In re Parrott Broad. Ltd. P'ship
| Decision Date | 15 October 2013 |
| Docket Number | Bankruptcy Case No. 10-40017-JDP |
| Parties | In Re: PARROTT BROADCASTING LIMITED PARTNERSHIP, Debtor. |
| Court | U.S. Bankruptcy Court — District of Idaho |
Appearances:
Daniel C. Green and Brett R. Cahoon, RACINE OLSON NYE BUDGE & BAILEY, Pocatello, Idaho, for chapter 7 trustee Gary L. Rainsdon.
Steven Taggart, MAYNES TAGGART, PLLC, Idaho Falls, Idaho, for chapter 7 trustee R. Sam Hopkins.
In this case, the Court is again asked to referee what amounts to a"trustee vs. trustee" contest.1 Following an August 23, 2013 hearing, and the submission of briefs, the issues were taken under advisement. This Memorandum disposes of the pending motions. Fed. R. Bankr. P. 7052; 9014.2
In 2007, Scott Daryl Parker ("Parker"), along with his mother and brother, formed Parrott Broadcasting, L.P. ("Parrott"), each investing significant sums into the new venture intended to acquire and operate several radio stations. Parker served as Parrott's general manager, which, according to the Limited Partnership Agreement ("PartnershipAgreement") executed by the partners, entitled him to receive a monthly "partnership management fee" of 10% of the business gross revenues, or $6,000, whichever sum was greater. Parker was never paid according to the Partnership Agreement despite providing his services to Parrott.
Parrott filed a chapter 11 petition on January 7, 2010. Parker used $15,000 of his own money to fund the retainer to Parrott's counsel. While he was the responsible officer for Parrott in the bankruptcy case, and signed all of the bankruptcy papers submitted on its behalf in the case, Parker did not list himself as a creditor in Parrott's bankruptcy schedules, nor did any of Parrott's chapter 11 monthly operating reports filed during the case, which Parker signed as true and correct, disclose any amounts owed to Parker for wages. Parrott's disclosure statement and proposed chapter 11 plans, signed by Parker and filed in the case, also did not propose to pay Parker any back wages as part of Parrott's reorganization of its financial affairs and on-going operations.
On February 10, 2011, Parrott's case was converted to a chapter 7 case, and Gary L. Rainsdon ("Rainsdon") was appointed to serve as thetrustee. Then, on May 24, 2011, Parker filed a personal chapter 7 bankruptcy case, Case No. 11-40823-JDP, and R. Sam Hopkins ("Hopkins") was ultimately appointed as the trustee in that case. In his personal bankruptcy schedules, Parker for the first time listed the unpaid wages owed to him, and the alleged unsecured loan he made to Parrott for the retainer, as potential assets.
Though he had already filed his own bankruptcy petition, on June 13, 2011, Parker filed a proof of claim in Parrott's bankruptcy case. Claims Reg. No. 34-1. It alleged Parrott owed him $135,000 in unpaid wages, and that a substantial portion of that amount was entitled to a wage-claim priority in payment under § 507(a)(4). Id. The proof of claim was amended on January 11, 2012, to substitute Hopkins as the claimant in light of the filing of Parker's chapter 7 case. Claims Reg. No. 34-2.
Rainsdon objected to the Parker/Hopkins proof of claim as amended, arguing, inter alia, that Parker should not be entitled to recover any amounts due for management fees because Parker and Parrott had never respected the terms of the Partnership Agreement giving rise toParker's claims. Dkt. No. 219. Rainsdon also argued that the claim for Parker's $15,000 "loan" to Parrott was not adequately documented. Id.
On March 7, 2013, Hopkins amended the proof of claim yet again, this time to increase the total claim to $495,000, with $10,950 entitled to priority under § 507(a)(4). Claims Reg. No. 34-3. After an evidentiary hearing on Rainsdon's objection to this second amended Parker/Hopkins proof of claim, the Court entered a Memorandum Decision, and a corresponding Order, determining that Parker, under applicable nonbankruptcy law, had waived his right to be paid both pre- and postpetition wages, and thus had no valid claim in Parrott's bankruptcy case. Dkt. Nos. 261 and 262.
Undeterred, on July 8, 2013, Hopkins filed a Motion for Relief from Stay and for Rule 3008 Reconsideration of Denial of Claim. Dkt. No. 264. Rainsdon objected to the motion, and the Court heard argument on August 20, 2013. After the parties submitted briefs, Dkt. Nos. 272 and 273, the motions were deemed under advisement.
In the motion, Hopkins argues that the automatic stay in the Parrott case should be modified so that he may commence an adversary proceeding in the Parker case against Rainsdon/Parrott to establish that Parker's waiver of his rights as a creditor constitutes an avoidable transfer, thereby creating a claim in favor of Hopkins in the Parrott case. Based upon this alleged avoidance claim, Hopkins seeks reconsideration of the Court's order disallowing his claim in the Parrott case.
Rainsdon argues that Hopkins' new claim is simply too late. He also contends that any avoidance claim to be asserted by Hopkins would be barred by the applicable statute of limitations, and thus does not constitute a colorable claim.
Rainsdon's arguments are both correct. Hopkins' motion lacks merit and will be denied.
The Code authorizes the Court to grant stay relief in favor of a party "for cause." § 362(d)(1). Here, Hopkins seeks relief from the stay to pursuean avoidance action in the Parker case against Rainsdon/Parrott under §§ 548(a)(1)(B), 544(b), 550(a)(1) and Idaho Code § 55-913(b), alleging that Parrott effectively received fraudulent transfers when Parker waived his "right" to both unpaid wages and to repayment of the retainer loan. Dkt. No. 264-1.4 The Court will decline Hopkins' request.
A bankruptcy court exercises discretion in deciding whether to grant relief from the automatic stay. Groshong v. Sapp (In re Mila, Inc.), 423 B.R. 537, 542 (9th Cir. BAP 2010); In re Franck, 171 B.R. 893, 895 (Bankr. D. Idaho 1994). In resolving Hopkins' stay relief motion, and while the merits are clearly debatable,5 the Court need not at this juncture consider whether Hopkins can prove the elements of his novel avoidance claim againstRainsdon/Parrott. Rather, the Court need only find that Hopkins asserts a "colorable" avoidance claim in order to support a grant of stay relief. In re Edwards, 454 B.R. 100, 105 (9th Cir. BAP 2011) () ); United States v. Gould (In re Gould), 401 B.R. 415, 425 n.14 (9th Cir. BAP 2009). A "colorable claim" is one "that is legitimate and that may reasonably be asserted, given the facts presented and the current law (or a reasonable and logical extension or modification of the current law.)" BLACK'S LAW DICTIONARY 282 (9th ed. 2009). A colorable claim is not "wholly insubstantial, immaterial, or frivolous." McBride Cotton & Cattle Corp. v. Veneman, 290 F.3d 973, 981 (9th Cir. 2002).
The Code provides that any action to avoid a fraudulent transfer under under §§ 544(b) or 548(a):
Rainsdon points out that when Parker filed his individual bankruptcy petition on May 24, 2011, it constituted an order for relief,6 and therefore, the § 546(a) statute of limitations for filing any §§ 544 or 548 actions expired in his case on May 24, 2013. He further argues that because neither this stay relief motion, nor any adversary complaint, was filed by Hopkins before that date, the statute of limitations would bar an avoidance action. Thus, Rainsdon concludes, Hopkins has not shown he holds a colorable avoidance claim, nor established "cause" for stay relief inthe Parrott case.
Hopkins disagrees. He argues that through operation of the "relation back" doctrine in Civil Rule 15(c)(2), made applicable to adversary proceedings via Rule 7015, this stay relief motion and his eventual adversary proceeding against Rainsdon, would be timely.
To refute Rainsdon's argument that his avoidance claim would be time-barred, Hopkins relies upon the "relation back" doctrine embodied in Civil Rule 15(c), which provides, in relevant part:
Civil Rule 15(c) (emphasis in original).
Hopkins argues that because Rainsdon was aware of the facts giving rise to Hopkins' avoidance claim against him, an adversary complaint toavoid the alleged fraudulent transfers would be timely despite no such action having been commenced before the deadline in § 546(a). In particular, Hopkins notes that he filed Amended Proof of Claim No. 34 in the Parrott case on May 3, 2012, in which he claimed Parker was owed wages for services provided to Parrott. In addition, on May 24, 2013, the bar date Rainsdon cites for purposes of § 546(a), Hopkins filed a Post-Hearing Brief, Dkt. No. 258, in which he states that §§ 547, 548, and 549 collectively "give [Hopkins] the power to set aside preferential, fraudulent and post-petition transfers," and that as a result, Hopkins should not be constrained by any of Parker's alleged bad behavior in completely failing to disclose his creditor claims against Parrott up to that time. Dkt....
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