Watts v. MTC Dev., LLC (In re Palisades at W. Paces Imaging Ctr., LLC)

• Decision Date: 13 November 2013
• Docket Number: Bankruptcy No. 09–87600–WLH.,Adversary No. 11–5235.
• Citation: 501 B.R. 896
• Parties: In re PALISADES AT WEST PACES IMAGING CENTER, LLC, Debtor, Janet G. Watts, as Chapter 7 Trustee, Plaintiff, v. MTC Development, LLC, Vinson Holding, Inc., Vinson Partners, L.L.L.P., Cynthia Vinson, Dana Vinson, The Trell Family Limited Partnership, Franklin P. Trell, Shaaron Trell, Project Personnel Leasing, LLC, and Sunbelt Construction Management, Inc., Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

501 B.R. 896

In re PALISADES AT WEST PACES IMAGING CENTER, LLC, Debtor,
Janet G. Watts, as Chapter 7 Trustee, Plaintiff,
v.
MTC Development, LLC, Vinson Holding, Inc., Vinson Partners, L.L.L.P., Cynthia Vinson, Dana Vinson, The Trell Family Limited Partnership, Franklin P. Trell, Shaaron Trell, Project Personnel Leasing, LLC, and Sunbelt Construction Management, Inc., Defendants.

Bankruptcy No. 09–87600–WLH.
Adversary No. 11–5235.

United States Bankruptcy Court,
N.D. Georgia,
Atlanta Division.

Nov. 13, 2013.

[501 B.R. 901]

William Russell Patterson, Ragsdale Beals Seigler Patterson & Gray, Barbara B. Stalzer, Barbara Bell Stalzer, P.C., Atlanta, GA, for Plaintiff.

Howard D. Rothbloom, The Rothbloom Law Firm, Marietta, GA, for Defendants.

ORDER AND JUDGMENT
WENDY L. HAGENAU, Bankruptcy Judge.

This matter came before the Court for trial on August 20–22, 2013 on the Trustee's Complaint for Avoidance of Fraudulent Conveyances under 11 U.S.C. § 544. The Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 1334 and 157, and this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(O). The parties stipulated in their Joint Pre–Trial Order that this Court could enter a final judgment in this case. After consideration of the evidence and arguments of counsel, the Court hereby enters judgment against the Defendants as follows:

+----------------------------------------------------------------------------+
                ¦ ¦MTC Development, LLC ¦$2,009,399.65¦ ¦
                +--------+----------------------------------+-------------+------------------¦
                ¦ ¦Sunbelt Construction Management, ¦$1,565,000.00¦ ¦
                ¦ ¦Inc. ¦ ¦ ¦
                +--------+----------------------------------+-------------+------------------¦
                ¦ ¦Franklin P. Trell ¦$ 372,250.00 ¦ ¦
                +--------+----------------------------------+-------------+------------------¦
                ¦ ¦Cynthia Vinson ¦$ 622,000.00 ¦ ¦
                +--------+----------------------------------+-------------+------------------¦
                ¦ ¦Vinson Holding, Inc. ¦$ 622,000.00 ¦ ¦
                +--------+----------------------------------+-------------+------------------¦
                ¦ ¦Vinson Partners, L.L.L.P. ¦$ 622,000.00 ¦ ¦
                +--------+----------------------------------+-------------+------------------¦
                ¦ ¦The Trell Family Limited ¦$ 654,250.00 ¦ ¦
                ¦ ¦Partnership ¦ ¦ ¦
                +----------------------------------------------------------------------------+
                

+------------------------------------------------------------------+
                ¦ ¦Project Personnel Leasing, LLC¦$–0– ¦ ¦
                +------------------------------------------------------------------+
                

+----------------------------------------------------------------------------+
                ¦ ¦Dana Vinson ¦$ 622,000.00¦ ¦
                +----------------------------------------------------------------------------+
                

+-------------------------------+
                ¦ ¦Shaaron Trell¦$–0– ¦ ¦
                +-------------------------------+
                

Background

The parties entered into an extensive Joint Statement of Undisputed Facts [Docket No. 41] (“Undisputed Facts” or “UF”). The Court will not restate all the facts, but will summarize some of the more relevant ones for ease of understanding this Order. The Debtor, Palisades at West Paces Imaging Center (“Imaging Center” or “Debtor”) was formed in 2002, with MTC Development, LLC (“MTC”) owning 66% of the Imaging Center and Dr. William Stuart owning 34% of the Imaging Center. MTC was owned equally by Vinson Partners, L.L.L.P. (“VP”) and The Trell Family Limited Partnership (“TFLP”). VP is owned by spouses Dana and Cynthia Vinson, while TFLP is controlled by spouses Franklin and Shaaron

[501 B.R. 902]

Trell. The purpose of the Imaging Center was to own and operate an imaging facility on the third floor of the Palisades at West Paces building (“Building”). Physicians with offices in the Building could use the Imaging Center for their patients by “leasing” time on a MRI machine. In October 2002, the Debtor entered into a construction contract with Batson–Cook as a general contractor for demolition and build-out work on the third floor of the Building. At the time, the Debtor had applied for a loan with Merrill Lynch to fund the project. The loan did not close, however, and Batson–Cook ceased work on the project in January 2004. The Debtor then solicited funds through a private placement memorandum in mid–2004. As a result of the private placement memorandum, the Debtor raised approximately $2 million. By July 8, 2005, though, most of the investors had filed a lawsuit against the Debtor and its principals, Franklin Trell (“Mr. Trell”) and Cynthia Vinson (“Ms. Vinson”), alleging fraud and seeking a full recovery of their investment.

While the litigation was pending, the Debtor continued with its plans to open the Imaging Center. It divided the third floor into three spaces with separate waiting rooms. In 2006, it signed a contract with Toshiba for a magnetic resonance imaging machine (“MRI”) for $456,000.00. The Debtor also applied for a loan from CIT Healthcare Financing (“CIT”). The CIT loan to the Debtor closed on or about July 18, 2006, in the maximum amount of 110 percent of $3,819,850.00. CIT funded the loan in installments as follows: July 21, 2006, $1,350,000.00; August 28, 2006, $1,450,000.00; November 20, 2006, $1,019,850.00; and November 27, 2006, $18,792.68. The Toshiba machine was installed in Suite 300 of the Building in September 2006, and scans began running on the machine in November 2006.

Mr. Trell, one of Debtor's principals, testified the Toshiba machine did not operate as anticipated, and the doctors stopped using it and refused to pay their commitment for MRI scans. Mr. Trell testified that, as a result of the Toshiba machine's failure, the Imaging Center failed and ultimately filed bankruptcy. Notwithstanding this defense, attached to Toshiba's undisputed proof of claim in the case, is an order of summary judgment Toshiba obtained against the Debtor. The Debtor filed bankruptcy under Chapter 7 of the Bankruptcy Code on October 19, 2009. Janet Watts was appointed the Chapter 7 Trustee (the “Trustee”). By the time of the bankruptcy filing, the Debtor was the subject of a lawsuit by Batson–Cook, the original contractor; Partitions, the subsequent contractor retained by the Debtor; Toshiba for failure to pay for the MRI machine; and CIT. The Debtor settled the litigation with the investors in March 2007, completing the payment of the settlement in the summer of 2007 in the amount of $2,083,000.00 plus attorney's fees.

The Trustee filed this Complaint on May 2, 2011, seeking to recover a number of transfers allegedly fraudulent under 11 U.S.C. § 544 and § 548. The Trustee also alleged Mr. Trell and Ms. Vinson were the alter egos of the Debtor and therefore liable for the full amount of the claims filed in this case, including in excess of $11 million in unsecured claims and $300,000.00 in fees and administrative expenses. Through the Pre–Trial Order and again at the trial, the Trustee refined her claims and theories of recovery. The Trustee alleged, and the Defendants did not dispute, that the Debtor transferred $1,339,399.65 to MTC and $1,515,000.00 to Sunbelt Construction Management, Inc. (“Sunbelt”) from the advances made by CIT on its loan. At the conclusion of the trial, the Trustee clarified that she sought the avoidance of these transfers only and recovery of those transfers from Mr. Trell,

[501 B.R. 903]

his wife and TFLP, and Ms. Vinson, her husband, VP and Vinson Holding, Inc. (“VH”). The Trustee also continued to argue that Ms. Vinson and Mr. Trell were the alter egos of the Debtor and therefore liable for the full amount of all claims filed in the case, including $300,000.00 in Trustee and professional fees for a total requested judgment of $11,694,000.00.

The transfers made by the Debtor at issue in this case and the party to whom they were made is set out below. The Defendants do not dispute the Transfers. The transfers to MTC are referred to as “MTC Transfers”, and the transfers to Sunbelt are referred to as “Sunbelt Transfers”. Collectively, they are referred to as the “Transfers”.

+----------------------------------------------------------------------------+
                ¦ ¦Date ¦Amount ¦Transferee ¦ ¦
                +----------------------------------------------------------------------------+
                

+---------------------------------------------------------------------------+
                ¦ ¦July 25, 2006 ¦$ 300,000.00 ¦MTC ¦ ¦
                +--------+----------------+-------------+----------+------------------------¦
                ¦ ¦July 25, 2006 ¦$ 150,000.00 ¦Sunbelt ¦ ¦
                +--------+----------------+-------------+----------+------------------------¦
                ¦ ¦July 31, 2006 ¦$ 473,019.65 ¦MTC ¦ ¦
                +--------+----------------+-------------+----------+------------------------¦
                ¦ ¦August 30, 2006 ¦$ 175,000.00 ¦Sunbelt ¦ ¦
                +--------+----------------+-------------+----------+------------------------¦
                ¦ ¦September 14, ¦$ 297,085.00 ¦MTC ¦ ¦
                ¦ ¦2006 ¦ ¦ ¦ ¦
                +--------+----------------+-------------+----------+------------------------¦
                ¦ ¦October 26, 2006¦$ 100,000.00 ¦MTC ¦ ¦
                +--------+----------------+-------------+----------+------------------------¦
                ¦ ¦November 8, 2006¦$ 100,000.00 ¦Sunbelt ¦ ¦
                +--------+----------------+-------------+----------+------------------------¦
                ¦ ¦November 9, 2006¦$ 169,295.00 ¦MTC ¦ ¦
                +--------+----------------+-------------+----------+------------------------¦
                ¦ ¦November 21, ¦$1,090,000.00¦Sunbelt ¦ ¦
                ¦ ¦2006 ¦ ¦ ¦ ¦
                +---------------------------------------------------------------------------+
                

Findings of Fact

In addition to the Undisputed Facts, the facts set out in the Background above, and the facts set out in the Section 550 analysis below, the Court makes the following Findings of Fact:

I. RELATIONSHIP AMONG DEFENDANTS AND RELATED COMPANIESA. Vinson Entities

The Court finds the Vinsons owned and controlled VH and VP. Ms. Vinson testified that both VP and VH were used by her husband and her to pay their personal expenses. In particular, funds in the VH and VP accounts were used to buy a vacation home in Sevierville, Tennessee, which was placed in Mr. Vinson's name, and then to furnish and...