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Kevin Padrick, Obsidian Finance Group, Summit 1031 Exchange, Summit Accomodators Bankruptcy

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Kevin Padrick, Obsidian Finance Group, Summit 1031 Exchange, Summit Accomodators Bankruptcy Powered By Docstoc
					                                   Case 08-37031-rld11                Doc 192   Filed 02/20/09




 1     Steven M. Hedberg, OSB No. 842440
       SHedberg@perkinscoie.com
 2     Jeanette L. Thomas, OSB No. 980420
       JThomas@perkinscoie.com
 3     PERKINS COIE LLP
       1120 N.W. Couch Street, Tenth Floor
 4     Portland, OR 97209-4128
       Telephone: 503.727.2000
 5     Facsimile: 503.727.2222
 6     Attorneys for Official Committee of Unsecured
       Creditors
 7

 8
                                         UNITED STATES BANKRUPTCY COURT
 9
                                               FOR THE DISTRICT OF OREGON
10

11     In re
                                                                       NO. 08-37031-rld11
12     Summit Accommodators, Inc., dba Summit
       1031 Exchange,                                                  JOINT MOTION OF OFFICIAL
13                                                                     COMMITTEE OF UNSECURED
                                    Debtor.                            CREDITORS AND CHAPTER 11
14                                                                     TRUSTEE FOR ORDER APPROVING
                                                                       CERTAIN COMPROMISES AND
15                                                                     SETTLEMENTS AND AUTHORIZING
                                                                       CHAPTER 11 TRUSTEE TO EXERCISE
16                                                                     RIGHTS AS SHAREHOLDER

17                                                                     Hearing Date: February 26, 2009
                                                                       Hearing Time: 10:00 a.m.
18

19
                The Official Committee of Unsecured Creditors (the "Committee") and Kevin D.
20
       Padrick, Chapter 11 trustee (the “Trustee”), by their counsel, file this Joint Motion for Entry of
21
       an Order Approving Certain Compromises and Settlements (the "Motion").
22

23                                                               Jurisdiction

24              1.        The Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and

25     1334. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2).

26              2.        Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
                                                                                              Perkins Coie LLP
PAGE   1-        MOTION FOR (I) INTERIM DISTRIBUTIONS                                 1120 N.W. Couch Street, Tenth Floor
                 AND (II) CLAIM MITIGATION                                                 Portland, OR 97209-4128
       70221-0001/LEGAL15388287.2                                                            Phone: 503.727.2000
       C:\Documents and Settings\jennb\My Documents\Motion.doc                                Fax: 503.727.2222
                                   Case 08-37031-rld11               Doc 192   Filed 02/20/09




 1              3.        The statutory bases for the relief requested by the Motion include sections 105
 2     and 363 of title 11 of the United States Code (the "Bankruptcy Code") and Rule 9019 of the
 3     Federal Rule of Bankruptcy Procedures.
 4                                                         Relief Requested
 5              4.        By this Motion, the Committee and the Trustee ask the Court to enter an Order
 6     (a) authorizing the Trustee to enter into certain agreements with the Shareholders; (b) granting
 7     the injunctive relief set forth below; (c) authorizing the Trustee to cause Three Sisters
 8     Development Co., Inc. (“Three Sisters”) to complete exchanges otherwise authorized by this
 9     Court; and (d) authorizing the Trustee to cause Inland Capital Corp. (“Inland”) to take any and
10     all actions that the Trustee determines in the exercise of his business judgment are in the best
11     interests of creditors, including without limitation, allowing amounts owed to Inland to be used
12     to preserve assets in the Creditors Trust (as defined below).
13                                                               Background
14              5.        On December 19, 2008 (the "Petition Date"), Summit Accommodators, Inc.
15     ("Debtor") filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code.
16              6.        On January 9, 2009, the United States Trustee for the District of Oregon
17     appointed the Committee. On February 17, 2009, the United States Trustee appointed Kevin D.
18     Padrick (“Trustee”) as chapter 11 trustee in this case pursuant to 11 U.S.C. § 1104 in accordance
19     with the Bankruptcy Court’s Order entered on February 13, 2009.
20     The Forward Exchange and Reverse Exchange Transactions
21              7.        Prior to the Petition Date, Debtor’s business involved acquiring, holding, and/or
22     conveying funds and property for its customers (the “Exchange Customers”) as part of “1031
23     exchange” transactions. More specifically, Debtor and/or its affiliates operated as a "qualified
24     intermediary" under Section 1.1031(k)-1(g)(4) of the Treasury Regulations and Section 1031 of
25     the Internal Revenue Code (the "Tax Code").
26
                                                                                            Perkins Coie LLP
PAGE   2-  MOTION FOR ORDER APPROVING                                               1120 N.W. Couch Street, Tenth Floor
           SETTLEMENT                                                                    Portland, OR 97209-4128
       70221-0001/LEGAL15388287.2                                                          Phone: 503.727.2000
       C:\Documents and Settings\jennb\My Documents\Motion.doc                              Fax: 503.727.2222
                                   Case 08-37031-rld11           Doc 192   Filed 02/20/09




 1              8.        As a qualified intermediary, Debtor collected the Exchange Customers’ funds
 2     from relinquished property for the purpose of applying such funds toward the purchase of
 3     replacement property (such transactions, “Forward Exchanges”). Debtor used the funds for other
 4     purposes, however, namely loaning a portion of those funds to Inland, a corporation owned and
 5     controlled by Debtor’s shareholders: Mark Neuman, Brian Stevens, Lane Lyons and Tim Larkin
 6     (the “Shareholders”). Inland loaned money to one or more of the Shareholders, entities owned in
 7     whole or party by the Shareholders, and to third parties to purchase investment property.
 8              9.        The Shareholders and other entities were unable to repay their loans to Inland
 9     which, in turn, was unable to repay its loan to Debtor, causing Debtor to have insufficient funds
10     to close the open exchanges. The shortfall in funds held by Debtor is approximately $14 million.
11              10.       Debtor and its affiliates also entered into certain reverse exchange agreements
12     (each a "Reverse Exchange"). In a Reverse Exchange, the Exchange Customer’s replacement
13     property is purchased prior to the sale of the relinquished property. As part of Reverse Exchange
14     transactions, Debtor used a company called Three Sisters to establish a limited liability company
15     in which Three Sisters was a member to hold the replacement property. Upon sale of an
16     Exchange Customer’s relinquished property, Three Sisters would convey the replacement
17     property to the Exchange Customer. In order to complete the open Reverse Exchanges, the
18     Trustee will need control over Three Sisters.
19     The Adversary Proceeding
20              11.       Debtor initiated Adversary Proceeding No. 09-03023-rld (the “Adversary
21     Proceeding”) by filing a Complaint for injunctive relief naming Inland, Three Sisters, each of the
22     Shareholders, certain of Debtor’s sales offices, and certain other entities and individuals,
23     including those that had commenced state court litigation against Inland, Three Sisters and/or the
24     Shareholders (the “Customer Defendants”).
25

26
                                                                                        Perkins Coie LLP
PAGE   3-  MOTION FOR ORDER APPROVING                                           1120 N.W. Couch Street, Tenth Floor
           SETTLEMENT                                                                Portland, OR 97209-4128
       70221-0001/LEGAL15388287.2                                                      Phone: 503.727.2000
       C:\Documents and Settings\jennb\My Documents\Motion.doc                          Fax: 503.727.2222
                                   Case 08-37031-rld11           Doc 192   Filed 02/20/09




 1               12.      Through the Adversary Proceeding and related motions, Debtor sought:
 2     (a) injunctive relief preventing the Shareholders from transferring any of their interests in Inland
 3     or Three Sisters or any of the assets acquired with the loan from Inland without further Order of
 4     the Court; (b) preventing the other defendants, including the Customer Defendants, from
 5     engaging in litigation or collection efforts or taking other action to obtain control over the assets
 6     of the Shareholders, Inland or Three Sisters; and (c) preventing Debtor’s sales offices from
 7     completing any exchange transactions without further Order of the Court.
 8               13.      On February 4, 2009, the Court entered a Temporary Restraining Order
 9     prohibiting the Shareholders from transferring any of their rights, titles, and interests in and to (a)
10     Inland, (b) Three Sisters, (c) any corporations, partnerships, limited liability companies, or other
11     entities, that are owned in whole or in part by the Shareholders, or one or more of them, and (d)
12     any of their other assets, except as necessary to pay reasonable expenses for personal, family,
13     and household purposes, including attorneys’ fees, and for their accounting and law practices
14     (the “TRO”). The TRO has been extended through February 20, 2009 and the Court has agreed
15     to enter an order further extending the TRO through February 26, 2009.
16     The Settlement
17               14.      The Trustee, the Committee, the Shareholders and the Customer Defendants have
18     agreed on the following general terms that will resolve certain issues in the Adversary
19     Proceeding and facilitate the acquisition of additional assets by the Trustee on behalf of the
20     estate:
21                        a.        The Transfer of Ownership Interests. The Shareholders and the Trustee
22     will enter into a Transfer and Assignment Agreement (the “Assignment Agreement”) pursuant to
23     which Shareholders will transfer all of their ownership interests in Inland and Three Sisters to the
24     Trustee on behalf of the estate. This will allow the Trustee to direct Three Sisters and/or Inland
25

26
                                                                                        Perkins Coie LLP
PAGE   4-  MOTION FOR ORDER APPROVING                                           1120 N.W. Couch Street, Tenth Floor
           SETTLEMENT                                                                Portland, OR 97209-4128
       70221-0001/LEGAL15388287.2                                                      Phone: 503.727.2000
       C:\Documents and Settings\jennb\My Documents\Motion.doc                          Fax: 503.727.2222
                                   Case 08-37031-rld11           Doc 192   Filed 02/20/09




 1     to take certain actions beneficial to the estate, including transferring property for the purpose of
 2     completing exchange transactions.
 3                        b.        The Trust Agreement. The Shareholders will enter into an agreement (the
 4     “Trust Agreement”) pursuant to which they will transfer all of their respective assets (with
 5     certain limited exclusions) (the “Shareholder Assets”) to Obsidian Finance Group, LLC
 6     (“Obsidian”) as trustee for the benefit of the creditors of Debtor’s estates (which creditors
 7     include creditors of Debtor and the Exchange Customers of certain of its affiliates serving as
 8     sales offices) (the “Creditors Trust”).
 9                        c.        The Security Agreement. The Shareholders will enter into an agreement
10     (the “Security Agreement”) pursuant to which they grant security interests to Obsidian as trustee
11     for the benefit of the Debtor’s estates for the purpose of securing the Shareholders’ obligation to
12     convey the Shareholder Assets pursuant to the Trust Agreement.
13                        d.        The Temporary Injunction. The Shareholders’ agreement to enter into the
14     foregoing transactions is contingent on the Court entering an Order enjoining the commencement
15     of litigation against, or efforts to collect the assets of, the Shareholders until such time as the
16     Trustee may determine whether creditors of the estate will be paid in full.
17              15.       The parties are finalizing the terms and form of the Assignment Agreement, the
18     Trust Agreement, the Security Agreement, and other related documents and will file such
19     documents with the Court as soon as possible prior to the hearing.
20              16.       Approximately three weeks prior to the date of this Motion, the Committee
21     negotiated an agreement to compensate Obsidian for serving as trustee pursuant to the Trust
22     Agreement that includes the following general terms: (a) Obsidian will absorb certain costs of
23     administering the trust, including real estate brokerage fees; and (b) Obsidian will be receive a
24     fee for its services of liquidating the Shareholder Assets and otherwise administering the trust
25     equal to 15% of (i) the amount of assets that are actually transferred to beneficiaries and
26
                                                                                        Perkins Coie LLP
PAGE   5-  MOTION FOR ORDER APPROVING                                           1120 N.W. Couch Street, Tenth Floor
           SETTLEMENT                                                                Portland, OR 97209-4128
       70221-0001/LEGAL15388287.2                                                      Phone: 503.727.2000
       C:\Documents and Settings\jennb\My Documents\Motion.doc                          Fax: 503.727.2222
                                   Case 08-37031-rld11             Doc 192     Filed 02/20/09




 1     (ii) repayment of indebtedness owing to an affiliate of Debtor. A detailed description of
 2     Obsidian’s compensation agreement will be attached as an exhibit to the Trust Agreement.
 3                                                          Basis for Relief
 4              17.        Fed.R.Bankr.P. 9019 provides that "after notice and a hearing, the [C]ourt may
 5     approve a compromise or settlement." In evaluating a settlement, Courts consider the following
 6     factors: (a) the probability of success in litigation; (b) the difficulties, if any, to be encountered in
 7     the matter or collection; (c) the complexity of the litigation involved, and the expense,
 8     inconvenience and delay necessarily attending it; and (d) the paramount interest of creditors and
 9     a proper deference to their reasonable views in the premises. In re A & C Properties, 784 F.2d
10     1377, 1381-82 (9th Cir. 1986).
11              18.       The decision to approve a settlement or compromise is within the discretion of the
12     court and is warranted where the settlement is fair and reasonable under the circumstances of the
13     case: "The law favors compromise and not litigation for its own sake, and as long as the
14     bankruptcy court amply considered the various factors that determined the reasonableness of the
15     compromised, the court's decision must be affirmed." Id. at 1382.
16              19.       In these unique circumstances, the A & C factors are largely inapplicable. The
17     settlement at issue does not require an inquiry into the merits, probability of success or the
18     complexity of litigation. The purpose of the agreements set forth herein is to mitigate damages
19     to the estate (which in turn, could result in liability for the Shareholders) by increasing the funds
20     available for satisfaction of claims against the estate. The estate will not be releasing any claims
21     or waiving any rights. Instead, through the agreements, it will be bringing assets into the estate
22     in an efficient manner. The injunctive relief requested herein will also benefit the estate by
23     preventing other parties from seeking to collect potential assets of the estates. For these reasons,
24     the last (and possibly only relevant) A & C factor – the interest of the creditors – clearly is
25     satisfied.
26
                                                                                            Perkins Coie LLP
PAGE   6-  MOTION FOR ORDER APPROVING                                               1120 N.W. Couch Street, Tenth Floor
           SETTLEMENT                                                                    Portland, OR 97209-4128
       70221-0001/LEGAL15388287.2                                                          Phone: 503.727.2000
       C:\Documents and Settings\jennb\My Documents\Motion.doc                              Fax: 503.727.2222
                                   Case 08-37031-rld11           Doc 192   Filed 02/20/09




 1              WHEREFORE, the Committee requests entry of an order granting the relief sought
 2     herein and such other relief as the Court determines is just and proper under the circumstances.
 3     DATED: February 20, 2009                                   PERKINS COIE LLP
 4
                                                                  By:/s/ Jeanette L. Thomas
 5                                                                    Steven M. Hedberg, OSB 842440
                                                                      SHedberg@perkinscoie.com
 6                                                                    Jeanette L. Thomas, OSB No. 980420
                                                                      JThomas@perkinscoie.com
 7                                                                1120 N.W. Couch Street, Tenth Floor
                                                                  Portland, OR 97209-4128
 8                                                                Telephone: 503.727.2000
                                                                  Facsimile: 503.727.2222
 9
                                                                  Attorneys for Official Committee of Unsecured
10                                                                Creditors
11
                                                                  TONKON TORP LLP
12

13                                                                By:/s/ Leon Simson
                                                                      Leon Simson, OSB No. 753429
14
                                                                      David S. Aman, OSB No. 962106
                                                                      Haley B. Bjerk, OSB No. 062760
15
                                                                  888 S.W. Fifth Avenue, Suite 1600
                                                                  Portland, OR 97204-2099
16
                                                                  Telephone: 503.221.1440
                                                                  Facsimile: 503.274.8779
17
                                                                  Email: leon.simson@tonkon.com
                                                                  david.aman@tonkon.com
18
                                                                  haley.bjerk@tonkon.com
19
                                                                  Attorneys for Chapter 11 Trustee
20

21

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23

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                                                                                          Perkins Coie LLP
PAGE   7-  MOTION FOR ORDER APPROVING                                             1120 N.W. Couch Street, Tenth Floor
           SETTLEMENT                                                                  Portland, OR 97209-4128
       70221-0001/LEGAL15388287.2                                                        Phone: 503.727.2000
       C:\Documents and Settings\jennb\My Documents\Motion.doc                            Fax: 503.727.2222
                                   Case 08-37031-rld11             Doc 192     Filed 02/20/09




 1              I certify that on February 20 2009, I served a true and correct copy of the foregoing Joint

 2     Motion for Entry of an Order Approving Certain Compromises and Settlements (the "Joint

 3     Motion") on those non-ECF Participants identified as receiving email notice on the attached

 4     Service Lists.

 5              I also certify that on February 20, 2009, I determined from the United States Bankruptcy

 6     Court for the District of Oregon's electronic case filing system that ECF Parties identified on the

 7     attached Service Lists will be served with the Joint Motion electronically via ECF.

 8

 9              Dated: February 20, 2009

10
                                                                 /s/ Jeanette L. Thomas
11                                                               Steven M. Hedberg, OSB No. 84244
                                                                 Jeanette L. Thomas, OSB No. 98042
12

13
                                                                 Attorneys for Official Committee of Unsecured
                                                                 Creditors Committee
14

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                                                                                             Perkins Coie LLP
PAGE   1-        CERTIFICATE OF SERVICE                                              1120 N.W. Couch Street, Tenth Floor
                                                                                          Portland, OR 97209-4128
       70221-0001/LEGAL15388287.2                                                           Phone: 503.727.2000
       C:\Documents and Settings\jennb\My Documents\Motion.doc                               Fax: 503.727.2222
                         Case 08-37031-rld11       Doc 192   Filed 02/20/09




                                             SERVICE LIST

                          IN RE SUMMIT ACCOMMODATORS, INC.
                                D/B/A SUMMIT 1031 EXCHANGE
                  USBC District of Oregon – Bankruptcy Case No. 08-37031-RLD-11


ECF PARTICIPANTS VIA ECF MAIL                         Richard S. Hoffman
THROUGH THE COURT TO SAID                             rhoff88302@aol.com
PARTYS'(S) OR ATTORNEY'(S)                            solanalaw@hotmail.com
REGISTERED EMAIL ADDRESS LISTED                       Attorneys for Gonzales Family Limited
BELOW:                                                Partnership

Steven M. Bowers                                      Scott L. Jensen
steve@stevebowers.com                                 Brownstein, Rask, Sweeney, Kerr
Attorneys for SR Center LLP                           Grim, DeSylvia & Hay, LLP
                                                      slj@brownrask.com
Joshua J. Busey                                       lac@brownrask.com
Carlson Boyd & Bailey PLLC                            Attorneys for Danny & Annie Nim
bmaloney@cbblawfirm.com                               and Tyson Jerald
jbusey@cbblawfirm.com
Attorneys for Tracy V. Tschauner, Debby L.            Carter M. Mann
Tschauner, Galen T. Roberts and Linda D.              Foster Pepper LLP
Roberts                                               mannc@fosterpdx.com
                                                      erwil@fosterpdx.com
David A. Foraker                                      Attorneys for Nodding Onion, LLC
Greene & Markley, P.C.
david.foraker@greenemarkley.com                       Martin P. Meyers
joyce.chartrand@greenemarkley.com                     Sussman Shank LLP
Attorneys for Brian D. Stevens                        martin@sussmanshank.com
                                                      ecf.martin.meyers@sussmanshank.com
Susan S. Ford                                         Attorneys for Debtors
Sussman Shank LLP
susanf@sussmanshank.com                               John Casey Mills
ecf.susan.ford@sussmanshank.com                       Miller Nash LLP
Attorneys for Debtors                                 casey.mills@millernash.com
                                                      brenda.hale@millernash.com
Martin E. Hansen                                      Attorneys for Bull Creek Apartments, LLC
Francis, Hansen & Martin LLP                          Lewis Interests, Ltd., Bert Manuel
meh@francishansen.com                                 Tenneson Engineering Corporation
kathy@francishansen.com
Attorneys for Tennant Investors
                                                      Eric Olmstead
David W. Hercher                                      Barney McKenna & Olmstead, P.C.
Miller Nash LLP                                       eolmstead@barney-mckenna.com
dave.hercher@millernash.com                           cnavas@barney-mckenna.com
teri.cochran@millernash.com                           Attorneys for K & J Camalot Holdings, LLC
d.hercher@comcast.net
Attorneys for Bull Creek Apartments, LLC




Service List – Summit Accommodators            1                                   2/20/2009
70221-0001/LEGAL15178598.1
                         Case 08-37031-rld11    Doc 192   Filed 02/20/09




Shawn P. Ryan                                      VIA EMAIL TO THE FOLLOWING
shawn@sryanlaw.com                                 PARTIES:
samantha@sryanlaw.com
Attorneys for Lane Lyons                           Charles Moster
                                                   620 Congress Ave #320
Tara J. Schleicher                                 Austin, TX 78701
Farleigh Wada Witt                                 cmoster@mosterwynne.com
tschleicher@fwwlaw.com                             dloy@mosterwynne.com
dfallon@fwwlaw.com                                 Attorneys for Smithridge Investor LLC
sormsby@fwwlaw.com
Attorneys for Michael Alessandro, Trustee          Unsecured Creditors Committee:
and Amelia Moen
                                                   Tennant Investors, Chair
Thomas W. Stilley                                  c/o Annie Tennant Buell, Partner
Sussman Shank LLP                                  6200 Buena Vista Drive
tom@sussmanshank.com                               Vancouver, WA 98661
janine@sussmanshank.com
Attorneys for Debtor                               Alessandro Family Trust
                                                   c/o Michael Alessandro, Trustee
US Trustee, Portland                               880 Snow King Ave
USTPRegion18.PL.ECF@usdoj.gov                      Jackson, WY 83001

Robert J. Vanden Bos                               Bull Creek Apartments Ltd.
Vanden Bos & Chapman, LLP                          c/o Diana G. Zuniga, Managing Partner
vbcservice@yahoo.com                               602 W.7th Str.
vbcservice@msn.com                                 Austin, TX 78701
Attorneys for Mark Neuman
                                                   Kevin Gross
Joseph M. Vanleuven                                Cooper's Hill
Davis Wright Tremaine LLP                          5424 Alta Monte Dr.
joevanleuven@dwt.com                               Santa Rosa, CA 95404
marciebutler@dwt.com
Attorneys for Felip Holbrook                       Lewis Interests, Ltd
Summit 1031 Exchange, Inc.                         c/o William C. Pollard
                                                   800 Rio Grande
Laura J. Walker                                    Austin, TX 78701
Cable Huston
lwalker@chbh.com                                   Danny Nim, Ex Officio
kharris@cablehuston.com                            1561 Orangewood Dr.
Attorneys for Patrick R Fortune                    San Jose, CA 95121

BY U.S. MAIL, POSTAGE PREPAID TO                   Nodding Onion, LLC
THE FOLLOWING PARTIES:                             c/o Rolland "Cork" Andrews, Member
                                                   629 Lower Valley Rd
IRS                                                Kalispell, MT 59901
1220 SW 3rd MSO240
Portland, OR 97204                                 Points West Holdings, Inc.
                                                   c/o Ron W. Jones
IRS                                                291 East 1400 South #6
P.O. Box 21126                                     St. George, UT 84790
Philadelphia, PA 19114


Service List – Summit Accommodators         2                                    2/20/2009
70221-0001/LEGAL15178598.1

				
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Description: US Bankruptcy No. 08-37031-rld11. Joint Motion of Official Committee of Unsecured Creditors and Chapter 11 Trustee for Order approving certain compromises and settlements and authorizing Chapter 11 Trustee to Exercise Rights as Shareholder.