Artho v. Happy State Bank (In re Artho)
| Decision Date | 30 March 2018 |
| Docket Number | Adversary No. 17-02002,Case No.: 15-20046-RLJ-12 |
| Citation | 587 B.R. 866 |
| Parties | IN RE: Jerry ARTHO, Debtor. Jerry Artho, Plaintiff, v. Happy State Bank, Panhandle Enterprises, Inc., OPR H2O, LLC, Shannon T. Burdett, and Outpost Ranches, Ltd., Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
Jerry Artho, Paris, TX, pro se.
John H. Lovell, Lovell, Lovell, Isern & Farabough, LLP, Thomas C. Riney, Riney & Mayfield LLP, Amarillo, TX, for Defendants.
Before the Court are separate but related motions to dismiss this adversary proceeding filed by Defendants Happy State Bank (HSB); Shannon T. Burdett; OPR H2O, LLC (OPR H2O); Outpost Ranches, Ltd. (Outpost); and Panhandle Enterprises, Inc. (Panhandle) (collectively, Defendants). The complaint initiating this adversary, filed by Jerry Artho (dba Artho Cattle) on February 8, 2017, alleges several causes of action against the various Defendants and seeks damages in an unliquidated amount.1 As addressed below, this proceeding is related to Artho's chapter 12 bankruptcy case and, in particular, his confirmed chapter 12 plan.
The Court asked the parties to address the Court's jurisdiction and authority to hear and decide this suit that alleges claims that arise out of both alleged pre-filing (of the bankruptcy) and post-confirmation (of the chapter 12 plan) misconduct by the Defendants. After reviewing the parties' briefs on the issues and considering the alleged facts and causes of action, the Court concludes it does have jurisdiction under 28 U.S.C. §§ 1334(b) and 157. All parties consent to the Court's hearing and deciding the causes raised here. See Wellness Int'l Network, Ltd. v. Sharif , ––– U.S. ––––, 135 S.Ct. 1932, 1948-49, 191 L.Ed.2d 911 (2015) ; see also Estate of Frances Maddox v. O'Cheskey (In re Am. Hous. Found.) , No. 15-02000, 2015 WL 5781396, at *2 (Bankr. N.D. Tex. Sept. 30, 2015).
On March 2, 2015, Artho sought bankruptcy relief under chapter 12 of the Bankruptcy Code.2 An amended chapter 12 plan of reorganization and motion for valuation (the Plan) was filed on June 17, 2015.3
Relevant to this pending litigation, the terms of the Plan allowed for a secured claim in favor of HSB in the amount of $1,534,185 as of the date the petition was filed.4 To pay on HSB's secured claim, and the claims of other creditors, the Plan called for a sale of all of Artho's real estate, farm machinery, and equipment free and clear of all interests, liens, and encumbrances.5 The sale was to be conducted by public auction within 60 days after the Court's entry of a confirmation order, whereby the order would also approve employment of Higgenbotham Auctioneers International, Ltd. to conduct the auction.6
The Plan also makes provision for specific claims against HSB. Included with that provision are facts and circumstances for which Artho contends the estate maintains its claims against HSB.8 The alleged facts, while not identical, are similar to those alleged in Artho's complaint against HSB.9 The Plan asserts that the alleged facts, if true, "could nullify the validity of the liens asserted by bank ... and also give cause for the award of a judgment against the bank and others acting in concert ...."10 The Plan was confirmed on June 19, 2015.11
On September 3, 2015, Artho filed his Debtor's Report of Sale of Personal Property, confirming that the debtor's real estate, farm machinery, and equipment were sold at an auction held on August 14 and 15, 2015.12 The Report of Sale of Personal Property reflected a net of $41,388.45 to Artho on account of the sale of his farm machinery and equipment.13 Artho separately filed the Debtor's Report of Sale of Real Property on October 6, 2015.14 The Report of Sale of Real Property reflected total dollars received from the sale of $3,632,358.95.15 From those funds, distributions were made to secured creditors, including HSB, and for fees of professionals; $99,411.89 was turned over to Artho; the remaining funds from the sales of real and personal property were deposited in Artho's counsel's trust account to pay unsecured creditors.16 Unlike the Report of Sale of Personal Property, the Report of Sale of Real Property does not contain information about the purchasers of the real estate tracts. By the Court's order, entered November 6, 2015, the Report of Sale of Real Property was approved, including the distributions contained in the referenced report.17
Artho filed an amended complaint on May 31, 2017.18 He alleges six causes of action against HSB, four of which are also alleged against the other named defendants.19 The causes of action against HSB are: (1) fraud by false promises; (2) civil conspiracy to commit fraud by false promises; (3) duress; (4) civil conspiracy to commit duress; (5) civil conspiracy to violate 18 U.S.C. § 152(5) ; and (6) conspiracy to violate 18 U.S.C. § 1962(b).20 Artho asserts the four conspiracy-based causes against the other defendants, as well.21
In support of these claims, Artho alleges that HSB had promised him additional time to conduct an auction of certain assets, the proceeds of which would pay HSB's loans.22 The auction was to occur in April 2015 and was necessary, Artho says, because he was not able to secure financing to pay the HSB loans otherwise.23 Relatedly, Artho contends that he was not able to secure financing from other lenders or otherwise sell his assets because of HSB's interference in the process.24 Artho says he relied on the alleged promise made by HSB to allow him time to hold a private auction conducted by an auctioneering company that would publicize and market the assets available for auction.25
Artho contends, however, that prior to the planned April 2015 auction, HSB posted all of Artho's property for foreclosure in February 2015 for a foreclosure sale in March 2015.26 The pending foreclosure caused Artho to seek relief in the bankruptcy Court under chapter 12.27
As stated, the terms of Artho's chapter 12 Plan provided for an auction of his property, farm equipment, and machinery. At the bankruptcy auction, Outpost was the successful bidder on two tracts of Artho's real property.28 The significance of Outpost's purchase of the two tracts is, Artho alleges, their proximity to other real property owned by Outpost and their having new water wells that could benefit Outpost's land.29 Artho contends that the Defendants sought to acquire these tracts at below-market prices because of their value to the business operations of each Defendant.30 Artho alleges that HSB sought information related to the production quantities of the newly completed water wells and with this information decided that portions of Artho's land would be advantageous to the other defendants. Artho alleges that the Defendants, by their agents, intimidated other "good-faith bidders" at the auction to help secure the identified properties.31
Despite an alleged fair market value of more than $15,000,000, all of Artho's auctioned property sold for $3,648,528.95.32 Artho claims that but for the actions of the Defendants—the false promise, the impending foreclosure, and the unlawful conduct at the bankruptcy auction—he could have refinanced the indebtedness owed to HSB or otherwise acquired the funds necessary to pay such indebtedness.33
By its motion to dismiss, HSB asserts that Artho's complaint fails to properly allege subject matter jurisdiction as required by Rule 12(b)(1), to state a claim upon which relief may be granted under Rule 12(b)(6), and to comply with Rule 9(b) for allegations of fraud.34 Particularly, HSB says that Artho lacks standing to prosecute claims that were not explicitly reserved in the confirmed chapter 12 Plan and that he lacks standing to assert a claim under 18 U.S.C. § 152(5), which is a criminal statute without a private remedy.35 HSB's motion contends that the allegations of Artho's complaint are not plausible and are nothing more than conclusory statements.36 Summarily, HSB seeks dismissal of Artho's complaint, and of specific causes, for the following additional reasons: (1) the complaint does not plead facts with particularity as required by Rule 9(b); (2) the statute of frauds applies to bar claims; (3) the conspiracy claims are barred by the statute of limitations; and (4) the causes alleging duress are barred by res judicata and those related to the bankruptcy auction were waived upon entry of the Court's order approving the sale.37
Defendants Shannon T. Burdett, Outpost, OPR H2O, and Panhandle raise similar arguments by their joint motion to dismiss Artho's complaint.38 They challenge Artho's standing to pursue claims not reserved in the confirmed chapter 12 Plan, the plausibility of the allegations, and compliance with Rule 9(b).39
Artho filed his responses and briefs opposing the motions to dismiss.40 The Court heard oral argument on September 15, 2017, at which time it asked the parties to brief the issue of whether the Court had jurisdiction and authority to hear and decide the case.41 After receipt of the parties' briefs on jurisdiction, the Court took the matter under advisement.
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