Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-04038/USCOURTS-ca10-89-04038-0/pdf.json

Parties Involved:
Ford Motor Credit Company
Appellee
Suresh "C" Shah
Appellant

Document Text:

I 

FI LED 

United States Court of Appeals 

UNITED STATES COURT OF APPEALS 

Tenth Circuit 

FOR THE TENTH CIRCUIT 

JUN 2 ~ 1990 

&OBERT L. HOECKER 

Clerk 

SURESH "C" SHAH, 

Debtor-Appellant, 

v. 

FORD MOTOR CREDIT COMPANY, a 

corporation, 

Appellee. 

) 

) 

) 

) 

) No. 89-4038 

) (D.C. No. 87-C-0177G) 

) ( D. Utah) 

) 

) 

) 

ORDER AND JUDGMENT* 

Before TACHA, SETH, Circuit Judges, and BROWN,** District Judge. 

**Honorable Wesley E. Brown, Senior District Judge, United States 

District Court for the District of Kansas, sitting by designation. 

The debtor-defendant, Mr. Suresh Shah, appeals from the 

order of the district court affirming the bankruptcy court's 

judgment excluding $404,941.96 from discharge in his personal 

Chapter 7 bankruptcy action. We affirm. 

Shah was the principal shareholder, president, and chief 

e x ecutive officer of Hobbit Ford, Inc. from 1977 to 1980. Under 

an Assumption Agreement executed by Shah, Hobbit was bound by the 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 89-4038 Document: 010110037505 Date Filed: 06/29/1990 Page: 1 
! 

floor plan agreement entered into by the predecessor dealership. 

The agreement contained the following provision: 

All merchandise financed hereunder shall be held by 

Dealer for the sole purpose of storing and exhibiting 

the same for sale in the ordinary course of Dealer's 

business . . . . Dealer shall not mortgage, pledge or 

loan all or any portion of such merchandise, and shall 

not transfer or otherwise dispose thereof except by sale 

in the ordinary course of Dealer's business. Any and 

all proceeds of any sale or other disposition of the 

merchandise by Dealer shall be received and held by 

Dealer in trust for FMCC and shall be fully, faithfully 

and promptly accounted for and remitted by the Dealer to 

FMCC to the extent of Dealer's obligation to FMCC with 

respect to such merchandise. 

Shah conceded that, during the period he was in control of Hobbit, 

certain vehicles had been sold by Hobbit for which FMCC had not 

received payment. The district court in Utah, upon FMCC's 

application, issued a temporary restraining order and a 

preliminary injunction restraining Hobbit and the Shahs from 

violating the floor plan agreement and ordered payment of all 

proceeds to FMCC. Shah argues that none of these circumstances 

placed him under fiduciary duties that should preclude 

dischargeability in his personal Chapter 7 bankruptcy proceeding 

of the debts related to the violation of the floor plan agreement. 

We disagree. 

Under the facts of this case, Shah was clearly the 

controlling officer of the corporation. He was directly 

responsible for the financial transactions that resulted in 

violations of the floor plan agreement and the TRO and preliminary 

injunction. Hobbit acted exclusively through Shah. Shah cannot 

seek refuge from the operation of the nondischargeability 

provisions of the bankruptcy laws where, as here, he caused the 

2 

Appellate Case: 89-4038 Document: 010110037505 Date Filed: 06/29/1990 Page: 2 
corporation to violate its debtor-in-possession duties to FMCC, 

which violation continued even in disregard of an explicit order 

of the district court. To allow such a fiction to shield Shah 

from the fiduciary duties owed by the debtor-in-possession makes a 

mockery of the contractual provisions, the bankruptcy laws, and 

the district court under the circumstances of this case. We agree 

with the bankruptcy and district courts that the $404,941.96 

should not be discharged in Shah's personal Chapter 7 bankruptcy 

action. See Ford Motor Credit Co. v. Owens, 807 F.2d 1556 (11th 

Cir. 1987). 

AFFIRMED. 

ENTERED FOR THE COURT 

PER CURIAM 

3 

Appellate Case: 89-4038 Document: 010110037505 Date Filed: 06/29/1990 Page: 3