Matter of Twin Lakes Village, Inc., Bankruptcy No. 4151

CourtUnited States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Nevada
Writing for the CourtLLOYD D. GEORGE
Citation2 BR 532
PartiesIn the Matter of TWIN LAKES VILLAGE, INC., Bankrupt. In the Matter of Charles M. HEERS and Marilyn E. Heers, Debtors. In the Matter of Carol D. HEERS and Evelyn M. Heers, Debtors.
Docket Number4245 and 4246.,Bankruptcy No. 4151
Decision Date22 January 1980

2 B.R. 532 (1980)

In the Matter of TWIN LAKES VILLAGE, INC., Bankrupt.
In the Matter of Charles M. HEERS and Marilyn E. Heers, Debtors.

In the Matter of Carol D. HEERS and Evelyn M. Heers, Debtors.

Bankruptcy Nos. 4151, 4245 and 4246.

United States Bankruptcy Court, D. Nevada.

January 22, 1980.

2 BR 533
2 BR 534
Harold Slane, Jr., of Slane, Slane & Lane, City of Commerce, Cal., and Jack G. Perry, of Perry & Clary, Las Vegas, Nev., for claimant

Louis Wiener, Jr., of Wiener, Goldwater, Waldman & Gordon, Las Vegas, Nev., for debtors, Charles M. and Marilyn E. Heers, and co-counsel for debtor, Twin Lakes Village, Inc.

Melvin D. Close, Jr., of Jones, Jones, Bell, Close & Brown, Las Vegas, Nev., for debtors, Carol D. Heers and Evelyn M. Heers, and co-counsel for debtor, Twin Lakes Village, Inc.


LLOYD D. GEORGE, Bankruptcy Chief Judge.

Some time ago, this matter came before the Court in the form of debtors' objections to certain claims filed by PCK of Sacramento, Inc. (hereinafter referred to as "PCK"), in each of the above-entitled proceedings. As substantiation for its claims, PCK had initially noted in its proof of claim filings a judgment dated May 31, 1967, entered in Case No. A 11885 in the Eighth Judicial District Court of the State of Nevada. Subsequently, amended proofs of claim were filed, appended to which were conformed copies of a judgment signed by Eighth Judicial District Judge John F. Mendoza, in the previously noted Case No. A 11885. Significant for the purposes of the instant proceeding, however, is the fact that said Case No. A 11885 had been entitled "P.C.K. of SACRAMENTO, INC., a corporation, Plaintiff, vs. HEERS BROTHERS, INC., a corporation, Defendant." In order to explain the relevancy of this judgment to the Debtors then before the Court, PCK further attached an "Exhibit `A'" to each proof of claim, stating that

"The basis for the claim is as follows:
"PCK of SACRAMENTO, INC. obtained a Judgment against HEERS BROTHERS, INC. in May of 1967. Said Judgment has become final.
"The basis of the claim against the Petitioner is as follows:
1. The Petitioner is the alter ego of the Judgment Debtor.
2. That the Petitioner is indebted to the Judgment Debtor, Heers Brothers, Inc.
3. That the Petitioner is in receipt of property beloning sic to the Judgment Debtor in violation of the Uniform Fraudulent Conveyance Act."

During the interim period between the filing of the original and the amended proofs of claim, PCK brought on applications to have receivers appointed in each of these proceedings. In response to these applications, counsel for Twin Lakes Village, Inc. then filed a petition asking for the discharge of that debtor and, later, an objection to the allowance of the claim of PCK against Twin Lakes. In a hearing held concerning this objection on May 7, 1971, the Court took the oral arguments of

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counsel under advisement, requesting that subsequent briefs be filed with respect to this objection. On July 27, 1971, Bankruptcy Judge Russell B. Taylor found that the Court had no jurisdiction to hear the claim against Twin Lakes Village, Inc., since the original judgment debtor of PCK, Heers Brothers, Inc., was not before the Court and could not be brought involuntarily before the summary jurisdiction of the Court. Therefore, without any further trial on the matter, Judge Taylor ordered the dismissal of the claim of PCK against Twin Lakes Village, Inc. and of the entire Chapter XI proceeding of the latter-named debtor

Thereafter, the individual Heers also petitioned for discharge on the same grounds as had Twin Lakes, having their proceedings also dismissed by Judge Taylor, on March 19, 1973. No distinct objection was made at that time, however, to the PCK claims in the Heers' proceedings. Meanwhile, PCK had appealed the Twin Lakes decision to the United States District Court, which affirmed Judge Taylor's orders on November 2, 1973, and then to the United States Court of Appeals for the Ninth Circuit. In a similar fashion, the dismissals of the individual Heers proceedings were appealed to the District Court, which instead chose to send these proceedings back to Judge Taylor for a specific finding as to the validity of PCK's claims against the estates of the Heers, as individuals. Finally, on January 23, 1975, the Ninth Circuit Court of Appeals vacated the orders of Judge Taylor in the Twin Lakes proceeding and requested that a more detailed analysis of his jurisdictional findings and conclusions be set forth, and that the bankruptcy court determine whether PCK had been given a fair hearing on their reply to the petition and objection of the then debtor-in-possession.

Pursuant to the orders of the District Court in the Heers cases, and of the Ninth Circuit Court of Appeals in the Twin Lakes matter, this Court scheduled a full evidentiary hearing on all of the questions raised by these parties. Following a number of continuances, such a hearing took place on June 5-6, 1978. After assessing the testimony there adduced, and examining the relevant law on each of the issues thus raised, the Court has no choice but to deny the claims of PCK in each of these proceedings. Inasmuch as a number of factors have intervened in these cases, however, to render the earlier questions raised by these parties concerning discharge or dismissal immaterial to present realities, the Court now withholds its determination on those matters. It should also be noted, in passing, that Twin Lakes Village, Inc. has since been adjudicated a bankrupt in its proceeding, no objection having been filed against its motion in that regard.

In first addressing the legal issues raised by the Ninth Circuit Court of Appeals in the Twin Lakes case, the Court observes that at this point in time there can be no doubt but that PCK has had a full opportunity to present its position on the asserted validity of its claims. However, with respect to the jurisdictional issue originally raised by the Debtors, the Court is inclined to rethink its position and to find that it is well within its summary powers to make a decision as to the obligations, if any, owing from the Debtors to PCK. This question is presented, factually, as a claim by PCK against the estates of debtors in proceedings under Chapter XI of the Bankruptcy Act. Section 2a(2) of that Act, 11 U.S.C. § 11a(2) (1976), as applied to Chapter XI proceedings by Section 312, 11 U.S.C. § 712 (1976), clearly permits the Court to "allow claims, disallow claims, reconsider allowed or disallowed claims, and allow or disallow them against debtors' estates." Furthermore, since claims against an estate are in the nature of proceedings brought only as to property in the present or eventual possession of the debtor-in-possession, or its receiver, they are not subject to the jurisdictionally disabling language of Bankruptcy Act Section 23b, 11 U.S.C. § 46b (1976). No matter what grounds may be asserted by PCK to demonstrate that the acknowledged judgment obligation owing from Heers Brothers, Inc. forms a possible claim against the Debtors' estates, the ultimate question still involves the provability and/or allowability of claims in proceedings

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before this Court. The Court may therefore hear the matter to the extent that it deals with obligations existing between this Claimant and these Debtors

Prior to examining each of the bases listed by PCK in support of its claims herein, however, it should be observed that at the time of hearing, Counsel for the Debtors introduced documentation to show that some $8,000 of the alleged $118,000 claim of PCK had been assigned to a third party, M.A. Cornell & Co. This entity has never filed a proof of claim in these proceedings. It was the holding of the Court then that since that alleged creditor was not before the Court, no validity could attach to that portion of PCK's original claim. The Debtors' objection was therefore sustained as to that amount. The Court sees no reason at this point to alter that determination. Hence, the Court's analysis of the Claimant's position will only relate to $110,000 of the amount demanded.

Taking first the claim of PCK that the Debtors are obligated to Heers Brothers, Inc., and that it may therefore assert against them the judgment debt owing it from the latter corporate entity, the Court finds the lack of both a legal and a factual foundation to support the Claimant's right to recovery in this forum. At best, the evidence elicited at trial on this question was sketchy. From some such proof, the Court might surmise that certain amounts were both loaned and given to, or on behalf of, the individual Heers family members. There is also evidence that the Heers individuals and Twin Lakes Village, Inc. were the beneficiaries of a settlement agreement involving Loma Linda University which disposed of certain real properties originally belonging to Heers Brothers, Inc. The only evidence given as to the existence of the loans mentioned, however, was in the form of entries made in a ledger for Heers Brothers, Inc., covering the years 1963-64. Account number 234 in that ledger, Claimant's Exhibit # 1, is entitled "Loans to Officers." It contains a number of entries dating from January 31, 1963 through December 31, 1964, which evidence the creation of a balance on such loans of $169,063.40. Thereafter, this amount was journaled out, with reference being made to a journal entry number 18-2, which covers salaries paid to officers, $39,000 of which seems to represent a forgiveness of indebtedness to such officers on account number 234. A second reference is made to journal entry number 18-3, which appears to create a forgiveness amounting to the remaining $130,063.40 balance found in the "Loans to Officers" account, predicated upon a certain transfer of land, on which the $130,063.40 was part of the consideration paid. Beyond this brief sketch of the transactions...

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