Desert Ranch LLLP et al v. Glasser

Filing 13

MEMORANDUM AND OPINION AND ORDER. IT IS ORDERED THAT the decision of the USBC for the District of Montana in Case No. 08-61570-11-RBK, Adversary Proceeding No. 10-00015 is HEREBY AFFIRMED. IT IS FURTHER ORDERED that the Clerk of Court shall enter judgment is favor of Appellee, Brian Glasser, Trustee of the Yellowstone Club Liquidating Trust and close this case. Signed by Judge Donald W. Molloy on 7/31/2014. (ELL, )

FILED

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION

JUL 3 1 2014
Clerk, u.s District Court
District Of Montana
Missoula

CV 14-02-BU-DWM

Inre:
YELLOWSTONE MOUNTAIN
CLUB, LLC, et al.,
Debtors.

MEMORANDUM OPINION

AND ORDER

DESERT RANCH LLLP, a Nevada
limited liability limited partnership;
DESERT RANCH MANAGEMENT
LLC, a Nevada limited liability
company; and TIMOTHY BLIXSETH,
an individual;
Appellants,
vs.
BRIAN A. GLASSER, AS TRUSTEE
OF THE YELLOWSTONE CLUB
LIQUIDATING TRUST,
Appellee.

I.

Status

Appellants Desert Ranch, LLLP, Desert Ranch Management, LLC, and
Timothy L. Blixseth appeal the Bankruptcy Court's order enjoining them from

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transferring any of their assets with a value exceeding five thousand dollars
($5,000.00). This Court has jurisdiction to hear this appeal pursuant to 28 U.S.C.
§ 158(a)(1). The Bankruptcy Court issued a preliminary injunction because it
found that Appellants violated a court order and fraudulently disposed of property
to the detriment of Appellee, Brian Glasser, Trustee of the Yellowstone Club
Liquidating Trust ("the Trustee"). Appellants contend the Bankruptcy Court
lacked the constitutional authority to enter the preliminary injunction and that the
injunction is not warranted on the merits because the Trustee has failed to satisfy
the four-part test required for issuance of a preliminary injunction. For the reasons
stated below, this Court affirms the Bankruptcy Court's order. The parties are
familiar with the extensive factual and procedural background of this case as
outlined by the Bankruptcy Court. It will be restated here only as needed to
explain this Court's decision.

II.

Standard

A district court reviews a bankruptcy court's legal conclusions de novo and factual
findings for clear error. In re Leavitt, 171 F.3d 1219, 1222 (9th Cir. 1999). Under
clear error review, the court must not reverse unless it is "left with the definite and
firm conviction that a mistake has been committed." United States v. Us. Gypsum
Co., 333 U.S. 364, 395 (1948).
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III.

Analysis
A.

This Court has jurisdiction to hear this appeal under 28 U.S.C.
§ 158(a)(1).

"The district courts of the United States shall have jurisdiction to hear
appeals from final judgments, orders, and decrees" of bankruptcy courts. 28
U.S.C. § 158(a)(l). The Trustee contends that a preliminary injunction is an
interlocutory order rather than a final appealable order and thus this Court does
not have jurisdiction to hear this appeal. (Doc 11 at 7.) But "[t]he unique nature
of bankruptcy proceedings dictates ... that [courts] take a pragmatic approach to
the question of finality." In re Mason, 709 F.2d 1313, 1318 (9th Cir. 1983).
"[C]ertain proceedings in a bankruptcy case are so distinct and conclusive either to
the rights of individual parties or the ultimate outcome of the case that final
decisions as to them should be appealable as of right." In re Stanton, 766 F.2d
1283, 1286 (9th Cir. 1985) (quoting Mason, 709 F.2d at 1317). "A judgment that
resolves a bankruptcy adversary proceeding is final for purposes of appeal." In re
Adam Aircraft Industries, Inc.,

B.R. _ , 2014 WL 1930156,

* 3 (Bankr. App.

10th Cir. 2014). The appeal before this Court is an appeal from an order entered
in Adversary Proceeding No. 10-00015 in Case No. 08-61570-11-RBK before
the Bankruptcy Court. Because the order enjoining Appellants from transferring
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their assets is a resolution of an adversary proceeding and is conclusive of the
property rights of individual parties, and considering the pragmatic approach to
finality necessary in bankruptcy proceedings, this Court has jurisdiction to hear an
appeal of the preliminary injunction order.
B.

Appellants' request that the preliminary injunction be vacated is
denied.

Pursuant to 11 U.S.C. § 105(a), a bankruptcy court may "issue any order,
process, or judgment that is necessary or appropriate to carry out the provisions of
[the Bankruptcy Code]." "Section 105( a) contemplates injunctive relief in
precisely those instances where parties are pursuing actions ... that threaten the
integrity of a bankrupt's estate." In re Canter, 299 F.3d 1150, 1155 (9th Cir.
2002) (internal citations and quotations omitted). To obtain a preliminary
injunction, a plaintiff must establish that (1) he or she is likely to succeed on the
merits, (2) he or she is likely to suffer irreparable harm without preliminary relief,
(3) the balance of equities tips in his or her favor, and (4) an injunction is in the
public interest. Winter v. Nat. Resources De! Council, Inc., 555 U.S. 7,20
(2008); Am. Trucking Assn., Inc. v. City a/Los Angeles, 559 F.3d 1046,1052 (9th

Cir. 2009).
The first element of a preliminary injunction requires the movant to prove

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that he or she is likely to succeed on the merits. In the underlying action, the
Trustee is asserting claims under Montana's Uniform Fraudulent Transfer Act and
sections 548 and 550 of the Bankruptcy Code for the recovery of fraudulent
transfers from Appellant Blixseth to Appellant Desert Ranch. (Doc. 11 at 19.)
Under Montana law, a transfer by a debtor is fraudulent if the debtor made the
transfer "with actual intent to hinder, delay, or defraud any creditor of the debtor."
Mont. Code. Ann. § 31-2-333(1)(a). In another adversary proceeding in this case,
the Bankruptcy Court found that Appellant Blixseth' s "fraudulent intent could not
be more clear. Blixseth ... [acted] with the actual intent to hinder, delay and
defraud his creditors ...." In re Yellowstone Mountain Club, LLC, 436 B.R. 598,
664 (Bankr. D. Mont. 2010). Since the Bankruptcy Court has already concluded
that Appellants acted with fraudulent intent, the Trustee has shown a likelihood of
success on the merits.
The second element of a preliminary injunction requires the movant to
prove that irreparable harm is likely-not merely possible-if injunctive relief is
not granted. Winter, 555 U.S. at 22. The Trustee has a judgment against
Appellant Blixseth in the amount of $40,067,962.43 plus fees and costs. (Bankr.
Case No. 08-61570-11-RBK AP 09-00014, Doc. 580 at 4.) In Adversary
Proceeding No. 09-00064, Blixseth stipulated to the entry of an order prohibiting
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him from transferring or encumbering certain assets, including the Tamarindo
Resort Property, (Bankr. Case No. 08-61570-11-RBK AP 09-00064, Doc. 16 at
2), which Blixseth maintained was worth $40 million, (Doc. 1-7 at 10). Blixseth
proceeded to violate that court order and dispose of the Tamarindo Resort
Property. (Bankr. Case No. 08-61570-11-RBK AP 09-00064, Doc. 49 at 6.)
Blixseth then spent all $13 million in proceeds from the sale, (id. at 14-15),
making that money unavailable to his creditors. Based on Appellant Blixseth' s
past conduct, the Trustee has adequately demonstrated the likelihood of
irreparable financial harm in the absence of an injunction.
The third element of a preliminary injunction requires "courts [to] balance
the competing claims of injury and consider the effect of granting or withholding
the requested relief." Winter, 555 U.S. at 9. Appellants note that Blixseth is a real
estate developer and that the Trustee has presented no evidence that Blixseth is no
longer in business. (Doc. 4 at 26.) The implication seems to be that real estate
developers are in the business of selling property and, without proof from the
Trustee that Blixseth is no longer in business, this Court should assume that the
inability to transfer property is per se harmful to Appellants. Appellants conclude
by arguing that the Bankruptcy Court does not have jurisdiction over the
transferred assets and "the mere fact that the Bankruptcy Court is restraining the
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transfer of non-estate property and companies that are not before the it [sic] based
upon attorney argument is more than sufficient harm in itself to vacate the
injunction." (Doc. 4 at 26.) This conclusory argument is unpersuasive. The likely
effect on the Trusteee of withholding the requested relief is clear: Appellants will
continue to dispose of assets in violation of a court order and to the financial
detriment of the Trustee and creditors. As the Bankruptcy Court noted, "Blixseth
and Desert Ranch have engaged in a pattern of secreting or dissipating assets to
avoid judgment." (Doc. 1-7 at 10.) The more property Appellants dispose of, the
less money will be available to the Trustee and consequently to creditors. This
element weights in the Trustee's favor.
The fourth element of a preliminary injunction requires courts to give
"particular regard to the public consequences" of granting or withholding the
requested relief. Winter, 555 U.S. at 9. Appellants argue that the "parties are
private actors; thus, their interests are not the publics [sic]." (Doc. 4 at 21.) But
the Trustee persuasively counters that legislatures have deemed preventing
fraudulent transfers in the public interest by enacting fraudulent transfer statutes.
See, e.g., Mont. Code Ann. § 31-2-326, et seq. Further, this Court agrees with the
Bankruptcy Court that "it is always in the public interest for parties to abide by
court orders." (Doc. 1-7 at 11.) To avoid judgment, Appellants previously have
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dissipated assets in violation of a court order. It is in the public interest to prevent
fraudulent financial dealings and promote respect for the law.

IV.

Conclusion
All four elements necessary to support entry of a preliminary injunction

favor the Trustee and the relief ordered by the Bankruptcy Court. Having
reviewed the Bankruptcy Court's findings of fact for clear error and legal
conclusions de novo, this Court is persuaded that the preliminary injunction was
properly issued. The decision of the Bankruptcy Court will therefore be affirmed.
IT IS ORDERED that the decision of the United States Bankruptcy Court
for the District of Montana in Case No. 08-61570-11-RBK, Adversary
Proceeding No. 10-00015, (see Doc. 1-7), is HEREBY AFFIRMED.
IT IS FURTHER ORDERED that Clerk of Court shall enter judgment in
favor of Appellee, Brian Glasser, Trustee of the Yellowstone Club Liquidating
Trust and close this case.
DATED this

1/61­
:tJ.L day of July, 2014.

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