In re Yellow Cab Co-op. Ass'n
| Decision Date | 01 September 1995 |
| Docket Number | Bankruptcy No. 93-23733-DEC. Adv. No. 94-1499-SBB. |
| Citation | 185 BR 844 |
| Parties | In re YELLOW CAB COOPERATIVE ASSOCIATION, EIN XX-XXXXXXX, Debtor. YELLOW CAB COOPERATIVE ASSOCIATION, Plaintiff, v. Karen J. MATHIS; the Mathis Law Firm, P.C.; Vicki S. Porter; and Vicki S. Porter, P.C., Defendants. |
| Court | U.S. Bankruptcy Court — District of Colorado |
E. Hil Margolin, E. Hil Margolin, P.C., Denver, CO, for plaintiff.
Robert S. Treece, Michael L. Hutchinson, Michelle A. Pinkowski, Treece, Alfrey & Musat, P.C., Denver, CO, for defendants Karen J. Mathis and the Mathis Law Firm, P.C.
ORDER ON MOTION TO DISMISS
THIS MATTER comes before the Court on the Motion to Dismiss Plaintiff's First and Third Claims for Relief filed by Defendants Karen J. Mathis and the Mathis Law Firm, P.C. (collectively, "Mathis") on July 6, 1995, the Response thereto filed by the Debtor on July 31, 1995, the Motion to Reopen Hearing on Motion to Dismiss filed by Mathis on August 4, 1995, and the Supplement thereto filed by Mathis on August 9, 1995. Oral argument was heard by this Court on August 1, 1995.
The Plaintiff in this adversary proceeding seeks, generally, review and recovery of receiver's and attorney's fees received by Mathis, the Debtor's prior state court receiver, and her law firm, pursuant to 11 U.S.C. §§ 548 and 549.
By way of the instant Motion to Dismiss, Mathis asks this Court to dismiss the Plaintiff's first and third claims for relief based on an asserted lack of subject matter jurisdiction. Mathis claims that the Bankruptcy Court lacks jurisdiction to review her actions and fees as a state court receiver appointed for the Debtor prior to this Chapter 11 case. In addition, Mathis claims the protection of judicial immunity for actions taken and fees received in her role as receiver.
The Debtor maintains, generally, that the Bankruptcy Court has the jurisdiction and authority, indeed the responsibility, to review and approve or disallow the fees paid to the receiver by the Debtor, both pre- and post-petition. The Debtor argues that it was not a party to the receivership action, thus overcoming Mathis' claims of res judicata and judicial immunity. The Debtor also maintains that it was denied fundamental due process in the receivership action; it had no notice or meaningful opportunity to object to the fees paid to Mathis as receiver and as attorney for the receiver.
The Court, having reviewed the file, conducted a hearing, and being advised in the premises, makes the following findings of fact and conclusions of law and enters the following orders.
1. Yellow Cab Cooperative Association ("YCCA" or the Debtor) was established as a cooperative corporation in 1979 for the purpose of allowing the driver owners of the cooperative to purchase the assets of YCCA's predecessor in interest. YCCA filed Articles of Incorporation and Bylaws and subsequently, completed the purchase of assets.
2. In 1991, a dispute arose between two driver member factions over the control and management of YCCA. Apparently, YCCA held an election to select individuals who would serve on the Board of Directors. That election process resulted in challenge from a group of dissident driver members, and litigation ensued in the District Court for the City and County of Denver. Several cases that were filed were ultimately consolidated into one action docketed at No. 91 CV 2401.
3. On May 2, 1991, nunc pro tunc to April 29, 1991, the Denver District Court, Judge Lynne M. Hufnagel acting sua sponte, entered an Order appointing Karen J. Mathis to act as receiver on behalf of YCCA pursuant to Rule 66(a)(3) of the Colo.R.Civ.P. No creditor of YCCA at any time requested that the company be placed into receivership.
4. This Court is not advised and the record does not inform the Court as to the basis on which Mathis was selected, why she was selected, what her experience as a receiver, or with this particular type of business, was, or what prior connections, if any, she may have had with YCCA, other persons related to this case, or what, if any, connections she may have had with the appointing court.
5. By Order dated May 11, 1991, nunc pro tunc to May 1, 1991, Judge Hufnagel granted an oral motion by attorney Peter Borenstein, on behalf of YCCA and two of its remaining directors, to intervene in the action.1 Although the Order purports to amend the caption of the case, this Court finds that use of the amended caption was sporadic, at best.2 This Court is, moreover, fundamentally unclear as to what the extent and nature of Borenstein's role or representation was in the state court receivership case; the evidence is very sparse. A careful review of the many reports filed by Mathis in the state court seems to reveal that Borenstein's role was evidently limited to representation of YCCA in certain personal injury lawsuits that were then pending.3 This Court can only conclude that, insofar as Borenstein's role in the receivership action is concerned, or his activity in representing YCCA in general legal affairs or management matters, it appears to have been, at most, infrequent, sporadic, and inconsequential.
6. The underlying litigation in state court, Consolidated Civil Action No. 91 CV 2401, District Court, City and County of Denver, State of Colorado, primarily involved allegations concerning the election of and control by YCCA's Board of Directors. During the lengthy proceedings it appears as though Judge Hufnagel never found that fraud or dishonesty was perpetrated by the management of YCCA upon any of its creditors or that YCCA's Board of Directors did not exercise reasonable and honest judgment in the exercise of YCCA's business affairs.
7. Judge Hufnagel addressed the issues of the underlying litigation in a lengthy Order dated May 12, 1991, which provided inter alia that an election of members to the Board of Directors would be held on July 12, 1991, subject to certain voting criteria and procedures established by the Court therein.
8. The May 12, 1991 Order further prohibited any Board of Directors which might be elected from exercising any management authority until further Order of the Court and termination of the receivership.
9. Mathis, acting as receiver, conducted a successful election pursuant to Judge Hufnagel's Order and certified the results of the election to the Court on July 15, 1991. Despite the fact that the election resulted in an ultimately uncontested designation of a seven member Board of Directors, Mathis has never, at any time, moved to permit the elected Board of Directors to exercise its statutory authority, nor has she ever moved to terminate the receivership over YCCA.4 Moreover, Mathis opposed motions filed by the parties to the underlying litigation which sought to have the receivership terminated.
10. Mathis continued in her role as Receiver and remained in management and control of YCCA for over 32 months, 29 of which were subsequent to the certification of the election she conducted.
11. On or about June 15, 1993, Mathis filed a motion with Judge Hufnagel which sought the authority to sell substantially all of the assets of YCCA. The proposed sale was objected to by several interested parties, including YCCA's largest secured creditor. Judge Hufnagel, however, at the request of Mathis, struck all of the objections and granted the sale motion on September 11, 1993.
12. The proposed sale of the assets would have amounted to a liquidation of YCCA. The only assets which would remain in YCCA following such sale would have been certain real property that bore potential environmental liability.
13. Mathis filed an application for the transfer of YCCA's assets with the Public Utilities Commission. On of about December 29, 1993, the staff for the Public Utilities Commission intervened to preserve the ability to file an objection to the proposed transfer.
14. Almost three years into the receivership, on December 29, 1993, YCCA's elected but, as yet still unseated, Board of Directors authorized and filed a Voluntary Petition pursuant to Chapter 11 of the Bankruptcy Code. Weeks later, and following four days of testimony and argument, Judge Donald E. Cordova of this Court ordered the turnover of assets remaining in Mathis' hands to the Debtor and concurrently denied Mathis' motion to dismiss the Voluntary Petition.5
15. The Debtor initiated the instant adversary proceeding by the filing of a Complaint on August 12, 1994. The Debtor seeks relief on four counts: (a) recovery of fees paid to Mathis pre-petition as fraudulent conveyances under 11 U.S.C. § 548; (b) recovery of the fees earned post-petition but prior to Judge Cordova's order requiring turnover pursuant to 11 U.S.C. §§ 543 and 549; (c) breach of fiduciary duty relating to Mathis' tenure as Receiver;6 and (d) disallowance of approximately $21,000 in fees incurred post-turnover pursuant to 11 U.S.C. §§ 543 and 549.
16. This Court has statutory jurisdiction to review a range of issues and accord various relief. The Debtor seeks relief, in principal part, pursuant to 11 U.S.C. §§ 548 and 549, over which this Court has exclusive jurisdiction and for claims against the Receiver which are core proceedings under 28 U.S.C. § 157(b)(2)(C), (E), and (H). Moreover, and significantly, Mathis has filed a proof of claim which subjects her to the claims allowance process in this Court. See. e.g., In re Manville Forest Products Corp., 896 F.2d 1384, 1389-1390 (2nd Cir.1990).7
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