In re Kilroy
| Decision Date | 30 October 2006 |
| Docket Number | Adversary No. 06-3320.,Bankruptcy No. 05 90083 H4 7. |
| Parties | In re William S. KILROY, Jr., Debtor. T. Layng Guerriero, individually, W & L Insurance Holdings Company, L.L.C., a Delaware limited liability company, and Aegis Insurance Holdings Co., L.P., a Delaware limited partnership Plaintiffs, v. William S. Kilroy, Jr., Defendant. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas |
Wayne Kitchens, Hughes Watters and Askanase, Houston, TX, for Debtor.
William Kilroy (Kilroy) filed a Chapter 7 petition on October 13, 2005. On April 6, 2006, T. Layng Guerriero (Guerriero), a former business partner of Kilroy in various ventures, filed a Complaint Objecting to Discharge under 11 § 523 and § 727.1 Kilroy filed a Motion to Dismiss on May 11, 2006 for failure to state a claim upon which relief can be granted. After a hearing on July 7, 2006, Guerriero was granted the opportunity to amend his complaint to comport with pleading requirements. He did so by filing a First Amended Complaint on July 17, 2006. This Memorandum Opinion addresses Kilroy's Supplemental Motion to Dismiss, which was filed on July 18, 2006.
The Court makes the following Findings of Fact and Conclusions of Law under Federal Rule of Civil Procedure 52 as incorporated into Federal Rule of Bankruptcy Procedure 7052. To the extent that any finding of fact is construed to be a conclusion of law, it is adopted as such. To the extent that any conclusion of law is construed to be a finding of fact, it is adopted as such. The Court reserves the right to make any additional findings and conclusions as may be necessary or as requested by any party.
1. On April 28, 1998 W & L Insurance Holdings Company, L.L.C. (W & L) was formed as a Delaware corporation. W & L is the general partner of Aegis Insurance Holdings Co., L.P. (Aegis), which is a Delaware limited partnership. [Docket No. 16, ¶ 9 and 10.]2
2. Guerriero and Kilroy each own 44.55% of Aegis; Mrs. Lora Jean Kilroy (Mrs. Kilroy),3 Kilroy's mother owns 9.9%; and W & L owns 1%. [Docket No. 16, ¶ 10.]
3. Aegis owns certain business ventures, including an insurance company and a software developer which provides services for funeral homes. [Docket No. 16, ¶ 9.]
4. In order to gain financing for the purchase of an asset for Aegis, Cuerriero executed an irrevocable proxy assigning his voting rights in Aegis to Kilroy. [Docket No. 16, ¶ 11.]
5. Guerriero was the minority shareholder of W & L, owning 33% of the company. Kilroy was the majority shareholder, owning 37%. Exercising his rights as a majority shareholder; Kilroy appointed himself as manager of W & L. [Docket No. IS, ¶ 10.]
6. Guerriero and Kilroy were also partners in a web-based obituary service called Arrange Online (AO), each owning a 50% share. [Docket No. IS, ¶ 12.] The aforementioned proxy did not cover the shares of AC. [Id.]
7. Guerriero and Kilroy wanted AC to acquire Continental Computer Specialties Inc. (CCSI). Guerriero and Kilroy pledged assets worth $12,000,030.00 toward the purchase and then solicited other investors to invest in the new holding company, Final Arrangements, LLC (FAL), which would own OCCSI. [Docket No. 16, ¶ 14.]
8. Sometime prior to October of 2005, Kilroy sought a loan from Southwest Bank of Texas (SWB). [Docket No. 16, ¶ 33.] As security for the loan, SWB required that Mrs. Kilroy cosign the note. Id. Further, Guerriero allowed Kilroy to use Guerriero's shares of Aegis as collateral for the benefit of Mrs. Kilroy in the event that SWB required her to perform her guaranty. Id.
9. Buffalo Funding LLC (BF) is a company formed by Mrs. Kilroy in October of 2005 that purchased the SWB loan. [Docket No. 16, ¶ 36.]
10. On October 13, 2005, Kilroy filed a voluntary Chapter 7 petition. [Main Case No. 05-90083, Docket No. 1.]
11. On February 3, 2006, Guerriero filed a pleading titled: "Agreed Motion to Extend the Time Within Which T. Layng Guerriero and W & L Insurance Holdings, LLC May File Objections to the Dischargeability of Debt Under 11 U.S.C. § 523; and an Opposed Motion to Extend the Time Within Which T. Layng Guerriero Individually, and For the Benefit of W & L Insurance Holdings, LLC May File an Objection to Dischargeability of the Debtor Pursuant to 11 U.S.C. § 727" (the Motion to Extend). [Main Case No. 05-90083, Docket No. 76.]
12. On February 22, 2006, the Court held a hearing on the opposed portion of Guerriero's Motion to Extend relating to claims under § 727.4 [Main Case No. 05-90083, Feb. 22, 2006 Hrg. on Motion to Extend.]
13. On March 3, 2006, the Court granted the Motion to Extend, a ruling which created an April 6, 2006 deadline for Guerriero and W & L to file a complaint to determine dischargeability under § 523 and/or an objection to discharge under § 727. [Docket No. 111.]
14. On April 6, 2008, Guerriero filed his original Complaint Objecting to Discharge Pursuant to 11 U.S.C. § 523 and § 727 (the Original Complaint), initiating the above referenced adversary proceeding. [Docket No. 1.] Guerriero brought suit against Kilroy individually, and also as a manager of W & L, as a manager of Aegis, as a manager of FAL, and as the President and CEO of CCSI. Id.
15. On May 11, 2006, Kilroy filed his original Motion to Dismiss Complaint Objecting to Discharge Pursuant to 11 U.S.C. § 523 and § 727 (the Original, Motion to Dismiss). [Docket No. 6.]
16. On May 31, 2006, Guerriero filed his Response to Debtor's Motion to Dismiss Complaint Objecting to Discharge Pursuant to 11 U.S.C. § 523 and § 727. [Docket No. 7.]
17. On July 7, 2006, the Court held a hearing on the Debtor's Original Motion to Dismiss. [July 7, 2006 Hrg. on Debtor's Motion to Dismiss.]
18. At the July 7, 2=6 hearing, counsel for Guerriero conceded that there was no extension fled on behalf of, or granted to, CCSI or FAL. The Court continued the hearing until July 19, 2006 and ordered Guerriero to amend his Original Complaint by pleading facts specific to each element of each claim. [July 7, 2006 Hrg. on Debtor's Motion to Dismiss.]
19. On July 17, 2006, Guerriero, W & L and Aegis filed a First Amended Complaint Objecting to Discharge Pursuant to 11 U.S.C. § 523 and § 727 (the First Amended Complaint). [Docket No. 16.]
20. On July 18, 2006, Kilroy filed his Supplemental Motion to Dismiss First Amended Complaint Objecting to Discharge Pursuant to 11 U.S.C. § 523 and § 727 (the Supplemental Motion to Dismiss). [Docket No. 17.]
21. On July 19, 2006, the Court held a hearing on the Original and Supplemental Motions to Dismiss. [July 19, 2006 Hrg. on Motion to Dismiss.]
The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334(b), 157(a) and (b)(1). This lawsuit is a core proceeding under 28 U.S.C. § 157(b)(2)(I) and (J).
First, Kilroy argues that any claims Aegis may have had should be dismissed because the extension that Guerriero sought to file objections to claim were only requested by, and granted to, Guerriero, individually, and W & L. [Docket No. 17, ¶ 18.] The Order granting the extension to file does not include any mention of Aegis [Main Case No. 05-90083, Docket No. 111], and the Agreed Motion to Extend explicitly stated that "[t]he requested extension relates solely to the claims held by T. Layng Guerriero and W & L." [Docket No. 64, ¶ 5.] Without an extension from the court, the deadline to file a complaint objecting to discharge under § 727 is 60 days after the first date set for the meeting of the creditors. Fed. R. Bankr.P. 4004(a). The date set for the first meeting of creditors was December 8, 2005. [Main Case No., Docket No. 13.] Therefore, the deadline to file a § 727 complaint objecting to discharge was February 6, 2006. Since the Original Complaint was not filed until April 6, 2006 and Aegis was not a party to the extension, Aegis' complaint objecting to discharge under § 727 is time barred. "
Guerriero also attempts to assert claims on behalf of Aegis under § 523. There is a similar SC.-day deadline to § 523 objections. "A complaint to determine the dischargeability of a debt under § 523(c) shall be filed no later than 83 days after the first date set for the meeting of creditors under § 341(a)." Fed. R. Bankr.P. 4007(c). Section 523(c) includes nondischargeability complaints under § 523(2), (4), and (6). Counts one through four of the Amended Complaint each involve these provisions of § 523; and therefore, as was the case with the § 727 objections, Aegis is time barred from asserting any of these objections. However, the Amended Complaint includes a claim of nondischargeability under § 523(a)(19). Since § 523(a)(19) is not included under § 523(c), the 60-day deadline of Rule 4007(c) is inapplicable; instead, Rule 4007(b) governs. There is no deadline for complaints under any subsection of § 523 not covered by § 523(c). Fed. R. Banks P. 4337(b). Thus, Aegis has missed the deadline to file all complaints to dischargeability except under § 523(a)(19), which will be addressed later in conjunction with Guerriero's individual complaint under the same subsection.
Having determined that Aegis is time-barred from filing a complaint under § 727 and § 523(c), but not under § 523(a)(19), the Court next addresses whether Guerriero has the right to bring a suit on behalf of W & L....
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