In re Moss
| Decision Date | 15 May 2000 |
| Docket Number | No. 00-30934-BJH-7.,00-30934-BJH-7. |
| Citation | 249 BR 411 |
| Parties | In re Jan McLendon MOSS, Alleged Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
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Michael D. Warner, Seymour Roberts, Jr., Simon, Warner & Doby, L.L.P., Ft. Worth, TX, for alleged debtor.
Craig W. Weinlein, David S. Coale, Carrington, Coleman, Sloman & Blumenthal, L.L.P., Dallas, TX, M. Fletcher Reynolds, Rosenthal, Reynolds, Mateer & Shaffer, P.C., Dallas, TX, for petitioning creditors.
R. Terry Bell, Craig Gant, Bell, Nunnally & Martin, Dallas, TX, for Isaac Lasky.
J. Mark Chevallier, McGuire, Craddock, et al., Dallas, TX, for Phones for All, Inc., et al.
Warren H. Smith, Donohoe, Jameson & Carroll, Dallas, TX, for Official Unsecured Creditors Committee.
Ken Stohner, Jackson & Walker, Dallas, TX, for Bell Atlantic-Virginia, Inc.
Camille R. McLeod, Bickel & Brewer, Dallas, TX, for Peter Sahagen and Sahagen Consulting Group, LLC.
This contested involuntary petition was heard on April 19, 2000. The petitioning creditors seek the entry of an order for relief against the alleged debtor. The alleged debtor seeks the dismissal of the involuntary petition or, in the event the Court finds the involuntary filing proper, the transfer of the case to the Central District of California. The Court has jurisdiction over this dispute pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding. 28 U.S.C. § 157(b). Five issues control the outcome.
First, whether the alleged debtor Jan McLendon Moss ("Moss") had twelve or more creditors on the petition date. The Court finds that Moss had twelve or more creditors.
Second, whether there are a sufficient number of petitioning creditors who hold sufficient claims to meet the requirements of § 303(b)(1) and/or (2). The Court finds that while three entities have filed the involuntary petition, those three entities only hold two claims against Moss. The Court further finds that the petitioning creditors hold non-contingent, non-disputed unsecured claims against Moss aggregating at least $10,775.00.
Third, whether Moss is generally paying her non-disputed debts as they become due. The Court finds that Moss is not generally paying her non-disputed debts as they become due.
Fourth, whether special circumstances exist which remove the three creditor requirement of § 303(b)(1). Under the facts of this case, such an exception exists and an order for relief is appropriate.
Fifth, whether venue of this case is proper in the Northern District of Texas and/or whether this case should be transferred to the Central District of California. Venue is proper here and the case will not be transferred.
An involuntary chapter 7 petition (the "Involuntary Petition") was filed against Moss on February 9, 2000 (the "Petition Date") by petitioning creditors Larry O. Littleton ("Littleton"), Neville Charles Christopher Small ("Small") and Neville Beresford Wolfe Braithwaite ("Braithwaite") (collectively, the "Petitioning Creditors"). Thereafter, Moss filed a Motion for Order Dismissing Involuntary Petition or, in the Alternative, Transferring Venue to the Central District of California (the "Motion to Dismiss or Transfer"). In the Motion to Dismiss or Transfer, Moss contends that she had twelve or more creditors on the Petition Date; that Small and Braithwaite hold a single claim against her; and therefore, the Involuntary Petition lacks the requisite number of petitioning creditors with the requisite amount of claims.1 Moss further contends that she has been generally paying her non-disputed debts as they become due; that the petitioning creditors filed the Involuntary Petition in bad faith; that this is essentially a two-party dispute between Moss and Littleton; that Littleton has an adequate remedy under state law that he is actively pursuing; and finally, that venue in the Northern District of Texas is improper.
The Petitioning Creditors contend that Moss had less than twelve creditors on the Petition Date and therefore only one petitioning creditor was required to properly file the Involuntary Petition. Alternatively, the Petitioning Creditors contend that if Moss had twelve or more creditors on the Petition Date, Small and Braithwaite each hold a right to payment against Moss and, along with Littleton, the required three creditors are present here. Finally, the Petitioning Creditors contend that in the event the Court concludes that the Involuntary Petition is otherwise defective, special circumstances exist which remove the three creditor requirement of § 303(b)(1) and that venue is proper here.
Littleton's claims against Moss arose on April 7, 1995, when Moss entered into an employment contract with Littleton. See Exhibit 1.2 Under that contract, Littleton was to form a Texas corporation called the Renaissance Group, Inc. ("Renaissance"), become its president, and set up offices in Dallas to conduct the corporation's business. Renaissance was to be a venture capital company for a group of wealthy investors, including Moss.
When Moss entered into the employment contract, she claimed to speak on behalf of that group of investors, and to be hiring Littleton on their behalf. These representations by Moss were false because no such group of investors existed. In an attempt to add credibility to her misrepresentations, Moss forged the signature of a supposed group member named Kent S. Powell, M.D. to the employment contract. Moss never paid Littleton pursuant to the employment contract.
Littleton sued Moss in August 1995 in the 160th District Court of Dallas County, Texas (the "Dallas State Court"). After two failed attempts to settle this litigation, a third settlement was reached on April 22, 1998 with the assistance of a court-appointed mediator. Both Moss and Littleton accepted the mediator's settlement proposal. See Exhibit 2. That proposal required Moss to make a series of payments to Littleton to avoid having an agreed judgment entered against her. After Moss failed to make any of the required payments, on June 26, 1998, the Dallas State Court entered a final judgment for $1.8 million in Littleton's favor, plus post-judgment interest at the rate of 10% per annum and court costs (the "Judgment"). See Exhibit 3. As of the Petition Date, Moss owed Littleton in excess of $2,000,000.00 on the Judgment.
Littleton undertook post-judgment discovery in an effort to collect the Judgment. Moss provided at least two affidavits regarding her assets in lieu of post-judgment asset depositions. See Exhibits 5 and 6. Littleton filed a Motion for Turnover Order in the Dallas State Court and on November 19, 1998, a Turnover Order was signed by the Dallas State Court directing Moss to assign various assets to Littleton. See Exhibit P. On December 18, 1998, the Dallas State Court entered an Amended Turnover Order (the "Turnover Order") requiring Moss to turnover essentially those same assets to the Dallas County Sheriff on or before December 28, 1998. See Exhibits 4 and Q. The Turnover Order listed numerous assets which Moss had admitted owning in her prior affidavits including: (1) funds in three bank accounts; (2) all funds Moss received as a result of a settlement with certain family members in June 1996 (the "McLendon Settlement Agreement"); (3) her stock in a California corporation called World Without Walls, Inc.; (4) her stock in a Costa Rica corporation called Rancho Playa Bejuco; (5) future payments to her from a family trust (the "Gay Noe McLendon Trust"); and (6) future payments to her of certain oil royalties.
Notwithstanding the Turnover Order requiring her to do so, Moss has never turned over any of those assets to the Dallas County Sheriff. While Moss appealed the Turnover Order, she never posted a supersedeas bond in connection with that appeal. See Exhibit R. To date, it appears that Moss has made no effort to comply with the Turnover Order.3 Moss's appeal of the Turnover Order and a motion filed by Littleton to hold Moss in contempt are currently pending in the Dallas Court of Civil Appeals. See Exhibit BB.
Pursuant to the McLendon Settlement Agreement, Moss was entitled to receive, among other sums, the sum of $1,000,000.00 from two Dallas family-based partnerships controlled by her brother, Bart McLendon, called Tri-State Theatres and The McLendon Company. See Exhibit 7A. That million dollars is to be paid over twenty-five (25) years without interest in monthly installments of $3,333.33. Littleton garnished this indebtedness in July 1998. Since September 1, 1998, these monthly installments have been paid into the registry of the Dallas State Court. To date, nineteen monthly payments (or approximately $63,333.27) have been paid into that registry. See Exhibit 8. In February 1999, the Dallas State Court entered an interlocutory partial summary judgment that Littleton had properly garnished the twenty-five year stream of monthly payments aggregating $1,000,000.00. See Exhibit 9.
Beginning in mid-1999, Littleton also garnished several oil royalty checks to be paid to Moss by Texaco Production and Exploration, Inc. ("Texaco"). Approximately $18,074.22 has been trapped by these garnishments as of the Petition Date. See Exhibit 10. That money is also being held in the registry of the Dallas State Court.
During May 1998, while Moss was supposed to be making payments to Littleton pursuant to their settlement, Moss entered into a transaction with her brother, Bart McLendon, Tri-State Theatres and The McLendon Company. Pursuant to this transaction, Moss released Tri-State Theatres and The McLendon Company from an obligation to pay her at least $575,000.00, and released several liens on real property in Texas that secured that obligation. In exchange, Bart McLendon caused Tri-State Theatres and The McLendon Company to pay $500,000.00 to...
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