487 B.R. 289
Bankr. D.N.M.2013Background
- AVIC is a Virgin Islands LLC wholly owned by the Debtor, who remains sole member and manager after bankruptcy.
- Boehm and her son agreed on Sept. 24, 2007 to sell Boehm’s Club Comanche Shares (447.5) to AVIC for $800,000, with AVIC paying $550,000 and the final $250,000 due by Nov. 1, 2009.
- Boehm defaulted on the cure payment, Boehm terminated the agreement ca. Nov. 17, 2009, and claimed ownership of the Shares.
- Post-petition, Debtor caused AVIC to dissolve and transfer the Shares to himself; Boehm challenges dissolution and transfer as improper under Virgin Islands law.
- Boehm filed the Virgin Islands Action in 2009 seeking declaratory relief; Debtor filed Boehm Adversary Proceeding in November 2012 seeking similar relief in bankruptcy.
- The Court must decide whether the automatic stay under 11 U.S.C. § 362 applies to the Virgin Islands Action given the post-petition transfer of the Shares and potential trust/fraud issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Debtor’s ownership after bankruptcy remains intact? | Boehm contends transfer/termination voided Debtor’s rights to AVIC Shares. | Debtor remains sole member/manager; bankruptcy does not dissolve ownership. | Debtor retained AVIC ownership/management rights post-p bankruptcy. |
| Effectiveness of the post-petition Shares transfer? | Boehm argues transfer void or voidable due to pre-petition termination and VI law issues. | Transfer was proper or at least effective to the extent AVIC had an interest; may create claims if improper. | Transfer effective to the extent AVIC had an interest; merits reserved. |
| Was court authorization required for the AVIC transfer? | Dissolution and transfer were not in the ordinary course and may have required court approval. | Proceedings may be voidable but not void; authority issues are unresolved. | Transfer potentially voidable; remains subject to court authority questions. |
| Does the automatic stay apply to the Virgin Islands Action after the transfer? | AVIC’s post-petition transfer brings assets into the estate, triggering the stay. | Subsidiaries’ assets typically not stayed; however, the transfer may bring the Shares into the estate. | Automatic stay applies to the Virgin Islands Action given the post-petition transfer and disputed ownership. |
Key Cases Cited
- In re Baldwin, 463 B.R. 142 (10th Cir. BAP 2006) (state-law disposition vs. federal estate rights; §541(c)(1) pre-emption)
- In re Klingerman, 388 B.R. 677 (Bankr.E.D.N.C. 2008) (dissolution/transfer rights devolve to trustee; post-petition transfers)
- In re Dixie Mgmt. & Invest., 474 B.R. 698 (Bankr.W.D.Ark. 2011) (trust/ fraud considerations in LLC wind-up; effect on distributions)
- Brown v. Chesnut (In re Chesnut), 422 F.3d 298 (5th Cir. 2005) (automatic stay extends to arguably property of the estate)