DM Bankr # 203 | Motion re Sale of Assets to Flynn | 2-10-bk-18510-BB_203

8/20/2019 DM Bankr # 203 | Motion re Sale of Assets to Flynn | 2-10-bk-18510-BB_203

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Case 2:10-bk-18510-BB Doc 203 Filed 12/06/12 Entered 12/06/12 16:23:06 Desc Main Document Page 1 of 79

1 Thomas H. Casey- Bar No. 138264

Kathleen M. Goldberg - Bar No. 132637

2 LAW OFFICE OF THOMAS H. CASEY, INC.

A PROFESSIONAL CORPORATION

3 22342 Avenida Empresa, Suite 200

Rancho Santa Margarita, CA 92688

4

Telephone: (949) 766-8787

Facsimile: (949) 766-9896

5 Email: [email protected]

6

7

8

[email protected]

Attorneys for Jason M. Rund

Chapter 7 Bankruptcy Trustee

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA LOS ANGELES DIVISION

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In re ) Case No. 2:10-bk-18510-BB

) Chapter 7

MONTGOMERY, DENNIS LEE, )

MONTGOMERY, BRENDA KATHLEEN, ) CHAPTER 7 TRUSTEE S MOTION

) FORORDER:

) 1) APPROVING SALE AGREEMENT

) WITH MICHAEL FLYNN REGARDING

) THE SALE AND PURCHASE OF THE

) ESTATE S INTEREST IN CERTAIN

) PROPERTY;

) 2)APPROVING OVERBID PROCEDURE;

Debtors. )

)

3)

DEEMING BUYER TO BE A GOOD

) FAITH PURCHASER PURSUANT TO 11

) U.S.C. §363(m);

) (4)WAIVING14DAYSTAYIMPOSEDBY

) FEDERAL RULE OF BANKRUPTCY

) PROCEDURE 6004(h);

) MEMORANDUM OF POINTS AND

) AUTHORITIES; AND, DECLARATIONS

)

OF TRUSTEE

JASON M. RUND,

) THOMAS H. CASEY,

AND

PROPOSED

) BUYER MICHAEL FLYNN

IN

SUPPORT

) THEREOF

) Hearing:

) Date: January 2, 2013

-------------- Time: 10:00 a.m.

Ctrm: 1475

28

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1

T BLE OF CONTENTS

2 Page

3 Chapter 7 Trustee s Motion For Order: Approving (1) Sale Agreement With

Michael Flynn Regarding The Sale And Purchase Of The Estate s Interest In Certain

4

Property; (2) Approving Overbid Procedure; (3) Deeming Buyer To Be A Good

Faith Purchaser Pursuant To

11

U.S.C. Section 363(m); (4) Waiving 14 Day

5 Stay Imposed By Federal Rule OfBankruptcy Procedure 6004(h) 1

6

Summary 1

7 Background Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

8

Scheduled Assets OfThe Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

9 A.ssetsCla1meci-Exempt 2

1 0

Assets Purchased By Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . .

3

11 Assets Abandoned By Trustee 3

12 Assets To Be Sold Include Documents Currently Held By The Trustee . . . . . . . . 4

13 Description

Of

Assets To Be Sold And Fair Market Value OfThe Assets . . . . . . 5

14 The Proposed Sale Of The Saleable Assets Is For Fair Market Value 7

15 Sale Terms 8

16 The Overbid Procedure 9

1 7

Determination

of

Good Faith Purchaser 10

18 Waiver Of Stay Is Appropriate 10

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Memorandum

of

Points and Authorities

12

I The Court May Authorize The Sale Of Property 12

II

III

IV.

The Bankruptcy Court Has The Authority To Implement

The Overbidding Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Waiver

Of

The Stay Is Appropriate

13

Conclusion 14

Declaration Of Jason M. Rund 15

Declaration of Thomas H. Casey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Declaration Of Michael Flynn, Proposed Buyer 27

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T BLE OF UTHORITIES

Page s)

2 CASES

3

In re Industrial Valley Re.frig. Air

ond

Supplies

Inc

77 B.R.

15,

21

Bankr. E.D.

Pa.

1987)

12

4

5

In

re Crown Corf.oration

679

F.2d 774 9

1

Cir. 1982)

13

6

Montgomery

v

eTreppid Technologies

2009

U.S.

Dist.

LEXIS

35543

10, 24, 27

7

8 ST TUTES

-

-

-1-1-tJ-:-S-:e.-§-IOI- 3-1-)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10;-23-;-27

10 11 U.S.C. §105 a)

13

11 u.s.c. §363 b) l) 12, 13

12

11

U.S.C. §363 m)

1,

10,

11,

15,

23,

25

13 11

u.s.c.

§703.140 b) l)

3, 16

14 11

U.S.C. §703.140 b) 2) 3,

16

15

11

u.s.c.

§703.140 b) 3)

2,

3,

16

16 11 U.S.C. §703.140 b) 4) 3, 16

1

7

11

u.s.c.

§703.140 b) 5)

3,

16

18

11

u.s.c.

§703.140 b) 6) 2,

16

19

11 U.S.C. §703.140 b) 10) E) 3,

16

20 31U.S.C.§3129 3 17

21

OTHER UTHORITIES

22

Federal Rule

of

Bankruptcy Procedure 6004 h)

1,

10,

11, 13, 15,

24,

25

23

24

25

26

27

28

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CHAPTER 7 TRUSTEE S MOTION FOR ORDER: (1) APPROVING

SALE AGREEMENT WITH MICHAEL FLYNN REGARDING THE

SALE AND PURCHASE OF THE ESTATE S INTEREST IN CERTAIN

PROPERTY; (2) APPROVING OVERBID PROCEDURE; (3) DEEMING

BUYER

TO

BE A GOOD FAITH PURCHASER PURSUANT

TO

U.S.C.

§363(m); (4) WAIVING 14 DAY STAY IMPOSED Y FEDERAL RULE

OF BANKRUPTCY PROCEDURE 6004(h)

TO

THE HONORABLE SHERI BLUEBOND, UNITED STATES BANKRUPTCY JUDGE;

THE OFFICE OF THE UNITED STATES TRUSTEE, AND ALL INTERESTED PARTIES:

Jason

M

Rund, the duly appointed, qualified and acting Chapter 7 Trustee ( Trustee ) for

the bankruptcy estate ofDennis Lee Montgomery and Brenda Kathleen Montgomery ( Debtors ),

brings this Motion ( Motion ) for Order Approving the Trustee's Sale Agreement with Michael

Flynn regarding the Trustee's sale

of

certain assets and in support

of

the Motion, the Trustee

respectfully represents as follows:

SUMMARY

The Trustee has received and accepted an offer from Michael Flynn ( Proposed Buyer ) for

the purchase ofcertain assets of he estate not previously claimed exempt, purchased by the Debtors,

or previously abandoned by the Trustee for the amount of $20,000 subject to overbid. By this

Motion, the Trustee is requesting approval of his proposed Sale Agreement, approval of overbid

procedures and a waiver of the

14

day stay imposed by FRBP 6004(h). The specific assets subject

to the Sale Agreement are discussed below. The Trustee's Motion should be approved. Fair market

value is being realized for the assets subject to the Sale Agreement and the approval

of

the Motion

will benefit the bankruptcy estate.

BACKGROUND INFORMATION

1 On June 26, 2009 ( Petition Date ), the Debtors filed a voluntary petition for relief

under Chapter 7

of

the Bankruptcy Code.

2

Jason M. Rund is the duly appointed, qualified and acting Chapter 7 Trustee

( Trustee ) for the bankruptcy estate. The Trustee conducted several very lengthy 34l(a)

examinations in this case.

SCHEDULED ASSETS OF THE DEBTORS

3

Listed assets

of

he bankruptcy estate on the Debtors' Schedules include the following

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real property: real property located at 6 Toscana Way, Rancho Mirage, California valued at

2 $952,000; real property located at 3812 94th Ave NE, Yarrow Point, Washington, valued

at

3 $2,150,000; and real property located at 12720 Buckthorn Lane, Reno, Nevada, valued at $605,000

4 (collectively, Real Properties ). A copy

of

the Debtor's Schedule A is attached hereto as

Exhibit

5

1

and incorporated herein by this reference.

6 4. The Debtors' Schedules also include the following personal property assets: Certain

7 bank accounts valued at a total

of

$10,036.89; household goods and furnishings valued at $8,000;

8 books and pictures, including a CD Juke Box, valued at $1, 100; wearing apparel valued at $4,540;

9- · jewelry valued r 9 8 ~ 9 0 2 ~ 8 0 ; a term lifeinsurance policy valuea af U:UO; an IRA a l u e f f a f 2 o ~ 4 U 2 ;

10 1,000 shares

of

Nevada Security Bank Stock valued at $859; Accounts Receivable valued at

$526,204; certain patents valued at $10,000,000; three automobiles - a 2006 Silverado valued at

12 $9,845; a 2005 Cadillac CTS valued at $13,850; and a 2003 Tahoe valued at $8,915; office

13

equipment valued at $875; other personal property listed as per Court Order entered in this

14

proceeding in the US Federal Court, Reno, NV - Case #306-cv-00056-PMP-VPC valued at

15

$2,104,600.12; and claims against various parties valued $38,809,011.12, scheduled as follows: (a)

16 the Claims against the Liner Firm, Teri Pham, and Deborah Klar for indemnification regarding

7 sanction order in Federal Court Reno, NV Case No. 306-cv-0056-PMP-VPC valued at $204,411.00;

18 (b) Claims for legal malpractice against Liner firm, Terri Pham, Deborah Klar, Tuneen Chisolm,

19

Shannon Anderson, Robert Oliver, Richard Mooney, Ryan Lapine, Robert Shore, Stuart A. Liner,

2 0 Peter Bransten, Ellen Garofalo, and Randal Sunshine in Federal Court Reno, NV Case No. 306-cv-

21 0056-PMP-VPC valued at $10,000,000.00; and ( c) Claims for misrepresentations against Edra

22 Blixseth and the Liner Law Firm for settlement agreement with Warren Trepp and Etreppid

2 3 Technologies

on

09/08 valued at $26,500,000.00 (collectively, Personal Property Assets ). A copy

24 of the Debtors' Schedule B is attached hereto as Exhibit 2 and incorporated herein by this

2 5 reference.

2 6 Assets laimed Exempt

2 7 5. The Debtors have claimed fully exempt the following Personal Property Assets:

28 household goods and furnishings in the amount of $21,065 per Section 703.140(b)(3) and (b)(6);

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1

books and pictures in the amount

of

3,188 per Section 703.140(b)(3); wearing apparel in the

2 amount of 4,540 under Section 703.140(b)(3); and the Debtors' IRA in the amount

of

26,402

3 per Section 703. l 40(b

1 O) E).

4

6.

The Debtors have claimed partially exempt the following Personal Property

5 Assets: jewelry in the amount

of

19,900 per Section 703.140(b)(4), (1) and (5); and 2006 Chevy

6 Silverado in the amount

of

2,97 5 per Section 703. l 40(b )(2).

7 Assets

Purchased y The Debtors

8 7. The following Personal Property Assets were sold to the Debtors per Court Order

enterec:i-June rr;-20TO:cD-JuRe Box; Jewelry;

r;OOOSliares

ofNevaaaSecurity Ban:KStock; ana-

10

three automobiles - a 2006 Silverado; a 2005 Cadillac CTS; and a 2003 Tahoe valued at 8,915.

11

Assets

Abandoned By The Trustee

12 8.

The following scheduled Personal Property Assets were abandoned by the Trustee

13

pursuant to Court Order entered November 10, 2010: (a) the Claims against the Liner Firm, Teri

14 Pham, and Deborah Klar for indemnification regarding sanction order in Federal Court Reno, NV

15 Case No. 306-cv-0056-PMP-VPC valued at 204,411.00; (b) Claims for legal malpractice

16 against Liner firm, Terri Pham, Deborah Klar, Tuneen Chisolm, Shannon Anderson, Robert

7 Oliver, Richard Mooney, Ryan Lapine, Robert Shore, Stuart A. Liner, Peter Bransten, Ellen

18

Garofalo, and Randal Sunshine in Federal Court Reno,

NV

Case No. 306-cv-0056-PMP-VPC

19 valued at 10,000,000.00; and (c) Claims for misrepresentations against Edra Blixseth and the

2 0 Liner Law Firm for settlement agreement with Warren Trepp and Etreppid Technologies on

21

09/08 valued at 26,500,000.00. Attached hereto as

Exhibit

3 and incorporated herein by this

22

reference is the November 10, 2010 Order.

2 3

9.

The following unscheduled Personal Property Asset was abandoned

by

the

2 4 Trustee pursuant to Court Order entered March 24, 2010: Complaint for violation of the False

25 Claims Act 31 U.S.C. Section 3129, et seq. and conspiracy to violate the False Claims

Act

filed

2 6 by the Debtor

on

behalfofhimself and the United States Government in camera and under seal in

2 7 the District Court ofNevada. Attached hereto as

Exhibit 4

and incorporated herein by this

2 8 reference is the March 24, 2010 Order.

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1 Assets To e Sold Include Documents Currently Held y The Trustee

2 10. The Trustee is currently holding a large number

of

documents at All Aboard Mini

3 Storage,

1705 S.

State College Boulevard, Unit

#19,

Anaheim, California, ( Documents In

4 Storage ), including but not limited to, documents delivered from the Liner Firm obtained in

5 their representation of the Debtor and from discovery documents received by the Liner Firm in

6 connection with litigation in which they represented the Debtor; and documents relating

to

7 litigation in Nevada, wherein upon the request of the United States Department of Justice

8 ( DOJ ), the Nevada District Court entered several protective orders including an Order entered

9 ·un .A:ugust-:29;-2007-( E>{)J-Protective O r o e r ) ~ T n e NevaclaE>istricrCouftalso entered a

1

O

protective order regarding discovery matters between the Debtor and eTreppid on September 11,

2007

( eTreppid Protective Order ).

2

11. The DOJ reviewed and redacted all

of

the Documents In Storage prior to their

3 receipt by the Trustee so

as

to comply with the Protective Order. The Trustee has caused the

14 review

of

the Documents In Storage and has verified that all

of

the documents appear to have

5

been reviewed

by

the DOJ. The Trustee is informed and believes that the Documents In Storage,

6 since they are fully redacted, are no longer subject

to

the DOJ Protective Order.

1 7

12.

With regards to the eTreppid Protective Order and the Documents In Storage

8

marked by eTreppid as Confidential or Restricted Confidential , the Trustee entered into an

9

additional stipulation with eTreppid, which was approved by the Bankruptcy Court on August

2 0

30, 2010.

Pursuant to this additional stipulation with eTreppid, the Trustee may seek and obtain

21 an order from the Bankruptcy Court allowing the release of these documents, after providing

22 eTreppid with the opportunity to collect the documents. A copy of the Trustee's stipulation with

2 3 eTreppid approved by Order entered August

30,

2010

is

attached hereto as

Exhibit

5

and

is

2 4 incorporated herein by this reference. The Trustee has requested direction from eTreppid as

to

2 5 their desire to collect the documents and has not received a response. As part

of

the motion

to

2 6 approve this Agreement, the Trustee will also seek confirmation that the documents marked

by

2 eTreppid as Confidential or Restricted Confidential may be released to the Buyer.

2 8 ///

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1

Description

f

Assets To Be Sold nd Fair Market Value

f

The Assets.

2

13.

The Proposed Buyer, Michael Flynn, wishes to purchase the Bankruptcy Estate's

3 interest, if any, the remaining assets not claimed exempt, purchased by the Debtors or previously

4 abandoned by the Trustee, for the purchase price

of

$20,000

( Offer ) as follows:

5

7

8

a.

That certain real property located at 3 812

9th

Ave. NE, Yarrow Point, WA,

98004, and legally described as:

THE SOUTH 25 FEET OF LOT 21, AND ALL

OF

LOT 22, BLOCK 1

REPLAT OF PORTIONS OF YARROW, ACCORDING TO THE PLAT

THEREOF, RECORDED IN VOLUME

21

OF PLATS, PAGE 11, IN

KING COUNTY, WASHINGTON

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(herein after referred to as the Yarrow Point Property ). The Yarrow Point Property is over

encumbered. A Rel ief from Stay Order was entered by the Bankruptcy Court on May

26, 2010.

In addition, the Debtors' Schedules indicate that Warren Trepp may have a judgment lien

encumbering this property.

b. Certain real property located at 6 Toscana Way, Rancho Mirage,

California ( Rancho Mirage Property ). The Rancho Mirage Property is over encumbered. A

Relief from Stay Order was entered by the Bankruptcy Court on October 27, 2009. In addition,

the Debtors' Schedules indicate that Warren Trepp may have a judgment lien encumbering this

property.

c. Certain real property located at 12720 Buckthorn Lane, Reno, Nevada

( Nevada Property ). The Nevada Property is over encumbered. Relief from Stay Orders were

entered by the Bankruptcy Court on October 28, 2009 and November 18, 2009. In addition, the

Debtors' Schedules indicate that Warren Trepp may have a judgment lien encumbering this

property.

d. Certain bank accounts scheduled by the Debtors. The evidence indicates

that

on

the Petition Date, the Debtors had no non-exempt funds

in

their scheduled bank accounts.

e. Accounts Receivable - Blxware Payroll in the scheduled amount of

$526,204.00. According to a previous Declaration executed by the Debtor, judgment creditors

executed on Blxware's assets in Washington State. Accordingly, Blxware is no longer operating

and the scheduled receivable has no value.


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f

Patents as provided on Debtors' Schedule B valued at $10,000,000. The

2 Debtors' scheduled interest in patents has no value. The Debtor's alleged patents and technology

3 were part of an investigation

of

the Debtor by the U.S. Government for, among other things,

4

fraud. Considering the allegations

of

fraud against the Debtor involving the Debtor's alleged

5 technology, the estate's interest in the patents have no value. Moreover, the alleged patents are

6 subject

to

a judgment lien in favor

of

eTreppid Technologies in the approximate amount of $26

7 million.

8 g. Any and all claims and/or causes of action derived from or arising out of

9 ·

assets iaenttfiec:l on tne Deotors'-Scnec:lUles notclaimea exempt, purcliasea-oy tlie Deotors or

10 previously abandoned by the Trustee. The Trustee is unaware of any claims or causes

of

action

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derived from or arising out of the assets identified on the Debtors' schedules .

h. Any and all proceeds derived from or arising out of assets identified on the

Debtors' Schedules which are not claimed exempt, purchased by the Debtors or previously

abandoned by the Trustee. The Trustee is unaware of any proceeds derived from or arising out of

assets identified

on

the Debtors' Schedules which are not claimed exempt, purchased by the

Debtors or previously abandoned by the Trustee;

1.

Any and all claims and/or causes

of

action against Edra D. Blixseth. The

Trustee is unaware of any claims or causes of action he may have against Edra Blixseth. Further,

Edra Blixseth filed a chapter

11

bankruptcy petition in U.S. Bankruptcy Court for the District

of

Montana

on

March 26, 2009, under case number 09-60452. Accordingly, the estate's interest in

any and all claims and/or causes of action against Edra D. Blixseth has no value. Furthermore,

some claims against Edra Blixseth have already been abandoned by the Trustee. See Exhibit

3 .

J.

Any and all claims and/or causes

of

action against the original lender,

25 mortgage broker, subsequent loan holder, loan assignee, loan related certificate holder, loan

2 6 servicer, mortgage servicer,

or

similar lender or loan entity associated with the purported loan

2

7

and purported security instruments which encumber or use as security for repayment, the Yarrow

28 Point Property. Such entities may include, but are not limited to, Bank of New York Mellon,


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1 Bank of America, N.A., Countrywide Home Loans, Inc., NV Mortgage, Inc. dba SOMA

2 Financial, Fannie Mae, Freddie Mac, Mortgage Electronic Registration Systems, Inc.,

3 Certificateholders CWMBS, Inc., CHL Mortgage Pass-Through Trust 2006-17, Mortgage Pass-

4 Through Certificates, 2006-17, and all successors and assigns thereto (hereinafter referred

to as

5 Yarrow Point Claims ). The Trustee is unaware of any claims and/or causes of action he may

6 have against these entities.

7 k Documents In Storage. The Documents

In

Storage have no value and the

8 continuing storage fees represent a liability to the estate. Per the Sale Agreement, the Proposed

-

Buyer must assume

tlle future

stor ge fees

for

tlie Documents lllStorage.

10 1 Any and all claims against Blxware, LLC; Opspring, LLC; Blxware, Inc.;

11 and Opspring, Inc. These claims were subject to pre-petition litigation and have no value

to

the

12

estate.

13 14 All assets to be sold include only those assets which existed on the Debtors'

14 bankruptcy Petition Date. Collectively, the above described assets are hereinafter referred to as

15 the Saleable Assets . An asset scheduled by the Debtor is: Per court order entered in this

16 proceeding in the

US

Federal Court, Reno, NV - Case #306-cv-00056-PMP-VPC. Debtor is

1 7 entitled to reimbursement

of

legal fees from the United States of America for wrongful conduct

18

of

the Federal Bureau oflnvestigation ( Potential Claim Against The U.S. Government ). The

19

Saleable Assets do not include any potential causes of action against the United States

2 0 Government, including but not limited to, the Potential Claim Against The U.S. Government.

21 The understanding of the Trustee and the Buyer that these potential causes of action are not

22 included as saleable assets is confirmed by the email of Trustee counsel dated December 4, 2012

2 3 and the confirming email

of

counsel for the Buyer dated December 4, 2012, attached hereto

as

2 4 collective Exhibit 6 and incorporated herein by this reference.

2 5 THE PROPOSED SALE

OF THE

SALEABLE ASSETS IS

FOR

FAIR MARKET VALUE

2 6 15 Subject to Court approval, the Trustee has accepted an offer from Proposed

2 7 Buyer, Michael Flynn, to purchase the Saleable Assets for the amount of $20,000 ( Offer ). A

2 8 copy of the sale agreement entered into between Michael Flynn and the Trustee ( Sale


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1

Agreement ) is attached hereto as Exhibit

7

and incorporated herein by reference.

2 16.

Fair market value for the Saleable Assets will be realized through the utilization

3 of the requested overbid procedure, which will ensure fair market value

of

the Saleable Assets

is

4 achieved. Further, the Saleable Assets appear

to

have a value less than the $20,000 purchase

5 price.

S LE TERMS

7

17.

Subject to Court approval, the Trustee proposes to sell the Saleable Assets to the

8 Proposed Buyer for the amount

of

$20,000. Pursuant

to

the terms of the Sale Agreement, the

9-

·

-proposeci-Buyer nas

r e m i t t e a - 2 0 ~ 0 0 0 - l O l l i e

Trustee for tlie purcliase ofllieSaleaEle Assets.

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The Sale Agreement provides in pertinent part as follows:

a

Proposed Buyer acknowledges that Proposed Buyer is purchasing the

Saleable Assets from the bankruptcy estate subject to any and all liens,

secured interests and encumbrances

of

any kind.

b. Proposed Buyer further acknowledges that immediately upon entry of an

Order approving a sale of the Estate's interest in the Saleable Assets, the

costs to store the Documents In Storage immediately becomes the

responsibility

of

the Proposed Buyer.

c

Proposed Buyer acknowledge that he is purchasing the Saleable Assets

from the Bankruptcy Estate as is without warranties of any kind,

expressed or implied, being given by the Trustee, concerning the condition

of the property or the quality of the title thereto, or any other matters

relating to the Saleable Assets.

d

Proposed Buyer is aware the Offer is contingent upon Bankruptcy Court

approval.

e

Any and all disputes which involve in any matter the bankruptcy estate or

the Trustee arising from the Sale Agreement shall be resolved only in the

U.S. Bankruptcy Court.


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1

2

19

THE OVER ID PROCEDURE

In order to obtain the highest and best offer for the benefit of the creditors of the

3 estate, the Trustee proposes that the foregoing Offer be subject to overbid. Notice is being

provided

of

the opportunity for overbidding to all interested parties in this matter.

5 20. The Trustee requests that the Court approve the following overbid procedure:

6

a

Only Qualified Bidders may submit an overbid. A Qualified Bidder

is

7

one who provides a financial statement and such business and banking references as are required

8 in Trustee's reasonable discretion, sufficient to assure Trustee of the bidder 's ability (based on

availa15ilicyoCfinancing, experience or otlier conoifions) to consummate tlie purcliase

o ~

1 Personal Property, AND one who can consummate the purchase of the Saleable Assets on the

11

same terms and conditions, other than price, as those proposed in the Offer.

12

b Each bid must be received by the Trustee and the Trustee's counsel no

13 later than three (3) business days prior to the hearing on the Motion.

14 c The initial overbid must exceed the Purchase Price by a minimum ofFive

15 Hundred U.S. dollars ($500.00). For instance, the first bid must be at least Twenty Thousand

16

Five Hundred U.S. dollars ($20,500.00). Each subsequent bid must then be in increments ofFive

1 7 Hundred U.S. dollars ($500.00). For instance, the first subsequent bid must be at least Twenty

18

One Thousand U.S. dollars ($21,000.00).

19 d Each bid must be all cash, non-contingent, and on the same terms and

2 0 conditions, other than price, as those proposed in the Offer.

21 e Each bidder must match all terms and conditions of the original bid. Thus,

22 the payment of the full $20,000 Purchase Price must be made to the Trustee. Said payment must

2 3 be received by the Trustee by no later than three (3) business days prior to the hearing

on

this

2 4 Motion. Said Payment must be in cash. cashier's check. or certified check, and must be

2 5 deposited with the Trustee so that the Trustee will have access to said funds no later than three

2

6 (3) business days prior to the hearing on the Motion.

2 7 21. The foregoing procedures will provide for an orderly completion

of

the sale

of

the

2 8 Saleable Assets by permitting all bidders to compete on similar terms, and will allow interested


9


13/79


1 parties and the Court to compare competing bids in order to realize the highest benefit for the

2 estate.

3 DETERMINATION OF GOOD FAITH PURCHASER

22. The Trustee further seeks an Order determining that the Proposed Buyer is a

5 good faith purchaser within the context

of

11 U.S.C. Section 363(m) such that any appeal

of

6 the Order granting this Motion, even if successful, will not affect the validity of the sale unless a

7 stay pending appeal is obtained.

8 23. The Proposed Buyer is Michael Flynn. The Proposed Buyer is not an insider as

- manerm isaefinecrinlTU:s-:-c:-smion roT 3T)-;-in tliat lie is not a relative or general partner o

10

the Debtor, nor is the Debtor his partner, director, officer or person in control of him.

11 24. Proposed Buyer, Michael Flynn, previously represented the Debtors in the matter

12

ofMontgomery v. eTreppid Technologies, 2009 U.S. Dist. LEXIS 35543.

13 25. Proposed Buyer, Michael Flynn is an attorney licensed in the State of

14

15

16

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18

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22

23

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27

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Massachusetts and is a judgment creditor of the Debtors by virtue of an alleged breach of the

Debtors' contractual obligation to pay attorneys fees due pre-petition.

26. The Proposed Buyer, Michael Flynn, filed a claim in the bankruptcy estate in the

amount

of

$833,223.15.

27. The proposed sale is in good faith and the Sale Agreement was an arms-length

transaction negotiated in good faith between the Parties.

WAIVER OF THE STAY IS APPROPRIATE

28. The waiver of the stay imposed by Rule 6004(h) is appropriate. Time is of the

essence on the Sale Agreement, the Proposed Buyer cannot take possession of the Saleable

Assets and a waiver

of

the stay is a condition

of

the proposed sale. Accordingly, the Trustee

requests that the Court waive the stay imposed by Rule 6004(h).

WHEREFORE, based on the foregoing, the Trustee requested that the Court grant the

Motion and enter an Order:

1.

2.

Authorizing the Trustee to enter into the Sale Agreement;

Approving the above referenced Sale Agreement, which does not include the sale


l O


14/79


1

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of any potential causes of action against the United States Government, and the Potential Claim

Against The U.S. Government.

3. Authorizing the release

of

the Documents In Storage marked by eTreppid

as

Confidential or Restricted Confidential to the Buyer per the terms

of

the Sale Agreement;

4. Deeming Buyer to be a good faith purchaser pursuant to 11 U.S.C. Section

363(m);

5.

Waiving the 14-day stay imposed by Federal Rule

of

Bankruptcy Procedure

6004(h); and

o For sucn otner anci-runner rehefastne Court may deem just and proper.

Date: December

-- 2.__,

2012

By:

Respectfully submitted,

THE LAW OFFICE OF THOMAS

H

CASEY, INC.,

PRO SSIONAL CORPORA TIO

Thomas H Casey, Attorney for Jason

M. d

Chapter 7

Trustee for the bankruptcy estate of De ·s Lee

Montgomery and Brenda Kathleen Montgomery

S

\

Wordperfect\Montgomery\Pleadings\Mtn.Approve.Sale.Agreement.Flynn. wpd


15/79


1 MEMOR NDUM OF POINTS ND UTHORITIES

2 L

3

THE COURT M Y UTHORIZE THE S LE OF PROPERTY

4

11

U.S.

C

Section 363(b)(l) provides that [t]he trustee, after notice and a hearing, may

5 use, sell, or lease, other than in the ordinary course

of

business, property of the estate. The sale

6 proposed is outside the ordinary course of business in that it is the sale of a significant asset of

7 the estate. A trustee must show that:

(1)

a sound business purpose justified the sale ; (2)

8 accurate and reasonable notice

of

the sale was provided; (3) the price to be paid is adequate,

-

-i.e., fair and reasonafile ;(4J good-faitU,-i.e., tlie aosence of any lucrative deals witninsiaers, is

10 present. See In re Industrial Valley Refrig. Air Cond Supplies Inc.

77 B.R. 15,

21 (Bankr.

11 E.D. Pa.

1987). As

discussed below, the proposed sale of the Saleable Assets to the Buyer as

2 proposed in the Sale Agreement conforms with each of these requirements.

13 There is a sound business purpose, in that this is a Chapter 7 liquidation case and the sale

4 of the Saleable Assets will allow liquidation of an estate asset for the benefit of the estate and its

15 creditors.

6

Notice of the Sale and

of

the hearing is being provided to all creditors and interested

1 7

parties.

18 The Trustee believes that, under the circumstances, the proposed sale represents the best

19 purchase price that can be expected by the estate.

2 0 The Trustee has fully investigated the value

of

the Saleable Assets and believes that the

2 proposed sale of the Saleable Assets, which includes the possibility of overbids is for fair market

value. Thus, the sale is in good faith.

23

IL

2 4

THE B NKRUPTCY COURT H S

TH

UTHORITY TO

5

IMPLEMENT THE OVERBIDDING PROCEDURES

2 6 Implementation of the bidding procedures is an action outside of the ordinary course of

2 7 business. Bankruptcy Code Section 363(b

)(1)

provides that a trustee after notice and hearing,

2 8 may use, sell or lease, other than in the ordinary course of business, property of the estate.


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16/79


1

Further, under Bankruptcy Code Section 105(a), [t]he court may issue any order, process, or

2

judgment that is necessary or appropriate to carry out the provisions of this title. Thus, pursuant

3 to Bankruptcy Code Sections 363(b)(l) and 105(a), this Court may authorize the implementation

4

of

overbidding procedures.

5

The Ninth Circuit, in a case under the Bankruptcy Act, recognized the power

of

a

6 bankruptcy court to issue orders determining the terms and conditions for overbids with respect

7 to a sale of estate assets. In re Crown Corporation 679 F .2d 77 4 (9

1

h

Cir. 1982). The Crown

8

Corporation

court entered an order specifying the minimum consideration required for an

-

-

overl5i0 as well as tlie partiCtilar contractual terms requirefftooe offerea-oy overoiooers. Ia ar

10 777. The Crown Corporation decision also approves

of

an order requiring and setting the

11 amount of potential overbidder's deposits and authorized courts to determine the disposition of

12

such deposits. Id

13 The overbid procedures proposed in this matter will ensure that the Saleable Assets will

14 generate the greatest possible value to the estate. The procedure also places appropriate checks

15 upon overbidders to ensure that only qualified bids are considered.

16

III

17 WAIVER OF THE STAY IS APPROPRIATE

18

7.

Under Rule 6004(h), an order authorizing the sale of property is stayed for 14 days

19 after the entry

of

the order, unless the Court orders otherwise. Fed. R Bankr.

P.

6004(h). The

2 0 Advisory Committee Note states that the Court may, in its discretion, order that the stay

is

21 inapplicable so that the sale or assumption may take place immediately upon entry of the order.

22

Fed. R. Bankr. P. 6004(g) Advisory Committee's Note.

3

8. Here, the waiver

of

the stay imposed by Rule 6004(h) is appropriate. Time is

of

2 4 the essence on the Sale Agreement as the Proposed Buyer

is

unable to take possession

of

the

2 5 Saleable Assets until the proposed sale takes place and in addition, a waiver

of

the stay is a

26 condition of the proposed sale. Accordingly, the Trustee requests that the Court waive the stay

2 7 imposed by Rule 6004(h).

28 ///


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17/79


1 IV.

2 ON LUSION

3 Based upon the foregoing the Trustee respectfully requests that the Motion be granted.

5

Respectfully submitted

6

THE LAW OFFICE OF THOMAS

H

CASEY INC. A

PROFESSIO AL CORPORATION

7

8 Date: December _f_ 2012

By:

Thomas

H

Casey Attorney for Jas . Rund

-

9

• en.apter

TTrustee f6f1lie Baiilmip

cy

estate of___

1

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12

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2

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22

23

24

25

6

27

28

Dennis Lee Montgomery

and

Brenda Kathleen

Montgomery


14


18/79


1 DECLARATION

OF

JASON

M.

RUND

2

I

Jason M. Rund, declare as follows:

3 1 I am the duly appointed, qualified and acting Chapter 7 Trustee for the

4

Bankruptcy Estate

of

n

re Dennis Lee Montgomery

nd

Brenda Kathleen Montgomery

The

5

facts contained herein are based upon information which I have acquired in my capacity as

6

Trustee and upon my review of the pleadings, records and files in this matter, and are true and

7 correct to the best ofmy knowledge, information and belief.

8 2. I make this declaration in support ofmy Motion For Order: Approving (1) Sale

9 --A:greement-WitllMicllael-Flynn

Regaraing

Tlie

SaleAna-Purcliase

o-f-TlieEstate Slnterest

In

__

1

Certain Property; (2) Approving Overbid Procedure; (3) Deeming Buyer To Be A

Good

Faith

11 Purchaser Pursuant To 11 U.S.C. Section 363(m); (4) Waiving 14 Day Stay Imposed By Federal

12

Rule OfBankruptcy Procedure 6004(h) ( Motion ).

13 3. On June 26, 2009 ( Petition Date ), the Debtors filed a voluntary petition for

14 relief under Chapter 7 of the Bankruptcy Code.

15

4. I conducted several very lengthy 341(a) examinations in this case.

16

SCHEDULED ASSETS

OF

THE DEBTORS

17

5. Listed assets

of

the bankruptcy estate on the Debtors ' Schedules include the

18 following real property: real property located at 6 Toscana Way, Rancho Mirage, California

19 valued at $952,000; real property located at 3812 94th Ave NE, Yarrow Point, Washington,

2

valued at $2,150,000; and real property located at 12720 Buckthorn Lane, Reno, Nevada, valued

21 at $605,000 (collectively, Real Properties ). A copy

of

the Debtor's Schedule A is attached

22

hereto as Exhibit 1 and incorporated herein by this reference.

3

6.

The

Debtors ' Schedules also include the following personal property assets:

24

Certain bank accounts valued at a total of $10,036.89; household goods and furnishings valued at

5

$8,000; books and pictures, including a CD Juke Box, valued at $1,100; wearing apparel valued

2 6

at $4,540; jewelry valued at $98,902.80; a term life insurance policy valued at $0.00; an IRA

7

valued at $26,402; 1,000 shares

of

Nevada Security Bank Stock valued at $859; Accounts

2 8 Receivable valued at $526,204; certain patents valued at $10,000,000; three automobiles - a 2006

S:\Wordperfect\Montgomery\Pleadings\Mtn.Approve.Sale.Agreement.Flynn.

wpd

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19/79


Silverado valued at $9,845; a 2005 Cadillac CTS valued at $13,850; and a 2003 Tahoe valued at

2 $8,915; office equipment valued at $875; other personal property listed

as

per Court Order

3 entered in this proceeding in the US Federal Court, Reno,

NV

- Case #306-cv-00056-PMP-VPC

4

valued at $2, 104,600.12; and claims against various parties valued $38,809,011.12, scheduled

as

5

follows: (a) the Claims against the Liner Firm, Teri Pham, and Deborah Klar for indemnification

6

regarding sanction order in Federal Court Reno, NV Case No. 306-cv-0056-PMP-VPC valued at

7 $204,411.00; (b) Claims for legal malpractice against Liner firm, Terri Pham, Deborah Klar,

8

Tuneen Chisolm, Shannon Anderson, Robert Oliver, Richard Mooney, Ryan Lapine, Robert

--9-.

-snore, StuarcA-:-1.:mer, Peter Bransten, Ellen Garofalo, ana-RanaarSunsliine inFederal-C-ou_rt_._

1

Reno,

NV

Case No. 306-cv-0056-PMP-VPC valued at $10,000,000.00; and (c) Claims for

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

misrepresentations against Edra Blixseth and the Liner Law Firm for settlement agreement with

Warren Trepp and Etreppid Technologies on 09/08 valued at $26,500,000.00 (collectively,

Personal Property Assets ). A copy

of

the Debtors' Schedule Bis attached hereto as Exhibit

2 and incorporated herein

by

this reference.

Assets

laimed Exempt

7. Based on my review of the Debtors' Schedules, I have determined that the

Debtors have claimed fully exempt the following Personal Property Assets: household goods

and furnishings in the amount of $21,065 per Section 703.140(b)(3) and (b)(6); books and

pictures in the amount of 3,188 per Section 703.140(b)(3); wearing apparel in the amount of

$4,540 under Section 703.140(b)(3); and the Debtors' IRA in the amount

of

$26,402 per Section

703.140(b)(1

O) E).

8. The Debtors have claimed partially exempt the following Personal Property

Assets: jewelry in the amount

of

$19,900 per Section 703.140(b)(4),

(1)

and (5); and 2006 Chevy

Silverado in the amount of $2,975 per Section 703.140(b)(2).

Assets Purchased By The Debtors

9.

By Court entered June 11, 2010, in my capacity as Trustee,

I

sold the following

27 Personal Property Assets to the Debtors: CD Juke Box; Jewelry; 1,000 shares

ofNevada

Security

2 8 Bank Stock; and three automobiles - a 2006 Silverado; a 2005 Cadillac CTS; and a 2003 Tahoe


16


20/79


valued at $8,915.

2 Assets Abandoned By The Estate

3 10.

Pursuant to Court Order entered November 10, 2010, I abandoned the following

4

scheduled Personal Property Assets: (a) the Claims against the Liner Firm, Teri Pham, and

5 Deborah Klar for indemnification regarding sanction order in Federal Court Reno, NV Case No.

6 306-cv-0056-PMP-VPC valued at $204,411.00; (b) Claims for legal malpractice against Liner

7 firm, Terri Pham, Deborah Klar, Tuneen Chisolm, Shannon Anderson, Robert Oliver, Richard

8

Mooney, Ryan Lapine, Robert Shore, Stuart

A.

Liner, Peter Bransten, Ellen Garofalo, and Randal

- - - ·g- - -sunsl ime

m

FeaeratCourrReno,

NV-Case

N0 : 306 cv 00 50 = PMP=VPC

valuea at

10 $10,000,000.00; and (c) Claims for misrepresentations against Edra Blixseth and the Liner Law

Firm for settlement agreement with Warren Trepp and Etreppid Technologies on 09/08 valued at

12 $26,500,000.00. Attached hereto as Exhibit 3 and incorporated herein by this reference is the

13 November 10, 2010 Order.

14 11. I further abandoned the following unscheduled Personal Property Asset pursuant

15 to Court Order entered March 24, 2010: Complaint for violation of the False Claims Act 31

16 U.S.C. Section 3129, et seq. and conspiracy to violate the False Claims Act filed by the Debtor

1 7

on behalfofhimself and the United States Government in camera and under seal in the District

18 Court ofNevada. Attached hereto as Exhibit 4 and incorporated herein by this reference is the

19

March 24, 2010 Order.

2 O Assets To Be Sold Include Documents Currently Held By The Estate

21 12. I am currently holding in storage a large number of documents at All Aboard Mini

22

Storage, 1705

S.

State College Boulevard, Unit #19, Anaheim, California, ( Documents In

2 3

Storage ), including but not limited to, documents delivered from the Liner Firm obtained in

2 4 their representation

of

the Debtor and from discovery documents received by the Liner Firm in

2 5

connection with litigation in which they represented the Debtor; and documents relating to

2 6 litigation

in

Nevada, wherein upon the request

of

the United States Department

of

Justice

2 7 ( DOJ ), the Nevada District Court entered several protective orders including an Order entered

2 8

on August 29, 2007 ( DOJ Protective Order ). The Nevada District Court also entered a


17


21/79


1 protective order regarding discovery matters between the Debtor and eTreppid on September 11,

2 2007 ( eTreppid Protective Order ).

13.

The DOJ reviewed and redacted all

of

the Documents In Storage prior to their

4

receipt by the estate so as to comply with the Protective Order. I have caused the review

of

the

5 Documents In Storage and have verified that all

of

the documents appear to have been reviewed

6 by the DOJ. I am informed and believe that the Documents In Storage, since they are fully

7 redacted, are no longer subject to the DOJ Protective Order.

8 14.

With regards to the eTreppid Protective Order and the Documents In Storage

9

marK.ea-oy

eTreppio as ''Confioential or

' R e s t r i c t e C I T o n f i a e n t i a l ~ I

enterea-into an aauitional__

1 stipulation with eTreppid, which was approved by the Bankruptcy Court

on

August 30, 2010.

11 Pursuant to this additional stipulation with eTreppid, I may seek and obtain an order from the

12 Bankruptcy Court allowing the release

of

these documents, after providing eTreppid with the

13 opportunity to collect the documents. A copy ofmy stipulation with eTreppid approved by Order

14 entered August 30, 2010 is attached hereto as Exhibit 5 and is incorporated herein by this

15

reference. I

am

informed and believe that

my

counsel,

on

behalfof the estate, has requested

16

direction from eTreppid as to their desire to collect the documents and has not received a

17 response. As part

of

the motion to approve this Agreement, I will also seek confirmation that the

18

documents marked by eTreppid as Confidential or Restricted Confidential may be released to

19

the Buyer.

2 Description f

Assets

To Be Sold nd Fair Market Value

f

The

Assets.

21

15.

The Proposed Buyer, Michael Flynn, wishes to purchase the Bankruptcy Estate's

2 2 interest,

if

any, the remaining assets not claimed exempt, purchased by the Debtors

or

previously

2 3 abandoned

by

the estate, for the purchase price

of

$20,000 ( Offer ) as follows:

24

a.

That certain real property located at 3 812 th Ave. NE, Yarrow Point, WA,

2 5 98004, and legally described as:

26

THE SOUTH 25 FEET OF LOT 21, AND ALL OF LOT 22, BLOCK 1

REPLAT OF PORTIONS OF YARROW, ACCORDING TO THE PLAT

27 THEREOF, RECORDED IN VOLUME 21 OF PLATS, PAGE 11, IN

KING COUNTY, WASHINGTON

28

S:I Wordperfect\Montgomery\Pleadings\Mtn.Approve.Sale.Agreement.Flynn. wpd

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22/79


1 (herein after referred to as the "Yarrow Point Property"). Based

on

my review of the Debtors'

2 Schedules, I am informed and believe that the Yarrow Point Property is over encumbered. A

3 Relief from Stay Order was entered by the Bankruptcy Court on May 26, 2010. In addition, the

4 Debtors' Schedules indicate that Warren Trepp may have a judgment lien encumbering this

5 property.

6 b. Certain real property located at 6 Toscana Way, Rancho Mirage,

7 California ("Rancho Mirage Property"). Based on my review of the Debtors' Schedules, I am

8 informed and believe that the Rancho Mirage Property is over encumbered. A Relief from Stay

--erderwmrenteTI ll-by the Bankruptcy eourt

on

October 27;-2009-:-In aclattion, tne DelJtors•

1 O Schedules indicate that Warren Trepp may have a judgment lien encumbering this property.

11 c Certain real property located at 12720 Buckthom Lane, Reno, Nevada

12

("Nevada Property"). Based on

my

review of the Debtors' Schedules, I am informed and believe

13

that the Nevada Property is over encumbered. Relief from Stay Orders were entered by the

14 Bankruptcy Court on October 28, 2009 and November 18, 2009. In addition, the Debtors'

15 Schedules indicate that Warren Trepp may have a judgment lien encumbering this property.

16 d

Certain bank accounts scheduled

by

the Debtors. The evidence indicates

1

7

that

on

the Petition Date, the Debtors had no non-exempt funds

in

their scheduled bank accounts.

18

e

Accounts Receivable - Blxware Payroll

in

the scheduled amount of

19 $526,204.00. According to a previous Declaration executed by the Debtor, judgment creditors

20

executed on Blxware 's assets in Washington State. Accordingly, Blxware is no longer operating

21

and the scheduled receivable has no value.

22 f

Patents as provided on Debtors' Schedule B valued at $10,000,000. The

2 3 Debtors' scheduled interest in patents has no value. The Debtor 's alleged patents and technology

2 4 were part

of

an investigation of the Debtor by the U.S. Government for, among other things,

2 5 fraud. Considering the allegations of fraud against the Debtor involving the Debtor's alleged

2 6 technology, the estate's interest in the patents have no value. Moreover, the alleged patents are

2

7

subject

to

a judgment lien in favor of eTreppid Technologies in the approximate amount of $26

28 million.


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23/79


1 g Any and all claims and/or causes

of

action derived from or arising out of

2 assets identified on the Debtors' Schedules not claimed exempt, purchased by the Debtors or

3 previously abandoned by the estate. I am unaware of any claims or causes of action derived

4 from or arising out

of

the assets identified on the Debtors' schedules .

5

h

Any and all proceeds derived from or arising out of assets identified on the

6 Debtors' Schedules which are not claimed exempt, purchased by the Debtors or previously-

7

abandoned by the estate. I am unaware of any proceeds derived from or arising out of assets

8 identified on the Debtors' Schedules which are not claimed exempt, purchased by the Debtors or

-

previously aoanoonea-oy tlie estate;

1

1

Any and all claims and/or causes of action against Edra D Blixseth. I am

11 unaware of any claims or causes of action the estate may have against Edra Blixseth. Further,

12 Edra Blixseth filed a chapter 11 bankruptcy petition in U.S. Bankruptcy Court for the District of

13 Montana on March

26, 2009,

under case number

09-60452.

Accordingly, the estate's interest in

14 any and all claims and/or causes of action against Edra

D

Blixseth has

no

value. Furthermore,

15 some claims against Edra Blixseth have already been abandoned by the estate.

See

Exhibit 3 .

16

J

Any and all claims and/or causes of action against the original lender,

1 7 mortgage broker, subsequent loan holder, loan assignee, loan related certificate holder, loan

18 servicer, mortgage servicer, or similar lender or loan entity associated with the purported loan

19

and purported security instruments which encumber or use as security for repayment, the Yarrow

20 Point Property. Such entities may include, but are not limited to, Bank

of

New York Mellon,

21 Bank ofAmerica, N.A., Countrywide Home Loans, Inc., NV Mortgage,

Inc

dba SOMA

22 Financial, Fannie Mae, Freddie Mac, Mortgage Electronic Registration Systems, Inc.,

2 3 Certificateholders CWMBS, Inc., CHL Mortgage Pass-Through Trust

2006-17,

Mortgage Pass-

2 4 Through Certificates, 2006-1 7, and all successors and assigns thereto (hereinafter referred to as

2 5 Yarrow Point Claims ). I am unaware

of

any claims and/or causes of action the estate may have

2 6 against these entities.

2 7 k Documents In Storage. The Documents In Storage have no value and the

2 8 continuing storage fees represent a liability to the estate. Per the Sale Agreement, the proposed


20


24/79


1

2

3

Buyer must assume the future storage fees for the Documents In Storage.

1 Any and all claims against Blxware, LLC; Opspring, LLC; Blxware, Inc.;

and Opspring, Inc. These claims were subject to pre-petition litigation and have no value to the

4 estate.

5 16.

All assets to be sold include only those assets which existed on the Debtors'


7 the Saleable Assets . An asset scheduled by the Debtor is:

Per

court order entered

in

this

8 proceeding in the US Federal Court, Reno, NV - Case #306-cv-00056-PMP-VPC. Debtor is

9- --entitled-to reiml:mrsementoilegai-fees from tne tJmtecfStates ofA.merica for wrongfiil conauct

10 of the Federal Bureau

of

Investigation ( Potential Claim Against The U.S. Government ). The

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


Government, including but not limited to, the Potential Claim Against The U.S. Government.

My understanding with the Buyer is that these potential causes of action are not included as

saleable assets and is confirmed by the email of my counsel dated December 4, 2012 and the

confirming email

of

counsel for the Buyer dated December 4, 2012, attached hereto as collective

Exhibit 6


THE

PROPOSED SALE

OF THE

SALEABLE ASSETS IS FOR FAIR MARKET VALUE

17. Subject to Court approval, I have accepted an offer from Proposed Buyer, Michael

Flynn, to purchase the Saleable Assets for the amount of $20,000 ( Offer ). A copy of the sale

agreement entered into between myself and Michael Flynn ( Sale Agreement ) is attached hereto

as

Exhibit

7 and incorporated herein by reference.

18. Fair market value for the Saleable Assets will be realized through the utilization

of

the requested overbid procedure, which will ensure fair market value

of

the Saleable Assets is

achieved. Further, the Saleable Assets appear to have a value less than the $20,000 purchase

pnce.

SALE TERMS

19. Subject to Court approval, I propose to sell the Saleable Assets to the Proposed

Buyer for the amount of $20,000. Pursuant to the terms

of

the Sale Agreement, the Proposed


2


25/79


Buyer has remitted $20,000 to the estate for the purchase of the Saleable Assets.

2 20. The Sale Agreement provides in pertinent part as follows:

3

4

5

6

7

8

9

1

12

13

14

15

16

17

18

19

2

21 21.

a

b

c

d

e

Proposed Buyer acknowledges that Proposed Buyer is purchasing the

Saleable Assets from the bankruptcy estate subject to any and all liens,

secured interests and encumbrances

of

any kind.

Proposed Buyer further acknowledges that immediately upon entry of an

Order approving a sale of the Estate's interest in the Saleable Assets, the

costs to store the Documents In Storage immediately becomes the

respons10ility of the Buyer.

Proposed Buyer acknowledge that he is purchasing the Saleable Assets

from the Bankruptcy Estate as is without warranties of any kind,

expressed or implied, being given by me, concerning the condition of the

property or the quality of the title thereto, or any other matters relating to

the Saleable Assets.

Proposed Buyer is aware the Offer is contingent upon Bankruptcy Court

approval.

Any and all disputes which involve in any matter the bankruptcy estate or

myself as Trustee arising from the Sale Agreement shall be resolved only

in the U.S. Bankruptcy Court.

THE OVER ID PROCEDURE

In order to obtain the highest and best offer for the benefit of the creditors of the

2 2

estate, I am proposing that the foregoing Offer be subject to overbid. Notice is being provided

of

2 3

the opportunity for overbidding to all interested parties

in

this matter.

2

4

22. I am requesting that the Court approve the following overbid procedure:

2 5

a. Only Qualified Bidders may submit an overbid. A Qualified Bidder is

2 6 one who provides a financial statement and such business and banking references as are required

2 7 in my reasonable discretion, sufficient to assure me of the bidder's ability (based on availability

2 8 of financing, experience or other conditions) to consummate the purchase of the Saleable Assets,


22


26/79


1 AND one who can consummate the purchase

of

the Saleable Assets on the same terms and

2

conditions, other than price, as those proposed in the Offer.

3

b.

Each bid must be received by me and my counsel no later than three (3)

4

business days prior to the hearing on the Motion.

5 c. The initial overbid must exceed the Purchase Price by a minimum

of

Five

6 Hundred U.S. dollars ($500.00). For instance, the first bid must be at least Twenty Thousand

7

Five Hundred U.S. dollars ($20,500.00). Each subsequent bid must then be in increments ofFive

8

Hundred U.S. dollars ($500.00). For instance, the first subsequent bid must be at least Twenty

-

one

J : i o u s a n c i D ~ S : c l o l l a r s

( 2T;UOU:UO).

10 d.

Each bid must be all cash, non-contingent, and on the same terms and

11 conditions, other than price, as those proposed in the Offer.

12 e.

Each bidder must match all terms and conditions

of

the original bid. Thus,

13 the payment

of

the full $20,000 Purchase Price must be made to the estate. Said payment must

14 be received by me by no later than three (3) business days prior to the hearing on this Motion.

15 Said Payment must be in cash. cashier's check. or certified check, and must be deposited with

me

16

so

that I will have access to said funds no later than three (3) business days prior to the hearing

1 7

on the Motion.

18 23. The foregoing procedures will provide for an orderly completion of the sale of the

19

Saleable Assets by permitting all bidders to compete on similar terms, and will allow interested

2 0 parties and the Court to compare competing bids in order to realize the highest benefit for the

21 estate.

22

DETERMIN TION OF GOOD F ITH PURCH SER

2 3

24.

I

am further seeking an Order determining that the Proposed Buyer is a good

2 4 faith purchaser within the context of 11 U.S.C. Section 363(m) such that any appeal of the

5

Order granting this Motion, even if successful, will not affect the validity

of

the sale unless a stay

2 6 pending appeal is obtained.

2 7 25. The Proposed Buyer is Michael Flynn. I am informed and believe that the

28 Proposed Buyer is not an insider as that term is defined in 11 U.S.C. Section 101(31), in that


23


27/79


1 he is not

a relative or general

partner

of

the Debtor,

nor

is the Debtor his partner,

director,

officer

2

or person in

control

of him.

3 26.

I

am

further informed

and

believe

that

Proposed

Buyer, Michael

Flynn,

previously

4

represented the Debtors in the

matter

of Montgomery v. eTreppid Technologies,

2009 U.S. Dist.

5 LEXIS 35543.

6 27.

I am informed

and believe that

Proposed Buyer, Michael Flynn is an attorney

7 licensed

in

the State

of

Massachusetts

and is

a judgment creditor

of the Debtors by

virtue of

an

8 alleged breach

of

the Debtors' contractual obligation to pay attorneys

fees

due pre-petition.

9

28.

The Proposed

Buyer, Michael

Flynn, filed a claim

in

the bankruptcy estate in

the

10

amount

of 833,223.15.

11 29.

I

am

informed and believe

that

the proposed sale is in good

faith

and the

Sale

12

Agreement was an

arms-length

transaction

negotiated

in good faith

between

the

Parties.

3 W IVER

OF THE ST Y

14

30.

Time is

of

the essence on the Sale

Agreement,

the Proposed Buyer cannot take

15 possession

of

the Saleable Assets

and a

waiver

of

the stay is

a condition

of the proposed sale.

16 Accordingly, I am

requesting that

the Court waive the stay

imposed by Rule 6004 h).

17 31. In my

business

judgment,

approval

of

he Sale Agreement

is

in

the best

interest

of

8

the

estate.

19 I declare under penalty ofperjury that

the

foregoing is true

and

correct and that

r fh

2 this Declaration was executed

on

December_:;; ,

201

21

22

3

24

25

26

27

28

S \Wordperfec1\M oolgom•ry\Pleod lngs\M tn.Approve.Solc.Aar••m•nt.Flynn.wpd

24


28/79


1 DECLARATION OF THOMAS H. CASEY

2 I Thomas H Casey, declare as follows:

3

1.

I am the attorney for the Chapter 7 Trustee

of

the estate of

In r Dennis Lee

4 Montgomery

nd

renda Kathleen Montgomery ( Debtors ). The facts contained herein are

5 based upon information which I have acquired in my capacity

as

attorney for the Trustee and

6 upon my review

of

the pleadings, records and files in this matter, and are true and correct to the

7

best

of

my knowledge, information and belief.

8

2.

I make this declaration in support

of

the Trustee's Motion For Order: Approving

9 · crrsale

.Agreement WilllIVIicliaerFiynn Regaraing TlieSaleA.llcl Purcliase OITlie Estate's

10 Interest In Certain Property; (2) Approving Overbid Procedure; (3) Deeming Buyer To Be A

11

Good Faith Purchaser Pursuant To

11

U.S.C. Section 363(m); (4) Waiving 14 Day Stay Imposed

12 By Federal Rule Of Bankruptcy Procedure 6004(h) ( Motion ).

13 3.

All assets to be sold include only those assets which existed on the Debtors'


15

the Saleable Assets . An asset scheduled by the Debtor is: Per court order entered in this

16 proceeding in the US Federal Court, Reno,

V

Case #306-cv-00056-PMP-VPC. Debtor is

1

7

entitled

to

reimbursement of legal fees from the United States

of

America for wrongful conduct

18

of the Federal Bureau oflnvestigation ( Potential Claim Against The U.S. Government ). The

19


2 0 Government, including but not limited to, the Potential Claim Against The U.S. Government.

21 The Trustee's understanding with the Buyer is that these potential causes of action are not

2 2 included as saleable assets.

23

ll

24

ll

25 ll

26

27

28

S:\Wordperfect\Montgomery\Pleadings\Mtn.Approve.Sale.Agreement.Flynn. wpd

2

S


29/79


1

2

4

5

10

11

12

13

14

15

16

17

18

19

20

21

22

3

24

25

26

27

28

4 This is confirmed by my email to counsel for the Proposed Buyer on December 4

2012 and a confirming email from counsel for the Proposed Buyer to me dated December 4

2012 attached hereto as collective

xhibit 6


I declare under penalty of perjury that the foregoing is true and correct and that this

Declaration was executed on December _l__ 2012 at Rancho Santa Margarita California.


26


30/79


1 DECLARATION OF MICHAEL FLYNN

2 I, Michael

Flynn,

declare.as follows:

3

1.

I am

the

Pr0posecl Buyer of he Saleable Assets referred to in

the

foregoing

4 Motion. I executed the Sale Agreement attached hereto and incorporated herein by reference as

5 Exhibit 7 .

6

2.

I previously represented the Debtors in the matter of Montgomeryv. eTreppid

7 Technologies, 2009 U.S.

Dist.

L:f:XIS

35543.

8

3. ·

I am an attorney licensed in the State ofMassachusetts and a judgment creditor of

9 the

Debtors

by virtue of

an

alleged

breach

of he

Debtors contractual obligation to

pay attorneys

10

fees due

r e ~ p e t i t i o n

11

4.

On or about September

7,

2010,

I filed a claim in the bankruptcy estate fur the

12

amount

of$834,891.24 representing a judgment and sanction order against the Debtor. This

13

claim

is docketed as Claim Number

5

on the Court's claims register ( Claim 15 ).

On

the same

14

day,

I

filed

an amendment to Claim 15, revising

the

claim amount to 833,223.15.

15

5.

To the best ofmy knowledge,.

information

and belief, I am not

considered

an

16

insider'' as that term

is defined in 11

U.S.C. § 101(31),

in

that I

am

not a relative or general

1 7 partner·of the Debtor. Further, I have

no

relationship with the Trustee,

his

employees or agents,

B

other

than

the

negotiation of

he purchase of he

Saleable Assets.

19

6.

My

offer is en arms-length transaction. negotiated in good

faith

between the

20 parties.

21 I decJare under penalty of perjuryunder the laws of

he

United States of America that the

2 2 foregoing

is true and correct.

Executed at

/< J , . , < . ~ / P c £: C eJ on December£..

2012.

2 3

r

----···

---

2 4 Michael Fl .

25

6

27

28

S

\W

onlporfoollM

onljoutory\Ploadlnp\M

tn.Approve.Salo.Alll'Wtll•nt..Plynu.,.pd

2?


31/79


xhibit


32/79


B6A (Official Form 6A) (12/07)

In

reDennis LMontgomery & Brenda K Montgomery,

Debtor

Case

No.

6:09-bk-24322

If known)

SCHEDULE A- REAL PROPERTY

Except as directed below, list

all

real property In which

the

debtor has any legal, equitable,

or

future interest, including

all

property owned

a.

a co-

tenant, community

property, or

in which

the debtor

has

a

life estate. Include any property

in

which

the

debtor holds rights

and

powers

exercisable

for

the

debtor's own benefil f

he

debtor

is married, state

whether

the husband, wife, both, or

the

marital community own the property by placing

an ''H,

W, J,

or

C in the column

labeled

Husband,

Wife,

Joint,

or Community. If

the debtor holds no interest in

real

property, write ''None under

Description and

Location

of

Property.

Do

not

Include interests

in

executory contracts and unexpired

leases on

this schedule. Ust

them

In Schedule G - Executory Contracts

and

Unexpired Le11ses.

Ifan

entity claims

to have a lien or hold a secured interest in any

property,

state

the amount

of he

secured claim.

See Schedule D. I f no entity claims

to

hold a

secured

interest in the property,

write

None

in

the column labeled

Amount

of Secured Claim.

If

the

debtor is an individual or if a joint petition is filed, state the amount of

any

exemption claimed in the

property

only in Schedule C - Property

Claimed as

Exempt.

DF.SCRIPTION AND

CURRENT

VALUE

AMOUNT

OF

Oz

LOCATION OF

NATURE OF

DEBTOR'S

'OJ

OF DEBTOR'S

SECURED

PROPERTY

INTEREST IN

PROPERTY

INTEREST IN

CLAIM•

PROPERTY, WITHOUT

c8

DEDUCTING

ANY

a ~

SECURED CLAIM

OR

EXEMPTION

i

Primary Residence - 6 Toscana Way

1,095,471.70

ancho

Mirage, CA 92270

Fee

J

952,000.00

House-3812

94th

Av NE

Yarrow Point, WA 98004

Fee

J

2, 150,000.00

2,477,813.65

House • 12720 Buckthom Lane

Reno,

NV 89511

Fee

J

605,000.00

661,556.21

* n addition, Warren Trepp may have

Judgment

liens

encumbering one or

more of these real properties

Total>

3,707,000.00

(Report

also on

Summary ol

Schedules.)

,

·

EXHIBIT 1 P


33/79


Exhibit


34/79


B6B (Official Form 6B) (12/07)

In re Dennis L Montgomery Brenda

K

Montgomery,

Debtor

Case No. 6:09-bk-24322

Uknown)

SCHEDULE

B

PERSON L PROPERTY

Except as directed below, list

all

personal property ofdle debtor of whatever

kind.

lfthe debtor has no property In one or more of

the

categories,

place an

x

in the

appropriate position

in the

column labeled

None. If

additional space

is needed in any

category, attach

a

separate

sheet properly

identified with

the

case

name, case

number,

and the number

of

he category.

f he debtor

is married,

state whether

the husband,

witi:,

both, or the marital

community own the property

by placing

an H,'' W, J, or C in the column labeled Husband, Wife, Joint, or Community. If the debtor is

an

individual

or a joint petition is filed, state the amount

of

any

exemptions

claimed

only

in

Schedule C • Property Claimed

Exempt.

Do not list Interests

In

executory contracts and unexpired leases

on this

schedule, List them

In

Schedule G - Executory Contracts

and

Unexpired Leases.

If the property is being held

for

the debtor by

someone

else, state that

person's

name and address under Description and Location of Property.

If the

property

is being

held

for a minor

child, simply

state the child's initials

and·the

name and address

of

the child's parent or guardian, such as

A.B., a minor child,

by

John Doe, guardian. Do not disclose the child's name. See, 11 U.S.C.

§

112 and Fed. R. Bankr. P. I007(m).

r

CURRENT VALUE

OF

DEBTOR'S

INTf:REST

N

IN

PROP'f:RT\',

WITll·

TYPE OF PROPERTY

0

DF..SCRIPTION AND LOCATION

OUT DlmUC..'TING

ANY

N

OF PROPERTY

SECURED CLAIM

E

OR EXEMPTION

I.

Cash on hand.

x

Nominal

2. Checking, savings

or other

fman-

See Attached Rider

J

10,036.89

cial accounts, certificates of deposit·

or shares in banks, savings and loan,

thrin..

building

and loan, and home-

stead

associations, or credit

unions,

brokerage houses,

or o o p e r a ~ v e s .

3. Security deposits with public util-

x

itles,

telephone c o ~ a n i e s landlords,

and

others.

Ordinary and necessary household goods and

J

8,000.00

4. Household goods d

furnishings,

furnishings

including

audio, video, and computer

equipment.

5

Books;

pictures

lll d other art

CD

Juke

Box

J

1,100.00

objects;

antiques;

stamp,

coin,

record, tape, compact disc, and other

collections

or collectibles.

6. Wearing

11pparel.

Ordinary and necessary wearing apparel

J

4,540.00

7. Furs

and

jewelry.

See Attached Rider

J

98,902.80

8. Firearms and sports, photo-

x

graphic, and other hobby equipment.

9.

Interests

in insunmce

policies.

Term Life

J

0.00

Name insurance company

of

each

Aviva Life and Annuity Company

policy and itemize surrender or refund

Policy#2250801

value of each.

I0. Annuities. Itemize

and

name

x

each issuer.

11. Interests in

an

education

IRA as

x

defined

in 26

U.S.C.

§

S30(b)(I}

or under

a

qualified State

tuition

plan

as defined in

26 U.S.C. § S29(b)(I ).

Give particulars.

(File separately the record(s) ofany

sudi

interest(s). 11 U.S.C. § S2l(c); Rule

1007(b)).

Imerican LegalNel Inc.

www.FormsWotfrtTow.com

EXHIBIT 2 PAGE 29


35/79


B6B (Official Form 68) (12/07) •• Cont.

In re

Dennis

L

Montgomery Brenda

K

Montgomery,

Debtor

Case

No.

6:09-bk·24322

If

known)

SCHEDULEB PERSONALPROPERTY

(Continuation Sheet)

TYPE OF PROPERTY

12. Interests in IRA, BRISA, Keogh, or

other pension or profit

sharing

plans.

Give

partlculars.

13.

Stock and

interests

n incorporated

and

unincorporated businesses.

Itemize.

14. Interests in partnerships or

joint

ventures.

ltcmrae.

IS. Government and

corporate

bonds

and o1her negotiable and non-

negotiable

instruments.

16.

Accounts

receivable.

17. Alimony, maintenance, support,

and property settleironts to which the

debtor

is or may

be cnlitled. Give

particulars.

18.

Other liquidated

debts

owed to

debtor

including tllll refunds. Give

particulars.

19.

Equitable

or

future

interests, life

estates,

and rights or powers exercisable

for

the benefit

of

lhe debtor other

than

those

listed in

Schedule A - Real

Property.

20. Contingenl and noncontlngent

interests in estate

of a

decedent, death

benefit plan, life

insurance

policy, or ll UsL

21. Other contingent and

unliquidated

claims of eveiy nature, including l8X

refunds, counterclaims of the

debtor,

and

rights

to

setoff claims.

Oive estimated value

of

each.

N

0

DESCRIPTION AND

LOCATION

N

OF PROPERTY

E

IRA

Nevada Security Bank

Stock, 1000

shares

x

x

Blxware

Payroll

42765 Dunes View

Road

Rancho

Mirage,

CA 92270