Taunt v. Vining (In Re M.T.G., Inc.)

400 B.R. 558, 2009 U.S. Dist. LEXIS 3008, 51 Bankr. Ct. Dec. (CRR) 14, 2009 WL 92224
CourtDistrict Court, E.D. Michigan
DecidedJanuary 14, 2009
DocketCivil Case No. 07-11831. U.S. Bankruptcy Case No. 95-48268-G
StatusPublished
Cited by4 cases

This text of 400 B.R. 558 (Taunt v. Vining (In Re M.T.G., Inc.)) is published on Counsel Stack Legal Research, covering District Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Taunt v. Vining (In Re M.T.G., Inc.), 400 B.R. 558, 2009 U.S. Dist. LEXIS 3008, 51 Bankr. Ct. Dec. (CRR) 14, 2009 WL 92224 (E.D. Mich. 2009).

Opinion

*560 MEMORANDUM OPINION AND ORDER

ANNA DIGGS TAYLOR, District Judge.

I.

This matter has come before this court on a cross-appeal, challenging the Bankruptcy court’s Opinion and Order issued on April 16, 2007. Appellants/Appellees Charles J. Taunt, Plunkett & Cooney P.C. (“Plunkett & Cooney”) and Comerica Bank (“Comerica”) challenge the Bankruptcy court’s finding that Taunt committed fraud on the court. 1 Additionally, Comerica challenges the Bankruptcy court’s decision vacating three Comerica Orders, which the court found had been obtained by fraud on the court. Appellees Todd M. Halbert and Guy C. Vining argue that the Bankruptcy court erred when it found that Comerica did not commit fraud on the court. Further, they argue that the Bankruptcy court should have done the following: (1) disallowed Comerica’s claims; (2) compelled Comerica to disgorge monies obtained by fraud; (3) awarded punitive damages and; (4) awarded attorney’s fees. For the reasons fully outlined below, the decision of the Bankruptcy court is affirmed.

II.

Procedural background

On August 6, 1995, Matrix Technology Group (“M.T.G.”), represented by Halbert, filed a petition for relief under Chapter 11. In re M.T.G., Inc. 366 B.R. 730, 733 (Bkrtcy.E.D.Mich., 2007). M.T.G.’s primary creditor was Comerica. Id. On February 8, 1996, the case was converted to a Chapter 7 proceeding and Taunt was appointed as the trustee. Id. The day after Taunt’s appointment, he began discussions with Comerica about compensating his firm, Charles J. Taunt & Associates, P.C. (“Charles J. Taunt & Associates”) for the liquidation of Comerica’s collateral. Id. This agreement (hereinafter the “Comeri-ca Fee Agreement”) was consummated by *561 March 1996. 2 However, on February 12, 1996, Taunt filed a “Verified Statement of Disinterest for Trustee to Employ Counsel,” attesting that his law firm, Charles J. Taunt & Associates, was disinterested and could act as counsel for the trustee. 3 Id. Taunt did not modify this statement to reveal the Comerica Fee Agreement. Id.

On June 26, 1996, Taunt, now a shareholder at the law firm of Plunkett & Coo-ney, P.C. filed a new ‘Verified Statement of Disinterest for Trustee to Employ Counsel.” In re M.T.G., Inc. 366 B.R. at 738. Again, the statement did not mention the Comerica Fee Agreement. Id. On August 21, 1996, the Bankruptcy court entered an Order substituting the Plunkett & Cooney firm for Charles J. Taunt & Associates as counsel for the trustee. Id. Appellants argue that while it is true that Taunt failed to disclose the fee agreement in any of the statements of disinterest, Taunt did disclose these agreements in the following three documents: (1) the April 9, 1996 Order Granting Trustee’s Motion For Authority To Conduct Public Auction Free And Clear Of Liens, And To Transfer Liens To Proceeds Of Sale, Except For Millutensil Machine; (2) Taunt’s April 15, 1996 Application for Authority to Compromise Claims Against the Becker Group, Inc.; and (3) paragraph 13 of the December 18, 1996 Joint First Interim Fee Application.

On August 29, 1996, the Bankruptcy court entered an Order Granting Application to Compromise Causes of Action Against Comerica Bank (the “Comerica Settlement Order.”). In re M.T.G., Inc., 366 B.R. at 738. The Order authorized Taunt to compromise any and all claims that the estate had against Comerica in exchange for a payment of $10,000.00 by Comerica. In re M.T.G., Inc. 366 B.R. at 738. Taunt did not mention the Comerica Fee Agreement in his Application to Compromise Causes of Action Against Comeri-ca Bank. Id. On November 26, 1997, Taunt filed a motion, in which he “proposed a disbursement which would pay his and his attorneys’ fees in full and then pay the balance to Comerica on account of the Section 507(b) “super-priority” damages it claimed.” 4 Id. at 740.

*562 On February 26, 1998, Halbert filed pleadings in the Bankruptcy court, arguing against a request that Taunt pay Comeri-ca’s super-priority claim. Further, he argued that the Comerica Settlement Agreement should be set aside pursuant to FRCP 60(b)(4). With respect to the settlement agreement, Judge Tucker framed Halbert’s argument as follows:

Mr. Halbert’s argument for setting aside the Comerica Settlement Order was based upon the agreement Mr. Taunt had made with Comerica at the outset of the Chapter 7 proceeding whereby Com-erica agreed to compensate Mr. Taunt and his attorney for services associated with the liquidation of Comerica’s collateral. Mr. Halbert contended that Mr. Taunt’s fee arrangement with Comerica represented a clear conflict of interest which should have been disclosed both as part of the appointment process for Mr. Taunt and his counsel as well as in connection with Mr. Taunt’s motion for authority to settle the estate’s lender liability claims against Comerica. In re M.T.G., 366 B.R. at 741.

On February 4, 1999, Bankruptcy Court Judge Ray Reynolds Graves issued an Opinion and Order holding:

.... that Mr. Taunt and his attorney failed to disclose the Comerica Fee Agreement in violation of Rule 2014 and ordered that they be sanctioned by reducing their fees by 25%. Judge Graves also determined that Comerica was entitled to a Section 507(b) claim in the amount of $444,475.17 and that Mr. Taunt “did not breach his fiduciary duty by not bringing any Chapter 5 cause of action.” In re M.T.G., Inc., 366 B.R. at 742.

The court’s Opinion and Order, however, did not address Mr. Halbert’s argument that “Comerica’s entire claim should be disallowed and that the Comerica Settlement Order should be set aside.” In re M.T.G., Inc., 366 B.R. at 742. Moreover, the Opinion did not address the fraud on the court issue.

On March 3, 1999, Halbert appealed the Bankruptcy court’s decision to this court and on September 7, 2000, the parties appeared before this court for oral arguments. 5 On October 10, 2000, this court issued an Order reversing the Bankruptcy court in-part by:

(i) denying 100% of attorney fees to Ap-pellee counsel, (ii) disqualifying the current Trustee [Taunt] for it’s failure to disclose it’s conflict of interest and (iii) vacating the settlement agreement ordered by the bankruptcy court. 6

On October 19, 2000, Comerica filed a Motion to “Correct Order and Judgment or in the Alternative for Reconsideration” and, on November 1, 2000, Halbert filed a similar motion.

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400 B.R. 558, 2009 U.S. Dist. LEXIS 3008, 51 Bankr. Ct. Dec. (CRR) 14, 2009 WL 92224, Counsel Stack Legal Research, https://law.counselstack.com/opinion/taunt-v-vining-in-re-mtg-inc-mied-2009.