IN RE ANDREWS

PETER BOWIE, Bankruptcy Judge

This matter came on regularly for hearing on plaintiff's motion for summary judgment. Following the hearing, the Court took the motion under submission for further review of the supporting and opposing documents.

The Court has subject matter jurisdiction of the proceeding pursuant to 28 U.S.C. § 1334 and General Order No. 312-D of the United States District Court for the Southern District of California. This is a core proceeding under 28 U.S.C. § 157(b) (2) (I).

The essence of plaintiff's complaint is that it entered into a contractual relationship with Andrews Financial Group, Inc. (AFGI) pursuant to which plaintiff would assign receivables to AFGI to collect and remit back to plaintiff. Debtor Andrews has been the sole owner and officer of AFGI. Plaintiff contends that it assigned a number of receivables to AFGI, that AFGI collected at least some of those receivables, but did not remit all of the proceeds to plaintiff.

Mr. Andrews filed a petition in bankruptcy under Chapter 7 in his individual capacity. Plaintiff filed an adversary proceeding, seeking to have this Court determine that Mr. Andrews is individually liable to plaintiff for the funds collected but not remitted, and that such a debt is nondischargeable under 11 U.S.C. § 523(a) (4) and (a) (6).

A threshold issue is whether plaintiff is entitled to pierce AFG's corporate veil and look directly to Mr. Andrews as the alter ego of AFGI. Plaintiff recognizes this obligation and asserts it has met it. Plaintiff also recognizes that the test for alter ego is:

(1) That there is such a unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist; and

(2) That, if the acts are treated as those of the corporation alone, an inequitable result will follow.

There is no dispute over whether Mr. Andrews was the sole owner and officer of AFGI. He was. But in and of itself that cannot be sufficient for application of the alter ego rule, for if it were, the corporate status of virtually every professional corporation would have to be similarly ignored. Rather, establishment of alter ego is a factual matter, and requires indicia of the principal ignoring corporate formalities, commingling funds, using corporate funds for personal expenses, and the like.

It is true that plaintiff argues that Mr. Andrews used the corporate accounts to pay personal expenses. In support, plaintiff points to a statement Mr. Andrews made under oath in a judgment debtor exam of AFGI taken March 11, 2005. There, Mr. Andrews was asked if AFGI provided him with a housing allowance. His response was:

A. Oh, housing allowance. I don't know how the accountant worked it out, but, you know, when I needed money, they just —

Q. So you would take a housing allowance occasionally?

A. Yes. Instead of a salary, yes, of course.

In this Court's view, that statement does not support an argument for application of the alter ego doctrine sufficient to require its application.

In the same judgment debtor exam, Mr. Andrews gave other testimony about how AFGI preserved corporate formalities, including board meetings as required (p. 16); maximum number of employees, 8 (p. 16); all the standard corporate records (p. 19); filed tax returns (p. 33). Moreover, he made clear that in his view any funds collected were used to pay corporate expenses. Specifically, he was asked:

Q. Generally, do you recall what happened to the money was [sic] received on behalf of Unisource? I can go account by account if it helps.

A. The only thing I think happened was it was eaten up by corporate expenses.

Q. Like the Formalarias accounting, that came in, and you used that to pay employees, gas, electricity, everything?

A. Whatever needed to be paid. We just weren't generating enough capital to keep opened. When I got sick, my officer manager just paid as she thought.

(p. 49).

The Court finds and concludes, based on both the foregoing and on the full record submitted on the summary judgment motion that plaintiff has fallen far short of providing sufficient competent evidence to show even by a preponderance that the alter ego doctrine should apply in the instant case. So far as the record discloses, no basis has been shown to justify looking past the corporate status of AFGI.

Accordingly, plaintiff's motion for summary judgment shall be, and hereby is, denied, without prejudice.

IT IS SO ORDERED.