United States District Court, E.D. Kentucky, Central Division, Lexington
FRED C. CARUSO, Plaintiff,
NELSON E. CLEMMENS, Defendant.
MEMORANDUM OPINION AND ORDER
K. CALDWELL, CHIEF JUDGE UNITED STATES DISTRICT COURT.
matter is before the Court on Clemmens' objections to the
Bankruptcy Judge's proposed findings of fact and
conclusions of law in this case. (DE 4; DE 16). For the
reasons stated below, Clemmens' objections are overruled.
Likewise, Caruso's motion for partial summary judgment is
granted, (DE 3); Clemmens' first motion for summary
judgment, (DE 1), is granted; and Clemmens' second motion
for summary judgment, (DE 2), is denied.
parties stipulate the following facts. (DE 4 at 3-6).
Industries, LLC, an automobile business and Delaware LLC, was
founded in 2008 by and among three Children's Trusts,
which were established for the benefit of the children of
Revstone's chairman and sole board member: George S.
Hofmeister. In 2011, the Children's Trusts assigned their
membership interests in Revstone to Ascalon Enterprises, LLC,
for which Hofmeister was also the chairman and sole member
the board. Id. at 3. Revstone-founded by
Hofmeister's Childrens' Trusts, and owned by
Hofmeister's Ascalon Enterprises-operated its business
through the direct or indirect ownership and management of
approximately thirty-two (32) subsidiary entities.
met Hofmeister in 1986. In 2007, Hofmeister selected Clemmens
to serve as the trustee of Hofmeister's family trusts.
2009, Revstone transferred $20, 000.00 to Clemmens via wire
to pay for thoroughbred horses. The wire transfer indicates
that the beneficiary of the transfer was the “Nelson
Clemmens Toroughbred [sic] Account.” This is known as
the “Horse Transfer.” (DE 3 at 69).
2010, Revstone twice transferred $5, 000.00 to Clemmens via
wire for trustee's fees (totaling $10, 000.00). Both
transfers include the descriptor “DESC TRUSTEE.”
These are known as the “Trustee Transfers.”
2011, Revstone made two wire transfers to Stone Spire, LLC,
for $16, 000.00 and $15, 000.00 (totaling $31, 000.00). Stone
Spire, LLC, is owned in equal parts by Clemmens, Hofmeister,
Leo Govoni. These are known as the “Stone Spire
2010 through 2011, Clemmens allegedly obtained loans for
Revstone and its affiliates totaling over $23 million. During
this time, Revstone made eight wire transfers to Clemmens,
totaling $675, 000.00. (DE 4 at 4-5). Three of these
transfers contained descriptors indicating that they were
likely finder's fees paid to Clemmens for his service in
obtaining the loans. These are known as the
“Finder's Fee Transfers.” (Id.; DE 3
December 2012, Revstone filed for Chapter 11 relief in the
United States Bankruptcy Court for the District of Delaware.
In 2014, Revstone filed a complaint in that Delaware court
seeking to avoid and recover its payments to Clemmens as
fraudulent transfers. In 2016, after resolving some
procedural issues, this matter was transferred to the Eastern
District of Kentucky. (DE 4 at 5-6).
parties filed cross motions for summary judgment. (DE 1; DE
2; DE 3). Caruso, the Bankruptcy Trustee for the
Revstone/Spara Litigation Trust, seeks summary judgment
against Clemmens for the recovery of the Horse and Trustee
Transfers based on a theory of constructive fraud pursuant to
11 U.S.C. § 544 and 550, and Del. Cod. Ann. 6
§§ 1301-12. (DE 3 at 3 ⁋ 1). Caruso also
seeks judgment on the matter of Revstone's insolvency.
Id. Clemmens seeks summary judgment for the
dismissal of Caruso's claims for the recovery of the
Stone Spire Transfers. (DE 1 at 3-4). Clemmens also seeks
summary judgment for Caruso's claims for the recovery of
the Finder's Fee Transfers. (DE 2 at 2).
Bankruptcy Court held that Caruso's motion, (DE 3),
should be granted, enabling the avoidance and recovery of the
Horse and Trustee Transfers from Clemmens. (DE 4 at 4). In
addition, the Bankruptcy Court held that Clemmens'
motion, (DE 1), should granted, dismissing Caruso's
claims against Clemmens for the recovery of the Stone Spire
Transfers. (DE 4 at 4). Finally, the Bankruptcy Court held
that Caruso is entitled to judgment as a matter of law on
Revstone's insolvency, (DE 3), and that there are
questions of material facts precluding judgment as a matter
of law as to the Finder's Fee Transfers, (DE 2; DE 4 at
4). Clemmens presents nine (9) objections to the Bankruptcy
Court's determinations. (DE 16).
STANDARDS OF REVIEW
Court reviews de novo the portions of the Bankruptcy
Court's decision to which Clemmens objects.
Fed.R.Bankr.P. 9033(d). The Court may accept, reject, or
modify the Bankruptcy Court's proposed findings of fact
and conclusions of law as required. In re Sahuaro
Petroleum & Asphalt Co., 170 B.R. 689 (C.D. Cal.
1994), aff'd 89 F.3d 846 (9th Cir. 1996),
cert. denied 519 U.S. 992 (1996). The Bankruptcy
Court opinion is to be reviewed with no deference,
presumption of validity or correctness. Waldman v.
Stone, 599 Fed.Appx. 569, 572 (6th Cir. 2015) (citing
Perry v. Simplicity Eng'g, 900 F.2d 963, 966
(6th Cir.1990)). Nonetheless, the Court is under no
obligation to expand the Record beyond that presented.
Fed.R.Bankr.P. 9033(d); Waldman, 599 Fed.Appx. at
572 (citing Deutsche Bank Nat'l Trust Co. v.
Tucker, 621 F.3d 460, 464 (6th Cir.2010)).
motion for summary judgment, the movant has the burden of
showing that there are no genuine issues of material fact in
dispute. The evidence, together with all permissible
inferences, is construed in the light most favorable to the
opposing party. Fed. R. Bank. P. 7056 (incorporating
Fed.R.Civ.P. 56); see Matsushita Elec. Indus. Co., Ltd.
v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986). Once
the moving party has made this initial showing, the opposing
party must come forward with affirmative evidence sufficient
“to permit a reasonable jury to find in that
party's favor.” Van Gorder v. Grand Trunk W.
R.R., Inc., 509 F.3d 265, 268 (6th Cir. 2007) (citing
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252
(1986)). Summary judgment must be entered if, “after
adequate opportunity for discovery, ” a party
“fails to make a showing sufficient to establish the
existence of an element essential to that ...