In re Moore Trucking, Inc., CASE NO. 2:20-bk-20136

IN RE: MOORE TRUCKING, INC., Debtor.

CASE NO. 2:20-bk-20136

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF WEST VIRGINIA AT CHARLESTON

July 14, 2020

CHAPTER 11

JUDGE FRANK W. VOLK

MEMORANDUM OPINION AND ORDER

Pending is the Debtor's Omnibus Motion to Require Disclosure and Rule 2004 Discovery (the "Omnibus Motion"), filed on April 26, 2020 [dckt. 19]. Interested party Douglas Moore filed two responses [dckts 26 & 67]. Additionally, creditor A.R. Walters Trucking LLC ("A.R. Walters") objected [dckt. 27]. The Debtor filed its Response to A.R. Walters' objection on May 5, 2020 [dckt. 29]. The Debtor additionally submitted its Reply to Douglas Moore's responses on May 6, 2020 [dckt. 30].

The Court has held four hearings on the Omnibus Motion: May 6, 2020, May 13, 2020, June 17, 2020, and June 24, 2020. At the last hearing, the Court ordered the parties to file, on or before July 1, 2020, a joint report detailing what, if any information has been disclosed, what is contemplated to be disclosed, and what if anything remains in controversy. As of July 13, 2020, no such report has been filed.¹ The parties have been unable to come to an agreement upon the issues presented by the Omnibus Motion. The matter is fully briefed and ready for adjudication.

I.

Douglas and Olivia Moore were married on May 12, 2008. At that time, Douglas Moore owned a commercial vehicle and was doing business as Moore Trucking. After the couple wed, they operated in much the same way, with Douglas Moore doing business as Moore Trucking until September 2011. During that time period, they acquired commercial vehicles for the business and Mr. Moore dispatched the vehicles and operated one of the trucks.

On January 22, 2011, Douglas Moore ceased driving for Moore Trucking and instead began dispatching at the Belt Transfer terminal for A.R. Walters, Belt Transfer Company ("Belt"), Moore Trucking, Inc., and the BESL Transfer Co. ("BESL").² The terminal was operated by Joe McCoy, who is the President of Belt. Douglas Moore and A.R. (Randy) Walters have been acquainted for forty-three years, have worked together for over thirty years, and are close friends. Douglas Moore has known Joe McCoy for more than eighteen years. They have worked together for over eight years and are considered to be close friends.

On September 16, 2011, the Moores formed the Debtor, Moore Trucking, Inc., and all the assets were transferred to the Debtor. Tax returns were prepared using handwritten summaries prepared by Mr. Moore. Olivia Moore served as the Secretary of the Corporation and Douglas Moore acted as the President. Olivia and Douglas each owned, and continue to own, 50% of the stock in the Debtor.

On July 21, 2015, the Debtor, by Douglas Moore, entered into an agreement with Randy Walters or A.R. Walters to purchase a 2005 Peterbilt Tractor for the sum of $30,000. The Debtor contends the vehicle was titled to it. Douglas Moore represented to Olivia Moore that the purchase was memorialized in a written contract, but Mr. Moore never gave her the document.

On January 25, 2017, Douglas Moore replaced Randy Walters to become the terminal manager for Belt Transfer Company, Inc.; he thus began to work under Joe McCoy's direct supervision. Also, on January 25, 2017, Mr. Moore, acting on the Debtor's behalf, purchased fourteen commercial trucks and trailers from Randy Walters for $341,000 (the "2017 Asset Purchase"). The vehicles were to be titled to the Debtor. Douglas Moore represented to Olivia Moore that the purchase was memorialized in a written contract, but Mr. Moore never gave her the document. Subsequently, on February 1, 2017, Douglas Moore directed the Debtor's accountant to place Randy Walters on the payroll and to pay him $1,065 per week, in addition to "matching costs."

In July 2018, the Internal Revenue Service ("IRS") commenced an audit of the Debtor. As part of the audit, the IRS required proof of both asset purchases listed previously (in 2015 and 2017), as the assets were being depreciated on the Debtor's books. As stated earlier, Douglas Moore had only provided handwritten summaries of the transactions and never produced any source documents. Mr. Moore finally eventually admitted to Olivia Moore that there existedno written contracts; the purchase agreement was oral and memorialized only by the vehicle titles transferred into the Debtor's name and by liens placed on each title by A.R. Walters. Mr. Moore subsequently provided Olivia Moore with the purchase agreements attached to the Omnibus Motion as Exhibits B & C.

Thereafter, the Moores' marital relationship deteriorated, and Mr. Moore allegedly began threatening Olivia Moore that she would "never receive any of the trucking assets." Douglas Moore allegedly altered the Debtor's income stream in March 2019 by asking Belt to write checks for the Debtor's operations payable to Douglas Moore, rather than depositing the funds into the Debtor's bank accounts, as was the historical practice. Using that method, between March 1, 2019, and December 12, 2019, Mr. Moore received a total of $71,584.47 and allegedly either cashed those payments or deposited them into his personal accounts. Additionally, during substantially the same time period, Mr. Moore allegedly diverted $16,823 from the Debtor's checking account by using a debit card.

Olivia Moore discovered this information, and on December 19, 2019, she removed half of the amount on deposit in the Debtor's accounts; $1,277.45 from the corporate savings account and $28,159.39 from the checking accounts. Remaining was $29,436.84 in the checking account.

The Debtor continued to do business until January 3, 2020; Olivia Moore filed for divorce on that day. After the divorce filing, Douglas Moore opened a new account for Moore Trucking, Inc., to which Olivia Moore did not and does not now have access. Douglas Moore refused to disclose information related to the company's earnings or the contents of the account, and he continued to threaten Ms. Moore by saying she would never receive any asset from the Debtor, regardless of its status as a jointly-owned marital asset.

On March 24, 2020, in the divorce proceedings, Olivia Moore filed a disclosure (Wife's Supplemental Disclosure) which reflected, at the date of separation, the National Automobile Dealers Association ("NADA") Commercial Book Value of the rolling stock of Moore Trucking, Inc. as $526, 691.00 [dckt. 19-4, Ex. H].

On March 25, 2020, in the state court divorce proceedings, Douglas Moore filed a Motion for Expedited Modification of Order Granting Temporary Relief ("Expedited Modification Motion") [dckt. 19-4, Ex. I] seeking permission to sell the Debtor in exchange for forgiveness of $100,000.00 in debt because, he claimed, A.R. Walters would otherwise foreclose on the Debtor's assets. Attached to the motion was a document entitled "Equipment Lease Agreement with Purchase Option" ("Lease Agreement") [dckt. 19-4, Ex. J], which was dated January 25, 2017. This document was dated the same day as the 2017 Asset Purchase and included the very same assets. Olivia Moore had knowledge of the 2017 Purchase Agreement which Douglas Moore provided to her after admitting that the purchase had been made orally, but she had never before seen the Lease Agreement pertaining to the same.

Also, in support of the Expedited Modification Motion, Douglas Moore and Belt prepared an Offer to Purchase signed by Douglas Moore and Joe McCoy, which purported to provide for the purchase of all the Debtor's assets. However, this Offer listed only eleven trucks and trailers. The West Virginia Department of Motor Vehicles has on record thirty-three assets titled in the name of the Debtor (seven are owned by Moore Trucking, twenty-one are owned by the Debtor, and fourteen are titled in Douglas Moore's name, but all are believed to be the property of the Debtor).

The Debtor alleges in the Omnibus Motion that Joe McCoy and Douglas Moore are colluding with the assistance of counsel to sell the Debtor's assets, while claiming an inaccurate number of assets are subject to the transaction.

Olivia Moore's divorce attorney, Lyne Ranson, believed that the Debtor's assets could be saved through a bankruptcy filing. After contacting counsel with bankruptcy experience, Ms. Moore sent a letter to Randy Walters on behalf of A.R. Walters, Joe L. McCoy on behalf of Belt, and Douglas Moore requesting that Mr. Walters and Joe L. McCoy agree, in writing, to refrain from threatening foreclosure or repossession of the property of Moore Trucking, Inc., until the conclusion of a full investigation into the issues. [dckt. 19, Ex. N]. In the alternative, Ms. Moore also asked Douglas Moore to agree to the commencement of a Chapter 11 bankruptcy to protect Moore Trucking Inc.'s assets. [Id.]

Receiving no response to the letter, on March 31, 2020, Olivia Moore filed in the divorce proceedings an Emergency Motion to Alter Temporary Order to Allow the Petitioner to Authorize Bankruptcy Filing and Engagement as Counsel ("Emergency Motion"). The Family Court of Jackson County granted the Ms. Moore's Emergency Motion, and authorized Olivia Moore to vote all the corporate stock of Moore Trucking, Inc., and initiate a bankruptcy filing for the company. The Bankruptcy Petition was filed that day.

On April 1, 2020, counsel for the Debtor received the startup letter from the Office of the United States Trustee (the "UST") and subsequently requested information and documents from Douglas Moore which would assist in the preparation of schedules and transmission of information to the UST. The same day, Douglas Moore, through counsel Leah Chappell, responded with an email providing one bank statement for the new checking account (to which Olivia Moore still did not have access) but declined to provide any other requested information.

On April 2, 2020, the Debtor offered Belt and BESL designation as a critical vendor in the bankruptcy case if they would be willing to continue...