Roy Nielsen Hafen

CourtUnited States Bankruptcy Court, D. Utah
DecidedDecember 8, 2020
Docket04-25018
StatusUnknown

This text of Roy Nielsen Hafen (Roy Nielsen Hafen) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Roy Nielsen Hafen, (Utah 2020).

Opinion

This order is SIGNED. Eee □□ Mle Dated: December 7, 2020 “if. ce Sea . a= ated: December 7, L "| Maite <3 5 WILLIAM T. THURMAN SCN eS U.S. Bankruptcy Judge

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF UTAH

In re: Bankruptcy Number: 04-25018 Roy Nielsen Hafen, Chapter 7 Debtor. Judge William T. Thurman

MEMORANDUM DECISION REGARDING THE TRUSTEE’S MOTION TO SELL PROPERTY

BACKGROUND AND FACTS: This is a Memorandum Decision memorializing what was read into the record on Monday November 23, 2020 at 10:00 AM. Accordingly, this Memorandum Decision supports the order issued on the same date at Docket entry 114, the Court specifically having reserved the right to issue this Memorandum Decision. This matter is before the court on the Trustee’s Motion to Sell Property (“The Motion”).' The Motion seeks to sell any interests that the estate may have in certain

' Docket No. 96.

property which is described in The Motion, as: (1) the Debtor’s 10 percent ownership interest in DANIEL ROY HAFEN, LTD, including any property acquired as a result of that ownership interest; (2) the Debtor’s 10 percent ownership interest in ACOM, LLC, including any property acquired as a result of that membership interest; (3) the Debtor’s beneficial ownership interest in the C.A.R. TRUST and sometimes referred to as the C.A.R. A Trust; (4) the Debtor’s claim in

water rights 71-298, currently in the name of Daniel R. Hafen and Alta Mae Hafen (both deceased), and; (5) the Debtor’s claim in DANIEL ROY HAFEN, LTD’s shares of the Pinto Irrigation Company, a Utah corporation. The Response by the Trustee to Debtor’s objection to the sale at docket 107 clarifies that item (5) is actually the interests in any property received as a result of the Debtor’s ownership interest in Daniel Roy Hafen, LTD and is accordingly duplicative of item (1). In addition, the Trustee seeks to sell his avoidance and fraudulent transfer claims pertaining to the above property under 11 U.S.C. §§ 544, 547, 548, and 549.2 All of this collectively will hereafter be referred to as the alleged or simply the “Estate Property.” The total purchase price is $15,277.00 in cash.

First, the Court would like to summarize the posture of this matter and how it came to be here today. The Debtor, Mr. Roy Nielson Hafen, filed for chapter 7 bankruptcy relief in 2004 and listed unsecured debts of $5M, assets of $11,000, and Trustee returned a gross amount of $5,000 to creditors.3 The case was closed on May 11, 2005. The case was reopened in 2018.4

On July 19, 2018, several creditors from the bankruptcy case filed a lawsuit against the Debtor and others in the Fifth Judicial District Court, Washington County, State of Utah (the “State Lawsuit” or “State Case”). The State Case was captioned Adams, et al. v. Hafen, et al., Civil No.

2 Docket No. 96. 3 In re Hafen, 616 B.R. 570 (10th Cir. BAP 2020); Docket No. 18. 4 Docket Nos. 28 (motion) & 34 (order). 180500337.5 The plaintiffs in the State Case (the “State Case Plaintiffs” or “Creditors”) sued the Debtor and a number of non-case parties on the basis of twelve claims for relief including fraud, securities violations, civil conspiracy, and avoidance claims. Each of the State Case Plaintiffs claimed $200,000 or more in damages from that litigation.6 Each State Case Plaintiff was listed on the original schedules as an unsecured creditor and received notice of the bankruptcy.7

The Trustee did not pursue any fraudulent/ voidable transfers. The Debtor received a discharge on July 21, 2004. In June of 2018, the Creditors filed a motion with this Court to reopen the case which was granted.8 The Plaintiffs/ creditors alleged inappropriate conduct by the Debtor years ago in transferring assets to others and wanted a trustee appointed to investigate these. In December 2018, the Debtor filed a motion in this case seeking sanctions against the Creditors and seeking to enforce the discharge injunction as the Plaintiffs named him as a co-defendant as well as several others who allegedly received some sort of an avoidable transfer in the State Case.9 As

a defense to the Debtor’s motion, the State Case Plaintiffs claim that, pursuant to 11 U.S.C. § 524(e), they may name the Debtor in their State Court Case for the sole purpose of creating a conduit of liability to the transferees for claims which establish Debtor’s liability but do not seek to collect damages against him.10 In the Debtor’s Motion for Sanctions, he argued that relevant case law provides that in order to name the debtor as a party in the state case, the debtor must also be a necessary/ required party in order to satisfy the exception to the discharge protection in § 524(e). That section provides that a debtor’s discharge “does not affect the liability of any other

5 Adams, et al. v. Hafen, et al., Civil No. 180500337 6 Id. 7 In re Hafen; Docket Nos. 2 & 4. 8 Docket Nos. 28 & 34. 9 Docket No. 37. 10 Docket No. 50. entity on or the property of any other entity...”11 The Debtor also argued that, to the extent that the debtor was a necessary/required party, those claims would belong to the Trustee.12 That specific matter of violating the discharge is not before the court in the current motion.

This Court ruled in April of 201913 that there was no violation of the discharge by the State Court Plaintiffs naming the Debtor as a defendant in the State Case based on the principles and persuasive authority found in In re Walker14 and In re Robben.15 The Court read the word “necessary” as found in the Walker case, not to mean the same thing as a “required” party under the rules of joinder. Rather, the word “necessary” as used by the circuit described a situation in which the appearance of the debtor in the case was needed to establish the elements of the liability.

This court’s decision was appealed to the 10th Circuit’s BAP.16 The BAP did not overturn this Court’s ruling on the law as to the meaning of “necessary” but determined that there were issues of standing in the State Court Lawsuit that should be considered by this Court. Consistent with the decision of the Panel, a status conference was held before this Court on October 8, 2020 to consider issues of standing. All parties agreed to continue the matter to October 29th in order to first resolve the Trustee’s Motion presented here today,17 the reasons being that 1) the proposed sale could potentially have impact on the question of standing and 2) the need to adjudicate the case expeditiously for all involved. The impact of granting this Motion would be to liquidate these rights for possibly a lower amount than which the Plaintiffs are seeking in the State Court Action.

Now that the matter is back before the Court, the Trustee seeks to sell what claims, if any, the

11 11 U.S.C. § 524(e). 12 Docket No. 51. 13 Docket Nos. 68 and 69 14 In re Walker, 927 F.2d 1138, 1142 (10th Cir. 1991). 15 In re Robben, 562 B.R. 469 (Bankr. D. Kan. 2017); See Docket Nos. 68 & 69. 16 See Docket No. 82. 17 See Docket No. 99.

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