Now Updating
In re: EMAD AZIZ MASOUD ALFAHEL and LINA NADIM FAHEL

Summarizing by Shane Ramsey

In re: EMAD AZIZ MASOUD ALFAHEL and LINA NADIM FAHEL

Summarizing by Bradley Pearce

Trans-west, Inc. v. Jeffrey Mullins

Case Type:
Consumer
Case Status:
Affirmed
Citation:
20-046 (10th Circuit, Jun 30,2021) Not Published
Tag(s):
Ruling:
Discerning no clear error in the post-trial factual findings of the U.S. Bankruptcy Court for the District of Colorado (BC), the Bankruptcy Appellate Panel of the Tenth Circuit (BAP) affirmed its determination to exempt, under § 523(a)(2)(A) and (a)(6), the whole debt as to which Charity D. Mullins was jointly and severally liable for with her co-debtor husband per to a theory of civil conspiracy, after finding her husband to have engaged in a fraudulent kickback scheme to the detriment of the appellee that rendered the same joint debt as to himself non-dischargeable per the same sections.
Procedural context:
Jeffrey T. Mullins (JTM) and Charity D. Mullins (CDM) (collectively, the DRs) appealed the BC’s judgment in favor of the appellee, Trans-West, Inc., d/b/a Transwest Truck Trailer RV (TW), on TW’s complaint that its debt be excepted from discharge under 11 U.S.C. § 523(a)(2)(A) and (a)(6). The BC issued its finding of fact after a four-day trial on the merits, which included live testimony from eight witnesses, three of whom were experts, and the deposition testimony of five additional witnesses. The BC determined that JTM, while an employee of TW, engaged in an extensive fraudulent kickback scheme netting himself over $1,000,000 to the detriment of TW. It thus (1) deemed JTM’s entire debt to TW to be excepted for discharge under § 523(a)(2)(A) for actual fraud and misrepresentation and (a)(6) for willful and malicious injury; (2) categorized JTM’s entire debt, which sat at $1 million, to be non-dischargeable as to CDM under these same provisions because, under a theory of civil conspiracy, CDM was jointly and severally liable for the entire sum due to her “extensive[] and overt[]” participation in her husband’s scheme; (3) found this debt to be subject to treble damages under Colorado law; and (4) adjudicated this debt, with damages included, to be except from discharge as to both JTM and CDM, leaving the two DRs on the hook for $3 million. By no means mitigating this judgment’s asperity, the BC did dismiss all counts related to fiduciary duty under § 523(a)(4). The DRs opted to timely appeal the BC’s judgment not as to JTM but solely as to CDM. They “assign[ed]” five separate points of error to the BC’s conclusion that CDM was properly found liable for the debt to TW.
Facts:
In Texas, no issue had apparently emerged, though some of the means were then arguably forged. Prior to October 2011, the DRs lived in Texas. While there, JTM owned and operated an RV sales business under the name Pinnacle Coach LLC (Pinnacle). Although not actively involved in the purchase and sale of RVs through his company, the BC found that CDM was an employee with check-signing authority on the company’s bank account and participated in the winding down of this entity in late 2011. It was after JTM, in September 2011, relocated the family to Colorado that the relevant fraud commenced, with CDM’s association clear, if not its full extent or her complete cognizance. Upon (or soon after) his arrival in the Centennial State, JTM took a job as sales manager with TW. From the very moment he began his tour—sometime towards the end of 2011—until its discovery in mid-2015, JTM orchestrated and conducted an elaborate fraudulent kickback scheme, using his position as sales manager to cause Trans-West to “buy high” from and “sell low” RV inventory to a network of business partners, who subsequently remitted checks or cash directly to JTM that represented a portion of the profit from each transaction. These proceeds were deposited into a joint personal checking account held by the Mullins, a bank account of Pinnacle, and a bank account of Mullbuch, LLC (Mullbuch), a life-coaching company operated by CDM. Upon discovery of this fraud, TW brought claims against the DRs in a state court civil action. After considering TW’s referral of the matter to the Weld County District Attorney, criminal charges were filed against JTM only in that rather agricultural jurisdiction. The wheels of civil litigation then stopped when the DRs filed single joint chapter 7 petition on April 20, 2016. TW responded by initiating the underlying adversary proceeding, which was itself stayed until the conclusion of the criminal case against JTM. In its second amended complaint, TW sought to establish the following: (1) the non-dischargeable nature of the debt owed by JTM under § 523(a)(2)(A), (a)(4), and (a)(6); (2) JTM’s his liability for violating Colorado’s civil theft statute, (3) both DRs’ liability to TW for conspiracy to commit false representation and actual fraud under § 523(a)(2)(A) and conspiracy to commit willful and malicious injury under § 523(a)(6); (4) a nondischargeable judgment against CDM alone for aiding and abetting fraud or defalcation while acting in a fiduciary capacity under § 523(a)(4); and (5) an award of any damages proven at trial, including an award of treble damages, attorney’s fees, and costs pursuant to Colorado’s civil theft statute for damages resulting from the underlying theft.
Judge(s):
Tom R. Cornish; Terrence L. Michael; and Sarah A. Hall

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