Wagner v. Oliva (In re Vaughan Co.)

• Decision Date: 23 October 2013
• Docket Number: 12–1050,11–1185,12–1109,12–1023,12–1110,Misc. No. 12–0006.,12–1028,12–1060,12–1134,12–1077,12–1098,12–1010,12–1017,12–1139,12–1004,12–1055,12–1295.,Bankruptcy No. 10–10759.,12–1057,12–1056,Adversary Nos. 11–1150,12–1113,12–1294,12–1065,12–1121,12–1116,11–1226
• Parties: In re VAUGHAN COMPANY, REALTORS, Debtor. Judith A. Wagner, Chapter 11 Trustee of the bankruptcy estate of the Vaughan Company, Realtors, Plaintiff, v. Anthony Oliva et al.; Kenneth J. Eberhard et al.; Patricia Pruett et al.; Derek Pintado et al.; Dianna Golden, as personal representative for the estate of Phil Lenk Margaret Valencia, as trustee of the Henry Valencia Trust, dated August 19, 1994; Mei–Hui Ma; LuAnn Shydohub; Stephan Moffat; Laura Rodriguez et al.; Shu Hui Lee; Wey–Ann Chen; Yuan Hsing Chen; Joshua Lloyd; Kathleen Atencio; Peter McAnena et al.; Ultima Homes, Inc. et al.; Kimon Lee, Craig Fenton et al.; Adam Gray et al.; John Petty; David Lankford et al.; Coy Wilson et al.; Diana Golden et al.; William Campbell et al.; Defendants.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico

500 B.R. 778

In re VAUGHAN COMPANY, REALTORS, Debtor.Judith A. Wagner, Chapter 11 Trustee of the bankruptcy estate of the Vaughan Company, Realtors, Plaintiff,

v.Anthony Oliva et al.; Kenneth J. Eberhard et al.; Patricia Pruett et al.; Derek Pintado et al.; Dianna Golden, as personal representative for the estate of Phil Lenk Margaret Valencia, as trustee of the Henry Valencia Trust, dated August 19, 1994; Mei–Hui Ma; LuAnn Shydohub; Stephan Moffat; Laura Rodriguez et al.; Shu Hui Lee; Wey–Ann Chen; Yuan Hsing Chen; Joshua Lloyd; Kathleen Atencio; Peter McAnena et al.; Ultima Homes, Inc. et al.; Kimon Lee, Craig Fenton et al.; Adam Gray et al.; John Petty; David Lankford et al.; Coy Wilson et al.; Diana Golden et al.; William Campbell et al.; Defendants.

Bankruptcy No. 10–10759.

Adversary Nos. 11–1150, 11–1226, 11–1185, 12–1004, 12–1010, 12–1017, 12–1023, 12–1028, 12–1050, 12–1055, 12–1056, 12–1057, 12–1060, 12–1077, 12–1098, 12–1109, 12–1110, 12–1113, 12–1116, 12–1121, 12–1134, 12–1139, 12–1065, 12–1294, 12–1295.

Misc. No. 12–0006.

United States Bankruptcy Court, D. New Mexico.

Oct. 23, 2013.

Mark Walsh Allen, Arland & Associates, LLC, Albuquerque, NM, James A. Askew, Edward Alexander Mazel, Daniel Andrew White, Askew & Mazel, LLC, Albuquerque, NM, for plaintiff Judeth A. Wagner.

Michael K. Daniels, Albuquerque, NM, for defendants Leonie Oliva, Margaret Valencia, John Petty and Tony Oliva.

Walter L. Reardon, Jr., Albuquerque, NM, for defendant Kenneth J. Eberhard.

R Trey Arvizu, III, Las Cruces, NM, for defendant Patricia Pruett.

Jason C. Bousliman, Lewis Roca Rothgerber LLC, Albuquerque, NM, for defendants Dianna Golden and Jeremy Golden.

Joshua R. Simms, Joshua R. Simms PC, Albuquerque, NM, for defendants Mei–Hui Ma, Yuan Hsing Chen, Wey–Ann Chen, and Shu Hui Lee.

James T. Burns, Albuquerque Business Law, P.C., Albuquerque, NM, Michael K. Daniels, Albuquerque, NM, for defendant Stephan Moffat.

Brian P. Gaffney, Denver, CO, Donald L. Gaffney, Phoenix, AZ, Benjamin William Reeves, Snell & Wilmer LLP, Phoenix, AZ, for defendants Alfred Warren Rodriguez and Laura Rodriguez.

Francie D. Cordova, Albuquerque, NM, Spencer Lewis Edelman, Modrall Sperling Roehl, Harris & Sisk PA, Albuquerque, NM, Paul M. Fish, Albuquerque, NM, Maria Weddige–Gurney, The Ahr Law Offices, PC, Albuquerque, NM, for defendants Ultima Homes, Inc., and J. Kendall Hightower.

Robert J. Muehlenweg, Eric D. Norvell, Rammelkamp, Muehlenweg & Cordova, P.A., Albuquerque, NM, for defendant Kimon Lee.

Michael K. Daniels, Albuquerque, NM, for defendants Cherie Fenton, Norman Fenton and Craig Fenton.

Brian P. Gaffney, Denver, CO, Donald L. Gaffney, Benjamin William Reeves, Snell & Wilmer, LLP, Denver, CO, for defendants Adam Gray and Andrew Gray.

Ron Cleek, Ron Cleek, Attorney & Counselor at Law, Ozark, MO, for defendants Coy Wilson and Jean Carruth.

John R. Cooney, Albuquerque, NM, Spencer Lewis Edelman, Modrall Sperling Roehl, Harris & Sisk PA, Albuquerque, NM, for defendants William Campbell, David Jones and Ilah Jones.

MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

THIS MATTER is before the Court on the Plaintiff's Motion for Summary Judgment (“Motion for Summary Judgment” or “Trustee's Motion”). See Docket Nos. 49 & 50. In each of the above-captioned adversary proceedings, Plaintiff Judith Wagner, Chapter 11 Trustee of the bankruptcy estate of the Vaughan Company Realtors (“Trustee”) seeks to recover certain payments made to the Defendants as fraudulent transfers pursuant to 11 U.S.C. § 548 and applicable state law. In her Motion, she seeks to prove certain elements of her prima facie case against each Defendant. After consideration of the Motion for Summary Judgment, the responses thereto, and the supporting papers, and being otherwise sufficiently informed, the Court finds that the Motion for Summary Judgment should be granted, in part.¹

SUMMARY JUDGMENT STANDARDS

Summary judgment, governed by Fed.R.Civ.P. 56, will be granted when the movant demonstrates that there is no genuine dispute as to a material fact and that the movant is entitled to judgment as a matter of law. SeeFed.R.Civ.P. 56(a), made applicable to adversary proceedings by Rule 7056, Fed.R.Bankr.P. “[A] party seeking summary judgment always bears the initial responsibility of informing the ... court of the basis for its motion, and ... [must] demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party seeking summary judgment must set forth by number all material facts the movant contends are not subject to genuine dispute and refer with particularity to the portions in the record upon which the movant relies. NM LBR 7056–1(b). In considering a motion for summary judgment, the Court must “examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment.” Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796 (10th Cir.1995) (quoting Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990)).

“[A] party opposing a properly supported motion for summary judgment may not rest on mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial” through affidavits or other supporting evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Furthermore, New Mexico Local Bankruptcy Rule 7056–1(c) provides that the party opposing summary judgment must: 1) list the material facts as to which the party contends a genuine fact exists; 2) “refer with particularity to those portions of the record upon which the opposing party relies;” and 3) “state the number of the movant's fact that is disputed.” NM LBR 7056–1(c). Properly supported material facts set forth in the movant's motion are “deemed admitted unless specifically controverted” by the party opposing summary judgment. NM LBR 7056–1(c).

SUMMARY OF CONSOLIDATED ISSUES

By an order entered December 6, 2012, the Court consolidated the above-captioned adversary proceedings for purposes of adjudicating certain elements of the Trustee's prima facie case. The consolidated issues include:

1. Whether any transfer at issue constituted an “interest of the debtor in property” under § 548(a)(1);

2. Whether any transfer at issue was made with the “actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted” under § 548(a)(1)(A);

3. If the Trustee alleged that a transfer was made representing an amount in excess of such Defendant's initial investment, whether the Debtor received “less than reasonably equivalent value in exchange for such transfers” under 11 U.S.C. § 548(a)(1)(B)(i);

4. Whether, with respect to any transfer or obligation, the Debtor “was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation” under § 548(a)(1)(B)(ii)(I);

5. Whether, with respect to any transfer, the Debtor “was engaged in business or a transaction or was about to engage in business or a transaction, for which any property remaining with the debtor was unreasonably small capital” under 11 U.S.C. § 548(a)(1)(B)(ii)(II);

6. Whether, with respect to any transfer, the Debtor “intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured” under § 548(a)(1)(B)(ii)(I–II);

7. Whether, with respect to any transfer, “the debtor made the transfer or incurred the obligation ... with actual intent to hinder, delay or defraud any creditor of the debtor” under N.M.S.A. § 56–10–18(A)(1);

8. If the Trustee alleged that a transfer was made representing an amount in excess of such Defendant's initial investment, whether the Debtor “received reasonably equivalent value in exchange for such transfer or obligation” under N.M.S.A. §§ 56–10–18(A)(2) and 56–10–19(A);

9. Whether, with respect to any transfer, the Debtor “was engaged or was about to engage in a business transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction” under N.M.S.A. § 56–10–18(A)(2)(a);

10. Whether, with respect to any such transfer, the Debtor “intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due” under N.M.S.A. § 56–10–18(A)(2)(b);

11. With regards to any transfer, whether the Debtor was “insolvent or became insolvent shortly after the transfer was made” under N.M.S.A. §§ 56–10–18(B)(9) and 56–10–19;

12. Whether the Debtor was involved in a Ponzi scheme, including the nature, extent, inception, and duration of the Ponzi scheme, if one existed; and

13. Any connection between the Ponzi scheme and the transfers at issue, including to the extent practical, any tracing issues relevant to the Trustee's prima facie case.

FACTS NOT SUBJECT TO GENUINE DISPUTE

1. Between 1972 and February, 2010, Douglas F. Vaughan (“Vaughan”) was the chairman, chief executive officer, president, and majority owner of VCR. See Plea Agreement attached to the Trustee's Motion as Exhibit B–2 (Docket No. 50–5) (the “Plea Agreement”), p. 12 of 27.²

2. In or about 1993, Vaughan began a promissory note program in which he accepted money on behalf of VCR from investors in exchange for interest-bearing promissory notes (the “Note Program”). Id.

3. The term of the notes varied but was typically three years. Id. The interest rate ranged from 8% to 40% per year. Id. Interest was generally paid in monthly installments. Id. At the end of the term of a note, Vaughan caused the principal to be paid off or offered the investor the opportunity to “roll over” the principal into a new note at the same or higher interest...