Judgment Factors, L. L.C. v. Packer (In re Packer)
| Decision Date | 10 October 2014 |
| Docket Number | Adversary No. 13–4082.,Bankruptcy No. 13–41304. |
| Citation | 520 B.R. 520 |
| Parties | In re Athol W. PACKER, XXX–XX–XXXX, Debtor. Judgment Factors, L.L.C., Plaintiff v. Athol W. Packer, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Texas |
Stephanie D. Curtis, Michael Howard Myers, Joshua Shepherd, Curtis Castillo PC, Dallas, TX, for Plaintiff.
Herman A. Lusky, Dallas, TX, for Defendant.
On this date the Court considered the Motion for Summary Judgment filed by the Defendant, Athol W. Packer (“Defendant”), in the above-referenced adversary proceeding (the “Motion”), the amended response in opposition filed thereto by the Plaintiff, Judgment Factors, L.L.C. (hereafter the “Response”), and the Defendant's reply thereto (hereafter the “Reply”). The complaint filed by the Plaintiff objects to the entry of any discharge order in favor of the Defendant pursuant to 11 U.S.C. § 727(a)(2)(A), § 727(a)(3), § 727(a)(4)(A) and § 727(a)(5). This Motion for Summary Judgment by the Defendant contests all of those § 727 claims. Upon due consideration of the pleadings, the proper summary judgment evidence submitted by the parties, and the relevant legal authorities, the Court concludes that the Defendant has met his burden to demonstrate that there is no genuine issue as to any material fact as to the Plaintiff's § 727 claims, that judgment should be granted as a matter of law to the Defendant on each of the § 727 claims as asserted in the Plaintiff's Complaint, and that a discharge order should be therefore entered in favor of the Defendant in case no. 13–41304. This disposes of all issues currently before the Court.1
The Defendant, Athol W. Packer, has been involved in the building of custom homes in the Dallas area for a number of years. In the mid-2000s, the Defendant formed Parthenon Development Partners, LLC with two partners, Dr. Henry Allen and Dr. David Allen (the “Partners”) to develop a residential development in Prosper, TX. The LLC and/or the individuals borrowed approximately $4,000,000.00 from Washington Federal Savings & Loan Association (the “Bank”) to finance the project. The Defendant and the Partners guaranteed the Bank note. After the development proved unsuccessful, the Bank later foreclosed upon the real property, filed suit against the Defendant and the Partners, and subsequently obtained a deficiency judgment of approximately $5.9 million. In November 2009, Jane Carol Puckett and Fariba “Faye” Payervand, the wives of the Partners, created the Plaintiff, Judgment Factors, L.L.C., and, under its auspices, acquired the judgment against the Defendant and the Partners from the Bank.
After significant efforts by Judgment Factors to collect the judgment solely against him, the Defendant Packer filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code in this Court on May 22, 2013, the Hon. Brenda T. Rhoades, presiding. Ms. Linda Payne was appointed as the Chapter 7 Trustee. Case administration in the main Chapter 7 case is continuing. The Trustee has filed no adversary proceeding to date.
However, on August 13, 2013, Judgment Factors timely filed this adversary proceeding in an attempt to prevent the entry of a Chapter 7 discharge order for the benefit of the Defendant–Debtor. After completion of the discovery period, the Defendant filed the present Motion on August 8, 2014, asserting that there are no genuine issues of material fact and that, under such uncontested facts, he is entitled to a judgment as a matter of law which denies all of the Plaintiff's claims for relief under 11 U.S.C. § 727(a)(2)(A), § 727(a)(3), § 727(a)(4)(A) and § 727(a)(5), respectively.
Before reaching the merits of the summary judgment motion, and the evidence tendered in regard thereto, the Court must first address the propriety of Count V of the Plaintiff's Complaint under which the Plaintiff seeks a declaration to erase the legal distinctions between the ownership of assets by the Defendant as an individual and the ownership of assets by various companies3 in which the Defendant owns all or substantially all of the membership interests. The Plaintiff contends in Count V that the Defendant has improperly disregarded corporate formalities with regard to most of these companies and alleges that he has instead utilized them in order to hinder, delay and defraud his individual creditors.4 Read carefully, Count V of the Plaintiff's Complaint is a claim for reverse veil-piercing through which the Plaintiff seeks to subject the assets of the Defendant's various companies for the satisfaction of the debts of this individual Defendant.5 A significant portion of the summary judgment evidence tendered by the Plaintiff pertains to those allegations and is presented as a purported evidentiary foundation upon which the Plaintiff asserts that the Defendant can be denied a discharge under the various subsections of § 727(a).
However, any evidence presented to support the alleged failure of the Defendant to observe corporate formalities or otherwise to maintain an identity separate from any of the companies, as a prelude to maintaining Count V, must be disregarded and Count V must be dismissed sua sponte since the Plaintiff has no standing to prosecute any such claims.6 It is well established in this Circuit that alter ego claims, as well as any reverse veil-piercing actions,7 constitute property of the bankruptcy estate and therefore lie within the exclusive control of the trustee. Thus, such claims may not be prosecuted by an individual creditor of a debtor. Cadle Co. v. Mims (In re Moore), 608 F.3d 253, 258–59 (5th Cir.2010) ; Schimmelpenninck v. Byrne (In re Schimmelpenninck), 183 F.3d 347, 358 (5th Cir.1999) ; Rodriguez v. Four Dominion Drive, L.L.C. (In re Boyd), 2012 WL 5199141, at *4–5 (Bankr.W.D.Tex. Oct. 22, 2012). Since the Plaintiff does not have standing to prosecute this particular cause of action on behalf of the bankruptcy estate, the court has no subject matter jurisdiction over that particular claim. See, e.g., U.S. Catholic Conference v. Abortion Rights Mobilization, Inc., 487 U.S. 72, 108 S.Ct. 2268, 101 L.Ed.2d 69 (1988) ; Diamond v. Charles, 476 U.S. 54, 106 S.Ct. 1697, 90 L.Ed.2d 48 (1986). Whenever it appears to the court that subject matter jurisdiction is lacking over a particular count, that portion of the complaint may be dismissed sua sponte. In re Phar–Mor, Inc. Sec. Litig., 900 F.Supp. 777, 783 (W.D.Pa.1994) (citing Carlsberg Resources Corp. v. Cambria Savings & Loan, 554 F.2d 1254, 1256–57 (3d Cir.1977) ); De Leon v. Perry, 975 F.Supp.2d 632, 645 (W.D.Tex.2014) (citing Taylor ex rel. Gordon v. Livingston, 421 Fed.Appx. 473, 474 (5th Cir.2011) ) [“Federal courts have no jurisdiction unless a case or controversy is presented by a party with standing to litigate.”].8 Therefore, Count V of the Plaintiff's Complaint will be dismissed by separate order.
The Defendant brings his Motion for Summary Judgment in this adversary proceeding pursuant to Federal Rule of Bankruptcy Procedure 7056. That rule incorporates Federal Rule of Civil Procedure 56, which provides that summary judgment shall be rendered “if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).9 “The purpose of summary judgment is to isolate and dispose of factually unsupported claims or defenses.” Chishty v. Texas Dept. of Aging and Disability Services, 562 F.Supp.2d 790, 800 (E.D.Tex.2006).
The party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). As a movant, a party asserting that a fact cannot be genuinely disputed must support that assertion by:
The manner in which the necessary summary judgment showing can be made depends upon which party will bear the burden of persuasion at trial. If, as in this instance, the burden of persuasion rests on the non-moving party, the party moving for summary judgment may satisfy Rule 56's burden of production in either of two ways. First, the moving party may submit affirmative evidence that negates an essential element of the non-moving party's claim. Secondly, the moving party may demonstrate to the Court that the non-moving party's evidence is insufficient to establish an essential element of the non-moving party's claim. Celotex, 477 U.S. at 322–323, 106 S.Ct. 2548 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ) (internal citations omitted); Stults v. Conoco, Inc., 76 F.3d 651, 655 (5th Cir.1996).
If the motion is supported by a prima facie showing that the moving party is entitled to judgment as a matter of law, a party opposing the motion may not rest upon the mere allegations or denials in its pleadings, but rather must demonstrate in specific responsive pleadings the existence of specific facts constituting a genuine issue of material fact for which a trial is necessary. Anderson, 477 U.S. at 256–57, 106 S.Ct. 2505 ; Bayle v. Allstate Ins. Co., 615 F.3d 350, 355 (5th Cir.2010). “A fact is material only if its resolution would affect the outcome of the action....” Wiley v. State Farm Fire & Cas. Co., 585 F.3d 206, 210 (5th Cir.2009) ; ac...
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