Silver Dollar Sales, Inc. v. Olson

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below described is SO ORDERED. LP De

Dated: December 19, 2023. | ’ Pur

MICHAEL M. PARKER

UNITED STATES BANKRUPTCY JUDGE

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF TEXAS

SAN ANTONIO DIVISION

IN RE: §

§

MICHAEL SCOTT OLSON § CASE NO. 22-51401-MMP

§

§

DEBTOR. § CHAPTER 7

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§

SILVER DOLLAR SALES, INC., §

§

PLAINTIFF, §

§

Vv. § ADVERSARY NO. 23-05032-MMP

§

MICHAEL SCOTT OLSON §

§

DEFENDANT.

OPINION

I. INTRODUCTION

Before the Court is Plaintiff Silver Dollar’s Motion for Summary Judgment (“Motion,”

ECF No. 26)1 filed by Silver Dollar Sales, Inc. (“Silver Dollar”) and the Defendant’s Reply to

Plaintiff’s Motion for Summary Judgment and Objection to Summary Judgment Proof

(“Response,” ECF No. 29) filed by Michael Scott Olson (“Olson”). Invoking this Court’s full faith

and credit obligation,2 Silver Dollar seeks to have a $6,621,281.71 Mississippi state court

judgment (“Mississippi Judgment”) against Olson declared nondischargeable under 11 U.S.C.

§§ 523(a)(2)(A), (a)(2)(B), and (a)(6)3 and moves for summary judgment based on the doctrine of

collateral estoppel. The Court finds that there is no genuine issue as to any material fact and Olson

is entitled to judgment as a matter of law that the fraud and fraudulent transfer findings of fact in

the Mississippi Judgment are precluded from relitigation, except as to the amount of the judgment

attributable to such findings. The amount of the Mississippi Judgment attributable solely to fraud

and fraudulent transfers is unclear. Silver Dollar is thus not entitled to summary judgment

determining that the full amount of the Mississippi Judgment is nondischargeable.4 Silver Dollar

must still establish the portion of its claim solely attributable to Olson’s fraud and fraudulent

transfers which will be nondischargeable under 11 U.S.C. § 523(a)(2)(A). Accordingly, the Court

grants the Motion in part.

1 “ECF” denotes the electronic filing number.

2 28 U.S.C. § 1738.

3 All statutory references are to Title 11 of the United States Code unless otherwise specified.

4 The Court is not ruling that the entire $6.6 million judgment cannot be found to be non-dischargeable, but only that

the Mississippi Judgment did not so clearly find.

2

II. JURISDICTION

The Court has jurisdiction under 28 U.S.C. §§ 157 and 1334, and the Standing Order of

Reference of the United States District Court for the Western District of Texas, dated October 4,

2013. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I). Venue is proper under 28 U.S.C.

§ 1409. Both Plaintiff and Defendants have consented to the entry of final orders and a judgment

by this Court in this adversary proceeding. ECF Nos. 21 and 25.

III. BACKGROUND

The relevant part of this long-running dispute begins more than two decades ago. Both

parties participated in the wholesale grocery business. Olson owned River City Traders, a

Tennessee corporation which bought wholesale grocery products and sold them to grocery stores.

Ryan Sparks, owner of Silver Dollar and a related enterprise, T.B.S. Traders, began doing business

with Olson and River City Traders beginning in 1995. In 2001, after River City Traders found

itself in bankruptcy, Sparks and his companies executed a series of contracts extending credit to

River City Traders. These contracts included a $1.32 million promissory note, a $512,397.03

promissory note, a settlement agreement, and a consignment agreement (“2001 Agreements”).

River City Traders continued for several years but found itself in financial trouble yet again

in late 2007. River City Traders did not honor its notes to Sparks and his enterprises and did not

maintain sufficient collateral under the 2001 Agreements. In April 2008, T.B.S. Traders filed a

complaint for replevin against River City Traders and received a favorable order in June of that

year.5 Sparks then assigned all claims held by T.B.S. Traders and himself personally to Silver

Dollar and proceeded to file suit against Olson personally in Mississippi state court in April 2010.6

5 Def.’s Ex. G.

6 Pl.’s Mot. for Summ. J. at 2.

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After years of litigation, Silver Dollar consolidated its claims in a third amended complaint.7 Silver

Dollar’s complaint sought damages for breach of contract, breach of $1,320,000.00 promissory

note, breach of $512,397.03 promissory note, tortious interference with contract, tortious

interference with business relations, fraudulent transfer, fraud, conversion, and civil conspiracy.

After trial, the Mississippi jury returned a verdict, finding for Silver Dollar. The jury also made

specific findings that Olson committed fraud against Silver Dollar and that Olson had fraudulently

transferred assets belonging to Silver Dollar.8 The jury awarded $6,618,461.71 in compensatory

damages and $250,000.00 in punitive damages. The Mississippi state court entered judgment

against Olson for $6,618,461.71 in compensatory damages but reduced punitive damages to

$2,820.00 under a Mississippi statute limiting punitive damages based on a defendant’s net worth.

Olson then filed for chapter 7 bankruptcy in this Court and received a general discharge.

Silver Dollar filed this adversary proceeding asking this Court to find its claims against Olson

nondischargeable.

IV. SUMMARY JUDGMENT STANDARD

Silver Dollar moves for summary judgment on its §§ 523(a)(2)(A), (a)(2)(B), and (a)(6)

claims. Silver Dollar asserts that the Mississippi Judgment collaterally estops Olson from denying

the amount and dischargeability of his obligations to Silver Dollar and eliminates any “genuine

dispute as to any material fact” in Silver Dollar’s Complaint. FED. R. CIV. P. 56(a).

If the Mississippi Judgment preclusively establishes each element of Silver Dollar’s

§ 523(a)(2)(A), (a)(2)(B), and (a)(6) claims, and Olson cannot establish any dispute as to a material

fact in Silver Dollar’s Amended Complaint, then Silver Dollar is entitled to “judgment as a matter

7 Pl.’s Ex. 1.

8 Pl.’s Ex. 7.

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of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once Silver Dollar has established

that the Mississippi Judgment collaterally estops denial of its § 523(a) claims, the burden of proof

then shifts to Olson to establish a disputed material fact, if any, to Silver Dollar’s claims.

V. DISCUSSION

Invoking the doctrine of collateral estoppel, Silver Dollar asserts that the preclusive effect

of relevant factual findings in the Mississippi Judgment makes Olson’s debt to it nondischargeable

under §§ 523(a)(2)(A), (a)(2)(B), and (a)(6). A debt can be found nondischargeable in bankruptcy

if a creditor can show the debt satisfies the requirements of a subsection of § 523. Section

523(a)(2)(A) excepts debts from discharge which were obtained by “false pretenses, a false

representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s

financial condition.” Section 523(a)(2)(B) excepts debts from discharge which procured via a

statement in writing that was i) materially false, ii) respecting the debtor’s or an insider’s financial

condition, iii) on which the creditor reasonably relied, and iv) that the debtor made or published

with an intent to deceive. Finally, § 523(a)(6) excepts debts from discharge that are for “willful

and malicious injury by the debtor to another entity or to the property of another entity.”

In this case, Silver Dollar seeks to use collateral estoppel to establish the elements of its

nondischargeability action against Olson. For § 523(a)(2)(A), Silver Dollar seeks to use the fraud

and fraudulent transfer findings in the Mississippi judgment to qualify its debt as obtained by

“actual fraud,” making it nondischargeable.9 For its § 523(a)(2)(B) claim, Silver Dollar argues that

the fraud findings show that Olson made misrepresentations about his financial well-being,

similarly making his debt to Silver Dollar nondischargeable.10 Finally, Silver Dollar also argues

9 Pl.’s Complaint at 7.

10 Id. at 8.

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that the Mississippi Judgment for fraud results from Olson’s willful and malicious injury to Silver

Dollar, satisfying § 523(a)(6).11 Therefore, for Silver Dollar to succeed in relying on the preclusive

effect of the Mississippi Judgment to determine nondischargeability, it must show that the issue of

Olson’s fraud is barred from relitigation by collateral estoppel.

In nondischargeability actions, parties can rely on collateral estoppel to give preclusive

effect to findings in previous judgments. Grogan v. Garner, 498 U.S. 279, 284 n.11 (1991). The

doctrine of collateral estoppel provides that “[w]hen an issue of ultimate fact has once been

determined by a valid and final judgment, that issue cannot again be litigated between the same

parties in any future lawsuit.” Dowling v. U.S., 493 U.S. 342, 347 (1990) (citing Ashe v. Swenson,

397 U.S. 436, 443 (1970)).

Whether the Mississippi Judgment is entitled to preclusive effect depends on Mississippi

collateral estoppel law. Gober v. Terra + Corp. (In re Gober), 100 F.3d 1195, 1201 (5th Cir. 1996)

(Courts “[m]ust look to the state that rendered the judgment to determine whether the courts of

that state would afford the judgment preclusive effect.” (citing Marrese v. Am. Acad. Of

Orthopaedic Surgeons, 470 U.S. 373, 380 (1985))); see also Caton v. Trudeau (In re Caton), 157

F.3d 1026, 1028 (5th Cir. 1998) (applying the collateral estoppel law of the state in which the prior

decision at issue was entered). Any preclusive effect given to a state court judgment under

Mississippi’s doctrine of collateral estoppel also requires this Court to give such judgment full

faith and credit. 28 U.S.C. § 1738; Migra v. Warren City Sch. Dist. Bd. Of Educ., 465 U.S. 75,

81 (1984). Under Mississippi law, collateral estoppel precludes parties from relitigating specific

issues when there is “(1) a prior final judgment on an issue that is (2) actually litigated, (3)

11 Id. at 10.

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determined by, and (4) essential to that judgment.” Saucier v. Aviva Life and Annuity Co., 589

Fed. App’x. 701, 705 (5th Cir. 2014) (citing Baker & McKenzie LLP v. Evans, 123 So.3d 387,

401 (Miss. 2013)). In this case, Silver Dollar seeks to use the findings of fraud in the Mississippi

Judgment to establish elements of its nondischargeability claims. To succeed, Silver Dollar must

introduce a record sufficient to establish the controlling facts and the issues litigated in the

Mississippi proceedings. Id. Accordingly, Silver Dollar must show that:

(1) Silver Dollar received a final judgment on issues of fraud;

(2) the fraud issues were actually litigated at trial;

(3) the fraud claims were fully resolved in the Mississippi Judgment; and

(4) the determination of fraud was essential to the Mississippi Judgment.

The first requirement is easily met. The Mississippi Judgment included a specific finding

of “liability for fraud and fraudulent conveyance” against Olson.12 In addition, the Mississippi

Judgment was a final judgment. Under Mississippi law, a final judgment on the merits “is one that

adjudicates the merits of the controversy and settles all issues between all parties” LaFontaine v.

Holliday, 110 So. 3d 785, 787 (Miss. 2013). The Mississippi Judgment fully disposed of the issues

in the case and adjudicated the merits of the controversy. The judgment could be appealed only

within thirty days of the entry of the judgment. MISS. R. APP. P. 4(a). No such appeal was filed.

Under the second requirement, collateral estoppel “‘applies only to questions actually

litigated in the prior suit, and not to questions which might have been litigated.’” Mayor and Bd.

of Aldermen, City of Ocean Springs v. Homebuilders Ass’n of Miss., Inc., 932 So.2d 44, 59

(Miss. 2006) (citing Dunaway v. W.H. Hopper & Associates, 422 So.2d 749, 751 (Miss. 1982)).

This requirement is satisfied because the entered final judgment, the jury instructions, and the

12 Def.’s Ex. A. A fraudulent conveyance finding may be nondischargeable because “actual fraud” under § 523(a)(4)

encompasses fraudulent conveyances. Husky Int’l Elecs., Inc. v. Ritz, 578 U.S. 355, 363 (2016).

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pleadings show that the fraud and fraudulent conveyance issues were both litigated by the parties

at trial.

The third requirement, that the issue be “determined by” the previous judgment, is also

met. Saucier, 589 Fed. App’x. at 705. As noted above, the Mississippi Judgment fully disposed of

the fraud issues with special findings on fraud and fraudulent transfer. The third requirement is

thus satisfied.

Finally, Mississippi law requires that the determination of the issue being precluded to be

“essential to the judgment.” Saucier, 589 Fed. App’x. at 705. In other words, the finding in the

previous proceeding must have been necessary for the current court to reach its holding and cannot

be mere dicta. See Covington Cty. Bank v. Magee, 177 So.3d 826, 831-832 (Miss. 2015) (holding

that a previous court’s determination of a party’s rights was not essential to the judgment because

the case was dismissed on jurisdictional grounds and the determination was stated in a footnote).

In the Mississippi proceedings, Silver Dollar’s Amended Complaint13 contained fraud and

fraudulent transfer claims and the returned jury verdict form shows that the jury specifically found

Olson committed fraud against Silver Dollar, and that Olson fraudulently transferred assets

belonging to Silver Dollar. It is hard to think of a finding more essential to the judgment. Silver

Dollar has carried its burden in showing the lack of a disputed issue of material fact about a finding

of Olson’s liability for fraud and fraudulent transfers in the Mississippi Judgment. For these

reasons, the findings of fact in the Mississippi Judgment will be given preclusive effect.

But the preclusive effect of the Mississippi Judgment ends at the liability stage. The

Mississippi Judgment collaterally estops Olson from relitigating the issues of his own liability for

13 Pl.’s Ex. 1 at 14-18.

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fraud and fraudulent transfers. The Mississippi jury made specific findings on both issues—Olson

committed fraud against Silver Dollar and fraudulently transferred assets belonging to Silver

Dollar. But the issue for this Court is whether the full judgment amount of $6,618,461.71 in

compensatory damages and $2,820.00 in punitive damages (plus accrued interest) is

nondischargeable in bankruptcy under § 523. Unfortunately, neither the language of the

Mississippi Judgment nor that of the returned jury verdict form make clear how much of the total

judgment flowed from fraud and fraudulent transfer claims, and how much flowed from the claims

of conversion and breach of contract. Despite Silver Dollar’s insistence to the contrary, this Court

has a duty “tediously separate out damages between dischargeable and nondischargeable

claims.”14 The Mississippi Judgment does not collaterally estop Olson from contesting the amount

of the Mississippi Judgment that is nondischargeable.

The Mississippi Judgment states that “[t]he Plaintiff, Silver Dollar Sales, Inc. obtained a

favorable jury verdict on its claims against Scott Olson for fraud, fraudulent conveyance,

conversion and breach of contract, specifically finding liability for fraud and fraudulent

conveyance…”15 The Judgment further orders that Silver Dollar may recover “$6,618,461.71 in

compensatory damages based on Plaintiff’s claims for fraud, fraudulent conveyance, conversion,

and breach of contract, plus interest at the rate of 8% per annum as of the date of entry of this

judgment until paid.”16 Neither of those statements makes clear that the award stemmed solely

from either fraud or fraudulent conveyance theories.

14 Pl.’s Mot. for Summ. J. at 1. Sill v. Sweeney (In re Sweeney), 276 B.R. 186, 195-96 (6th Cir. BAP 2002) (where a

state court judgment renders only a single amount owed for multiple causes of action, a bankruptcy court must

determine what portion of that established debt is non-dischargeable).

15 Pl.’s Ex. 9 at 2.

16 Id.

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But this Court need not only look at the final judgment to determine collateral estoppel on

the issue of nondischargeability. Bankruptcy courts are empowered to look “beyond the labels

which state courts—and even parties themselves—give obligations which debtors seek to have

discharged.” Matter of Dennis, 25 F.3d 274, 277 (5th Cir. 1994). A court may examine verdict

forms, jury instructions, and other evidence offered in the first proceeding when analyzing the

preclusive effect of a judgment. In re Shuler, 722 F.2d 1253, 1257-58 (5th Cir. 1984).

The jury verdict forms in the summary judgment record do little to illuminate the damages

issue. The first form, marked Jury Instruction No. 16, presented the jury five questions:

1. Do you find for the Plaintiff?

2. If the answer to Question No. 1 is YES, do you find that the Defendant committed fraud

against Silver Dollar Sales, Inc.; TBS Traders, Inc.; or Randy Sparks?

3. If the answer to Question No. 1 is YES, do you find that the Defendant fraudulently

transferred assets belonging to Silver Dollar Sales, Inc.; TBS Traders, Inc.; or Randy

Sparks?

4. If the answer to Question No. 1 is YES, do you find that the Plaintiff suffered damages?

5. If the answer to Question No. 4 is YES, at what amount do you assess damages?17

The jury answered in the affirmative to questions 1 through 4 and assessed damages at

$6,618,461.71 in Question No. 5. Silver Dollar argues that this form makes clear that the full

damages award flowed directly from the fraud and fraudulent conveyance charges (and those

alone), and that to rule otherwise is a violation of this Court’s full faith and credit obligation.

To the contrary, the Court intends to give full faith and credit to the entire Mississippi

Judgment, which includes as grounds for its award the claims of conversion and breach of contract.

The referenced jury instruction does not clarify that the damages flow only from the fraud and

fraudulent conveyance claims. The jury found for Silver Dollar (presumably on all counts), found

that Olson committed fraud and fraudulently transferred assets, and awarded damages. Nothing in

17 Pl.’s Ex. 7.

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the returned form shows that the damages were limited to the fraud and fraudulent transfer claims.

Jury Instruction No. 16 alone does not resolve the damages issue.

The second returned jury verdict form, marked Jury Instruction No. 19, addressed punitive

damages.18 The form instructed the jury that punitive damages may be awarded if 1) Silver Dollar

was entitled to compensatory damages, and 2) “Silver Dollar had proven by clear and convincing

evidence that Olson acted with actual malice or gross negligence which evidences a willful, wanton

or reckless disregard for the safety of others, or committed actual fraud.” After listing some

considerations the jury should assess in reaching its punitive damages conclusion, the form asks

“What amount, if any, do you award the Plaintiff for punitive damages?” The returned form

awarded Silver Dollar $250,000.00. This amount was later reduced to $2,820.00 due to a statutory

limitation on the imposition of punitive damages.19 Jury Instruction No. 19, like No. 16, also does

not answer how much of the total amount awarded in the Mississippi Judgment flowed from the

claims of fraud and fraudulent transfer.

Silver Dollar urges this Court to view the jury’s return of these two verdict forms (and

these two forms only) as eliminating any questions of fact about the Mississippi jury’s exclusive

finding of fraud. In other words, Silver Dollar posits that the jury could not have awarded any

damages on breach of contract or conversion because they returned no other verdict forms. This is

untrue. A review of the jury instructions given in the Mississippi proceedings20 show that Jury

Instructions Nos. 16 and 19 (the returned verdict forms) are the only instructions which include

blank entries for the foreperson of the jury to complete. Silver Dollar has not pointed the Court to

18 Pl.’s Ex. 8.

19 Pl.’s Ex. 9 at 3. See Miss. Code Ann. §11-1-65 (limiting punitive damages based on a defendant’s net worth).

20 Pl.’s Ex. 6.

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any Mississippi authority that gives weight to the return of certain jury instructions and not of

others. In the Mississippi proceedings, the jury appears to have completed only Jury Instructions

Nos. 16 and 19. The jury’s return of certain instructions does not appear to show the jury only

awarded damages on the fraud and fraudulent transfer issues. While it is clear from the instructions

that the jury found Olson committed fraud and fraudulent transfers, the returned instructions do

not necessarily show fraud and fraudulent transfers as the exclusive source of the damages.

Both parties cite an expert report introduced as evidence in the Mississippi proceeding by

an accountant, Mr. Paul G. Jarrell, (“Expert Report”) in support of their arguments. But the Expert

Report contains evidence that cuts both ways. The Expert Report contains damage calculations in

its “Attachment A” using “Method 1” and “Method 2.” “Method 1” calculates damages at the

eventual judgment amount: $6,618,461.71. Jarrell reached this amount simply by adding up the

principal on the original notes ($5,012,397.03) with the interest accrued ($1,606,064.68). Nowhere

in the attachment is there a calculation which ties the fraud to those amounts, nor does it specify

the amount of money Olson fraudulently transferred. But as Silver Dollar’s Counsel argued at the

hearing on this motion, page 9 of the Expert Report states, “[e]ither method [of accounting]

calculates damages that were incurred as a direct result of the diversion of funds by Olson.” This

supports Silver Dollar’s argument that all $6,618,461.71 in damages was a direct result of Olson’s

fraudulent transfers. Because the Expert Report fails to focus exclusively on the fraud and

fraudulent transfer portion of the damages, the Court will not ascribe the report’s conclusions to

the jury as the jury’s conclusions when awarding damages.

For these reasons, a fact issue remains as to how much of Olson’s debt to Silver Dollar

resulted from fraud or fraudulent transfers. The Court will therefore deny summary judgment as

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to the amount of the Mississippi Judgment that is nondischargeable, but Olson is collaterally

estopped from relitigating his liability for fraud and fraudulent transfers at trial.21

VI. CONCLUSION

The Court grants Silver Dollar’s Motion in part. Silver Dollar has met its burden to show

that there are no disputed issues of material fact about the preclusive effect of the Mississippi

Judgment’s liability determination. But a material issue of fact remains: what portion of the

Mississippi Judgment is nondischargeable? An order granting the Motion in part will be entered

separately.

# # #

21 To clarify for trial on the damages issue, the Court will respond to a specific argument made by Olson. Counsel for

Olson, at the hearing on this motion, argued that because part of the damages (as calculated by Silver Dollar’s expert

and identically awarded by the jury) included $1.4 million on a note executed in 2001, and because the alleged fraud

and fraudulent transfers did not occur until at least 2007, the $1.4 million could not have arisen from fraud and the

jury could not have been awarding damages on a fraud or fraudulent transfer theory. This is untrue. Under Mississippi

fraudulent conveyance law, one of a creditor’s remedies for a debtor’s fraudulent conveyance is “[a]voidance of the

transfer or obligation to the extent necessary to satisfy the creditor’s claim.” Miss. Code Ann. § 15-3-111(1)(a). Silver

Dollar can ask a court to avoid the fraudulent transfer and reclaim the transferred funds all the way up to the creditor’s

full claim, even though the fraudulent transfer occurred after the initial debt. Of course, this requires Silver Dollar to

identify the specific fraudulent transfers and their amounts to succeed. But Silver Dollar’s fraud claim is not precluded

from nondischargeability simply because the fraudulent activity took place after the note was signed.

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