In re Raejean S. Bonham dba World Plus
Bankruptcy No. F95-00897
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REPLY TO OPPOSITION TO
MOTION FOR SUMMARY JUDGMENT
The Trustee has filed a motion to strike the "Response to Trustee's Certificate of No Objections and Certification of Defendant's Objections to Trustee's Motion for Summary Judgment" (referred to as "the Defendants' Opposition") filed by the defendants on or about October 9, 1996. In the event the court determines not to strike that untimely pleading, the Trustee submits this Reply to the Defendants' Opposition.
The Trustee cannot find any material issue of fact as to which the defendants have raised any competent evidence. The U.S. Supreme Court, writing in Celotex Corporation v. Catrett, 477 U.S. 317 (1986), stated:
The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of any element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be 'no genuine issues as to any material fact' since complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial.
Id, 322-323. The defendants have failed to demonstrate any fact which would deny the Trustee the right to summary judgment.
The first few pages of the Defendants' Opposition argue that the items of personal property were not properly taken and sold by the Trustee. See Defendants' Opposition, pages 1-5. Of course, that issue is no longer before the court. This question was the subject of the a trial. The defendants lost. A partial final judgment was entered on July 3, 1996. The defendants took no appeal. The property was sold, as described in the reports of auction filed with the court, and attached as Exhibits to the Trustee's motions for reconsideration.
The defendants deny that they stipulated to the sale of the 1992 Corvette, the 1992 Bayliner and the 1990 Itasca Motorhome. The record will speak for itself. See Order of May 2, 1996, page 2, Paragraph 2 (Docket No. 26). At the time they defendants agreed to surrender those assets, the 1992 Corvette and the 1990 Itasca were subject to pending motions for relief from stay and the defendants had no means of making the monthly payments. The Trustee has made no misrepresentation in that regard.
The defendants state that the Trustee also misrepresented to the court that "the mortgages against them [the personal property?] could be satisfied." In fact, the defendants' notes secured by security interests in the 1992 Corvette and the 1992 Bayliner were paid and satisfied by the proceeds of the auction sale. The proceeds from the sale of the 1990 Itasca were apparently insufficient to meet the balance due on the note. The Trustee assumes that John Deere Credit, whose letter is attached to the Defendants' Opposition as an unlabeled exhibit, have a deficiency, and want to recover the deficiency from Steve Bonham, the addressee of the letter. That has nothing to do with the Trustee, nothing to do with the issues presented by the summary judgment motion, and much to do with the finances of the defendants. The 1990 Itasca sold for $31,000. See Report of Auction. John Deere estimated its wholesale fair market value at $21,520. See John Deere's Motion for Relief from Stay dated March 11, 1996. In other words, the Trustee was able to obtain approximately 150% of the average wholesale price.
At no time has the Trustee represented that the proceeds from the auction sale would be sufficient to pay the underlying note in full. The defendants' problem is that they relied upon other people's money to make the payments on the 1990 Itasca note. See Affidavit of Larry Compton filed April 1, 1996 in Support of Motion for Summary Judgment, pp. 4 - 5 (showing most of the payments on the Itasca note came directly from World Plus). When those funds dried up, so did the defendants' ability to pay the note. That Steve Bonham faces a deficiency is unsurprising and, contrary to the defendants' arguments, supports the inference that, indeed, they had no equity in the 1990 Itasca motorhome.
The defendants do not dispute in their "Response" the merits of the pending motion at all. Their arguments are instead focused on earlier stages of the proceeding.
However, in their Affidavits, the defendants raise arguments addressing the pending motion for summary judgment. Some of the allegations contain serious misrepresentations, or betray serious misunderstandings of this case. In an effort to help both the defendants and the court understand, the Trustee will attempt to address all of those allegations.
In Paragraph 2, they state this is an involuntary Chapter 7. It is not. This is a case that started as an involuntary Chapter 7 and, on the Debtor's separate petition under Chapter 11, was converted to Chapter 11. It was subsequently converted to a voluntary Chapter 7.
In Paragraphs 4 - 7, they assert they lack information about the "point of origin" and "chain of custody" of bank records and documents. First, the records have been admitted into evidence. The arguments are moot. Second, the Trustee testified he found those records either at the Debtor's place of business or among records returned by the FBI. There is absolutely no indication those records are anything but what they purport to be. Third, the defendants are barred by res judicata - the rule of law that things decided once may not be litigated again - from raising these issues now. Fourth and last, the defendants simply testify they can "neither affirm or [sic] deny" the documents or assumptions drawn from the documents. To avoid a summary judgment motion, the defendants must be able to prove things. Their testimony is that they can't prove anything.
The Debtor, in her Paragraph 7, asserts that she has been "denied possession" of her books and records, "by the Court." The statement is correct, but the implications of the statement are false. The court will recall that the Trustee has agreed to allow the Debtor (and, for that matter, Steve Bonham) access to records in the Trustee's possession under the supervision of either the chair of the creditors committee, Nancy Larson, or the vice-chair, Bob Darling. The Trustee is willing to consider other, disinterested persons if the Debtor proposes them in writing. If the Trustee does not agree to a person proposed by the Debtor, the Debtor can take the issue to the court. The point here is that the Debtor in fact has access to her records.
In Paragraph 8, the defendants speculate that the ratio of payments for missing records might be different than in those records the Trustee has. In Paragraph 9, the defendants admit they have no evidence either way. Their speculation is no evidence and does not help them avoid summary judgment.
In Paragraphs 10 - 14 the defendants advance the theory that World Plus was an S Corporation under the Internal Revenue Code, and that officers, directors and shareholders could "legally withdraw money from assets of the corporation." The Trustee is ware that World Plus made as "S Corporation" election in some years, but, based upon tax returns filed, not in all years. In any event, the argument is irrelevant. An Alaska corporation is forbidden to make distributions to shareholders if it is insolvent. AS 10.06.358-360. World Plus was a Ponzi scheme. It was insolvent from the date it wrote its first check. Nothing about its tax status affected its obligations to comply with Alaska law.
In Paragraphs 15 - 16, the defendants deny that World Plus was a Ponzi scheme. This court has already reached that conclusion, and the defendants did not appeal. The court's conclusion was supported by overwhelming evidence. Everything the Trustee has seen and heard since the court made that determination supports it. The Securities & Exchange Commission has concluded World Plus was a Ponzi scheme. The Debtor has not provided a shred of new evidence to the contrary. Steve Bonham, by contrast, has told the court he knew next to nothing about his own finances, let alone those of his wife's business. His credibility on the issue of the underlying character of World Plus is nil.
In Paragraph 17 the defendants dispute that the bankruptcy court can act to sell property and allocate the proceeds under §363(h). The U.S. Constitution confers bankruptcy jurisdiction on the federal government. Article I, §8. Congress has chosen through the bankruptcy code to displace state law in certain regards. The defendants are mistaken.
In Paragraph 18 the defendants state they dispute "almost every material fact." But they offer no facts whatsoever in support of their "dispute." They recite a lengthy list of legal issues, and a couple of mixed issues of law and fact, but they offer no facts to support their claim that the allocation of sale proceeds set out in the motion for summary judgment is in error. Again, to avoid summary judgment they must point to specific facts. They have not done so. Indeed, since almost all of the facts required to resolve this issue are in the Findings of Fact and Conclusions of Law and are res judicata, it is impossible for them to do so.
The next substantive allegations appear to the Trustee to be at Paragraphs 22 - 23, a renewal of the argument that World Plus was an S Corporation and could distribute money as it saw fit. World Plus, the court has found, was a fraud and, as a consequence, World Plus could not distribute monies at all, let alone distribute monies to its officers, directors and shareholders. The Trustee adopts his earlier arguments to these allegations. The Trustee notes, too, that these paragraphs are incorrect statements of Alaska corporate law.
The remaining paragraphs appear to contain only restated arguments addressed earlier. The Trustee can identify no facts which constitute relevant, competent evidence to resist the motion for summary judgment. Opinions of law (that the personalty has been illegally seized, or that the defendants are entitled to a jury trial before an Article III court) don't constitute evidence. As arguments of law, they are irrelevant to the issues presented by the pending motion for summary judgment.
Assuming the court determines that it is necessary to consider the Defendants' Opposition, there is nothing in its which raises a material issue of fact on any relevant question. For the reasons set forth in this reply, the court should grant the Trustee summary judgment.
DATED at Fairbanks, Alaska this ___ day of October, 1996.
GUESS & RUDD
Attorneys for Trustee
James D. DeWitt
ABA No. 760523
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