Brooke Credit Corp. v. Lobell (In Re Lobell)

390 B.R. 206, 2008 Bankr. LEXIS 2513, 2008 WL 2599990
CourtUnited States Bankruptcy Court, M.D. Louisiana
DecidedJune 19, 2008
Docket16-10412
StatusPublished
Cited by4 cases

This text of 390 B.R. 206 (Brooke Credit Corp. v. Lobell (In Re Lobell)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Brooke Credit Corp. v. Lobell (In Re Lobell), 390 B.R. 206, 2008 Bankr. LEXIS 2513, 2008 WL 2599990 (La. 2008).

Opinion

MEMORANDUM OPINION

DOUGLAS D. DODD, United States Bankruptcy Judge.

Brooke Credit Corporation (“Brooke”) sued to prevent the chapter 7 discharge of *210 debtor Rhonda Benoit Lobell (“Lobell”), to except Lobell’s debt to it from discharge on several grounds and for injunctive relief. Lobell’s obligation to Brooke is excepted from discharge under 11 U.S.C. § 523(a)(6). The court also denies Lobell’s discharge under 11 U.S.C. § 727(a)(2) and (7). Brooke did not establish its entitlement to the other relief it sought.

FACTS

A. Lobell and Brooke Embark in Business

Rhonda Lobell has spent much of her adult life in the insurance business. She worked for Wright and Percy, a local independent insurance agency, from 1985 until January 2001. She left that firm to start her own independent insurance agency, which she named Lobell-Dixon Insurance Agency, LLC (“L-D”).

Lobell set out to expand her business in 2004 by purchasing other area insurance agencies but was unable to locate financing. An acquaintance gave Lobell’s name to Brooke Franchise (“Brooke”). 1 Brooke’s business model involved the purchase of independent insurance agencies which it then sold on credit to third parties who ran the agencies as Brooke franchises. 2 Brooke was interested in acquiring and selling insurance agencies to establish its franchises around Baton Rouge.

On November 15, 2004, Jim Crombie of Brooke electronically mailed Lobell financial information (including cash flows and pro formas) for two independent insurance agencies Brooke had available for sale, one in Baton Rouge and the second in LaPlace. Lobell was interested in buying the two agencies and also making L-D’s Gonzales office a Brooke franchise. The November 15, 2004 electronic mail also transmitted credit and franchise applications. 3

Warren Kuberry of Brooke visited Baton Rouge in November 2004 to accompany Lobell on an inspection of the Baton Rouge and LaPlace agencies. Though Lo-bell was the intended purchaser and Ku-berry accompanied her, she insisted at trial that Kuberry alone performed the only due diligence in connection with the purchases.

B. Lobell-Dixon Agency Transactions

L-D, Lobell’s independent insurance agency, agreed to buy the Baton Rouge agency on November 29, 2004. 4 L-D entered into a similar agreement to buy the LaPlace agency on November 30, 2004. 5

The sales closed on November 30, 2004. Brooke financed L-D’s purchase of the two franchises and provided working capital. L-D executed a promissory note in *211 Brooke’s favor for $1,167,034. 6 The parties also entered into an Agreement for Advancement of Loans (“Loan Agreement”) for both the original purchase money loan and subsequent loans. 7 Brooke took as security a lien on all L-D’s tangible and intangible personal property, including its books of business, customer accounts, customer lists, customer files, insurance policies, rights to payments or proceeds, contract rights and goodwill. 8 L-D also signed a franchise agreement to operate the Gonzales, Baton Rouge and LaPlace offices as Brooke franchises. 9 Finally, Rhonda Lobell personally guaranteed payment of L-D’s obligations to Brooke. 10

L-D also entered into a Buyer Assistance Plan with The American Heritage, Inc., another Brooke affiliate, for consulting services relating to the agency acquisition. 11 These services included “inspecting the agency, consulting with the buyer, training services, marketing services, facility services, facility analysis, personnel analysis and operational analysis during the pre- and post-closing periods.” 12

C. L-D’s Failed Transition to the Brooke System

Shortly after the closing, Brooke sent three employees to help Lobell with the transition of the newly franchised agencies to the Brooke “model.” Lobell testified that the transition team was ineffective. She also communicated to Kuberry that she did not like Brooke’s accounting and marketing systems. Lobell complained too about delays in handling correspondence and Brooke’s requirement that L-D deal only with vendors Brooke selected to finance customers’ premiums, to buy office supplies and for printing. 13

Kuberry admitted that the transition did not go well but disagreed with Lobell on the reason. Kuberry testified that Lobell and her employees did not accept the basic procedures Brooke required its franchisees to follow, particularly the procedures associated with receiving and depositing premium payments. He also testified that LD’s offices were overstaffed.

In any case, the evidence supports a finding that Lobell quickly developed buyer’s remorse.

D. Lobell Helps Form Lobell Insurance Services

Lobell attended a training program for new Brooke agents at the Brooke Training Academy in late February 2005. Her dissatisfaction with this class, and with Brooke generally by then, caused her to begin considering a way to end their relationship. By November or December 2005, Lobell decided to look for another agency to which she could transfer L-D’s customers. Not coincidentally, the debtor *212 helped form Lobell Insurance Services around the same time.

Gene Eleazar, Lobell’s boyfriend, formed Lobell Insurance Services (“LIS”) in November 2005. Eleazar did not then, or at the time of trial, hold a Louisiana insurance agent’s license. Lobell helped Eleazar prepare documents needed to create the agency but did not disclose to Brooke either that LIS had been formed, or that she had taken part in its formation. 14 LIS’s first employee was Charles Dixon, Lobell’s former husband, a licensed insurance agent who had worked for L-D. Dixon was in fact LIS’s sole employee for nearly six months, until May 2006.

E. Lobell and Brooke’s Problems Grow

By early 2006, Kuberry noticed that the L-D agencies’ revenues were declining. In mid-February 2006, new Brooke area manager Michelle Mulle met with Lobell for the first time. As an area manager, Mulle was to assist Brooke franchisees with their daily operations including cash flow, work flow, marketing plans, budgets and operating expenses.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
390 B.R. 206, 2008 Bankr. LEXIS 2513, 2008 WL 2599990, Counsel Stack Legal Research, https://law.counselstack.com/opinion/brooke-credit-corp-v-lobell-in-re-lobell-lamb-2008.