Jerry Marsh v. Madison Resource Funding Group

Case Type:
Business
Case Status:
Affirmed
Citation:
20-6018 (8th Circuit, Jul 21,2021) Published
Tag(s):
Ruling:
Finding no error in the ruling, made by the U.S. Bankruptcy Court for the District of Minnesota (BC), on the amount of damages owed to Madison Resource Funding Corp. (Madison) by Jerry Marsh (Jerry) and Robert Marsh (Robert, and with Jerry, DRs) under § 523(a)(2)(A), the only part of the BC's ruling that the DRs opted to appeal, the Bankruptcy Appellate Panel for the Eighth Circuit (BAP) affirmed.
Procedural context:
The Debtors each filed a bankruptcy petition. In separate adversary proceedings brought by Madison against each Debtor, the BC held nondischargeable under § 523(a)(2)(A) debt owed to Madison. Specifically, it found that Jerry's debt to Madison arose from breach of contract (his guaranty) and was excepted from Jerry's discharge due to the latter's fraudulent representations and omissions to Madison. It then determined that, based on a letter from Madison to Syglo, LLC (Syglo), a temporary staffing agency created by Jerry, as well as Jerry himself terminating the Master Agreement, at the time of termination Madison was owed $1,676,162.20--as did Jerry pursuant to his own personal guaranty. As to Robert, the BC held that, because Robert was a willing participant in Jerry's fraud, the debt was nondischargeable as to him as well under imputation of fraud.
Facts:
Synico Staffing, LLC (Synico), a company formed in 2006, operated to fulfill the temporary staffing needs of other companies. Brothers, the DRs were Synico's president and vice president. Through an entity that contracted with U.S. Bank (USB) to facilitate its temporary staffing practices, Synico provided temporary staff to USB. In 2013, Jerry formed Syglo, LLC (Syglo), a temporary staffing agency; in 2014, without the approval and knowledge of USB Synico and Syglo entered into an agreement for Syglo to provide temporary staff to USB as a subvendor of Synico. It was thereafter that Madison, a provider of payroll and billing services to temporary staffing agencies, including Syglo, and a buyer of existing and future accounts, entered the picture. In 2014, Madison and Syglo entered into a Master Agreement and a Security Agreement. Jerry signed a guaranty of Syglo's obligations to Madison. When Jerry submitted USB to Madison for approval as a new client, he omitted mention that Syglo would be a subvendor for Synico. Unbeknownst to Madison until a year after it started funding and processing payments for Syglo's employees at USB, iSyglo, not USB, that made direct payments to Madison in violation of the agreement. Unfortunately because of a later contract dispute between USB and Synico, Syglo was unable to pay Madison.
Judge(s):
Charles L. Nail, Jr.; Barry S. Schermer; and Thomas L. Saladino

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