Colonial-Interstate, Inc. v. Ayers (In Re Ayers)

83 B.R. 83, 1988 Bankr. LEXIS 198, 17 Bankr. Ct. Dec. (CRR) 134
CourtUnited States Bankruptcy Court, M.D. Georgia
DecidedFebruary 22, 1988
Docket19-40096
StatusPublished
Cited by9 cases

This text of 83 B.R. 83 (Colonial-Interstate, Inc. v. Ayers (In Re Ayers)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Colonial-Interstate, Inc. v. Ayers (In Re Ayers), 83 B.R. 83, 1988 Bankr. LEXIS 198, 17 Bankr. Ct. Dec. (CRR) 134 (Ga. 1988).

Opinion

MEMORANDUM OPINION ON COMPLAINT TO DETERMINE DIS-CHARGEABILITY OF DEBT

ROBERT F. HERSHNER, Jr., Chief Judge.

STATEMENT OF THE CASE

Glenn M. Ayers, Defendant, filed a petition for relief under Chapter 7 of the Bankruptcy Code on September 22, 1986. Colonial-Interstate, Inc., Plaintiff, is listed in Defendant’s bankruptcy schedules as an unsecured creditor holding a disputed claim in the amount of $7558.51. On December 29, 1986, Plaintiff filed a complaint seeking to have its claim determined to be nondis-chargeable under section 523 of the Bankruptcy Code. 1

The complaint came on for trial on June 24,1987. The Court, having considered the evidence presented, now publishes its findings of fact and conclusions of law.

FINDINGS OF FACT

Plaintiff employed Defendant at its service station in Commerce, Georgia. In September of 1983, Plaintiff promoted Defendant to the position of service manager of the Commerce station. This adversary proceeding concerns the period of time from September of 1983 to March of 1985, during which Defendant served as station manager of the Commerce station.

Defendant’s duties as station manager included making a daily deposit and com *85 pleting a daily report on inventory. The daily deposits were to be made in cash only, as it was Plaintiffs policy not to allow station managers to deposit checks as part of the daily deposits. Therefore, Defendant was required to cash any checks received from customers before making the daily deposit. In September of 1983, Defendant opened an account in the name of Ayers Interstate at the First National Bank of Jackson County (Jackson Bank) for the purpose of cashing customer checks. Defendant used the account at the Jackson Bank for the purpose of cashing checks. No checks were written on the account at the Jackson Bank.

On September 29, 1984, Defendant opened an account at the First National Bank of Commerce (Commerce Bank). The account at the Commerce Bank was a personal account and not related to Defendant’s service station. Defendant testified that he deposited his personal income in the account at the Commerce Bank. Defendant received income from his employment with Plaintiff and from cars that he sold as a sideline business. Although Defendant wrote some checks on the account at Commerce Bank for personal expenses, he testified that he paid a majority of his bills in cash.

After Defendant assumed the position of service station manager, he became aware of shortages in the money received at the station. Mr. James Doggett, a supervisor for Plaintiff, testified that the Commerce station had a history of shortages before Defendant became the station manager, and that two previous managers of the Commerce station had lost their jobs due to these shortages. Defendant initially reported some minor shortages 2 to Plaintiff, in accordance with company policy. 3 Defendant testified that he attempted to ascertain which, if any, of his employees was responsible for the shortages, however, he was unable to discover the cause of the shortages. Rather than continue reporting the growing shortages to Plaintiff, Defendant testified that he borrowed money to cover the shortages and did not indicate a shortage on his daily reports. It was the policy of Plaintiff that service station managers were responsible for paying to Plaintiff the amount of any shortages.

By September of 1984, the shortages at the Commerce station had increased and Defendant no longer felt capable of covering the shortages with his personal funds. Rather than inform Plaintiff of the shortages, Defendant developed a “check-kiting” scheme to camouflage the shortages. Defendant began writing checks payable to cash on his personal account at the Commerce Bank, cashing the checks at the Jackson Bank, and then sending the money to Plaintiff in the daily deposit. Defendant would then take money from the Commerce station over the next few days and deposit this money in his account at the Commerce Bank to cover the check which he had cashed at the Jackson Bank. Defendant did not indicate a shortage on his daily reports, therefore Plaintiff was kept unaware of the situation at the Commerce station.

Defendant continued writing checks payable to cash on the account at the Commerce Bank and cashing the checks at the Jackson Bank until February of 1985, at which time the Jackson Bank refused to cash any more checks for Defendant. Defendant then began writing checks on the account at the Commerce Bank and cashing these checks at the Northeastern Banking Company (Northeastern Bank) located in Commerce, Georgia. Apparently the Northeastern Bank would not cash checks for large amounts that were drawn on another bank and made payable to “cash,” therefore Defendant began writing these checks to fictitious payees. Defendant would endorse the check in the name of the fictitious person, cash the check along with the checks received from customers, and *86 send the money to Plaintiff in the daily deposit.

Defendant continued to operate in this fashion until March 18, 1985. On the morning of March 18, 1985, Mr. James Doggett arrived at the Commerce station for the purpose of conducting a routine audit control. Defendant failed to appear for work on that day. 4 Mr. Doggett had the locks on the Commerce station changed on the evening of March 18, 1985. Defendant testified that, after learning from station employees that Plaintiff had changed the locks on the station, Defendant did not return to work because he “figured [Plaintiff] didn’t want [him] up there.” On March 19, 1985, Mr. Doggett was joined by Mr. Jack Kennedy, a supervisor for Plaintiff. Mr. Doggett and Mr. Kennedy conducted an audit of the Commerce station, which revealed a shortage of $7551.81.

CONCLUSIONS OF LAW

Plaintiff contends that the debt owed it by Defendant is nondischargeable under section 523(a)(2)(A) and (4). 5 A creditor seeking to have a debt determined to be nondischargeable under section 523 bears the burden of proving each element by clear and convincing evidence. Schweig v. Hunter (In re Hunter), 780 F.2d 1577, 1579 (11th Cir.1986); Seepes v. Schwartz (In re Schwartz), 45 B.R. 354, 357 (S.D.N.Y.1985).

Section 523(a)(2)(A) provides that a debt- or may not obtain a discharge from any debt “(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition; ....” 11 U.S.C.A. § 523(a)(2)(A) (West Supp.1987). In In re Hunter, 6 the Eleventh Circuit Court of Appeals set forth the elements a creditor must establish under this section. The Eleventh Circuit stated:

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Cite This Page — Counsel Stack

Bluebook (online)
83 B.R. 83, 1988 Bankr. LEXIS 198, 17 Bankr. Ct. Dec. (CRR) 134, Counsel Stack Legal Research, https://law.counselstack.com/opinion/colonial-interstate-inc-v-ayers-in-re-ayers-gamb-1988.