Montoya v. Ferguson (In re Motiva Performance Eng'g )

• Decision Date: 23 December 2022
• Docket Number: 19-12539-t7,Adv. Pro. 21-1026-t
• Court: U.S. Bankruptcy Court — District of New Mexico
• Parties: In re: MOTIVA PERFORMANCE ENGINEERING, LLC, Debtor. v. WILLIAM S. FERGUSON, DEALERBANK FINANCIAL SERVICES, LTD, ARMAGEDDON HIGH PERFORMANCE SOLUTIONS, LLC, ARMAGEDDON TOOL & DIE, LTD, AVATAR RECOVERIES, LLC, and DAVID ROCHAU, Defendants. PHILIP MONTOYA, Trustee, Plaintiff,

In re: MOTIVA PERFORMANCE ENGINEERING, LLC, Debtor.

PHILIP MONTOYA, Trustee, Plaintiff,
v.
WILLIAM S. FERGUSON, DEALERBANK FINANCIAL SERVICES, LTD, ARMAGEDDON HIGH PERFORMANCE SOLUTIONS, LLC, ARMAGEDDON TOOL & DIE, LTD, AVATAR RECOVERIES, LLC, and DAVID ROCHAU, Defendants.

No. 19-12539-t7

Adv. Pro. No. 21-1026-t

United States Bankruptcy Court, D. New Mexico

December 23, 2022

OPINION

Hon. David T. Thuma, United States Bankruptcy Judge

The Court tried the merits of this adversary proceeding in August 2022 and entered judgment against Defendants in October 2022. Defendants have filed a motion to reconsider and likely will appeal the final judgment if the motion is denied. In the meantime, Defendants have asked the Court to stay enforcement of the judgment and set a supersedeas bond. Plaintiff does not object to a bond being posted but disagrees with Defendants on the proper amount of the bond. The Court rules that the bond amount should be $810,000.

A. FACTS.^[1]

1

For the limited purpose of ruling on Defendants' request to set a supersedeas bond, the Court finds:^[2]

On October 7, 2022, the Court entered a final judgment against Defendants as follows:

Count	Dealerbank Financial Services, Ltd.	William S. Ferguson (“Ferguson”)	Armageddon Tool & Die, Ltd.
I	$0	$0	$0
II	$630,216	$91,601	$3,500
III	$196,050	$91,601	$3,500
IV	$630,216	$91,601	$3,500
V	$196,050	$91,601	$3,500
VI	$575,082	$0	$0
VII	Declaration of personal liability for all estate obligations
VIII	Claim disallowed until judgment paid in full	Claim disallowed until judgment paid in full
Total money judgment (excluding duplicates)	$1,205,298	$91,601 plus liability for all estate obligations	$3,500

Defendants timely filed a motion to reconsider the final judgment, thus preserving their right to appeal the judgment if the motion is not granted. See Fed. R. Bankr. P ("Bankruptcy Rule") 8002(b)(1)(A). The motion to reconsider has been fully briefed but not yet ruled upon.

At the same time, Defendants moved the Court to stay enforcement of the judgment pending reconsideration, and to set an appropriate bond.^[3] Defendants argue that an appropriate bond would be about $200,000. Plaintiff argues for a much higher bond, i.e., between about $1,000,000 and $1,500,000, depending on which judgment is used.

2

Defendants justify their relatively low figure in part because "On December 1, 2022, Mr. Ferguson caused $491,547.20 to be wired on his behalf to the Modrall Sperling Trust account to be used to pay the Judgment in favor of Creig Butler against Motiva Performance Engineering, LLC[.]"^[4] Per an agreement between Butler and Plaintiff, approved by the Court after notice to Defendants and others in June 2021, the Modrall firm forwarded the funds to Plaintiff, who disbursed $218,765 to the Modrall firm (for its work as Plaintiff's special counsel) and $193,418 to Butler. The estate retained $82,893.

Because of the alter ego judgment, the pre- and postpetition claims against the estate are relevant. Those are summarized and discussed in sections C, D, E, F, H, and I below.

B. Stay Pending Appeal and the Supersedeas Bond.

Fed. R. Civ. P. ("FRCP") 62, made applicable to this proceeding by Bankruptcy Rule 7062, provides in part:

(b) Stay by Bond or Other Security. At any time after judgment is entered, a party may obtain a stay by providing a bond or other security. The stay takes effect when the court approves the bond or other security and remains in effect for the time specified in the bond or other security.

In addition, Bankruptcy Rule 8007 provides in part:

(a) Initial motion in the Bankruptcy Court

(1) In general

Ordinarily, a party must move first in the bankruptcy court for the following relief:

(A) a stay of a judgment, order, or decree of the bankruptcy court pending appeal;

(B) the approval of a bond or other security provided to obtain a stay of judgment;

(C) an order suspending, modifying, restoring, or granting an injunction while an appeal is pending; or

(D) the suspension or continuation of proceedings in a case or other relief permitted by subdivision (e).

(2) Time to file

3

The motion may be made either before or after the notice of appeal is filed.

"A judgment creditor's primary concern when a judgment in his favor is stayed pending appeal is that he be "secure ... from loss resulting from the stay of execution...." Miami Int'l Realty Co. v. Paynter, 807 F.2d 871, 873 (10th Cir. 1986), quoting Texaco, Inc. v. Pennzoil Co., 784 F.2d 1133, 1154 (2d Cir. 1986), reversed on other grounds, 481 U.S. 1 (1987); see also Midwest Tr. Co. of Missouri v. Gard, 2009 WL 2043502, at *1 (D. Kan.) (quoting Miami Int'l); Fed. Prescription Serv., Inc. v. Am. Pharm. Ass'n, 636 F.2d 755, 760 (D.C. Cir. 1980) (the purpose of the supersedeas bond is to secure the appellee from loss resulting from the stay of execution; because the stay benefits appellant and deprives appellee of the immediate benefits of his judgment, a full supersedeas bond should normally be required).

When setting supersedeas bonds courts seek to protect judgment creditors as fully as possible without irreparably injuring judgment debtors . . . .A full supersedeas bond may be required "where there is some reasonable likelihood of the judgment debtor's inability or unwillingness to satisfy the judgment in full upon ultimate disposition of the case and where posting adequate security is practicable."

Miami Int'l, 807 F.2d at 873 (quoting Pennzoil); Bird, 2015 WL 10945571, at *2 (quoting Miami Int'l).

Trial courts have discretion in setting supersedeas bonds. Miami Int'l, 807 F.2d at 873, citing Pennzoil, 784 F.2d at 1155; Wood v. Allstate Ins. Co., 2021 WL 1293334, at *1 (D. Colo.) (citing Miami Int'l); Bird v. Regents of New Mexico State Univ., 2015 WL 10945571, at *2 (D.N.M.) (same).

Here, Defendants do not argue that the bond should be reduced because of an inability to post it. Rather, the dispute is over how large a bond is needed to protect...