Christopher J. Redmond v. Ashraf Fouad Hassan
| Decision Date | 21 December 2010 |
| Docket Number | CASE NO. 04-20332-7,ADV. NO. 05-6215 |
| Parties | CHRISTOPHER J. REDMOND, Trustee, KANSAS EXPRESS INTERNATIONAL, INC., PLAINTIFFS, v. ASHRAF FOUAD HASSAN, BILAL SAID, INTERNATIONAL FOOTBALL CLUB, INC., OVERLAND PARK SPORTS COMPLEX, LLC, ERRA SPORTS GROUP, LLC, TERRA VENTURE, INC.,TERRA VENTURE INVESTMENTS, In Re:ASHRAF FOUAD HASSAN, IRINA HASSAN, DEBTORS. LLC, ANALYTICAL MANAGEMENT LABORATORIES, INC., MARK MURPHY, THE MURPHY LAW FIRM, P.A., DEFENDANTS, and FINAL TOUCH, INC., KANSAS CITY LIMOUSINE, INC. AND BUDGET LIMOUSINE, AL MOSER, DIANE MOSER, DEFENDANTS & THIRD-PARTY PLAINTIFFS, v. STEVEN G. LORD, BROADMOOR CAPITAL, INC., BROADMOOR CAPITAL CONSULTING, LLC, THIRD-PARTY DEFENDANTS. |
| Court | U.S. Bankruptcy Court — District of Kansas |
SIGNED this 21 day of December, 2010.
THE TRUSTEE AND THE MURPHY DEFENDANTS
Dale L. Somers
This proceeding is before the Court on opposing motions for summary judgment. Defendants Mark Murphy and the Murphy Law Firm appear by counsel George D. Halper and Daniel F. Church of McAnany, Van Cleave & Phillips, P.A., of Roeland Park, Kansas. Plaintiff-Trustee Christopher J. Redmond apears by counsel Christopher J. Redmond, P. Glen Smith, and Gabrielle A.J. Beam of Husch Blackwell Sanders LLP of Kansas City, Missouri. The Court has reviewed the relevant materials, and is now ready to rule on the motions.
Although there are numerous other parties to this proceeding, the summary judgment motions now before the Court directly concern only the Trustee's claims against Defendants Mark Murphy and the Murphy Law Firm ("the Murphy Defendants").
For purposes of the motions, except where disputes are noted, the following relevant facts are uncontroverted.
On February 3, 2004, Defendant-Debtor Ashraf Hassan and his wife filed a voluntary petition for bankruptcy relief pursuant to Chapter 7 of the Bankruptcy Code. Before filing, the Debtor had operated a limousine and taxi service ("Limousine Business"). The Debtor's wife apparently had little to do with the Limousine Business, although her credit standing was used to obtain vehicles for it. The Debtor formed two corporations, Kansas Express, Inc., and Kansas Express International, Inc., but neither of them ever issued any stock. He used those names, as well as a number of others, for his Limousine Business. The Debtor did not follow corporate formalities and the corporations' charters were forfeited for failing to file annual reports. In the mainbankruptcy case, an order has been entered to substantively consolidate the Debtors' bankruptcy estates with the two corporations and another corporate name, Kansas International, Inc., the Debtor used without forming a corporation.
In Schedule B of their bankruptcy papers, the Debtors reported owning stock or interests in a worthless corporation. They listed the corporation's name as "Kansas International, Inc." On their Statement of Financial Affairs, the Debtors reported having a little less than $5,000 in income from "Kansas International" in 2001 and a loss of over $17,000 from the same business in 2002.
About seven weeks after filing for bankruptcy, on March 26, the Debtor began making arrangements for a transaction with Defendant Al Moser. The Debtor and Moser disagree who approached whom about the transaction, but no one questions that they ultimately signed an agreement. The Debtor told Moser the Limousine Business generated net income of $12,000 to $15,000 per month. On various dates, Moser received other information about the Limousine Business from Steve Lord, a broker who had been trying to sell the business for the Debtor. On May 14, Lord faxed Moser a December 2001 list of the business's office inventory with stated values totaling over $300,000, plus an assertion the business had goodwill based on: over 2, 000 repeat clients, successful operation for over ten years, a number of trained employees, brochures, a Web site, and Yellow Pages advertising.
On May 17, the Debtor, Lord, and Moser met with attorney Mark Murphy of the Murphy Law Firm. As a result of that meeting, the Murphy Defendants sent anngagement letter to the Debtor and to Moser and his wife. The letter stated the law firm was being hired "to prepare all necessary documentation and advise both [the Debtor], as the seller, and [the Mosers], as the purchasers, of all of the capital stock of Kansas Express International, Inc., which is owned by [the Debtor]." The Debtor indicated his acceptance of the terms of the engagement letter by signing it both individually and as president of Kansas Express International, Inc., and the Mosers both signed it to indicate their acceptance of the terms.
According to Murphy's sworn affidavit, the engagement letter "expressly provided that [he] would provide no legal advice to the buyer [the Mosers] and seller [the Debtor]," although he did not specify what language accomplished that. After the Mosers and the Debtor signed the letter, Murphy swears he "drafted a purchase agreement" based on their description of their transaction, but he "offered no legal advice to either of the parties regarding the transaction." He claims he "was retained to act solely as a scrivener of this agreement reached by the parties." Despite these assertions, the engagement letter identifies itself as an "Engagement Letter for Legal Representation." After the letter notes that having the Murphy Law Firm perform the work specified in the letter could raise conflicts, which Murphy had disclosed to the parties, the letter said the parties agreed to waive the conflicts and retain the firm, but "Should a conflict arise which cannot be resolved, we will withdraw from this transaction with regard to all parties in the matter, and you should then retain your own legal counsel to advise you." The letter specifies hourly rates the firm would charge for "legal fees and expenses," andincorporates an attached sheet of "Standard Terms of Engagement" for the Murphy Law Firm, "Attorneys and Counselors at Law."
On May 26 and 27, Moser paid the Debtor a total of $96,000 towards the transaction, and on May 28, the day they first signed an agreement, he paid another $9,000. Moser made more payments on various dates in June, so by the end of that month, he had paid the Debtor a total of $129,420.
The Mosers were to pay another $170,000 at the closing of the sale, and give the Debtor a promissory note for the remaining $275,000, secured by the stock the Debtor was selling.
The closing was set for July 1 or another date if the parties agreed to change it.
The Stock Purchase Agreement described 16 documents and said they were all attached to the agreement, but none of them were produced in connection with an earlier summary judgment motion or the present motions, nor has anyone suggested any of them were ever actually prepared and presented to the Debtor and the Mosers when they signed the agreement. Instead, the only other document the parties have submitted in connection with any of the summary judgment motions that was involved when the Debtor and the Mosers signed documents for the transaction on May 28, 2004, is the Pledge Agreement, which was mentioned in the Stock Purchase Agreement but not said to be attached to it. In ruling on the Trustee's prior motion for partial summary judgment, the Court said the conspicuous absence of the 16 exhibits described in the Stock Purchase Agreement had caused the Court to conclude none of them was ever prepared. The Court notes none of the parties has produced any of the 16 exhibits in connection with the current motions, either, further solidifying the Court's conclusion the exhibits were never created.
The Stock Purchase Agreement included other relevant provisions. Paragraph 9(f) says a variety of assets and obligations of the corporation — for example, interests in real and personal property, contracts to which the corporation is a party, and accounts receivable — are described or listed on attached exhibits. In paragraph 14, the Debtor agreed to a ten-year covenant not to compete with the corporation's business. Paragraph 11(c) says As indicated, no such agreement has been produced. The Court has previously ruled that under the Stock Purchase Agreement, there could be no doubt that the Mosers were buying the Debtor's Limousine Business, and not his promise to work for them after the business was transferred to them. If the Debtor's consulting services...
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