RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 1 of 13

Transcription

1 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 1 of 13 Charles W. Hingle (Bar No Shane P. Coleman (Bar No Robert L. Sterup (Bar No HOLLAND & HART LLP 401 North 31st Street, Suite 1500 P.O. Box 639 Billings, Montana Telephone: ( Facsimile: ( ATTORNEYS FOR MARC S. KIRSCHNER, AS TRUSTEE OF THE YELLOWSTONE CLUB LIQUIDATING TRUST UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MONTANA YELLOWSTONE MOUNTAIN CLUB, LLC, et al., Debtors, MARC S. KIRSCHNER, AS TRUSTEE OF THE YELLOWSTONE CLUB LIQUIDATING TRUST v. Plaintiff, TIMOTHY BLIXSETH; CASA 20 LLC; TAMARINDO, LLC; John Does 1-100; and XYZ Corp ; Defendants. Case No RBK Jointly administered with , and Chapter 11 Adversary No. COMPLAINT

2 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 2 of 13 COMES NOW Marc S. Kirschner, as Trustee for the Yellowstone Club Liquidating Trust (the YCLT, by and through counsel of record, herein states his causes of action and claims for relief against Timothy Blixseth, Casa 20, LLC, and Tamarindo, LLC. INTRODUCTION 1. This action pertains to two discrete transfers of property from Yellowstone Development, LLC ( YD to Timothy Blixseth and his affiliated entities. The properties are commonly known as Lot 90 in the Yellowstone Club and the Tamarindo resort in Mexico. The transfers at issue occurred less than a year before YD filed bankruptcy. 2. This action also pertains to member distributions from Big Sky Ridge, LLC ( BSR to Timothy Blixseth or his affiliated entities. These distributions relate to the proceeds of the sales of lots in the Yellowstone Club that were owned by BSR and include distributions paid less than one year before BSR filed bankruptcy. PARTIES 3. Plaintiff Marc S. Kirschner is the trustee of the YCLT. 4. YCLT was formed under the Plan of Reorganization filed May 22, 2009, in Case No (dkt. #947 (the Bankruptcy Case, refiled May 29, 2009 (dkt. #955, and confirmed by this Court s Memorandum of Decision dated June 2, 2009 (dkt. #1025 (hereinafter, the Confirmed Plan of Reorganization. 5. YD is a Montana limited liability company and is one of the debtors in Bankruptcy Case. 6. BSR is a Montana limited liability company and is one of the debtors in Bankruptcy Case. 7. Pursuant to the Confirmed Plan of Reorganization and Assignments of Claims (Exhibit 1 hereto, Mr. Kirschner, as Trustee of the YCLT, succeeds to all Causes of Action that 2

3 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 3 of 13 the Debtors or their Estates could assert immediately prior to the Effective Date, except certain claims released by the Confirmed Plan of Reorganization. In particular, Plaintiff succeeds to the interests of the litigation claims of YD and BSR, and their respective estates. 8. Timothy Blixseth is a citizen of the United States and a resident of the State of Washington. Timothy Blixseth is a transferee of the assets and cash distributions for which avoidance is sought and is the obligor on the Lot 90 Note (defined below for which collection is sought. 9. Casa 20, LLC is a Washington limited liability company controlled by Timothy Blixseth and is a transferee of assets for which avoidance is sought. Timothy Blixseth is the sole member of Casa 20, LLC. 10. Tamarindo, LLC is a Washington limited liability company controlled by Timothy Blixseth and is a transferee of assets for which avoidance is sought. 11. John Does and XYZ Corp are, respectively, unknown individuals and corporations or other business entities, who are transferees or who facilitated the transfers of the assets or cash distributions described herein, and who will be named in an amended pleading when they are identified. JURISDICTION AND VENUE 12. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 1334, Standing Order 12 (Revised, U.S. Dist. Ct., D. Mont., and Section of the Confirmed Plan of Reorganization. 13. Venue is proper pursuant to 28 U.S.C COUNT I. AVOIDANCE OF THE LOT 90 TRANSFER 14. Plaintiff hereby restates each and every preceding paragraph, as if specifically stated herein. 3

4 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 4 of On December 29, 2006, YD purchased real property located Madison County described as follows: Lot 90, Yellowstone Mountain Club Subdivision, Phase 1 and 2, Madison County, Montana, according to the official plat thereof on file and of record in the office of the County Clerk and Recorder, Madison County, Montana. This property is commonly known as Lot On February 12, 2008, less than one year prior to the filing of this bankruptcy, YD transferred Lot 90 to Timothy Blixseth in a cashless transaction at a substantial loss. Timothy Blixseth received Lot 90 in exchange for (i a $2 million promissory note from Timothy Blixseth to YD (the Lot 90 Note, and (ii $500,000 in previously paid consideration. Timothy Blixseth signed the Real Estate Purchase and Sale Agreement both on behalf of himself as Buyer and on behalf of YD as Seller. 17. On information and belief, Lot 90 has been transferred, either as a part of the initial transfer or in one or more subsequent transfers, to Defendant Casa 20, LLC and/or to Bahia Dorada S.A. de C.V., a Mexican entity. On information and belief, Bahia Dorada S.A. de C.V. is the present owner of record of Lot YD received no payments under the Lot 90 Note. 19. YD did not receive reasonably equivalent value for the transfer of Lot At the time of the Lot 90 Transfer, YD s remaining assets were unreasonably small, and YD and Timothy Blixseth should have reasonably believed that YD would be unable to pay its debts as they came due. 21. At the time of the Lot 90 Transfer, YD was insolvent or became insolvent as a result of the transfer or obligation. 4

5 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 5 of At the time of the Lot 90 Transfer, YD was engaged or was about to engage in a business or transaction for which its remaining assets were unreasonably small in relation to the business or transaction. 23. At the time of the Lot 90 Transfer, YD intended to incur, or believed or reasonably should have believed that it would incur, debts beyond its ability to pay as they became due. 24. The Lot 90 Transfer was made with the intent to hinder, delay, or defraud creditors of YD. 25. The YCLT has all of the rights of creditors to bring avoidance claims under applicable state law. 26. YD had unpaid creditors whose claims were in existence on the date of the Lot 90 Transfer, which claims are to be paid through distributions from the YCLT. 27. Pursuant to 11 U.S.C. 544(b, the Lot 90 Transfer was a fraudulent transfer under Mont. Code Ann , The Lot 90 Transfer was a fraudulent transfer under 11 U.S.C Accordingly, the Lot 90 Transfer may be avoided pursuant to 11 U.S.C Upon avoidance, Tim Blixseth and Casa 20, LLC must pay the YCLT the value of Lot 90. COUNT II. LOT 90 PROMISSORY NOTE 31. Plaintiff hereby restates each and every preceding paragraph, as if specifically stated herein. 32. This Count II is brought in the alternative to Count I, in the event that the Lot 90 Transfer is found to not be an avoidable transfer. 5

6 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 6 of The YCLT is the owner of a promissory note from Timothy Blixseth, dated February 12, 2008 (the Lot 90 Note. A true, correct, and complete copy of the Lot 90 Note is attached hereto as Exhibit Pursuant to the terms of the Lot 90 Note, payment was due in full by March of Timothy Blixseth has failed or refused to make payments due under the Lot 90 Note. 36. The YCLT is entitled to judgment against Timothy Blixseth for the principal amount of $2,000,000 due under the Note, plus interest at the annual rate of 6.25% and attorneys fees. 37. To the extent that Defendants may assert that the Lot 90 Note was canceled or paid pursuant to Timothy Blixseth s divorce proceedings, any such cancellation would be invalid as a voidable transfer, because YD was insolvent at the time of Timothy Blixseth s divorce proceedings, could not pay its debts as they came due, and did not receive reasonably equivalent value for the Lot 90 Note. COUNT III. AVOIDANCE OF THE TAMARINDO TRANSFER 38. Plaintiff hereby restates each and every preceding paragraph, as if specifically stated herein. 39. In early 2008 and within a year prior to YD s bankruptcy, YD owned certain interests in Mexican corporate entities related to the Tamarindo beach resort worth at least $40 million. In particular: a. YD owned 99.99% of Yellowstone Club World Tamarindo, S. de R.L. de C.V. ( YCWT, a Mexican entity; 6

7 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 7 of 13 b. YD also owned 99.99% of Yellowstone Holdings Mexico S. de R.L. de C.V ( YHM, a Mexican entity; c. YHM, in turn, owned the remaining.01% of YCWT; and d. Blixseth Group Inc. ( BGI, an Oregon corporation, owned the remaining 0.1% of YHM, having a par value of 1 peso. 40. YCWT s principal asset is a resort in Mexico known as Tamarindo, which was valued by Timothy Blixseth and Edra Blixseth at $40 million. 41. In early 2008, divorce proceedings were pending between Timothy Blixseth and Edra Blixseth. Those divorce proceedings concluded with an agreement between the Blixseths known as the Marital Settlement Agreement ( MSA. The MSA has a stated Closing Date of July 3, 2008, but on information and belief actually closed on or about August 13, Among other matters, the MSA required Edra Blixseth to transfer to Timothy Blixseth the equivalent of Sixty Million Dollars. The $60 million payment included membership interests in foreign entities that held the Tamarindo, Mexico resort property in which Yellowstone Development, LLC holds an interest, which the Blixseths valued at $40 million (the Tamarindo Transfer. 43. To effect the Tamarindo Transfer under the MSA, the following transactions occurred: a. YD transferred all of its interest in YCWT and YHM to Edra Blixseth in exchange for (i a recital that $5,000 cash was paid to YD, which was never actually received, and (ii a $39,995,000 note from Edra Blixseth to YD. A true, correct, and complete copy of the undated Assignment of Company Interests Agreement is attached hereto as Exhibit 3. A true, correct, and complete copy of the undated Promissory Note from Edra Blixseth is attached 7

8 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 8 of 13 hereto as Exhibit 4. Edra Blixseth signed the Assignment document both individually as transferee and on behalf of YD as transferor. b. BGI transferred its.01% interest in YHM to Tamarindo, LLC pursuant to an undated Assignment of Company Interest agreement, a true, correct, and complete copy of which is attached hereto as Exhibit 5. Timothy Blixseth is named as the manager of Defendant Tamarindo, LLC, a Washington entity. c. Edra Blixseth immediately donated her newly-acquired interests in YCWT and YHM to Tim Blixseth, by an undated Donation of Company Interests agreement, a true, correct, and complete copy of which is attached hereto as Exhibit In summary, prior to the Tamarindo Transfer, YD owned a % interest in resort property valued at $40 million. In exchange for this interest, YD received a note from Edra Blixseth for $39,995,000 and a recited, but unpaid, cash component of $5, YD did not receive reasonably equivalent value from the transfer of its interests in YCWT and YHM. The note from Edra Blixseth was worth materially less than the value of the transferred property because she did not have the financial wherewithal to make payments on the note when she signed the note, she did not ever intend to repay the note and she filed personal bankruptcy just months later. Further, Edra Blixseth did not even pay YD the recited $5,000 in cash. 46. At the time of the Tamarindo Transfer, YD s remaining assets were unreasonably small and the parties to that transaction, including Timothy Blixseth, should have reasonably believed that YD would be unable to pay its debts as they came due. 47. YD was insolvent at the time of the Tamarindo Transfer or became insolvent as a result of the Tamarindo transfer. 8

9 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 9 of The Tamarindo Transfer, as effected by the MSA and the related documents, was intended to hinder, delay or defraud creditors, including creditors of YD. 49. At the time of the Tamarindo Transfer, YD was engaged or was about to engage in a business or transaction for which its remaining assets were unreasonably small in relation to the business or transaction. 50. At the time of the Tamarindo Transfer, YD intended to incur, or believed or reasonably should have believed that it would incur, debts beyond its ability to pay as they became due. 51. The YCLT has all of the rights of creditors to bring avoidance claims under applicable state law. 52. YD had unpaid creditors whose claims were in existence on the date of the Tamarindo Transfer, which claims are to be paid through distributions from the YCLT. 53. The Tamarindo Transfer, as effected by the MSA and the related documents, is a fraudulent transfer under 11 U.S.C. 544 and Mont. Code Ann , The Tamarindo Transfer, as effected by the MSA and the related documents, is a fraudulent transfer under 11 U.S.C Accordingly, the Tamarindo Transfer may be avoided pursuant to 11 U.S.C The Tamarindo Transfer, as effected by the MSA and the related documents, was made for the benefit of Timothy Blixseth and Tamarindo, LLC. Timothy Blixseth is liable to the YCLT for the value of the asset transferred, which is at least $40 million, or alternatively, for the return of the transferred interests. 57. Tamarindo, LLC is liable to BGI for the return of its transferred.01% interest in YHM. 9

10 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 10 of 13 COUNT IV. AVOIDANCE OF BSR DISTRIBUTIONS 58. Plaintiff hereby restates each and every preceding paragraph, as if specifically stated herein. 59. Between 2005 and 2008, BSR owned certain real property in Madison County, Montana. 60. During this time period, BSR was owned 50% by Timothy Blixseth and 50% by YD. 61. On information and belief, when BSR sold certain lots, BSR paid the sales proceeds as dividends to Timothy Blixseth and YD. 62. These distributions include without limitation, the following distributions made within one year of the filing of BSR s bankruptcy, as well as other prior transactions, all of which are collectively referred to as the BSR Distributions : a. $1.65 million paid to Timothy Blixseth on or about December 13, 2007, in connection with the sale of Lots 499, 450, and 457; b. $1.65 million paid to Timothy Blixseth on or about December 20, 2007, in connection with the sale of Lots 459, 463, and 465; and c. $500,000 paid to Timothy Blixseth on or about February 14, 2008, connection with the sale of Lot BSR did not receive any consideration, much less reasonably equivalent value, for the BSR Distributions. 64. At the time of the BSR Distributions, BSR s remaining assets were unreasonably small and BSR should have reasonably believed that BSR would be unable to pay its debts as they came due. 10

11 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 11 of At the time of the BSR Distributions, BSR was insolvent or became insolvent as a result of the distributions. 66. At the time of the BSR Distributions, BSR was engaged or was about to engage in a business or transaction for which its remaining assets were unreasonably small in relation to the distributions. 67. At the time of the BSR Distributions, BSR intended to incur, or believed or reasonably should have believed that it would incur, debts beyond its ability to pay as they became due. 68. The BSR Distributions were made with the intent to hinder, delay, or defraud creditors and other shareholders of BSR and its affiliated entities. 69. The YCLT has all of the rights of creditors to bring avoidance claims under applicable state law. 70. BSR had unpaid creditors whose claims were in existence on the date of the BSR Distributions, which claims are to be paid through distributions from the YCLT. 71. Pursuant to 11 U.S.C. 544(b, the BSR Distributions were fraudulent transfers under Mont. Code Ann , The BSR Distributions were fraudulent transfers under 11 U.S.C Accordingly, the BSR Distributions may be avoided pursuant to 11 U.S.C Upon avoidance, Tim Blixseth must pay the YCLT the amount of the BSR Distributions to be proven at trial, which in no event is less than $3.8 million. COUNT V. WRONGFUL DISTRIBUTIONS UNDER STATE LAW 75. Plaintiff hereby restates each and every preceding paragraph, as if specifically stated herein. 11

12 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 12 of The BSR Distributions described above were made while BSR was unable, or became unable, to pay its debts as they came due in the usual course of business. 77. BSR was insolvent when it made the BSR Distributions. 78. The BSR Distributions are wrongful distributions under Mont. Code Ann Timothy Blixseth is personally liable, as member and manager of BSR who caused the BSR Distributions to occur, for the return of the BSR Distributions to the YCLT, pursuant to Mont. Code Ann The YCLT is entitled to judgment against Timothy Blixseth in the amount of the BSR Distributions, to be proven at trial, which in no event is less than $3.8 million. WHEREFORE Plaintiff prays: 1. For judgment against Timothy Blixseth, Casa 20, LLC, and all other transferees of Lot 90 for the value of Lot 90; 2. Alternatively, for judgment against Timothy Blixseth for amounts owed under the Lot 90 Note, plus interest and attorneys fees; 3. For an Order of this Court that the transfer of the membership interests in the business entities holding the Tamarindo property, including YCWT and YHM, from Yellowstone Development, LLC and BGI to Edra Blixseth, Timothy Blixseth, Tamarindo, LLC, and/or any other transferees be set aside and voided; 4. For judgment against Timothy Blixseth, Tamarindo, LLC, and all other transferees of the Tamarindo property or of ownership interests in entities owning or controlling the Tamarindo property for the value of the transferred membership interests; 12

13 RBK Doc#: 1231 Filed: 09/02/09 Entered: 09/02/09 15:11:43 Page 13 of For an order enjoining the sale, transfer, or encumbering of the Tamarindo property, all assets associated with such properties, and any entities that own or control such properties or assets; 6. For an order of this Court that the BSR Distributions to Timothy Blixseth be set aside and voided; 7. For judgment against Timothy Blixseth for the amount of the BSR Distributions; 8. For prejudgment interest; 9. For attorneys fees and costs; and 10. For such other and further relief that the Court deems proper. Dated: September 2, 2009 /s/ Shane P. Coleman Charles W. Hingle Shane P. Coleman Robert L. Sterup HOLLAND & HART LLP 401 North 31st Street, Suite 1500 P.O. Box 639 Billings, Montana ATTORNEYS FOR MARC S. KIRSCHNER, TRUSTEE OF THE YELLOWSTONE CLUB LIQUIDATING TRUST _2.DOC 13