Curtis v. Awbrey (In re Longhorn Paving & Oilfield Servs., Inc.)

Decision Date21 November 2022
Docket NumberCase No: 19-70233,Adversary No. 20-7006
Parties IN RE: LONGHORN PAVING & OILFIELD SERVICES, INC. and Monty Awbrey, Debtors. Catherine S. Curtis, Plaintiff, v. Monty Jeff Awbrey and Longhorn Services, Inc. and Awbrey Enterprises, Inc., Defendants.
CourtUnited States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas

Carissa Brewster, Randall A. Pulman, Leslie Sara Hyman, Anna Kochut MacFarlane, Pulman, Cappuccio & Pullen, LLP, San Antonio, TX, Thomas Rice, Pulman Cappuccio Pullen Benson & Jones, San Antonio, TX, for Plaintiff.

Steven Gerard Cennamo, Law Office of Cennamo & Werner, San Antonio, TX, for Defendants Awbrey Enterprises, Inc., Longhorn Services, Inc., Monty Jeff Awbrey.

MEMORANDUM OPINION

Eduardo Rodriguez, United States Bankruptcy Judge

Chapter 7 trustee Catherine S. Curtis brings nine counts against Monty Jeff Awbrey, Longhorn Services, Inc. and Awbrey Enterprises, Inc. seeking to avoid and recover various alleged transfers of estate property pursuant to §§ 541, 542, 547, 549 and 550 of the Bankruptcy Code, as well as for conversion, breach of fiduciary duty, knowing participation in a breach of fiduciary duty, and usurpation of corporate opportunities under Texas law. Catherine S. Curtis additionally seeks an award of exemplary damages pursuant to § 41.003 of the Texas Civil Practices & Remedy Code and recovery of attorneys’ fees pursuant to §§ 327, 330, 362, 544 of the Bankruptcy Code and uncited "applicable state statutes" from Monty Jeff Awbrey, Longhorn Services, Inc. and Awbrey Enterprises, Inc. The Court conducted a one day trial on October 11, 2022. For all the reasons discussed infra, the Court finds that all nine counts, as well as Trustee's request for attorney's fees and exemplary damages, are denied.

I. BACKGROUND

This Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure ("Rule ") 52, which is made applicable to adversary proceedings pursuant to Federal Rule of Bankruptcy Procedure ("Bankruptcy Rule ") 7052. To the extent that any finding of fact constitutes a conclusion of law, it is adopted as such. To the extent that any conclusion of law constitutes a finding of fact, it is adopted as such. This Court made certain oral findings and conclusions on the record. This Memorandum Opinion supplements those findings and conclusions. If there is an inconsistency, this Memorandum Opinion controls.1

1. Longhorn Paving and Oilfield Services, Inc. ("Debtor ") was in the business of commercial paving and oilfield services.2
2. Debtor was owned by Melissa Awbrey.3
3. Monty Jeff Awbrey Jr. ("Awbrey ") previously served as president of Debtor but resigned his position as of February 28, 2019.4 Awbrey continued to be an employee/consultant and received a regular salary from Debtor until January 17, 2020,5 shortly before the case was converted on March 25, 2020.6
4. Melissa Awbrey is the sister of Monty Jeff Awbrey Jr.
5. On June 10, 2019, (the "Petition Date ") Debtor filed for bankruptcy protection under chapter 11 of the Bankruptcy Code7 initiating the bankruptcy case styled In re Longhorn Paving and Oilfield Services, LLC, pending under Case No 19-70233, in the United States Bankruptcy Court for the Southern District of Texas, McAllen Division (the "Bankruptcy Case ").
6. Debtor's original schedules filed on June 10, 2019, listed $3,733,262.92 in total assets and $3,131,973.26 in total liabilities.8
7. On July 31, 2019, Awbrey formed Longhorn Services, Inc. ("LSI ") and began operating a similar business to Debtor.9
8. Between November 16, 2018, and May 24, 2019, Awbrey received seventeen regular salary disbursements from Debtor totaling $31,100.00.10 Some of these salary disbursements included reimbursement for out of pocket travel expenses.11
9. Between November 16, 2018, and December 21, 2018, Awbrey Enterprises Inc. ("AEI ") received three payments from Debtor totaling $17,000.00.12
10. Between June 10, 2019, and January 17, 2020, Awbrey received twenty regular salary disbursements from Debtor totaling $31,358.30.13 Some of these salary disbursements included reimbursement for out of pocket travel expenses.14
11. Between October 1, 2019, and July 31, 2021, LSI generated $362,719 in profit.15
12. On March 25, 2020, the Bankruptcy Case was converted to a proceeding under chapter 7.16
13. On March 26, 2020, Catherine S. Curtis ("Trustee" or "Plaintiff ") was duly appointed as chapter 7 Trustee.17
14. On November 17, 2020, the instant adversary proceeding styled Curtis v. Awbrey 20-7006 ("Adversary Proceeding ") was filed by Trustee against Awbrey, LSI, and AEI (collectively "Defendants ").18
15. On January 5, 2021, Defendants timely filed an answer to the original complaint.19
16. On August 19, 2021, Trustee filed her first amended complaint ("Complaint ").20
17. On August 30, 2022, Defendants timely filed their answer to the Complaint ("Answer ").21
18. On May 23, 2022, the parties filed a joint motion to refer the matter to mediation,22 which was granted by the Court on the same day.23
19. On June 29, 2022, mediation was unsuccessful and the Court issued its order for a pre-trial conference.24
20. On July 5, 2022, Trustee and Defendants submitted a joint pre-trial statement ("Joint Pre-Trial Statement ") that listed agreed and disputed issues of law and fact, as well as the witnesses that would be called at trial.
21. On October 11, 2022, the Court conducted a one day trial. The Court now issues its instant Memorandum Opinion.
II. CREDIBILITY OF WITNESSES

It is the Court's duty to assess and weigh the credibility of witnesses.25 At the October 11, 2022 trial, the Court heard testimony from four witnesses: (1) Catherine S. Curtis; (2) Greg T. Murray; (3) Jose M. Falcon; and (4) Monty Jeff Awbrey Jr. After observing the witnesses and listening to their testimony, the Court makes the following observations regarding the credibility of the witnesses, as set forth below.

1. Catherine S. Curtis

Catherine S. Curtis is the Chapter 7 Trustee in the underlying Bankruptcy Case and is the Plaintiff in this adversary proceeding.26 At trial, Catherine S. Curtis responded to questions clearly, completely, and directly.27 Thus, the Court finds that she is a very credible witness and gives substantial weight to her testimony.

2. Greg T. Murray

Greg T. Murray is a forensic accountant retained as an expert witness by the Trustee in this adversary.28 At trial, Greg T. Murray responded to questions clearly, completely, and directly.29 Thus, the Court finds that he is a very credible witness and gives substantial weight to his testimony.

3. Jose M. Falcon

Jose M. Falcon is a former employee of Debtor.30 At trial, Jose M. Falcon responded to questions clearly, completely, and directly.31 Thus, the Court finds that he is a very credible witness and gives substantial weight to his testimony.

4. Monty J. Awbrey Jr.

Monty J. Awbrey Jr. is a Defendant in this adversary and former president of Debtor. At trial, Monty J. Awbrey Jr. responded to questions clearly, completely, and directly.32 Thus, the Court finds that he is a very credible witness and gives substantial weight to his testimony.

III. JURISDICTION, VENUE, AND CONSTITUTIONAL AUTHORITY

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334 and exercises its jurisdiction in accordance with Southern District of Texas General Order 2012–6.33 Section 157 allows a district court to "refer" all bankruptcy and related cases to the bankruptcy court, wherein the latter court will appropriately preside over the matter.34 This Court determines that pursuant to 28 U.S.C. § 157(b)(2)(A), (E), (F), and (O) this proceeding contains core matters, as it primarily involves proceedings concerning the administration of this estate, recovery of estate property, and recovery preferential transfers.35 This proceeding is also core under the general "catch-all" language with respect to the preference and recovery of estate property claims, because such suits are the type of proceeding that can only arise in the context of a bankruptcy case.36

This Court may only hear a case in which venue is proper.37 28 U.S.C. § 1409(a) provides that "a proceeding arising under title 11 or arising in or related to a case under title 11 may be commenced in the district court in which such case is pending." Defendants reside and have their principal place of business in Edinburg, Texas38 and therefore, venue of this proceeding is proper.

While bankruptcy judges can issue final orders and judgments for core proceedings, absent consent, they can only issue reports and recommendations on non-core matters.39 On February 23, 2021, Trustee filed her notice of consent stating that she consented to the entry of final orders and judgments by this Court as it pertains to any and all non-core matters.40 On the same date, Defendants entered their notice of non-consent.41 Regarding any non-core claims involved, this Court finds that resolution of such claims is inextricably intertwined with resolution of the core claims.42 As such this Court can enter final orders and judgments. However, should the Honorable United States District Court determine that the Bankruptcy Court did not have authority to enter final orders and judgments, this Court requests that the Honorable United States District Court convert this Memorandum Opinion into a Report and Recommendation.

IV. ANALYSIS

Trustee brings nine total counts against Awbrey, LSI, and AEI. Trustee brings Counts One, Two, and Three against all three Defendants seeking to avoid and recover various alleged transfers of estate property pursuant to §§ 541, 542, 549 and 550 of the Bankruptcy Code and Texas conversion law;43 Count Four under Texas law against Awbrey and LSI for breach of fiduciary duty and knowing participation in a breach of fiduciary duty respectively;44 Counts Five, Six, Eight, and Nine against Awbrey for usurpation of corporate opportunities under Texas law and recovery of alleged...

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