Collins v. Ebert, et al (In re: Maranatha Construction Co.)

Collins v. Ebert, et al (In re: Maranatha Construction Co.), No. 13-11027 (5th Cir. April 2014).
The Fifth Circuit, in an unpublished opinion, affirmed the district court’s decision finding veil-piercing claims to be property of the Estate under 11 U.S.C. § 541(a)(1) and properly pursued by the bankruptcy trustee where the appellant creditors alleged only the same general harm suffered by all other creditors and failed to allege any harm personal only to them.
Procedural context:
The United States District Court for the Northern District of Texas (Fort Worth Division) affirmed creditors Clyde and Betty Collins’ appeal of the bankruptcy court’s order granting summary judgment in favor of the chapter 7 trustee, Howard E. Watson, III, Sydney Watson, and Maranatha Roofing, Inc. on the question of who owns veil piercing claims asserted against the Watsons and Maranatha Roofing, Inc., the chapter 7 trustee or the Collinses. Appellants appealed to the Fifth Circuit Court of Appeals.
Prior to filing its chapter 7 petition, the debtor company was a single-family residential home builder. Also prior to the petition date, Clyde and Betty Collins commenced suit and received judgment against the debtor company ($300,000) and Howard E. Watson, III, the debtor company’s president and 50% shareholder, individually (12% of that amount). On October 14, 2011, the chapter 7 trustee commenced an adversary proceeding against Howard E. Watson, III, Sydney Watson (vice-president and 50% shareholder of the debtor corporation), and Maranatha Roofing, Inc. to avoid certain prepetition monetary transfers from the debtor company to such persons and also asserting recovery claims against them on the basis of alter-ego theory. The chapter 7 trustee subsequently filed a motion seeking authority to compromise such claims, to which motion the Collinses filed an objection and therein asserted that they, not the chapter 7 trustee, are the owners of the alter-ego claims the trustee was seeking to compromise. The chapter 7 trustee, the Watsons and Maranatha Roofing, Inc. thereafter requested, and the bankruptcy court granted, partial summary judgment in their favor on this issue.
Jerry E. Smith; Fortunato P. Benavides; and Edith Brown Clement

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