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Post-Confirmation Committee for Small Loans, Inc. v. Martin

United States District Court, M.D. Georgia, Albany Division

October 14, 2014

POST-CONFIRMATION COMMITTEE FOR SMALL LOANS, INC., Plaintiff,
v.
W. DEREK MARTIN, as Executor of the Estate of Vance R. Martin, et al. Defendants.

ORDER

W. LOUIS SANDS, District Judge.

Presently before the Court is a Motion to Dismiss filed by pro se Defendant Grace Elizabeth Martin Johnston, Individually, and as Trustee of the Vance R. Martin GST Exempt Family Trust F/B/O Grace Elizabeth Martin Johnston ("Johnston"). (Doc. 70.) Therein, she seeks dismissal of Counts III, IV, X, XIX, XX, XXI, and XXIV. ( Id. at 3-4.) Johnston also argues that the Court does not have personal jurisdiction over her. ( Id. at 4.)

FACTUAL BACKGROUND[1]

Johnston, a citizen of Ohio, is the daughter of Vance "Rudy" Martin ("Rudy Martin") and the sister of Derek Martin and Jeff Martin. (Doc. 1 at ¶¶ 32 & 46.) She was, at all times relevant to this suit, an equity owner of Small Loans, Inc., The Money Tree, Inc., The Money Tree of Georgia, Inc., The Money Tree of Florida, Inc., and The Money Tree of Louisiana, Inc. (collectively, "the Debtors"), and The Interstate Motor Club, Inc., as well as the owner and/or beneficiary of various trusts and entities established by members of the Martin family, including the Johnston trust. ( Id. at ¶¶ 17 & 32.)

In 1987, Vance "Rudy" Martin ("Rudy Martin") founded The Money Tree of Georgia in Bainbridge, Georgia. ( Id. at ¶ 46.) Over time, Rudy Martin organized various corporate affiliates of The Money Tree of Georgia in Alabama, Florida, and Louisiana. ( Id. ) The Money Tree was organized as the parent company of Small Loans, The Money Tree of Georgia, The Money Tree of Florida, and The Money Tree of Louisiana. ( Id. at ¶¶ 17 & 46.) The primary business of those corporate entities was providing small loans to individuals with limited access to credit. ( Id. at ¶ 46.)

By 2000, the Debtors were insolvent and continued in business only by raising additional funds by debt offerings to Investors, who were primarily Georgia retirees. ( Id. at ¶¶ 3 & 46.) Best Buy Autos of Bainbridge, Inc. ("Best Buy"), a subsidiary of The Money Tree of Georgia, and therefore an indirect subsidiary of The Money Tree, sold and financed automobiles. ( Id. at ¶¶ 36 & 47.) From 2009 until the Debtors filed for bankruptcy, Best Buy owed The Money Tree of Georgia at least $16.97 million. ( Id. at ¶ 47.) The Money Tree and The Money Tree of Georgia raised capital by selling various debt instruments to people residing in Georgia. ( Id. at ¶ 48.) The latter sold various debt instruments to Georgia investors from 1999 until 2005. ( Id. at ¶ 49.) The Money Tree of Georgia raised approximately $73 million in capital during that time period. ( Id. ) In 2005, The Money Tree registered with the United States Securities and Exchange Commission to sell debt instruments to members of the public. ( Id. at ¶ 50.) From 2005 until 2011, The Money Tree raised approximately $71 million in capital through debt offerings. ( Id. )

The Debtors filed for bankruptcy and their Chapter 11 Plan was confirmed on or about May 6, 2013. ( Id. at ¶ 51.) Plaintiff was appointed to pursue any claims and causes of action held by the Debtors' estates because those estates do not have sufficient assets to satisfy at least $84 million in claims of the Debtors' creditors. ( Id. ) The Debtors' loss of assets and, derivatively, the creditors' loss of assets, would have been lessened or avoided but for the actions of the Defendants in this suit. ( Id. at ¶ 52.)

According to the Debtors' own records, the Debtors were insolvent by 2001. ( Id. at ¶ 54.) Prior to his death, Rudy Martin established several trusts, including the Johnston Trust. ( Id. at ¶ 58.) The trusts were established with knowledge of the potential claims against Rudy Martin and his heirs as a result of the misconduct associated with the various Money Tree entities. ( Id. )

The Motor Club was a business organized by Rudy Martin in 1990 to market various ancillary services to Debtors' consumer loan customers. ( Id. at ¶ 81.) The equity interests in that company were owned by Rudy Martin, Derek and Jeff Martin, and Johnston. ( Id. ) The Motor Club was established separately from Debtors so the Martins could usurp the Debtors' corporate opportunities. ( Id. at ¶ 82.) During the four years prior to the Debtors' bankruptcy petition, the Debtors transferred at least $1, 885, 800.55 to The Motor Club. ( Id. at ¶ 84.) Johnston received at least $120, 626.50 from The Motor Club. ( Id. at ¶¶ 84-86.)

ANALYSIS

Federal Rule of Civil Procedure 12(b)(6) permits a party to assert by motion the defense of failure to state a claim upon which relief can be granted. When reviewing a Rule 12(b)(6) motion, the Court must "accept[] the allegations in the complaint as true and constru[e] them in the light most favorable to the plaintiff." Hill v. White, 321 F.3d 1334, 1335 (11th Cir. 2003). A motion to dismiss a plaintiff's complaint under Rule 12(b)(6) should not be granted unless the plaintiff fails to plead enough facts to state a claim to relief that is plausible, and not merely just conceivable, on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "Dismissal for failure to state a claim is proper if the factual allegations are not enough to raise a right to relief above the speculative level.'" Edwards v. Prime, Inc., 602 F.3d 1276, 1291 (11th Cir. 2010) (quoting Rivell v. Private Health Care Sys., Inc., 520 F.3d 1308, 1309 (11th Cir. 2008)). "Stated differently, the factual allegations in the complaint must possess enough heft' to set forth a plausible entitlement to relief.'" Id. at 1291 (quoting Fin. Sec. Assurance, Inc. v. Stephens, Inc., 500 F.3d 1276, 1282 (11th Cir. 2007)).

A. Conspiracy to Breach Fiduciary Duties and Aiding and Abetting Breach of Fiduciary Duties

Counts III and IV allege that Johnston, in concert with various individuals and entities, including Debtors' directors and officers, intentionally conspired to breach fiduciary duties, and aided and abetted others in the breach of fiduciary duties, owed by Debtors' directors and officers to Debtors and their creditors. (Doc. 1 at ¶¶ 121-126.) Johnston argues that she cannot be held liable in Counts III and IV because she was not an officer, director, or majority shareholder of The Money Tree and therefore did not owe a fiduciary duty to any investor or creditor. (Doc. 70 at 3.)

The Court finds that Counts III and IV properly state causes of action against Johnston under Georgia law for conspiracy to breach fiduciary duties and aiding and abetting breach of fiduciary duties. To be liable for those torts, Johnston need not owe any person fiduciary duties. See Ga. Code Ann. § 51-12-30. Instead, the complaint is sufficient as to Counts III and IV if it alleges that Johnston acted as a joint tortfeasor with other individuals who owed fiduciary duties. Insight Technology, Inc. v. FreightCheck, LLC, 633 S.E.2d 373, 377-78 (Ga.Ct.App. 2006). Here, the complaint alleges that Johnston acted with others in a conspiracy to intentionally breach ...


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