Butler v. Candlewood Rd. Partners, LLC (In re Raymond)

• Citation: 529 B.R. 455
• Decision Date: 17 April 2015
• Docket Number: Case No. 13–16214–JNF,Adv. P. No. 14–1082
• Parties: In re Neil St. John Raymond, Debtor Joseph G. Butler, Chapter 7 Trustee, Plaintiff v. Candlewood Road Partners, LLC, Maplecroft Partners LLC, 53–85 Canal Street LLC, Buttonwood Trust, Buttonwood Nominee Trust, 2002 Buttonwood Nominee Trust, Neil St. John Raymond, Jr., Macy Raymond, Benjamin Raymond, Samuel Raymond, and Elizabeth Raymond, Defendants
• Court: United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts

529 B.R. 455

In re Neil St. John Raymond, Debtor
Joseph G. Butler, Chapter 7 Trustee, Plaintiff
v.
Candlewood Road Partners, LLC, Maplecroft Partners LLC, 53–85 Canal Street LLC, Buttonwood Trust, Buttonwood Nominee Trust, 2002 Buttonwood Nominee Trust, Neil St. John Raymond, Jr., Macy Raymond, Benjamin Raymond, Samuel Raymond, and Elizabeth Raymond, Defendants

Case No. 13–16214–JNF
Adv. P. No. 14–1082

United States Bankruptcy Court, D. Massachusetts.

Signed April 17, 2015

529 B.R. 457

Charles A. Dale, III, Eric French, K & L Gates LLP, Boston, MA, for Plaintiff.

Christopher M. Candon, Sheehan Phinney Bass & Green PA, Manchester, NH, for Defendants.

MEMORANDUM

Joan N. Feeney, United States Bankruptcy Judge

I. INTRODUCTION

The matter before the Court is the Motion of the Plaintiff Joseph G. Butler, the Chapter 7 Trustee of the estate of Neil St. John Raymond (the “Debtor”), for Leave to Amend Complaint pursuant to Fed. R. Bankr.P. 7015(a) for the purposes of adding defendants and a claim for relief. The

529 B.R. 458

Defendants, Candlewood Road Partners, LLC, a Delaware limited liability company, Maplecroft Partners LLC, a Massachusetts limited liability company, 53–85 Canal Street LLC, a Massachusetts limited liability company, Buttonwood Trust, Buttonwood Nominee Trust, 2002 Buttonwood Nominee Trust, Neil St. John Raymond, Jr., Macy Raymond, Benjamin Raymond, and Samuel Raymond (collectively, the “Defendants”), filed an Opposition to the Motion.

If the Court grants the Motion for Leave to Amend, the Defendants' pending Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(6), which Defendant Elizabeth Raymond joined by way of a document captioned, “Joinder to Motion to Dismiss,” the Court then must determine whether the Motion to Dismiss is moot. According to the court in Oquendo–Claudio v. Santander Fin. Servs., Inc., No. 10–2185–GAG, 2011 WL 5163319, at *1 n. 4 (D.P.R. Oct. 31, 2011), “while it is common for district courts to deny a motion to dismiss an original complaint as moot if an amended complaint is timely filed pursuant to Rule 15(a)(1)(B), an amendment to a complaint does not automatically render moot the grounds raised in the motion to dismiss the original complaint.” The court in Oquendo–Claudio noted that if the allegations and claims asserted in the original and amended complaints are substantially identical, defendants' motions to dismiss are not moot. Id. For the reasons set forth below, the Court shall grant the Trustee's Motion for Leave to Amend and address the merits of the Defendants' Motion to Dismiss because the allegations in the original Complaint and Amended Complaint are substantially identical.

II. BACKGROUND

The Debtor filed a voluntary Chapter 11 petition on October 24, 2013. He subsequently filed a Motion for Entry of Order Converting Debtor's Chapter 11 Case to Chapter 7, which the Court granted on November 20, 2013, and the Plaintiff, Joseph G. Butler, Esq., was appointed Chapter 7 Trustee.¹ The Court established

529 B.R. 459

February 18, 2014 as the deadline for filing complaints under 11 U.S.C. §§ 523 and 727. Neither the Chapter 7 Trustee nor any creditors timely filed a complaint under 11 U.S.C. § 523 or § 727,² and the Court entered a discharge order on April 1, 2014.

On April 25, 2014, the Chapter 7 Trustee filed a Verified Complaint against the Defendants, Candlewood Road Partners, LLC (“Candlewood”),³ Maplecroft Partners LLC (“Maplecroft”),⁴ 53–85 Canal Street LLC (“Canal Street”),⁵ Buttonwood Trust, Buttonwood Nominee Trust, 2002 Buttonwood Nominee Trust, and certain individual defendants, namely the Debtor's spouse (“Elizabeth”) and children, Neil St. John Raymond. Jr. (“Jed”), Macy Raymond (“Macy”), Benjamin Raymond (“Benjamin”), and Samuel Raymond (“Samuel”).

In his original Complaint, the Trustee alleged that the Debtor, a well-known real estate developer who was involved in “a high-end golf course and housing development” in Ipswich, Massachusetts known as “Turner Hill,” “treated the assets held by

529 B.R. 460

the Defendant trusts and limited liability companies ... as if they were his own.” According to the Trustee, the Debtor allegedly solicited investments for the Turner Hill project and personally guaranteed some of them to induce the investors' contribution of capital. When the Turner Hill project failed, triggering the personal guarantees, the Debtor's debts exceeded his ability to pay. The Trustee alleged that the Debtor paid down his debts and granted collateral security to some of his creditors, but claimed insolvency to many others, telling creditors that “Turner Hill had wiped out his assets and that he would not be able to pay his debts.” The Trustee further alleged that the Debtor “did not disclose to his creditors his beneficial interests in one or more trusts, including the Buttonwood Trust, or any personal property with significant value;” that “[w]hile claiming insolvency to stave off collection efforts by his creditors, [Debtor] began a campaign of liquidating and concealing assets, using entities he controlled to shield money and property;” and that since at least 2004, “whenever [the Debtor] needed money to support his real estate projects, help with his legal and personal bills, or assistance in satisfying obligations to creditors that he deemed critical, [he] used assets nominally owned by various legal entities that he controlled, including the Buttonwood Trust, the Buttonwood Nominee Trust, the 2002 Buttonwood Nominee Trust, the Raymond Children's Trust, Maplecroft Partners LLC, Candlewood Road Partners LLC, Raymond Property Company LLC, and 53–85 Canal Street LLC.” In sum, the Trustee alleged that “[d]espite putative restrictions limiting the use of their assets, [the Debtor] routinely consumed their property for his own personal benefit.....”

Specifically, the Trustee alleged that “despite the presence of a spendthrift clause in the Buttonwood Trust ... [the Debtor] has exercised unfettered control over the assets and income of the Buttonwood Trust,⁶ the Buttonwood Nominee

529 B.R. 461

Trust, and the 2002 Buttonwood Nominee Trust, and regularly used them to either secure or satisfy his personal and business debts.” In 2007, the Debtor allegedly used assets in the Buttonwood Trust and the Buttonwood Nominee Trust to secure a $1.95 million letter of credit from Bank of New England that was subsequently used to pay the Debtor's 2005 federal tax bill. According to the Trustee, the Debtor pledged an asset of the Raymond Children's Trust to one of the Debtor's creditors, even though the Debtor purportedly had no control over the assets and the Trust was set up as an irrevocable trust; that Maplecroft, an asset in which the Children's Trust held a 62.89% interest, executed a fraudulent mortgage to secure payment on an “equally fraudulent” promissory note of $2 million in an effort to tie up assets to keep them away from creditors; and that the Debtor caused Maplecroft to mortgage its interest in Vermont real estate as security for his unpaid legal bills and outstanding letters of credit. In addition, the Trustee alleged that the Debtor and his children “dissolved the Raymond Children's Trust with the actual intent to hinder, delay and defraud the Debtor's creditors” and that the Debtor's children formed a new entity with the assets of the Raymond Children's Trust, namely Candlewood Road Partners, LLC. The Trustee further alleged that although the Debtor had no interest in Candlewood, he “controlled and extensively used 53–85 Canal Street LLC” to secure and satisfy his personal spending habits, business and other debts, using the rents collected from tenants by 53–85 Canal Street “to satisfy his own personal needs.”

The Trustee, through his proposed Verified First Amended Complaint, seeks to add additional defendants, namely 1) Raymond Property Company LLC (“RPC”), a Massachusetts limited liability company;⁷ 2) the Raymond Children's Trust; and 3) Joseph A. Brear, Jr. (“Attorney Brear”) in his capacity as the former trustee of the Buttonwood Trust, the Buttonwood Nominee Trust, the 2002 Buttonwood Nominee Trust, and the Raymond Children's Trust, a Massachusetts Trust formed under a declaration of trust dated December 7, 1981 and allegedly terminated in August of 2011. With respect to Attorney Brear, a former partner at the now closed law firm of Craig and Macauley, P.C. (“C & M”), the Trustee alleges the following:

Attorney Brear served as trustee of the Buttonwood Trusts and the Children's Trust. Despite his responsibility to protect the interests of all beneficiaries and to preserve trust assets for their benefit, Attorney Brear posed no obstacle for Raymond, who voraciously used and consumed their property for his own personal benefit. During his tenure as trustee of these trusts, Attorney Brear was employed by C & M, which simultaneously served as Raymond's personal and business counsel. Prior to joining C & M, Attorney Brear worked for Raymond

529 B.R. 462

...