In re Carolo Bondanelli
- Summarized by Lars Fuller , BakerHostetler
- 3 years 2 months ago
- Case Type:
- Case Status:
- CC-19-1175-TaFS (9th Circuit, Mar 18,2020) Not Published
- BAP for 9th Circuit affirmed ruling of the bankruptcy court (CD Cal.) granting chapter 7 trustee's motion to approve settlement of avoidance action against multiple parties, including debtor. Settlement was fair and equitable, and bankruptcy court did not abuse discretion. Creditors' opposition was a factor, but not a veto right. Bankruptcy court properly weighed all factors.
- Procedural context:
- Chapter 7 trustee moved for approval of settlement of avoidance claims against debtor and affiliated defendants. Creditors objected. Bankruptcy court (CD Cal.) approved. Creditors appealed to BAP for 9th Circuit.
- In 2004, Mr. Bondanelli, Appellants, and others formed a joint venture to develop real property in Santa Monica, California (the “Property”). A newly-formed entity, New West TC, LLC (“New West”), would acquire title and Mr. Bondanelli would complete development using joint venturer contributions and loan proceeds. But after acquisition of the land, disputes arose regarding the amount of additional development funding from Appellants. Mr. Bondanelli, who was responsible for the development and had guaranteed repayment of the acquisition loan, eventually adopted a problematic method for obtaining cash from Appellants. He sued Appellants to compel additional capital contributions. Mr. Bondanelli then entered into a settlement with Appellants where he agreed to pay them $800,000 in exchange for a transfer of all rights to New West and its assets, including the Property, seems reasonable in isolation. The problem, however, is that unbeknownst to Appellants, Mr. Bondanelli caused New West to sell the
Property and to distribute the proceeds among all Defendants before entering into the settlement. Thereafter, he never paid the $800,000, and the value of New West, now a mere former owner of the Property, was negligible.
After Appellants learned of Mr. Bondanelli’s deception, they sued him for fraudulent transfer, fraud, and breach of fiduciary duty. He responded by filing a chapter 7 case. Eventually, the chapter 7 trustee, filed § 548(a)(1)(A) complaints against Defendants, alleging that New West’s transfers of the sale proceeds were made to defraud Mr. Bondanelli’s creditors (i.e., the Appellants); he sought the return of nearly $400,000 from the non-debtor defendants.
On the verge of trial, the parties reached a mediated settlement that, as relevant on appeal, required payment to the estate of $60,000 (the “Settlement”). Given the fraud allegations that underlaid the litigation, the Settlement required Defendants to provide declarations under penalty of perjury attesting that, other than the Pension Plan, none of them had assets of significant value and that the majority of their assets were undeveloped, raw land in the high desert of Southern California. Civitas agreed to pay the $60,000.
- Taylor, Faris, Spraker
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