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Willis v. Smith

United States District Court, D. New Mexico

March 7, 2017

BOBBY L. WILLIS, individually and as trustee for the BOBBY L. WILLIS AND CARRIE S. WILLIS TRUST, WILLIS ASSET MANAGEMENT, LLC, JTB DEVELOPMENT PROPERTIES 3, LLC, and JTB DEVELOPMENT PROPERTIES 4, LLC, Plaintiffs,
v.
QUENTIN SMITH and STOREY & CLYDE, INC. Defendants, QUENTIN SMITH and STOREY & CLYDE, INC., Counterclaimants
v.
BOBBY WILLIS, Counterdefendant.

          MEMORANDUM OPINION AND ORDER ORDER GRANTING DEFENDANTS QUENTIN SMITH'S MOTION FOR SUMMARY JUDGMENT REGARDING ALTER EGO LIABILITY

         On January 25, 2017 Defendant Quentin Smith (Smith) filed DEFENDANTS (sic) QUENTIN SMITH'S MOTION FOR SUMMARY JUDGMENT REGARDING ALTER EGO LIABILITY (Doc. No. 70) (Motion). A response to the Motion was due on February 24, 2017. See NOTICE OF AGREEMENT TO EXTEND TIME TO FILE RESPONSE (Doc. No. 81). At a status conference on February 27, 2017, Plaintiffs' counsel, Allan Wainwright, informed the Court that Plaintiffs did not intend to file a Response to the Motion. Under Local Rule 7.1(b), “[t]he failure of a party to file and serve a response in opposition to a motion within the time prescribed for doing so constitutes consent to grant the motion.” D.N.M. LR-Civ. 7.1(b). The Court will grant the Motion based on Local Rule 7.1(b) and also on the merits and will enter a judgment in favor of Defendants on all claims asserting alter ego liability.

         I. STANDARD OF REVIEW

         Summary judgment may be granted if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). When applying this standard, the Court examines the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment. Applied Genetics Intl, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir. 1990). The party seeking summary judgment bears the initial burden of “show[ing] that there is an absence of evidence to support the nonmoving party's case.” Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991) (internal quotation marks omitted). The party opposing the motion must present sufficient evidence in specific, factual form for a jury to return a verdict in that party's favor. Id. citing Clifton v. Craig, 924 F.2d 182, 183 (10th Cir. 1991). In other words, the nonmoving party “may not rest upon the mere allegations or denials of his pleadings” to avoid summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering a motion for summary judgment, the Court's “role is simply to determine whether the evidence proffered by plaintiff would be sufficient, if believed by the ultimate factfinder, to sustain her claim.” Foster v. Alliedsignal, Inc., 293 F.3d 1187, 1195 (10th Cir. 2002).

         II. BACKGROUND

         In the COMPLAINT FOR FRAUD AND OTHER CLAIMS (Doc. No. 1-1), Plaintiffs allege that in 2011, Ronnie Garner (Garner) developed a plan for the construction of a project called the Americas Medical Clinic. (Compl. ¶ 11.) In August 2011, Garner hired Smith as manager for the “various AMC companies.” (Id. ¶ 12.) During the period between December 30, 2011 and February 3, 2012, Smith managed two limited liability companies (LLCs), JTB 3 Development Properties, LLC (JTB 3) and Americas Medical Clinic, LLC (AMC). (Mot. Ex. 1 Smith Aff. ¶¶ 17-18.) Plaintiffs allege that due to Smith's mismanagement of the LLCs, the AMC project “collapsed resulting in significant financial losses to the Bobby Willis Plaintiffs.” (Compl. ¶ 24.) Smith received no payment for his services other than a 5% interest in two LLCs: AMC and JTB 3.

         Plaintiffs allege that “Smith delivered gemstones and jewelry to Willis as his investment in AMC and companies related to AMC (Exhibit 11)[, ]” and Smith “exchanged his gemstones and jewelry as an investment in AMC or JTB 3 LLC.” (Compl. ¶¶ 26-27.) Smith, Garner, Michael Atchison (Atchison) and Willis “all met in or around December 29, 2011 and negotiated an agreement … confirmed by Addendums attached hereto as Exhibit 15 dated December 29, 2011 whereby [Smith] was to acquire the 5% interest in AMC and JTB 3, LLC.” (Compl. ¶¶ 29-30.) Smith received no other remuneration for his services, and Smith received no documentation confirming his ownership interest in JTB 3 or AMC. (Mot. Ex. 1 ¶¶ 5-12.)

         Plaintiffs allege that Smith represented that millions of dollars were needed for the construction of the AMC project, and Smith “contrived a plan to convince Willis to invest assets, time and labor from his company and employees in the project.” (Compl. ¶ 18.) Plaintiffs claim Willis relied on Smith's statements and invested “Real Estate that was deeded into JTB 3[, ] . . . 3395 ounces of Gold and 1117 ounces of Silver and gem stones delivered directly to Garner which was valued at approximately $10 million[, ] . . . [m]oney for professional services, . . . [and] [h]ours of time spent by Bobby Willis and his employees[.]” (Id. ¶19A-D.)

         Plaintiffs allege that AMC was never properly capitalized and Smith and Garner “used AMC or related entities for improper or fraudulent purposes as their alter ego (sic).” (Compl. ¶ 17.) Smith, Garner and possibly others “operated AMC as their alter ego (sic) and are individually responsible for all damages or losses sustained by Willis in connection with AMC.” (Id. ¶ 58.) “Any corporate veil of AMC should be pierced such that [Smith] and Garner are individually responsible for any claims or amounts owed by AMC.” (Id. ¶ 61.) Smith, as the alter ego of AMC, is “personally liable to Willis for failure to pay for all the amounts detailed above, including the fair market value of the 5112 ounces of Gold and Silver, plus interest.” (Id. ¶ 66.)

         After the AMC project failed, Smith demanded the return of his gemstones and jewelry, but Willis refused to return the property. Smith allegedly gave false statements to the State of New Mexico, which led to Willis' arrest on charges of embezzlement. (Id. ¶ 45-46.) Willis claims he was falsely imprisoned on those charges at the San Juan County Jail until his release on May 28, 2015. (Id. ¶ 47.)

         When asked to identify all facts supporting alter ego liability, Willis answered interrogatories and supplemented his answers as follows:

Interrogatory No. 28: Identify all facts upon which you contend Quentin Smith operated any entity as an alter ego, and explain how each Plaintiff suffered damages as a result of the same.
Answer: Looking back I think all the entities, AMC, Mesquite, and the color LLCs were just sham companies run by Smith to sucker me and others in. The facts are in my complaint and we are going to do discovery to gather more. I was damaged because if there was nothing behind the curtain then it was all a fraud to get me to invest and now lose all my money that I have already detailed herein. . . .
Answer: After the fact I learned that the various companies were shams set up by Smith and maybe Garner just as a rouse (sic) to get me to invest. Smith is going to need to prove that all the . . . companies were legit and that the new companies he set up or took over had any real substance. When Smith took over, I am ...

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