Source: http://www.iciclesoftware.com/worldplus/WPBRAIssues/WPConsolidReply.html
Timestamp: 2020-04-09 15:59:10
Document Index: 479430534

Matched Legal Cases: ['§363', '§539', 'art, 34', 'art, 1073', '§521', '§704', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1', '§331', '§1361', '§1361']

World Plus - Trustee's Consolidated Reply
CONSOLIDATED REPLY TO:
(1) OPPOSITION TO MOTION FOR RECONSIDERATION AND RENEWED MOTION FOR SUMMARY JUDGMENT AND "SUPPLEMENT" TO OPPOSITION
(2) OPPOSITION TO TRUSTEE'S MOTION FOR ENTRY OF PARTIAL FINAL JUDGMENT
(3) REQUEST TO RESPOND TO REPLY TO OPPOSITION TO MOTION FOR SUMMARY JUDGMENT
(4) OPPOSITION TO MOTION TO STRIKE UNTIMELY OPPOSITION
(5) OPPOSITION TO MOTION FOR SUMMARY JUDGMENT AS TO PERMANENT INJUNCTION
The Trustee submits the this Consolidated Reply to the following pleadings served November 8, 1996:
(1) The Opposition to Motion for Reconsideration and Renewed Motion for Summary Judgment and the "Supplement" to those pleadings dated November 8, 1996.
(2) The Opposition to Trustee's Motion for Entry of Partial Final Judgment.
(3) The Request to Respond to Reply to Opposition to Motion for Summary Judgment.
(4) The Opposition to Motion to Strike Untimely Opposition.
(5) The Opposition to Motion for Summary Judgment as to Permanent Injunction.
The Trustee responds to these numerous pleadings with this Consolidated Reply because (a) there is very substantial factual overlap among the various issues, (b) it will save substantial paper, and (c) it will more clearly frame for the court the issues to be resolved in this case.
The Trustee will demonstrate in this pleading that, despite the extended efforts by the defendants to avoid summary judgment, there are no genuine, material issues of fact and that the Trustee is entitled to prevail on all of the claims before the court under the five matters described above.
The Trustee notes the following matters as an overview to the present issues:
(a) There was a trial on the 11 U.S.C. §363(h) action. Findings of Fact and Conclusions of Law were issued in that case. Those Findings and Conclusions are res judicata in this second stage of the case, and operate as collateral estoppel in other proceedings to which the debtor, Steve Bonham and the Trustee are parties. The debtor and Steve Bonham are not permitted to re-litigate those issues. Those matters are finally decided.
It is a fundamental principle of jurisprudence that material facts or questions which were directly in issue in a former action, and were there admitted or judicially determined, are conclusively settled by a judgment rendered therein, and that such facts or questions become res judicata and may not again be litigated in a subsequent action between the same parties or their privies.
46 AM.JUR.2D "Judgments," §539 at pp. 538-53 (footnotes omitted). See generally Lytle v. Household Mfg., Inc., 494 U.S. 545, 108 L.Ed.2d 504, 110 S.Ct. 1331. Even the submission of new evidence to address a matter already litigated is not permitted, Commissioner v. Sunnen, 333 U.S. 591, 92 L.Ed. 898, 68 S.Ct. 715. These are long settled rules of law. To a large extent, the arguments made by the defendants are barred by issue preclusion, both as a matter of res judicata and collateral estoppel.
(b) While the defendants represent themselves, they do so as a matter of choice. They had counsel, they had agreement from the court and the Trustee as to how that counsel was to be paid, and the defendants elected to discharge that attorney. In none of the pleadings at issue under this Consolidated Reply do they offer any specific excuse for their failure to timely file oppositions and replies. Instead, they simply recite that they are representing themselves. The Trustee is unaware of any case or rule which excuses pro se defendants from the application of the Bankruptcy Rules and Local Bankruptcy Rules.
(c) On a motion for summary judgment, the movant initially bears the burden of proof. However, once that burden is met, the burden of proof shifts to the nonmoving party, who must then establish that there are genuine, material issues of disputed fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-323 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-587 (1986). In meeting that burden,
Defendants cannot withstand a motion for summary judgment by simply asserting that the facts are disputed. Sufficient evidence supporting a claimed fact must be submitted to create a genuine fact issue.
Pailila v. Hawaii Dept. of Land and Natural Resources 639 F.2d 495, 497 (9th Cir. 1981).
[The nonmoving party] must present affirmative evidence in order to defeat a properly supported motion for summary judgment.
Tidmore Oil Co. v. BP Oil Co./Gulf Products Division, a Division of BP Oil Co., 932 F.2d 1384, 1387 (11th Cir.), Cert. denied 502 U.S. 925, 112 S.Ct. 339, 116 L.Ed.2d 279 (1991).
The nonmoving party may not defeat a properly supported motion for summary judgment by relying on self-serving and conclusory statements concerning the nature of the facts.
In re St. Theresa Properties, Inc., 28 C.B.C.2d 1057, 1062 (B.C. SDNY 1993), citing Wyler v. United Sates, 725 F.2d 156, 160 (2d Cir. 1983).
As the Supreme Court has explained, the non-moving party must come forward with specific facts and "must do more than simply show there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 576. If the non-moving party fails to do so, summary judgment, if appropriate, shall be entered against him.
In re St. Theresa Properties, Inc., 28 C.B.C.2d 1057, 1062-3.
Both Tidmore and Pailila are cited in Matter of Stewart, 34 C.B.C.2d 1066, 1074 (M.D. Ga 1995). There, the defendant, in opposing a summary judgment motion to recover the cash value of a life insurance policy, submitted an affidavit reciting only that he did not have an interest in the life insurance policy at the petition date, and had conveyed it away more than a year earlier. Stewart did not describe to whom he had transferred the policy, or for what value. He offered no documents evidencing the transfer. The Stewart court, ruling that mere conclusory allegations in an affidavit were insufficient, and relying on Tidmore and Pailila, granted summary judgment against the defendant. Stewart, 1073-1074.
To avoid summary judgment here, the Bonhams must produce something more than conclusory allegations or unsupported assertions ("I can swear my equity in the Bobcat exceeds $10,000."). If they fail to do so, the Trustee is entitled to summary judgment.
2. Opposition to Motion for Reconsideration and Renewed Motion for Summary Judgment and the "Supplement" to those pleadings dated November 8, 1996.
Many of the allegations of disputed fact raised by the defendants in these pleadings are simply irrelevant to the issues before the court in this consolidated proceeding. For example, through a series of letters (Exhibits C, D, E and F to the defendants' Opposition to Motion for Reconsideration and Renewed Motion for Summary Judgment) the defendants attempt to paint a picture of a trustee who refuses to help the debtor prepare her schedules. That's not relevant to the issues any of these motions presented to the court. Like many of the defendants' disputed facts, this is a straw man argument. It has no direct relevance. The only faint, indirect relevance would arise if the defendants did not have access to their records. But the defendants have access to their records at the law offices of the Trustee's attorneys. There are conditions attached to that access, it is true, but only those necessary in the circumstances of this case.
Regarding the schedules and statements, however, it is and remains the debtor's duty to prepare and file schedules, not the Trustee's. 11 U.S.C. §521(1); Bankruptcy Rule 1007(b)(1) (". . . the debtor, unless the court orders otherwise, shall file schedules of assets and liabilities. . ."). Where the debtor has defaulted in performance, the court can order the trustee to prepare schedules instead. Bankruptcy Rule 1007(k). That has not occurred here. The trustee's duties include examination of the debtor regarding her schedules. 11 U.S.C. §704(4). In a case where, as here, the trustee from the outset has been strongly adverse to the debtor, to the extent of moving to convert the case from Chapter 11 to Chapter 7, and where the Trustee, in the performance of his duties, has encountered evidence of criminal conduct, it is completely inappropriate for the Trustee to prepare or assist in preparation of schedules. The critical missing schedules involve personal property, and can be created by the debtor inventorying the contents of the defendants' home with pen and paper.
The defendants have submitted affidavits dated November 7, 1996 in support of their pleadings. Steve Bonham testified in
his affidavit that he had "verifiable income" for the 13 years from 1976 through 1988 "well in excess of" $500,000. Steve Bonham Affidavit dated September 6, 1996, Par. 2. He does not state whether that is gross or net income. His average income for those 13 years would have been about $38,500. While respectable, it is hardly spectacular. Steve Bonham obviously had expenses during that period. The gross income figure is meaningless absent proof he was able to save any of that $38,500 per year. Once some savings or investments are established, the defendants must next trace those monies into the personal property at issue here. Since all of the assets at issue in this proceeding were purchased after 1988, Steve Bonham's income before that date is relevant only if a portion of that income can be traced into those assets. The defendants have failed to provide any of that evidence. The evidence might support an inference that Steve Bonham has additional equity in the personal property at issue here if the defendants' could show that monies remained in their accounts past 1988. They have not.
In any event, for the period 1990-1992 and 1994-1995, the court has already found that Steve Bonham drew benefits from World Plus in excess of $430,000; see Findings of Fact and Conclusions of Law. Those benefits were summarized in the Trustee's Trial Brief in that case. The table is replicated here:
Direct payments from World Plus to S & S Services (See Exhibits E-1 to E-5)
Monies distributed to S & S Services by Credit Card Drafts (See Exhibit E-6)
Monies distributed to Shane Bonham by World Plus through credit cards (See Exhibit F-1)
Monies distributed to Stephanie Bonham by World Plus through credit cards (See Exhibit F-2)
Monies contributed by World Plus to Steve Bonham's truck (See Exhibit F-3)
Personal heating oil expenses paid by World Plus (See Exhibit F-4)
Personal electric Utility expenses paid by World Plus (See Exhibit F-5)
Annual life insurance premiums paid by World Plus (duration of payments not known) (See Exhibit F-6)
Personal credit card expenses of Steve Bonham paid by World Plus (See Exhibit F-7)
"Rent" payments under "lease" for personal residence of Steve Bonham paid by World Plus (See Exhibit F-9)
First truck purchased for Shane by World Plus (See Exhibit G-1)
Second truck purchased for Shane by World Plus (See Exhibit G-2)
First auto purchased for Stephanie by World Plus (See Exhibit G-3)
Second auto purchased for Stephanie by World Plus (See Exhibit G-4)
Payments on 1992 Bayliner to First National Bank of Anchorage by World Plus (See Affidavit of Larry Compton in Support of Summary Judgment)
Payments on 1993 Corvette to GMAC by World Plus (See Affidavit of Larry Compton in Support of Summary Judgment)
Payments made on Itasca Motorhome to John Deere Credit by World Plus (See Affidavit of Larry Compton in Support of Summary Judgment)
TOTAL DIRECT AND INDIRECT BENEFITS TO STEVE BONHAM
If any part of Steve Bonham's $38,500 per year did remain in an account until 1990, he was more than reimbursed over the following years. In addition to these offsets, Steve Bonham would also have to show that any savings he did accrue weren't generated or preserved through disbursements from World Plus.
Absent all of that evidence, Steve Bonham's $38,500 per year for the 13 years between 1976 and 1988 are meaningless.
Steve Bonham testified in his affidavit that he had "income" for the 8 years from 1988 through 1995 "in excess of" $10,000 a year. Steve Bonham Affidavit dated November 7, 1996, Par. 3. He does not state whether that is gross or net income. Since he was self-employed for that period, the court might reasonably infer it is gross income. The same relevancy and proof issues that afflict Steve Bonham's evidence for his income from 1976-1988 affect his evidence for 1988 to 1995. The Trustee incorporates them here. Without the crucial links showing there was net disposable income after living expenses, and without some showing that the net disposable income can be traced into the assets, the evidence is irrelevant. And then the defendants must prove that any net income that was available isn't more than offset by the $430,000 received by Steve Bonham for the five of those eight years.
Steve Bonham testified in his affidavit that he often ("over half of my paychecks") signed his income over to his wife who would cash them or deposit them into the World Plus or Atlantic Pacific accounts, as distinguished from the S & S Services account. Steve Bonham Affidavit dated November 7, 1996, Pars. 4-5. He states his bank account was "shared" with World Plus. Steve Bonham Affidavit dated November 7, 1996, Par. 6.
First, if Steve Bonham monies were deposited into the Atlantic Pacific account, it didn't happen until 1993. The Atlantic Pacific account did not exist before 1993.
Second, if Steve Bonham elected to commingle his monies with those of World Plus or Atlantic Pacific, he may well have forfeited any claim to those monies. The World Plus and the Atlantic Pacific accounts were corporate accounts. His deposit of personal funds into the corporate accounts would appear to be either a loan to the corporation or a purchase of stock in the corporation.
Third, if Steve Bonham elected to "save" his money at World Plus or Atlantic Pacific, he "drew out" far more than he "saved," as shown by the Findings of Fact and Conclusions of Law and table set out above.
Fourth, both the World Plus account at Key Bank and the Atlantic Pacific account at First National Bank of Anchorage were repeatedly overdrawn for the years in question. As is shown by the Affidavit of Carleen Mangold filed with this pleading, those accounts were often overdrawn. If Steve Bonham "saved" his money at World Plus, the "bank" "failed."
Fifth, World Plus was a Ponzi scheme, as the court has previously found. It was insolvent - its liabilities exceeded its assets - not later than the first time it wrote a check to an investor. If Steve Bonham "invested" his money in World Plus by commingling its funds with his, he is an investor in World Plus as is payable as such. No more than any other creditor, he cannot "trace" monies into specific assets. He is just another unsecured creditor.
Steve Bonham testified in his affidavit that he used some of the money he had "saved" in the World Plus account to purchase the 1995 Harley. Steve Bonham Affidavit dated November 7, 1996, Par. 7. As shown above, there was no money in the World Plus account as of August 17, 1994; the account on that date was overdrawn by $42,410. Affidavit of Carleen Mangold. The 1995 Harley-Davidson motorcycle was purchased on December 14, 1994 from Farthest North Harley-Davidson Outpost ("H.D. Outpost") for a purchase price of $17,408.45. Findings of Fact and Conclusions of Law, Finding No. 10. Plainly any "savings" Steve Bonham believes he had in the World Plus account had been expended earlier. Steve Bonham's affidavit testimony cannot be reconciled to the known facts.
At Steve Bonham Affidavit dated November 7, 1996, Par. 8, he opines that the 1992 Harley was "for the majority purchased by trade." Again, the hard, documentary evidence and earlier findings in this case do not support Steve Bonham's opinion. The 1992 Harley-Davidson motorcycle was purchased on or about February 22, 1992. Findings of Fact and Conclusions of Law, Finding No. 13. This court has already found that $13,250 of the purchase price for the 1992 Harley came from World Plus monies. Finding No. 14. The evidence is particularly damning since the instruments used for purchase were all drawn on the World Plus account, and bore the notation "Cash for Motorcycle" or "Deposit for Motorcycle." See Finding No. 14.
At Steve Bonham Affidavit dated November 7, 1996, Par. 9, he swears that "my equity in the Bobcat exceeds $10,000." He offers no proof of beyond that bare allegation. The Trustee has proven, and the court has issued findings, concluding that the Bobcat and its accessories were purchased with World Plus monies. Against that, Steve Bonham offers only his sworn statement. Steve Bonham's effort to introduce new evidence (if it is new evidence) at this date is barred by res judicata. If the court determines that it is somehow admissible, and that for some reason not known to the Trustee, res judicata does not apply, then the Trustee is still entitled to summary judgment because the statement represents nothing more than "self-serving and conclusory statements concerning the nature of the facts" under St. Theresa Properties, cited in Part 1(c) of this Consolidated Reply.
While the Steve Bonham Affidavit dated November 7, 1996, Par. 10 swears to the contents of the defendants' Memorandum in Opposition, the Trustee is unable to identify any allegations of fact relevant to issues involving Steve Bonham's equity in the personal property. The arguments of law, as distinguished from facts, are discussed below.
Finally, at Steve Bonham Affidavit dated November 7, 1996, Par. 11, he asserts there are "genuine, material and factual issues in dispute." Again, this is precisely the kind of "self-serving and conclusory statements concerning the nature of the facts" referred St. Theresa Properties and Part 1(c) of this Consolidated Reply and does not advance the defendants' position, or assist them in avoiding summary judgment.
Raejean Bonham also filed an affidavit dated November 7, 1996. A brief review of that affidavit will show that it, too, fails to raise a material issue of fact relevant to the summary judgment motion.
At Raejean Bonham Affidavit dated November 7, 1996, Par. 2, she makes the bare assertion that "There exist genuine issues of material fact in dispute" without any additional detail. This is another example of a "self-serving and conclusory statements concerning the nature of the facts" referred to in St. Theresa Properties and Part 1(c) of this Consolidated Reply and does not advance the defendants' position, or assist them in avoiding summary judgment.
At Raejean Bonham Affidavit dated November 7, 1996, Par. 3, she asserts she can prove the calculations are in error. The statement is a conclusion and is entirely unsupported. If she has evidence that the Trustee has erred in his calculations, she must set them forth in the form of competent evidence or the Trustee is entitled to summary judgment. The bare allegation does not assist her defense at all.
At Raejean Bonham Affidavit dated November 7, 1996, Par. 4, she states that "I can prove I stand to suffer . . . loss" if the motion is granted. There are four things wrong with this sworn statement: (1) it is unsubstantiated; see Part 1(c) above; (2) it implies that she has some interest in the proceeds, when she plainly does not; (3) to the extent she proves she has a greater interest in the proceeds, she is proving the Trustee is entitled to a larger recovery as against her spouse; and (4) assuming it were true it is irrelevant to the motion for summary judgment.
At Raejean Bonham Affidavit dated November 7, 1996, Pars. 6 - 8, she states generally that she purchased "things" with monies from World Plus and then reimbursed World Plus with monies either from S & S Services or from "my husbands [sic] payroll checks." She also states she used the World Plus account as a savings account for herself and her husband. While these are devastating admissions from a debtor who has earlier urged the court that the corporations were separate entities, Eagle Air, Inc. v. Corroon and Black/Dawson and Co. of Alaska, Inc., 648 P.2d 1000 (Alaska 1982), they do not assist her in avoiding summary judgment.
First she cites no specific instances where either defendant or S & S Services "reimbursed" World Plus for any of the documented $430,000 the court has found were expended by World Plus for the benefit of the defendants. To avoid summary judgment, the defendants must provide specific evidence, not vague and unsubstantiated allegations. These are just "self-serving and conclusory statements concerning the nature of the facts" and do not allow the defendants to avoid summary judgment. See Part 1(c) of this Consolidated Reply, supra.
Second, the Trustee, in the course of his review of the records, has not discovered a single instance where any of the three kinds of "reimbursements" or "savings" has occurred. See Affidavit of Larry D. Compton.
Third, and specifically with regard to the alleged deposits of her husband's paychecks, her husband, by his own testimony, was self-employed as S & S Services after 1988. He quit his job at the University of Alaska Geophysical Institute. There were no "paychecks."
Fourth, like her husband's claim of "savings" the debtor's sworn testimony founders on the realities of repeatedly overdrawn accounts, the legal effects of shareholder's payments to a corporate account, and the absence of any shred of proof that the defendants accrued savings even vaguely resembling the $430,000 already proven to have been drawn down. As the court observed in the context of the debtor's claims of millions of frequent flyer miles at the hearing on the motion to convert the case, "It doesn't pencil out."
(a) Specific Issues: Not All the Assets Have Been Sold.
Defendant Steve A. Bonham swears to the truth of the allegations of fact set out in his various pleadings. See Affidavit of Steve A. Bonham dated November 7, 1996, Par. 10. That requires a brief review of what amount to assertions of disputed fact in those pleadings.
Steve Bonham asserts "not all of the assets have been seized." Memorandum in Support of Opposition to Motion for Reconsideration ("Memorandum"), p. 2. True, but irrelevant. All of the assets that are the subject of this case have been sold. The motions before the court require it to determine whether there is a legal basis for the court's disinclination to have been sold. There is no question of fact there, and the defendants offer no legal basis for such a result. Interim compensation is expressly authorized by 11 U.S.C. §331.
Steve Bonham asserts he is entitled to know what other property will be "seized" and sold. Memorandum, p. 3. He cites no authority for such a requirement. The Trustee is unaware of any rule of law which requires him to tell a defendant, in advance, what a plaintiff intends to do, particularly where, as here, through the continued failure of the debtor to file a personal property schedule, the Trustee is uncertain what property exists, and where, as here, there has been an apparent pattern of transfers of assets, pre-petition and post-petition, with the goal of complicating further the Trustee's tasks. Mr. Bonham may be certain that if the Trustee can trace World Plus or Atlantic Pacific monies into assets, the Trustee will act to recover those assets. Mr. Bonham may also be certain that if the Trustee recovers a money judgment against him, and he does not pay the money judgment, the Trustee will proceed by levy and execution.
(b) Specific Issues: The House Has Not Been Sold.
Steve Bonham attempts to build an argument based upon the sale of the Bonhams' personal residence. He confuses the main case and at least two adversary cases - this consolidated proceeding and the recently commenced adversary proceeding for the sale of the house in Case No. F95-00897-185-HAR, filed October 21, 1996. Bonham makes much of the statement in the Trustee's Memorandum in Support of Reconsideration that the real property action had not yet been filed when, as event would have it, the case was filed the same day as the Memorandum. He does not explain how that coincidence of dates is relevant to the issues presented by this motion. Nothing in the pending motions will adjudicate the real property case.
From the same position, the defendants attack the Trustee's credibility, arguing that since the Trustee didn't have records and blamed the debtor, he is trapped in a lie. In fact, the Trustee still has not received any records from the debtor since the date of the order for conversion. Not a single piece of paper. The Trustee has obtained records from other sources. As the Trustee continues with the reconstruction of the business records, additional evidence is found.
The defendants first assume that all of the records must come from them, and that by their continued failure to produce records, they can hamstring administration of this case. The defendants next argue that since they have not succeeded in that effort, the Trustee must be lying, and therefore should be disbelieved. The chain of argument is riddled with non sequiturs and absurdities, not least of which is the premise that by refusing to produce, for example, 1993 checking records, the Trustee can't use that information if he obtains it or portions of it from another source.
Steve Bonham next asserts the court entered its Order Deferring Ruling based upon his opposition. That's not what the court's earlier Order says. The very right of the court to consider the untimely Opposition is presently before the court.
Steve Bonham denies he is being obstructive and dilatory, and protests the Trustee's right to seek summary judgment. Memorandum, 6. The Trustee reminds the court that the last time the Bonhams had an opportunity to proceed to trial they didn't even bother to bring their copy of the Trustee's exhibits to trial. The Trustee cannot imagine clearer evidence that the Bonhams' primary tactics are to delay and make administration of this case as expensive as possible. They don't want a trial. They want the delay and expense of a trial to be imposed upon the Trustee and the bankruptcy estate.
(c) Specific Issues: Accounting.
Steve Bonham argues that the court should infer bad faith by the Trustee in his dismissal of the claim for an accounting. Once again, Mr. Bonham reveals his true strategy. He has sworn to the court and to the Trustee that he doesn't have any business records, and that he doesn't know anything about the finances of his own business let alone the finances of World Plus or Atlantic Pacific. While, as Mr. Bonham notes, the Trustee is deeply suspicious of Mr. Bonham's claims of ignorance, the Trustee will not expend the estate's assets in a futile effort to obtain information from those who claim not to have it. Instead, the Trustee is attempting to reconstruct the records the debtor and Steve Bonham should have from original sources. Those efforts are ongoing.
Mr. Bonham's efforts to argue that the dismissal of the claim for an accounting is somehow sinister is disingenuous. Since he has sworn he cannot provide an accounting, he cannot be heard to complain that the Trustee is abandoning his efforts to compel him to do so.
(d) Specific Issues: Untimely Opposition.
The defendants, in their Memorandum and in their separate Opposition to the Trustee's Motion to Strike Untimely Opposition, "humbly beg" the court to excuse their violation of court rules, reminding the court, unnecessarily, that they do not have an attorney. They offer no other excuse or explanation for this most recent violation of the bankruptcy court rules.
As the court knows, these parties have been involved in litigation for nearly a year now. They are hardly novices at litigation. Nor are they novices at persuasive skills. But they have no attorney as a matter of choice, having fired the debtor's lawyer. They have offered no other excuse for their default. They have offered no explanation of why the plain language of AK LBR 9013-1(d) should not apply. The untimely opposition should be stricken.
(e) Specific Issues: Liquidated Sum.
The defendants argue that all of the personal property in this adversary case - as distinct from all of the personal property in the main case - has not been liquidated. The only item of property that has not been reduced to cash is the boat trailer (see Note 4, supra) and the only issue there is the court's approval of the application.
The defendants do not identify any other unsold asset which is the subject of this adversary case. Their objections fail.
(f) Specific Issues.
The defendants plainly do not understand bankruptcy procedure regarding judgments. The Trustee moved for an order for summary judgment. If that Order was entered, the Trustee would have next moved for entry of a final judgment. On the Trustee's understanding, there were no further contested issues in adversary F95-00897-004. If the court rules as to some but not all of the issues on summary judgment, then the case may or may not be suitable for partial judgment under Bankruptcy Rule 7054(b). Since the court seemed to invite such a motion, the Trustee has filed it as well.
(g) New Issues.
The defendants argue that there is a genuine fact issue as to the extent of the proceeds they are entitled to recover, thereby bringing in by the backdoor their untimely opposition to the Trustee's original motion for summary judgment. Assuming the court decides to entertain those untimely issues, as has been demonstrated above, the defendants attempt to avoid summary judgment with vague and conclusive allegations. They offer no specific solid facts whatsoever. "Self-serving and conclusory statements," St. Theresa Properties, 1062, are insufficient to meet their burden. And, as shown above, even if the court were to accept those self-serving and conclusory allegations, their are prior factual determinations in this case which remove any question of fact as to the right to the proceeds. There is no evidence of any kind that any monies went from Steve Bonham to World Plus or Atlantic Pacific, beyond the vague allegations. And the court has already found that $430,000 or more went from World Plus to the defendants.
The defendants argue that nothing has changed since the court's April 30, 1996 denial of the Trustee's motion for summary judgment. This is errant nonsense. There was a trial. There were findings of fact and conclusions of law entered in that trial. The defendants are bound by those findings of fact and conclusions of law.
The defendants argue Steve Bonham earned "more than half a million dollars" between 1976 and 1988. Since all of the assets at issue here were purchased between 1990 and 1995, the argument only works if some part of that alleged income was still around in 1992, and in the World Plus account from which these assets were purchased. The defendants have failed to establish those links. The Trustee has shown:
(a) The World Plus account was overdrawn repeatedly over the dates in question.
(b) There is no documentary evidence to support the alleged transfers.
(c) There is no showing that the amounts alleged to have been deposited by Steve Bonham exceeded the amounts paid over to him, as established by the earlier Findings of Fact in this case.
(d) There is no showing that loans made by Steve Bonham to World Plus should be treated differently than loans made by the thousand or more other investors.
The defendants renew their argument that because World Plus was allegedly an S Corporation it could make the payments at issue here. Memorandum, 8. An S Corporation is an eligible corporation whose shareholders have all elected treatment as an S Corporation and timely filed IRS Form 2553. Income of an S Corporation is taxed to the shareholders and not to the corporation. See generally 26 USC §§1361-1362. It is completely irrelevant to the question of who has an interest in the personal property at issue in this case. It is completely irrelevant to the question of whether or not a corporation can make distributions. For example, an insolvent corporation may not make distributions to its shareholders, no matter what the tax treatment of the distributions might be.
The defendants are confusing the income tax consequences of distributions with the lawfulness of the distributions. Federal income tax law, including IRS Code §§1361-1362 do not authorize any distribution of monies by the corporation. Rather, they say who will pay taxes on whatever distributions may be lawfully made. In any event, it is undisputed that neither corporation and neither debtor has filed an income tax return since 1992.
The defendants argue that since there were deficiencies on some of the assets which were subject to security interests, the Trustee should not receive summary judgment. Memorandum, 9. This is another non sequitur. The assets were sold at public auction. If the proceeds realized on the sale of the Itasca Motor Home were less than the balance due to John Deere Credit, the deficiency is the result of financial forces, not anything the Trustee did or didn't do. In the case of the Debtor, the deficiency does not matter. She is in bankruptcy, and a deficiency is the least of her problems. In the case of Steve Bonham, he is free to dispute the accuracy of the deficiency and defend himself in court. But the note for the Itasca Motor Home was in default at the time of sale, was the subject of a motion for relief from stay, and, on the Trustee's understanding, sold at auction for more than Bluebook value. Mr. Bonham must bear the consequences of purchasing assets where the repayment was contingent on proceeds from a Ponzi scheme.
The defendants also point to a parking ticket on the Corvette, given at a time when title should plainly have been transferred to a new owner. The defendants should not be permitted to make too much of this issue: there is no claim of a deficiency on the Corvette. But, ultimately, the question of title transfer to the new owner is not relevant to the right to proceeds from the sale.
The defendants complain that they should not be bound by findings made earlier in this case. Memorandum, 9. Yet they make no showing that the sound policies underlying res judicata should be ignored here. They complain that their evidence submitted earlier (and again attached to their Memorandum) has been "ignored or refuted." Memorandum, p. 9, final paragraph. To the best of the Trustee's knowledge, none of the relevant evidence submitted by the defendants has been ignored. They are correct that, to a very large degree, it was refuted in the earlier trial. That does not entitle them to ignore the results of the earlier trial, or assist them in avoiding summary judgment here.
3. Opposition to Trustee's Motion for Entry of Final Judgment.
The defendants point out the boat trailer is noticed for sale but that the order for sale has not yet been entered. At this date, the sale has not been opposed. See Footnote 4, supra. Uncontroverted evidence regarding payment for the boat trailer is already in evidence. As is shown by the Affidavit of Larry D. Compton dated March 21, 1996,
1990 Itasca Motorhome
Melroe Hydraulic Blade
113,645.07
72,637.53
5,238.49
Details regarding specific payments for the boat trailer are set out in the Trustee's Affidavit of March 21, 1996.
The proceeds from the sale of the boat trailer, based on the uncontroverted evidence, should be divided in the same ratio as payments:
$34,979.86
$31,442.60
The Trustee has assumed, for the purposes of the instant motion, that the unidentified $1,572.13 payment came from S & S Services. Fifty percent of S & S Services presumptively belongs to Raejean Bonham, since the S & S Services account is in both names. Thus, on the uncontroverted evidence, the Trustee is entitled to all of the World Plus interests and fifty percent of the S & S Services interests in the boat trailer, for a total of
52.66% + 47.34%/2 = 76.33%
The Trustee is entitled to 76.33% of the proceeds from the sale of the boat trailer; Steve Bonham is entitled to 23.67%.
The defendants offer no other evidence or cogent arguments beyond the boat trailer as a basis for avoiding entry of a final judgment, upon the court's entry of an order for summary judgment. The court should enter a final judgment as sought by the Trustee.
4. Response to Reply to Opposition to Motion for Summary Judgment.
The defendants have lodged a "Response to Reply to Opposition to Motion for Summary Judgment" as a part of a "Request to Respond." Assuming the court elects to consider what amounts to a supplementary opposition, the Trustee notes to the court it raises no new arguments not already advanced by the defendants in earlier pleadings. The defendants renew their argument that Steve Bonham earned "in excess of half a million dollars" but add nothing by which that argument can be made relevant. There is nothing to link earlier salary to disposable income, to the availability of funds at the time of the purchase, or to the other issues raised by the Trustee in this Consolidated Reply.
The defendants acknowledge they did not appeal the earlier partial final judgment, but offer nothing to show why the decisions in that case should not be fully binding upon them.
The defendants assert there are irregularities in the accounting for the proceeds from the sale of the Itasca Motor Home. The Trustee is not aware of them. The defendants have not challenged the accountings for the auctions as filed. Steve Bonham is free to pursue those defenses in any deficiency action that may be brought against him. It is true that the Itasca Motor Home brought less than the Trustee expected at auction sale, but the defendants do not offer any evidence beyond the Trustee's initial opinion of value. "The non-moving party must come forward with specific facts and 'must do more than simply show there is some metaphysical doubt at to the material facts.'" Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 576.
The defendants challenge the chain of custody on the bank records offered into evidence by the Trustee. Response, p. 2. Those records are already in evidence. It is too late for the defendants to raise those issues. Nor is there the slightest reason to regard those records as inaccurate. A review of the Trustee's exhibit list earlier in this case and the exhibits in support of the present motion will show the exhibits are copies of the Debtor's checks, the Debtor's bills and other Debtor-generated documents. The defendants, without more, assert a very general, non-specific challenge to "point of origin and chain of custody." In the light of the earlier, uncontested admission of the exhibits, and the vague allegations of the defendants, this argument is without merit. The defendants assert there is a "question of impropriety here" that they will "more fully outline for this Court in the near future" (Response, p. 3) but they present no evidence and make no argument now. Assuming that the authenticity and admissibility of the evidence is still in issue at this late date, the failure to address the issue now is a waiver.
The defendants argue that World Plus was only insolvent in its last year, that it was solvent "15 of those 16 years," and that the Trustee's arguments under Alaska's Corporations Code therefore fail. Response, p. 3. World Plus was a Ponzi scheme. A Ponzi scheme is insolvent from the date it writes it first check. By definition, the debtor was distributing capital and not income. As is shown by the Affidavit of Larry D. Compton, in 1993, there were already a total of 1,310 investment contracts issued with a face value of some $28,055,000. Some of the contracts were for more than $100,000 each. While all inferences must be drawn in favor of the defendants, it defies credibility and common sense for them to claim that World Plus was not a Ponzi scheme in 1993 and earlier. Certainly there is a complete absence of evidence in the record to show where income to satisfy the fifty percent return on those 1,310 contracts was to come from, if not from the monies brought in by new investors.
The defendants again challenge the conclusion that World Plus is a Ponzi scheme. Response, p. 4. The previous paragraph, and the Affidavit of Larry Compton, demonstrate conclusively that while the defendants may feel that they are compelled to challenge the court's earlier ruling, the court was right then and is right now. World Plus and Atlantic Pacific were a classic Ponzi scheme, paying earlier investors with proceeds from later investors, augmented by whatever net income may have been realized from the $350,000 - $450,000 gross sales of Delta Airlines tickets. Since, as has been shown earlier, the debtor had a typical gross margin of $50 - $100 on the sale of a $550 ticket, net of overhead (rent, telephone, employee salaries, etc.) was insufficient to pay the interest on more than one or two of the larger investor contracts. While the court is required to draw every reasonable inference in favor of the defendants, it is not required to deny summary judgment if all the defendants offer is "some metaphysical doubt at to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 576.
The defendants next point to the $10 million proof of claim filed by Delta Airlines as proof that World Plus and Atlantic Pacific were not a Ponzi scheme. Some elementary arithmetic shows that the defendants' conclusion is insupportable.
The debtor has testified she sold frequent flyer tickets at a price of $450 - $550 each. Those tickets would allow travel anywhere Delta served. If we assume a high end average price of $550, and average annual gross sales of $450,000, there were about 818 tickets sold, on average, each year. If we assume that the full fare for those flights was only twice the World Plus price, or $1,000, then each year Delta Airlines would assert it lost some $818,000. The debtor has testified she sold frequent flyer tickets for 16 years. If true, that means she may have created a claim in Delta Airlines as large as $13 million. Now the Trustee cannot presently say whether these specific numbers used here are accurate, but plainly, the Delta Airlines claim is consistent with the record in this case.
Nothing in the defendants' lodged Response assists them in avoiding summary judgment on the pending motion for summary judgment.
5. Reply to Opposition to Motion to Strike Untimely Opposition.
The defendants offer nothing to excuse their untimely opposition except that they represent themselves and the "debtor was ill during a period of time" before the response was due. Opposition, p. 1. As set out above, the defendants are pro se by their choice. For nearly a year, they have been involved in litigation. By this point, they know what the deadlines are and the consequences of failing to meet those deadlines. Absent some showing that the debtor's "illness" was severe and protracted, the mere recitation does nothing to assist the court is determining whether to excuse the failure to meet the deadlines. The court should grant the Trustee's motion to strike the untimely opposition.
6. Reply to Opposition to Motion for Permanent Injunction.
The defendants make the same arguments regarding the Trustee's motion for summary judgment granting a permanent injunction that they have elsewhere in their pleadings. They argue Steve Bonham earned half a million dollars between 1976 and 1988. The Trustee adopts his earlier arguments in that regard. They argue Steve Bonham has substantial equity in the unliquidated assets, but point to no specific facts to support that conclusory allegation.
More tellingly, the defendants do not address the proof offered by the Trustee that on at least one occasion, the American Funds account withdrawal of $1,700, the defendants have violated the preliminary injunction (and earlier temporary restraining order). Nor have they challenged the proof that Steve Bonham transferred title to two vehicles in the joint names of the defendants post-petition.
Pailila v. Hawaii Dept. of Land and Natural Resources 639 F.2d 495, 497 (9th Cir. 1981). The defendants have failed to prove a material fact relevant to the permanent injunction. The court should grant the Trustee's motion for summary judgment, granting the trustee a permanent injunction as requested.
Even making allowance for pro per defendants, there are no disputed, material facts in issue which are relevant to the motions before the court. Even drawing reasonable inferences in favor of the defendants, there is no basis, other than metaphysics, for denying summary judgment to the Trustee. The balance of the relief sought should also be granted.
However, there is a great deal of smoke, in the form of unsubstantiated allegations, pleas that res judicata and other black letter law standards now be applied to them, and irrelevancies. The Trustee, in this Consolidated Reply, has made an effort to address those arguments thoroughly.
The sheer volume of paper involved here may tempt the court to simply conclude that there must be some contested issue of fact or there wouldn't be this much discussion. The Trustee urges the court to resist that temptation. It takes a single sentence for the defendants to make an unsubstantiated allegation: "Steve Bonham earned a half a million dollars between 1976 and 1988." It takes a several pages of analysis to show why that unsubstantiated allegation does nothing to support the defendants' claims.
These defendants have cost the bankruptcy estate tens of thousands of dollars in unnecessary attorneys' fees and costs. They do not respond to efforts to compromise. Either through ignorance or intent, they repeatedly re-inject issues that are long since resolved. Either through ignorance or intent, they ignore settled doctrines of law. If the court denies summary judgment, then the Trustee will, of course, proceed to trial. As in the case of the last trial, at considerable cost and delay, the Trustee will obtain the relief he seeks. There is no need for trial, or for the cost or delay. There are no relevant, material issues of fact, and the Trustee is entitled to prevail on all of the issues now before the court in this contested proceeding.
DATED at Fairbanks, Alaska this 20th day of November, 1996.
AFFIDAVIT OF CARLEEN MANGOLD
CARLEEN MANGOLD, being first duly sworn, states that:
1. I am a legal assistant employed at Bundy & Christianson, special counsel for the Trustee.
2. As a part of my duties, I have reviewed and reconstructed checking account records for the debtor and her businesses.
3. That reconstruction is still under way, but is completed for all known accounts of the debtor for the period December 1993 through December 1995. In particular, the sole known account of Atlantic Pacific Funding Corporation at First National Bank of Anchorage and the account of World Plus at Key Bank of Alaska are balanced and reconciled for those periods.
4. Based upon the records I have reviewed, it appears that both accounts were overdrawn numerous times. For example, the World Plus account was overdrawn in June of 1994 by as much as $20,000 and on August 17, 1994 by some $42,410. The Atlantic Pacific account was overdrawn (rounded to the nearest dollar):
2/1-3/95
5. These lists are not exhaustive. They are simply some, but not all, of the larger amounts by which these accounts were overdrawn.
DATED at Anchorage, Alaska this 19th day of November, 1996.
/s/ CARLEEN MANGOLD
1. I am the duly authorized and acting Chapter trustee in this proceeding.
2. I have been involved in the construction and reconstruction of the business records of the debtor and her business activities from the original documents which we have been able to obtain.
3. In particularly, I have reviewed checking account records as follows:
Key Bank/S & S Services
1990-1992, portions of 1993, 1994-1995
Key Bank/World Plus
First National Bank of Anchorage/Atlantic Pacific Funding Corporation
Portions of 1993, 1994-1995
Denali State Bank/World Plus
Merrill Lynch/World Plus
4. Nowhere among those records was I able to identify significant amounts of money transferred from S & S Services to any of the business accounts, contrary to the allegations in the debtor's affidavit. There do not appear to be any checks drawn by either defendant on the S & S Services account to the order of World Plus.
5. Based upon my review, deposits to World Plus and Atlantic Pacific tend to be in two forms: large deposits rounded to the nearest thousand, representing investor deposits, and deposits that are multiples of $550 or $525, which I infer represent proceeds from the sale of frequent flier-coupon based tickets.
6. There are very few deposits to World Plus accounts or the Atlantic Pacific account in odd amounts, as you would expect with payroll checks.
7. There are occasional deposits in other amounts, in amounts with odd dollars and pennies, to the S & S Services account, which appear to be payroll checks drawn by the debtor from World Plus for those periods when the debtor drew a salary from World Plus, in addition to the draws I have already shown to the court.
8. I understand that the defendants in this action claim that World Plus was only insolvent in 1995, and that it was solvent in the other 15 years it existed. I strongly disagree.
9. With the assistance of my attorneys and their staff, I have worked to reconstruct the financial records of the debtor. The investments made by the investors, now the creditors, of World Plus were kept on large note cards. There was no mechanism for determining total debt at any moment, or the total due in any six month period.
10. The records reconstruction is made more complex because (a) not all of the investment contracts appear to have been documented; (b) not all of the disbursements were made in the true name of the investor (i.e., the debtor appears to have used fictitious payees in some cases); (c) not all of the documented investment contracts were posted to the index cards; and (d) the debtor, in what I believe was an effort to minimize withdrawals by investors, permitted "roll-overs," (reinvestment of original principal and accrued interest at the expiration of the contract term); "partial roll-overs," (withdrawal of a portion of interest and principal and "roll-over" of the rest); "contract splitting." (an existing contract, at maturity, transferred to different or additional investors); and "lateral transfers," (a new investor purchases an existing investor's contract, with or without the proceeds going through a World Plus account). All of these factors and others make the process of records reconstruction slow.
11. The debtor appears to have relied on two methods to determine whose note or contract was due: she kept lists and diaries, and she responded to written demands for payment. There appear to have been no scheduling or planning tools to allow her to forecast, for example, how much was coming due in the next 30 days or next 90 days.
12. I am reconstructing those records, working through the debtor's records. Currently, records have been reconstructed for almost all investment contracts reflected on the index cards. Reconstruction by checking against individual contracts is proceeding.
13. In 1993, the earliest year for which substantial numbers of investment contracts have been documented, I have so far identified 1,310 investment contracts, ranging in face value from $5,000 to $125,000. The total face value of those 1993 contracts is $28,055,000. I emphasize that these numbers are incomplete, and that they will likely increase as records reconstruction proceeds.
14. It is a financial and practical impossibility for the debtor's activities to have been anything but a Ponzi scheme as early as 1993.
DATED at Anchorage, Alaska this 20th day of November, 1996.