In Re: Tred Holdings
| Decision Date | 03 September 2010 |
| Docket Number | Case No. 10-40749 |
| Parties | IN RE:TRED Holdings, L.P., Alleged Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Texas |
This is an involuntary petition prosecuted by an attorney, Douglas J. Brooks, who purported to act on behalf of three creditors of TRED Holdings, L.P. Mr. Brooks filed the involuntary petition against TRED so that two of the petitioning creditors, Tonya Hampton and Branden Maner, L.L.C., would gain an advantage against TRED in certain state court litigation. TRED has requested actual and punitive damages against Mr. Brooks and two of the petitioning creditors, Tonya Hampton and Branden Maner, pursuant to 11 U.S.C. § 303(i). TRED dropped its request for damages against the third petitioning creditor, Anna J. Molina, based on her testimony at the damages hearing. The following constitutes the Court's findings of fact and conclusions of law.
TRED is in the business of lending money to people who want to purchase homes. Jeffrey R. Burrell, one of the owners of TRED, testified that TRED has not originated any new loans since January 2008. TRED has serviced its existing portfolio of loans for the past several years as well as bought and sold its own properties.1
The dispute that led to this involuntary bankruptcy case arises from a loan TRED made to Branden Maner in 2006. In particular, on or about September 22, 2006, Branden Maner executed and delivered to TRED a promissory note in the original principal amount of $435,000. To secure payment of the Note, Branden Maner executed and delivered to TRED a deed of trust for the real property generally described as 4865 County Road 2714, Caddo Mills, Texas. In addition, Malcolm Hampton Jr., who is the managing member of Branden Maner, Malcolm Hampton Sr., and Tonya Hampton guaranteed the note.
Branden Maner failed to perform its obligations under the note. As a result, TRED purchased the property at a foreclosure auction on November 6, 2007. Malcolm Hampton Jr. was living with his wife, Tonya, and his father on the Caddo Mills property at the time of the foreclosure sale. TRED thereafter made demand upon the Hampton family to vacate the property. They refused.
Neither Branden Maner nor the Hampton family made any payments to TRED after the foreclosure sale. On or about January 20, 2009, TRED brought a forcible detainer lawsuit against the Hampton family in a county court in Hunt County, Texas. Malcolm Hampton Sr. obtained a stay of that action by filing a bankruptcy petition in this Court on March 19, 2009. Malcolm Hampton Sr. maintained that since he and his family occupied the property, and he had sought bankruptcy protection in this Court, the county court could not proceed with the forcible detainer lawsuit until TRED obtained relief from the automatic stay.
While Malcolm Hampton Sr.'s bankruptcy case was pending, in or around January 2009, Malcolm Hampton Jr. and his wife filed a state district court lawsuit in Hunt County, Texas. They alleged, among other things, a claim against TRED for wrongful foreclosure. The Hunt County district court dismissed their suit for want of prosecution on November 30, 2009.
On October 19, 2009, TRED filed a motion in Malcolm Hampton Sr.'s bankruptcy case for relief from the automatic stay with respect to the real property located at 4865 County Road 2714, Caddo Mills, Texas. TRED sought relief from the stay to the extent necessary to proceed with its forcible detainer action and, if it prevailed in that action, to evict Malcolm Hampton Sr. and his family from the Caddo Mills property. Malcolm Hampton Sr. opposed the motion, arguing that the foreclosure sale was wrongful. He asserted in his opposition to the motion that he was preparing an adversary complaint against TRED.
On December 2, 2009-the day TRED's motion for relief was scheduled for a final hearing-Malcolm Hampton Sr. filed his adversary complaint against TRED. However, the parties appeared at the final hearing on TRED's motion for relief from the stay and announced that they had reached an agreement. On December 17, 2009, the Court entered an agreed order lifting the stay and allowing TRED's forcible detainer action to proceed in county court. On January 8, 2010, the Court entered an agreed order dismissing Mr. Hampton's adversary complaint with prejudice.
On January 28, 2010, TRED obtained a judgment for possession of the Caddo Mills property. Branden Maner and the Hampton family appealed the judgment and requested a stay pending appeal. On February 9, 2010, the state appellate court denied their motion for a stay pending appeal.
On February 10, 2010, Branden Maner filed a lawsuit in the 191st District Court of Dallas County, Texas, and obtained a temporary restraining order restraining TRED from serving the writ of possession. The district court scheduled a temporary injunction hearing for 9:00 a.m. on February 26, 2010. According to Mr. Brooks, on the eve of the scheduled hearing, he had a discussion with Malcolm Hampton Jr. and Gale Corbitt Hutchinson, who Mr. Brooks employed as a paralegal on a case-by-case basis, regarding whether to file an involuntary petition against TRED in order to obtain another stay of the execution of the writ of possession. At or around this time, Malcolm Hampton Jr. contacted Anna Molina and invited her to join in the bankruptcy case as a petitioning creditor. Anna Molina declined.
Between 1:25 and 1:32 a.m. on February 26, 2010, Mr. Brooks' electronic login and password were used to file two involuntary petitions against TRED.2 The petitions were filed in the United States Bankruptcy Court for the Eastern District of Texas, Lufkin Division. The Court closed one of the cases as a duplicate. The Court transferred the other case to the Sherman Division and assigned it Case No. 10-40749.
The involuntary petition lists three petitioning creditors: Branden Maner, Anna J. Molina, and Tonya Hampton. The involuntary petition states that each creditor's claim is based on fraud and breach of contract. The stated amount of Branden Maner's claim is $542,972.32, the stated amount of Tonya Hampton's claim is also $542,972.30, and thestated amount of Anna Molina's claim is $329,754. Mr. Brooks knew that none of these individuals or entities held undisputed claims against TRED as required for them to sustain an involuntary petition pursuant to § 303(b) of the Bankruptcy Code.
Mr. Brooks orally announced the filing of the involuntary petition at the injunction hearing on the morning that the involuntary petition was filed. He also informed the state district court that Malcolm Hampton Jr., the managing member of Branden Maner, was filing a suggestion of bankruptcy relating to the involuntary petition. As a result, the state district court did not go forward with the injunction hearing. In addition, Mr. Brooks' office faxed a notice of the involuntary filing to TRED's primary lender, Texas Capital Bank, on the date of the involuntary bankruptcy filing.3
TRED promptly requested an emergency hearing in this Court on the involuntary petition. The Court granted the request over the objection of the petitioning creditors, which Mr. Brooks filed electronically on March 5, 2009. The Court scheduled the emergency hearing for March 11, 2010.
The Hunt County Constable served the writ for forcible entry and detainer on the Hamptons on March 8, 2010. The next day, on March 9, 2010, Branden Maner filed a Chapter 7 petition in the United States Bankruptcy Court for the Northern District of Texas, Case No. 10-41667. On the same day, Brandon Maner requested an emergency hearing, seeking enforcement of the automatic stay against TRED. The bankruptcy court denied Branden Maner's request in an order entered on March 11, 2010.4
At the emergency hearing in this Court on March 11, 2010, Mr. Brooks announced that he was appearing for the petitioning creditors. None of the petitioning creditors attended the hearing. Mr. Brooks announced to the Court that Branden Maner's principal, Malcolm Hampton Jr., and Tonya Hampton were moving out of the Caddo Mills property that morning, and Anna Molina had a "personal emergency" that prevented her from attending the hearing. According to Mr. Brooks' testimony at a subsequent hearing, he made the representation regarding Anna Molina's scheduling conflict based on a representation made to him by Malcolm Hampton Jr. Mr. Brooks did not advise the Court that a paralegal had mistakenly filed the involuntary petition nor did Mr. Brooks advise the Court that his client's had not authorized the filing.
At the conclusion of the hearing on March 11, 2010, the Court granted TRED's motion to dismiss the involuntary petition based on the failure of the petitioning creditors to present evidence in support of the petition. The Court declined to address TRED's request for an award of damages in light of Mr. Brooks' complete lack of preparation for the hearing. The Court scheduled TRED's request for an award of costs, actual damages, punitive damages, and attorney's fees under § 303(i) of the Code for an evidentiary hearing on April 12, 2010. At that time, Mr. Brooks advised the Court that he is not a bankruptcy attorney and would be withdrawing from his representation of the petitioning creditors prior to the damages hearing.
Mr. Brooks did not withdraw from representing the petitioning creditors. At the damages hearing on April 12th, TRED appeared with several witnesses who had traveled from other cities to testify. Mr. Brooks once again appeared without any witnesses orother evidence. Mr. Brooks requested a continuance of the hearing on behalf of his purported clients.
In support of his request for a continuance, Mr. Brooks represented that he had not been able to reach Anna Molina to notify of her of the damages hearing. He also represented that Malcolm and Tonya Hampton had just moved to...
To continue reading
Request your trial