Unit 82 Joint Venture v. Int'l Commercial Bank of China

• Decision Date: 05 November 2014
• Docket Number: No. 08–13–00088–CV.,08–13–00088–CV.
• Citation: 460 S.W.3d 616
• Parties: UNIT 82 JOINT VENTURE, Five Star Holding Company, Inc., Five Star Holding Management, L.L.C., and 1320/1390 Don Haskins, Ltd., Appellants, v. INTERNATIONAL COMMERCIAL BANK OF CHINA, LOS ANGELES BRANCH, Maynards Industries (1991) Inc. d/b/a Maynards Industries, Ltd., and Robb Evans, Receiver for Mediacopy Texas, Inc., Appellees.
• Court: Texas Court of Appeals

460 S.W.3d 616

UNIT 82 JOINT VENTURE, Five Star Holding Company, Inc., Five Star Holding Management, L.L.C., and 1320/1390 Don Haskins, Ltd., Appellants

v.INTERNATIONAL COMMERCIAL BANK OF CHINA, LOS ANGELES BRANCH, Maynards Industries (1991) Inc. d/b/a Maynards Industries, Ltd., and Robb Evans, Receiver for Mediacopy Texas, Inc., Appellees.

No. 08–13–00088–CV.

Court of Appeals of Texas, El Paso.

Nov. 5, 2014.

Randy Lee, Attorney at Law, Midland, TX, for Appellants.

Kenneth N. Russak, Frandzel Robins Bloom & Csato, L.C., Los Angeles, CA, Clyde A. Pine Jr., Mounce, Green, Myers, Safi & Galatzan, Ken Slavin, Kemp Smith, El Paso, TX, for Appellees.

Before McCLURE, C. J., RIVERA (not participating), and RODRIGUEZ, JJ.

OPINION

ANN CRAWFORD McCLURE, Chief Justice.

Appellants, Unit 82 Joint Venture, Five Star Holding Company, Inc., Five Star Holding Management, L.L.C., and 1320/1390 Don Haskins, Ltd., appeal from the trial court's orders determining that the ancillary receivership did not violate a bankruptcy stay and terminating the ancillary receivership and discharging the receiver because the ancillary receivership expired by statute on March 24, 2013. For the reasons that follow, we affirm.

PROCEDURAL AND FACTUAL BACKGROUND

On May 28, 2010, this court issued an opinion and judgment which vacated the judgment of the trial court and dismissed the suit below because we concluded that the ancillary receivership violated a bankruptcy stay which arose when Mediacopy, a California Corporation (M–CA), declared bankruptcy. Unit 82 Joint Venture v. Mediacopy Texas, Inc., 349 S.W.3d 42 (Tex.App.-El Paso 2010). The Texas Supreme Court disagreed because it concluded there was a fact issue as to whether M–CA had an interest in any of the warehouse property sold by the ancillary receiver and it held that we should have abated the appeal to allow the application of the automatic stay to be determined by the trial court. Evans v. Unit 82 Joint Venture, 377 S.W.3d 694, 694–95 (Tex.2012). Consequently, it reversed our judgment and remanded the cause directly to the trial court to resolve the fact issue. Id. The trial court conducted an evidentiary hearing on March 12, 2013 to determine whether M–CA owned an interest in any of the warehouse property sold by the ancillary receiver. The parties submitted a substantial amount of testimonial and documentary evidence on the contested fact issue. As we did in the prior opinion, we begin by identifying the parties and one non-party to the appeal. Five Star Holding Company, Inc. (Five Star) owns a 200,000 square foot warehouse located at 1390 Don Haskins Drive in El Paso, Texas (the El Paso Premises). It is a member of Five Star Holding Management, L.L.C. As will be discussed in more detail below, Five Star leased the El Paso Premises to M–CA in 1997 and it later transferred its interest in the lease to 1320/1390 Don Haskins, Ltd. Five Star Holding Management is the general partner of 1320/1390 Don Haskins. For convenience, we will refer to these parties collectively as Appellants except where it is necessary to identify them individually.¹

Robb Evans is the primary receiver appointed by a California Superior Court and is the ancillary receiver appointed by the trial court. M–CA and Mediacopy Texas, Inc. (MTI) are subsidiaries of Infodisc Global Holdings, Inc. (Infodisc). M–CA is not a party to the suit below or to this appeal. In 1997, M–CA, MTI, and Infodisc were in the business of replicating DVDs for movie studios and duplicating VHS videotapes.

On December 19, 1997, Five Star Holding Company (Five Star) entered into a “standard net industrial lease” with M–CA as tenant. The lease is for approximately 10.6 acres of land and a 200,000 square foot building to be constructed at 1280 Don Haskins in El Paso, Texas (the El Paso Premises).² According to the lease, Five Star was responsible for constructing the building. Five Star also entered into letter agreements to loan M–CA the sum of $485,000 for the purpose of constructing certain tenant improvements at 1280, 1290, and 1390 Don Haskins.

On January 8, 1998, MTI, not M–CA, entered into a “Tax Abatement Agreement” with the City of El Paso.³ Under the Tax Abatement Agreement, the City of El Paso agreed to abate 50% of the assessed value of the 200,000 square foot building MTI proposed to construct at 1280 Don Haskins (referred to as Phase One)⁴ and to abate 25% of the assessed value of eligible personal property to be installed by MTI in this city-designated reinvestment zone. In exchange, MTI agreed to construct improvements, install certain personal property, identified as operator workstations, office furniture, computer equipment, telephone equipment, office equipment, and distribution machines, and to create and maintain a minimum level of professional, administrative, and labor employment positions for a period of five years. Jerry Ayoub, on behalf of Five Star Holding Company, signed the Tax Abatement Agreement and thereby expressly consented to it.

On October 17, 2000, M–CA entered into a construction contract with F–Star Development, L.P., to construct, install, and complete tenant improvements at 1390 Don Haskins.⁵ The record is not clear when construction was completed or the exact date when M–CA and MTI began operating the video replicating business at the El Paso Premises, but according to sworn documents filed by M–CA in the bankruptcy court in 2004, M–CA had ceased acting as an operating entity by 2001. From that point forward, its primary business was the leasing of property for its own benefit and for its affiliated corporate entities in the United States.

In August 2003, Infodisc and MTI entered into a credit agreement with the International Commercial Bank of China, Los Angeles Branch (ICBC) and two other banks, whereby the banks agreed to loan these two companies up to $30 million, $20 million of which would be used to repay existing indebtedness and the remainder would be used as working capital. MTI and Infodisc borrowed more than $16,000,000 and executed promissory notes and a security agreement which gave ICBC a security interest in tangible and intangible personal property, including all machinery, equipment, and fixtures located at borrowers' facilities.

Like many other American businesses, M–CA, Infodisc, and MTI experienced significant financial difficulties in 2003 and 2004. Infodisc and MTI defaulted on the credit agreement and promissory notes and ICBC filed suit on November 30, 2004, in the Superior Court of California, Los Angeles County, Los Angeles. The petition included a claim for breach of the credit agreement and the promissory notes and sought to recover more than $12,895,000. ICBC also requested the appointment of a receiver. On January 13, 2005, the California Superior Court, with the agreement of MTI, Infodisc, and ICBC, entered a stipulated order appointing a receiver, Robb Evans, to liquidate MTI's assets. Because some of MTI's assets were located in El Paso, Texas, ICBC filed a verified petition and application for appointment of an ancillary receiver in the 327th District Court. The trial court entered a stipulated order on March 24, 2005 appointing Evans as the ancillary receiver. At about the same time, the California Superior Court approved Maynards Industries, Ltd. (Maynards) as the receiver's agent to liquidate the assets.

In 2004, M–CA became delinquent on the lease payments for the El Paso Premises and Appellants gave M–CA notice of intent to lockout M–CA from the premises. In response, M–CA filed a Chapter 11 bankruptcy petition on October 22, 2004. On November 5, 2004, M–CA filed its Schedules of Assets and Liabilities (Schedules) and Statement of Financial Affairs (SOFA). On Schedule B, M–CA listed all of its personal property. M–CA's personal property includes landlord security deposits for 1280 Don Haskins ($30,000) and 1390 Don Haskins ($30,750), and prepaid rent for 1390 Don Haskins ($66,909). Schedule B also includes a small amount of machinery, equipment, and supplies, some of which was leased. None of the property sold by the Ancillary Receiver in 2005 appears on Schedule B.

M–CA made statements in its bankruptcy filings which indicated it no longer operated out of the leased facilities in El Paso and its affiliates instead operated out of those facilities. For example, M–CA filed a motion in the bankruptcy court on December 21, 2004 seeking an extension of time in which to either assume or reject the lease for the El Paso Premises. M–CA supported the motion with the sworn declaration of its Chief Financial Officer, Paul Westphal, who stated: “[M–CA] itself primarily manages an office facility in Culver City, California and manufacturing and warehousing facilities, utilized by its affiliates, in El Paso, Texas, for which it is the lessee.” Westphal also stated that M–CA sought to extend the time within which to assume or reject the lease for the El Paso Premises because the property serves as M–CA's affiliates' main manufacturing and warehouse facility in Texas and the vast majority of the affiliates' inventory is stored on the premises. Westphal further represented that without the property, M–CA's affiliates could not operate their business.

M–CA also informed the bankruptcy court about the California suit against Infodisc and MTI and the receivership, and it disclosed that its affiliates were working with the receiver to liquidate assets owned by MTI. In its second status report filed on March 9, 2005 in the bankruptcy court, M–CA reported the following:

7. In the initial stages of this case, the Debtor undertook significant efforts to evaluate the feasibility of continuing both the Debtor and its affiliates as going concerns, and the feasibility of a sale of the assets of the Debtor and its affiliates as going concerns. However, during late January 2005, two of the Debtor's affiliates (Infodisc Global Holding, Inc. and Mediacopy Texas, Inc.) which are borrowers under a credit agreement

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