In re Canyon Systems Corp., Bankruptcy No. 97-33774.

Citation343 B.R. 615
Decision Date31 March 2006
Docket NumberAdversary No. 03-2605. [DO Adversary No. 03-2606. [DO Adversary No. 03-2607. [DO Adversary No. 03-2609. [DO Adversary No. 03-2610. [DO Adversary No. 03-2611. [DO Adversary No. 03-2612. [DO Adversary No. 03-2613. [DO Adversary No. 03-2614. [DO Adversary No. 03-2615. [DO Adversary No. 03-2616.,Bankruptcy No. 97-33774.
PartiesIn re CANYON SYSTEMS CORPORATION, Debtor. John Paul Rieser, Trustee, Plaintiff, v. Dennis Hayslip, et al., Ron Piljay, et al., Camden Enterprises, Lynn A. Kubal, Rose Kubal, Gail D. Mayes, Gregory N. Mayes, Gregory McCollum, Gerald L. Wendling, Mary A. Wilkie, and Nena Grant, Defendants.
CourtUnited States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio

John Paul Rieser, Patricia Friesinger, Dayton, OH, for Plaintiff.

Thomas R. Noland, Tina Woods, Dayton, OH, for Defendants Huffman, Marohl, Osier, Piljay, Camden Enterprises, Lynn A. Kubal, Rose Kubal, McCollum, Wendling, Wilkie and Grant.

Gary C. Schaengold, Dayton, OH, for Defendant Scott Johnson.

Melissa K. Schindler, Dayton, OH, Richard B. Reiling, Springboro, OH, for Defendants Schraeder, Withrow, Julia Carmack and Jeffrey Carmack.

Barry S. Galen, Dayton, OH, for Debtor.

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART TRUSTEE'S MOTION FOR PARTIAL SUMMARY JUDGMENT

JOHN E. HOFFMAN, JR., Bankruptcy Judge.

Pending before the Court in these adversary proceedings are identical motions for partial summary judgment (collectively, "Motion") filed by the Plaintiff, John Paul Rieser, Chapter 7 Trustee ("Rieser" or "Trustee"), against all remaining defendants ("Defendants") in all remaining adversary proceedings in the bankruptcy case of Canyon Systems Corporation ("Canyon" or "Debtor"). For the reasons explained below, the Motion is granted in part and denied in part.

I. Jurisdiction

The Court has jurisdiction to hear and determine these adversary proceedings pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. These are core proceedings. 28 U.S.C. § 157(b)(2).

II. Procedural Background

Canyon filed a voluntary Chapter 11 petition on July 7, 1997 ("Petition Date"), following the collapse of its gold coin sales programs.1 These programs promised participants large profits from purchasing and selling gold bullion coins. Less than a month after the Chapter 11 case was filed, and after the United States Trustee had moved to convert the case to a Chapter 7 liquidation proceeding, or in the alternative to appoint a Chapter 11 trustee, Canyon agreed to convert to Chapter 7. Rieser was appointed Chapter 7 Trustee.

On July 6, 1999, the Trustee filed in excess of 400 adversary proceedings to recover money from individuals and companies who had bought or sold gold coins through one of Canyon's programs. The complaints contain multiple federal and state law causes of action, but the gravamen of each is that prepetition transfers of cash and gold coins made to participants in Canyon's gold coin sales programs — which the Trustee alleges constituted a Ponzi scheme — are subject to avoidance and recovery. On March 29, 2000, Judge William A. Clark, the judge originally assigned to the Canyon case, entered an order reassigning the case and all related adversary proceedings to Judge Hoffman.

After his appointment as Trustee, Rieser pursued a strategy of negotiating settlements with all investors in the alleged Ponzi scheme before forging ahead with the litigation against the Defendants, each of whom he asserts played a larger role in Canyon than being a mere investor in the scheme — some were officers, directors and/or key employees of Canyon, while others were relatives of Jackson Johnson ("Jack Johnson"), the founder, President and CEO of Canyon. Thus, the Trustee asked that trial on the complaints naming the Defendants ("Complaints") be deferred until the other nearly 400 adversary proceedings had been resolved. Counsel for the Defendants did not challenge the Trustee's decision to defer a day of reckoning. In fact, counsel for most of the Defendants sought, and received, multiple extensions of time to answer, move or otherwise plead (some spanning more than a year) in response to the Complaints. Over the ensuing several years, Rieser settled or dismissed his claims against all parties to the Canyon adversary proceedings except the Defendants identified below:2

                Defendant Relationship with Debtor Amounts Transferred
                D. Scott Johnson              Son of Founder/CEO                       84,570.00 Commissions
                ("Scott Johnson")             Independent Affiliate                   209,800.00 Overrides
                Individually and                                                       65,200.00 Comp Gold
                                                                                      ----------
                through DSJ Enterprise                                                359,570.00 Total
                Trust # 1 and
                Enterprise Trust # 2
                James W. Huffman              Director                                  25,030.00 Commissions
                ("Huffman")                                                              2,900.00 Overrides
                                                                                        13,950.00 Comp Gold
                                                                                        -----------
                                                                                        41,880.00 Total
                John E. Marohl                Director Independent                      20,500.00 Commissions
                ("Marohl")                    Affiliate                                  2,200.00 Overrides
                                                                                             0.00 Comp Gold
                                                                                        ---------
                                                                                        22,700.00 Total
                V. William Osier              Director                                       0.00 Commissions
                ("Osier")                                                                    0.00 Overrides
                                                                                         1,195.00 Comp Gold
                                                                                         --------
                                                                                         1,195.00 Total
                Ron Piljay                    Director Independent                      15,810.00 Commissions
                ("Piljay,)                    Affiliate                                  2,200.00 Overrides
                                                                                         3,700.00 Comp Gold
                                                                                        ---------
                                                                                        21,710.00 Total
                
                Kim Schraeder                 Step-daughter of                         60,150.00 Commissions
                ("Schraeder")                 Founder/CEO Director                     15,300.00 Overrides
                Individually and              Independent Affiliate                    30,700.00 Comp Gold
                                                                                      ----------
                through Trust #1                                                      106,150.00 Total
                Lisa Withrow                  Step-daughter of                         46,770.00 Commissions
                ("Withrow")                   Founder/CEO Director                      9,200.00 Overrides
                Individually and              Independent Affiliate                    33,900.00 Comp Gold
                                                                                       ---------
                through Trust #1                                                       89,870.00 Total
                Julia M. Carmack              Daughter of Founder/CEO                  41,792.38 Commissions
                                              Independent Affiliate                     7,200.00 Overrides
                                                                                       43,550.00 Comp Gold
                                                                                       ---------
                                                                                       92,542.38 Total
                Jeffrey T. Carmack            Son-in-Law of Founder/CEO                   220.00 Commissions
                                              Independent Affiliate
                                                                                        2,100.00 Overrides
                                                                                        4,300.00 Comp Gold
                                                                                        --------
                                                                                        6,620.00 Total
                Camden Enterprises            Independent Affiliate                    17,450.00 Commissions
                                                                                        1,800.00 Overrides
                                                                                       ---------
                                                                                       19,250.00 Total
                Lynn A. Kubal                 Independent Affiliate                    45,330.00 Commissions
                                                                                        6,100.00 Overrides
                                                                                       12,800.00 Comp Gold
                                                                                       ---------
                                                                                       64,230.00 Total
                Rose Kubal                    Independent Affiliate                     8,358.80 Commissions
                                                                                          800.00 Overrides
                                                                                        8,100.00 Comp Gold
                                                                                       ---------
                                                                                       17,258.80 Total
                Gail D. Mayes                 Independent Affiliate                     5,860.00 Commissions
...

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