Angueira v. Trujillo (In re Trujillo)

607 B.R. 734

IN RE Leonidas Ortega TRUJILLO, Debtor.

Robert A. Angueira, Chapter 7 Trustee, Plaintiff,

v.Leonidas Ortega Trujillo, et al., Defendants.

CASE NO. 15-20614-LMI

ADV. NO. 16-01277-LMI

United States Bankruptcy Court, S.D. Florida.

Signed January 2, 2019

Vincent F Alexander, Fort Lauderdale, FL, Dyanne E. Feinberg, Corali Lopez-Castro, Esq, David L. Rosendorf, Esq, Coral Gables, FL, Jeffrey T. Kucera, Esq, K & L Gates LLP, Mindy Y. Kubs, Miami, FL, for Plaintiff.

Leonidas Ortega Trujillo, Miami, FL, pro se.

Paul L. Orshan, Esq., Orshan, P.A., Joanne Gelfand, Esq, Akerman LLP, Brett D. Lieberman, Luis R. Casas, Miami, FL, for Defendants.

ORDER AND MEMORANDUM OPINION DENYING CORPORATE DEFENDANTS' ORE TENUS MOTION FOR JUDGMENT ON PARTIAL FINDINGS

Laurel M. Isicoff, Chief United States Bankruptcy Judge

The Court conducted a hearing on December 17, 2018, on an ore tenus motion for judgment on partial findings (the "Motion") made by defendants TLG The Language Group, LLC; I.F. Multicultural Interactive Solutions, LLC; TL2 Travel Live & Learn, LLC; Infiservice, Corp.; Grupo IF-USA, Inc.; Panama Investment Moon Corporation; and LTG Foundation (collectively, the "Corporate Defendants"). Having reviewed the record in this proceeding, including inter alia (i) the Second Amended Complaint [ECF #46] and (ii) pleadings setting forth legal argument relevant to the Corporate Defendants' Motion,¹ and having reviewed applicable law, including inter alia (i) the cases listed in the Corporate Defendants' Notice of Filing Authorities in Support of Corporate Defendants' Motion for Directed Verdict [ECF #323] and (ii) the cases cited by the parties during the December 17th hearing, the Court announced its bench ruling on the record at the conclusion of the hearing. The following order memorializes and supplements the bench ruling issued by the Court on December 17, 2018.

I. The Standard of Review

This matter came before the Court on the Corporate Defendants' Motion for Judgment on Partial Findings pursuant to Rule 52(c) of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure. The Corporate Defendants argued the Motion at the closing of the Plaintiffs' case in chief in this adversary proceeding.

" Rule 52(c) applies in cases where the court acts as both judge and finder of fact. Accordingly, the court resolves conflicts in the evidence and also makes credibility assessments.... Moreover, in evaluating the evidence[,] the court makes no special inferences in favor of the nonmoving party." Quantachrome Corp. v. Micromeritics Instrument Corp. , 97 F. Supp. 2d 1181, 1184 (S.D. Fla. 2000) (citations omitted), aff'd in part on other grounds, vacated in part on other grounds , 15 F. App'x 848 (Fed. Cir. 2001). A trial court may enter judgment on partial findings where the plaintiff fails to make out a prima facie case, or where the plaintiff makes out a prima facie case but the court determines that a preponderance of the evidence cuts against the plaintiff's claim. Stokes v. Perry , No. 94 CIV. 0573(RO), 1997 WL 782131, at *9 (S.D.N.Y. Dec. 19, 1997) (citation omitted).

It is the Plaintiffs' burden to prove every element of the claims they assert against the Corporate Defendants. See Schaffer ex rel. Schaffer v. Weast, 546 U.S. 49, 57, 126 S.Ct. 528, 163 L.Ed.2d 387 (2005) ("[W]e have usually assumed without comment that plaintiffs bear the burden of persuasion regarding the essential aspects of their claims."); Little v. NCR Corp., 1995 WL 929019, at *3 (N.D. Ga. Dec. 7, 1995 ) ("At trial, Plaintiff bears the burden of proving each element of the causes of action pleaded in Plaintiff's Complaint."). Only when the Plaintiffs have met their initial burden, does the burden then shift to the Corporate Defendants to either rebut the Plaintiffs' evidence, or, where appropriate, put on proof of any statutory defenses on which the Corporate Defendants might rely.

In this proceeding, the Corporate Defendants argue that the Plaintiffs have failed to meet their burden regarding the Trustee's claims for alter ego as a matter of law and have failed to meet their legal burden with respect to asserting a nominee claim.

The underlying issue in this adversary proceeding is whether and to what extent the Corporate Defendants were, on the petition date,² property of the bankruptcy estate of Leonidas Ortega Trujillo ("LOT" or the "Debtor") under 11 U.S.C. § 541. In making that determination, what efforts have been made after the petition date and what changes have been made after the petition date may be relevant to put prepetition conduct into context, but postpetition conduct does not otherwise change what was the situation on the petition date.

II. Count 2 – Equitable Ownership

The Corporate Defendants argue that the Trustee is clearly relying on the nominee theory in order to establish equitable ownership, and that, as a matter of law, that argument fails because the nominee theory only applies in taxpayer cases. Moreover, the Corporate Defendants argue, the Trustee may only rely on the Florida law on resulting trusts to establish an equitable ownership claim, which the Trustee has failed to do both in his pleadings and in his proof. The Court does not agree.

Federal courts are not as rigid with respect to the nominee theory as the Corporate Defendants would argue. Courts have recognized that the nominee theory is not exclusive to cases in which the claims are made to establish taxpayer liability. See, e.g., Followell v. United States (In re Gurley) , 357 B.R. 868 (Bankr. M.D. Fla. 2006), remanded on other grounds, 2009 WL 2901226 (M.D. Fla. Sept. 10, 2009); Menchise v. Steffen (In re Steffen), 464 B.R. 450, 460 (Bankr. M.D. Fla. 2012), aff'd sub nom., Daer Holdings, LLC v. Menchise (In re Steffen) , 2014 WL 11428827 (M.D. Fla. Mar. 13, 2014), aff'd per curiam, 611 Fed. App'x 677 (11th Cir. 2015).

In the Steffen bankruptcy case, the bankruptcy court entered judgment in favor of the trustee on the trustee's nominee claim,³ holding that, based on the nominee theory, the debtor continued to maintain an equitable ownership interest in property that had been sold by the bankruptcy estate. The bankruptcy court decided, in determining whether property was held by a nominee of the debtor, to apply the test from Shades Ridge Holding Company, Inc. v. United States , 888 F.2d 725 (11th Cir. 1989) ("Shades Ridge "), which considers

(i) the control the taxpayer exercises over the nominee and its assets; (ii) the family relationship, if any, between the taxpayer and the corporate officers; and (iii) the use of corporate funds to pay the taxpayer's personal expenses.

Menchise v. Steffen (In re Steffen), 464 B.R. at 460 (citing Shades Ridge at 729).

The United States District Court for the Middle District of Florida (the "District Court") affirmed the bankruptcy court's ruling that the nominee theory could apply to the trustee's claim against the property. Daer Holdings, LLC v. Menchise (In re Steffen) , 2014 WL 11428827, at *4. The Corporate Defendants argue that in the Steffen appeal to the District Court, (i) the parties agreed that the nominee theory applied and (ii) the nominee claim belonged to the IRS when it intervened. The Corporate Defendants' arguments are a misreading of the District Court's opinion.

It is clear from the bankruptcy court's and the District Court's opinions that the Steffen trustee sought a determination that the property at issue was property of the bankruptcy estate based on the nominee theory, a claim that the IRS also made when it intervened. And the District Court stated that the parties agreed that the correct test to determine whether the purchaser of the property was the nominee of the Debtor was the Shades Ridge test, not that the parties agreed that the nominee theory applied in general. Daer Holdings, LLC v. Menchise (In re Steffen) , No. 2014 WL 11428827, at *5. Ultimately, the United States Court of Appeals for the Eleventh Circuit concluded that neither the bankruptcy court nor the District Court committed reversible error when both lower courts applied the Shades Ridge test to determine that the purchaser was the debtor's nominee. Daer Holdings, LLC v. Menchise (In re Steffen), 611 Fed. App'x 677.

The Corporate Defendants also incorrectly rely on the District Court's opinion in Steffen to support the Corporate Defendants' argument that, under Florida law, only a resulting trust claim would enable the Trustee to prevail on his equitable ownership count. In Steffen , the District Court cited Towerhouse Condominium, Inc. v. Millman , 475 So. 2d 674, 677 (Fla. 1985) ("Towerhouse ") in support of its holding that "Florida law recognizes that bare legal title is not determinative of all property rights, and that an ownership interest may be with a party who is not the titleholder of record."

Daer Holdings, LLC v. Menchise (In re Steffen) , 2014 WL 11428827, at *5 (citing Towerhouse ). The Corporate Defendants are correct that Towerhouse is a resulting trust case. But it is clear that the District Court was using Towerhouse to illustrate that, under Florida law, bare legal title is not the end stop in determining ownership; not that resulting trusts are the sole available method to resolve that issue.

This is underscored by the District Court in a footnote quoting another Florida district court - "While the federal courts generally apply the law of the forum state (in this case, Florida) to resolve nominee, alter-ego and similar questions, Florida, like many states, does not have a bright-line test for determining nominee ownership. Therefore, federal common law applies." Daer Holdings, LLC v. Menchise (In re Steffen) , 2014 WL 11428827, at *4 n.6 (quoting United States v. Dornbrock , 06-61669-CIV, 2008 WL 769065, at *5 (S.D. Fla. Jan. 17, 2008), aff'd , 309 Fed. App'x 359 (11th Cir. 2009) ); accord Followell v. United States (In re...