Bank of Montreal v. Collins, et al.
Filing
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ORDER denying 1 Motion to Withdraw Reference signed by Judge Lawrence K. Karlton on 4/2/13. (Kaminski, H)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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IN RE:
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SK FOODS, L.P., a California
limited partnership, et al.,
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Debtor.
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BANK OF MONTREAL, as Administrative
Agent, Successor by Assignment to
Debtors SK Foods, L.P. and RHM
Industry Specialty Foods, Inc.,
a California Corporation, d/b/a
Colusa County Canning Co.,
CIV. S-13-0237 LKK
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Plaintiff,
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v.
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CARY SCOTT COLLINS, an individual
doing business as Collins and
Associates; FREDERICK SCOTT SALYER,
an individual, SAS 1999 TRUST;
CGS 1999 TRUST; CGS 2007 TRUST;
STEFANIE A. SALYER, an individual
CAROLINE G. SALYER, an individual,
O R D E R
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Cross-defendants.
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/
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I.
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This
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BACKGROUND
bankruptcy.
is
an
Adversary
Proceeding
within
the
SK
Foods
It is brought by the Bank of Montreal (“BMO”) against
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Frederick Scott Salyer and Salyer’s accountant, Cary Scott Collins
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(dba Collins and Associates).
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daughters, their trust funds and Monterey Peninsula Farming, LLC,
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as defendants.
The complaint also names Salyer’s
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The complaint seeks to recover $3.2 million in “apparently
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improper” tax refunds, which Collins allegedly obtained by filing
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unauthorized tax returns on behalf of the bankruptcy debtors.
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complaint also seeks to recover ownership in non-party “Cedenco
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Foods.” The complaint alleges that Salyer and Collins spirited the
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$3.2 million out of the country, and “transferred ownership” of
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Cedenco to a “secret trust located in the Cook Islands,” in the
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South Pacific.
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and included a demand for a jury trial.
The
Collins answered the complaint on July 30, 2012,
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Collins has now moved to withdraw the automatic reference to
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the Bankruptcy Court, citing his asserted right to a jury trial on
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Counts One, Two, Four and Nine.
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the avoidance of the post-petition transfer of the tax refunds,
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under 11 U.S.C. § 549 (avoidance of post-petition transfers) and
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Cal. Civ. Code 3439.05 (fraudulent transfer).
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recovery of the tax refunds from Collins, the transferee, under 11
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U.S.C.
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Section 549.
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Collins’ “unjust enrichment” in the amount of the tax refunds.
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Count Nine seeks to avoid the fraudulent transfer of the ownership
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of Cedenco, under Cal. Civ. Code § 3439.05.
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////
§
550(a),
based
Count One of the complaint seeks
upon
the
Count Two seeks the
avoidance
alleged
under
Count Four seeks a constructive trust to recover
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II. STANDARDS FOR WITHDRAWAL OF THE REFERENCE
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Except as otherwise provided by Congress, the district court
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has original and exclusive jurisdiction over all cases arising
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under Title 11.
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___, 131 S. Ct. 2594, 2603 (2011).
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district court to refer to bankruptcy judges any cases arising
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under that title as well as related proceedings.
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157(a).
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through a General Order adopted by the District Court, has referred
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all cases under Title 11 as well as related proceedings to the
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Bankruptcy Judges of the district. See General Order Nos. 182 (May
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14, 1985) & 223 (October 22, 1987).
28 U.S.C. § 1334(a); Stern v. Marshall, 564 U.S.
Congress has empowered the
See 28 U.S.C. §
Under this authority, the Eastern District of California
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The Ninth Circuit has recently determined however, that two
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Supreme Court decisions, Granfinanciera, S.A. v. Nordberg, 492 U.S.
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33 (1989), and Stern v. Marshall, 564 U.S. ___, 131 S. Ct. 2594
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(2011) make clear that bankruptcy courts do not “have the general
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authority to enter final judgments on fraudulent conveyance claims
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asserted against noncreditors to the bankruptcy estate.” Executive
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Benefits Ins. Agency v. Arkison (In re Bellingham Ins. Agency,
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Inc.), 702 F.3d 553, 565 (9th Cir. 2012).
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claims must normally be determined by the district court.
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are two caveats to this rule, however.
Accordingly, those
There
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First, defendant can waive its right to have the matter heard
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and finally determined by the district court, if he fails to
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“timely” object to the Bankruptcy Court’s authority.
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(“Because EBIA waited so long to object, and in light of its
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Id., at 568
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litigation tactics, we have little difficulty concluding that EBIA
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impliedly consented to the bankruptcy court's jurisdiction”).
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Second, even with a timely objection, the Bankruptcy Court is still
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authorized
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Recommendations for the district court’s de novo review.
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566 (“bankruptcy courts have statutory authority to hear and enter
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proposed findings of fact and conclusions of law in a fraudulent
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conveyance proceeding asserted by a bankruptcy trustee against a
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noncreditor, subject to de novo review by a federal district
to
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the
matter,
and
to
submit
Findings
and
Id., at
court”).
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hear
III. ANALYSIS
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Counts One and Nine are fraudulent transfer claims under state
They may
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law, and thus are governed by the rule of Bellingham.
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be finally decided only by the district court, absent waiver or
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consent (including implied consent), by both parties defendant.
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BMO argues that Collins waived his right to have this matter
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finally determined by the district court by waiting too long – over
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six months from his Answer – to file the withdrawal motion, after
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the Bankruptcy Court had “already invested significant time and
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effort on this case,” and after it had already “entered final
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judgment” against Collins’ co-defendants.
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at 5 (ECF at 8).
Opposition (ECF No. 6)
This court’s review of the Bankruptcy Court record shows that
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Collins answered the adversary complaint on July 30, 2012.
Bankr.
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Dkt.
Status
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Conference Statement in which he proposed a schedule to proceed in
No.
149.
On
August
16,
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2013,
Collins
filed
a
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the Bankruptcy Court.
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(close
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conference), with a trial date “to be set.”
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The Statement does not indicate any desire to proceed in the
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district court, but rather contemplates that all proceedings will
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take place in the Bankruptcy Court.
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of
The proposed dates range from May 24, 2013
discovery)
to
August
27,
2013
(final
pretrial
Bankr. Dkt. No. 160.
The Bankruptcy Court thereupon issued a Pretrial Scheduling
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Order
with
dates
ranging
from
September
28,
2013
(initial
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disclosures) to June 6, 2013 (final pretrial conference).
The
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close of discovery was scheduled for March 29, 2013.
Collins did
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not file any objection, nor advise the Bankruptcy Court or opposing
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counsel that the Scheduling Order would be meaningless because he
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intended to move the proceedings to the District Court.
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it appears that he complied with the Scheduling Order by, for
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example, making his expert disclosures in the Bankruptcy Court, on
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the date specified in the Scheduling Order.
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210.
Instead,
See Bankr. Dkt. No.
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On February 7, 2013, about two months before the close of
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discovery in the Bankruptcy Court, and a little over six months
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after filing his Answer, Collins moved to withdraw the reference.
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The court finds that Collins’ conduct in the Bankruptcy Court
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waived his right to try the case in the district court, and
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instead, impliedly consented to trial before the Bankruptcy Court.
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IV. CONCLUSION
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For the reasons stated above, defendants’ Motion To Withdraw
the Reference is DENIED.
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IT IS SO ORDERED.
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DATED:
April 2, 2013.
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