Edwards v. Mario Reis, M&M Fuel Serv., LLC (In re M&M Fuel Oil Trucking, Inc.), Case No.: 15-13965 (VFP)

• Decision Date: 10 July 2017
• Docket Number: Case No.: 15-13965 (VFP),Adv. Pro. No.: 15-2324 (VFP)
• Citation: Edwards v. Reis (In re M&M Fuel Oil Trucking, Inc.), Adv. Pro. No.: 15-2324 (VFP), Case No.: 15-13965 (VFP) (Bankr. N.J. Jul 10, 2017)
• Parties: In Re: M&M FUEL OIL TRUCKING, INC., Debtor. BARBARA A. EDWARDS, AS CHAPTER 7 TRUSTEE, Plaintiff, v. MARIO REIS, M&M FUEL SERVICE, LLC, M&M FUEL OIL SERVICE LLC AND MICHAEL WIJATYK, Defendants.
• Court: U.S. Bankruptcy Court — District of New Jersey

In Re: M&M FUEL OIL TRUCKING, INC., Debtor.

BARBARA A. EDWARDS, AS CHAPTER 7 TRUSTEE, Plaintiff, v. MARIO REIS, M&M FUEL SERVICE, LLC, M&M

FUEL OIL SERVICE LLC AND MICHAEL WIJATYK, Defendants.

Case No.: 15-13965 (VFP)

Adv. Pro. No.: 15-2324 (VFP)

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY

Entered: July 11, 2017

July 10, 2017

Chapter: 7

Hearing Date: June 27, 2017

Judge: Vincent F. Papalia

OPINION

APPEARANCES:

BARBARA A. EDWARDS, ESQ.

Muscarella, Bochet, Edwards & D'Alessandro

10-04 River Road

Fair Lawn, NJ 07410

Chapter 7 Trustee

ERIN R. KENNEDY, ESQ.

Forman Holt

66 Route 17 North

Paramus, NJ 07652

Attorney for Chapter 7 Trustee

CHRISTOPHER R. HIGGINS, ESQ.

Law Office of Christopher R. Higgins, Esq., LLC

P. O. Box 124

Parlin, NJ 08859

Attorney for Debtor and forDefendant Mario Reis

ANDREW T. SHAW, ESQ.

301 Dover-Chester Road

Randolph, NJ 07869

Attorney for Defendant Michael Wijatyk

MELISSA ANN CHAPASKA, ESQ.

Hawke, McKeon & Sniscak, LLP

100 North Tenth Street-P. O. Box 1778

Harrisburg, PA 17105

Attorney for Intervenor Sycamore Energy-Rockaway

Retail, LLC

ANDREW J. KELLY, ESQ.

The Kelly Firm, P. C.

Coast Capital Building

1011 Highway 71, Suite 200

Spring Lake, NJ 07762

Attorney for Intervenor World Business Lenders, LLC HONORABLE VINCENT F. PAPALIA, Bankruptcy Judge

I. INTRODUCTION

This matter is before the Court on the Motion filed by Sycamore Energy-Rockaway Retail, LLC, as Intervenor ("Sycamore"), in the captioned adversary proceeding to enforce a November 30, 2015 Order Granting Injunctive Relief (the "Order") (Adv. Dkt. No. 53). The Order was originally obtained by Chapter 7 Trustee Barbara A. Edwards, Esq. to compel the Defendants (none of whom is the Debtor) to turn over, to account for, and to refrain from using the Debtor's property (as well as the Debtor's business profits). Sycamore, a creditor of the Debtor, was granted leave to intervene in the adversary proceeding and to enforce the November 30, 2015 Order on its own behalf. The Trustee subsequently determined to abandon the estate's interest in the property as of inconsequential value to the estate. See 11 U.S.C. § 554(a) and Dkt. Nos. 49, 74, and 79. On June 27, 2017, the Court held a hearing on this Motion attended by counsel for Sycamore, no other party-in-interest having filed an objection or appeared, and now issues this Opinion.

II. JURISDICTIONAL STATEMENT

The Court has jurisdiction over this matter under 28 U.S.C. § 1334(b) and under the Standing Orders of Reference entered by the United States District Court on July 10, 1984 and amended on September 18, 2012. The Court also has core jurisdiction, as this is a proceeding to enforce its own Order. Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009); In re FormTech Indus., LLC, 439 B.R. 352, 357 (Bankr. D. Del. 2010); 28 U.S.C. § 157(b)(2)(A) and (O). Venue is proper in this Court under 28 U.S.C. § 1408. The Court issues the following findings of fact and conclusions of law pursuant to FED. R. BANKR. P. 7052. To the extent that any of the findings of fact might constitute conclusions of law, they are adopted as such. Conversely, to the extent that any conclusions of law constitute findings of fact, they are adopted as such.

III. STATEMENT OF FACTS

The Debtor, M&M Fuel Oil Trucking, Inc. (the "Debtor") filed a voluntary Chapter 11 bankruptcy petition on March 6, 2015, through counsel, Christopher Roy Higgins, Esq., over the signature of Defendant Mario Reis as Director ("Mario").¹ On September 11, 2015, the Court entered an Order converting the Debtor's case to one under Chapter 7, on the unopposed motion filed by the Office of the United States Trustee, after the Debtor failed to meet its obligations under Chapter 11 (Main Dkt. No. 31, Sept. 11, 2015 Conversion Order). Barbara A. Edwards, Esq., was appointed Chapter 7 Trustee (the "Trustee"), and she retained the law firm Forman, Holt, Eliades & Youngman, LLC (now Forman Holt) as special counsel by Order entered on November 3, 2015 (Main Dkt. No. 58).

On October 30, 2015, the Trustee filed the instant adversary proceeding with an Order to Show Cause to enjoin Defendants Mario Reis and M7M [sic] Fuel Oil Trucking, Inc.² from using the Debtor's assets (particularly motor vehicles), accounts and customer lists in a successor business and to compel the Defendants to turn over at least $24,064 in receivables collected from Debtor's customers (Adv. Dkt. No. 3).³ According to the Trustee's application, Sycamore advised the Trustee about the Debtor's continuing operation and the successor's misuse of Debtor's assets (Dkt. No. 3-3, Atkins Aff. in Support of Order to Show Cause, Exs. A and B, letters dated Sept. 16, 2015 and Oct. 6, 2015 from counsel for Sycamore to the Trustee).

In response to the Trustee's Order to Show Cause, Debtor's attorney, Christopher R. Higgins, Esq., certified "on information and belief" that Mario had ceased operating the Debtorand that Mario's son-in-law was operating the similarly named Defendant, M&M Fuel Oil Service (Adv. Dkt. No. 12, Higgins Cert., ¶¶ 4-13).⁴ The Trustee objected to this attorney certification as nonresponsive, improper and as essentially supporting the Trustee's allegations in any event (Adv. Dkt. No. 14). The Court entered the Order Granting Injunctive Relief on November 30, 2015 (Adv. Dkt. No. 16). On December 28, 2015, also pursuant to this Order, the Trustee filed an Amended Complaint and named as the complete roster of Defendants: Mario Reis; M&M Fuel Service LLC; M&M Fuel Oil Service LLC; and Michael Wijatyk (Adv. Dkt. No. 18). Andrew T. Shaw, Esq., filed an Answer to the Amended Complaint on behalf of Wijatyk (Adv. Dkt. No. 20).

The Debtor scheduled Sycamore on its petition as the ninth largest, general unsecured creditor in the amount of $39,021 (Main Dkt. No. 1, pp. 6, 22). Sycamore filed a timely proof of claim #3-1 on June 22, 2015 in the amount of $45,460. The claim consists of accounts receivable, which Sycamore acquired through the purchase of another entity (Claim #3-1, June 22, 2015 letter of counsel for Sycamore). On April 4, 2016, Sycamore filed a motion to intervene in the adversary proceeding on the grounds that the Defendants continued to operate with Debtor's assets in derogation of the November 30, 2015 Order (Adv. Dkt. No. 26). Sycamore based its motion on the certification of Louis Aponte, General Manager, that (i) a Sycamore employee observed one of Debtor's fuel trucks operating on February 14, 2016; (ii) that Debtor still had a Facebook page as of March 31, 2016 (showing a customer order dated February 29, 2016); and (iii) that, as of March 31, 2016, Defendant M&M Fuel Oil Service, LLC, represented on its Facebook page that it was "M&M Fuel Oil Trucking" (Adv. Dkt. No. 26-4, Aponte Cert., ¶¶ 6-9). The Court granted the unopposed motion for intervention by Orderentered on August 8, 2016 (Adv. Dkt. No. 28), and Sycamore filed a Third-Party Complaint on August 15, 2016 (Adv. Dkt. No. 30).

On December 1, 2016, the Trustee moved to dismiss this adversary proceeding on the grounds that the successor entity had ceased operating; that Debtor's books and records were in such disarray as to militate against further administration; that the vehicles were overencumbered; that the customer lists had limited value; and, in general, that any value remaining in the assets was not worth the expense of collecting and administering them and would not create a benefit for the bankruptcy estate (Adv. Dkt. No. 40-1, Trustee's Cert., ¶¶ 12-20).⁵ Sycamore opposed dismissal on the grounds that it believed that Mario Reis was still violating the November 30, 2015 Order and using Debtor's assets to operate a successor company (Adv. Dkt. No. 43, Sycamore Obj., ¶¶ 7-11). A January 18, 2017 letter from Chambers asked Sycamore to address whether its Third-Party Complaint should be dismissed without prejudice to Sycamore's right to bring the action in another court, based on "procedural and practical" concerns, including whether the Bankruptcy Court had continuing jurisdiction after the main complaint is dismissed (Adv. Dkt. No. 45).⁶ Sycamore, through counsel, asked the Bankruptcy Court to retain jurisdiction over the adversary proceeding and to continue to enforce its Order (Adv. Dkt. No. 44).

At the hearing on January 31, 2017 the Court: (i) dismissed the adversary Complaint and the Third-Party Complaint of World Business; (ii) ordered Sycamore to file a contempt motion within ninety (90) days; and (iii) determined that the Court would retain jurisdiction over the Sycamore Third-Party Complaint for the limited purpose of deciding the contempt Motion and appropriate remedies (Adv. Dkt. No. 51, Feb. 3, 2017 Order). Sycamore timely filed the instant Motion on May 2, 2017 and was ordered to re-serve it on the Defendants by certified mail (having initially relied on electronic notice only) (Adv. Dkt. Nos. 53, 54). Sycamore served Mario Reis through Higgins, who, as indicated above, had filed a Notice of Appearance on behalf of Mario Reis in this matter.

The Motion relies (i) on a photograph of an undated postal advertisement showing "J&M Fuel" and its contact information on one side and the legend "formerly M&M Fuel"; and (ii) on other similar evidence (Adv. Dkt. No. 53-3, Attorney Cert., Ex. B). Sycamore also attaches the Trustee's November 30, 2016 Certification in support of the Trustee's dismissal Motion (which reprises the results of the Trustee's investigation of the unauthorized use and/or transfer of Debtor's assets) (Adv. Dkt. No. 53-3, Ex. C). Based on these exhibits, Sycamore argues that Mario and the other Defendants (except Wijatyk) should be held in contempt on ground that the Debtor has either continued to operate through a successor or that the Debtor has transferred its information to a successor (Adv. Dkt. No. 53-3, Attorney Cert., Exs. B and C; Adv. Dkt. No. 53-4, Br.). The Motion remained unopposed through the June 27, 2017 adjourned return date.

IV. CONCLUSIONS OF LAW

The Bankruptcy Court has the power...