Caudill v. N.C. MacHinery, Inc. (In Re American Eagle Mfg., Inc.)

231 B.R. 320, 41 Collier Bankr. Cas. 2d 1331, 1999 Bankr. LEXIS 260, 34 Bankr. Ct. Dec. (CRR) 127
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedMarch 3, 1999
DocketBAP Nos. WW-97-1574-RRyRu, WW-97-1698-RRyRu, Bankruptcy No. 96-06145
StatusPublished
Cited by10 cases

This text of 231 B.R. 320 (Caudill v. N.C. MacHinery, Inc. (In Re American Eagle Mfg., Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Caudill v. N.C. MacHinery, Inc. (In Re American Eagle Mfg., Inc.), 231 B.R. 320, 41 Collier Bankr. Cas. 2d 1331, 1999 Bankr. LEXIS 260, 34 Bankr. Ct. Dec. (CRR) 127 (bap9 1999).

Opinions

OPINION

RUSSELL, B., Bankruptcy Judge.

The debtor and its president appeal two bankruptcy court orders certifying a chapter 7 2 trustee following a disputed trustee election under § 702. We AFFIRM.

I. FACTS

Appellant American . Eagle Mfg., Inc. (“American Eagle” or the “debtor”) filed a voluntary chapter 11 case on May 29, 1996. Prior to bankruptcy, the debtor was engaged in manufacturing aluminum hull vessels in La Conner, Washington. Appellant James R. Caudill was the debtor’s president.

During the pendency of the chapter 11 case, the unsecured creditors’ committee (the “committee”) and other creditors investigated the debtor’s financial affairs. The investigation allegedly3 revealed that substantial pre- and postpetition transfers of assets had been made to insiders, including Caudill, and that Caudill had allegedly ceased all of the debtor’s operations and transferred contracts and other assets to a corporation which he allegedly owned named the “Hammerhead Corporation.” The creditors moved to appoint a CPA with auditing experience as trustee, and the committee moved to pursue collection of the insider transfers.

The debtor in turn filed an ex parte motion to voluntarily convert the case to chapter 7. On March 7,1997, the court entered an order granting the debtor’s motion and converting the case to chapter 7. The United States Trustee (“UST”) appointed Peter Arkinson as the interim chapter 7 trustee. The court issued a notice which, inter alia, scheduled [323]*323the § 341(a) meeting of creditors for April 30,1997.

The attorney for the UST presided at the § 341(a) meeting on April 30, 1997. Representatives of four unsecured creditors, including appellee N.C. Machinery, Inc. (“Machinery”) and appellee Alaskan Copper & Brass (“Alaskan Copper”) appeared in person. Secured creditors Skagit State Bank (“Skagit”) and His Highness the Aga Khan appeared through counsel. Also in attendance were the debtor’s counsel, a representative of the debtor, and the committee’s counsel.

The UST’s attorney stated throughout the § 341(a) meeting that she was accepting any and all election requests and votes, and that objections would be resolved later:

MS. GEIGER [UST’S COUNSEL]: I didn’t want my comments at all to mean that you’re not entitled to request [an election]. I don’t know the answer....

Transcript of April 30, 1997 § 341(a) Meeting, p. 3.

I’m going to go ahead and request creditors that want to vote. At this point I don’t know if we have a properly called election, but I want to proceed and take votes, and I’ll—

Id. at 5.

I’d be willing to accept proofs of claim at this time and deem them filed. If anyone wants to file a proof of claim, they can submit proofs of claim to me.

Id. at 9-10.

The Aga Khan and the four unsecured creditors who were present4 requested an election and cast votes in favor of appellee Kent Mordy, a CPA with extensive bankruptcy experience employed by the accounting firm of Coopers & Lybrand. In addition, counsel for the committee delivered ballots from five additional creditors who were not present.5 The UST’s attorney offered Skagit a proof of claim and the opportunity to cast a ballot, which Skagit declined.

The debtor’s counsel objected to the ballots submitted by the absent creditors on the basis that they had not complied with applicable rules regarding voting by proxy and were therefore ineligible to vote. He objected to the Aga Khan’s ballot on the ground that he was a secured creditor and thus ineligible to vote. He further stated that the debtor disputed the entire portion of a $1.2 million claim filed by the Hone Heke Corporation (“Hone Heke”), which had not submitted a ballot.

The UST’s attorney closed the April 30, 1997 session of the § 341(a) meeting by stating:

I’ll close the election at this point. And I will file a report of election with the Court; serve all those parties who are present today; and then anyone who disputes my report has 10 days to request [324]*324relief from the Court to resolve the dispute if — or resolve the election if they don’t agree with my conclusions.
MR. ARKISON [INTERIM TRUSTEE]: (Inaudible).
MS. GEIGER: What I was going to do is — I don’t know if we can set a date certain for the 341 meeting. We may just have to just have to [sic] simply renotice. What is your next available calendar?
MR. ARKISON: Well, I’ve got the first Tuesday in June, June 3rd at 10:30 — (inaudible). If they could do it at 10:30—
MS. GEIGER: Let’s continue this 341 meeting to June 3 at 10:30 in this room. We’ll continue this meeting.
We will tentatively schedule it for June 3 at 10:30, the continued meeting.

Transcript of April 30, 1997 § 341(a) Meeting, p. 12-13.

On May 7, 1997, Ms. Geiger filed a report of the disputed election (“UST’s report”), which advised the court that four creditors holding claims totaling $195,215.176 had requested an election of a permanent trustee at the § 341(a) meeting. The UST’s report detailed the divergence of opinion in the case law on the appropriate method of calculating the “universe of claims” for determining whether the requisite 20% of creditors had requested an election and had voted.7 Utilizing the various methods presented in the case law, the UST’s report set forth five alternative calculations of the universe of claims in this case, which were summarized as follows:

Method of Calculating the Universe of Total Unsecured, 20% Requirement Claims Nonpriority Claims — Uni-_verse of Claims_

A Total unsecured claims per schedules ex- 1,018,106.92 203,621.38 eluding two insider claims and two claims scheduled as disputed_

B Total unsecured claims per proofs of claim 1,959,323.65 391,864.73 excluding two insider claims (no POC excluded as disputed because no formal objection filed)_

C Total unsecured claims per proofs of claim 609,323.658 141,042.73 excluding two insider claims and Hone Heke claim_

D Total unsecured claims per schedules as 2,243,103.07 448,620.61 supplement [sic] by proofs of claim excluding: 1) three insider claims, and 2) one claim scheduled as disputed. Excluded no POC as disputed because no formal objections filed, though one creditor who filed claim scheduled as disputed.

[325]*325E Total unsecured claims per schedules sup- 993,103.07 198,620.61 plemented by proofs of claim, excluding: 1) three insider claims, 2) one claim scheduled as disputed where no POC filed, and 3) Hone Heke claim

UST’s Report, p. 11 (emphasis in original).

The UST’s report concluded by stating: [T]he United States Trustee files this report and indicates to the Court that he is not able to advise the Court regarding 1) whether an election was requested by the requisite 20 percent of unsecured creditors; and 2) whether the proposed trustee ■ was elected by a majority of the requisite 20 percent.

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Bluebook (online)
231 B.R. 320, 41 Collier Bankr. Cas. 2d 1331, 1999 Bankr. LEXIS 260, 34 Bankr. Ct. Dec. (CRR) 127, Counsel Stack Legal Research, https://law.counselstack.com/opinion/caudill-v-nc-machinery-inc-in-re-american-eagle-mfg-inc-bap9-1999.