Allred v. Nickeson (In re James Lee Nickeson SSN/Itin XXX-Xx-8970)
| Decision Date | 25 November 2014 |
| Docket Number | Bankr. No. 13-10137,Adv. No. 14-1004 |
| Court | U.S. Bankruptcy Court — District of South Dakota |
| Parties | In re: JAMES LEE NICKESON SSN/ITIN xxx-xx-8970 Debtor. FORREST C. ALLRED, TRUSTEE Plaintiff v. CAMILLE NICKESON; LEE NICKESON; JAMES L. NICKESON FARMS, INC.; and LLJ, LLP Defendants. |
The matters before the Court are Trustee-Plaintiff Forrest C. Allred's Motion for Partial Summary Judgment and Defendants Camille Nickeson and James L. Nickeson Farms, Inc.'s Motion for Partial Summary Judgment. These are core proceedings under 28 U.S.C. § 157(b)(2). The Court enters these findings and conclusions pursuant to Fed.R.Bankr.P. 7056 and Fed.R.Civ.P. 56(a). For the reasons discussed below, the Court will deny both motions.
James L. Nickeson Farms, Inc. ("Farm Corporation")1 was incorporated in 2002.Its articles of incorporation authorized it to issue 15,000 shares with a par value of $100.00 per share "fully paid and nonassessable[.]" James Lee Nickeson ("Debtor") was the lone incorporator and sole director.2
Debtor filed a chapter 11 petition in bankruptcy on December 3, 2009, Bankr. No. 09-10263 (D.S.D.). According to his chapter 11 schedules, his assets were worth $646,300.00, while his liabilities totaled $5,146,441.69. On his schedule of personal property, Debtor stated he owned 15,000 shares in Farm Corporation with anunknown value.
Debtor's original disclosure statement in his chapter 11 case did not reference his wife Camille Nickeson, except as to an attached February 7, 2007 balance sheet for Farm Corporation she had signed.3 The original disclosure statement also did not reference Central Livestock Association Inc. or Genex Cooperative, Inc. (collectively "Genex") as specifically holding a secured or an unsecured claim to be paid through the plan. Two objections to Debtor's original disclosure statement were filed, including one by Genex, which identified itself as holding 80% or more of the unsecured claims in the chapter 11 case. After a hearing, Debtor was ordered to set forth the resolution of the objections in an amended disclosure statement, which the parties in interest were given an opportunity to review before Debtor filed it. Debtor eventually filed the amended disclosure statement, and the Court approved it on December 22, 2010.
In the amended disclosure statement, where claims were described, Debtor added a reference to Genex:
Class 14 is the partially secured/unsecured claim of Central Livestock Association/Genex Cooperative, Inc. in the amount of $1,717,742.46, plus accrued interest through the date of the commencement of the case. This claim is to be paid pursuant to the Stipulation of the parties as shown in Exhibit H. It is estimated that these creditors are receiving a distribution roughly equal to a present value of $.20 on the dollar.
In another section of the amended disclosure statement entitled "Means for Execution of the Plan," Debtor added:
The Debtor's spouse intends to sell $100,000 worth of Gold investments she owns. These funds will be paid to James Nickeson Farms. Nickeson Farms will then pay the $220,000 to Genex. James Nickeson Farms will issue stock to Debtor's spouse which will reduce the value of Debtor's stock.
To the amended disclosure statement, Debtor attached the same February 7, 2007 balance sheet for Farm Corporation, which indicated Farm Corporation had a net worth of $5,484,012.00. The balance sheet also stated Farm Corporation owned $65,000.00 worth of gold, $6,500.00 worth of silver, and $120,000.00 worth of art prints and guns. Another attachment to the amended disclosure statement was Debtor's liquidation analysis. As had the one attached to Debtor's original disclosure statement, this liquidation analysis did not assign a value to Debtor's interest in Farm Corporation. Rather, therein Debtor enigmatically stated,
Debtor also attached to the amended disclosure statement a new document entitled "Stipulation for Plan Treatment of the Pre-petition Secured and Unsecured Claims of [Genex]." In it, Debtor and Genex acknowledged Genex had a judgment against Debtor, R&J Dairy, and Richard Millner for $1,717,742.46 and agreed Genex would be paid a total of $550,000.00 on that debt, with $220,000.00 to be paid by January 15, 2011 and the balance to be paid in annual installments $30,000.00 for several years. The stipulation further provided:
The stipulation also included certain subordination provisions regarding Genex's new security interests.
Debtor circulated for confirmation the amended disclosure statement and a modified plan. In the modified plan, Debtor stated:
The Debtor will work for James Nickeson Farms, Inc. and James Nickeson Farms, Inc. will guarantee the secured debts if this Plan is confirmed. Farms will transfer sufficient funds to make the payments required under the Plan for Secured Creditors. For the Unsecured Class (Class 15), Farms will guarantee that the Class 15 claimants will be paid the amount they would receive under a Chapter 7, less tax claims and other liquidations costs.
Attached to the modified plan was the above-described stipulation between Debtor and Genex. In the modified plan itself, the Court did not find any other reference to Camille Nickeson. Also, the modified plan referenced Farm Corporation as theguarantor secured and unsecured claims, while Debtor's stipulation with Genex referenced Nickeson Farms, Inc. as the guarantor for Genex's claim.
According to the January 7, 2011 minutes from a special meeting of Farm Corporation's board of directors, directors Debtor and Camille Nickeson approved an amendment to the corporation's articles of incorporation.4 Under the amendment, Farm Corporation would have authority to issue 75,000 shares, rather than just 15,000. Again, each share was to have a par value of $100.00 "fully paid and nonassignable[.]" According to the same January 7, 2011 board meeting minutes, the Farm Corporation's by-laws were amended to increase the number of directors from one to two. The board minutes further provided, "Camille Nickeson stated that she had contributed cash to the corporation in the sum of $133,000.00 in return for the issues of 60,000 shares of the capital stock of the Corporation." The board's attendant formal resolution provided Farm Corporation could issue the 60,000 shares to Camille Nickeson upon receipt of the stated consideration. Shareholder minutes of the same date, signed by both Debtor and Camille Nickeson, accepted the board'schange to the articles of incorporation and the change to the by-laws. Debtor continued as Farm Corporation's president and treasurer; Camille Nickeson served as its secretary.
With this planned transfer, Camille Nickeson would own 80% of the available shares in Farm Corporation. Debtor's interest would drop from 100% to 20%.
In an August 22, 2013 state court deposition, Camille Nickeson initially indicated she did not know why Farm Corporation's available shares were increased from 15,000 to 75,000. In the same deposition, she later stated it was done because "[Debtor] needed to pay Central Genex money that was a, I don't know if it was a lawsuit or what it was, and the corporation couldn't pay it, [Debtor] didn't have the money, so I said I would, but I would have to have extra shares, I would have to be a bigger share in the corporation in order to do that." She further acknowledged the Genex debt was personal to Debtor, not the corporation.
In a July 29, 2013 state court deposition, Debtor testified the source of the $133,000.00 Camille Nickeson used to purchase the 60,000 shares was an inheritance from her father. In her August 22, 2013 state court deposition, however, Camille Nickeson said about $81,000.00 of the funds came from the inheritance, savings, and a loan from Debtor's and her son Lee Nickeson, and the balance came from gold. Camille Nickeson stated in her deposition she received the gold from Debtor, who had been collecting gold coins for years. Camille Nickeson further stated Farm Corporation eventually carried the gold on its books as an asset, Debtor then gave the gold to her, and she subsequently used the gold to purchase the 60,000shares from Farm Corporation. Camille Nickeson said she did not pay for the gold. In her amended answer in the instant adversary proceeding, Camille Nickeson provided a different scenario: She said she obtained the funds to purchase the 60,000 shares via two "loans" from Lee Nickeson totaling $79,375.00 ...
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