Angel v. Tauch (In re Chiron Equities, LLC)

• Decision Date: 01 July 2016
• Docket Number: Adversary No. 16–03100,Case No. 14–34031
• Citation: 552 B.R. 674
• Parties: In re: Chiron Equities, LLC, Debtor. Virginia Angel, trustee of the Gobsmack Gift Trust, Plaintiff v. Kyle Tauch and K Realty Development, LLC, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Texas

552 B.R. 674

In re: Chiron Equities, LLC, Debtor.Virginia Angel, trustee of the Gobsmack Gift Trust, Plaintiff

v.Kyle Tauch and K Realty Development, LLC, Defendants.

Case No. 14–34031

Adversary No. 16–03100

United States Bankruptcy Court, S.D. Texas, Houston Division.

Signed July 01, 2016

J. Mark Davis, Law Offices of J. Mark Davis, Houston, TX, for Debtor.

John James Sparacino, Vorys Sater Seymour & Pease LLP, Houston, TX, for Plaintiff.

Misty A. Segura, Cokinos, Bosien & Young, Houston, TX, for Defendants.

MEMORANDUM OPINION REGARDING PLAINTIFF'S REQUEST FOR TEMPORARY INJUNCTION

[This Memorandum Opinion Relates to Adv. Doc. No. 1]

Jeff Bohm

, United States Bankruptcy Judge

I. Introduction

This Memorandum Opinion concerns an acrimonious dispute involving the two shareholders of the corporate debtor and the wife of one of these shareholders. Specifically, the fight centers around whether the claims brought by one shareholder against the other in a state court lawsuit are direct claims of that shareholder or derivative claims of the debtor corporation that the shareholder has no standing to bring. Moreover, the wife of the shareholder who is being sued in state court asserts that the other shareholder has no standing to bring these claims because she (through her trust) purchased these causes of actions at an auction held in this Court in 2015; therefore, she contends that the shareholder's prosecution of these claims against her husband constitutes a theft of these assets. Further, she points out that this shareholder participated at the auction and has known all along that her trust purchased these claims from the debtor corporation's Chapter 7 estate. Under these circumstances, she requests this Court to impose an injunction against the shareholder who is prosecuting the claims in state court against her husband.

Pursuant to Federal Bankruptcy Rule 7052

, the Court makes the following findings of fact and conclusions of law regarding the plaintiff's request for a temporary injunction. The Court does so in the wake of an evidentiary hearing held on May 25, 2016 (the “TI Hearing ”). To the extent that these written findings of fact and conclusions of law conflict with the oral findings of fact and conclusions of law that this Court made on the record at the hearing held on June 14, 2016, the former shall govern. To the extent that these written findings of fact and conclusions of law do not encompass any of the oral findings of fact and conclusions of law that this Court made on the record at the hearing held on June 14, 2016, the latter shall supplement the former. For the reasons set forth herein, the Court grants the temporary injunction.

I. Findings of Fact

1. K Realty Development, LLC (“KRD”), an investment company, is owned solely by Kyle Tauch (“Tauch ”) (collectively, the “Defendants ”). [Hr'g Tr. 61:24–62:2, May 25, 2016].

2. Virginia Angel (“Angel ”) is the trustee of the Gobsmack Gift Trust (the “Plaintiff ”), a creditor of Chiron Equities, LLC, the debtor in the main case (the “Debtor ”). [Hr'g Tr. 15:23–16:12, May 25, 2016].

3. Jay Krasoff (“Krasoff ”) is the husband of Angel. [Hr'g Tr. 22:25–23:1, May 25, 2016].

4. The Debtor is a privately-held company with two members. KRD has majority ownership and Krasoff has the minority ownership. [Plaintiffs Ex. No. 6, pp. 9–10 of 11].

5. The Debtor was formed in the fall of 2007. [Id. at p. 11 of 11]; [Hr'g Tr. 58:24–59:1, May 25, 2016].

6. Krasoff initially managed the Debtor, but was later replaced in April of 2012 by Tauch, who then became the managing member of the Debtor. [Hr'g Tr. 49:9–12, May 25, 2016].

7. On July 1, 2011, KRD and Krasoff, among others, executed a Memorandum of Understanding (the “MOU ”). [Plaintiff's Ex. No. 1, p. 23 of 25]. The purpose of the MOU was to “establish operating guidelines” and to “clarify ownership rights in [theDebtor ].” [Id. ]. The MOU contains the following paragraph:

With respect to Chiron Equities and its affiliated companies (the “Companies”) any person individually or as an employee or representative of any Company agrees to 1) never remit, expend or transfer funds in any form, incur debt, or divert income away from any Company without the prior written approval of Board of Directors. Until the particulars of a Board are agreed to by Walt, Eric, Jay, AND Kyle, Kyle will have full control as if he were the Board of Directors. Expenditures of the Companies will be made in conformance with a budget preapproved in writing by both the preparer of the budget and Board of Directors. Until the particulars of a Board are agreed to by Walt, Eric, Jay, AND Kyle, Kyle will have full control as if he were the Board of Directors.

[Id. ]. The following parties signed the MOU: (a) KRD; (b) Chiron Financial Advisors, LLC; (c) Walter McNeil; (d) Krasoff; and (e) Eric Israel. [Id. at p. 24 of 25].

8. Prior to the Debtor's bankruptcy filing, KRD remitted substantial monies into the Debtor's accounts in order to fund the Debtor's operations. [See Hr'g Tr. 73:4–74:6, May 25, 2016].

9. On July 23, 2014 (the “Petition Date ”), four creditors—Angel, Strategic Network Consulting, LLC, Roman Law Firm, P.C., and the Law Office of Rikki M. Rutchik—filed an involuntary Chapter 7 petition against the Debtor. [Main Case No. 14–34031, Doc. No. 1].

10. On August 15, 2014, the Debtor filed its Motion to Dismiss, requesting that this Court dismiss the involuntary petition. [Main Case No. 14–34031, Doc. No. 15].

11. On the same day (i.e., on August 15, 2014), the Plaintiff filed her Motion to Join in Involuntary Petition Pursuant to 11 U.S.C. § 303(c)

and

Fed. R. Bankr. P. 1003(b)

. [Main Case No. 14–34031, Doc. No. 20].

12. On August 19, 2014, September 3, 2014, and September 4, 2014, this Court held hearings on the involuntary petition, and then made oral findings of fact and conclusions of law; orally granted the involuntary petition; and orally denied the Motion to Dismiss. Thereafter, the Court entered an Order: (1) Granting Petitioning Creditors' Chapter 7 Involuntary Petition; (2) Denying Debtor's Motion to Dismiss; and (3) Setting Status Conference for 1:30 P.M. on November 13, 2014. [Main Case No. 14–34031, Doc. No. 42].

13. On October 17, 2014, Tauch, in his capacity as the manager of the Debtor, signed under penalty of perjury the Debtor's Schedules and Statement of Financial Affairs (“SOFA ”), and these documents were filed on this same day. [Plaintiff's Ex. Nos. 5 & 6].

14. In Schedule B, Tauch represented that the Debtor held the following claims, among others:

Breach of fiduciary duties, denuding business of assets, and conspiracy related thereto, against Jay Krasoff, 6308 Haskell, Houston, Texas 77007, Virginia Angel, 6308 Haskell, Houston, Texas 77007 and other John Does, unknown.

Claims and causes of action as to creditors identified with “disputed” in Schedule F.

[Id. ].

15. One of the creditors disclosed on Exhibit F is Krasoff, and the debt owed to him is scheduled as “disputed.” [Id. at p. 26 of 47]. Therefore, Tauch, on behalf of the Debtor, represented that the Debtor not only had claims against Krasoff for breach of fiduciary duties, denuding business of assets, and conspiracy, but also for any other “claims and causes of actions.”

16. In the SOFA, Tauch, on behalf of the Debtor, affirmatively represented twice that the “Memorandum of Understanding dated July [1], 2011” was “never consummated.” [Plaintiff's Ex. No. 6, pp. 9–10 of 11].¹

17. On September 10, 2014, Randy Williams was appointed as the trustee of the Debtor's Chapter 7 estate (the “Trustee ”).

18. On March 20, 2015, the Trustee filed a Motion for an Order (I) Approving Sale Procedures and (II) Authorizing the Sale of Claims Pursuant to 11 U.S.C. § 363 Free and Clear of All Liens, Claims and Encumbrances (the “Motion for Order Approving Sale ”). [Plaintiff's Ex. No. 2].

19. On April 22, 2015, this Court granted the Motion for Order Approving Sale by entering an order on the docket (the “Sale Order ”). [Plaintiff's Ex. No. 3]. KRD and Tauch were aware of the Sale Order, and did not appeal it, nor did anyone else. It became a final, non-appealable order on May 7, 2015. The Sale Order expressly set forth

that an auction would be held on May 20, 2015, at 1:30 P.M., so that the Trustee could sell the following assets owned by the Debtor:

(i.) any and all claims and causes of action against pre-petition officers, directors, and or managers of Chiron Equities, LLC;

(ii.) the avoidance actions arising from chapter 5, Title 11, United States Code;

(iii.) the claims and causes of action disclosed in Schedule B(16)² and B(21)³ of the Debtor's Schedules of Assets and Liabilities[ ];

(iv.) the assets disclosed in Schedule B(35)⁴ of the Debtor's Schedules of Assets and Liabilities;

(v.) the books and records of Chiron Equities, LLC, subject to allowing the Trustee access to same for the purpose of reviewing and/or objecting to proofs of claim; and,

(vi.) any and all other claims, debts, causes of action, rights or demands, hereafter of Chiron Equities, LLC, accrued or unaccrued, contingent or noncontingent, whether arising from contract, tort, strict liability, warranty, misrepresentation, fraud, negligence, or any other claim, at law or in equity, whether asserted theretofore or not, whether cognizable judicially or by any administrative or regulatory agency, at the present time or created by statute or judicial action

(collectively, the “Sale Order Claims ”). [Id. ].

20. On May 20, 2015, at approximately 1:30 P.M., the Court conducted an auction on the record in open court during which the Trustee sold the Sale Order Claims to the Plaintiff. Tauch, as the representative of KRD, actively participated at this auction, but the Plaintiff ultimately outbid him for the purchase of the assets. [Hr'g Tr. 20:7–21:8, May 25, 2016]. The highest bid, which came from the Plaintiff, was $31,500.00. [Plaintiff's Ex. No. 4, p. 2 of 6].

21. After the auction was conducted, the Trustee executed a Bill of Sale to the

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