Menotte v. Vero Beach Country Club, Inc. (In re Mills)

605 B.R. 549

IN RE: William B. MILLS, Debtor.

Deborah Menotte, as Court Appointed Receiver for Real Estate & Management Group, LLC, Plaintiff,

v.Vero Beach Country Club, Inc., Defendant/Third-Party Plaintiff,

v.William B. Mills and Mary Jane Mills, Third-Party Defendants.

Case No. 15-29068-EPK

Adv. Proc. No. 18-01215-EPK

United States Bankruptcy Court, S.D. Florida, West Palm Beach Division.

Signed August 7, 2019

Kenneth B Robinson, Esq., Ft. Lauderdale, FL, for Plaintiff.

G Steven Fender, Ft. Lauderdale, FL, for Defendant.

Clive N. Morgan, Busch Slipakoff Mills & Slomka LLC, Jacksonville, FL, for Third-Party Defendants.

ORDER ON THIRD-PARTY PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT ON COUNT II OF THE THIRD-PARTY COMPLAINT AND ON THE THIRD-PARTY DEFENDANTS' COUNTERCLAIM

Erik P. Kimball, Judge

This matter came before the Court upon Vero Beach Country Club, Inc.'s Motion for Summary Judgment on Count II of Its Third- Party Complaint and on the Millses' Counterclaim [ECF No. 43] (the "Motion for Summary Judgment") and the Affidavit of Timothy Straley [ECF No. 46] (the "Affidavit") filed by Vero Beach Country Club, Inc. ("VBCC"), the response thereto [ECF No. 48] and the Affidavit of William B. Mills [ECF No. 49] filed by William B. Mills and Mary Jane Mills (together, the "Defendants"), and the reply thereto [ECF No. 60] filed by VBCC.

Facts

VBCC owns and operates a private golf country club. In May 2003, the Defendants applied for membership at VBCC. Exh. A, ECF No. 46. That same month, VBCC accepted and executed the Defendant's membership application. Id . The Defendants have been members since that time.

As members of VBCC, the Defendants are governed by the VBCC Bylaws, Exh. B, ECF No. 46, and the VBCC Policies, Procedures, and Rules, Exh. C, ECF No. 46 (the "PPR").¹ Pursuant to the PPR, the VBCC board of directors has the right to suspend (up to one year) or expel any member for the member's failure to satisfy indebtedness to VBCC or for the member's misconduct. PPR, § C.1.

The Defendants are obligated to pay to VBCC annual membership dues and "[a]ll fees and charges," such as sums due for golf, meals, and beverages. PPR, § C.2.a. Regarding overdue indebtedness, the PPR provides:

b. Overdue Indebtedness. As early as possible each month, the Treasurer shall mail to each member a statement showing the member's indebtedness through the last day of the previous month. If such indebtedness or part thereof remains unpaid when the member's statement for the succeeding month is prepared, it shall be included therein as well as any late fee charges as may be determined by the Board. If still unpaid after 45 days from the original statement date, the member shall be notified of the amount in arrears, and said member shall be denied any further credit until the amount in arrears has been satisfied. Should payment of the amount in question still not be made within 60 days of the original statement date, the name of the delinquent member shall be posted on the club bulletin board. If the total amount in arrears has not been satisfied within 30 days after posting of the member's name, the member shall be suspended. Further, unless full payments of the amounts in question is made in the interim, the member shall be expelled at the next regular meeting of the Board of Directors. In such cases, a record of all financial obligations will be turned over to a collection agency and a copy will be sent to the credit authorities, for inclusion in the expelled member's credit history.

The expelled member shall not be eligible to utilize any of the Club's facilities (golf course or Clubhouse) neither as a guest of a member or another guest until said indebtedness has been paid in full.

PPR, § C.2.

The PPR defines "misconduct" as a member's violation of the Bylaws or the PPR or "conduct injurious to the good order, peace, interest or welfare of [VBCC], its members and staff." PPR, § C.3.a. The VBCC board of directors may initiate an investigation of possible misconduct on its own volition. Id . The PPR provides the following enforcement mechanism for a member's alleged misconduct:

b. Hearing. The Secretary shall inform the member concerned of the substance of the complaint and his right to submit a written answer or to appear in person before the Board at a specific date and time. He may present evidence in his behalf, but will not be given access to any written complaint nor will the identity of the writer be disclosed. If the complaint involves a husband or wife or both, either or both may appear.

c. Decision. At the conclusion of its investigation the Board may dismiss the complaint as unfounded, issue an appropriate warning, or by a two-thirds vote, suspend or expel the member(s) concerned. The Board shall be the sole judge of the validity of such complaints and its judgment shall be final.

PPR, § C.3.b-c.

The Defendants jointly own Real Estate & Management Group, LLC ("REMG"). Schedule B, ECF No. 1, Case No. 15-29068-EPK. Mr. Mills is the president of REMG. Exh. A, ECF No. 46. The Defendants caused REMG to pay to VBCC the Defendants' annual membership dues and their fees and charges. Exh. D, ECF No. 46.

On October 28, 2015, Mr. Mills filed a voluntary chapter 7 bankruptcy petition. ECF No. 1, Case No. 15-29068-EPK. Michael R. Bakst was appointed as the chapter 7 trustee (the "Trustee"). At that time, the Defendants were current with all monetary obligations owed to VBCC. ¶ 7, ECF No. 46. VBCC was not involved in Mr. Mills' chapter 7 case. On September 14, 2017, Mr. Mills received a discharge. ECF No. 138, Case No. 15-29068-EPK.

On September 21, 2017, the Trustee filed an adversary proceeding against REMG for judicial dissolution and for the appointment of a receiver. ECF No. 1, Adv. Proc. No. 17-01366-EPK. The Court granted the Trustee's request to appoint a receiver and, pursuant to Fla. Stat. § 605.0704, appointed Deborah C. Menotte as receiver of REMG (the "Receiver"). ECF No. 24, Adv. Proc. No. 17-01366-EPK. The Court authorized the Receiver to take control of REMG, to wind down and liquidate its assets, and, among other things, "to investigate and sue to avoid fraudulent or other improper transfers." Id.

On March 30, 2018, the Receiver sent a letter to VBCC demanding repayment of four years of sums that the Defendants caused REMG to pay to VBCC for annual membership dues, fees, and charges. Exh. D, ECF No. 46. The Receiver threatened legal action if VBCC failed to comply with the demand. Id. According to Tim Straley, general manager and chief operating officer of VBCC, VBCC was "greatly concerned" about the Receiver's demand because "[a]t this time, VBCC was also in the middle of a construction protect with financing where contingent liabilities had to be disclosed to VBCC's lender which would affect VBCC's debt ratio." ¶ 8, ECF No. 46.

On April 13, 2018, VBCC sent a letter to the Defendants demanding, among other things, that the Defendants defend or protect VBCC from the Receiver's demand. Exh. E, ECF No. 46. This letter warned the Defendants that failure to defend or protect VBCC may result in expulsion from VBCC and/or legal action for damages incurred by VBCC. Id. Shortly after VBCC sent this letter, the president of VBCC and Mr. Straley met in person with Mr. Mills and again demanded that the Defendants defend or protect VBCC from the Receiver's demand. ¶ 10, ECF No, 46. A few days later, VBCC sent the Defendants a draft written agreement requiring the Defendants to fully defend, indemnify and hold harmless VBCC from any and all claims brought by the Receiver against VBCC. Exh. F, ECF No. 46.

On May 4, 2018, the Defendants notified VBCC that the Defendants would neither defend or protect VBCC nor sign the proposed written agreement. ¶ 12, ECF No. 46.

On May 11, 2018, the Receiver filed the instant adversary proceeding against VBCC, seeking to avoid and recover $55,338.21, representing the sum of four years of transfers from REMG to VBCC on behalf of the Defendants. ECF No. 1. The Receiver's claims against VBCC were brought solely under the Florida Uniform Fraudulent Transfer Act, Fla. Stats. §§ 726.105(1)(b) and 726.106(1). Id .

On May 22, 2018, by letter entitled "Notice of Hearing," and pursuant to section C of the PPR, the secretary of the VBCC board of directors demanded that the Defendants "appear in person or provide written defenses as to why [the Defendants] should not immediately resolve all issues contained within [the adversary proceeding filed by the Receiver against VBCC] and if not, be suspended and/or expelled until the [adversary proceeding] is resolved without [VBCC] incurring any damages, expenses or attorneys' fees of any kind whatsoever." Exh. G, ECF No. 46. The letter scheduled a disciplinary hearing before the board of directors on June 5, 2018 at 3:30 p.m. Id .

On May 24, 2018, prior to the disciplinary hearing, counsel for VBCC sent a letter to counsel for the Defendants indicating that "VBCC's board of directors voted to suspend [the Defendants'] VBCC membership and all associated benefits until this matter is fully resolved." Exh. H, ECF No. 46. The letter indicated that VBCC was negotiating with the Receiver to pay a sum less than the amount requested in the Receiver's complaint against VBCC. Id . The letter stated that payment by the Defendants to VBCC, in the full amount ultimately paid by VBCC to the Receiver, may restore the Defendants' membership rights. Id . According to Mr. Straley, "[w]hile VBCC board members approved this letter before it was sent, the [letter] erroneously states that [the Defendants'] membership was considered suspended, when in fact, that suspension would not potentially become effective until the June 5, 2018 meeting when a vote of the board was taken." ¶ 15, ECF No. 46.

On May 31, 2018, the Defendants, with the assistance of counsel, responded in writing to the VBCC notice of hearing. Exh. I, ECF No. 46. The Defendants indicated that they chose to respond in writing since the...