May v. Lobo Land, L.L.C. et al

1This case was filed before the effective date of the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,
so references to the Bankruptcy Code and Rules are as they
existed in January, 2005.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
LOBO LAND, LLC,
Debtor. 	No. 11-05-10262 SS
OMER MAY,
Plaintiff,
v. 	Adv. No. 07-1125 S
LOBO LAND, LLC and
CAROL CAGAN aka Cappy Cagan,
Defendants.
MEMORANDUM OPINION ON JURISDICTION
This matter came before the Court for an initial pretrial
conference. 	Plaintiff appeared through his attorney Sutin,
Thayer & Browne (Jay D. Hertz). 	Defendants appeared through
their attorney Scheuer, Yost & Patterson, P.C. (Donald A.
Walcott). 	The Court sua sponte questioned its jurisdiction to
hear this adversary proceeding, given that the Chapter 11 case
has been confirmed and Carol Cagan is not a debtor. 	Plaintiff
and Lobo Land, LLC filed briefs (docs 6, 8 and 9). 	Defendant
Cagan did not file a brief. 	The Court reviewed the materials
submitted, and being otherwise informed now issues this
Memorandum Opinion which constitutes the Court’s findings of fact
and conclusions of law. 	This is a core proceeding. 	28 U.S.C. §
157(b)(2)(A) and (O) 1.
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2Carol Cagan is an insider of the Debtor. 	See 11 U.S.C. §§
101(31)(B)(iii) and (C)(v).
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The Court takes judicial notice of the file, and finds that
the Chapter 11 case was filed on January 14, 2005. 	The petition
was signed by Carol Platt Cagan as Managing Member 2 of the
Debtor. 	The case was confirmed on March 8, 2006 (Main case, doc
85). 	The Plan (Main case, doc 73) provides, in part:
ARTICLE 6
TREATMENT OF CLAIMS AND INTERESTS
...
6.3.1.3 Debtor shall pay to May one or more lump sum
payments totaling $40,000 from the proceeds of the
sales of the residential lots as such funds become
unrestricted by order of the Court if such funds are
not available prior to the Effective Date.
...
ARTICLE 8
RETENTION OF JURISDICTION
8.1 The Court shall retain jurisdiction after the
Effective Date of this Plan for all purposes provided
for by the Code, by this Plan, and by applicable law,
including, but not limited to, resolution of claims
objections as provided for in the Plan, interpretation
or construction of the Plan, hearing and ruling on
adversary proceedings provided for in paragraph 7.6
above, and valuation as may be necessary for
implementation of the Plan.
On July 9, 2007, an Order to Release Moneys in Escrow was filed
in the main bankruptcy case. (Main case, doc 116). 	On September
20, 2007 Plaintiff filed a motion for relief from stay (Main
case, doc 124), which was granted on November 2, 2007 (Main case,
doc 136).
THE COMPLAINT
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The Complaint alleges that as a result of the July 19, 2007,
order a title company released $32,369.96 from escrow that
represented the proceeds of residential lots. 	Notwithstanding
the order, which directed payment to the Debtor and
notwithstanding the plan requirement that the funds be paid to
Plaintiff, the entire amount was deposited into Carol Cagan’s
bank account. 	All the funds are now gone and Debtor has no other
funds to pay Plaintiff. 	The First Claim alleges conversion by
Carol Cagan or aiding and abetting conversion by Debtor. 	The
Second Claim alleges breach of fiduciary duty. 	The Third Claim
seeks punitive damages because the July 9, 2007 order was
obtained without notice to Plaintiff and constituted a willful
and deliberate fraud upon the Court and Plaintiff. 	The Fourth
Claim sought prejudgment attachment but has since been abandoned.
THE PARTIES’ ARGUMENTS
Plaintiff argues that this action “arises in” Debtor’s
bankruptcy case because it is based upon ¶ 6.3.1.3 of the Plan
and also because it involves a fraud on the Court that implicates
administration of the case. 	He also argues that it is a core
proceeding concerning administration of the case or impacting
adjustment of the debtor-creditor relationship.
Debtor argues that this Court lacks jurisdiction over this
proceeding. 	First, it argues that because Plaintiff was granted
stay relief he should pursue these matters in the state court
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foreclosure action. 	Next, it argues that this case does not
“arise in” the bankruptcy because it has no effect on
implementation of the plan and because the claims against Carol
Cagan will have no impact on Debtor’s performance of the plan.
The rest of Debtor’s brief suggests that Carol Cagan should be
pursued in state court and argues the merits of the case rather
than the jurisdictional issues.
CONCLUSIONS
First, the Court finds that Plaintiff has the requisite
standing to file this adversary. 	He has suffered a direct injury
to his right to be paid from certain proceeds of sale and the
Court can redress that injury. 	Yellow Cab Co-op. Ass’n. v. Metro
Taxi, Inc. (In re Yellow Cab Co-op. Ass’n.), 132 F.3d 591, 594
(10 th Cir. 1997).
In general, a bankruptcy court retains post-confirmation
jurisdiction in a chapter 11 proceeding only to the extent
provided in the plan of reorganization. 	Hospital and University
Property Damage Claimants v. Johns-Manville Corp. (In re Johns-
Manville Corp.), 7 F.3d 32, 34 (2 nd Cir. 1993). 	The court’s
post-confirmation jurisdiction is therefore defined by reference
to the Plan. 	Id. 	In this case, Plan ¶ 8.1 preserved
jurisdiction for “all purposes provided for by the Code, by this
Plan, and by applicable law” which is quite broad. 	Bankruptcy
Code section 1142 further preserves jurisdiction in post-
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3The Court takes judicial notice that on December 17, 2007,
the Court converted the bankruptcy case to Chapter 7. 	This does
not change the Court’s decision in this case on jurisdiction.
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confirmation cases to allow the court to oversee the
reorganization efforts. 	The Court also has the jurisdiction to
enforce its own orders. 	Local Loan Co. v. Hunt, 292 U.S. 234,
239 (1934)(“That a federal court of equity has jurisdiction of a
bill ancillary to an original case or proceeding in the same
court, whether at law or in equity, to secure or preserve the
fruits and advantages of a judgment or decree rendered therein,
is well settled.”)(Citations omitted.) 	Therefore, the Court
finds no impediment to subject matter jurisdiction as long as the
case otherwise fits within the boundaries of bankruptcy
jurisdiction.
The Court finds that this adversary proceeding “arises in”
the chapter 11 case because it involves implementation of the
confirmed plan 3. 	U.S. Brass Corp. v. Travelers Ins. Group, Inc.
(In re U.S. Brass Corp.), 301 F.3d 296, 305-06 (5 th Cir. 2002).
Therefore, the Court has core jurisdiction.
Furthermore, the Court has jurisdiction over corporate
insiders, directors or officers that receive preferential or
unauthorized transfers from corporations, see, e.g., Smith v.
Cox, 113 N.M. 682, 685, 831 P.2d 981, 984 (1992); see also 11
U.S.C. § 549, or breach their fiduciary duty to the corporation
or commit torts in the name of the corporation, see, e.g.,
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National City Bank of Minneapolis v. Lapides (In re Transcolor
Corp.), 296 B.R. 343, 371 (Bankr. D. Md. 2003)(“A corporate
officer, director or employee, while ordinarily not responsible
for the contractual debts of a corporation, may nevertheless be
held personally liable for his or her own fraudulent conduct
committed on behalf of the corporation which causes injury to
another.”)(Citations omitted.)
CONCLUSION
The Court finds that it has subject matter and core
jurisdiction over this adversary proceeding and personal
jurisdiction over the parties thereto. 	The Court will reschedule
the initial pretrial conference.
Honorable James S. Starzynski
United States Bankruptcy Judge
date entered on docket: 	December 21, 2007
copies to:
Jay D Hertz
PO Box 1945
Albuquerque, NM 87103-1945
Donald A Walcott
PO Drawer 9570
Santa Fe, NM 87504-9570
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