In re Western World Funding, Inc.
| Decision Date | 05 September 1985 |
| Docket Number | Adv. No. 82-214.,Bankruptcy No. 82-477,82-517,82-507 and 82-478,82-508 |
| Citation | 52 BR 743 |
| Court | U.S. Bankruptcy Court — District of Nevada |
| Parties | In re WESTERN WORLD FUNDING, INC., In re LEASCO FINANCIAL CORPORATION, In re UNITED SECURITY SYSTEMS, INC., In re UNITED EMERGENCY SERVICES, INC., In re UNITED SECURITY SYSTEMS LEASING, INC., Debtor. Timothy J. HENDERSON, Trustee, Plaintiff, v. Neil BUCHANAN, Clair Vogt, Bruno Menicucci, Anna Menicucci, Air Priority Airways, Hartford Trust Company, World Resorts, Inc., and Menicucci Insurance Services, Inc., Defendants. |
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Lee S. Molof, Henderson & Nelson, Reno, Nev., for plaintiff.
Frank R. Petersen, Petersen & Petersen, Reno, Nev., for defendants Bruno and Anna Menicucci.
Cal F. Hoover, Reno, Nev., for defendants Clair Vogt and Neil Buchanan.
Western World Funding, Inc. filed its petition under Chapter 11 of the Bankruptcy Code on June 16, 1982, and was soon joined by the other above-named debtors. The Trustee was appointed by Order dated July 6, 1982, and the Trustee's motion for joint administration was granted on July 8, 1982. Sometime later, on April 5, 1983, these cases were converted to Chapter 7 and substantively consolidated.
In the meantime, the Trustee commenced this adversary proceeding by the filing of a Complaint on August 13, 1982. The Complaint contained thirteen causes of action, including allegations of breach of fiduciary duty, conversion of corporate assets, and preferences. The Trustee also sought a determination that the defendants Buchanan, Menicuccis and Vogt operated the debtor corporations as partnerships, and as their alter egos. After two years of discovery, pre-trial motions, and amendments to the Complaint, this proceeding came on for a trial on the merits during the month of September, 1984. Having duly considered the record, this Court hereby makes its Findings of Fact and Conclusions of Law as required by Bankruptcy Rule 7052. To the extent that the Findings contain Conclusions of Law, they shall be deemed to be Conclusions; to the extent that the Conclusions contain Findings of Fact, they shall be deemed to be Findings.
The segregation of the following Findings of Fact within headings indicating, generally, the various causes of action, does not necessarily imply that a specific Finding of Fact does not relate to more than one cause of action. Many of the proposed Findings of Fact relate to more than one cause of action, and the headings which follow are merely for convenience.
1. Defendant Bruno Menicucci, with regard to his credibility as a witness, was relatively straight forward and honest with the Court, with the exception that some of his perceptions and responses regarding his responsibility for the actions of Western World Funding, the lack of records of Western World Funding, and the investment of monies in his control were less than sincere. The Court does not believe and finds, contrary to his testimony, that Mr. Menicucci did not think that the investors' funds were going into short-term bank notes, leases, and leasing blocks. He knew, the Court finds, that investors' funds were instead going into United Security Systems Leasing.
2. The Court finds, with regard to the credibility of Defendant Clair Vogt as a witness, that her testimony was not at all credible. The Court finds Mrs. Vogt to be a relatively astute and intelligent person. She was at the offices of the debtors almost every day. She issued checks, maintained bank accounts, and managed apartments. She knew how to handle assets of her own. Consequently, the Court finds incredible her statements that she simply took direction from Defendant Neil Buchanan. The Court also finds incredible her repeated response to questioning that she did not recall. The Court believes, and finds, that she recalled when she wanted to recall.
3. The Court finds, with regard to the credibility of Defendant Neil Buchanan as a witness, that his testimony was almost totally not credible. He had to be corrected out of his own prior deposition testimony more often than any other witness. The Court wondered, at first, after listening to his testimony for an hour or two, whether Mr. Buchanan knew the difference between truth and falsity. The Court has concluded, after listening to his testimony for several days, that he knows, very well, the difference and intended the falsities. The Court observed personal mannerisms of Mr. Buchanan, both facial and hand actions, as well as an aggressive voice and attitude, which he exhibited when he attempted to cover up or state a falsehood.
4. Defendants Neil Buchanan and Clair Vogt were officers and Directors in each of the five debtor entities as well as twenty other related corporations.
5. Defendant Bruno Menicucci was President and Director of debtor Western World Funding, Inc. and President of debtor Leasco Financial Corporation.
6. Defendant Anna Menicucci was Vicepresident of debtor Western World Funding, Inc.
7. Defendants Clair Vogt and Neil Buchanan each consented to, approved of, or ratified the other's use of corporate funds, all as discussed more fully below, for personal or improper purposes.
8. The debtor corporations did not consent to, ratify, or approve of the breaches of fiduciary duty, all as discussed more fully below.
9. The debtor corporations were all insolvent from their inception.
10. Defendants Neil Buchanan and Clair Vogt had an express agreement to operate businesses as co-owners and to share in the profits of these business.
11. Defendants Neil Buchanan and Clair Vogt understood and intended this association to be a partnership.
12. Defendants Neil Buchanan and Clair Vogt, as partners, acted as agents for each other with respect to all transactions discussed herein.
13. This partnership, comprised of Defendants Neil Buchanan and Clair Vogt, organized, incorporated or controlled more than twenty-five (25) corporations in the State of Nevada.
14. Five (5) of these corporations were the above-captioned debtors, Western World Funding, Inc., United Security Systems Leasing, Inc., United Security Systems, Inc., United Emergency Services, Inc., and Leasco Financial Corporation.
15. One aspect of the partnership agreement was that Clair Vogt agreed to loan the necessary monies for start-up costs and also use her credit rating and personal guarantees to borrow additional operating funds.
16. Another aspect of the partnership agreement was that Neil Buchanan would act as the Managing Director for each of the ventures undertaken by the partnership.
17. Neil Buchanan and Clair Vogt, as general partners, did actually receive and share in the gross profits from the various ventures, including the debtor companies.
18. Both Neil Buchanan and Clair Vogt shared in the management responsibilities of the various ventures undertaken by their partnership.
19. Defendants Neil Buchanan and Clair Vogt and the partnership of Neil Buchanan and Clair Vogt caused the funds of the debtor entities to be freely transferred and co-mingled with the funds in the accounts of each other and with the funds in the accounts of the other related entities.
20. Defendants Neil Buchanan and Clair Vogt and the partnership of Neil Buchanan and Clair Vogt caused the personal funds of Clair Vogt to be freely transferred and co-mingled with the funds of the five debtor entities and with the funds of the other related entities, as if all these funds were Defendant Clair Vogt's funds and the funds of the partnership.
21. Defendant Neil Buchanan diverted funds of the five debtor entities to noncorporate and personal purposes and treated such debtor company funds as if they were his own.
22. Defendant Neil Buchanan transferred significant amounts of funds belonging to the debtor entities to his daughter, Beverly Buchanan, for her personal expenses, including medical expenses, living expenses, university tuition expenses, dental expenses, and other similar expenses.
23. Defendants Neil Buchanan and Clair Vogt, and the partnership of Neil Buchanan and Clair Vogt, diverted debtor company funds and used such funds for personal gambling purposes, and did gamble with such funds at numerous casinos in the Reno, Nevada area.
24. Defendant Neil Buchanan diverted debtor company funds for the purchase of a gift shop business for Defendant Buchanan's wife in the State of Washington.
25. Defendants Neil Buchanan and Clair Vogt took more than $50,000.00 in cash belonging to the debtor companies to their residences and kept this cash at their homes and used said cash for personal purposes.
26. Defendants Neil Buchanan and Clair Vogt dined out regularly at expensive restaurants, for non-business purposes, and paid for these meals with debtor company funds.
27. Defendant Neil Buchanan used debtor company funds for personal expenses including purchase of clothing, drycleaning expenses, medical expenses, and other personal expenses.
28. Defendant Clair Vogt diverted funds belonging to all of the debtor entities to her own personal uses, including the payment of personal loans borrowed from First Interstate Bank of Nevada and American Investors Management Mortgage Co., as well as for other personal expenses.
29. Defendant Clair Vogt and the partnership of Clair Vogt and Neil Buchanan held herself and itself out to be personally liable for the debts of the debtor companies, and personally guaranteed loans received from, among others, First Interstate Bank of Nevada, as well as for loans made to debtors Western World Funding, Inc. and United Security Systems Leasing, Inc. from the many investors.
30. Defendant Clair Vogt personally...
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