In re Murray Industries, Inc.
| Decision Date | 11 September 1990 |
| Docket Number | Bankruptcy No. 88-7473-8P1. |
| Parties | In re MURRAY INDUSTRIES, INC., Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida |
John K. Olson, Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Tampa, Fla., for debtor.
Robert B. Glenn, Jr., Glenn, Rasmussen, Fogarty, Merryday & Russo, Tampa, Fla., for Creditors' Committee.
Lynne L. England, Tampa, Fla., Asst. U.S. Trustee.
Wayne Thomas, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Tampa, Fla., for Joel A. Schleicher.
Wanda Anthony, Trenam, Simmons, Kemker, Scharf, Barkin, Frye & O'Neill, Tampa, Fla., for Chrysler Capital Corp., Chrysler Asset Management Corp., Barnett Bank and Blister Boat claimants.
John W. Kozyak, Kozyak, Tropin & Throckmorton, Miami, Fla., for Merrill Lynch Private Capital.
Allan L. Gropper, White & Case, New York City, for InterRedec.
ORDER ON MOTION FOR SUBSTANTIVE CONSOLIDATION
THIS IS a Chapter 11 case and the matter under consideration is a Motion seeking substantive consolidation of the following estates:
Name Case Number
Murray Industries, Inc. (Industries) 88-7473
Murray Chris-Craft Aqua Homes, Inc. (Aqua) 88-7474
Murray Chris-Craft Sportboats West, Inc
(Sportboats West) 88-7475
Murray Chris-Craft Boat Parts, Inc. (Boat Parts) 88-7476
Murray Chris-Craft Yachts, Inc. (Yachts) 88-7477
Murray Chris-Craft Cruisers, Inc. (Cruisers) 88-7478
Clear Lake Cruisers, Inc. (Lakes Cruisers) 88-7479
Murray Chris-Craft Fishboats, Inc. (Fishboats) 88-7480
Murray Chris-Craft Hi-Performance (Hi-Performance) 88-7481
Murray International Corporation (International) 88-7482
Murray Transportation Co., Inc. (Transportation) 88-7483
Murray Boat Administrative Services, Inc. (MBASI) 88-7484
Murray Chris-Craft Boat Development, Inc
(Boat Development) 88-7485
Murray Chris-Craft Sportboats, Inc. (Sportboats) 88-7486
Murray Chris-Craft Sportdecks, Inc. (Sportdecks) 88-7487
Uniflite, d/b/a Murray Chris-Craft Cruisers West
(Uniflite) 88-7488
Each of these entities filed its respective Petition for Relief under Chapter 11 of the Bankruptcy Code on December 9, 1988. Each filed its own Schedule of Assets and Liabilities and Statement of Financial Affairs and Summary of their respective assets and liabilities. The Motion for Substantive Consolidation of the estates of these Debtors is opposed by Merrill-Lynch Private Capital, Inc. (Merrill-Lynch), Joel Schleicher, Citizens & Southern National Bank of Florida (C & S), Louis Karagas, and William Wittenberg.
The facts relevant to the Motion under consideration, as established at the final evidentiary hearing and by the pertinent parts of the general case file of these entities, can be summarized as follows:
Pre-Petition Historical Background of the Debtors
In 1910, Chris Smith and Johnny J. "Baldy" Ryan joined forces and formed the "Smith-Ryan Boat Co.", and Smith and Ryan remained partners until 1913. The company then became known as the "C.C. Smith Boat & Engine Company." Later, Gar Wood, a boat designer, secured a controlling interest in the company, but the Wood-Smith association dissolved in 1922 and decades of bitter estrangement between Wood and Smith, both celebrated marine authorities, followed. Once again, Smith's company, now called "Chris Smith & Sons Boat Co." was independent, and Chris Smith and three of his sons each had a 25% interest in the company. By 1924, the company began using the name "Chris-Craft" for a single boat model. In 1930, an option to sell one third of the company to a Wall Street investment firm was negotiated, and the company changed its name to "Chris-Craft Corporation." The Smith family controlled the company stock.
By the early 60's, all the shares in the Chris-Craft Corporation (Chris-Craft) were held privately by 55 people, and the corporation remained as a privately held corporation until 1981. In 1981, G. Dale Murray (Murray), together with Richard E. Genth, F. Lee Bailey, Walter K. Schumacher and Ed McMahon, formed a corporation under the name of Murray Industries, Inc. (Industries), under the laws of the state of Delaware. This newly formed corporation commenced negotiations for the purpose of acquiring two operating divisions of Chris-Craft Cruisers and Sportboats, and to obtain a license and the right to use the Chris-Craft name in boat manufacturing operations.
The two operating divisions were Cruisers and Sportboats, both subsidiaries of Chris-Craft. Cruisers was formed in 1979 as a Delaware corporation and operated a cruiser manufacturing plant in Holland, Michigan. Sportboats was formed the following year as a Delaware corporation and operated a manufacturing plant for sportboats and fishing boats in Bradenton, Florida. After Industries acquired these subsidiaries, their names were changed to Murray Chris-Craft Cruisers, Inc., and Murray Chris-Craft Sportboats, Inc., and they continued their separate manufacturing operations.
In late 1981, in order to expand its operations into the lower cost boat market, Sportdecks was formed as a Delaware corporation and a subsidiary of Industries to purchase an existing boat manufacturing company in Goshen, Indiana, from Coachman Industries. This entity, which had no previous connection with Industries, continued its separate manufacturing operation.
In 1984 Industries needed additional manufacturing facilities and it purchased Uniflite's operations in Bellingham, Washington, where yachts, cruisers, and sportboats were manufactured for distribution in the western part of the country. In 1984 Industries also purchased a manufacturing plant in Swansboro, North Carolina, and Hi-Performance was incorporated as a Delaware corporation to recognize this separate operation.
In 1985 Mr. Murray, the majority owner of Murray Chris-Craft, obtained a large personal loan from Merrill-Lynch that was secured by a pledge of Murray's shares in the company. As a result of his default on this loan, Merrill-Lynch became the largest minority shareholder of one of the Debtors, Industries. In late 1986, Murray sold a controlling interest in the company to InterRedic, Inc. (InterRedic), which now claims to hold a 79% interest in the Debtor corporations.
After learning about the possibility of insider abuses involving Murray, the Board of Directors of Industries authorized William Batastini of InterRedic to review the financial affairs of Industries and its subsidiaries. As the result of findings based on the review, InterRedic terminated its shareholder agreement with Murray. Shortly thereafter, Murray, Joel Schleicher and others either resigned or were terminated as officers of these corporations by InterRedic. A new management team, which included William Batastini of InterRedic as the chief financial officer of these Debtor corporations, replaced the previous management.
Industries is the parent corporation of fifteen related subsidiary corporations. While Industries and all of the subsidiaries had separate boards of directors, it is fair to state that there was great overlap among the various boards, and most corporate formalities were ignored, at least by the subsidiaries. Essentially, all of the corporations were managed and controlled by Industries and its Board of Directors.
The parent corporation, Industries, headquartered in Bradenton, Florida, functioned in fact as the corporate headquarter for all of the subsidiaries. All of the subsidiaries, except for Cruisers and Sportboats West, were funded by Industries. It appears that Industries made the majority of policy decisions for all of the subsidiaries. The highest-level manager of each of the subsidiaries actually operated out of Industries. All product design, marketing, and other important functions were carried out by Industries in Bradenton. All major contracts of the subsidiaries were negotiated by Industries without the involvement of the local management of any of the subsidiaries.
Some subsidiaries had separate and distinct functions, while other subsidiaries appear to have had no purpose, no assets and no liabilities. Rather, they existed merely as paper corporations. Other subsidiaries played a major role in the overall operation of Industries. For example, one subsidiary, MBASI, operated in the same building as Industries and had a strong impact on all of the other subsidiaries as the financial arm of Industries and all of the subsidiaries. MBASI, as the "central administrator", was in charge of all accounting functions for each company, although each company had its own independent accounting and record keeping system. MBASI maintained two operating accounts and two payroll accounts in Bradenton, Florida. MBASI controlled the cash flow for all the Debtors.
While each subsidiary collected its own accounts receivable, the subsidiaries essentially acted as conduits through which funds for MBASI would flow. MBASI maintained a separate account for each corporation and debited and credited those accounts accordingly. MBASI controlled the general operating account for each of the subsidiaries and paid their bills, including payrolls, with the exception of the payroll of Uniflite which maintained its own payroll. In order to execute this control, the officers and directors of MBASI were also on the Boards of Industries and its subsidiaries. In exchange for services performed by MBASI, it charged Industries and each subsidiary its proportional share of its cost of operation plus a 10% fee and debited each account by that amount. It is important to note that these debits and credits were only transfers on paper and none of these charges were actually paid to MBASI...
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