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In re Martino

United States District Court, M.D. Florida, Tampa Division

April 27, 2017

THOMAS SALVADOR MARTINO, Appellee. SAVANNAH CAPITAL, LLC, Appellant, Bankr. No. 8:14-bk-13452-KRM Adversary No. 8:15-ap-418-KRM



         This appeal arises from a Chapter 7 bankruptcy and a related adversary proceeding. Appellant Savannah Capital, LLC filed its brief on January 20, 2017. (Doc. # 14). Appellee Thomas Salvador Martino filed his responsive brief on March 7, 2017. (Doc. # 20). The bankruptcy trustee joined in the Appellee's brief. (Doc. # 21). Savannah filed its reply brief on March 21, 2017.

         I. Background

         Appellee Thomas Salvador Martino, the Debtor and defendant in the bankruptcy and adversary proceedings below, was married to Pam Martino, a stepchild of Robinson Callen. (Doc. # 8-63 at ¶¶ 1, 7-9). Pam Martino and her fifteen siblings own Savannah, which has been managed by Callen since 2012. (Id. at ¶ 8). Before him, Tanya Glaize, also a child of Callen, managed Savannah. (Doc. # 8-51 at 3, ¶ 2). Pam Martino and her siblings go by the moniker of the “Callen Group.” (Doc. # 8-63 at ¶ 8).

         At some unspecified point, the Callen Group agreed with the Debtor to form a new corporation, DeVille Corp. (Id. at ¶ 9). As part of this venture, it was agreed the Callen Group would own fifty percent of DeVille via a separate corporate entity and the Debtor and Pam Martino would own the other fifty percent. (Id.). The Debtor was to have ongoing control of DeVille. (Id.).

         In October of 2012, the Debtor, in his capacity as president of DeVille, emailed Callen to request Savannah's consent for DeVille to file Chapter 11 bankruptcy. (Doc. # 8-66 at ¶ 4). The Debtor's email initiated a series of events that culminated in August of 2014, when Savannah filed suit against DeVille in state court for declaratory judgment and for court-ordered inspection of DeVille's records. (Doc. # 8-63 at ¶ 16; Doc. # 8-66). That state-court action led to the entry of a judgment declaring that Savannah owned fifty percent of DeVille. (Doc. # 14 at 18; Doc. # 20 at 10 n.2).

         While the state-court action was pending, on November 14, 2014, the Debtor filed his voluntary petition for Chapter 7 bankruptcy, thereby initiating the underlying bankruptcy case. (Doc. # 8-6). Among his Schedules, the Debtor listed Savannah as a creditor, noting the “[c]laim[] [was] for monies owed and mismanagement.” (Doc. # 8-7 at 17). The amount of the claim was listed as “[u]nknown” and the claim itself was marked as contingent, unliquidated, and disputed. (Id.).

         Thereafter, Savannah filed a proof of claim and a complaint objecting to the dischargeability of debt, which initiated the underlying adversary proceeding. (Doc. ## 8-63; 8-19 at 43-49). The bankruptcy court deemed the proof of claim and the complaint to be timely filed, and entered orders documenting the same. (Doc. ## 8-26; 8-28); see also (Doc. # 8-27). The complaint in the adversary proceeding brought suit against the Debtor and DeVille. (Doc. # 8-63). Through it, Savannah asserted three counts: objection to dischargeability of debt, judicial dissolution of DeVille, and accounting. (Id.). The Debtor moved to dismiss on the grounds that Savannah lacked standing (Doc. # 8-70), and DeVille moved to be dismissed on the grounds that the bankruptcy court lacked subject-matter jurisdiction (Doc. # 8-71).

         The bankruptcy court held a hearing on June 11, 2015, during which it heard arguments on the two motions to dismiss. (Doc. # 8-76). The bankruptcy court orally granted DeVille's motion to dismiss stating, “I will grant in part the motion to dismiss all claims against De[V]ille Corp. De[V]ille Corp. is not under my jurisdiction.” (Id. at 22:16-18). As to the Debtor's motion to dismiss, the hearing was continued. (Id. at 35:14-24). The order dismissing DeVille from the adversary proceeding was entered on June 16, 2015. (Doc. # 8-75).

         On August 18, 2015, the bankruptcy court held its continued hearing on the Debtor's motion to dismiss. (Doc. # 8-85 at 28:15-44:4). The Debtor again argued Savannah lacked standing to sue in its own right because its claim was a derivative of DeVille's. (Id. at 30:14-22). For its part, Savannah focused its arguments on whether it had pled enough to give rise to a plausible claim for relief. (Id. at 35:20-21:13). After hearing argument, the bankruptcy court denied the Debtor's motion to dismiss, stating: “[i]t seems to me that in a closely-held corporation . . . one shareholder . . . who has his hands on the control of the corporation[] could directly injure the other shareholder by mismanaging the corporation.” (Id. at 40:7-12). The bankruptcy court stated further:

[t]he question, really, is whether under the Bankruptcy Code there is a debt that's owed for an injury to . . . Savannah . . . . [t]hat is distinct from the debts owed to [DeVille]. And there's an overlay here of a closely-held corporation. [Counsel for Savannah] has alleged and has suggested there's an overlay behind the scenes of a family nature. I'm not sure if that's alleged, but you've argued that.
And so for this purpose, I think that's sufficient to at least get past a motion to dismiss. Can one shareholder of a privately-held fifty-fifty corporation who has his hands on the management of a company[] manage that company in such a way as to directly prejudice his other shareholders? And I think that's -- I think that can happen.

(Id. at 40:22-41:14). The order denying the Debtor's motion to dismiss was entered on September 4, 2015. (Doc. # 8-77).

         The Debtor subsequently filed his answer and again asserted Savannah lacked standing. (Doc. # 8-78 at ¶ 55).

         The adversary proceeding continued and on May 17, 2016, the Debtor filed a motion for summary judgment as to all counts of the complaint and the allowance of Savannah's proof of claim. (Doc. # 8-82). The thrust of the Debtor's motion for summary judgment was that Savannah's claim was a derivative of DeVille's; in other words, it was DeVille- rather than Savannah-that had suffered an injury due to the Debtor's alleged actions. (Id.). Savannah responded by arguing summary judgment was premature. (Doc. # 8-84). The bankruptcy court held a hearing on the motion for summary judgment on June 9, 2016. (Doc. # 8-87). In making its ruling, the bankruptcy court explained:

There are only three parties in the room -- the two shareholders and the entity. And the cases that you've cited support the proposition that (a) you look to the four corners of the complaint and see what's alleged as the claims -- see what claims are alleged.
Secondly, you analyze them as to whether the losses are direct to the Plaintiff or they're indirect to the Plaintiff through the losses to the corporation.
And I'm going to grant your motion. . . . I'm going to grant your motion for summary judgment.
it seems to me the only damages that have been alleged are that assets, the one asset, the property, was allowed to be foreclosed on and that property is now gone, and that the corporation lost the equity in that property. On the merits, it would be whether there was any equity or not.
And secondly, that the company's treasury was diminished, the assets of the company were diminished by making a personal loan of a million -- I don't know, over a million dollars to Mr. Martino. And those are assets of the corporation. And the damages you've alleged are the shareholder's -- your client's interest is as a shareholder in the value of the corporation's assets, and the damages alleged are the shareholder losses.
So four corners of the complaint, the claims are direct as to Deville, derivative as to Savannah Capital. And under the case law that I have seen, that would mean that this particular Plaintiff does not have standing to make this claim, even though we've all acknowledged that it's the only party who could have done it, but after all these months and all this time, has not. And that's where we are today.

(Id. at 26:18-31:23). The written order entered by the bankruptcy court conforms to the reasons stated during the hearing; namely, that “[l]ike the claimant in [White v. Whittle, 449 B.R. 427, 430 (Bankr. M.D. Fla. 2011)], [Savannah] ha[d] no standing to recover directly any damages ...

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