DiTucci et al v. Ashby et al
Filing
46
MEMORANDUM DECISION AND ORDER granting 26 Plaintiffs Expedited Emergency Verified Motion for Ex Parte Prejudgment Writ of Attachment. Signed by Judge Tena Campbell on 6/24/2019. (jds)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
ROSA DiTUCCI, an individual, et al.,
Plaintiffs,
ORDER AND
MEMORANDUM DECISION
GRANTING
PREJUDGMENT WRIT OF
ATTACHMENT
vs.
Case No. 2:19-cv-277-TC
Judge Tena Campbell
CHRISTOPHER J. ASHBY, an individual, et
al.,
Defendants.
The Plaintiffs are individual investors who collectively invested $4.9 million to purchase
what they thought was a safe and secure property with guaranteed lease payments. They allege
they were victims of Defendants’ fraudulent scheme which caused them to lose the value of their
investments and left them with tax penalties and other financial problems. The Defendants (a
group of interrelated individuals and companies) must now defend against Plaintiffs’ causes of
action for fraud, securities fraud, sale of unregistered securities, conversion, breach of contract,
elder abuse, and unjust enrichment.
Plaintiffs have filed an Expedited Emergency Motion for Ex Parte Prejudgment Writ of
Attachment (ECF No. 26) targeting a $2.4 million house built and owned by Defendant William
“Bil” Bowser. The Plaintiffs asked for expedited consideration because the house—located in
Park City, Utah, and referred to as the Glenwild house—was under contract for sale with an
1
imminent closing date. They asserted that Mr. Bowser, who allegedly misappropriated
Plaintiffs’ funds, is apparently insolvent or about to become insolvent. They further alleged that
if the house (Mr. Bowser’s only substantial asset) were sold and converted to cash, they were at
risk of losing their remedy for their claim of unjust enrichment (the only claim at issue in this
particular proceeding). For these reasons they requested that the court issue a writ ex parte.
The court denied the ex parte request and held an expedited hearing on the motion,
during which both sides addressed the issues. Because key issues were not fully developed, the
court imposed temporary restrictions on Mr. Bowser’s disposition of the proceeds, ordered
supplemental briefing, and held an evidentiary hearing.
Now, having reviewed the evidence and argument from the parties, the court finds, for
the reasons set forth below, that the Plaintiffs are entitled to a prejudgment writ of attachment.
PROCEDURAL BACKGROUND
The court, upon receiving the emergency motion, held an expedited hearing on the
Plaintiffs’ request for a writ. At that point, the court scheduled an evidentiary hearing. In the
interim, the court, with the parties’ agreement, issued a temporary order that accomplished the
following: Mr. Bowser, who said he was not planning on absconding with the sale proceeds, was
allowed to sell the Glenwild house and use a portion of the proceeds to pay two secured liens on
the house and costs related to the sale. The remainder of the proceeds were divided into a down
payment on a townhome that Mr. Bowser was in the process of purchasing (the “Townhome”)
(the court allowed that sale to go through as well) and cash that was to be held in a bank account
and not spent in any way pending the court’s ruling. Mr. Bowser was not allowed to use the sale
proceeds to pay two unsecured financial obligations: $170,000 to J&J Construction and $57,000
for three credit card balances.
2
Now, having received further briefing and evidence during the court’s June 17, 2019
hearing, the court issues its findings of fact and conclusions of law in support of its ruling
granting the request for a writ.
FINDINGS OF FACT 1
Mr. Bowser is President of Defendant Noah’s Corporation (Noah), which holds itself out
as a developer and operator of events-center properties (e.g., venues that rent space for weddings
and receptions). He receives a salary of $180,000. Noah has approximately 500 shareholders
and a board of directors consisting of Mr. Bowser and two other individuals. Mr. Bowser is a
three-percent shareholder, but only one other person holds more shares than Mr. Bowser. The
difference in the amount of shares each holds is slight.
Mr. Bowser also controls Defendant Gabriel Management Corporation (Gabriel), a
property management company that was in charge of venue construction. Gabriel is wholly
owned by Noah. Mr. Bowser is the only officer of Gabriel and serves as its president.
The Defendants worked together in various roles to sell and manage investments in the
events-center properties. The investments consist of Tenant-in-Common (TIC) interests in real
property bundled with the lease of an events center (in this case a structure yet to be built) to
Noah that in turn is supposed to operate the venue and, from that revenue, pay guaranteed lease
payments to the investors.
Defendants Rockwell TIC, Inc. and Rockwell Debt Free Properties (collectively,
1
Given the expedited nature of these proceedings, the court was not able to obtain a transcript of
the evidentiary hearing before issuing the order, so it is unable to cite to specific in-court
testimony. But much of Ms. DiTucci’s and Mr. Bowser’s live testimony reiterated statements in
their declarations submitted before the hearing and statements made by Mr. Bowser during his
June 10, 2019 deposition (albeit memorialized in an uncertified rough draft submitted to the
court). The court also emphasizes that the findings here are limited to the prejudgment writ of
attachment proceedings.
3
Rockwell) were the first stop in the investment transaction. According to Mr. Bowser, the
transaction occurred (or was supposed to occur) as follows:
Relative to Noah, generally, Rockwell (or an entity owned and controlled by
Rockwell) would acquire real property. It would then enter into a lease agreement
regarding that real property with Noah or a subsidiary of Noah. Rockwell would
then sell TIC interests in the real property to purchasers. Rockwell would assign
its rights in the lease agreement to the TIC purchasers, who would become the
landlord of the Noah subsidiary. Rockwell would then distribute remaining funds
for construction of event venues to Noah or a construction entity related to Noah.
Noah pays rent to a property manager, which distributes those rent payments per
each TIC owner’s respective interest.
(First Decl. of William Bowser ¶ 8, attached as Ex. A to Bowser’s Opp’n to Mot., ECF No. 351.)
According to the Plaintiffs, they received Rockwell’s sales package (the “Executive
Summary, a Property Description, and a Lease Profile”) which described the series of
transactions and parties involved with the investment. (See First Am. Compl. ¶ 99, ECF No. 4.)
When Plaintiffs invested, they expected that their money would be put toward the land purchase
and costs to construct the venue. In other words, the money given initially to Rockwell was
earmarked for costs incurred by other parties—namely Gabriel and Noah—after being deposited
with Rockwell.
Multiple steps in the transaction (essentially, a chain of transactions) were necessary to
satisfy the terms of the investment (i.e., the lease payments). Multiple entities, by necessity,
worked together to make the investment come to fruition.
But here the Plaintiffs’ investment did not come to fruition. The $4.9 million they
collectively invested was diverted by Bil Bowser for other purposes. The property they
purchased—“Noah’s Carmel” 2—was never developed. It is a vacant piece of land.
2
The property is located in Carmel, Indiana.
4
Although each entity supposedly had a distinct role in carrying out the investment, it
appears that investor money flowed freely among the entities. To begin, Rockwell received the
investors’ money. The land was purchased. Plans were (supposedly) put into action to construct
the events center on that land. To get construction going, Gabriel, the development arm of this
group, requested money (“draws”) from Rockwell to pay construction costs. 3 In this case,
Gabriel took draws from Plaintiffs’ money for exterior finishes, roof, doors, windows,
landscaping, flooring, sheetrock, insulation, interior finishes, and other construction totaling over
$4.9 million. (See Rough Tr. of June 10, 2019 Dep. of Bil Bowser at 80:15-81:2, attached as Ex.
5 to Pls.’ Supplemental Brief, ECF No. 41-5; Table of Construction Draws, Evid. Hr’g Ex. AD.)
Clearly the draws did not go to Noah’s Carmel, which remains a vacant piece of land.
Instead, at Bil Bowser’s direction, the money was diverted to pay Gabriel’s costs to
construct other Noah properties. He admitted as much to the Plaintiffs. During a May 11, 2019
conference call with over 100 owners of properties leased to Noah, including Plaintiffs, Mr.
Bowser stated that he had used the money from one project to complete other projects. Between
March 18, 2019, and March 22, 2019, Mr. Bowser told Ms. DiTucci and other Plaintiffs that he
was “robbing Peter to pay Paul” and that he had used 85-90% of the Noah’s Carmel funds to
perform work on other buildings under his management with the remaining 10% used for
operations and expenses. 4 He said he did so because Gabriel (and Noah, which is now in
3
According to Mr. Bowser, Gabriel is a property management company that develops the Noah
properties by “acquiring new properties, entitling new properties, you know, getting permits,
holds the construction license, and the – the day-to-day operation of the – of developing
property.” (Dep. of Bil Bowser at 48:20-23.)
4
In another statement that demonstrated his loose treatment of money coming into the entities,
he admitted that he had used money earmarked to pay taxes on the leases as a “slush fund.”
(Decl. of Rosa DiTucci ¶ 11, Ex. A to Pls.’ Mot.)
5
bankruptcy) 5 had significant financial problems at the time the Plaintiffs invested their money
and the money was needed elsewhere.
He made the decision unilaterally. When asked at the hearing why he did not use the
Carmel investors’ money to develop the Carmel project and keep that project on track, his only
answer was that he put the money where it was most needed to keep those projects afloat. In
essence, he said something to the effect of, “you do what you have to do.”
Importantly, during the hearing it became clear that Mr. Bowser’s family permeates the
entities and transactions. Multiple members of Mr. Bowser’s family have a financial interest in
Noah and Gabriel.
His family dominates roles in Gabriel. In addition to employing Mr. Bowser, Gabriel
employs his son-in-law (Scott Jensen) and the brother of that son-in-law (Brandon Jensen), both
of whom are project managers. Employee Cory Lowder (superintendent) is the exception. As
for principals, Gabriel has three: Mr. Bowser is the President, Scott Jenson is an Officer, and
Brandon Jensen is an Officer. (Registered Principal Filing with the State of Utah for Gabriel
Management Corporation, Evid. Hr’g Ex. AC.) And on Gabriel’s bank account, all of the
signatories are related to Mr. Bowser. The signatories consist of Mr. Bowser, Kate Jensen (his
daughter), Hailey Gardiner (daughter), Scott Jensen, and Brandon Jensen.
The family connection blends into Noah as well. For instance, his daughters and son
have shares in Noah. And his wife receives a salary ($6,583.33 a month, for a total of $79,000
annually) from Noah. (Uniform Residential Loan Application of Mr. and Mrs. Bowser, Evid.
5
On May 28, 2019, less than a month after Plaintiffs filed this suit, Noah and its subsidiaries
filed for bankruptcy. Noah’s estimated assets are $1 million to $10 million but its liabilities fall
somewhere in the range of $10 million to $50 million. It has over 200 creditors, including Mr.
Bowser.
6
Hr’g Ex. AB.) Noah has one bank account which it uses to operate all of its forty-two event
venues. (Bowser Dep. at 45:16-21; 47:20-48:1.) There are three signatories on Noah’s bank
account: Mr. Bowser, Kate Jensen (Mr. Bowser’s daughter), and Hailey Gardiner (Mr. Bowser’s
daughter).
When asked during his deposition how many other relatives are employed by Noah or its
subsidiaries, he responded: “I have a niece [named] Samantha Kemp. I have a brother, Mike
Bowser. I have a brother Mark Bowser. I have a nephew, Andrew Bowser and then my mom,
Marilyn Bowser.” (Id. at 97:10-14.)
Based on the evidence seen, it appears that financial controls are loose. Gabriel and
Noah share access to a system called Divvy “that is credit card like” but is “not really a credit
line. … It’s almost more like a debit card if you will.” (Id. at 92:7-17.) They use the same
Divvy account. “[W]e would be – they would submit a draw for the Divvy amount. So anything
that construction used on the Divvy account, we would be treated just like a subcontractor and
that amount would be reimbursed to Noah’s.” (Id. at 93:4-8.) A credit card in the name of Mr.
Bowser’s wife was used to pay Noah’s utilities and funds were transferred directly from the
Noah operating account to that credit card. (Id. at 94:13-95:14.)
Money was freely interchanged. For instance, in 2017, Rockwell put $6 million into
Noah in an attempt to keep it afloat. And Rockwell, using the Plaintiffs’ funds, paid the initial
rent payments to the Plaintiffs. “Per Noah’s construction agreement with Rockwell, Rockwell
made the first nine rent payments out of Noah’s budgeted construction draw [which came from
the Plaintiffs’ payment to Rockwell] to the TIC owners from the date of the Lease Agreement
through February 2019, in the aggregate amount of approximately $328,500.00.” (SOF ¶ 17 of
Bowser Opp’n (citing Bowser First Decl. ¶ 21).) At one point, Mr. Bowser borrowed money
7
from Noah, and he put some of his personal funds into Noah. Mr. Bowser divided his salary up
into two parts: one part allocated to the percentage of work he spent on Gabriel business with the
remaining part allocated to Noah.
In sum, the record is filled with evidence of interchangeable roles and intermingled
money connected to Gabriel, Noah, and the Bowser family.
ANALYSIS
Requirements for a pre-judgment writ of attachment
A prejudgment writ of attachment is intended to preserve the status quo by placing “‘the
property in the custody of the law to be so held until the court determines whether or not
[Plaintiffs] in the action [are] entitled to judgment in the main case.’” Blackmore v. L&D Dev.,
Inc., 274 P.3d 316, 316 (Utah Ct. App. 2012) (emphasis omitted) (quoting Bristol v. Brent, 103
P. 1076, 1079 (1909)). To obtain a prejudgment writ of attachment, the Plaintiffs must satisfy
seven criteria set forth in Rules 64A and 64C of the Utah Rules of Civil Procedure. 6
First, they must show that (1) the property is not earnings and not exempt from execution;
(2) the writ is not sought to hinder, delay or defraud a creditor of the defendant; and (3) there is a
substantial likelihood that the plaintiffs will prevail on the merits of the underlying claim. Utah
R. Civ. P. 64A(c)(1)–(c)(3). They must also show that “the defendant has assigned, disposed of
or concealed, or is about to assign, dispose or conceal, the property with intent to defraud
creditors; or probable cause of losing the remedy unless the court issues the writ.” Utah R. Civ.
6
Rule 64 of the Federal Rules of Civil Procedure (titled “Seizing a Person or Property”) provides
that “every remedy is available that, under the law of the state where the court is located,
provides for seizing a person or property to secure satisfaction of the potential judgment. But a
federal statute governs to the extent it applies.” Fed. R. Civ. P. 64(a). Because a federal statute
does not apply in this situation, the court looks to Utah rules to determine whether the Plaintiffs
are entitled to a writ of attachment of the proceeds from the sale of the Glenwild Property.
8
P. 64A(c)(7) and (c)(10) (emphasis added). Finally, they must satisfy three elements set forth in
Rule 64C: (1) the defendant is indebted to the plaintiff; (2) the action is upon a contract; and
(3) payment of the claim has not been secured by a lien upon property in this state.
Some of the requirements are easily established and it does not appear that Mr. Bowser
contests them. In particular, Plaintiffs have shown that (1) the property is not earnings and is not
exempt from execution (such property includes burial plots, health aids, disability, veterans or
unemployment benefits, child support, alimony or maintenance, insurance proceeds, and
personal works of art) 7; (2) they are not seeking the writ to hinder, delay or defraud creditors;
and (3) payment for Plaintiffs’ unjust enrichment claim “has not been secured by a lien upon
property in this state.” (See Pls.’ Mot. at 11–12, 16; Def.’s Opp’n to Mot. at 10, 12–16.) The
remainder of the elements are disputed.
Substantial Likelihood of Prevailing on the Claim of Unjust Enrichment
Unjust enrichment has three elements: (1) “a benefit conferred on one person by
another,” (2) “the conferee must appreciate or have knowledge of the benefit,” and (3) there must
be “the acceptance or retention by the conferee of the benefit under such circumstances as to
make it inequitable for the conferee to retain the benefit without payment of its value.” Desert
Miriah, Inc. v. B & L Auto, Inc., 12 P.3d 580, 582 (Utah 2000).
Plaintiffs contend that they collectively conferred a benefit upon Mr. Bowser by
transferring more than $4.9 million to Rockwell, of which $3 million was then disbursed to and
accepted by Mr. Bowser. Mr. Bowser transferred that money to prop up other struggling Noah
investment properties. That, Plaintiffs say, was a windfall to Mr. Bowser, who, without
Plaintiffs’ knowledge or consent did not use the money for purposes related to Noah’s Carmel.
7
Utah Code Ann. § 78B-5-505.
9
For that reason, they assert it would inequitable for him to retain the benefit of the proceeds
without re-payment of the value. Because Mr. Bowser’s only significant assets are the
Townhome and the net proceeds of the sale of the Glenwild Property (which is substantially less
than the $3 million Plaintiffs seek under their unjust enrichment claim), his receipt of proceeds of
the sale of that property is the only way the Plaintiffs may obtain at least part of that $3 million.
Mr. Bowser contends that the Plaintiffs have not shown a substantial likelihood of
success on the merits for three reasons. First, he asserts that they have not established the
elements of unjust enrichment. Second, Plaintiffs have a legal remedy, which forecloses the
equitable remedy of unjust enrichment. Third, the actual harm (which he characterizes as unpaid
rent payments) “does not approximate the damages they seek.” (Def.’s Opp’n to Mot. at 12.)
The Elements of Unjust Enrichment
Conferring a Benefit on Mr. Bowser
Mr. Bowser argues that Plaintiffs did not confer a benefit on him because (1) they paid
Rockwell, not Gabriel, and (2) the money was drawn and transferred by Mr. Bowser solely in his
corporate role as President of Gabriel and Noah (in other words, they cannot pierce the corporate
veil of Noah or Gabriel). As noted below, the court finds that Mr. Bowser was the alter ego of
Gabriel, so what Gabriel received was really a payment to Mr. Bowser.
Mr. Bowser’s challenge to the first element of the Plaintiffs’ unjust enrichment claim
(i.e., the benefit conferred) is based on an unnecessarily strict reading of the element. He does
not consider the multi-part nature of the Noah’s Carmel investment or the fluidity of transactions
and links between Rockwell, Gabriel, and Noah.
A similar argument was rejected in Desert Miriah v. B & L Auto, Inc., 12 P.3d 580 (Utah
2000). There, the Utah Supreme Court analyzed whether the claimant, Mr. Denning, conferred a
10
benefit on the “conferee,” Desert Miriah. In that case, after a convoluted series of loan
transactions, Mr. Denning lost $50,000 he had loaned to a third party in connection with Desert
Miriah’s purchase of a houseboat. Mr. Denning sought $50,000 from Desert Miriah through a
claim for unjust enrichment. Desert Miriah argued that it did not receive a benefit from Mr.
Denning because the money was paid to a third party. In other words, it asserted that it was not
the “conferee” because any benefit Desert Miriah may have received in connection with Mr.
Denning’s loan to another was indirect and so not actionable. The Court disagreed and found
that Mr. Denning’s loan to the third party ultimately allowed Desert Miriah to avoid seizure of
the houseboat. “The benefit to plaintiff in this case was not so far removed from Denning’s
actions as to find that Denning did not confer a benefit on [Desert Miriah] in making the loan.”
Id. at 583.
Here, Plaintiffs paid money to Rockwell as part of a plan that would funnel the money to
construction and operation of the venue by Gabriel and Noah. Given the investment’s structure,
a payment to Rockwell does not foreclose a finding that Gabriel, which was interconnected with
Rockwell and Noah and formed a necessary link in the chain of events, received Plaintiffs’
money.
Furthermore, even though the money went to Gabriel’s account, Mr. Bowser, not Gabriel,
was the conferee. As discussed below in the court’s “alter ego” analysis, when Mr. Bowser took
draws on the Plaintiffs’ investment money, he was not acting in his role as an agent of the
corporation. He was the alter ego of Gabriel and so, in essence, was the conferee.
And he benefited from the money. He used the money in an attempt to keep Gabriel
operating successfully and to keep struggling Noah projects afloat. He benefited from that
11
transfer because the success of Gabriel and Noah (albeit fleeting) protected not only his financial
interests, but the direct financial interests of multiple members of his family. 8
Knowledge of Benefit
This element is easily established. Mr. Bowser knew that the funds he pulled from
Rockwell and diverted were the Plaintiffs’ investment money and that his use of that money to
protect other projects was improper. As noted above, he told Ms. DiTucci and other Plaintiffs
that he had diverted the Noah’s Carmel funds to perform work on other Noah buildings. (See
Decl. of Rosa DiTucci ¶ 10 (“Bowser told me and other Plaintiffs that he was ‘robbing Peter to
pay Paul’ and had used 85-90% of the funds from Noah’s Carmel investors to perform work on
other buildings under his management, and the remaining 10% was used for operations and
expenses.”), ECF No. 26-2.)
Inequitable to Retain Benefit Without Payment of its Value
Plaintiffs paid that money to Rockwell to purchase land and fund Noah’s Carmel in
exchange for regular lease payments. Their money was used on other projects. Noah’s Carmel
has not been built. The property is vacant land, and its value is significantly less than their
investment. It would be inequitable to allow Mr. Bowser to avoid paying the money he
personally diverted.
Legal v. Equitable Remedy
Mr. Bowser asserts that Plaintiffs have a legal remedy (i.e., recovery under contract) and
so they are not allowed to obtain the equitable remedy of unjust enrichment. See Am. Towers
8
Indirect financial interests existed as well. Before the Plaintiffs filed their motion, Mr. Bowser
had plans to use a substantial amount of the liquidated sales proceeds of his house to pay an
unsecured loan to J & J Construction for building the Glenwild Property. J & J Construction is
owned by Scott and Branden Jensen, who, in addition to being related to Mr. Bowser through
marriage, are Gabriel employees, Gabriel officers, and signatories on Gabriel’s bank account.
12
Owners Ass’n, Inc. v. CCI Mech., Inc., 930 P.2d 1182, 1193 (Utah 1996) (“[I]f a legal remedy is
available, such as breach of an express contract, the law will not imply the equitable remedy of
unjust enrichment.”). According to him,
[a]lthough … Plaintiffs do not have a contract with Bowser personally, they do
have contracts with Noah: the Lease Agreement and the Purchase and Sale
Agreement. Through these documents, Plaintiffs have a bargained-for outcome
for their purchase of the Carmel Property, reduced to writing: ownership of the
property as tenants in common, and monthly rent payments.
(Def.’s Opp’n to Mot. at 11.) But Plaintiffs have not alleged a breach of contract claim against
Gabriel or Mr. Bowser. Accordingly, any contract they may have with Noah (or Rockwell, for
that matter) does not bar their unjust enrichment claim against Mr. Bowser.
Nature of Damages
Finally, Mr. Bower’s characterization of Plaintiffs’ damages as lost rent payments is not
persuasive. Plaintiffs lost $3 million when Mr. Bowser diverted those funds to uses other than
Noah’s Carmel. That is their damage. They are not seeking unpaid rent from Mr. Bowser.
Piercing the Corporate Veil of Gabriel
Mr. Bowser, through Gabriel, ordered draws of the Plaintiffs’ money from Rockwell.
Because the money was transferred to Gabriel, and then to Noah projects, Mr. Bowser, who was
acting as President of both Gabriel and Noah, argues he does not have personal liability for the
transfers. In response, Plaintiffs present evidence that Gabriel was the alter ego of Mr. Bowser
and argue that Mr. Bowser should not be allowed to hide behind the corporate entities he used to
transfer the money.
Utah employs a two-prong test to determine whether a party may pierce the corporate
veil. First, “there must be such unity of interest and ownership that the separate personalities of
the corporation and the individual no longer exist.” In other words, “the corporation is, in fact,
the alter ego of one or a few individuals.” Norman v. Murray First Thrift & Loan Co., 596 P.2d
13
1028, 1030 (Utah 1979), quoted in Jones & Trevor Mktg. v. Lowry, 284 P.3d 630, 635 (Utah
2012). Second, “the observance of the corporate form would sanction a fraud, promote injustice,
or an inequitable result would follow.” Id.
The court may consider eight non-exclusive factors in determining whether to pierce the
corporate veil:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
undercapitalization of a one-man corporation;
failure to observe corporate formalities;
nonpayment of dividends;
siphoning of corporate funds by the dominant stockholder;
nonfunctioning of other officers or directors;
absence of corporate records;
the use of the corporation as a façade for operations of the dominant stockholder or
stockholders; and
(8) the use of the corporate entity in promoting injustice or fraud.
Colman v. Colman, 743 P.2d 782, 786 (Utah Ct. App. 1987). But these factors “are merely
helpful tools and not required elements.” Jones & Trevor Mktg., 284 P.3d at 636.
To begin, Gabriel was a “one-man corporation.” Mr. Bowser was the sole officer and
acted as President. He employed his family members. He and his family members controlled
the bank accounts. He managed Gabriel without oversight from Noah (unless one characterizes
his role as Noah’s President as a form of oversight, which would be an illogical result).
Gabriel was losing money at the time the Plaintiffs invested in Noah’s Carmel. After the
Plaintiffs paid Rockwell, Gabriel essentially gave the $3 million in construction draws to Noah
(or spent them on construction of other Noah properties). The diversion of Plaintiffs’ funds
meant that Gabriel was unable to complete its obligation to construct the Noah’s Carmel
building.
There was no evidence that Gabriel observed corporate formalities. Mr. Bowser was the
only principal of Gabriel and he simultaneously served as President of Noah. He wore two hats
14
as he carried out the transactions. And, according to the record before the court, the flow of
money between Rockwell, Gabriel, and Noah was not checked by financial controls.
Mr. Bowser’s salary reflects the lack of respect for the corporate form. He explained
how he drew a salary from Gabriel and Noah. “[I]t doesn’t matter what entity it is. And I found
myself – I didn’t think it was an accurate, necessarily, display of my salary all in Noah’s, so we
bifurcated it into some of it from Gabriel and some of it from Noah’s because that’s how I was
spending my time.” (Bowser Dep. at 105:1-9.)
All of this shows that there is “such unity of interest and ownership that the separate
personalities of the corporation and the individual no longer exist.”
As for the other prong of the test, the court finds that allowing Mr. Bowser to hide behind
the shell of Gabriel would sanction his act of diverting the Plaintiffs’ money, which would
“promote injustice” and allow an “inequitable result.” Norman, 596 P.2d at 1030.
For the foregoing reasons, Plaintiffs have established the likelihood of success on their
unjust enrichment claim against Mr. Bowser who is the alter ego of Gabriel.
Intent to Defraud Creditors or Probable Cause that Remedy Will Be Lost
Mr. Bowser is correct that Plaintiffs have not shown that he “has assigned, disposed of or
concealed, or is about to assign, dispose of or conceal, the property with intent to defraud
creditors.” 9 But Plaintiffs have established the alternative element: “probable cause of losing the
remedy unless the court issues the writ.”
9
Plaintiffs contend that the Defendants were operating a Ponzi scheme because the Defendants,
and particularly Mr. Bowser, were using funds from new investors to cover costs for projects and
lease payments to earlier investors. They then suggest that the court may find that a Ponzi
scheme exists and apply “the Ponzi presumption” to find all the transfers from Gabriel to Noah
are, as a matter of law, presumed to be fraudulent. (See Pls.’ Supplemental Brief at 14–15, ECF
No. 41.) The court declines to reach this issue because it has not been sufficiently developed in
the pleadings.
15
As Plaintiffs note, “Based upon Bowser’s financial situation and commingling of funds,
Plaintiffs will lose their sole remedy [for the unjust enrichment claim] unless the Court issues the
writ.” (Pls.’ Mot. at 14.) Mr. Bowser has no other assets to attach (he testified that the
Townhome, remaining proceeds of the sale, and proceeds from the sale of one car were his only
assets). He cannot satisfy a judgment against him.
Indebted to Plaintiff
Plaintiffs must establish that Mr. Bowser is indebted to them. Utah R. Civ. P. 64C(b)(1).
Although there is little Utah law on the meaning of “indebted to,” a case in this district recently
addressed this requirement, at least in part. In First Guaranty Bank v. Republic Bank, Inc., the
court first noted that “the indebtedness requirement cannot mean that the plaintiff must have a
judgment in hand before it can qualify for a writ of attachment. Such an interpretation would
render meaningless the prejudgment remedy provided in Rule 64A.” 303 F. Supp. 3d 1200,
1209 (D. Utah 2017). But it also held that “the indebtedness requirement must require
something more than the assertion of a legal claim for recovery for which there is a substantial
likelihood of success.” Id. at 1209 (looking to analogous Texas law, “which has long included a
similar ‘justly indebted’ requirement to issue a writ of attachment”).
The party advocating for the writ in that case argued that the phrase “indebted to”
“should be read to mean ‘an obligation to pay a liquidated sum on an express or implied
contract’ or an obligation to pay an unliquidated sum ‘if the underlying contract provides a rule
for ascertaining such damages.’” Id. (emphasis in original) (quoting In re Argyll Equities, LLC,
227 S.W.3d 268, 271 (Tex. App. 2007)). Although the First Guaranty court did not directly
address that contention, it did quote analogous Texas case law with approval, which provided
that “‘[a]ttachment is not appropriate if the amount of the claim is so uncertain that a jury must
16
determine the final amount of damages.’” Id. (quoting In re Argyll Equities, 227 S.W.3d at 271).
The concern appears to be whether the amount of indebtedness is easily ascertainable. Here,
there is a clear measure of the money diverted: $3 million of the Plaintiffs’ funds that were
diverted by Mr. Bowser. Accordingly, the court finds that the Plaintiffs have shown that Mr.
Bowser is indebted to them because the obligation is liquidated.
An Action Upon a Contract
Plaintiffs must also show that “the action is upon a contract.” 10 Utah R. Civ. P.
64C(b)(2)(i). They assert that they have established this requirement because unjust enrichment
is a “contract implied in law.” Jones v. Mackey Price Thompson & Ostler, 355 P.3d 1000, 1012
(Utah 2015). The language of the rule does not differentiate between implied and express
contracts, and it does not differentiate between an implied-in-fact contract and an implied-in-law
contract. Mr. Bowser has not provided persuasive argument that forecloses Plaintiffs’
proposition that “contract” can extend to a contract recognized in equity under the unjust
enrichment cause of action. Accordingly, the court finds that Plaintiffs have satisfied this
requirement.
ORDER
For the foregoing reasons, the Plaintiffs’ Expedited Emergency Verified Motion for Ex
Parte Prejudgment Writ of Attachment (ECF No. 26) is GRANTED. By this order, the court
issues a prejudgment writ of attachment on the net proceeds of the sale of the Glenwild Property
(totaling $844,816.83), described as follows: the Townhome described in Mr. Bowser’s initial
opposition brief (ECF No. 35) (or, alternatively, the proceeds earmarked for its purchase, which
10
In the alternative, a party must show that the action “is against a defendant who is not a
resident of this state or is against a foreign corporation not qualified to do business in this state”
or “the writ is authorized by statute.” Utah R. Civ. P. 64C(b)(2). Neither apply here.
17
total $496,995.36) and the remainder of the unencumbered proceeds ($347,821.48). Mr. Bowser
is ORDERED to deposit $347,821.48 with the court. It is further ORDERED that he and Mrs.
Bowser may not transfer the Townhome, or any interest in the Townhome. If the Townhome
sale does not go forward (the sale had not closed at the time the court held the evidentiary
hearing), Mr. Bowser may not transfer the $496,995.36 in any way without express permission
from the court (for instance, if he has to use the funds to purchase a different piece of property,
he must petition the court for permission to do so).
DATED this 24th day of June, 2019.
BY THE COURT:
TENA CAMPBELL
U.S. District Court Judge
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