In re Seminole Walls & Ceilings Corp.

Decision Date02 April 2007
Docket NumberBankruptcy No. 6:01-bk-01966-KSJ.,Adversary No. 6:04-ap-77.,Adversary No. 6:04-ap-79.
Citation366 B.R. 206
CourtU.S. Bankruptcy Court — Middle District of Florida
PartiesIn re SEMINOLE WALLS & CEILINGS CORP., Debtor. Carla Musselman, Trustee, Plaintiff, v. Debbie Jasgur, Joseph Jasgur, Robert L. Fox, Dartlin J. Africh, Africh Maintenance, Inc., Africh Management & Investment, Inc., Vintage Partners, Inc., Bradley E. Whittle, The Funding Solutions, Inc., Joseph Yaron, Pita Corporation, Paul Philipson, Defendants. Carla Musselman, Plaintiff, v. Africh Management & Investments, Inc., Africh Maintenance, Inc., Dartlin J. Africh, Robert L. Fox, Pita Corporation, Defendants.

Jennifer A. Jones, Winderweedle Haines Ward & Woodman, PA, Bradley M. Saxton, Orlando, FL, for Plaintiff.

Elizabeth A. Green, Jacqueline E. Ferris, Latham Shuker Barker Eden & Beaudine LLP, Kimberly Doud, Nicolette Corso Vilmos, Broad and Cassel, Frank M. Wolff, Wolff Hill McFarlin & Herron PA, Roy S. Kobert, Tucker H. Byrd, Orlando, FL, Joel A. Goldman, Los Angeles, CA, for Defendants.

MEMORANDUM OPINION

KAREN S. JENNEMANN, Bankruptcy Judge.

Joseph Jasgur is a very talented photographer who mingled with and photographed Hollywood celebrities starting in the 1940's. One celebrity he photographed was Norma Jean Mortenson,1 more popularly known as Marilyn Monroe. Jasgur apparently took her first professional photographs, including the only photo that suggests she had six toes on one foot. His collection,2 however, is much more extensive includes many Hollywood celebrities from the 1940-1950's, and, by all accounts, is very impressive (the "Jasgur Collection"). During these bankruptcy proceedings, the debtor described the Jasgur Collection as consisting of "Norma Jean a/k/a Marilyn Monroe posters, collector cards, props limited edition photographs as well as the Hollywood Canteen Collection and other Hollywood celebrity photographs and memorabilia." (Doc. No. 221, p. 3-4 in the Main Case). The reader can get a sense of the magic of these early celebrity photos by looking at some examples introduced during the trial or by looking at Jasgur's personal journal. (Jasgur Ex. Nos. 15 and 16; Africh Ex. No. 59).

Unfortunately, Mr. Jasgur's marketing and business expertise does not equal his photographic ability. For decades, Jasgur has tried to capitalize on his work, to largely no avail. He has associated with many potential purchasers and marketers for his photographs. One of these potential purchasers, PITA Corporation, is intertwined with the debtor in this Chapter 7 bankruptcy case.

Because of the numerous issues relating to the extent of PITA's interest in the Jasgur Collection, a multi-day trial was held on some, but not all, of the complex issues raised in these adversary proceedings. The only two issues tried and the only two issues resolved in this. Memorandum Opinion relate to (i) whether Jasgur ever effectively transferred any assets to PITA, and (ii) whether the Court should approve a settlement agreement between Jasgur and the Chapter 7 Trustee, Carla Musselman. All other issues raised in this adversary proceeding will be decided later, to the extent the issues remain relevant.

Parties and Bifurcated Issues

To start, a description of the parties and their complicated relationships is appropriate. The debtor is Seminole Walls and Ceilings Corporation ("Seminole Walls"). On March 13, 2001, the company initially filed a petition seeking to reorganize its financial affairs under Chapter 11 of the Bankruptcy Code.3 Seminole Walls was controlled by Robert Fox,4 who used the company for varying business purposes. He ran a drywall business, but he also used the debtor's corporate entity for other diverse ventures, such as investing in fine wine. Pursuant to the Disclosure Statement filed by Seminole Walls, the debtor also owned PITA,5 which in turn, claimed an interest in the Jasgur Collection:

The Debtor currently holds one hundred percent of the stock in PITA Corporation. This corporation was purchased as an investment vehicle for the Debtor. Over the years PITA has invested and disposed of various investment properties. The last purchase was the Jasgur Collection.... PITA sold all of its rights to the collection to Vintage Partners Inc., in exchange for cash and a note in the amount of $1,800,000.00. The note was due and payable on November 4, 2001. Citing the poor economy and other legal factors, Vintage Partners, Inc., defaulted on the note. The Debtor filed suit to collect on the note in the Circuit Court of Orange County Florida against one of the principals of Vintage Partners, Inc., in December of 2001. Further amendments to the complaint will be forthcoming to add additional defendants and to press for judgment on the note or return of the collateral. The Debtor is currently in settlement negotiations with Vintage. When the note is collected or the Jasgur Collection is liquidated, after costs expenses and debts of PITA are paid (PITA has less than $700,000 in debt), the net proceeds shall be used by the Debtor toward the implementation of the Plan of Reorganization.

(Debtor's Disclosure Statement, Doc. No. 221 in the Main Case, p. 3-4).

PITA, in turn, was to contribute its interest in the Jasgur Collection to pay claims of Seminole Wall's creditors. Specifically, Article VII of the debtor's Plan of Reorganization provided that upon liquidation of the Jasgur Collection "[t]hese net proceeds shall be applied in the following sequential order: first, to the claim in Class 4 until that claim is paid in full; next to Class 6 until paid in full and finally to Class 7 until that claim is paid in full." (Debtor's Third Amended Plan of Reorganization, Doc. No. 221, Exhibit D, pg. 8 in the Main Case).

The debtor eventually confirmed, after several tries, a Third Amended Plan of Reorganization, as further amended (Doc. No. 221 and 244 in the Main Case). The confirmation order was entered on August 21, 2002. (Doc. No. 249 in the Main Case). Because the debtor's earnings were speculative and just marginally enough to pay operating expenses, feasibility of the debtor's ability to perform as required under the plan looked shaky. Moreover, the Court had grave reservations about Fox, his trustworthiness, and his ability to perform upon his promises.

Based on these concerns, the Court specifically retained supervision over the debtor and its finances and provided that no final decree closing the case could enter until after the debtor demonstrated to the satisfaction of the Court that it had substantially consummated its confirmed plan and, in no event, before January 29, 2003. The debtor, in the interim, was required to file monthly financial reports and to timely pay its taxes. More importantly, the debtor knew that the only way the required payments realistically could occur was if PITA's alleged interest in the Jasgur Collection was sold or if PITA collected upon the promissory note due by Vintage Partners, Inc.

Not unexpectedly, the debtor stopped making payments required under its confirmed plan. Creditors started filing motions seeking relief from the automatic stay and to dismiss the Chapter 11 case due to the debtor's failure to perform (for example, the Motion to Dismiss filed by Hertz Equipment (Doc. No. 285A in the Main Case.); the Motion to Dismiss Case filed by creditor, Vicki B. Whitman (Doc. No. 302 in the Main Case); and the Motion for Relief from Stay filed by creditor, Williams Scotsman, Inc. (Doc. No. 304 in the Main Case)). Eventually, the United States Trustee filed a Motion to Convert the Case to Chapter 7 (Doc. No. 299 in the Main Case). In this motion, the UST asserted that the debtor had stopped making all required tax payments, including the payment of employee trust fund withholding taxes, and that the debtor, by its own admission, ."has experienced a series of financial reverses that have prevented the debtor from fully consummating the plan of reorganization."6 A hearing on the motion was set for April 2, 2003.

The hearing on this motion was dramatic. Fox entered the courtroom waving a check which, he said, could pay part, but not all, of the amounts then due under the debtor's confirmed plan of reorganization. The monies were insufficient to stop the conversion, and the case was converted to a Chapter 7 case (Doc. No. 312 in the Main Case). Carla Musselman was appointed as the Chapter 7 trustee. Since that day, April 2, 2003, the trustee has sought to collect the assets of the debtor. One of the primary assets is the bankruptcy estate's interest in the Jasgur Collection.

After some preliminary investigation, the trustee filed two adversary proceedings — Adversary Proceedings 04-77 and 04-79 — both seeking to get control of the Jasgur Collection. In the first adversary proceeding, 04-77, the trustee seeks a diverse variety of relief, including, in Count 3, a declaratory judgment that would define the items included in the Jasgur Collection and determine the claims of the various parties who claim ownership in some or all of the Jasgur Collection. In addition, the trustee in both adversary proceedings seeks the turnover of the Jasgur Collection from the various parties holding parts of the collection as well as determination of various fraudulent transfer claims. Because many people have been promised a part of the Jasgur Collection, the issues raised in these related adversary proceedings are complicated.

However, the trustee's claim of ownership to the Jasgur Collection rests on two primary arguments. First, the trustee's claim to the Jasgur Collection is no greater than the ownership interest of PITA. The trustee can only assert those rights that the debtor, Seminole Walls, had through its alleged subsidiary, PITA. In re Witko, 374 F.3d 1040, 1043 (11th Cir.2004) (although property of a bankruptcy estate is broadly defined under 11 U.S.C....

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