United States District Court, E.D. Pennsylvania
JAN E. DUBOIS, District Judge.
This case arises out of the alleged fraudulent transfer of the assets of defendant SCIX, LLC ("SCIX"), and the proceeds of those assets, to the remaining defendants, in violation of, inter alia, the Pennsylvania Uniform Fraudulent Transfer Act ("PUFTA"), 12 Pa. Cons. Stat. Ann. § 5104.
Presently before the Court are (1) Plaintiff's Motion for Summary Judgment Against Clement Hipple, Complete Group, LLC and Steel Seal, LLC Filed Pursuant to Fed.R.Civ.P. 56 and for Default Judgment Against Melissa Moreno, SCIX, LLC, and Steel Seal Pro, LLC Pursuant to Fed.R.Civ.P. 55(b)(2) [hereinafter plaintiff's Motion for Summary Judgment]; (2) defendant Clement Hipple and Steel Seal, LLC's Cross-Motion for Partial Summary Judgment [hereinafter defendants' Cross-Motion for Partial Summary Judgment]; (3) Plaintiff's Motion for Injunctive Relief Pursuant to Fed.R.Civ.P. 65 Against All Defendants to Seize Assets and Prevent the Ongoing Theft of Assets that Are the Proceeds of the Fraudulent Conveyance of the Assets of SCIX, LLC [hereinafter plaintiff's Motion for Injunctive Relief], treated by the Court as a Motion for Preliminary Injunction; and (4) defendant Clement Hipple, Steel Seal, LLC, and Complete Group, LLC's Supplemental Brief Post-Deposition of Plaintiff's Expert, Wayne Geisser, CPA, in Further Opposition to Plaintiff's Motion for Summary Judgment [hereinafter defendants' Motion in Limine], treated by the Court as a Motion in Limine to exclude the proposed testimony of Wayne Geisser.
For the following reasons, all of the Motions presently before the Court are denied except for that part of plaintiff's Motion for Summary Judgment that requests the entry of default judgment, pursuant to Federal Rule of Civil Procedure 55(b)(2), against defendants Melissa Moreno, SCIX, and Steel Seal Pro, LLC ("Steel Seal Pro"). Default judgment is entered against those defendants, and a hearing for the purpose of determining appropriate relief will be scheduled in due course.
A. SCIX and Steel Seal
Defendant Clement Hipple founded SCIX in 1999. Pl.'s Mot. Summ. J. at 2 ¶ 2. The exclusive business of SCIX was the sale of Steel Seal, an automotive-repair product used to seal blown head gaskets. Dep. Clement Hipple, at 25, 30. SCIX is the assignee of three patents related to Steel Seal. Pl. Mot. Summ. J. Ex. B. In 1999, SCIX entered into a "confidentiality agreement" with Colonial Chemical Company ("Colonial"), Pl. Reply Mem. Ex. E, whereby Colonial manufactured Steel Seal for SCIX, and SCIX marketed and sold Steel Seal using the internet, Pl. Mot. Summ. J. Ex. B at 25-26.
On January 1, 2001, Clement Hipple transferred his "membership interest" in SCIX to Brian Hipple, his son, for one dollar. Ans. of Defs. to Pl.'s Mot. Summ. J. at 4 ¶ 3. Clement Hipple "retain[ed] full voting rights with respect to... all matters relating to the affairs of the Company." Pl. Mot. Summ. J. Ex. U. The extent Clement Hipple exercised control over SCIX after selling his "membership interest" to Brian Hipple is contested. Ans. of Defs. to Pl.'s Mot. Summ. J. at 4 ¶ 3.
B. Judgments Against SCIX
Plaintiff Teresa Hipple and defendant Clement Hipple were married on March 31, 2001. Aff. Clement Hipple ¶ 3. On July 3, 2002, in exchange for loans made to SCIX, SCIX executed a $250, 000 judgment note payable to Teresa Hipple. Pl.'s Mot. Summ. J. at 2 ¶ 6. On August 23, 2002, to secure an additional loan, SCIX executed a $100, 000 judgment note made payable to Teresa Hipple with the same terms and conditions. Id. at 2 ¶ 7. Both notes were signed by Brian Hipple. Ans. of Defs. to Pl.'s Mot. Summ. J. at 4-5 ¶¶ 6, 7. The judgment notes were recorded in the Bucks County Court of Common Pleas, and SCIX did not challenge them. Id. ¶¶ 8, 9.
The books of SCIX purport to show loans to two additional creditors: JC Consultant & Leasing Corporation ("JC Consultant") and defendant Clement Hipple. Ans. of Defs. to Pl.'s Mot. Summ. J. Ex. F. JC Consultant is an "inactive" business solely owned by Clement Hipple. Dep. Clement Hipple, at 16, 21. The loans of JC Consultant are reflected in judgment notes filed in the Bucks County Court of Common Pleas. Ans. of Defs. to Pl.'s Mot. Summ. J. Ex. 3. The validity of the JC Consultant notes is contested. The loans of Clement Hipple are reflected only in the books of SCIX, Pl.'s Mot. Summ. J. Ex. J, and the value of those loans is contested.
On April 1, 2010, plaintiff Teresa Hipple and defendant Clement Hipple were divorced. Pl. Mot. Summ. J. at 3 ¶ 11. On September 16, 2010, the Bucks County Court of Common Pleas issued a Writ of Execution on one of the judgment notes payable to plaintiff. The Writ of Execution was served by the Sheriff of Bucks County on Wachovia Bank as garnishee, and on October 13, 2010, a judgment in the amount of $53, 524.14 was entered against Wachovia Bank in favor of Teresa Hipple. Pl.'s Mot. Summ. J. at 3-4 ¶ 15. Wachovia Bank paid plaintiff $53, 524.14 from SCIX's bank account. Id.
C. Transfer of Assets of SCIX to Clement Hipple
On October 5, 2010, nineteen days after the Bucks County Court of Common Pleas issued a Writ of Execution on plaintiff's judgment note, Brian Hipple, acting on behalf of SCIX, signed a promissory note in the amount of $210, 000 payable to Clement Hipple. Pl. Mot. Summ. J. Ex. H. The promissory note states that it was "in consideration of substantial credit extended to it previously by Clement R. Hipple." Id. The note also states that "all such principal and interest [are] due and payable immediately upon Creditor incurring, sustaining or expending monies whatsoever in connection with or on account of the Loan, without demand or further notice." Id. SCIX executed a Security Agreement on the same day to secure the October 5, 2010 promissory note. Pl. Mot. Summ. J. Ex. I. The Security Agreement was signed by Brian Hipple. Id. The UCC Financing Statement accompanying the Security Agreement lists the collateral as "[a]ll business assets" of SCIX. Id. In describing the collateral, the UCC Financing Statement incorporates "Exhibit A, " which lists as collateral, inter alia, "websites, QuickBooks, 1-800 number, " "Steel Seal Logo, ads, rights to the name, confidentiality agreement with Colonial Chemical, the formula, " and Steel Seal inventory. Id.
On October 8, 2010, Clement Hipple sent a letter to Brian Hipple stating that "I am making a formal demand for repayment in full of the amount of $210, 000. According to the terms of the Security Agreement you have two days in which to repay the loans or you will be in default of our agreement." Pl. Mot. Summ. J. Ex. K. On October 13, 2010, Clement Hipple sent Brian Hipple a letter stating that he was exercising his "rights as a secured creditor, " and that he "will be coming to any locations utilized by SCIX to take possession of that collateral in partial satisfaction of the debt." Pl. Mot. Summ. J. Ex. M. Brian Hipple, on behalf of SCIX, signed a statement on that letter "consent[ing] to an acceptance by you of all collateral repossessed from SCIX, LLC, in satisfaction of the obligation it secures." Id.
As set forth in greater detail below, the assets that Clement Hipple obtained in satisfaction of the Security Agreement are in dispute. It is undisputed that Clement Hipple obtained all the items listed in the inventory titled "SCIX physical assets that I have taken." Ans. of Defs. to Pl.'s Mot. Summ. J. at 10 ¶ 6. Among the items listed on the inventory are 572 eight-ounce bottles of Steel Seal and 433 cases of sixteen-ounce bottles of Steel Seal. Ans. of Defs. to Pl.'s Mot. Summ. J. Ex. 10. In his affidavit, Clement Hipple claimed that the product he repossessed "was sold in the same manner and for the same price as SCIX had charged." Aff. Clement Hipple ¶ 67. The amount yielded from those sales is disputed. Clement Hipple "estimated" that the physical assets were sold for $110, 000.00. Id. Plaintiff asserts that the value of the finished inventory alone, if sold at the prices listed on the Steel Seal website, was $493, 988. Pl.'s Resp. to Defs.' Supplemental ...