IN RE: MICHAEL G. KASOLAS V. AURORA CAPIT
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 23-60022 (9th Circuit, Jun 04,2024) Not Published
- Tag(s):
-
- Ruling:
- The U.S. Court of Appeals for the Ninth Circuit (Circuit) affirmed the dismissal of the decision of the circuit's Bankruptcy Appellate Panel (BAP) to affirm the partial dismissal of an adversary complaint that sought avoidance and recovery of post-petition transfers of property filed by the trustee for the Robert Brower, Sr., Liquidating Trust (TR) by the U.S. Bankruptcy Court for the Northern District of California (BC), for precisely the same reasons as the BAP.
- Procedural context:
- The TR sought to avoid certain transfers under section 549, which requires the TR to show that Robert Brower, Sr., a chapter 11 debtor-in-possession since deceased (DR), had a property interest in certain proceeds from the sale of property by Coastal Cypress (Coastal) such that they belonged to Brower’s bankruptcy estate. Under California law, however, a “shareholder simply has an expectancy in [corporate property or earnings]” and “becomes the owner of a portion of each only when the corporation is liquidated by action of the directors or when a portion of the corporation’s earnings is segregated and set aside for dividend payments." Finding that the TR's second amended complaint failed to plausibly allege that these proceeds constituted estate property as they were mere expectancies in an entity that was never actually liquidated and never declared a dividend, discerning no justification for using the alter ego doctrine to treat Coastal's corporate assets as the DR's personal ones, and pointing to section 549's expired statute of limitations, the BC dismissed the TR's section 549 cause of action and all related claims.
- Facts:
- The DR filed a chapter 11 bankruptcy case in the BC on March 11, 2015. AS DIP, the DR caused his wholly owned corporation, Coastal, to sell its main asset (Wine Estate Property). Proceeds from the sale of the Wine Estate Property (the Net Proceeds) were then transferred without court approval to the appellees. While the the sale of the Wine Estate Property constituted a “Liquidation Event” under Coastal's articles of incorporation, the corporation itself was never liquidated; moreover, it never declared a dividend.
- Judge(s):
- Sidney R. Thomas; Gabriel P. Sanchez; and Consuelo Callahan
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