In re KTMA Acquisition Corp.

Citation153 BR 238
Decision Date16 March 1993
Docket NumberBankruptcy No. 4-89-3530.
PartiesIn re KTMA ACQUISITION CORP., d/b/a KTMA TV 23, Debtor.
CourtUnited States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of Minnesota


Steven L. Freeman, Minneapolis, MN, for the Committee of Unsecured Creditors.

Thomas J. Lallier, Minneapolis, MN, for Sonlight Television, Inc.

Larry B. Ricke, Minneapolis, MN, for trustee.

Katherine A. Constantine, Minneapolis, MN, for Investment Ltd. Partnership.

N. Walter Goins, debtor, pro se.

Albert Turner Goins, Maplewood, MN, assisted N. Walter Goins.



This case came on for hearing on November 4, 1992 on the motions of the Committee of Unsecured Creditors, Sonlight Television, Inc. and the trustee for the imposition of sanctions against N. Walter Goins pursuant to Rule 9011 of the Federal Rules of Bankruptcy Procedure. Steven L. Freeman appeared for the Committee of Unsecured Creditors, Thomas J. Lallier appeared for Sonlight Television, Inc., Larry B. Ricke appeared for the trustee and Albert T. Goins assisted N. Walter Goins appearing pro se. This court has jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157(a) and Local Rule 201. Based on the motions, the entire file, the evidence and the arguments of the parties, I make this memorandum order:


I. Background1

From 1982 to 1987, N. Walter Goins was the president and the sole shareholder of L.E.O. Broadcasting, Inc., a Minnesota corporation which owned and operated Stations KXLI-TV (Channel 41) and KXLT-TV (Channel 47). In 1987, Goins sold L.E.O. to Halcomm, Inc. in exchange for 110,000 shares of stock amounting to twelve and twenty two one hundreds percent (12.22) ownership interest. Besides Goins, Halcomm's shareholders included Dale W. Lang. Lang was both Halcomm's controlling shareholder and largest creditor. Lang held mortgages and security interests in substantially all of Halcomm's assets.

On November 18, 1988, Halcomm informed its shareholders that it was considering the sale of all or substantially all of the corporation's assets. Halcomm planned to sell its assets to a new corporation. The new corporation was to consist of all the assets of Halcomm, KTMA Acquisition Corp. and Red River Broadcast Corp. Halcomm scheduled a shareholders meeting for December 8, 1988 to obtain approval for the sale.

On November 30, 1988, representatives of KTMA, Red River and Halcomm entered into a Letter Agreement. In the Letter Agreement, the parties agreed to form a new corporation to assume the assets and liabilities of Halcomm, KTMA and Red River. The Letter Agreement explicitly required the approval of the shareholders of Halcomm, KTMA and Red River.

On December 5, 1988, Goins, by written notice to Halcomm, dissented from the sale and expressed his intent to demand the fair value of his shares under Minnesota law. Halcomm's shareholders approved the transaction at the shareholders meeting on December 8, 1988. However, neither KTMA nor Red River were able to obtain financing. The new corporation was never formed and the parties agreed to abandon the transaction.

A year later, on December 30, 1989, Lang, foreclosed on Halcomm's assets and sold them at a public auction. Lang purchased the assets himself at the auction for $5 million.

II. The Papers Filed in the KTMA Chapter 11 Case

On July 28, 1989, KTMA, one of the parties to the Letter Agreement, filed a voluntary Chapter 11 case. KTMA operated as a debtor-in-possession until August 27, 1991 when a trustee was appointed pursuant to 11 U.S.C. § 1104.

A. The Proof of Claim

Shortly after his appointment, the trustee entered into negotiations to sell all or substantially all of the debtor's assets. Ultimately, Sonlight Television, Inc. and the trustee entered into a purchase agreement. News broke of this tentative agreement and Goins filed a Proof of Claim on November 18, 1991. Goins' proof of claim is number 171. In the proof of claim, Goins asserts:

1. he was a 12.22% dissenting shareholder of Halcomm, Inc.; and
2. that the Letter Agreement is an executory contract and that the claimant has a claim against the debtor as evidenced by the signatures of Dale W. Lang as President of Halcomm and officer of KTMA Acquisition Corp.

Goins attached a copy of the Letter Agreement and signed the proof of claim.

B. Objection of Claimant & Motion for Stay of Approval of Trustee's Motion & Declaratory Relief

The trustee filed a motion to approve his sale of the debtor's assets to Sonlight. In response, Goins filed an "Objection of Claimant and Motion for Stay of Approval of Trustee's Motion and Declaratory Relief" on December 12, 1991. The motion asserted:

1. he was moving for a stay of approval of the trustee\'s motion to sell all assets free and clear of liens and sought declaratory relief under 28 U.S.C. § 2201;
2. he is a dissenting shareholder to a binding letter agreement and therefore has a claim under 11 U.S.C. § 101(4);
3. as a dissenting shareholder to the debtor\'s November 30, 1988 letter agreement he was entitled to a first priority claim on the assets of the debtor;
4. that because the trustee failed to file a copy of the Letter Agreement for inspection, "the court is to require the Trustee" to include the rights under the November 30, 1988 letter agreement as part of the KTMA assets sold and "to act to enforce the terms of the . . . `Letter Agreement\'";
5. Goins "further moved and requested that the Trustee be required and declared to have established a constructive trust of any and all funds received by the estate as a result of any plan of sale, transfer, or assignment of the assets, leases, and contracts of the Debtor to the complete full, and sole benefit of claimant, . . . as a dissenting shareholder of a co-signatory of the . . . `Letter Agreement\', notwithstanding any asserted claims of priority, whether secured or unsecured, and notwithstanding any stipulations entered into by the Debtor as `Debtor in Possession\', or the Trustee herein";
6. that there was "direct and collateral evidence that the Trustee and/or certain parties in interest in this proceeding may have failed to comply with or sought to evade the requirements of 47 CFR § 73.3613 and other rules of the Federal Communication Commission required of licensees";
7. that "based on a cursory review of the docket, it would appear that certain application filings made by the Debtor may have been undertaken to work in concert with other commission licensees to evade these ownership contract filing agreements, and thus to result in possible violations of title 18, sic U.S.C. § 151 et seq.";
8. that "certain documents now of record with the Minnesota Secretary of State . . . indicate that certain parties in interest may have acted to avoid revealing certain regulatory requirements to this Court which would flow from the compliance with Federal Communication Commission rules"; and
9. that "based upon regulatory requirements of Section 362 of the Code and the pertinent Commission rules and other law, as well as matters of which this Court may take official notice, the requested relief should be granted pending final determination of the regulatory issues herein."

Goins signed and verified2 his motion.

C. Writ of Mandamus3

On December 19, 1991, Goins provided this court with a copy of a "Petition for Writ of Mandamus Against Officer of the United States Donald R. Johnston, Trustee and to Compel Compliance with the Federal Communications Commission's Rules" to be heard by the U.S. Court of Appeals for the District of Columbia.

D. Motion to Quash

The trustee investigated Goins' proof of claim and on December 20, 1991 served on Goins a Notice of Taking Deposition and Request for Production of Documents pursuant to Rule 9014 of the Federal Rules of Bankruptcy Procedure. A deposition subpoena was issued by the Clerk of the United States Bankruptcy Court instructing Goins to appear, be deposed and to produce certain documents on December 30, 1991. On December 24, 1991, Goins filed a Motion to Quash asserting:

1. "the matters sought to be discovered by the terms of the subpoena relate to certain matters now pending the the sic U.S. Court of Appeals for the District of Columbia Circuit . . . and other matters pending appeal at the Federal Communications Commission . . . ";
2. the subpoena was "illegal"; "there was no evidence of proof of service of the notice of subpoena made to the clerk of court" 3. the subpoena was an effort "to avoid the jurisdiction of a superior court on the part of the Trustee and his counsel inasmuch as it relates to matters which are pending in the United States Court of Appeals for the District of Columbia Circuit";
4. the subpoena was a "retaliatory action in breach of the Trustee\'s duties under Section 362 of title 11 (the Bankruptcy Code), in an effort to eliminate Goins as a proper claimant, thus avoiding the original and appellate jurisdiction of the court of appeals relative to FCC filing Rules and regulatory issues"; and
5. the trustee was "improperly seeking to avoid a required action under Bankruptcy Rule 6006(b) . . . in aid for an improper effort to effect a nonjudicial bankruptcy discharge of an equitable interest against other parties including the purported secured lender International or Investment Limited Partnership."

Goins signed and verified the motion. The motion to quash was denied on December 26, 1991 and the deposition took place as scheduled on December 30, 1991.

E. Motion to Strike Trustee's Unauthorized Motion to Approve Rejection of Executory Contract

The trustee also filed a motion asking the court to determine that the Letter Agreement had been abandoned or to approve his rejection of the agreement. On December 26, 1991, Goins filed a "motion to strike trustee's unauthorized motion to approve rejection of executory contract." Supporting his motion Goins asserts:

1. that the trustee has breached his duty by not

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