Scott Garrett and Pamela Jane Garett v. Cook et al

1Defendants agreed to allow Garrett to file a surreply
addressing the statute of limitations issue only, which was
raised in the Defendants’ reply brief.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re DANIEL WILLIAM COOK
and YOLANDA TERESA COOK,
Debtors. 	No. 7-04-17704 SA
SCOTT GARRETT and PAMELA JANE GARETT,
Trustees of the Scott Garrett and Pamela
Garrett Family Trust dated June 14, 1999,
as Shareholder individually, and on behalf
of TRENCHLESS INFRASTRUCTURE TECHNOLOGIES,
f/k/a and f/d/b/a HYDROSCOPE GROUP, INC.,
n/k/a and d/b/a HYDROSCOPE INTEGRATED
TECHNOLOGIES, INC., a Nevada Corporation,
and WHEELER PEAK CONSULTING. INC.,
Plaintiffs,
v.
DANIEL W. COOK, individually and as a
member of the Board of Directors of
Trenchless Infrastructure Technologies, Inc.
and YOLANDA COOK, individually and as a
member of the Board of Directors of
Trenchless Infrastructure Technologies, Inc.
Defendants. 	Adv. No. 08-1074 SA
MEMORANDUM OPINION ON DEFENDANTS’
MOTION TO DISMISS
This matter is before the Court on Defendants’ Motion to
Dismiss (doc 18), Garrett’s objection thereto (doc 22),
Defendants’ Reply (doc 23), and Garrett’s surreply 1 (doc 24).
This is a core proceeding to determine the dischargeability of
debts. 	28 U.S.C. § 157(b)(2)(I). 	For the reasons set forth
below, the Motion to Dismiss will be denied in part. 	Plaintiffs
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2See Doc 22, p. 1.
3See Doc 22, p. 10.
4As discussed below, when ruling on a motion to dismiss,
allegations of the complaint must be taken as true.
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consent to dismissal of Count 2 2. 	In addition, Wheeler Peak
Consulting, Inc. will be dropped as a plaintiff 3 .
Standards to dismiss
Defendants move to dismiss on two grounds: 1) lack of
standing and 2) failure to state a claim under Rule 12(b)(6).
The Court will address both grounds.
STANDING
Before discussing the standing issues, certain facts 4 should
be noted. 	The Complaint defines “Garrett” as “Scott Garrett and
Pamela Jane Garrett, Trustees of the Scott Garrett and Pamela
Garrett Family Trust dated June 14, 1999". 	See Complaint preface
(emphasis added). 	The Garretts are residents of Bernalillo
County and the Garrett Family Trust is organized under the laws
of New Mexico. 	Id. ¶ 1. 	Garrett is the owner of 900,000 shares
of common stock of Hydroscope. 	Id. ¶ 7. 	Garrett invested $2
million in Hydroscope in exchange for the shares on or about
November 10, 1998. 	Id. ¶ 8. 	At all relevant times, Garrett was
and continues to be a shareholder in Hydroscope. 	Id. ¶ 105.
There is obviously a mistake here. 	Mr. Garrett, individually or
jointly with Ms. Garrett, purchased the shares in 1998, but the
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5These “facts” however, appear nowhere in the complaint and
the Court is not treating this motion to dismiss as a motion for
summary judgment. 	See Federal Rule of Civil Procedure 12(d).
Therefore, these facts are not considered by the Court for this
decision. 	The lack of transfer on the books is probably not
relevant in any event. 	See Schwabacher and Co. v. Zobrist, 102
Nev. 55, 58, 714 P.2d 1003, 1005 (1986)(An unregistered transfer
of stock is valid as between the purchaser and seller.); Double O
Mining Co. v. Simrak, 132 P.2d 605, 606 (Nev. 1942)(An
unregistered transfer is binding on the parties and the equitable
title passes.)
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trust was not established until June 14, 1999. 	Therefore, the
stock must have been transferred to the trust at some point.
And, “Garrett” as defined above cannot have held the stock at all
relevant times because the Garretts, individually, could not have
have been trustees before the trust was created. 	In addition, on
the fourth line of the caption of this adversary it states “as
Shareholder individually,” which is an apparent reference back to
Scott Garrett and Pamela Garrett. 	So, a possible reading of the
caption is that both Garretts, both as Trustees and as
individuals, and on behalf of Hydroscope, are the Plaintiffs.
The Defendants argue that the only Plaintiff identified in
the Complaint is Garrett as Trustee for the trust. 	Doc 18, p.3.
They then argue that the shares purchased by Scott Garrett in
1998 were restricted shares that could not be transferred under
the terms of the purchase agreement and that the shares were in
fact never transferred on the books of Hydroscope into the
trust. 5 	Therefore, defendants argue that the trust has no
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6Defendants cite Theratx, Inc. v. Duncan, 231 F.3d 1315
(11th Cir. 2000) for this proposition. 	This opinion was
withdrawn by the 11th Circuit and replaced by 234 F.3d 1240 (11 th
Cir. 2000).
7Garretts argue, also outside of the record, that they
instructed Mr. Cook to transfer the ownership of the shares on
the books but that they never knew if he did or not, and that he
refused to provide any information as to who the record owners
were. 	If this were true, the Court might find that defendants
should be estopped from basing arguments on the ownership of the
shares.
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standing because it never owned the shares 6 , and it is too late
to add the Garretts, individually, as additional plaintiffs 7.
The Court finds, however, that the issue involved here is
not standing.
Over the years, our cases have established that
the irreducible constitutional minimum of standing
contains three elements. 	First, the plaintiff must
have suffered an “injury in fact”-an invasion of a
legally protected interest which is (a) concrete and
particularized, see [Allen v. Wright, 468 U.S. 737], at
756, 104 S.Ct. at 3327; Warth v. Seldin, 422 U.S. 490,
508, 95 S.Ct. 2197, 2210, 45 L.Ed.2d 343 (1975); Sierra
Club v. Morton, 405 U.S. 727, 740-741, n. 16, 92 S.Ct.
1361, 1368-1369, n. 16, 31 L.Ed.2d 636 (1972);[footnote
1: By particularized, we mean that the injury must
affect the plaintiff in a personal and individual way.]
and (b) “actual or imminent, not ‘conjectural’ or
‘hypothetical,’” Whitmore [v. Arkansas, 495 U.S. 149],
supra, 495 U.S. at 155, 110 S.Ct. at 1723 (quoting Los
Angeles v. Lyons, 461 U.S. 95, 102, 103 S.Ct. 1660,
1665, 75 L.Ed.2d 675 (1983)). 	Second, there must be a
causal connection between the injury and the conduct
complained of-the injury has to be “fairly ...
trace[able] to the challenged action of the defendant,
and not ... th[e] result [of] the independent action of
some third party not before the court.” 	Simon v.
Eastern Ky. Welfare Rights Organization, 426 U.S. 26,
41-42, 96 S.Ct. 1917, 1926, 48 L.Ed.2d 450 (1976).
Third, it must be “likely,” as opposed to merely
“speculative,” that the injury will be “redressed by a
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favorable decision.” Id., at 38, 43, 96 S.Ct., at 1924,
1926.
The party invoking federal jurisdiction bears the
burden of establishing these elements. 	See FW/PBS,
Inc. v. Dallas, 493 U.S. 215, 231, 110 S.Ct. 596, 608,
107 L.Ed.2d 603 (1990); Warth, supra, 422 U.S., at 508,
95 S.Ct., at 2210. 	Since they are not mere pleading
requirements but rather an indispensable part of the
plaintiff's case, each element must be supported in the
same way as any other matter on which the plaintiff
bears the burden of proof, i.e., with the manner and
degree of evidence required at the successive stages of
the litigation. 	See Lujan v. National Wildlife
Federation, 497 U.S. 871, 883-889, 110 S.Ct. 3177,
3185-3189, 111 L.Ed.2d 695 (1990); Gladstone, Realtors
v. Village of Bellwood, 441 U.S. 91, 114-115, and n.
31, 99 S.Ct. 1601, 1614-1615, and n. 31, 60 L.Ed.2d 66
(1979); Simon, supra, 426 U.S., at 45, n. 25, 96 S.Ct.,
at 1927, and n. 25; Warth, supra, 422 U.S., at 527, and
n. 6, 95 S.Ct., at 2219, and n. 6 (Brennan, J.,
dissenting). 	At the pleading stage, general factual
allegations of injury resulting from the defendant's
conduct may suffice, for on a motion to dismiss we
“presum[e] that general allegations embrace those
specific facts that are necessary to support the
claim.” 	National Wildlife Federation, supra, 497 U.S.,
at 889, 110 S.Ct., at 3189.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).
This case is still at the initial pleading stage. 	General
factual allegations of injury are sufficient. 	We know that for
counts 1 and 3, the stockholder (whoever it is) suffered injury
from the general factual allegations. 	And, it is only a
stockholder that can bring the derivative actions on behalf of
Hydroscope under counts 4, 5 and 6. 	The issue is not standing,
but rather whether this case is being prosecuted by the proper
party in interest. 	Federal Rule of Civil Procedure 17(a)(3)
provides:
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Joinder of the Real Party in Interest. 	The court may
not dismiss an action for failure to prosecute in the
name of the real party in interest until, after an
objection, a reasonable time has been allowed for the
real party in interest to ratify, join, or be
substituted into the action. 	After ratification,
joinder, or substitution, the action proceeds as if it
had been originally commenced by the real party in
interest.
The Court finds that for Counts 1 and 3 some discovery is
needed to determine who the real parties in interest are. 	The
Motion to Dismiss for lack of standing will be denied as to
Counts 1 and 3.
Counts 4, 5 and 6 are derivative claims, however, and the
real party in interest is the corporation for whose benefit the
action is brought. 	Koster v. (American) Lumbermens Mut. Casualty
Co., 330 U.S. 518, 522-23 (1947); Liddy v. Urbanek, 707 F.2d
1222, 1224 (11 th Cir. 1983). 	The corporation is a necessary
party in any shareholder derivative action, Tuscano v. Tuscano,
403 F.Supp.2d 214, 225 (E.D. N.Y. 2005), and it should be named
as a defendant whenever the corporate management is
“antagonistic” to the plaintiff shareholder, Liddy, 707 F.2d at
1224 (quoting Doctor v. Harrington, 196 U.S. 579 (1905)).
Antagonism is evident when the derivative action alleges that the
controlling shareholders are guilty of fraud or malfeasance. 	Id.
It is clear from the caption of this adversary proceeding that
the shareholder plaintiff is bringing a derivative action.
However, the corporation is named as a plaintiff through the
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8The federal rule is substantially identical to Nevada Rule
of Civil Procedure 23.1.
Page -7-
reference “and on behalf of TRENCHLESS INFRASTRUCTURE
TECHNOLOGIES, f/k/a and f/d/b/a HYDROSCOPE GROUP, INC., n/k/a and
d/b/a HYDROSCOPE INTEGRATED TECHNOLOGIES, INC., a Nevada
Corporation.” 	Therefore the Court should realign the corporation
as a defendant. 	And, the Plaintiff should forthwith obtain a
summons and serve this defendant. 	Counts 4, 5 and 6 will not be
dismissed for lack of standing. 	However, should plaintiff be
unable to bring the corporation into this suit for any reason,
Counts 4 through 6 perhaps should be dismissed for failure to
join necessary parties.
Derivative claims are subject to Federal Rule of Civil
Procedure 23.1 8, which states:
(a) Prerequisites. This rule applies when one or more
shareholders or members of a corporation or an
unincorporated association bring a derivative action to
enforce a right that the corporation or association may
properly assert but has failed to enforce. 	The
derivative action may not be maintained if it appears
that the plaintiff does not fairly and adequately
represent the interests of shareholders or members who
are similarly situated in enforcing the right of the
corporation or association.
(b) Pleading Requirements. 	The complaint must be
verified and must:
(1) allege that the plaintiff was a shareholder or
member at the time of the transaction complained
of, or that the plaintiff's share or membership
later devolved on it by operation of law;
(2) allege that the action is not a collusive one
to confer jurisdiction that the court would
otherwise lack; and
(3) state with particularity:
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(A) any effort by the plaintiff to obtain the
desired action from the directors or
comparable authority and, if necessary, from
the shareholders or members; and
(B) the reasons for not obtaining the action
or not making the effort.
Defendants argue that the Complaint does not allege that the
Trust was a shareholder at the time of the transactions of which
Plaintiff complains, that it does not allege with particularity
the efforts made by the Plaintiffs to obtain the action desired
and reasons for Plaintiffs’ failure to obtain the action, and
that the Complaint was not brought by a shareholder that fairly
and adequately represents the interest of the other shareholders.
See Doc 18, p. 8. 	The Court disagrees. 	While it is true there
is some confusion about the identity of the stockholder, Garrett
alleges that he purchased the stock on November 10, 1998 (¶¶ 8
and 67) and complains about actions that took place from 1999 to
2005 and later. 	Garrett lists both general and specific demands
made on the Board of Directors: ¶¶ 28, 31, 33, 35, 36, 41, 44,
58, 59, 60, 61, 62, 65, 107, 108 and 109. 	These were sufficient.
See also Shoen v. SAC Holding Corp., 122 Nev. 621, 638, 137 P.3d
1171, 1182 (2006)(The demand requirement is excused if the
complaint’s allegations, taken as true with all inferences drawn
in favor of the plaintiff, suggests that the “business judgment
rule” is inapplicable because the directors are “interested” in
the subject transaction.) 	Finally, at this motion to dismiss
stage there is no evidence in the record one way or the other
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whether Garrett is a typical minority shareholder that does not
fairly and adequately represent the interests of shareholders or
members who are similarly situated in enforcing the right of the
corporation. 	This issue can be brought up by motion later in the
case.
Therefore, there appears to be no standing impediment to
this adversary proceeding, and no problem with Federal Rule of
Civil Procedure 23.1. 	Therefore, the Court will now turn to the
substantive motion to dismiss for failure to state a claim.
FAILURE TO STATE A CLAIM
The legal sufficiency of a complaint is a question
of law, and a Rule 12(b)(6) dismissal is reviewed de
novo. 	Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir.
2006). 	Again, for purposes of resolving a Rule
12(b)(6) motion, we accept as true all well-pleaded
factual allegations in a complaint and view these
allegations in the light most favorable to the
plaintiff. 	Id. 	“The court's function on a Rule
12(b)(6) motion is not to weigh potential evidence that
the parties might present at trial, but to assess
whether the plaintiff's complaint alone is legally
sufficient to state a claim for which relief may be
granted.” 	Sutton v. Utah State Sch. for Deaf & Blind,
173 F.3d 1226, 1236 (10th Cir. 1999) (internal
quotation omitted).
The Supreme Court recently retired “the accepted
rule that a complaint should not be dismissed for
failure to state a claim unless it appears beyond doubt
that the plaintiff can prove no set of facts in support
of his claim which would entitle him to relief.”
Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2
L.Ed.2d 80 (1957), abrogated by Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929
(2007). 	The Court replaced the Conley standard with a
new standard in Twombly, which “prescribed a new
inquiry for [courts] to use in reviewing a dismissal:
whether the complaint contains ‘enough facts to state a
claim to relief that is plausible on its face.’ “ Ridge
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at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177
(10th Cir. 2007) (quoting Twombly, 127 S.Ct. at 1974).
The Court explained that “a plaintiff must ‘nudge his
claims across the line from conceivable to plausible’
in order to survive a motion to dismiss.” 	Id.
(internal citation and brackets omitted). 	“Thus, the
mere metaphysical possibility that some plaintiff could
prove some set of facts in support of the pleaded
claims is insufficient; the complaint must give the
court reason to believe that this plaintiff has a
reasonable likelihood of mustering factual support for
these claims.” 	Id.
Smith v. United States, 561 F.3d 1090, 1098 (10 th Cir. 2009).
The Court will now examine the remaining counts to see if
they are legally sufficient.
COUNT 1
Count 1 is based on 11 U.S.C. § 523(a)(2)(A) which provides:
(a) A discharge under section 727, 1141, 1228(a),
1228(b), or 1328(b) of this title does not discharge an
individual debtor from any debt–
...
(2) for money, property, services, or an extension,
renewal, or refinancing of credit, to the extent
obtained by--
(A) false pretenses, a false representation, or actual
fraud...[.]
11 U.S.C. § 523.
To prevail on a nondischargeability claim under §
523(a)(2)(A) claim, the creditor must prove by a
preponderance of the evidence that:
1) the debtor made a false representation;
2) the debtor had the intent to deceive the creditor;
3) the creditor relied on the debtor's conduct;
4) the creditor's reliance was justifiable; and
5) the creditor was damaged as a proximate result.
See Fowler Bros. v. Young (In re Young), 91 F.3d 1367,
1373 (10th Cir. 1996) (elements of § 523(a)(2)(A)); see
also Field v. Mans, 516 U.S. 59, 74-75, 116 S.Ct. 437,
133 L.Ed.2d 351 (1995) (creditor's reliance must be
justifiable, but not necessarily reasonable); Grogan v.
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Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755
(1991) (creditor must prove elements by a preponderance
of the evidence).
Groetken v. Davis (In re Davis), 246 B.R. 646, 652 (10 th Cir.
B.A.P. 2000), aff’d in part, vacated in part on other grounds, 35
Fed.Appx. 826 (10 th Cir. 2002).
The “General Allegations” section of the complaint and Count
1 list numerous misrepresentations and failures to disclose
information. 	Intent can be inferred from the magnitude of the
misrepresentations and their frequency. 	See Port Louis Owners
Assn., Inc. v. Savage (In re Savage), 366 B.R. 574, 583 (Bankr.
E.D. La.), aff’d, 371 B.R. 171 (E.D. La. 2007). 	Reliance is
plead, as well as the justification for reliance. 	Damages are
plead, and causation is plead. 	Count 1 states a cause of action
under 11 U.S.C. § 523(a)(2).
COUNT 2
Plaintiffs consent to the dismissal of Count 2.
COUNT 3
Count 3 is based on 11 U.S.C. § 523(a)(6) which provides:
(a) A discharge under section 727, 1141, 1228(a),
1228(b), or 1328(b) of this title does not discharge an
individual debtor from any debt–
...
(6) for willful and malicious injury by the debtor to
another entity or to the property of another entity[.]
The “General Allegations” and Count III allege that the actions
taken by Defendants, “without justification or excuse, and with
full knowledge of the specific consequences of their conduct,
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acted notwithstanding, knowing full well that their conduct would
cause particularized injury, in this case damages to Garrett.”
Combined with the allegations for Count 1, Count 3 states a cause
of action under 11 U.S.C. § 523(a)(6).
COUNT 4
Count 4 is a derivative action based on 11 U.S.C. §
523(a)(2)(A). 	While Count I seeks a judgment in favor of Garrett
for misrepresentations made to Garrett, Count 4 seeks a judgment
in favor of Hydroscope. 	The Complaint fails, however, to allege
any specific instances of misrepresentation or fraud by the
Defendants with respect to Hydroscope. 	All of Count 4's
allegations go more to the issue of the Defendants, as directors
of Hydroscope, 1) not protecting the interests of minority
shareholders, 2) engaging in self-dealing, 3) engaging in schemes
designed to force minority shareholders to sell their shares for
pennies on the dollar, and 4) wrongfully moving assets out of
Hydroscope. 	These allegations more properly belong in Count 5.
The Court finds that Count 4 does not state a claim and should be
dismissed.
COUNT 5
Count 5 is a derivative action based on a breach of
fiduciary duty and 11 U.S.C. § 523(a)(4) which provides:
(a) A discharge under section 727, 1141, 1228(a),
1228(b), or 1328(b) of this title does not discharge an
individual debtor from any debt–
...
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9Hydroscope is a Nevada corporation. 	The Court looks to the
laws of the state of incorporation in determining a corporate
director’s duties and liabilities. 	Miramar Resources, Inc. v.
Shultz (In re Shultz), 205 B.R. 952, 958 (Bankr. D. N.M. 1997).
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(4) for fraud or defalcation while acting in a
fiduciary capacity[.]
Under Nevada common law 9, a corporate officer or director
stands as a fiduciary to the corporation. 	Leavitt v. Leisure
Sports Inc., 103 Nev. 81, 86, 734 P.2d 1221, 1224 (1987); Horwitz
v. Southwest Forest Indus., Inc. 604 F.Supp. 1130, 1134 (D. Nev.
1985) (construing Nevada law); Western Indus., Inc. v. General
Ins. Co., 91 Nev. 222, 228, 533 P.2d 473, 476 (1975). 	This
obligation consists of a duty of care and loyalty, 	Horwitz, 604
F.Supp. at 1134, as well as a duty of good faith, honesty and
full disclosure. 	Western Indus., 91 Nev. at 228, 533 P.2d at
476. 	If it is shown that a director has a self-interest in a
transaction, the burden of proof is on the director to
demonstrate that the transaction is fair and serves the best
interests of the corporation and its shareholders. 	Horwitz, 604
F.Supp. at 1134. 	And, if a director exploits an opportunity that
belongs to the corporation it is a breach of fiduciary duty.
Bedore v. Familian, 122 Nev. 5, 13 n. 25, 125 P.3d 1168, 1173 n.
25 (2006).
Under Nevada statutory law the board of directors of a
corporation has full control over the affairs of the corporation.
N.R.S. § 78.120(1). 	The board must exercise its powers in good
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faith and with a view to the interests of the corporation.
N.R.S. § 78.138(1). 	But, “a director or officer is not
individually liable to the corporation or its stockholders or
creditors for any damages as a result of any act or failure to
act in his capacity as a director or officer unless it is proven
that: (a) His act or failure to act constituted a breach of his
fiduciary duty as a director or officer; and (b) His breach of
those duties involved intentional misconduct, fraud or a knowing
violation of the law.” 	N.R.S. § 78.138(7).
The Complaint in this case alleges intentional misconduct on
the part of the Defendants. 	Count 4 alleges 1) not protecting
the interests of minority shareholders, 2) engaging in self-
dealing, 3) engaging in schemes designed to force minority
shareholders to sell their shares for pennies on the dollar, and
4) wrongfully moving assets out of Hydroscope. 	Count 5 alleges
that Defendants moved, encumbered and alienated assets of
Hydroscope contrary to the interests of its shareholders, failed
to account, mismanaged, filed lawsuits that were not in the best
interests of the corporation, and issued themselves shares of
stock without any authority to do so. 	Plaintiffs also allege
that the Defendants’ actions were intentional, willful, wanton,
malicious, oppressive, fraudulent, in bad faith, or undertaken
with utter and reckless disregard for the rights of Hydroscope or
its shareholders. 	This states a cause of action under 11 U.S.C.
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10 By discussing this argument, the Court is not finding one
way or the other that the Nevada statutes of limitation apply in
New Mexico Bankruptcy Court.
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§ 524(a)(4). 	See also Miramar Resources, 205 B.R. at 959
(applying Delaware law):
Based on Delaware statutes and common law, the
Court finds Shultz, as a director of Miramar, was under
a fiduciary obligation to the corporation for the
management of the corporation and its assets, which can
be considered to constitute the res of a technical
trust. The Court further finds that Shultz was acting
in his preexisting fiduciary capacity at the time of
the transactions which constituted the breach, and the
requirements of § 523(a)(4) are satisfied.
See also Assurance Systems Corp., ASC v. Jackson (In re Jackson),
141 B.R. 909 (Bankr. N.D. Tex. 1992)(Derivative action against
directors of a Texas corporation; Court found requisite fiduciary
relationship and breach of duties and held debt nondischargeable
under 11 U.S.C. § 523(a)(4); applying Texas law.) 	The complaint
states a claim for relief under 11 U.S.C. § 523(a)(4).
COUNT 6
Count 6 is a derivative action based on willful and
malicious injury under 11 U.S.C. § 523(a)(6). 	The combined
allegations from Counts 4, 5 and 6 also state a claim for relief
under 11 U.S.C. § 523(a)(6).
DEFENDANTS’ STATUTE OF LIMITATIONS ARGUMENT
In their reply brief, doc. 23, the Defendants raise N.R.S. §
11.190(3) as a statute of limitations defense 10 . 	That section
fixes a three year statute of limitation for fraud actions.
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11 Garrett’s Surreply, doc 24, discusses the state court
litigation, what the counts were, when Garrett discovered the
fraud, etc. 	As mentioned above, however, none of this is
evidence.
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N.R.S. § 11.190(3)(d). 	It also applies to breach of fiduciary
duty actions. 	Nevada State Bank v. Jamison Family Partnership,
106 Nev. 792, 799-800, 801 P.2d 1377, 1382 (1990) (citing Shupe
v. Ham, 98 Nev. 61, 64-65, 639 P.2d 540, 542 (1982)). 	“However,
the statute of limitation will not commence to run until the
aggrieved party knew, or reasonably should have known, of the
facts giving rise to the breach.” 	Id. at 800, 801 P.2d at 1382.
Defendants characterize the entire Complaint as based on the
1998 stock transaction. 	See Doc. 23, p. 7, ¶ 27. 	If this were
true, then perhaps summary judgment would be available. 	However,
the 1998 stock transaction is only one allegation of many that
are alleged to have occurred over many years. 	The Court is also
aware from previous hearings in the main bankruptcy case that
these parties have been involved in extensive state court
litigation over a long period of time. 	The record 11 does not
evidence when Garrett knew or reasonably should have known about
the alleged breaches. 	The record does not evidence any tolling
that may have taken place. 	The Court cannot grant a motion to
dismiss for statute of limitations grounds on the current record.
SUMMARY
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Page -17-
The Motion to Dismiss will be granted in part and denied in
part. 	The Motion is granted for Counts 2 and 4. 	The Motion is
denied for Counts 1, 3, 5 and 6. 	The Motion is granted with
respect to named Plaintiff Wheeler Peak Consulting, Inc. 	A
separate Order will enter.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	August 14, 2009
Copies to:
Chris W Pierce
Attorney for Plaintiff(s)
Hunt & Davis, P.C.
P.O. Box 30088
Albuquerque, NM 87190-0088
Daniel J Behles
Attorney for Defendant(s)
Cuddy & McCarthy, LLP
7770 Jefferson NE, Suite 305
Albuquerque, NM 87109
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