In re Barkal, Case No. 08-20663 JPK (Bankr.N.D.Ind. 7/14/2008)

Decision Date14 July 2008
Docket NumberCase No. 08-20663 JPK.
PartiesIN RE: PAUL KEVIN BARKAL, Chapter 13, Debtor.
CourtU.S. Bankruptcy Court — Northern District of Indiana
MEMORANDUM OF DECISION

PHILIP KLINGEBERGER, Bankruptcy Judge.

On March 18, 2008, the debtor and the Chapter 13 Trustee, jointly, filed a Joint Motion for Turnover Against Receiver ("Joint Motion"). By order entered on April 2, 2008, the Court scheduled a preliminary pre-trial conference with respect to the Joint Motion and with respect to other contested matters involving the debtor and Martin F. Goldberg, as receiver appointed in state court proceedings in California ("Receiver") with respect to matters relating to a judgment entered against the debtor Paul Kevin Barkal ("Barkal") and in favor of Anna May Webb ("Webb") in a case originally entitled Webb v. San Diego Pain Management Clinic, a medical corporation and Kevin Barkal, Case No. GIC757374 in the Central Division of the Superior Court of California for the County of San Diego. At that preliminary pre-trial conference, the parties and the Court jointly determined the manner in which the "core issue" with respect to the Joint Motion, certain other of the contested matters, and in relation to Adversary Proceeding Numbers 08-2027 and 08-2033 — would be determined. The procedure thus determined is stated in the Court's Order Regarding Further Proceedings entered on April 29, 2008. As stated in that order, the contested matter arising from the Joint Motion was chosen as the vehicle by which the "core issue" in other matters presented to the Court would also be determined. The April 29, 2008 order stated the "core issue" as follows:

The extent to which proceeds of accounts receivable of the Barkal Entities or of Kevin Barkal, M.D., or corporate governance powers in relation to the Barkal Entities — now or in the future subject to the possession or control of Martin Goldberg, as Receiver appointed with respect to Case No. GIC757374 in the Superior Court of California, County of San Diego, Central Division — constitute property of the Chapter 13 bankruptcy estate of Paul Kevin Barkal in case number 08-20663.

In part pertinent to this decision, the April 29, 2008 order provided a mechanism for the parties' submission of a stipulated record to the Court with respect to determination of the core issue, and designated deadlines for filing legal memoranda in relation to that issue.

The parties' designated record was delivered to the chambers of the Court on May 16, 2008, as memorialized by docket record entry #116 dated May 19, 2008.1 The record is comprised of a "Joint Index of Exhibits Regarding Appointment of Receiver and Judgment-Debtor Alter Egos" ("Joint Index"), which designates 58 separate exhibits which were submitted with the Joint Index. This submission constitutes the entire record before the Court for determination of the matter addressed by this decision. Because the parties chose to submit this record to the Court pursuant to paragraph 4(a) of the April 29, 2008 order — rather than to create a record by means of an evidentiary hearing — the Court deems all materials in the submitted record to be agreed by the parties to be admissible into evidence under the Federal Rules of Evidence. Because the designated record thus constitutes the entire evidentiary record in this matter, as would be true if a record were created at an evidentiary hearing, the Court is free to draw inferences from the materials in the record, to weigh the evidence created by the record, and to determine its legal conclusions from the facts which it so determines from the record.

The Joint Index designated above was signed solely by counsel for Barkal and by counsel for Webb. Paragraph 4(a) of the April 29, 2008 order provided for the submission of the record by those parties, and in addition by the "Barkal Entities" [comprised of Surgical Leasing Company, Inc.; The San Diego Pain Management Group, Inc.; Pain Management Group, Inc.; Medical Facilities Management Group, Inc.; Torrey Pines Facilities Management Group, GP; West Coast International Pain Medicine; CV Surgical Management, Inc. and Pemcor, Inc.] Although counsel for the Barkal Entities did not sign the Joint Index, pursuant to the terms of the April 29, 2008 order, those parties are deemed to be bound by the factual record created by the designated record submission.

Legal memoranda were timely filed by Barkal, Webb and by the Barkal Entities. The core issue designated above is now before the Court for determination.

The Court has jurisdiction over the Joint Motion and the issue to which this Memorandum of Decision is addressed pursuant to 28 U.S.C. § 1334(a) and (b); 28 U.S.C. § 157(a) and (b); and N.D.Ind.L.R. 200.1(a). The matter addressed herein is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (E).

The facts necessary for determination of the core issue have been very capably set forth in the "Parties and Underlying Transactions" section of the Debtor's Brief Regarding Alter Ego Issue filed on May 30, 2008; those facts are the following:

1. Paul Kevin Barkal, the Debtor herein, filed a Petition for Relief under Chapter 13 of the United States Bankruptcy Code on March 10, 2008 ("Petition Date").

2. Prior to the filing of his Bankruptcy Petition, Dr. Kevin Barkal ("Dr. Barkal" or "Debtor") was sued in the Superior Court for the State of California, for the County of San Diego, Central Division, by Anna May Webb in a case entitled Webb vs. San Diego Pain Management Clinic, a Medical Corporation and Kevin Barkal, under Case No: GIC757374 ("State Court Action"). (See Exhibit 1). The State Court Action is premised on a slip and fall accident which occurred on the business premises of the San Diego Pain Management Clinic, ("SDPM") an entity in which the Debtor has an interest.

3. On December 29, 2000, the Debtor was dismissed as a party to the State Court Action. (See Exhibit 2). The case was still pending against SDPM after the December 29, 2000, dismissal against the Debtor.

4. On January 7, 2002, SDPM, Kevin Barkal and Webb entered into a Settlement Agreement and Release wherein SDPM agreed to pay Webb the sum of $138,000.00. ("Settlement Agreement") (See Exhibit 3). Forty Thousand Dollars ($40,000.00) was paid upfront by SDPM's insurance carrier and the balance was to be paid in forty eight (48) monthly installments of $2,000.00 with Dr. Barkal personally guaranteeing the payment. ("Settlement") The entire case was dismissed upon the execution of the Settlement Agreement. The Settlement was not lodged in the State Court Action. SDPM made approximately ten (10) payments and failed to make any more.

5. On October 15, 2002, Webb filed an Ex Parte Motion to Enforce Settlement in the State Court Action wherein Webb sought to convert the Settlement Agreement into a judgment against not only SDPM, but the previously dismissed party, Kevin Barkal. (See Exhibit 5).

6. On February 13, 2003, the Court granted the Motion to Enforce Settlement and entered a judgement against SDPM and Kevin Barkal in the amount of $151,971.21 ("Judgment").

7. On April 4, 2005, Webb filed an Ex Parte Application to Amend Judgement nunc pro tunc to add the proper Defendant, San Diego Pain Management Consultants (as opposed to San Diego Pain Management Clinic). The Court granted said Motion on April 6, 2005. (See Exhibit 7).

8. On June 13, 2005, the Court entered a Charging Order against Surgical Leasing Company, LLC and Strategic Leasing Company, LLC which, effectively, ordered that any and all interest of the Debtor in these two companies were charged with the balance of the Judgment against Kevin Barkal. This Order required any funds due and owing the Debtor by the two companies be paid to Webb toward satisfaction of the Judgment. (See Exhibit 8).

9. On June 16, 2005, the Court entered an Order assigning all rights, title and interest payments due to Debtor (i.e. commission, royalties, insurance reimbursement payments, contract payments) to Webb. (See Exhibits 9 and 10).

10. On December 19, 2005, Webb filed an Ex Parte Application for the Appointment of a Post Judgment Limited Receiver. On December 21, 2005, the Court entered an Order to Show Cause as to Post Judgment Limited Receiver and appointed Martin Goldberg ("Goldberg" or "Receiver") as Receiver ("Receiver Order"). (See Exhibits 11 and 12).

11. The Receiver Order, entered ex parte, ordered Kevin Barkal to turn over all keys, leases, books, records, books of account, ledgers, operating statements, budgets, tax bills, insurance policies and all other business records relating to the subject assets, wherever located, and in whatever mode maintained, including information contained on computers and any and all software relating thereto, as well as all banking records, statements and cancelled checks relating to Debtor Barkal from the following entities (1) Pemcor, Inc; (2) CV Surgical Management, Inc.; (3) West Coast Interventional Pain Medicine, a medical Corporation; (4) Pain Intervention Therapy of San Diego; (5) Surgical Leasing Company, Inc.; (6) Strategic Leasing Company, LLC; (7) Surgical Leasing Company, LLC; (8) Kellett, Inc.; (9)War, Inc.; (10) San Diego Pain Management Center, Inc.; (11) Genesee Surgery Center, LP; and (12) Beach Cities Surgery Center, LP.

12. On or about January 24, 2006, Webb petitioned the Court to Amend the Receiver Order to allow the Receiver to immediately seize all of Debtor Barkal's direct and indirect business interests, including but not limited to, bank accounts, books, records, papers and accounts for the following entities: (1) Pemcor, Inc; (2) CV Surgical Management, Inc.; (3) West Coast Interventional Pain Medicine, a medical Corporation; (4) Pain Intervention Therapy of San Diego; (5) Surgical Leasing Company, Inc.; (6)Strategic Leasing Company, LLC; (7) Surgical Leasing Company, LLC; (8) San Diego Pain Management Center, Inc.; (9) Genesee Surgery Center, LP;...

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