In re Jones
| Decision Date | 11 March 1986 |
| Docket Number | No. 683-00082,Adv. No. 685-6009.,683-00082 |
| Parties | In re Elwyn Ray JONES and Twilla Jean Jones, Debtors. CENTRAL NATIONAL BANK OF SAN ANGELO, Plaintiff, v. Elwyn Ray JONES, et al., Defendants. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas |
E. Dwain Psencik, Logan, Lewis, Symes & Keeling, San Angelo, Tex., for plaintiff, Central Nat. Bank of San Angelo.
Cole B. Parker, Dallas, Tex., for trustee.
Scott C. Larsen, Vineyard, Drake & Miller, Dallas, Tex., for Michael Cass.
Plaintiff, CENTRAL NATIONAL BANK OF SAN ANGELO ("the Bank"), brings this interpleader action under Rule 7024 of the Bankruptcy Rules seeking protection from potential conflicting claims to funds on deposit in various accounts at the Bank totalling approximately $43,474.00. Trial was held before the Court on February 7, 1986; and the Court, having heard the evidence and having reviewed the post-trial briefs of the parties, now enters the following findings of fact and conclusions of law pursuant to Rule 7052 of the Bankruptcy Rules:
STIPULATED FACTS1
1. Neither Ray Jones nor Twilla Jones is a signatory on any of the "Accounts".2
2. None of the Accounts are styled or established in the name of Ray Jones or Twilla Jones.
3. None of the funds on deposit in the Accounts is claimed by Ray Jones or Twilla Jones.
4. Ray Jones has no interest in the Accounts.
5. Twilla Jones has no interest in the Accounts.
6. Ray Jones and Twilla Jones were divested of any interest in the Accounts by the express terms of the Final Judgment.3
7. North American Technology Corporation ("NATC") commenced a Chapter 11 bankruptcy proceeding on August 23, 1985 which was converted to a Chapter 7 bankruptcy proceeding on December 19, 1985, BK No. 385-32148, in the Northern District of Texas, Dallas Division. The Trustee for NATC is Don Navarro ("the Trustee").
8. North American Brokerage Corporation ("NABC") commenced a Chapter 11 bankruptcy proceeding on October 3, 1985 which was converted to a Chapter 7 bankruptcy proceeding on December 19, 1985, BK No. 385-32580, in the Northern District of Texas, Dallas Division. The Trustee for NABC is Don Navarro.
9. North American Leasing Corporation ("NALC") commenced a Chapter 11 bankruptcy proceeding on October 3, 1985 which was converted to a Chapter 7 bankruptcy proceeding on December 19, 1985, BK No. 385-32582, in the Northern District of Texas, Dallas Division. The Trustee for NALC is Don Navarro.
10. North American Software Corporation ("NASC") commenced a Chapter 11 bankruptcy proceeding on October 3, 1985 which was converted to a Chapter 7 bankruptcy proceeding on December 19, 1985, BK No. 385-32581, in the Northern District of Texas, Dallas Division. The Trustee for NASC is Don Navarro.
11. Zion Corporation, a Texas corporation formed by Michael Cass ("Cass"), was his alleged nominee to act in conjunction with matters relating to the Final Judgment. Zion Corporation was the general manager and sole director of NALC, NABC, NATC and NASC prior to their filing bankruptcy.
12. The Final Judgment was appealed by Ray Jones to the United States District Court, San Angelo Division; but the appeal has now been dismissed by the Honorable Halbert O. Woodward and the Final Judgment is now final and unappealable.
13. The Final Judgment has a res judicata and collateral estoppel effect, against the parties thereto and their privies, as prescribed by law.
14. The attorneys for the Bank were provided with a copy of the Final Judgment by letter dated July 27, 1985 from the attorney for Cass.
15. A letter dated August 13, 1985 was sent to and received by the Bank (the "August 13 Letter") advising the Bank that:
16. On September 20, 1985, James Schroeder on behalf of NALC, NABC, NATC and NASC presented corporate resolutions to the Bank to close the Accounts and issue cashier checks payable to each entity. The corporate resolution presented on behalf of NABC was unsigned and uncertified. The corporate resolutions presented on behalf of NALC, NATC and NASC were executed and certified originals.
17. The Bank, at no time prior to the presentation of corporate resolutions as described in Stipulation 16 above, advised Cass, Zion Corporation, its officers, directors, attorneys or other representatives that the Bank had knowledge of any claim by any third party to the Accounts or that the Bank would not honor the directions contained in the August 13 Letter.
18. On September 20, 1985, the Bank refused to honor the directions contained in the corporate resolutions of NALC, NABC, NASC and NATC to close the Accounts and deliver the funds on deposit in the Accounts as directed thereby.
19. The amounts in the Accounts as of September 20, 1985 were as follows:
Balance
on
Account No. Name of Account 9/20/85
XXX-XXX-X North American Speed Math I $ 3,603.89
XXX-XXX-X North American Technology Corp. 12,076.57
XXX-XXX-X North American Leasing Corp. 83.85
XXX-XXX-X North American Dental Billings, Ltd. 2,434.46
XXX-XXX-X North American Speed Reading-I, Ltd. 5,894.93
XXX-XXX-X North American Medical Billing, Ltd. 2,448.72
XXX-XXX-X North American Data Base-I 5,172.02
XXX-XXX-X North American Software Corp. 11,764.72
20. On September 24, 1985, the Bank allegedly exercised its alleged right of offset against all amounts in Account No. XXX-XXX-X on an alleged pre-existing corporate obligation of NALC and against $10,358.77 of the amount in Account No. XXX-XXX-X on an alleged pre-existing corporation obligation of NASC.
21. The expense to Zion Corporation to send James Schroeder to San Angelo on behalf of the Corporations and the Partnerships to close the Accounts is $430.15.
22. The Court can determine the amount of reasonable attorneys fees and costs incurred in connection herewith based upon the documentation thereof submitted to the Court after trial on the merits by the attorneys which the Court finds are entitled thereto.
23. The Bank possessed written information in its files furnished in connection with the opening of the Accounts which reflected that NATC was the general partner of Speed Reading, Dental Billing and Medical Billing; that either NALC or NATC was the general partner of Speed Math; and that said partnerships were represented to the Bank to be limited partnerships.
24. The only corporate resolutions which the Bank had relating to the Accounts, other than those presented September 20, 1985, were as follows:
25. No certificate of limited partnership has been filed with the Texas Secretary of State regarding any of the Partnerships.
26. The Bank holds limited contracts of guaranty executed and delivered by the Investors which guaranteed in part the payment of the loans made by the Bank to certain Partnerships.4
27. The Internal Revenue Service, Abusive Tax Shelter Section, is conducting an investigation into the circumstances surrounding the Partnerships and an audit of same as abusive tax shelters.
28. The U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, after considering the Motion Requesting Relief from Automatic Stay filed by the Bank in the NALC, NASC, NABC and NATC bankruptcies and after hearing the oral argument, entered an "Order Granting Relief from Automatic Stay" on January 10, 1985 in each of said bankruptcies which modifies the automatic stay in each case so as to allow Debtors to be served with process in this Adversary Proceeding, and so as to allow the litigation and final determination of the issues raised herein.
29. The U.S. District Court for the Northern District of Texas, San Angelo Division, after considering the Motion of Certain Defendants to Withdraw Reference Thereof and Brief in Support Thereof and further considering the response and memorandum brief of the Bank in opposition thereto, on January 31, 1986 entered its Order in Civil Action No. CA-6-85-0132, Adversary No. 685-6009, Bankruptcy Case No. XXX-XXXXX, denying said Motion.
30. The U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, after considering the Motion to Abstain and Brief in Support Thereof, and after hearing argument in open court from Plaintiff and Defendants, entered on October 23, 1985 its "Order Dismissing Without Prejudice", Adversary No. 385-3737 filed in Bankruptcy Case No. XXX-XXXXX.
31. The funds in the Accounts were maintained in money market accounts by the Bank and the funds deposited with the Court included interest paid thereon from September 20, 1985 through the date of deposit into the registry of this Court at the rate of 6.75% per annum.
32. As a result of the change in ownership effected by the Final Judgment, the Bank through its attorneys opened the records of the Bank regarding the Corporations and the Partnerships to...
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