally be discharged.
However, Meyer is also correct in stating that claims arising from fraud committed by a

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fiduciary are not discharged. The Bankruptcy Code provides that a discharge does not discharge an
individual debtor from any debt “for fraud or defalcation while acting in a fiduciary capacity,
embezzlement, or larceny.” 11 U.S.C. § 523(a)(4). Here, the issues are whether (1) Caldwell was
in a fiduciary relationship with Meyer, and (2) the debt at issue is one “for fraud or defalcation while
acting in a fiduciary capacity.”
On the issue of a fiduciary relationship, the Fifth Circuit has noted that, “[u]nder § 523(a)(4),
the term ‘fiduciary’ is distinct from the concept of a ‘fiduciary’ under the common law; it is limited
to instances involving express or technical trusts.’” In re Shcolnik, 670 F.3d 624,628 (5th
Cir. 2012) (quoting Matter of Tran, 151 F.3d 339, 342 (5th Cir. 1998)). However, the Fifth Circuit
has also held that fiduciary relationships created by state law can lead to nondischargeability, such
as in actions where the debtor was an officer of the creditor. See Matter of Moreno, 892 F.2d 417,
421 (5th Cir. 1990).
There is no express or technical trust at issue. Nor did state law create a fiduciary
relationship between Caldwell and Meyer. Meyer has argued that Caldwell is an officer of the LLC,
but this position did not create a fiduciary relationship between Caldwell and Meyer. Meyer is
merely an unsecured creditor of the LLC. A fiduciary relationship is not automatically created
between the officers of an LLC and its unsecured creditors. Therefore, no fiduciary relationship
existed between Caldwell and Meyer, and the dischargeability exception under § 523(a)(4) is not
applicable.
Further, even assuming, arguendo, that a fiduciary relationship did exist, there is no evidence
that the debt at issue is a debt “for fraud or defalcation while acting in a fiduciary capacity.” 11
U.S.C. § 523(a)(4). This exception was “intended to reach those debts incurred through abuses of

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fiduciary positions and through active misconduct whereby a debtor has deprived others of their
property by criminal acts; both classes of conduct involve debts arising from the debtor’s acquisition
or use of property that is not the debtor’s.” Miller v. J.D. Abrams Inc., 156 F.3d 598, 602 (5th Cir.
1998) (internal quotations omitted).
Fraud has a specific, but well-defined, meaning. For a debt to be nondischargeable due to
fraud, a creditor must show: “(1) that the debtor made a representation; (2) that the debtor knew the
representation was false; (3) that the representation was made with the intent to deceive the creditor;
(4) that the creditor actually and justifiably relied on the representation; and (5) that the creditor
sustained a loss as a proximate result of its reliance.” In re Cardwell, 487 Fed. App’x 183, 185 (5th
Cir. 2012) (internal quotations omitted). Defalcation requires only a willful neglect of duty. In re
Shcolnik, 670 F.3d at 628 (citing Schwager v. Fallas, 121 F.3d 177, 182 (5th Cir. 1997)).
There is no evidence that Caldwell made any false representation with the intent to deceive
Meyer, that Meyer relied on any representation made by Caldwell, or that she suffered a loss as a
result of such reliance. The debt owed to Meyer arose from the judgment in her discriminatory
termination action against the LLC. Fraud was not a part of the previous litigation, nor is there
evidence, or even an allegation, that Caldwell willfully neglected any duty.
Finally, Meyer has offered no evidence that her loss was a proximate result of her reliance
on any statement by Caldwell. Meyer’s loss arose when she was terminated by the LLC. Meyer
offers only her unsupported allegation that Caldwell and others transferred assets from the LLC to
the INC in an effort to frustrate Meyer’s efforts to collect her judgment. Even if Meyer could support
her allegation with evidence, the transfer would be the proximate cause of Meyer’s failure to collect

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her judgment, not the proximate cause of the loss itself.1
For these reasons, it is clear that the requirements for a nondischargeability exception to 11
U.S.C. § 523(a)(4) have not been met. The Court finds that the claims that Meyer now asserts
against Caldwell were discharged by the Bankruptcy Court on April 5, 2012.
III.

CONCLUSION
The Motion to Dismiss filed by Defendant Joanne Caldwell Bayles [Doc. No. 45], converted

by the Court to a motion for summary judgment, is GRANTED, and Rose Meyer’s claims against
Caldwell are DISMISSED WITH PREJUDICE.
MONROE, LOUISIANA, this 16th day of April, 2013.

1

The Court notes that Caldwell has offered evidence that Kilpatrick Life Insurance Company
and the United States Department of Agriculture, Rural Business Cooperative Service were secured
creditors of the LLC’s, with a balance of $4,328,268.20 secured with a mortgage on the LLC’s
property in the amount of $5,500,000.00. See Doc. No. 45-3. There is no evidence that the LLC had
assets in excess of $4,328,268.20. Thus, it appears that the proximate cause of Meyer’s inability to
collect her judgment is her status as an unsecured creditor behind a secured creditor to whom a
significant debt is owed. Therefore, it is clear that the transfer of assets from the LLC to the INC had
no effect on Meyer’s ability (or inability) to collect her judgment. She would have been unlikely to
collect even had the transfer never occurred.
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