In re Carvalho

578 B.R. 1
CourtUnited States Bankruptcy Court, District of Columbia
DecidedNovember 29, 2017
DocketCase No. 15-00646
StatusPublished
Cited by5 cases

This text of 578 B.R. 1 (In re Carvalho) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Carvalho, 578 B.R. 1 (D.C. 2017).

Opinion

MEMORANDUM DECISION RE SIMU’S MOTION TO REMOVE ESTATE TRUSTEE AND MOTION FOR LEAVE TO SUE TRUSTEE

S. Martin Teel, Jr., United States Bankruptcy Judge

Teodora Aureliana Simu has filed a Unified, Motion to Dismiss Bankruptcy Case for Bad Faith Motion to Remove Estate Trustee Motion for Leave to Sue the Estate Trustee (Dkt. No. 131), incorporating an earlier Motion to Remove Estate Trustee (Dkt. No. Ill) and an earlier Motion' for Leave to Sue Estafe Trustee (Dkt. No. 112).1 Simu seeks to remove the chapter 7 trustee, Bryan S. Ross, “for malfeasance and misfeasance in the non-administration of Debtor Sharra Carvalho’s Estate” and seeks “leave to the Creditor to sue Trustee' Bryan Ross for his breach of fiduciary duties in his non-administration of the Debtor’s Estate.” For the following reasons, Simu’s motions will be denied.

I

THE EVENTS LEADING TO ROSS’S REPORT OF NO DISTRIBUTION AND THE EFFECT OF THAT REPORT

On December 15,2015, the debtor, Shar-ra Neves Carvalho, commenced this case by filing a voluntary petition under chapter 7 of the Bankruptcy Code (11 U.S.C.). On her petition she noted in response to .item 17 that after any exempt property is excluded and administrative expenses are paid no funds will be available to distribute to unsecured creditors. See Dkt. No. 1, at 6.

Pursuant to 28 U.S.C. § 586(a)(1), the United States Trustee maintains and supervises a panel of private trustees that are eligible and available to serve as trustees in cases under chapter 7 of the Bankruptcy Code. Ross has served as such a chapter 7 panel trustee for 37 years. On December 16, 2015, pursuant to 11 U.S.C. § 701(a), the United States Trustee appointed Ross to be the interim chapter 7 trustee in Carvalho’s case.

On December 16, 2015, the clerk issued a notice to creditors regarding the commencement of the case, noting that Ross was the chapter 7 trustee and that the meeting of creditors (under 11 U.S.C. § 341(a)), at which Carvalho was required by 11 U.S.C. § 343 to appear and testify under oath, was to be held on January 14, 2016. In accordance with Fed. R. Bankr. P. 2002(e), the notice indicated that no property appeared to be available to pay creditors, and that if it later appeared that assets were available to pay creditors, the clerk would send creditors another notice telling them they can file proofs of claim and stating the deadline for doing so. See Dkt. No. 11.

On Carvalho’s Schedule E/F, Carvalho listed Teodora Simu as an unsecured creditor with a claim in the amount of $90,250. See Dkt. No. 1, at 22. Prior to the commencement of the bankruptcy case, both Carvalho and Simu at one point had been together involved in the operation of Elite Insurance & Consulting Services, LLC (“Elite”). Simu had later sued Carvalho in the Superior Court of the District of Columbia, asserting claims relating to Carval-ho’s operation of Elite, and ultimately recovering a $90,250 monetary judgment against Carvalho. That monetary judgment accounts for the $90,250 unsecured claim owed to Simu that Carvalho listed in her Schedule E/F. Carvalho also scheduled a disputed unsecured claim of $374,741.45 owed to Simu for attorney’s fees accrued in the Superior Court case by Simu’s attorney; Matthew LeFande. See Dkt. No. 1, at 22.

As of the petition date, Carvalho owned a 100% equity interest in Elite. Upon Car-valho’s filing of her petition, that equity interest in Elite became property of the estate under 11 U.S.C. § 541(a)(1). Prior to the meeting of creditors, Ross examined Carvalho’s schedules and statement of financial affairs, which were filed with the petition (Dkt. No. 1, at 8-43) and signed by Carvalho under penalty of perjury, as well as Simu’s complaint in the adversary proceeding (Adv. Pro. Case No. 16-10001, Dkt. No. 1). On her schedules, Carvalho valued her interest in Elite as worth $1 and claimed an exemption of $1 with respect to that interest, See Dkt. No. 1, at 11,' 18. Ross also examined Simu’s complaint in the adversary proceeding, which included an allegation that Carvalho had falsely valued her interest in Elite as worth only $1. See Adv. Pro. Case No. 16-10001, Dkt. No. l,atJ44.

Ross investigated the debtor’s $1 valuation of Elite prior to the meeting of .creditors, He spoke to Merrill Cohen, Carval-ho’s attorney, regarding the nature of Elite’s business, -its assets, and its operation. Cohen informed Ross that Carvalho operated Elite as an insurance brokerage firm out of her home; that Elite’s clients were principally businesses managed by Spanish speakers; that Carvalho is bilingual in Spanish and English; and that Elite had no non-compete agreement with Carvalho that barred her from opening a new .business and taking clients of Elite with her to the new business, Ross has known Cohen for 25 years. As a chapter 7 trustee, Ross has been on the opposite side of Cohen in other cases and views him as highly credible.

Ross determined that because Carvalho is bilingual and Elite’s clients are primarily Spanish-speaking, and because Carvalho operated Elite out of her home, it was likely prudent to have Carvalho continue to operate the insurance brokerage. Moreover, because Carvalho was not subject to a non-compete agreement, if anyone else began to operate Elite, Carvalho could immediately and lawfully form a new insurance brokerage and move all of Elite’s clients to her newly formed brokerage. These considerations led Ross to believe that Carvalho’s valuation of Elite at $1 was accurate: especially in light of the absence of a non-compete agreement, a business broker would be unable successfully to sell the debtor’s interest in Elite (or the underlying business of Elite) for a meaningful amount.

Ross had no reason to arrive at this conclusion as a favor to Cohen or to any other attorney at Cohen’s firm. Ross did not stand to benefit from granting Cohen or any other attorney such a favor. Moreover, choosing not to sell Carvalho’s interest in Elite if that interest actually could be successfully sold for a meaningful amount was actually against Ross’s personal financial interest because, pursuant to 11 U.S.C. § 326(a), Ross was entitled to a commission from such a sale.

On January 5, 2016, almost one week before the meeting of creditors, Simu filed a complaint in this court commencing an adversary proceeding against Carvalho (Adv. Pro. No, 16-10001). In that adversary proceeding, Simu sought under parts of 11 U.S.C. § 523(a) to declare the monetary judgment against Carvalho nondis-chargeable and sought under parts of 11 U.S.C. § 727(a) to deny Carvalho a discharge of any debts.2

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Cite This Page — Counsel Stack

Bluebook (online)
578 B.R. 1, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-carvalho-dcb-2017.