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Tagged Opinion

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF FLORIDA

FORT LAUDERDALE DIVISION

In re:

Case No. 21-12188-PDR

No Rust Rebar, Inc.,

Chapter 11

Debtor.

/

ORDER CONVERTING CASE TO CHAPTER 7

Green Tech Development, LLC has asked the Court to either remove the 

principal of the Debtor or convert this case from a Chapter 11 to a Chapter 7.1 The 

Court held a four-day evidentiary hearing on these matters. For the reasons that 

follow, the Court finds cause to convert the case or remove No Rust as the debtor in 

possession, and that conversion is in the best interest of the estate and its creditors.

1 (Docs. 70; 116).

Peter D. Russin, Judge

United States Bankruptcy Court

_____________________________________________________________________________

ORDERED in the Southern District of Florida on May 23, 2022.

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Findings of Fact

In the 1980s, while operating a boat manufacturing and design business, Don 

Smith came into the possession of a significant amount of basalt fibers. Smith became 

fascinated with the material and believed that he could use it to create a replacement 

for traditional structural reinforcement products, such as rebar, with the advantage 

that basalt does not rust. However, Smith never patented the process and chose to 

maintain it in his own head because he was worried that he did not have the means 

to defend a patent. When the idea of using basalt fibers as structural reinforcement 

became less financially viable due to the crash of the housing market in the mid 

2000s, Smith shifted his focus to the energy sector and founded Raw Energy 

Materials, Inc. (“REM”), which used basalt fibers to create products for the wind 

industry.2

REM struggled because it was unable to manufacture basalt fibers itself and 

its product was large, expensive, and time consuming to produce. Smith, therefore, 

turned his interest back to manufacturing and selling structural reinforcement 

products, particularly rebar, made from basalt fibers. At a Christmas party in 2014, 

Smith met Robert Bryan, who was fascinated by Smith’s idea. In January 2015, 

following a $1.2 million investment from Bryan, No Rust Rebar, Inc. (“No Rust”) was 

born. Though Bryan put no specific restrictions on Smith’s use of the funds, he 

assumed they would be used exclusively for the benefit of No Rust and that the 

2 (Doc. 188 at 33:16–43:2, 45:2–18, 103:11–14).

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company’s additional funding needs for things like research and development would 

be minimal.3

No Rust initially needed to secure a manufacturing facility. Bryan suggested 

that No Rust buy a $3 million property he owned in Georgia. Smith declined. Instead, 

Smith was interested in a foreclosed industrial facility in Pompano Beach, Florida 

that contained office space, meeting rooms, and an industrial facility, but required 

significant repairs and maintenance (the “Property”). Bryan suggested he could 

purchase the Property and No Rust could lease it from him. Again, Smith declined. 

In July 2015, against the wishes of Bryan, No Rust contracted to purchase the 

Property for $450,000 and paid a non-refundable $50,000 deposit that allowed it to 

occupy the premises and begin maintenance and repairs immediately. Bryan, angry 

that he had been seemingly squeezed out of the deal for the Property, refused to 

provide No Rust with any further funding. Without additional investment from 

Bryan, No Rust lacked the funds to close and risked losing both the Property and its 

$50,000 deposit.4

Desperate for a solution, Smith turned to a friend, Joan Saperstein, for help. 

Saperstein created a new entity, Green Tech Development, LLC (“Green Tech”) to 

which No Rust agreed to assign its right to purchase the Property. No Rust contends 

that consideration for the assignment included an option to purchase the Property 

3 (Docs. 1; 130-1; 130-2; 130-4; 138 at ¶ 1; 160 at 48:11–14; 170 at 52:4–56:4, 58:5–63:24, 81:4–

16; 188 at 43:3–44:20).

4 (Docs. 130-5; 160 at 15:18–24; 170 at 77:3–97:3, 106:16–110:11; 188 at 47:15–56:14, 78:9–

79:13).

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from Green Tech, but Green Tech contends there was no such option. Both parties 

agree that there is no signed written agreement memorializing the purported option. 

In January 2016, Green Tech bought the Property and No Rust remained in 

possession.5

No Rust needed permits and a business license before it could begin 

manufacturing operations on the Property. Though No Rust filled out the 

applications, it needed Green Tech, as the owner of the Property, to sign them. For 

reasons that remain unclear, Green Tech refused. According to Smith, Green Tech’s 

refusal was part of a concerted effort by associates of Green Tech to extort him into 

taking out a $10 million loan.6

In May 2016, No Rust executed, but never recorded, a $400,000 mechanics lien 

against the Property in favor of another company Smith had recently created, Raw 

Materials Corp. (“RMC”). RMC was created by Smith in September 2015 to provide 

fiber and resin packages to his entities and also operated out of the Property. When 

pressed about why RMC received the mechanics lien, Smith acknowledged it was 

“protection” for his entities to make the Property “less enticing” to Green Tech. 

Shortly thereafter, Smith listed “No Rust Rebar, Inc.” both as a fictitious name of 

RMC and as a d/b/a on RMC’s bank account. Smith testified he did this so he could 

5 (Docs. 130-8; 188 at 63:14–66:2, 80:25–81:8).

6 (Doc. 188 at 81:9–85:18).

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transfer checks made payable to No Rust to RMC when he, in his discretion, believed 

doing so was appropriate.7

In November 2016, Smith sought to exercise No Rust’s purported option by 

filing a Notice of Election to Purchase Real Property, but Green Tech refused to sell. 

Less than a month later, No Rust sued Green Tech for specific performance; Green 

Tech countered seeking No Rust’s ejectment and damages for civil trespass (the 

“Property Dispute”).8

In December 2016, Smith founded Raw, LLC (“Raw”), which served as a 

holding company. Then, in January 2017, Smith reinstated an older entity, Global 

Energy Sciences, LLC (“GES”), to hold his intellectual property, including the 

trademark and brand licenses associated with his basalt rebar product. However, it 

appears No Rust paid the bills for at least some of GES’s intellectual property and, 

at least once, transferred a patent to GES for no consideration. No Rust is obligated 

to pay GES $200/day ($73,000 annually) for a license to produce basalt rebar, though 

Smith testified that payment has not been required recently given No Rust’s financial 

situation.9

In February 2017, Smith used various entities to complete a deal with 

PayMeOn, Inc. (“PayMeOn”), a publicly traded company interested in the sale of 

7 (Docs. 130-7; 130-20; 131-9; 138; 160 at 50:21–54:22, 134:23–155:19; 162 at 107:13–108:4; 170 

at 25:4).

8 (Doc. 160 at 63:3–65:7); see No Rust Rebar, Inc. v. Green Tech Dev., LLC (In re No Rust Rebar, 

Inc.), No. 21-01111-PDR (Bankr. S.D. Fla.); Green Tech Dev., LLC v. No Rust Rebar, Inc. (In re No Rust 

Rebar, Inc.), No. 21-01112-PDR (Bankr. S.D. Fla.).

9 (Docs. 130-7; 130-13; 130-14; 160 at 58:8–64:17, 80:3–85:23, 177:18–179:9).

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Smith’s basalt rebar (the “PayMeOn Deal”). Under the agreement, PayMeOn received 

an exclusive license to sell basalt rebar in Florida and the Caribbean. No Rust 

provided two machines, basalt fibers, and finished inventory to help close the deal, 

but in return received no consideration. RMC, however, received $2.4 million in cash 

and Raw received 10 million shares in PayMeOn.10 In short, in exchange for No Rust’s 

assets and No Rust losing its right to sell basalt rebar in Florida and the Caribbean, 

RMC received millions of dollars, Raw received millions of shares in a publicly traded 

company, and No Rust received nothing. Smith, however, contends that No Rust lost 

nothing because it was not presently selling product anyway and ultimately received 

reasonably equivalent value for the transaction in the form of new equipment and 

machinery.11

In 2019, the electric company cut the Property’s power due to a split of the 

power source from the contiguous property; power has not been restored but a 

generator has provided some power. Since then, No Rust and the other entities 

operating from the Property have been severely limited in their ability to conduct any 

business at all.12 Given that the Property is presently unusable for manufacturing 

and No Rust’s rights to it were in dispute, No Rust could have chosen to lease another 

Property or take some other action to ramp up its prospective core business. However, 

10 Raw was also supposed to receive a consulting fee, but the testimony suggests that Raw 

received no cash and never held any assets other than the shares of PayMeOn stock. See (Docs. 131-

18; 131-19; 160 at 62:8–64:17).

11 (Docs. 131-18; 131-19; 160 at 62:8–64:17, 69:12–15, 93:24–95:10, 99:19–102:9, 105:6–108:12, 

116:1–120:3, 121:11–127:25, 154:1–5; 162 at 39:21–49:12; 188 at 87:4–93:25).

12 (Doc. 162 at 63:20–64:11).

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Smith testified, in his business judgment, that was too expensive and not in No Rust’s 

best interests.13

In September 2020, RMC registered “Raw, LLC” as a fictitious name. No 

explanation has been provided for this action. On March 5, 2021, No Rust registered 

“Raw, LLC” as a fictitious name. No explanation has been provided for this action

either.14

On March 5, 2021, No Rust filed a voluntary bankruptcy petition under 

Subchapter V of Chapter 11 of the Bankruptcy Code.15 There are irregularities in No 

Rust’s Schedules, including:16

1. RMC’s checking account is not listed in the Schedules even 

though “No Rust Rebar, Inc.” is listed as a d/b/a on the account 

and the account was open on the Petition Date. According to 

Smith, the failure to include the account was not a mistake 

because, despite being listed as a d/b/a on the account, No Rust 

has no interest in the account.17

2. The 2020 tax returns provide that No Rust is due nearly $492,000 

from RMC, but No Rust did not list that accounts receivable as an 

asset in the Schedules. When pressed, Smith was unable to 

provide a sufficient explanation for what the debt due to No Rust 

is for or why it was not included in the Schedules but did 

acknowledge it should have been.18

3. The 2020 tax returns showed that No Rust had no inventory, but 

No Rust scheduled some inventory on the Schedules. Smith 

13 (Doc. 160 at 176:22–177:10).

14 (Docs. 130-21; 131-6; 160 at 193:25–194:20). 

15 (Docs. 1; 130-21).

16 (Docs. 19; 133-16; 173).

17 (131-9; 160 at 144:10–155:19; 170 at 25:4).

18 (Docs. 131-25; 160 at 199:16–203:9).

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explained that the inventory was not listed based on any 

consideration of corporate documentation but was rather 

determined by walking around the building (which holds other 

corporate entities’ assets) and identifying certain pieces of 

inventory to include.19

4. No Rust scheduled a $129,250 debt owed to Smith’s sister 

resulting from a loan she gave to Smith personally in 2005, 

roughly a decade before No Rust was incorporated. Smith states 

he agreed to carry the debt into No Rust because No Rust “is the 

entity that came to fruition out of [her] original seed monies.”20

Shortly after the Petition Date, on March 29, 2021, No Rust removed several 

actions from state court to this Court, including the Property Dispute.21 The Court 

denied cross motions for summary judgment in the Property Dispute and the matter 

remains pending.22

There are only six total claims in this case. Two are related to the Property 

Dispute: (1) Green Tech asserts a $1.95 million claim arising from damages related 

to the Property Dispute,23 and (2) Pet Star Corp. asserts a $1.05 million conditional 

claim arising from its mortgage on the Property.24 No Rust objects to both claims as 

contingent, unliquidated, and disputed.25 The other claims in this case include, (1) a 

19 (Doc. 188 at 210:8–25). 

20 (Docs. 19 at 16; 160 at 191:21–193:4).

21 See No Rust Rebar, Inc. v. Green Tech Dev., LLC (In re No Rust Rebar, Inc.), No. 21-01111-

PDR (Doc. 1) (Bankr. S.D. Fla. Mar. 29, 2021) (the “Property Dispute”); Green Tech Dev., LLC v. No 

Rust Rebar, Inc. (In re No Rust Rebar, Inc.), No. 21-01112-PDR (Doc. 1) (Bankr. S.D. Fla. Mar. 29, 

2021).

22 See No Rust Rebar, Inc. v. Green Tech Dev., LLC (In re No Rust Rebar, Inc.), No. 21-01111-

PDR, 2021 WL 4314221 (Bankr. S.D. Fla. Sept. 22, 2021). 

23 (Claim 4-1).

24 (Claim 3-1). 

25 (Docs. 123; 125).

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$12,559.49 claim by the U.S. Small Business Administration,26 (2) an $11,750.40 

claim by Broward County for 2020 and 2021 tangible property taxes,27 and (3) two 

claims by Broward County Water and Wastewater Services totaling $52,669.83 for 

services to the Property.28 

On April 14, 2021, as part of a litigation settlement agreement related to the 

PayMeOn Deal, Raw agreed to sell its 10 million shares in PayMeOn to Basanite, Inc. 

for $1.2 million.29 The deal was not disclosed, and no Court approval was sought for 

the transaction. Because Raw does not have its own bank account, the funds were 

remitted to Smith. Smith contends that, even though Raw is No Rust’s fictitious 

name, the settlement was unrelated to No Rust and there was not a need to disclose 

the settlement or seek court approval for it.30

On June 3, 2021, No Rust submitted its Subchapter V Plan. In short, the Plan 

acknowledges that confirmation depends entirely on No Rust’s success in the 

Property Dispute and states that, if No Rust loses or is removed as the debtor in 

possession, the case will automatically convert to a Chapter 7. If No Rust wins the 

case, however, No Rust states that Smith will personally contribute funds to allow 

No Rust to acquire the Property and, once No Rust’s business ramps up, it will be 

26 (Claim 1-1).

27 (Claim 2-2). 

28 (Claim 5-1; 6-1).

29 Basanite appears to be a successor entity to PayMeOn.

30 (Doc. 133-9; 133-10; 133-11; 160 at 55:8–18, 62:8–64:17, 70:19–23, 204:11–16; 162 at 49:13–

53:23).

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able to fund a 100% plan through its future earnings and contributions from Smith.31

The Plan lacks any specificity with respect to the capital needed to fund it and offers 

no projections or proof of available financing for the purchase of the property or the 

ramp up of the business. The Plan is consistent with Smith’s stated perspective on 

No Rust’s prospects for success. He asserts that everything is resolved “when” he 

succeeds in obtaining the Property and making it operational for both No Rust and 

RMC. At present, however, he “can’t get through the Court to get [the Property] that 

[No Rust] contracted for” and is, instead, “stuck in a quagmire.”32

On June 7, 2021, the Court directed the Subchapter V Trustee to investigate 

No Rust and file a report in the bankruptcy case addressing whether Smith had 

breached any duties or fiduciary obligations and whether No Rust should be removed 

as debtor in possession. In the Report, the Subchapter V Trustee concluded that 

Smith did not appear to have breached his duties and No Rust should not be 

removed.33

Since the report, however, additional information has become available 

regarding Smith’s entities—which he refers to as the “Family”—and the commingling 

of their assets.34 Smith routinely transferred money amongst the Family at his sole 

31 (Doc. 56).

32 (Doc. 160 at 203:17–204:1).

33 (Doc. 59); No Rust Rebar, Inc. v. Don Smith (In re No Rust Rebar, Inc.), No. 21-01131-PDR 

(Doc. 24) (Bankr. S.D. Fla. June 7, 2021).

34 Smith used the “Family” to refer to No Rust, RMC, REM, and GES, but not Raw. For the 

Court’s purposes, the Family refers to all of Smith’s related entities, including Raw. See (Docs. 138; 

160 at 31:3–7; 50:21–55:22, 192:21–193:4, 198:13–17).

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discretion, his bookkeeper served as the bookkeeper for the whole Family, and 

whenever assets appeared commingled amongst the Family, Smith would simply rely 

on his financial professionals to sort out any issues or confusion that might arise. 

Smith also used the same emblem on every Family member’s checks. Smith explained

that the Family failed to maintain corporate formalities largely because the Family 

included closely held companies that he personally controlled, he lacked clerical help 

to separate the Family’s assets and liabilities, and “things began to get mixed up” 

once he “began to spend huge amounts of legal fees.”35

On August 5, 2021, Green Tech filed its Motion for Removal of Debtor as Debtor 

in Possession and, on November 21, 2021, filed its related Motion to Convert Chapter 

11 Case to Chapter 7.36 No Rust opposes the motions, arguing Green Tech lacks

standing and has failed to satisfy the standards for removal or conversion.37 The 

Court set an evidentiary hearing38 and heard the Motion for Removal, the Motion to 

Convert, and the Motion for Sanctions on December 8, 2021, December 21, 2021, 

January 4, 2022, and January 10, 2022.39 No Rust, Green Tech, and the Subchapter 

V Trustee submitted final briefs following the hearings.40

35 (Docs. 130-20; 130-21; 131-6; 134-20; 160 at 16:18–17:1, 54:23–55:12, 87:25–93:5, 123:23–

125:1, 128:21–133:11, 193:25–194:20, 207:7–209:10).

36 (Docs. 70; 116).

37 (Doc. 75).

38 (Docs. 86; 141).

39 (Docs. 160; 162; 170; 188).

40 (Docs. 175; 176; 180).

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At the hearings, the Subchapter V Trustee amended her position from the 

Report and recommended conversion. In addition to citing confusion and concern 

resulting from the commingling of Family assets and liabilities, the Subchapter V 

Trustee testified that No Rust failed to satisfy its duties as a debtor in possession to 

provide appropriate documentation, including bank statements, tax returns, and 

monthly operating reports.41 Upon review of No Rust’s present situation, the 

Subchapter V Trustee testified that, unlike Smith, she does not see No Rust as a 

manufacturing company, but rather as—at best—a real estate holding company 

currently embroiled in a dispute over its rights to its only (potential) asset. In her 

opinion, No Rust will not be able to produce sufficient income to become operable and 

fund a plan and will have to look for other avenues of business to survive. However, 

the Subchapter V Trustee did acknowledge that the recent collapse of a condominium 

in Surfside, Florida might provide a potential opportunity for No Rust to position its 

product as a better alternative to traditional structural reinforcement products. In 

her proposed findings and conclusions, consistent with her testimony, the Subchapter 

V Trustee recommended that the Court convert the case to a Chapter 7.42

41 The Court previously found that No Rust’s monthly operating reports were insufficient 

because they “fail[ed] to provide all the required financial information” and required that they be 

amended. (Doc. 77). No Rust amended the monthly operating reports, but the Subchapter V Trustee 

still testified at the evidentiary hearing, months after the amendments, that, even with the 

amendments, she was not privy to “fulsome monthly operating reports.” See (Docs. 80–85; 160 at 37:4–

7). 42 (Docs. 160 at 17:8–21:25, 25:9–13; 28:17–30:14, 33:7–14; 180).

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Following the evidentiary hearing, No Rust amended its schedules. The only 

change in the Amended Schedules appears to be that No Rust scheduled a $9,500 

forklift that had previously been undisclosed.43

Presently, No Rust is not operating.44

Jurisdiction & Venue

The Court’s subject matter jurisdiction is derived from 28 U.S.C. § 1334. The 

Court has statutory authority to hear and determine this proceeding under 28 U.S.C. 

§ 157(a) & (b)(2)(A), and the general order of reference from the United States District 

Court for the Southern District of Florida. See, e.g., In re State Street Houses, Inc., 

305 B.R. 726 (Bankr. S.D. Fla. 2002). The Court has constitutional authority to enter 

final orders in this core proceeding. Venue is proper under 28 U.S.C. §§ 1408 and 

1409.

Conclusions of Law

Chapter 11 debtors operate as debtors in possession and, in general, “have all 

the rights . . . and powers, and shall perform all the functions and duties . . . of a 

trustee serving in a case under this chapter.” 11 U.S.C. § 1107(a). If a party in interest 

believes that the Chapter 11 debtor should not be the debtor in possession any longer, 

they may, for cause, seek to either (1) covert the case from Chapter 11 reorganization 

to a Chapter 7 liquidation or (2) keep the case in Chapter 11, but appoint a trustee. 

See 11 U.S.C. §§ 1104(a), 1112(b), & 1185(a). Green Tech requests that the Court take 

43 (Doc. 173 at 7).

44 (Doc. 160 at 16:1–17, 33:7–14).

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such decisive action in this case. No Rust opposes the relief, arguing that Green Tech 

(1) lacks standing as a party in interest to seek conversion or removal, and (2) failed 

to establish sufficient cause.

I. Standing

A party must be a “party in interest” to have standing to request conversion of

a Chapter 11 case or removal of the debtor as debtor in possession. See 11 U.S.C. 

§§ 1104(a), 1112(b), & 1185(a). Though 11 U.S.C. § 1109(b) contains a list of examples 

of parties in interest, “including the debtor, the trustee, a creditors’ committee, an 

equity security holders’ committee, a creditor, an equity security holder, or any 

indenture trustee,” the list is not exclusive. See 11 U.S.C. § 102(3) (defining 

“including” and “includes” as “not limiting” as used under the Bankruptcy Code); In 

re E.S. Bankest, L.C., 321 B.R. 590, 594 (Bankr. S.D. Fla. 2005). To be a party in 

interest in a matter arising in a Chapter 11 case, a party must merely have “a 

sufficient stake in the outcome . . . so as to require representation.” E.S. Bankest, 321 

B.R. at 595; see also In re SFD @ Hollywood, LLC, 411 B.R. 453, 455 (Bankr. S.D. Fla. 

2009) (“A ‘party in interest’ under § 1109(b) is any person with a direct financial stake 

in the outcome of the case.”); In re Amatex Corp., 755 F.2d 1034, 1042 (3d Cir. 1985). 

Green Tech holds title to the Property that No Rust currently possesses, 

asserts an interest in, and has declared to be the lynchpin of its entire bankruptcy

case. In fact, No Rust has declared in its Plan and elsewhere that, if it loses the 

Property Dispute, it cannot reorganize and will simply convert the case. The Property 

Dispute consists of two lawsuits, both of which have been removed to this Court. The 

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first adversary proceeding, brought by No Rust, seeks to enforce the purported option; 

the second, brought by Green Tech, seeks ejectment of No Rust and damages for civil 

trespass. The Property Dispute was pending for years before No Rust filed for 

bankruptcy and removed the lawsuits here. As a result of the Property Dispute, 

Green Tech filed a $1.9 million proof of claim arising from alleged damages resulting 

from No Rust’s filing a lis pendens on the Property and its continued occupancy of the 

Property.45

No Rust contends that Green Tech does not have standing because Green 

Tech’s relationship with the bankruptcy case arises from the Property Dispute, and 

if No Rust prevails, that relationship will cease. In support, No Rust relies on E.S. 

Bankest, where the bankruptcy court concluded that a movant lacked standing to 

seek conversion where its sole relationship to the case was as a defendant in an 

adversary proceeding and the movant was only seeking conversion as a “litigation 

tactic” to delay or hinder prosecution of the adversary proceeding. See E.S. Bankest, 

321 B.R. at 593, 596–99. No Rust argues:

By displacing [No Rust] from management of this case, Green Tech 

sweeps aside its long-time adversary in litigation matters collectively 

pending for over a decade. And at what cost to the actual, undisputed, 

allowed claimants in this case? [No Rust] has filed a Plan in which it: 

waives discharge; pledges full payment to all non-insider creditors; 

provides for an immediate installment payment to non-insider 

unsecured creditors; requires Mr. Smith to infuse significant capital; 

prohibits management from taking a salary until all creditors are paid 

in full; leaves the Sub V trustee in control of all earnings and future 

income; and provides for conversion of the case to Chapter 7 if [No Rust] 

does not prevail in the Specific Performance Suit, or if Mr. Smith loses 

control over management of this case.

45 (Claim 4-1). 

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. . .

If Green Tech loses the Specific Performance Suit, it will have no claim

in this case.

If Green Tech prevails in the Specific Performance Suit, it may have a 

claim for [No Rust’s] occupancy of the Property, but Green Tech will also 

have possession of all of [No Rust’s] tangible assets, as well as the assets 

of non-debtor affiliates, and unaffiliated entities. All that would remain 

for unsecured creditors is awaiting the outcome of an investigation into 

the alleged recoveries through litigation by a trustee.46

No Rust’s argument, however, seemingly complicates what is ultimately a 

relatively simple issue: whether Green Tech clearly has a sufficient interest in who 

controls the property of the estate “to require representation.” It does.

Green Tech filed a proof of claim. Generally, “[o]ne who has filed a proof of 

claim is considered a party in interest unless the proof of claim is withdrawn or 

disallowed.” In re Xenon Anesthesia of Tex., P.L.L.C., 698 F. App’x 793, 794 (5th Cir. 

2017). Though No Rust objects to Green Tech’s proof of claim, it has neither been 

withdrawn nor disallowed. By contrast, the movant in E.S. Bankest never filed a proof 

of claim and asserted no interest in property of the estate. See E.S. Bankest, 321 B.R. 

at 596–97. No Rust has not provided, nor can the Court find, any case law concluding 

that a debtor’s mere objection to a proof of claim eliminates the claimant’s standing; 

the Court sees no support for such a conclusion here. See, e.g., In re Marshall, 298 

B.R. 670 (Bankr. C.D. Cal. 2003) (explaining that “[a] scheduled creditor who has 

failed to file a proof of claim remains a ‘party in interest’ with standing” under § 

1112(b)).

46 (Doc. 175 at 7–8).

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Further, Green Tech is a “creditor” and, therefore, a “party in interest” as 

defined by § 1109. A “creditor” under the Bankruptcy Code includes any “entity that 

has a claim against the debtor that arose at the time of or before the order for relief 

concerning the debtor.” 11 U.S.C. § 101(10)(A). The definition of “claim” under the 

Bankruptcy Code is similarly broad and includes any “right to payment, whether or 

not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, 

matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” 

11 U.S.C. § 101(5)(A). Green Tech asserts a right to payment and therefore holds a 

“claim” against No Rust which arose before the Petition Date, making Green Tech a 

“creditor” of No Rust, and a “creditor” is a “party in interest” as defined by § 1109.

In addition, even if Green Tech loses the Property Dispute, it still has a claim

because No Rust must then perform under the option. As such, regardless of whether 

No Rust succeeds in its objection to Green Tech’s claim and prevails in the Property 

Dispute, Green Tech retains a sufficient financial stake in the outcome of these 

proceedings. See SFD @ Hollywood, LLC, 411 B.R. at 455; E.S. Bankest, 321 B.R. at 

595.

Moreover, the basis for Green Tech’s request for removal or conversion is based 

on Smith’s and No Rust’s alleged fraud, dishonesty, conflicts of interests, 

incompetence, and gross mismanagement. The Court is unaware of any case law 

which suggests a debtor can prevent a creditor who seeks to share in the assets of a 

bankruptcy estate from seeking to protect those assets where it believes some 

improper action by the debtor may threaten them. To the contrary, such a 

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determination would seemingly present a legal and public policy nightmare. For 

example, if Green Tech is correct that Raw’s sale of 10 million shares of stock for $1.2 

million, all of which is now in the hands of Smith personally, was a postpetition sale 

of undisclosed estate property without court approval, decisive action would need to 

be taken to ensure that value is preserved. The Court sees no legal or factual basis to 

conclude that parties claiming to be creditors of the estate cannot act to protect the 

estate merely because the debtor objects to their claim. Consequently, the Court finds 

and concludes that Green Tech is a party in interest and has standing to seek removal 

or conversion.

II. Cause for Conversion or Removal

Conversion of a Chapter 11 case and removal of a debtor as debtor in possession 

may only be “for cause.”47 See 11 U.S.C. §§ 1112(b)(1) & 1185(a). Section 1112(b)(4) 

contains a list of non-exclusive potential causes for conversion and sufficient cause to 

remove a Subchapter V debtor as debtor in possession includes “fraud, dishonesty, 

incompetence, or gross mismanagement of the affairs of the debtor, either before or 

after the date of commencement of the case . . . or for failure to perform the obligations 

of the debtor under a plan confirmed under this subchapter.”48 In addition to the 

47 Even if the Court finds cause under § 1112(b)(1), it may not convert a case if it “finds and 

specifically identifies unusual circumstances establishing that converting . . . the case is not in the 

best interests of creditors and the estate, and the debtor or any other party in interest establishes” 

both that: (1) there is reasonable likelihood the debtor will timely confirm, or confirm within a 

reasonable period of time, a Chapter 11 plan, and (2) that the debtor’s acts or omissions that support 

conversion can be both reasonably justified and cured within a reasonable period of time. 11 U.S.C. § 

1112(b)(2). No party has specifically raised § 1112(b)(2) and the Court, on its own review of the record, 

sees no basis to apply § 1112(b)(2) to prevent conversion even if it identifies sufficient cause to convert.

48 “Because § 1104(a) and §1185(a) use the same language, the court may rely on authority 

construing § 1104 in determining whether to remove a debtor in possession under §1185.” In re Neosho 

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causes provided under § 1112(b)(4) and § 1185(a), bankruptcy courts have frequently 

identified other factors that support a finding of cause, including where “the debtor 

in possession has a conflict of interest in properly investigating and pursuing 

potential fraudulent transfers” and other claims of the estate. In re Picacho Hills 

Utility Co., Inc., 518 B.R. 75, 82 (Bankr. D.N.M. 2014); see also In re Ashley River 

Consulting, LLC, No. 14-13406 (MG), 2015 WL 1540941, at *9 (Bankr. S.D.N.Y. Mar. 

31, 2015). Here, the Court finds that substantial cause exists to convert the case or 

remove No Rust as the debtor in possession.

A. Smith commingled No Rust’s assets with Smith’s and the Family’s 

assets in a manner that supports both conversion and removal.

Though Smith sought to portray the Family as a group of related, but separate 

and distinct entities that operated independently, the evidence does not support his 

assertion. To the contrary, the Family appears to have been a group of commingled 

entities whose responsibilities, assets, and liabilities were constantly shuffled to fit 

Smith’s needs or whims. This commingling resulted from incompetence or gross 

mismanagement of No Rust’s affairs at best, and fraud or dishonesty at worst, but 

most damningly created an incurable conflict between the interests of Smith and 

those of the estate. Accordingly, conversion or removal of No Rust as debtor in 

possession is required.

Smith’s bookkeeper served as the bookkeeper for the entire Family and Smith 

would simply rely on her and other financial professionals, such as his accountant, to 

Concrete Prod. Co., 2021 WL 1821444 (Bankr. W.D. Mo. May 6, 2021) (citing In re Peak Serum, Inc., 

623 B.R. 609, 614 n.1 (Bankr. D. Colo. 2020)).

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sort out any confusion that might arise; Smith even used the same corporate emblem 

on the checks for the entire Family. Smith himself ultimately testified that the 

Family failed to maintain corporate formalities largely because the Family included

all closely held companies that he personally controlled, he lacked clerical help to 

separate the Family’s assets and liabilities, and “things began to get mixed up” once 

he “began to spend huge amounts of legal fees.”49

This failure to maintain separate books and records amongst the various 

entities ultimately caused the commingling of many assets. This was perhaps best 

illustrated by Smith’s testimony regarding how he identified the assets to include in 

the Schedules. According to Smith, he simply walked around the Property, which 

houses not just the Family but other entities not owned by Smith, and just picked 

assets to include in the Schedules.50 It is, therefore, difficult—if not impossible—to 

discern with reasonable certainty what assets in the Property actually belong to No 

Rust.

Smith also commingled No Rust’s assets with the assets of other Family 

members’ through his unusual and improper practice of listing the formal name of 

one entity as the d/b/a or fictitious name of another.51 He listed “No Rust Rebar, Inc.” 

as RMC’s fictitious name and as a d/b/a on its bank account, and “Raw, LLC” as a 

fictitious name of No Rust and RMC.

49 (Docs. 130-20; 130-21; 131-6; 134-20; 160 at 16:18–17:1, 54:23–55:12, 87:25–93:5, 123:23–

125:1, 128:21–133:11, 193:25–194:20, 207:7–209:10).

50 (Doc. 188 at 210:8–25).

51 See Fla. Stat. § 865.09(14).

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Smith testified that he used No Rust’s formal corporate name as a fictitious 

name and d/b/a of RMC so he could deposit checks made out to No Rust into RMC’s 

account. In short, Smith testified that he created this structure specifically so he 

could, in his sole discretion, quickly and conveniently commingle assets in No Rust’s 

name with those in RMC’s name. Of course, Smith contends that he only deposited 

No Rust’s checks into RMC’s accounts where appropriate. Though the Court does not 

find that Smith necessarily intentionally committed fraud through this practice, 

Smith’s mere statement on the record that his actions were always appropriate, 

especially in the absence of any specifics or legitimate business justification for the 

scheme, is not sufficiently credible to eliminate the very real possibility that RMC’s 

bank account contains recoverable property of the estate of unknown value. 

Raw’s postpetition sale of 10 million shares of stock for $1.2 million presents 

similar issues. Even though No Rust listed “Raw, LLC” as its fictitious name with the 

State of Florida and on the Petition, No Rust received nothing from the sale. This is 

concerning. The evidence shows that:

(1) No Rust and Raw are owned and operated by Smith;

(2) Both No Rust and Raw were parties to the PayMeOn Deal, which 

included several assets and interests of No Rust and no assets or 

interests of Raw;

(3) The PayMeOn deal provided No Rust with no direct 

consideration, but provided Raw with 10 million shares of 

PayMeOn stock;

(4) Raw has no bank account and its only business has ever been to 

hold the PayMeOn stock;

(5) Prepetition, No Rust listed “Raw, LLC” as its fictitious name;

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(6) On its Petition, No Rust listed “Raw, LLC” as its fictitious name;

(7) Postpetition, in April 2021, Raw sold the PayMeOn stock for $1.2 

million as part of a settlement agreement resolving the litigation 

stemming from the PayMeOn Deal;

(8) No Rust received nothing from the sale of the stock or as part of 

the settlement agreement; and

(9) The funds from the sale were provided to Smith personally.

In response, No Rust argues there is nothing to see here because the sale of 

the stock resulted from a litigation settlement involving Raw and that No Rust was 

uninvolved in the litigation and lacks an interest in the stock or in the proceeds 

resulting from the stock’s sale.52 This argument is based purely on Smith’s conclusory 

testimony. In short, No Rust’s argument boils down to Smith’s request to just trust 

him and let him keep the money. That is simply insufficient and not credible. The 

Court, therefore, still has significant concerns regarding whether the settlement 

constitutes a postpetition sale of undisclosed property of the estate without court 

approval.

Smith commingled No Rust’s assets with those of the Family and possibly 

himself, regularly transferred assets between No Rust and other Family members at 

his sole discretion and failed to maintain sufficient records showing the nature of 

those transfers and transactions. Other courts have found similar patterns “of 

intermingling funds and of expedient transfers, and the absence of proper record 

keeping” to be sufficient evidence to conclude that the debtor’s principal lacks sound 

business judgment and supports removal of the debtor as debtor in possession. See In 

52 (Doc. 175 at 12).

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re Rivermeadows Assoc., Ltd., 185 B.R. 615, 619 (Bankr. D. Wyo. 1995). Certainly, 

there is more than enough evidence available in the record here to arrive at a similar 

conclusion.

But this issue goes far beyond Smith’s poor practices and goes to the heart of

whether Smith can effectively and appropriately discharge his duty to the estate and 

its creditors. At best, Smith’s unusual business practices constitute prepetition 

incompetence and gross mismanagement of the affairs of No Rust. See 11 U.S.C. § 

1185(a). At worst, those practices commingled No Rust’s assets in a manner that has 

caused substantial loss to the estate for which there is little reasonable likelihood of 

recovery unless action is taken to pursue the funds. See 11 U.S.C. §§ 1112(b)(4)(A)–

(B), & 1185(a); Ashley River, 2015 WL 1540941, at *9; In re Harrell, No. 12-30112, 

2013 WL 1403484, at *1–2 (Bankr. S.D. Ga. Mar. 27, 2013).

These circumstances demand an investigation into whether the estate has an 

interest in any funds in RMC’s bank account, in the PayMeOn stock (or the proceeds 

from its sale), or in any other assets of the other Family members. But only a trustee 

or the debtor in possession would seemingly have the authority to investigate and 

prosecute these issues. See 11 U.S.C. §§ 544, 548, & 549; In re Pacific Gas & Elec. Co., 

281 B.R. 1, 13 (Bankr. N.D. Cal. 2002). The Subchapter V trustee does not have this 

power and Smith, given his testimony, lacks the inclination.53 See 11 U.S.C. § 1183(b).

Left in control, Smith, as the principal of No Rust, would have to investigate and, if 

necessary, sue himself and his own entities. Clearly, this is an incurable conflict of 

53 Section 1183 provides the Subchapter V trustee with powers far more limited than those of 

other trustees. See 11 U.S.C. §§ 704(a) & 1106(a).

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interest. “Where the debtor in possession has a conflict of interest in properly 

investigating and pursuing potential fraudulent transfers” or other claims that may 

benefit the estate, conversion is appropriate. Picacho Hills Utility Co., 518 B.R. at 82 

(cleaned up); In re Ancona, No. 14-10532 (MKV), 2016 WL 7868696, at *9–10 (Bankr. 

S.D.N.Y. Nov. 30, 2016); In re Sundale, Ltd., 400 B.R. 890, 900 (Bankr. S.D. Fla. 

2009). Accordingly, the Court concludes Smith’s conflict constitutes sufficient “cause” 

for conversion or removal.

B. The Plan justifies conversion.

No Rust is presently not operating. This is, at least in part, Smith’s choice as 

he decided it was in No Rust’s best interest to remain on the Property, which lacks 

power, instead of finding a new location. This leads the Court to have substantial 

concern over the prospects of No Rust’s reorganization and the feasibility of 

complying with a Subchapter V plan.

Under § 1112(b)(4)(J), the “failure to file a disclosure statement, or to file or 

confirm a plan, within the time fixed by this title or by order of the court” constitutes 

cause for conversion. Other courts have explained that causes exists under § 

1112(b)(4)(J) where the debtor’s plan is materially incomplete or otherwise 

insufficient. See, e.g., See In re Babayoff, 445 B.R. 64, 78 (Bankr. E.D.N.Y. 2011). 

“[W]here . . . the plan contains inaccuracies and vague areas, as well as 

misstatements and deficiencies, conversion is warranted.” Id. (cleaned up). Here, the 

Plan is materially incomplete and insufficient.

A confirmable plan must be feasible and provide “adequate means for the

plan’s implementation.” See 11 U.S.C. §§ 1123(a)(5) & 1129(a)(1). To satisfy this 

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requirement, a plan must—at a minimum—offer reasonable assurances of success. 

See In re Haas, 1362 F.3d 1087, 1090 (11th Cir. 1998); In re Midland Plaza Assocs., 

247 B.R. 877, 885 (Bankr. S.D. Fla. 2000). Here, the only means provided for the 

Plan’s implementation require that No Rust prevail in the Property Dispute.

The Court has previously explained precisely what No Rust must accomplish 

to win the Property Dispute:

No Rust seeks specific performance under the alleged Option. To win a 

suit for specific performance, “the plaintiff must do more than merely 

prove his case by a preponderance of the evidence ... he must prove the 

contract as alleged in his complaint by competent and satisfactory proof 

which must be clear, definite and certain.” Miller v. Murray, 68 So. 2d 

594, 596 (Fla. 1953) (emphasis added); see, e.g., Lupetto, Inc. v. South 

Bay Dev. Grp., LLC, 302 So. 3d 1061, 1063 (Fla. 3d DCA 2020).

Under Florida’s Statute of Frauds, certain types of contracts – including 

contracts for the sale of land, contracts for leases that exceed one year, 

and contracts that will not be performed within one year – are only 

enforceable if they are in writing and signed by the party against whom 

relief is sought. Fla. Stat. § 725.01; see Avery v. Marine Bank & Trust 

Co., 216 So. 2d 251, 252 (Fla. 2d DCA 1968) (“It is axiomatic that, under 

the Statute of Frauds, ... a mere oral contract for sale of lands is not 

enforceable in Florida.”). Here, the parties agree there is no written 

contract signed by Green Tech providing No Rust with the Option. 

Normally, that would end the inquiry, but No Rust argues that the facts 

of this case fall under the “partial performance” exception to the Statute 

of Frauds. To take a contract out of the Statute of Frauds under the 

partial performance exception, the party seeking enforcement of the oral 

contract must establish: (1) that an oral contract for sale was made; (2) 

payment of all or part of the consideration, whether it be in money or 

services; (3) possession by the party seeking enforcement; and (4) the 

making of valuable and permanent improvements upon the land with 

the consent of the owner, or, in the absence of improvements, the proof 

of such facts as would make the transaction a fraud upon the purchaser 

if it were not enforced. Miller, 68 So. 2d at 596.

If No Rust establishes the existence of a valid and enforceable oral 

contract including the Option, it will then have to show that it is entitled 

to specific performance by proving that it strictly complied with the 

applicable provisions of the contract and was ready, willing, and able to 

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perform under the contract at the time it exercised the Option. See, e.g., 

Shapiro v. Jacobs, 948 So. 2d 880, 882 (Fla. 3d DCA 2007).

So, to prevail, No Rust must prove:

(1) No Rust and Green Tech made an oral contract providing 

No Rust the option to purchase the Property;

(2) No Rust provided at least part of the consideration under 

the contract;

(3) No Rust possessed the Property;

(4) No Rust made valuable and permanent improvements 

upon the land with the consent of Green Tech or, 

alternatively, facts that would make the transaction a 

fraud upon No Rust if it were not enforced; and

(5) No Rust complied with all applicable terms of the contract 

and was ready, willing, and able to exercise its rights and 

perform the contract at the time it exercised its rights.

No Rust, 2021 WL 4314221, at *3–4. 

This is an undeniably high burden for No Rust to satisfy, and it is certainly far 

from a given that it will. Of course, the Court believes No Rust may succeed, that is 

why the Court denied Green Tech’s request for summary judgment, but that does not 

mean No Rust’s success is reasonably likely. No Rust’s Plan depends on victory in the 

Property Dispute, but because No Rust’s chances of prevailing in the Property 

Dispute are not reasonably likely, the Plan is not feasible and fails to provide 

adequate means for its implementation. 

More fundamentally, however, the Plan lacks any explanation of precisely how 

No Rust will ramp up, particularly because No Rust has not really conducted much

business. No Rust offers no estimate of the amount of capital investment required for

it to begin operating, a business plan, projections showing profitability allowing it to

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pay its creditors, or substantive information regarding the availability of the capital 

other than a vague promise by Smith to fund the Plan.54 No Rust provides woefully 

insufficient information required by its Subchapter V plan. See 11 U.S.C. § 

1190(1)(C). 

The Court finds that the Plan, as presented, is not feasible, fails to provide 

adequate means for its implementation, and does not include information that is 

required in every Subchapter V Plan. As such, the Plan’s material insufficiency 

constitutes cause for conversion.

C. The Schedules justify conversion.

The Schedules contains several clear deficiencies and possible areas of concern. 

The clearest deficiency in the Schedules is No Rust’s failure to schedule a nearly 

$492,000 debt owed to it by RMC for which No Rust provides no explanation.55 It is 

notable that No Rust neglected to account for a debt owed to it by a company owned 

and controlled by Smith. The failure to include the debt in the Schedules, without 

explanation, constitutes an unexcused failure to disclose material information in the 

Schedules. Such a failure, whether willful or reckless, supports conversion. See 11 

U.S.C. § 1112(b)(4)(F); In re Korn, 523 B.R. 453, 467 (Bankr. E.D. Pa. 2014) (holding 

that, while the bankruptcy court could infer that the debtor’s “glaring omissions” from 

his schedules were deliberate, a mere finding of recklessness was sufficient cause for 

conversion (citing Bullock v. BankChampaign, N.A., 569 U.S. 267 (2013)).

54 Ironically, this suggests Smith may use the money earned from the postpetition sale of the 

PayMeOn stock to fund the Plan.

55 (Docs. 131-25; 160 at 199:16–203:9).

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In addition, there are several potential additional discrepancies and areas of 

concern that are worthy of investigation, namely whether No Rust should have 

scheduled the RMC checking account, accurately identified its assets, and properly 

scheduled a debt owed personally to Smith’s sister from before No Rust was even 

founded.56 Though the Court does not find, at this time, that those issues are 

necessarily cause for conversion or removal on their own, the Court does find that 

those issues are worthy of further investigation. Based on Smith’s conflict of interest 

in investigating these matters, removal or conversion is necessary.

D. The Monthly Operating Reports justify conversion.

The Subchapter V Trustee testified and included in her final brief that (1) as 

of December 21, 2021, No Rust had not provided the Subchapter V Trustee with its 

2019 or 2020 tax returns, (2) few documents were made available to the Subchapter 

V Trustee and the U.S. Trustee, (3) the Subchapter V Trustee is of the opinion that 

No Rust failed to satisfy its obligation to timely file tax returns and other required 

government filings, and (4) No Rust provided insufficient monthly operating reports. 

The Court previously found that the monthly operating reports were insufficient and 

ordered their amendment to include “all required information.” Despite No Rust’s 

timely amendments prior to the evidentiary hearing, the Subchapter V Trustee still 

testified that she had not been presented with “fulsome monthly operating reports.”57

This constitutes cause for conversion. 

56 (Docs. 19 at 16; 131-9; 160 at 144:10–155:19, 191:21–193:4; 170 at 25:4; 188 at 210:8–25).

57 (Docs. 77; 80–85; 160 at 17:8–21:25, 25:9–13; 28:17–30:14, 33:7–14; 180).

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First, the “unexcused failure to satisfy timely any filing or reporting 

requirement established by this title or by any rule applicable to a case under this 

chapter” is cause for conversion. See 11 U.S.C. § 1112(b)(4)(F). No Rust’s failure to 

timely provide the Subchapter V Trustee and U.S. Trustee with all of the required 

filings, reports, and information—particularly “fulsome monthly operating reports”—

was unexcused and supports a finding of cause. See, e.g., In re Landmark Atl. Hess 

Fam, LLC, 448 B.R. 707, 716–17 (Bankr. D. Md. 2011) (holding that the U.S. 

Trustee’s opinion that the debtor’s monthly operating report “contain[ed]

deficiencies” was sufficient to find cause under § 1112(b)(4)(F)).

Second, the “failure to comply with an order of the court” is cause for 

conversion. 11 U.S.C. § 1112(b)(4)(E). The failure to comply with a court order need 

not be willful or the product of bad faith. See Babayoff, 445 B.R. at 80 (holding that a 

debtor’s failure to timely file monthly operating reports in violation of a court order, 

even without a finding of willfulness or bad faith was sufficient to constitute cause 

under § 1112(b)(4)(E)). Here, the Court ordered No Rust to amend its deficient 

monthly operating reports to include all required information. Though No Rust timely 

amended, the Subchapter V Trustee continues to testify that she has yet to be 

presented with “fulsome monthly operating reports.” The amended reports, therefore, 

are still deficient. The Court does not question No Rust’s or its counsel’s desire to 

provide as complete a picture as possible in the monthly operating reports, but the 

fact remains that those who have been tasked with understanding and ascertaining 

No Rust’s financial position have been unable to do so through the monthly operating 

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reports, even as amended. As such, despite No Rust’s attempt to amend its reports, 

the insufficiency of the amended reports still constitutes cause for conversion under 

§ 1112(b)(4)(E).

Despite what may or may not be No Rust’s best efforts, its failure to maintain 

adequate books and records has seemingly prevented it from providing all the 

required information necessary to apprise the creditors, Subchapter V Trustee, U.S. 

Trustee, and the Court with all the necessary information to understand its financial 

condition. This inability is cause for conversion under §§ 1112(b)(4)(E) and (F).

E. Smith’s prepetition failure to get a signed and written contract that 

includes an option to purchase the Property constitutes incompetence or 

gross mismanagement.

Based on the evidence provided, the Property Dispute can only have arisen in 

one of two ways. Either (1) Smith is lying that Green Tech granted No Rust an option 

in consideration for the assignment to purchase the Property, or (2) Smith failed to 

have the agreement signed in writing. For purposes of this analysis, the Court will 

assume that No Rust and Smith have been truthful in their version of events and No 

Rust believes Green Tech orally promised an option to buy the Property from Green 

Tech.

The failure to document the purported option by a signed, written contract with 

Green Tech is Smith’s fault and singlehandedly thwarted No Rust’s business 

prospects before they even began. Now, as Smith and No Rust acknowledge, they 

must win the Property Dispute to have any hope at salvaging No Rust. Though the 

Court denied summary judgment in favor of both parties in the Property Dispute, No 

Rust or Smith must meet an extremely high burden to succeed in that case.

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Regardless of whether No Rust may ultimately prevail in the Property dispute, the 

only reason it is in this position in the first place falls squarely on Smith’s shoulders. 

As a result of this incompetence and gross mismanagement, No Rust is unlikely to be 

able to successfully reorganize. See 11 U.S.C. § 1112(b)(2)(A).

III. Conversion is in the best interests of the estate.

The Court finds both that (1) there is sufficient cause to remove No Rust as the 

debtor in possession or to convert the case to a Chapter 7, and (2) the requirements 

of § 1112(b)(2), which would prevent conversion even in the face of cause, have not 

been satisfied. Therefore, the Court must either remove Smith or convert the case. 

See 11 U.S.C. §§ 1112(b)(1) & 1185(a) (both stating that “the court shall” remove the 

debtor or convert the case). Here, the most appropriate conclusion is conversion.

As the Subchapter V Trustee articulated in her final brief, No Rust is an entity 

that, at best, holds an interest in a single piece of real estate, lacks any real 

production facility, and has failed to provide a “viable solution” to becoming an 

operational business.58 The statements of Smith and what little information is 

provided in the monthly operating reports seemingly support this conclusion. There 

appears to be no business to reorganize and, consequently, no reason to place the 

Subchapter V Trustee in control of No Rust’s assets. If the Court removed No Rust as 

the debtor in possession, in all likelihood, the Subchapter V Trustee would have to

liquidate the assets of the estate and pursue any claims that the trustee might believe 

58 See (Doc. 180 at 2).

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are in the interest of the estate. This is best accomplished through a Chapter 7. 

Therefore, conversion is in the best interest of creditors and the estate.

Accordingly, the Court ORDERS:

1. The Motion to Convert (Doc. 116) is GRANTED.

a. This case is CONVERTED to a Chapter 7 case.

b. If applicable, the Debtor shall remit to the clerk of court the 

$15.00 trustee surcharge fee prescribed by the Judicial 

Conference of the United States (if not previously paid by the 

debtor). 

c. No Rust shall:

i. Turnover to the Chapter 7 trustee all records and property 

of the estate under its custody and control as required by 

Fed. R. Bankr. P. 1019(4);

ii. Within 30 days of the date of this Order, file an accounting 

of all receipts and distributions made. A copy of this report 

must be served on the U.S. Trustee; and

iii. Within 14 days of the date of this Order, file a schedule of 

unpaid debts incurred after the commencement of the 

Chapter 11 case as required by Fed. R. Bankr. P. 1019(5) 

and a supplement matrix and certification in the format 

required by Local Rule 1019-1(B). No Rust or No Rust’s 

counsel is required to provide notice to those creditors 

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under Local Rule 1019-1(B). Failure to comply may also 

result in sanctions being imposed by the Court. Debts not 

listed or noticed will not be discharged. A copy of this 

schedule shall be served on the Chapter 7 trustee.

iv. Within 14 days of the date of this Order, file the statements 

and schedules required by Fed. R. Bankr. P. 1019(1)(A) and 

1007(c) and in accordance with Local Rule 1019-1(B).

d. Under Local Rule 2016-1(C)(2), the Debtor’s attorney, any 

examiner or trustee appointed by the Court, or any other 

professional person employed under 11 U.S.C. §§ 327 or 1103 

shall, within 90 days after the date of the post-conversion 

meeting, file an application for compensation of outstanding fees 

and expenses incurred during the Chapter 11 administration 

including an application justifying retention of any retainer 

received which has not been approved by a prior award. Any 

retainers received which are not approved will be subject to 

turnover to the Chapter 7 trustee. Counsel for No Rust shall 

notify all such professionals of this deadline by serving them with 

a copy of this Order.

e. No Rust shall provide notice to affected parties of the deadline set 

pursuant to Local Rule 1019-1(J)(1) for filing by a 

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nongovernmental unit a request for payment of an administrative 

expense.

f. Failure of No Rust to comply with the provisions of this Order my 

result in dismissal of this case without further hearing or notice.

2. The Motion to Remove (Doc. 70) is DENIED AS MOOT.

# # #

Copes to Stacy Bressler, Esq., who is directed to serve this Order on all interested parties.

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