Springel v. Prosser (In re Prosser)
| Decision Date | 22 November 2013 |
| Docket Number | Civil Action No. 2013-087,Civil Action No. 2013-056,Civil Action No. 2013-010,Adv. Pro. No. 07-03010,Bankruptcy No. 06-3009,Civil Action No. 2013-057 |
| Parties | In re: Jeffrey J. Prosser, Debtor. STAN SPRINGEL, CHAPTER 11 TRUSTEE OF THE ESTATE OF INNOVATIVE COMMUNICATION CORPORATION, AND JAMES P. CARROLL, AS CHAPTER 7 TRUSTEE OF THE ESTATE OF JEFFREY J. PROSSER Plaintiffs/Appellees, v. JEFFREY J. PROSSER, DAWN PROSSER, JUSTIN PROSSER, MICHAEL PROSSER, SYBIL G. PROSSER, MICHELLE LABENNETT, AND LYNDON A. PROSSER Defendants/Appellants. |
| Court | U.S. District Court — Virgin Islands |
Attorneys:
Philadelphia, PA
For the Plaintiff/Appellee James P. Carroll, Chapter 7 Trustee
New York, NY
For the Defendant/Appellant Jeffrey J. Prosser
Jeffrey B. Moorehead, Esq.,
St. Croix, U.S.V.I.
THIS MATTER comes before the Court on Appellants Jeffrey Prosser and Dawn Prosser's Motion to Stay (Dkt. No. 7), in which they request that the Court stay the proceedings by enjoining the sale of certain real property pending appeal. For the reasons discussed below, the Court will grant the Motion.
Jeffrey Prosser ("Mr. Prosser") is a debtor in both a Chapter 7 bankruptcy case and a Chapter 11 bankruptcy case.1 On September 18, 2012, the United States Bankruptcy Court for the District of the Virgin Islands (the "Bankruptcy Court") held Mr. Prosser and his wife, Dawn Prosser ("Mrs. Prosser") (collectively the "Prossers"), in civil contempt of court for violating three Bankruptcy Court Orders. (Bk. Dkt. No. 1006). At the center of the controversy was the Prossers' wine collection ("the Wines"), once valued at over two million dollars. Springel v. Prosser (In re Prosser), 2012 Bankr. LEXIS 4332, at * 4 (Bankr. D.V.I. Sept. 18, 2012).
The Wines were located at the Prossers' residence in Palm Beach, Florida (the "Palm Beach Property"), the Prossers' residence in St. Croix, Virgin Islands (the "Shoys Estate Property"), and various storage facilities. Id. In 2008, inventories were taken of the Wines at the Palm Beach Property on January 16 and the Shoys Estate Property on January 25 and 26. Id. at*6-10. Both inventories were carried out by the Chapter 7 Trustee accompanied by employees of Christie's Inc. ("Christie's"), a company hired to sell property of the estate via auction. Id. Additionally, a forensic accountant assisted with the Palm Beach Property inventory.
The Bankruptcy Court's three relevant Orders with respect to the Wines are as follows:
1. A preliminary injunction (the "Injunction") granted on December 11, 2007, which provided that the Prossers "shall keep the [Wines] in secure locations and protect [them] from destruction, damage, modification, theft, removal, or transfer, pending [their] turnover to the Trustees . . . ." (Bk. Dkt. No. 79).
2. An Order (the "9019 Order"), issued on December 12, 2008, approving of a stipulation2 between the Chapter 7 Trustee and Mrs. Prosser in which they agreed to divide the Wines evenly and further agreed as follows: (Adv. Pro. No. 08-03010, Dkt. No. 61 at 2).3
Following the 9019 Order, the Wines were evenly divided between the Chapter 7 Trustee and Mrs. Prosser, "so as to enable a sale of the Estate Wines pending resolution of the other Wine Claims." (Adv. Pro. No. 08-03010, Dkt. No. 44 at 5). The Wines were generally distributed so that the Wines located in storage facilities were allocated to the Chapter 7 Trustee and the Wines located in the Prossers' residences (the Palm Beach Property and the Shoys Estate Property) were allocated to Mrs. Prosser. Following the issuance of the 9019 Order, the Chapter 7 Trustee auctioned the Estate's allocation of the Wines. (Bankruptcy Case No. 06-30009, Dkt. No. 2523). The remainder of the Wines were left in the possession of the Prossers, subject to the strict dictates of the Injunction which required the Prossers to keep them secure and protected from damage. (Adv. Pro. No. 08-03010, Dkt. No. 61 at 2).
On March 11, 2011, following the issuance of the Turnover Order, the Chapter 7 Trustee performed a second inventory of the Palm Beach Wines with the assistance of two forensic accountants and three employees of Christie's. 2012 Bankr. LEXIS 4332, at *27. On July 29, 2011, the Chapter 7 Trustee instructed other Christie's employees to pick up the Shoys Estate Wines. Id. at *28-29. At both locations, it was discovered that about half of the Wines that were present during the initial inventories in 2008 were missing. Id. at *28, 36. The remaining Wines at the Palm Beach Property were packed up and removed for auction. Id. at *28.
The remaining Shoys Estate Wines, however, were not removed from the property. The Christie's employees determined that they would not be marketable because of the conditions of their storage. Id. at *41. They found that the air being blown into the room was tepid and the Wines were warm to the touch, were stacked haphazardly, were in a state of deterioration, had been exposed to light and heat, and had missing or ruined labels in some instances. Id. at *30-38.They also intended to sample six of the most durable Wines, but determined that, based on the fact that all six of the corks broke upon opening, the Wines were "out of condition" and unmarketable. Id. at *40-41.
On September 18, 2012, the Bankruptcy Court held the Prossers in civil contempt for violating its three Orders:
The court finds that since December 2007, when the Injunction was entered, the Prossers have been forbidden, by explicit Order of this court, from disposing of, consuming, damaging, or in any other way compromising the integrity of the Wines. The court finds that the Prossers had knowledge of the orders and flagrantly disobeyed them by dissipating (or permitting the dissipation of) approximately 52% of the inventoried bottles of Wine at the Palm Beach Property, dissipating (or permitting the dissipation of) approximately 46% of the inventoried 980 bottles of Wines at Shoys Estate, and by failing to maintain (or to make reasonable efforts to maintain) the remaining Wines at the Shoys Estate in a protected, light and temperature controlled environment (as they were stored in 2008) such that they became unmarketable by Christie's. Thus, we find Jeffrey Prosser and Dawn Prosser in civil contempt of court. Moreover, their violation of three orders of the court is so egregious that sanctions are warranted.
Id. at *42-43. The Bankruptcy Court's Contempt Order found the Prossers jointly and severally liable for "any and all damages to be awarded pursuant to this Memorandum Opinion and Order." (Bk. Dkt. 1006). The Bankruptcy Court also ordered the Chapter 7 Trustee to file a fee application presenting the fees, costs, and expenses incurred by the Chapter 7 Estate's counsel, investigators, and experts in the filing and litigation of the contempt motion. (Id.) On January 18, 2013, the Bankruptcy Court entered an Order approving the Chapter 7 Trustee's amended fee application and directing the Prossers to pay $528,086.07 (the "initial sanction award") within thirty days. (Bk. Dkt. No. 1023). On February 1, 2013, Mr. Prosser filed a "Notice of Appeal" in this Court, appealing the Bankruptcy Court's September 2012 Contempt Order and January 2013 Order approving the Chapter 7 Trustee's amended fee application. (3:13-cv-00010, Dkt. No. 1).
When the Prossers failed to comply with the Bankruptcy Court's January 2013 Order, theChapter 7 Trustee moved for compliance with that Order. (Bk. Dkt. 1066). On May 24, 2013, the Bankruptcy Court entered a Supplemental Order directing the Prossers to pay the Chapter 7 Trustee an additional $419,135.59 (the "supplemental sanction award"), "reflecting the diminution in value of the missing and unmarketable wines that are the subject of the Contempt Order," and requiring this additional amount to be paid within thirty days. (Bk. Dkt. 1078).
On May 31, 2013, the Bankruptcy Court issued an Order coercing the Prossers' compliance with the January 2013 Contempt Order. (Bk. Dkt. No. 1088). In this Order, the Bankruptcy Court laid out a plan by which the Prossers would "purge their contempt of the Contempt Fee Order . . . by paying the Trustee the Initial Sanction Award [of $528,086.07]" in sixty monthly payments. (Id. at 4). The Bankruptcy Court further ordered that the Prossers would be in default if they missed a monthly payment and that, in such an event, the Chapter 7 Trustee would provide them with notice of default. (Id. at 4-5). Failure by the Prossers to cure a payment default within five days would constitute an immediate waiver ("purge opportunity waiver") by the Prossers. (Id. at 5). Within ten days of the purge opportunity waiver, the Prossers would, without further Order of the Bankruptcy Court execute deeds of title conveying ownership of Plots 168, 169, 170, and 171 of Estate Shoys (the "Anna's Hope Property") to the Chapter 7 Estate. (Id.) Were the Chapter 7 Trustee to successfully sell the Anna's Hope Property, the money would go to the balance of the amount of the initial sanctions award then owed by the...
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