IN RE:  KENTUCKY HVAC WHOLESALE, INC.                       CASE NO. 96-50587

 

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

 IN RE:

 

KENTUCKY HVAC WHOLESALE, INC.                       CASE NO. 96-50587

 

DEBTOR

 

STEPHEN PALMER, TRUSTEE                 PLAINTIFF

 

VS.                             ADVERSARY NO. 97-5026

 

WHOLESALE SUPPLY & DISTRIBUTION

COMPANY, LLC and WILLIAM A. HURLEY                   DEFENDANTS

 

VS.

 

WILLIAM A. GANNON and                 THIRD-PARTY

EMMETT TURNER                   DEFENDANTS

 

MEMORANDUM OPINION

 

 

            This matter is submitted, following trial, on the complaint of the trustee against the defendants Wholesale Supply & Distribution Company, LLC (“Wholesale Supply”) and William A. Hurley (“Hurley”), for damages, including punitive damages and attorney fees, for breach of a contract to purchase the debtor’s business, breach of a disclosure and confidentiality agreement, tortious interference with the debtor’s business, and misappropriation of property of the debtor.  The complaint also requests such other and further relief to which the plaintiff trustee may appear entitled.

            The defendants Wholesale Supply and Hurley, who identifies himself as a minority interest holder in Wholesale Supply d/b/a Hoe, have filed a counterclaim against the trustee (the bankruptcy estate) and a third-party complaint against William A. Gannon (“Gannon”), president of the debtor Kentucky HVAC Wholesale, Inc. and Emmett Turner (“Turner”), acting manager and sales manager of the debtor, for damages for alleged false representations made by Gannon and Turner concerning the assets and liabilities of the debtor during negotiations for the acquisition of the debtor’s business by Hurley and Wholesale Supply.  There is no evidence to support the allegations in the counterclaims of the defendants Hurley and Wholesale Supply.  Consequently, their counterclaims shall be dismissed.

            The third-party defendants Gannon and Turner have filed counterclaims/cross-claims against the defendants Wholesale Supply and Hurley for damages suffered by them individually as a result of the alleged bad faith of Hurley and Wholesale Supply in negotiations for the purchase of the debtor’s business.  The third-party defendants also request punitive damages, attorney fees, and such other and further relief to which they may appear entitled.

FINDINGS OF FACT:

            The debtor filed a petition for relief under chapter 11 of the Bankruptcy Code in this court on March 22, 1996.  The debtor was engaged in business as a wholesale distributor of heating, ventilation, and air conditioning (HVAC) supplies, which the debtor sold to heating and air conditioning contractors and repairmen.  The debtor conducted its business from a rented warehouse and office facility at 1044 Eastland Drive, Lexington, Kentucky.  According to testimony of representatives of the debtor, the chapter 11 petition was filed at the request of and with full knowledge of the defendants Wholesale Supply & Distribution Company, LLC and William A. Hurley, and their counsel, to facilitate the purchase of assets of the debtor by Hurley or the “Hurley Group,” which may include the defendant, Wholesale Supply & Distribution Company, LLC, free and clear of the claims of creditors of the debtor after the sale price was reduced below an amount that would have paid all creditors in full.  The use of a chapter 11 liquidation proceeding and plan for this purpose is not unusual since repeal of Chapter 6 (the Bulk Transfer provisions) of the Uniform Commercial Code.  Sale of assets of the debtor to Hurley or Wholesale Supply was not consummated, and this case was converted to a case under chapter 7 of the Bankruptcy Code on July 15, 1996.  The plaintiff Stephen Palmer, is the duly appointed and qualified trustee of the debtor.

            In August of 1995, approximately seven months before the commencement of the chapter 11 proceeding, the defendant William A. Hurley went to the debtor’s place of business and asked Emmett Turner, whom he had known previously, whether the business was for sale.  Hurley learned at that time that the business was owned by Bill Gannon.  Tr. Nov. 5 and 6, 1998, pg. 143.  Hurley then contacted Donald Eugene (Gene) McGuire, a business consultant, who in turn contacted the law firm of Greenebaum, Doll & McDonald, which prepared a Disclosure and Confidentiality Agreement, which the parties executed on August 31, 1995.  Id. at pgs. 143-144.  Hurley then presented a request for documents in the form of a Due Diligence List.  He admitted he eventually got the information he was looking for.  Id. at pg. 145.

            The Disclosure and Confidentiality Agreement was executed on behalf of the debtor, Kentucky HVAC Wholesale Supply, Inc., by William Gannon, Donna Gannon, his wife, and Emmett Turner as principals, and by William A. Hurley and Donald Eugene McGuire in behalf of Hurley individually and an amorphous entity described as the “Hurley Group.”  The agreement recites that Hurley and/or the Hurley Group is considering a possible negotiated acquisition transaction or financing transaction with HVAC, the acronym used in the agreement to identify the debtor.

            On or about September 11, 1995, the debtor, with the assistance of Colleen Milburn, a CPA, provided detailed responses to the Due Diligence requests of Hurley.  See Exhibit No. 1; Tr. pg. 220.  Thereafter, the parties met in the rear office of the debtor and exchanged financial information.  According to the testimony of Mr. Turner, Mr. Hurley and Mr. McGuire seemed satisfied with the information provided, which included revelation of the amount of taxes owed, payoffs on leased vehicles and equipment, inventory, receivables, and financial statements of the debtor for the years 1993 and 1994 and to date in 1995.  The parties set a closing date for November 1, 1995.  Tr. pgs. 38-43.  The sale seemed to be a done deal.  Tr. pg. 53.

            On October 9, 1995, counsel for Mr. Hurley forwarded to counsel for Kentucky HVAC Wholesale, Inc. a letter summarizing what had occurred at the foregoing meeting, which probably took place on or about October 6, 1995.

            The letter indicates Hurley individually was to be purchaser and that the parties had agreed on a purchase price of $353,000 to be allocated and paid as follows:

            Inventory - $130,000 (estimate amount to be paid based upon an actual inventory).

 

            Hard Assets - $75,000 (will actually pay book value, estimated at approximately $75,000).

 

            Accounts Receivable – $120,000 (an estimate only, to be paid as collected).

 

            Rental Deposit - $3,000

 

            Customer List, Non-compete and Good Will - $25,000

 

See Exhibit A to the complaint.  Tr. 42.

            The sale did not close on November 1, 1995 as contemplated.  Hurley did not show up for the closing.  Shortly thereafter he came to Emmett Turner’s home and assured him that everything was going to be all right; that they were going to work out the deal.  Tr. pg. 83.

            In connection with the purchase of the debtor’s business Hurley had also entered into an agreement with Stephanie Estes, owner of a trailer park adjacent to the warehouse occupied by the debtor’s business, to purchase land occupied by the trailer park.  Estes thought she had an agreement with Hurley whereby he was to purchase land, but he never showed up for the closing.  Tr. pgs. 20-22.  See affidavit of Emmett Turner of Feb. 25, 1998, pg. 5, filed in support of the trustee’s September 23, 1998 motion for summary judgment.

            According to the testimony of Emmett Turner, Hurley, who earlier had said it was in the bank’s hands, and it was just a matter of a phone call on closing the deal (Tr. pg. 43) was now saying there was a problem in obtaining the money, the bank was holding him up, and that he might have to look for another bank.  Tr. pg. 46.

            Prior thereto Hurley had discussed with Turner redesigning the debtor’s office space to make room for Hurley’s sales people (Tr. pg. 51), had discussed employing people for the new business (Tr. pg. 48), and had asked that a parts shipment he had coming in for a customer be unloaded and warehoused at debtor’s place of business until he could arrange for the shipment to be picked up by the customer (Tr. pg. 49).  Hurley continued to assure Turner it was a done deal.  Turner was apprehensive about closing the sale because Hurley had promised Turner continued employment at Turner’s salary of $750 per week.  Tr. pg. 52.

            During this time Hurley visited the business regularly and used the office facilities.  Tr. pg. 55.

            After the first failure to close, the parties met again.  Hurley expressed some apprehension about funding.  They discussed what Kentucky HVAC could do to help Hurley.  HVAC, through Gannon, offered to carry the financing on the inventory, to give Hurley terms to pay off the inventory.  Tr. pg. 57.

            At a subsequent meeting of the debtor’s attorneys and the attorneys for Hurley, at which Mr. McGuire was also present, the attorney for Mr. Hurley requested that the debtor file chapter 11 bankruptcy in order that the debtor would be able to assign leases on the warehouse/office facility, motor vehicles, and forklifts.  The attorney represented, in Hurley’s presence, that once the debtor filed chapter 11 they could close the deal.  Tr. pg. 58.

            A letter dated March 4, 1996 prepared and signed by the defendant William A. Hurley as managing member of the defendant Wholesale Supply & Distribution Company, LLC (Exhibit B to the complaint), confirms the offer of Wholesale Supply to acquire certain limited assets of the debtor, as follows:

            1.  Wholesale will acquire Kentucky HVAC’s leasehold interest in its present real estate location and a portion of the assets listed on the latest financial statement presented to representatives from Wholesale.

 

            2.  The purchase price will be $75,000, with $40,000 being paid in cash at closing and the remainder to be paid within thirty (30) days after closing.

 

            3.  Kentucky HVAC will retain ownership of its inventory.  At the same time, Wholesale will allow Kentucky HVAC to store its inventory on the present property location, and will assist in sales through the Wholesale sales force.  All inventory remaining one (1) year after closing, will either be removed from the location or will be purchased by Wholesale at 50% of its value.

 

            4.  Wholesale will not assume or be responsible for any debts or liabilities of Kentucky HVAC except leases and equipment payments as agreed upon.

 

            5.  Kentucky HVAC will be responsible for the collection of its accounts receivable.  If, however, payments are made on accounts receivable to Wholesale, the funds will be immediately turned over to Kentucky HVAC.  If customers are indebted to Kentucky HVAC, Wholesale will implement a “watch list” to ensure that Wholesale is not providing credit to organizations showing a bad credit history with Kentucky HVAC.

 

            6.  Property lease to be pro rated at the time of closing.

 

            7.  The offer will be subject to and conditioned upon approval from Wholesale’s current banking institutions.  Wholesale is subject to certain affirmative loan covenants and other bank covenants.  The opening of the office in Lexington at the Kentucky HVAC current location would breach those existing covenants without affirmative waiver.  Accordingly, it will be necessary to obtain appropriate waiver of the covenants and obtain appropriate financing from its banking institutions.

 

            8.  This offer is a non-binding offer and will be binding only upon the execution of an acquisition agreement, containing covenants, representations and warranties, satisfactory to legal counsel for Wholesale and Kentucky HVAC.

 

            9.  As a result of the acquisition, Wholesale will then be entitled to acquire the services of any present HVAC employee as an employee of Wholesale.

 

            The court notes that the address shown for Wholesale Supply & Distribution Company, LLC, 3406 Thistleton Drive, Lexington, Kentucky 40502, is the home address of the defendant, William A. Hurley.  Apparently the purchaser was now to be Wholesale Distribution and Supply Company, LLC, rather than Hurley individually.

            On page 3 of Exhibit B William A. Gannon indicates he had read and agreed to the terms of the March 4, 1996 offer.  But his acceptance is not dated.

            There is a written notation on page 1 of Exhibit B, as follows:  “Agreed to as revised 4/5/96 William Gannon.”  This was after the expiration date of the time fixed in the letter for accepting the offer.  It was also after the commencement of the debtor’s chapter 11 bankruptcy case.

            The revisions inserted by Gannon were as follows:

            Wholesale will assume all ongoing expenses for utilities, rent, payroll, insurance of  (sic) Ky Home as of 4-1-96.

 

            This offer is pursuant to bankruptcy court approval.  If the court fails to approve the sale any amount expended by Wholesale will be nonrefundable.

 

            Wholesale agrees to assume the leases and balance due on the following equipment as of 3-25-96

 

            1.  Ford Pickup Truck

            2.  Ford Van

            3.  Yale Forklift

            4.  Xerox Copier

            5.  GTE Phone System

            6.  Ford – Truck

 

            There is also attached to Exhibit B a letter agreement dated April 4, 1996 which permitted Wholesale Supply to pay Emmett Turner a retainer in some amount agreeable to Turner and Wholesale in order to keep him from seeking employment elsewhere or from accepting a job offer until a final conclusion.  The letter agreement is  signed by William A. Gannon, Emmett Turner, and William A. Hurley.

            This letter agreement indicates the parties were still in negotiation with respect to the March 4, 1996 offer and proposed revisions thereto, but that a final agreement had not been reached.

            In any event, Wholesale Supply and Hurley never closed on the offer of March 4, 1996 or the modified version thereof.

            The debtor converted its chapter 11 case to a chapter 7 bankruptcy liquidation case on July 15, 1996.  Apparently the equipment, inventory, and receivables of the debtor were encumbered by liens exceeding the liquidation value thereof and the property was surrendered to the lienholders.

            William A. Gannon, the president and owner of the debtor, testified that Mr. Turner introduced him to Hurley as a person interested in buying the business of the debtor.  Mr. Gannon showed Hurley through the warehouse; Hurley expressed a real interest in buying the business.  Subsequently, Gannon and Turner met with Hurley and Mr. McGuire and came to an agreement that Mr. Hurley was going to buy the business.  Tr. pg. 99.  They shook hands and Gannon asked Hurley if they had a deal and Hurley said yes.

            Hurley showed Gannon some financial statements, which looked great.  The biggest part of the financial statements was Hoe Supply’s statement of finances.  Tr. pg. 100.

            Throughout the negotiations Hurley represented himself to be the owner of Hoe Supply Company, a distributor of HVAC products with business locations at Christopher, Illinois and Paducah, Kentucky.  Tr. pgs. 88-89.  It now appears doubtful that Hurley had purchased Hoe Supply.  He may have merely entered into a contract to purchase an interest in the company.  Tr. pg. 63.  According to the testimony of Mr. McGuire, Hurley purchased both the Christopher, Illinois and Paducah, Kentucky outlets of Hoe shortly before beginning negotiations to purchase the debtor’s business.  Mr. McGuire indicated Hurley desired to have an outlet in Lexington.  Tr. pgs. 97-98.  However, McGuire stated he actually knew little about Hurley’s finances; McGuire’s job was to evaluate businesses which Hurley desired to purchase.

            In his testimony Hurley identified himself as only a minority owner of Hoe Supply, which may explain how he came to have financial statements, accounts receivable and accounts payable records of that company in his possession, and thereby was able to convey to Mr. Turner and Mr. Gannon the impression he owned Hoe Supply Company.  Hurley’s number one goal after he “got” Hoe Supply was to get the location in Lexington and a location in western Tennessee.  Tr. pgs. 142-143.  Apparently both Turner and Gannon were under the impression that Hurley was the sole owner of Hoe Supply.

            Hurley gave the impression he was ready to move in and take over the debtor’s business.  He had computer equipment shipped to the debtor’s place of business and asked the debtor to store the equipment for him.  His plan was to have the equipment installed and operate Hoe Supply outlets from the Lexington location.  Tr. pg. 104.

            Hurley was at the debtor’s place of business three or four days a week.  He made and received telephone calls from the debtor’s business.  Tr. pg. 105.

            The debtor’s inventory was reduced at Hurley’s request.  The inventory got so low it was a problem, and Mr. Turner had to get Hurley’s assistance in obtaining inventory from the Hoe Supply location at Christopher, Illinois.  Hurley arranged for the debtor to obtain inventory from Hart Cooling by telling Hart’s credit manager that he (Hurley) was purchasing the debtor’s business.  Tr. pgs. 106-107.

            Gannon told customers of the debtor he was bringing the inventory down because he was in the process of working through the sale of the company to Hurley and the business would be completely restocked when Hurley took over.  Tr. pg. 107.

            Eventually Hurley said “they” could not buy the company unless “they” had clear title to all equipment, and assets, and the only way “we” could do that was under the bankruptcy laws; for the debtor to file chapter 11.   Gannon agreed to place the company in chapter 11 and Gannon adjusted the purchase price downward.  This was the third time they had had a deal.  Tr. pg. 109.

            After the debtor’s chapter 11 petition was filed Hurley said he was having trouble with financing.  Then he said “they” were not going to buy the company.  Tr. pgs. 110-111.

            In his testimony Hurley acknowledged he eventually got from the debtor all the due diligence information he had requested.  He claims he was put off by the debtor’s tax liability.  However, Hurley and his business consultant, Mr. McGuire, learned of the debtor’s tax liability when the debtor answered the due diligence questions on October 9, 1995, the date of Hurley’s initial letter offer to purchase the debtor’s business for $353,000.  Exhibit A to the complaint.

            Hurley denied that he ever requested that the debtor not replenish inventory (Tr. pg. 151), but the court finds the evidence is clear and convincing that he did.  Tr. pgs. 70, 105-107.

            Hurley testified that financing was never an issue early on.  He claims he had an unused line of credit at Bank One sufficient to cover the purchase of the debtor’s business.  Tr. pg. 152.  In view of the fact he failed to close on any of the transactions and consistently told Turner and Gannon he was having a problem with the bank on financing, the court finds Hurley’s statement that financing was not a problem to be completely unconvincing.  Hurley offered no evidence to support the statement in paragraph 7 of the March 4, 1996 letter agreement that a waiver of loan and bank covenants was required.  This appears to have been puffery inserted in a letter which Mr. Hurley himself prepared.

            Hurley simply ran the debtor’s business into bankruptcy with false representations that he was on the verge of purchasing the business, knowing full well that he did not have the financial capability to do so.  He conveyed a false impression of his financial capability by brandishing financial statements and documentation of Hoe Supply Company without revealing he merely had entered into a contract to acquire only a minority interest in that company.

            Gannon and Turner reasonably and justifiably relied on Hurley’s representations that he intended to purchase the debtor’s business, to the extent of practically permitting him to assume control of the business.  At Hurley’s request, they ceased ordering inventory because Hurley wanted to order different brands of merchandise.  They gave Hurley keys to the business and taught him the alarm code.  At Hurley’s request they posted ads for a truck driver and interviewed others as potential employees.  Hurley explained how he wanted to redesign the counter and office area to make room for a sales force.  Hurley regularly used the debtor’s office for telephone calls and faxes.  Hurley had merchandise, which he had ordered for others shipped to the debtor’s warehouse.  He had shipped to the debtor’s business a large computer system, which he said he intended to install at the location for use in controlling this and the two outlets of Hoe Supply Company, which he represented he owned.

            This conduct caused Gannon and Turner to rely for a period of eight months on what they believed to be Hurley’s good intentions while the debtor’s business deteriorated and was ruined.  The business was viable although not particularly profitable when Hurley intruded.  His intrusion forestalled the possibility of sale of the business to other prospects (Tr. pg. 117), or possible refinancing of the business while it was still viable.

            The efforts of Hurley to keep Turner from seeking employment elsewhere because Hurley wanted Turner to continue to run the business is an indication that Hurley kept alive much too long his unrealistic expectation of being able to buy the debtor’s business.  Tr. pg. 199.

            When Hurley intruded on the debtor’s business and entered into a tentative agreement to purchase the business for $353,000 this offer was only slightly higher than the offer of another putative purchaser of the business.  The trustee’s complaint seeks an award of compensatory damages in the total amount of $412,120.  The court fixes the amount of damages suffered by the debtor at $300,120.

            Gannon lost his investment in the debtor as a result of the destruction of the debtor’s business.  He estimated his damages resulting from the lack of good faith dealings, misrepresentations, and misconduct of Hurley to be $100,000, the amount of his cross-claim against Hurley and Wholesale Supply.

            After the debtor’s business closed, Turner had to take a low-paying job for a substantial period of time.  He has cross-claimed against Hurley and Wholesale Supply for damages in the amount of $25,000.

            Hurley surreptitiously entered the debtor’s business after hours, using the key and knowledge of the security code which had been provided to him, and reclaimed the large computer he had caused to be shipped to and stored on the premises.  The computer equipment was stored on two four-wheeled carts of the debtor.  In reclaiming the computer equipment Hurley took and has never returned a four-wheeled cart and hand truck of the debtor, in all valued at $120.00.

            No evidence was presented as to the value of the services of employees of the debtor utilized by Hurley in his frequent visits to the debtor’s business.

            Hurley and Wholesale Supply did not offer evidence contesting the amount of the damage claims asserted by the bankruptcy estate, Gannon or Turner.

CONCLUSIONS OF LAW:

            The court is not persuaded that on the facts of this case the bankruptcy estate has a cause of action for breach of contract.  There were handshakes by Gannon, the owner of the debtor, and Mr. Hurley, the ostensible purchaser, but  escape clauses in the underlying written documents preclude a finding there was a final contract pursuant to which defendant Hurley agreed to purchase the debtor’s business.

            The facts of this case do not fall within the traditional factual framework of an action for tortious interference with a prospective business/economic advantage or an action for interference with a contractual relationship.  With respect to the former, there is no evidence Hurley knew of the possible sale of the debtor’s business to a competing third party and was attempting to frustrate such sale.  With respect to the latter, there is no evidence Hurley interfered with a contractual relationship between the debtor and an identifiable third party.  For a discussion of relevant Kentucky law with respect to such causes of action, see CMI, Inc. v. Intoximeters, Inc., 918 F. Supp. 1068 (W.D. Ky. 1995), appeal dismissed, 95 F3rd 1168 (6th Cir. 1996), cert. Denied 118 S. Ct. 66 (1997); Stratmore v. Goodbody, 866 F.2d 189, 194-195 (6th Cir. 1989).  For a discussion of these concepts within the context of a bankruptcy proceeding, see In re Midway Airlines, Inc., Sheldon L. Solow, Trustee v. Northwest Airlines, Inc., 1993 WL 65673 (Bankr. N.D. Ill. 1993); In re Coin Phones, Inc., Balabar-Strauss v. Trustee v. New York Telephone, 203 B.R. 134 (Bankr. S.D. N.Y. 1996).

            The evidence supporting the claim that Mr. Hurley breached the Disclosure and Confidentiality Agreement  entered into between the parties is likewise vague, and insufficient to support this allegation in the complaint.  There was no evidence Hurley actually disclosed to third parties any financial information supplied to him in response to due diligence requests.

            The complaint of the trustee and the cross-claims of Gannon and Turner request such other relief as is appropriate.

            The court is of the opinion the bankruptcy estate, Gannon and Turner, are entitled to damages suffered as a result of Hurley’s misrepresentation of his financial ability to conclude a purchase of the debtor’s business on which misrepresentations the plaintiffs justifiably relied, and which misrepresentations resulted in the destruction of the debtor’s business warranting an award of damages to the trustee in behalf of the bankruptcy estate and to the third party defendants Gannon and Turner on their cross-claims against the defendants Hurley and Wholesale Supply.

            On the facts of this case the bankruptcy estate, Gannon and Turner are entitled to damages against Hurley and Wholesale Supply, of which Hurley was an officer and agent, for statutory and common law deceit.  Hurley misrepresented his financial condition in writing by presenting a written instrument showing the financial condition of Hoe Supply, which he led Gannon and Turner to believe he owned.  He also misrepresented his financial condition orally by statements indicating he was financially able to purchase the debtor’s business.  See KRS 411.070 and Hill v. Halmhuber, 9 S.W.2d 55 (Ky. 1928).

            The debtor, through Gannon and Turner, and Gannon and Turner individually, in good faith relied on Hurley’s representations concerning his intentions and financial ability to purchase the debtor’s business.  Hurley’s false representations both oral and in writing were relied on by Gannon and Turner to their detriment, and to the detriment of the debtor.

            The court is not persuaded the facts of this case warrant the imposition of punitive damages.  The representations of Hurley with respect to his financial condition were false, reckless, and irresponsible, and certainly caused injury to the debtor, Gannon, and Turner, but it is not clear that Hurley acted with intent to cause such injury, a requisite for the imposition of punitive damages.  K.R.S. 411.184(1)(b).

            The court is satisfied the reckless and irresponsible conduct of Hurley personally, and as agent of Wholesale Supply, warrant an award of damages in favor of the debtor in the amount of $300,120, in favor of Gannon in the amount of $100,000, and in favor of Turner in the amount of $25,000.

            Dated this 28th day of February 2000.

                        By the court –

 

                        ________________________________
                        JOE LEE, U.S. BANKRUPTCY JUDGE

 

Copies to:

George O. Pearson, Esq.

Paul E. Porter, Esq.

John E. Davis, Esq.

U.S. Trustee


UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

 

 

IN RE:

 

KENTUCKY HVAC WHOLESALE, INC.                       CASE NO. 96-50587

 

DEBTOR

 

 

STEPHEN PALMER, TRUSTEE                 PLAINTIFF

 

VS.                             ADVERSARY NO. 97-5026

 

WHOLESALE SUPPLY & DISTRIBUTION

COMPANY, LLC and WILLIAM A. HURLEY                   DEFENDANTS

 

VS.

 

WILLIAM A. GANNON and                 THIRD-PARTY

EMMETT TURNER                   DEFENDANTS

 

 

 

JUDGMENT

 

 

            In conformity with the memorandum opinion of the court this day entered, IT IS HEREBY ORDERED that the counterclaim of the defendants Wholesale Supply & Distribution Company, LLC and William A. Hurley is hereby DISMISSED.  Based on the false and misleading misrepresentations of the defendant William A. Hurley concerning his financial condition, acting for himself and as agent of the defendant, Wholesale Supply & Distribution Company, LLC, which misrepresentations and the conduct of William A. Hurley in furtherance of such misrepresentations caused damages to the debtor, Kentucky HVAC Wholesale, Inc. and the principals thereof, and as authorized by KRS 411.070 and Kentucky common law from which this statute derives, IT IS ORDERED and ADJUDGED that compensatory damages should be awarded against William A. Gannon, individually, and Wholesale Supply & Distribution Company, LLC, jointly and severally as follows:

            In favor of the chapter 7 trustee, Stephen A. Palmer and the bankruptcy estate of the debtor in the amount of $300,120, with interest at the rate of 6.287% until paid, plus attorney fees to be fixed by subsequent order of the court;

            In favor of William A. Gannon in the amount of $100,000, with interest at the rate of 6.287% until paid, plus attorney fees to be fixed by subsequent order of the court;

            In favor of Emmett Turner in the amount of $25,000, with interest at the rate of $6.287% until paid, plus attorney fees to be fixed by subsequent order of the court.

            This is a final and appealable judgment.

            Dated this 28th day of February 2000.

                        By the court –

 

                        _______________________________
                        JOE LEE, U.S. BANKRUPTCY JUDGE

 

Copies to:

 

George O. Pearson, Esq.

Paul E. Porter, Esq.

John E. Davis, Esq.

U.S. Trustee