Henderson v. Buchanan (In Re Western World Funding, Inc.) (1985)

But see In re Western World Funding, 52 B.R. 743, 783 (Bankr.D.Nev.1985), rev’d in part, 131 B.R. 859 (D.Nev.1990), rev’d in part, 985 F.2d 1021 (9th Cir.1993) (“Under the Nevada alter ego doctrine, the corporation has, in some sense, an equitable interest in the assets of its alter ego, because the corporation and the alter ego are identical.”).

FACTS AND PRIOR PROCEEDINGS The underlying facts in this case have already been set forth at some length in both the bankruptcy court’s published decision, see Henderson v. Buchanan (In re Western World Funding, Inc.), 52 B.R. 743, 753-62 (Bankr.D.Nev.1985), and in the district court’s published opinion, see Buchanan v. Henderson, 131 B.R. 859, 862-64 (D.Nev.1990).

Delgado Oil Co., Inc. v. Torres, 785 F.2d 857, 861 (10th Cir.1986) (liability of the corporation’s fiduciary for violating a trust relationship applied to all creditors); Ford Motor Credit Co. v. Hinges, 473 F.2d 918, 920-21 (4th Cir.1973) (right of action for directors’ negligent mismanagement may. only be maintained in name of corporation or its receiver if insolvent); Dana Molded Products, Inc. v. Brodner, 58 B.R. 576, 580 (N.D.Ill.1986) (creditor may not bring action aga…

Delgado Oil Co., Inc. v. Torres, 785 F.2d 857, 861 (10th Cir.1986) (liability of the corporation's fiduciary for violating a trust relationship applied to all creditors); Ford Motor Credit Co. v. Minges, 473 F.2d 918, 920-21 (4th Cir.1973) (right of action for directors' negligent mismanagement may only be maintained in name of corporation or its receiver if insolvent); Dana Molded Products, Inc. v. Brodner, 58 B.R. 576, 580 (N.D.Ill.1986) (creditor may not bring action agai…

Id. at 783 (citations omitted).

World Funding, Inc., 52 B.R. 743, 784 (Bankr.

Int'l Refinery, 402 B.R. at 744 -45 (quoting In re Western World Funding, Inc., 52 B.R. 743, 783 (Bankr.

The statute of limitations for negligence against the Appellees as directors is also three years as prescribed in NRS 11.380. 2 In re Western World Funding, Inc., 52 B.R. 743, 765 (Bankr.D.Nev.1985).

We have determined that a claim is derivative if the injury alleged by the plaintiffs is "primarily to the corporation, and is an injury to the plaintiff creditor insofar as it decreases the assets of the corporation to which he must look for satisfaction of his debt, then the suit is for a tort suffered by the corporation, and properly brought by the trustee.” Peat Marwick, 923 F.2d at 273, quoting In re Western World Funding, Inc. 52 B.R. 743, 775 (Bankr.D.Nev.1985). .

Appellant's Brief at 13 n. 1. 9 We have determined that a claim is derivative if the injury alleged by the plaintiffs is "primarily to the corporation, and is an injury to the plaintiff creditor insofar as it decreases the assets of the corporation to which he must look for satisfaction of his debt, then the suit is for a tort suffered by the corporation, and properly brought by the trustee." Peat Marwick, 923 F.2d at 273, quoting In re Western World Funding, Inc. 52 B.R. 74…

If the injury alleged by the plaintiffs is 49 primarily to the corporation, and is an injury to the plaintiff creditor only insofar as it decreases the assets of the corporation to which he must look for satisfaction of his debt, then the suit is for a tort suffered by the corporation, and properly brought by the trustee. 50 In re Western World Funding, Inc., 52 B.R. 743, 775 (Bankr.D.Nev.1985), cited in Brief of Intervenor-Appellee at 38. 51 In this case, however, the plain…

In re Western World Funding, Inc., 52 B.R. 743, 775 (Bankr.D.Nev.1985), cited in Brief of Intervenor-Appellee at 38.

Matter of Kaiser, 791 F.2d 73, 75 (7th Cir.1986), cert. denied, 479 U.S. 1011 , 107 S.Ct. 655 , 93 L.Ed.2d 710 (1986); In re Western World Funding, Inc., 52 B.R. 743, 781 (Bankr.D.Nev.1985).

Matter of Kaiser, 791 F.2d 73, 75 (7th Cir.1986), cert. denied, 479 U.S. 1011 , 107 S.Ct. 655 , 93 L.Ed.2d 710 (1986); In re Western World Funding, Inc., 52 B.R. 743, 781 (Bankr.D.Nev.1985).

Therefore, the trustee does not bring this as a chose in action on which the debtor-corporation could have sued outside of bankruptcy; he brings it simply to establish the identity of the alter egos with the corporation in order to determine what are the assets of the estate. 52 B.R. at 783 (emphasis added).

Henderson v. Buchanan (In re Western World Funding, Inc.), 52 B.R. 743, 784 (Bankr.D.Nev.1985) (citations omitted), aff'd, 131 B.R. 859 (D.Nev.1990), rev’d on other grounds, 985 F.2d 1021 (9th Cir.1993).

Henderson v. Buchanan (In re Western World Funding, Inc.), infra, 52 B.R. 743, 783 (Bkrtcy.D.Nev.1985) (citations omitted).

World Funding, Inc., 52 B.R. 743, 753 (Bankr.D.Nev.1985) (noting that the court may determine whether a witness can discern the difference between truth and lies).

However, it is clear, despite the fact that the trustee filed this suit on behalf of the estate, that the real party in interest is the specific class of creditors consisting of the unpaid employees of the debtor. “[I]f-there is a special damage to the creditor suing, not common to other creditors, then it is a personal creditor action which the trustee may not pursue.” In re Western World Funding, Inc., 52 B.R. 743, 775 (Bankr.D.Nev.1985).

In re Western World Funding, Inc., 52 B.R. 743, 775 (Bankr.D.Nev.1985).

Las Vegas Machine & Engineering Works, Inc. v. Roemisch, 67 Nev. 1, 213 P.2d 319, 323 (1950); In re Western World Funding, Inc., 52 B.R. 743, 776 (Bkrtcy.Nev.1985). 8 .

Citing Western World 23 Funding, Inc., 52 B.R. 743, 763 (Bankr.

Inc.• 52 B.R. 743, 764 (Bkrtcy.

Extending aiding and abetting liability to a party already owing a fiduciary duty is inconsistent and duplicative of this principle because a fiduciary is already liable for the breach. {29} Plaintiff cites (In re Western World Funding, Inc.) Henderson v. Buchanan, 52 B.R. 743, 764 (Bankr.D.Nev.1985), rev’d in part on other grounds, 131 B.R. 859 (D.Nev. 1990), to support its position that Defendants may be held liable both principally and as aiders and abettors.

See Nev.Rev.Stat. § 78.140(4); cf. Schoff v. Clough, 79 Nev. 193, 196 , 380 P.2d 464 (1963) (examining transaction with corporate officer to determine if price was reasonable); In re Western World Funding, Inc., 52 B.R. 743, 763 (Bkrtcy.D.Nev.1985) (fiduciaries who engage in transactions with corporation may not benefit at the expense of the corporation, and must ensure that interested transactions are inherently fair). 2.

World Funding, Inc., 52 B.R. 743, 753 (Bankr.D.Nev.1985) (noting that the Court may determine whether a witness can discern the difference between truth and lies).

See Sender v. Porter (In re Porter McLeod, Inc.), 231 B.R. 786, 792-93 (D.Colo.1999); Raleigh v. Schottenstein (In re Wieboldt Stores, Inc.), 131 B.R. 655, 668 (N.D.Ill.1991) Collins v. Kohlberg & Co. (In re Southwest Supermarkets, LLC), 325 B.R. 417, 426-27 (Bankr.D.Ariz.2005); Henderson v. Buchanan (In re Western World Funding, Inc.), 52 B.R. 743, 773-75 (Bankr.D.Nev.1985).

World Funding, Inc., 52 B.R. 743, 753 (Bankr.D.Nev.1985) (noting that the Court may determine whether a witness can discern the difference between truth and lies).

In re Western World Funding, Inc., 52 B.R. 743, 773 (Bankr.D.Nev.1985). 24 .

In re Western World Funding, Inc., 52 B.R. 743, 773 (Bankr.D.Nev.1985), citing, McCandless v. Furlaud, 296 U.S. 140 , 56 S.Ct. 41 , 80 L.Ed. 121 (1935).

More recently Fisher v. Apostolou, 155 F.3d 876, 879-80 (7th Cir.1998) has reconfirmed the Koch reading of the “strong-arm” provisions of Section 544, distinguishing actions that “represent the interests of the creditors as a class” — an apt description of the breach of fiduciary duty actions against Galesi — from “personal claims of creditors,” which - “the trustee has no standing to bring.” 11 Accord, in the same context that is at issue here, Henderson v. Buchanan (In re …

In re Western World Funding, Inc., 52 B.R. 743, 783 (Bankr.Nev.1985); 4 Collier on Bankruptcy ¶ 541.08, at 541-41 (15th Ed. rev.1999).

Funding, Inc., 52 B.R. 743, 774-75 (Bankr.

In Henderson v. Buchanan (In re Western World Funding, Inc.), 52 B.R. 743, 784 (Bankr.D.Nev. 1985) affd in part and rev'd in part on other grounds, 131 B.R. 859 (D.Nev.1990), rev’d, 985 F.2d 1021 (9th Cir.1993) the Bankruptcy Court for the District of Nevada addressed the fact that there were no Nevada cases holding that a corporation could pierce itself and stated that the absence of case law on the matter must not be interpreted as a prohibition on the debtor having such a…

Joint Venture, 132 B.R. 287, 292 (Bankr.S.D.N.Y.1991); see also Murphy v. Nunes (In re Terrific Seafoods, Inc.), 197 B.R. 724 (Bankr.D.Mass. 1996); Alberto v. GIT Group/Equipment Financing, Inc. (In re Alberto), 1990 WL 250332 , at *6 (Bankr.N.D.Ill.1990); In re Atlas Fire Apparatus, Inc., 56 B.R. 927, 934 (Bankr.E.D.N.C.1986); In re Western World Funding, Inc., 52 B.R. 743, 762 (Bankr.

See also Dudley v. Allen, 1971 WL 302 , CCH Fed.Sec.L.Rep. ¶ 93,273 (W.D.Ky.1971); In re Western World Funding, Inc., 52 B.R. 743, 765 (Bankr.D.Nev.1985), aff'd in part, rev’d in part on other grounds sub nom.

Co., Inc.), 816 F.2d 1222 , 1225 (8th Cir.1987), cert. denied 484 U.S. 848 , 108 S.Ct. 147 , 98 L.Ed.2d 102 (1987); Wieboldt Stores, Inc. v. Schottenstein, 94 B.R. 488, 508 (N.D.Ill.1988); Henderson v. Buchanan (In re Western World Funding, Inc.), 52 B.R. 743, 775 (Bankr.D.Nev. 1985); aff'd in part and reversed in part on other grounds sub nom., Buchanan v. Henderson, 131 B.R. 859 (D.Nev.1990), rev’d on other grounds, 985 F.2d 1021 (9th Cir.1993). 14 .

Co., Inc.), 816 F.2d 1222, 1225 (8th Cir.1987), cert. denied 484 U.S. 848 , 108 S.Ct. 147 , 98 L.Ed.2d 102 (1987); Wieboldt Stores, Inc. v. Schottenstein, 94 B.R. 488, 508 (N.D.Ill.1988); Henderson v. Buchanan (In re Western World Funding, Inc.), 52 B.R. 743, 775 (Bankr.D.Nev.1985), *986 aff 'd in part and reversed in part on other grounds sub nom., Buchanan v. Henderson, 131 B.R. 859 (D.Nev.1990), rev'd on other grounds, 985 F.2d 1021 (9th Cir.1993). 57 .

Acquisition, Inc., 817 F.2d 1142, 1153 (5th Cir.1987) rely on the “well-reasoned” approach of In re Western World Funding, Inc., 52 B.R. 743, 783 (Bankr.Nev.1985): The debtor need not have even a claim of title at the time of bankruptcy, if a creditor could have nevertheless acquired a lien on the property. 4B Collier at 574.

World Funding, Inc., 52 B.R. 743, 774-775 (Bankr.

In re Western World Funding, Inc., 52 B.R. 743, 777 (D.Nev.1985).

However, "where shareholders ... approve of and ratify the misconduct of others, their actions merely create an estoppel against them_ [Shareholder ratification as a defense] does not apply in the context of the liquidation of an insolvent company, for in such a case, it is the creditors who will benefit from any recovery by the corporation." In re Western World Funding, Inc., 52 B.R. 743, 772 (Bankr.D.Nev.1985).

The Trustee cites In re Western World Funding Inc., 52 B.R. 743, 773-75 (Bkrtcy.D.Nev.1985) in support of its conclusion that it is bringing Counts XV and XVI under Section 544.

Thus, any alleged injury to the debtors is as illusory as was their corporate identity. 9 Plaintiffs contend that the debtors’ sham status should be ignored because the “alter ego doctrine is an equitable remedy which may be invoked for some purposes and not others,” and that the trustee for a debtor corporation does not always step into the shoes of the wrongdoer. 10 In re Western World Funding, Inc., 52 B.R. 743, 772 (Bankr.D.Nev.1985).

Accord: In re Production Steel, Inc., 48 B.R. 841, 846-49 (M.D.Tenn.1985); In re Moody, 46 B.R. 231, 233 (M.D.N.C.1985); In re Tom Carter Enterprises, Inc., 44 B.R. 605, 607-08 (C.D.Cal.1984); In re Benny, 44 B.R. 581, 587-88 (N.D.Cal.1984); In re Western World Funding, Inc., 52 B.R. 743, 762 (Bankr.D.Nev.1985); Matter of Baldwin-United Corp, 48 B.R. 49, 53 (Bankr.S.D.

Matter of Kaiser, 791 F.2d 73, 75 (7th Cir.1986), cert. denied, 479 U.S. 1011 , 107 S.Ct. 655 , 93 L.Ed.2d 710 (1986); In re Western World Funding, Inc., 52 B.R. 743, 781 (Bankr.D.Nev.1985); Koch Refining v. Farmers Union Cent.

Henderson v. Buchanan (In re Western World Funding, Inc.), 52 B.R. 743, 775 (Bankr.D.Nev. 1985).

In re Osborne, 42 B.R. 988, 993 (W.D.Wis.1984) (subordination is core); In re Wheeling-Pittsburgh Steel Corp., 74 B.R. 656, 658 (Bankr.W.D.Pa.1987) (reclamation is core); In re Atlas Fire Apparatus, Inc., 56 B.R. 927, 934 (Bankr.E.D.N.C.1986) (subordination); In re Western World Funding, Inc., 52 B.R. 743, 762 (Bankr.D.Nev.1985) (subordination).

In re Western World Funding, 52 B.R. 743, 785 (Bankr.Nev.1985).

Buchanan, 52 B.R. 743, 782 (D.Nev.1985).