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Ipacesetters, LLC v. Douglas

Supreme Court of West Virginia

October 27, 2017

IPACESETTERS, LLC, Garnishee Below, Petitioner
KACE DOUGLAS and RANDI DAMPHA, et al. Plaintiffs Below, Respondents

          Submitted: October 3, 2017

         Appeal from the Circuit Court of Brooke County Honorable Jason A. Cuomo, Judge Civil Action No. 10-C-33

          Ancil G. Ramey, Esq. Hannah C. Ramey, Esq. Stacey L. Richards-Minigh, Esq. Steptoe & Johnson PLLC Huntington, West Virginia Counsel for the Petitioner

          James F. Companion, Esq. Yolanda G. Lambert, Esq. Schrader, Byrd & Companion PLLC Wheeling, West Virginia and Brent W. Wolfinbarger, Esq. Charles Town, West Virginia Counsel for the Respondents


         1."'It is the general rule that a plaintiff can recover on a suggestion only when the garnishee is liable to the defendant [debtor].' Syl. pt. 1, in part, Emmons-Hawkins Hardware Company v. Sizemore, 106 W.Va. 259, 145 S.E. 438 (1928)." Syl. Pt. 1, Waco Equip. Co. v. B.C. Hale Const. Co., Inc., 182 W.Va. 381, 387 S.E.2d 848 (1989).

         2. "It is the province of the court, and not of the jury, to interpret a written contract." Syl. Pt. 1, Stephens v. Bartlett, 118 W.Va. 421, 191 S.E. 550 (1937).



         The petitioner, iPacesetters, LLC ("petitioner"), seeks relief from the circuit court's August 11, 2016, order through which it denied the petitioner's motion to dismiss and awarded summary judgment in favor of the respondents, Kace Douglas and Randi Dampha, individually and on behalf of others ("respondents"), in this ancillary statutory proceeding in aid of collection on a judgment. Asserting it was statutorily entitled to a jury trial and that summary judgment was in error due to a material issue of fact, the petitioner seeks a reversal and either entry of judgment in its favor or a remand for further proceedings before the circuit court. Upon our review of the parties' briefs, the arguments of counsel, the appendix record submitted, and the applicable law, we affirm the circuit court's summary judgment ruling.

         I. Facts and Procedural Background

         This appeal arises out of a proceeding in aid of execution against the petitioner brought by the respondents under West Virginia Code § 38-5-10 (2011 & Supp. 2017).[1] T h e respondents were previously awarded a judgment against their employer, Tele-Response Center, Inc. ("Tele-Response"), on September 7, 2011, in a class action alleging violations of the West Virginia Wage Payment and Collection Act.[2] Tele-Response's appeal of that judgment was ultimately dismissed in January 2013 due to its inability to post an appeal bond.

         A little more than two months after judgment was entered in favor of the respondents on their underlying claim, the petitioner entered into a series of agreements with Tele-Response, TRC Acquisitions Corp. ("TRC"), and Telestar Marketing, Inc. ("Telestar") on November 30, 2011.[3] Through an Asset Purchase Agreement, the petitioner acquired substantially all of Telestar's assets.[4] Under a Services Agreement, [5] Tele-Response provided services to the petitioner for which it invoiced the petitioner at least once each month for the costs it incurred in providing those services. During the August 19, 2013, hearing held below, Gerald DeBiasi, the petitioner's executive chairman, testified, [6] describing these services as Tele-Response giving the petitioner the "use of the facilities, use of the systems, use of the equipment, use of the furnishings, the work stations, et cetera. That is the services they [Tele-Response] are providing in the Services Agreement." The petitioner had the option to acquire the assets of Tele-Response "free and clear of all Liens" at the end of the term of the Services Agreement.[7]

         The Services Agreement also required the petitioner to make scheduled payments to Tele-Response, as set forth in paragraphs 1(b)(i), (ii), and (iii), over a two-year period totaling $1, 250, 000. These payments were described as a "mark-up" or "cost plus" on the services being provided by Tele-Response.[8] The paragraph 1(b)(i) payment was made by the petitioner prior to its receipt of the respondents' suggestion and is not in contention in this proceeding. The petitioner's $500, 000 payment to Tele-Response under paragraph 1(b)(ii), which was to be made on November 30, 2012, or within thirty days thereafter, was restricted by paragraph 1(c) of the agreement in that it would "only be made if and at such time as all outstanding liabilities (fixed, contingent, liquidated, unliquidated or otherwise) and other obligations of [Tele-Response] . . . including, but not limited to, all federal and state tax claims, litigation claims and all claims of others have been fully and finally discharged . . . ." Mr. DeBiasi testified that this particular payment was never remitted by the petitioner because Tele-Response did not meet the requirements of paragraph 1(c).

         Regarding the $250, 000 payment under paragraph 1(b)(iii) of the Services Agreement, Mr. DeBiasi testified that this payment was remitted to Tele-Response early[9]"[b]ecause of the difficult financial straights of Tele-Response" and "to provide for more cash flow for their operations." In his affidavit signed three years later, Mr. DeBiasi stated that this $250, 000 was to be forwarded to entities with superior liens whom he identified as the Internal Revenue Service ("IRS") and Joseph Dresnok. There is no provision in the Services Agreement obligating the petitioner to pay either the IRS, Mr. Dresnok, or any of Tele-Response's lien holders, creditors, or vendors.

         A Proceeds Agreement was also entered into on November 30, 2011, "[a]s a condition to and in order to induce iPacesetters to enter into each of the above agreements[.]" This particular agreement contains additional covenants and agreements between these entities and provides that

TRC is advancing to Tele-Response, its wholly-owned subsidiary, (or Telestar is loaning to Tele-Response) the sum of monies for the purpose of settling all outstanding obligations of Tele-Response to the creditors set forth on Exhibit 1 hereto . . . . Each of Telestar, Tele-Response, TRC and [Jason] Fine represent and warrant that Exhibit 1 includes all existing creditors and claimants of any kind of Tele-Response (fixed, contingent, liquidated, unliquidated or otherwise) except for those creditors and claimants set forth on Exhibit 2 hereto.

         Although not reflected on the face of Exhibit 1 to the Proceeds Agreement, Mr. DeBiasi stated in his affidavit, which was attached to the petitioner's memorandum in opposition to the respondents' motion for summary judgment, that the amount of $938, 661 listed on Exhibit 1 as "Federal Payroll Taxes- Valid Through Nov[.]" was an IRS lien, and that the "Contingent Liabilities" in the amount of $1, 070.000 on this exhibit "are believed to be in reference to the claim of Joseph Dresnok, which claim was actually reduced to a judgment against Tele-Response Center on April 5, 2011 in the amount of $1, 101, 624.87."[10] No explanation is offered as to why a judgment lien would be listed as a "contingent liability, " nor why the amounts would be different. This same Exhibit 1 states "[t]he following table represents the complete Creditor and Contingent liabilities of Tele-Response and Telestar as [o]f October 31, 2011[, ]" but it does not indicate which obligations belonged to Tele-Response and which were those of Telestar. Although page two of the exhibit reflects that the federal taxes listed in the table were owed by Tele-Response, there is no further mention of the "Contingent Liabilities."

         The respondents' judgment entered against Tele-Response more than two months earlier does not appear on any exhibit to any of these November 30, 2011, agreements. The parties appear to have contemplated such an omission by including in the Proceeds Agreement an indemnification provision that states that if Tele-Response failed to list an obligation, Tele-Response, Telestar, TRC Acquisitions, and Mr. Fine would be required to indemnify the petitioner for satisfying the debt obligation.

         In June 2012, the respondents served the petitioner with writs of execution on personal property in seeking to satisfy the judgment they had obtained against Tele-Response. On October 11, 2012, the respondents caused a suggestion of personal property to be served upon the petitioner in which they sought:

Amounts and/or monies and/or debts and/or obligations and/or things of value owed and/or to be owed and/or due and/or to be due to Tele-Response Center, Inc., including, but not limited to, those described in the various agreements dated November 30, 2011 and/or as of November 30, 2012 where iPacesetters, LLC, and/or Tele-Response Center, Inc., and/or Telestar Marketing, Inc., and/or TRC Acquisition Corp., and/or Jason Fine and/or Teleservices Solutions Holdings, LLC, are parties such as the SERVICES AGREEMENT between Tele-Response Center, Inc. and iPacesetters, LLC, dated as of November 30, 2011.

         The petitioner filed its verified answer to the suggestion on October 30, 2012, denying that it either owed any "amounts, monies or other things of value" to Tele-Response or had "debts and/or obligations due" to Tele-Response "[a]s of the date of the filing of this Answer[.]" The petitioner characterized the payments it owed to Tele-Response under the Services Agreement as a "contingent contractual obligation."[11] Documents produced by the petitioner show that several invoices were due around the time that the petitioner received the suggestion and filed its answer to the same. The petitioner's chief financial officer, Michael Kennedy, testified below that there were no outstanding invoices "due" on the date the answer was filed, although he acknowledged that the petitioner had a contractual obligation to make payments to Tele-Response. On November 2, 2012, just a few days after the petitioner filed its answer to the suggestion, the petitioner remitted a payment of $51, 000 to Tele-Response followed by another payment on November 13, 2012, in the amount of $154, 263.31.

         The appendix record contains a document produced by the petitioner, which is titled "Cost Plus Payments paid to Tele-Response Center, Inc. Per Services Agreement dated 11/30/11." This document reflects that after the suggestion was received, the petitioner made monthly payments to Tele-Response in varying amounts between November 2012 and July 2013, which totaled more than $2, 000.000.

         During the course of this proceeding, the respondents filed motions seeking to join the petitioner as a defendant, to make the petitioner liable for the respondents' judgment, and for sanctions. In its order entered on October 21, 2013, the circuit court denied the motion to join the petitioner as a defendant; granted the motion for sanctions; and granted, in part, the motion to make the petitioner liable for the respondents' judgment. The court found that the respondents' evidence was insufficient to demonstrate that the various agreements discussed above were fraudulent, but it also found that the conduct of the parties reminded the court of a "'shell game.'"[12] Moreover, it was "disturbed by the conduct of both iPacesetters, LLC and Tele-Response in this case[, ]" noting that it had "directed the W.Va. R. Civ. P. 30(b)(7) designated representative(s) of Tele-Response to appear at the August 19, 2013" hearing, yet no representative appeared, and that notwithstanding the respondents' suggestion, the petitioner continued to pay monies to Tele-Response. Although the circuit court ordered the petitioner to cease payments to Tele-Response, it appears from an exhibit attached to Mr. Debiasi's affidavit that the petitioner may have continued to make payments to Tele-Response through at least July 2014.

         Following discovery in aid of execution, multiple dispositive motions, and various trial dates, the respondents filed a third motion for summary judgment on June 24, 2016, addressing the legal issues that had been previously identified by the parties and asserting there were no factual issues for a jury to resolve. On July 11, 2016, the petitioner filed a motion to dismiss and response to the motion for summary judgment. By order entered August 11, 2016, the circuit court denied the petitioner's motion to dismiss and awarded summary judgment in favor of the respondents, directing the petitioner to pay to the respondents the amount of their judgment against Tele-Response.[13] The court found that the facts regarding the debts, liability, and payments of the petitioner to Tele-Response had been developed through discovery, making trial unnecessary; that whether the petitioner's payments to Tele-Response were fixed or contingent was a question of law for the court to decide; and that West Virginia Code § 38-5-18 (2011)[14] did not supersede the court's "role and duty under Rule 56 of the West Virginia Rules of Civil Procedure to decide questions of law . . . ."[15] The circuit court concluded that the petitioner's obligation to make the payments to Tele-Response was fixed and the fact that the petitioner did not know the specific amount of the monthly obligation in advance did not make the contractual obligation contingent. The circuit court further ruled that even if the sums the petitioner owed to Tele-Response were for debts that Tele-Response owed to third-party vendors, those payments were not insulated from the suggestion proceedings; that the petitioner's obligation was to Tele-Response-not to Tele-Response's lien holders or other creditors; and that because there was no evidence that any of Tele-Response's other creditors had attempted garnishment proceedings against the petitioner, the petitioner was not a "party" to any other such lien. This appeal followed.

         II. Standard of Review

         Our review of the circuit court's summary judgment order is plenary. See Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994) ("A circuit court's entry of summary judgment is reviewed de novo."). Against this standard, the parties' arguments will be considered.

         III. Discussion

         The petitioner asserts that the circuit court erred in awarding summary judgment in favor of the respondents because its contractual obligations to Tele-Response were not subject to the respondents' suggestion and because there were liens against Tele-Response that were superior to the respondents' judgment lien. The petitioner further argues that summary judgment was improper because it was entitled to a jury trial under West Virginia Code § 38-5-18. We address these issues below.

         A. Whether the contractual obligations between the petitioner and Tele-Response were "fixed" or "contingent" and whether there ...

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