In re Divine Ripe, L.L.C.

• Decision Date: 21 July 2016
• Docket Number: CASE NO: 15–70405
• Citation: 554 B.R. 395
• Parties: In re: Divine Ripe, L.L.C., Debtor
• Court: U.S. Bankruptcy Court — Southern District of Texas

554 B.R. 395

In re: Divine Ripe, L.L.C., Debtor

CASE NO: 15–70405

United States Bankruptcy Court, S.D. Texas, McAllen Division.

Signed July 21, 2016

Antonio Martinez, Jr, Attorney at Law, McAllen, TX, for Debtor.

MEMORANDUM OPINION SUSTAINING FRESCOS TOMVER, S.A. DE C.V.'S OBJECTION TO DISCLOSURE STATEMENT AND DENYING DEBTOR'S MOTION TO APPOINT SAUL ZUNIGA AS DESIGNATED REPRESENTATIVE OF DIVINE RIPE, L.L.C. PURSUANT TO FEDERAL BANKRUPTCY RULE 9001(5)(A)

[Resolving ECF Nos. 68 and 105 ]

Eduardo V. Rodriguez

, United States Bankruptcy Judge

I. INTRODUCTION

Pending before this Court are two motions. The first motion, filed by Frescos Tomver, S.A. DE C.V. (“Frescos Tomver ”), an unsecured creditor, is self-styled as “Objection to Disclosure Statement,” [ECF No. 105] (the “Objection ”), which alleges that the Debtor's Disclosure Statement, [ECF No. 93] (“Disclosure Statement ”), does not contain adequate information on certain aspects of the Debtor's Plan of Reorganization: Information on Marco Jimenez's financial capabilities and Information about certain aspects of the Debtor. In addition, Frescos Tomver objects on the premise that Debtor's plan would be violative of federal law.

In the second, filed by the Debtor, is self-styled as “Motion to Appoint Saul Zuniga as Designated Representative of Divine Ripe, L.L.C. Pursuant to Federal Bankruptcy Rule 9001(5)(A)

.” [ECF No. 68] (“Motion to Appoint ”). The Motion to Appoint sought approval of this Court for the Debtor to appoint Saul Zuniga, an employee of the Debtor, as the Designated Representative. Id. This Court considers the Objection, the Motion to Appoint, the argument presented in hearings on this matter held February 12, 2016, February 22, 2016, and April 12, 2016, all other evidence in the record, and relevant case law, and determines that the Objection should be SUSTAINED, as such Debtor's Disclosure Statement is NOT APPROVED, and that the Motion to Appoint should be DENIED.

II. PROCEDURAL BACKGROUND

On October 16, 2013, Frescos Tomver initiated a lawsuit against Divine Ripe, L.L.C. (the “Debtor ”) and Marco Antonio Jimenez (“Jimenez ”), claiming violations under the Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. § 499a et seq.,

breach of contract, and breach of fiduciary duty in the United States District Court for the Southern District of Texas in McAllen, TX. [Case No. 7:13–cv–00577, ECF No. 1]. The Debtor filed its Motion to Extend the Automatic Stay as to Jimenez with Respect to Certain Pre–Petition Litigation, which this Court denied. In re Divine Ripe, L.L.C., 538 B.R. 300, 314 (Bankr.S.D.Tex.2015) ; [ECF No. 50], Subsequently, Frescos Tomver continued to pursue Jimenez in the Civil Case, which included noticing Jimenez for a deposition related to his role with the Debtor. [ECF No. 63 at ¶¶ 7, 22]. Frustrated by the alleged evasive, to put it mildly, conduct of Jimenez, Frescos Tomver brought its Motion to Dismiss or Convert to rectify what it views as bad faith behavior. Id. at ¶¶ 15–23. Debtor subsequently sought to appoint Saul Zuniga (“Zuniga ”), an employee of the Debtor, as its Representative, a move opposed by Frescos Tomver. [ECF Nos. 68, 76]. This Court conducted a hearing on the Debtor's motion seeking to appoint Zuniga on February 12, 2016, that was continued to February 22, 2016, when this Court conducted a hearing on Frescos Tomver's Motion to Dismiss or Convert as well as the continued motion. This Court took both motions under advisement, where the Motion to Dismiss or Convert remains. The instant matter involves Frescos Tomver's Objection and Debtor's Motion to Appoint.

III. FINDINGS OF FACT

This Court makes the following Findings of Fact and Conclusions of Law pursuant to Federal Rules of Bankruptcy Procedure 7052

, which incorporates Fed. R. Civ. P. 52, and 9014. 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.

For the purposes of this Memorandum Opinion, this Court adopts each of the Findings of Fact in this Court's Memorandum Opinion Denying Debtor's Motion to Extend Stay to Non-Debtor Marco Jimenez with Respect to Certain Pre–Petition Litigations, [Case No. 15–70405, ECF No. 49 at 3–9], and incorporates each into this Memorandum Opinion. See also In re Divine Ripe, L.L.C., 538 B.R. at 303–05

.

On September 15, 2015, this Court heard the parties' arguments on Debtor's Motion to Extend the Automatic Stay as to Marco Jimenez, [ECF No. 12]. This Court denied Debtor's Motion. In re Divine Ripe, L.L.C., 538 B.R. at 314

; [ECF No. 50]. On December 22, 2015, Frescos Tomver filed its Motion to Dismiss or Convert.

[Case No. 15–70405, ECF No. 63] (“MTD ”). In the Motion, Frescos Tomver averred significant misconduct by Jimenez in not only the Civil Case, but also in the bankruptcy case. Id. at ¶¶ 5–7, 8–14, 20–22.

On January 15, 2016, Debtor filed its Motion to Appoint on an expedited basis that requested this Court to approve the appointment of Zuniga as the representative for the Debtor. [ECF No. 68 at ¶ 8]; see also [ECF No. 70]. Frescos Tomver filed its Objection to Motion to Appoint Zuniga as Designated Representative of Divine Ripe, L.L.C. Pursuant to Federal Bankruptcy Rule 9001(5)(A)

. [ECF No. 76] (the “Response ”). Frescos Tomver objected on two interrelated bases: (1) Zuniga testified that “he was neither an officer nor a director of the Debtor”; and (2) the Debtor's Articles of Incorporation preclude managers and the Debtor has not evinced a change in this policy, therefore Jimenez is solely responsible for control and management of the Debtor. Id. at ¶¶ 1–4.

On February 12, 2016, this Court conducted an evidentiary hearing on Debtor's Motion to Appoint. Zuniga testified extensively regarding Debtor's operations, and his knowledge about the ability of Jimenez to enter the United States, conducting the business of Debtor, and Jimenez's authorizations of Zuniga for his role in Debtor's operations. This Court continued that hearing to February 22, 2016, at which time the hearing would be concluded contemporaneously with a hearing on the MTD. In addition, Debtor's representative, Jimenez, was ordered to be physically present to provide testimony to show cause as to why the Debtor's bankruptcy should not be dismissed or converted. [ECF No. 84].

On February 22, 2016, Debtor filed its Disclosure Statement, [ECF No. 93], and Plan of Reorganization, [ECF No. 94] (the “Plan ”), prior to the hearing to be conducted that same day. This Court entered an order scheduling a hearing on the Disclosure Statement, which was reset to April 12, 2016. Frescos Tomver filed its Objection to Disclosure Statement on April 5, 2016. [ECF No. 105] (the “Objection ”). In its Objection, Frescos Tomver stated that there were multiple deficiencies of adequate information in several sections of the Disclosure Statement as the basis for its objecting and also that the Plan provisions violate PACA due to its licensing requirements. Id.

Also on February 22, 2016, this Court conducted an evidentiary hearing on the MTD and continued Motion to Appoint. At the hearing, Jimenez appeared and testified extensively regarding the anticipated operations of his tomato cultivation in the State of Jalisco, Mexico. Jimenez also testified regarding the anticipated profits of that tomato cultivation and how Debtor would benefit. While the hearing was ongoing, the Court ordered Zuniga removed from the courtroom because he appeared to be assisting or coaching, via gesturing, Jimenez on his testimony. [ECF No. 112 at 53]. The Court is uncertain how much, if any, assistance Jimenez received prior to Zuniga being observed and the extent to which Jimenez's testimony is colored by such assistance as he did receive. Thus, this Court finds that Jimenez's testimony is less credible given the observed and potentially unobserved assistance rendered by Zuniga.

On April 12, 2016, this Court conducted an evidentiary hearing on the Disclosure Statement (the “Hearing ”). At the Hearing, Counsel for Debtor and Frescos Tomver were present and presented argument on the Disclosure Plan and the Objection.

No witnesses were called to present testimony.

1. Exhibits at the Hearing:

a. Debtor's counsel offered and admitted

i. Exhibit B: Notice of Deposition for Divine Ripe LLC

ii. Exhibit D: Cash Collateral Order, [ECF No. 45].

iii. Exhibit E: IDI Designation by Jimenez

iv. Exhibit F: Divine Ripe, L.L.C. Article of Organization

v. Exhibit H: Loan Modification

vi. Exhibit I: Disclosure Statement, [ECF No. 93], and Plan, [ECF No. 94], including all attached exhibits and incorporating any amendments.

vii. Exhibit K: Lease Contracts

b. Frescos Tomver did not offer any exhibits.

2. Both parties presented extensive arguments on the virtues of the Disclosure Statement, in the case of the Debtor, or the lack thereof, in the case of Frescos Tomver.

III. LEGAL STANDARD

a. Disclosure Statements

Rule 3016(b) requires that a disclosure statement be filed with a plan of reorganization or alternatively, at a time set by the court. Fed. R. Bankr.P. 3016(b)

. A disclosure statement must contain “adequate information” about the debtor and be provided to “each holder of a claim or interest of a particular class.” 11 U.S.C. § 1125(c). Section 1125 broadly defines adequate information to mean:

information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor's books and records, including a discussion of the potential material Federal tax consequences of the plan to the debtor, any successor to the debtor, and a hypothetical investor typical of the holders of claims or interests in the case, that would enable such a hypothetical investor of the relevant class to make an informed judgment about the plan, but adequate information need not include such information about any other possible or proposed plan ...

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