Castle Arch Real Estate Investment Company, LLC
Case #11-35082 JTM (Lead Case)

Affiliated Entities

Case #11-32237 - CAOP Managers, LLC
Case #11-35240 - Castle Arch Opportunity Partners I, LLC
Case #11-35241 - Castle Arch Opportunity Partners II, LLC
Case #11-35242 - Castle Arch Kingman, LLC
Case #11-35246 - Castle Arch Smyrna, LLC
Case #11-35243 - Castle Arch Secured Development Fund, LLC
(Jointly Administered)


Bankruptcy Adversary Proceeding

The two year statutory deadline to file any bankruptcy related adversary proceedings was mid-October 2013. The Trustee and his professionals conducted an analysis and filed over 30 complaints before the deadline. These complaints and related documents are included below:

Litigation Against Insiders/Former Management

The Trustee and his professionals drafted a preliminary complaint against the former management, officers, and directors of the Debtors which was shared with the parties. In an effort to explore possible settlement opportunities before prolonged litigation, the Trustee and the former management, officers and directors entered into Tolling Agreements which extends the statutory deadline for filing a complaint to April 2014 (later extended to October 2014) and agreed to pursue mediation and settlement efforts. The parties pursued mediation in an attempt to resolve the matters with some or all of the defendants. The parties filed mediation statements and participated in the mediation process that began on February 21, 2014. After the mediation, the Trustee continued to work with various parties to settle claims.

In 2012, Axis Surplus Insurance Company ("Axis") issued a $1 million insurance policy providing coverage to the directors, officers, and employees of CAREIC. After the failed mediation process, Axis filed a Complaint for Interpleader with the US District Court and interplead the remaining amount of the insurance policy proceeds, less professional fees paid on behalf of the insured, totaling $589,661.61. The Trustee filed a motion to intervene in the case as a result of the settlement that was reached with William Warwick. The Trustee has since stipulated to withdraw his opposition to the Complaint for Interpleader filed by Axis. The distribution of the $200,000 Axis interplead funds as contemplated in the Warwick settlement was opposed by Douglas Child, Keith Green, William Grundy and William Davidson. A hearing was held on November 12, 2015, in which both sides presented their arguments to the Court. The Court has taken the matter under advisement; however, a ruling on the matter has not yet been issued.

The settlement reached with William Warwick totaled $400,000. The settlement includes; (a) $200,000 cash payment from personal funds of Mr. Warwick, (b) payment of the remaining $200,000 will be sought from the Axis interplead funds, (c) an assignment of all rights Mr. Warwick has under the Axis insurance policy, including any right to pursue a bad faith claim. The Trustee filed an initial motion for approval in the Bankruptcy Court and former management opposed the motion and moved to have the action removed to the District Court. In an effort to minimize fees and costs, the Trustee stipulated to the removal to the District Court. The settlement was briefed by both parties and heard by the District Court in July 2015. The settlement was approved on July 17, 2015. Subsequent to the settlement being approved, Jeff Austin, Keuth Green, William Grundy, Douglas Child and William Davidson opposed the distribution of the $200,000 from the Axis interplead funds as contemplated by the settlement. A hearing was held on November 12, 2015, in which both sides presented their arguments to the Court. The Court has taken the matter under advisement; however, a ruling on the matter has not yet been issued.

On October 30, 2014, the Trustee filed a complaint against Kirby Cochran, Jeff Austin, Austin Capital Solutions, William Davidson, Douglas Childs, Child, Van Wagoner & Associates (fka as Child Sullivan & Associates and Child Van Wagoner & Bradshaw), Robert Clawson, and Hybrid Advisor Group in the US District Court alleging, among other things, breach of fiduciary duty, mismanagement, and fraud. On November 6, 2015, Robert Geringer filed a complaint against D. Ray Strong, in his capacity as Liquidating Trustee in the United States District Court Central District of California. Subsequently, on November 24, 2015, the Trustee filed a complaint against Robert Geringer in the United States District Court Central Division of Utah.

The Trustee negotiated a joint settlement with Kirby Cochran, former executive of Castle Arch, and his bankruptcy Trustee ("Cochran Bankruptcy Trustee"). The terms of the settlement include: (a) a cash payment by Cochran of $150,000 ($25,000 upon execution of the settlement agreement, $25,000 on or before January 31, 2016, $25,000 on or before May 31, 2016, and $50,000 on or before June 30, 2016; (b) cash payment is secured by a Consent to Entry of Stipulated Nondischargeable Judgment and a Stipulated Nondischargeable judgment in the amount of $3 million; (c) Trustee will not have any further obligation to extend the deadline to file a Section 523 non-dischargeability action in the Cochran Bankruptcy Case; (d) Castle Arch Trusts’ proof of claim in the Cochran Bankruptcy Case will be deemed to be liquidated and allowed in the amount of $3 million; (e) Cochran Bankruptcy Trustee will assign to the Trustee and Trusts, any and all rights that the Cochran Bankruptcy Estate in the Axis Surplus Insurance Company ("Axis") and interpleader action; (f) Trustee will agree to the entry of a contribution order in the Malfeasance Action against Mr. Cochran; (g) Mr. Cochran will cooperate with the Trustee in his administration of the Debtors’ estates and the Trusts; (h) litigation cases will be dismissed; and (i) and releases will be provided. A settlement agreement was executed in October 2015. The Trustee will be filing a motion with the Bankruptcy Court seeking approval of the settlement.

A mediation was held with Robert Geringer in January 2015 and the parties continued to explore settlement. A second mediation was held in May 2015 whereby the Trustee negotiated and ultimately formalized a Memorandum of Understanding ("MOU") to purchase the Smyrna property for $2.25 million including releases of claims against Mr. Geringer. The MOU indicated the transaction was subject to Court approval and the ability to terminate the existing Smyrna purchase agreement with DSSIII. DSSIII had informed the Trustee they required additional concessions including a $500,000 reduction in the purchase price in order to close on the transaction. A Purchase Agreement was finalized and executed with Robert Geringer in June 2015 for the higher $2.25 purchase price and a notice of termination of the existing agreement was sent to DSSIII. DSSIII filed a complaint in Tennessee seeking the Trustee to perform on its purchase agreement at the $1.5 million purchase price. Hearings were held with the Bankruptcy Court regarding the Robert Geringer purchase agreement and termination of the DSSIII agreement in July 2015. Ultimately the Trustee determined in his business judgment that closing on the $1.5 million agreement with DSSIII was in the best interest of the estate. The transaction was finalized with DSSIII in July 2015. A third mediation in order to continue to explore settlement options with Robert Geringer occurred on November 4th. The third mediation was unsuccessful. On November 6, 2015, Robert Geringer filed a complaint against D. Ray Strong, in his capacity as Liquidating Trustee in the United States District Court Central District of California. Subsequently, on November 24, 2015, the Trustee filed a complaint against Robert Geringer in the United States District Court Central Division of Utah.

On or about October 14, 2011, the Trustee sued Western Showcase for breach of contract and/or fraudulent transfer with respect to money transferred to purchase various manufactured homes. Alleged damages in the complaint were no less than $554,624.38. After several months, the Trustee ultimately negotiated a settlement with Western Showcase. The settlement includes; (a) cash payment of $300,000 within 60 days after approval of the Court. (b) CAOPII Trust will transfer any interest it holds in the purchased manufactured homes within 5 day of receiving payment, (c) principal of Western Showcase shall cooperate with the Trustee in any adversary proceeding maintained by the Trustee against former insiders of CAOPII or any of its affiliates, (d) complaint will be dismissed within 5 days of receiving payment, and (e) the parties agree to mutual releases upon completion of all obligations under the settlement agreement. A motion was filed with the Court on May 8, 2014 seeking approval of settlement. An Order granting the motion was executed on June 6, 2014. The Trustee has been attempting to collect the settlement amount. Western Showcase is in default of the settlement and the Trustee is pursuing payment and its legal remedies from Western Showcase.

On February 13, 2014, the Trustee filed a complaint against the Black Castle LLC, Daniel Thompson, Laurie Holcomb, and BlackStar Financial, Inc. ("Black Castle Parties") alleging among other things that the investment of CAOPI and CAOPII in Black Castle LLC constituted an avoidable post-petition transfer and alleged various theories of corporate mismanagement against the Black Castle Parties. Amount other allegations, the Trustee claimed that the Operating Agreement contained restrictions on the nature and types of investments which could be made by Black Castle LLC and that the Black Castle Parties breached that agreement. The Trustee analyzed the financial position of Black Castle and the Black Castle Parties and through a series of meetings and negotiations have agreed to settle the disputes. A settlement agreement was executed on March 12, 2015 and submitted for approval on March 13, 2015 (later amended on March 16, 2015). The settlement includes: (a) payment of $1.5 million ($400,000 payable upon entry of the Bankruptcy Court Order approving the sale, $800,000 six months from the entry of the Order, and the remaining payment of $300,000 paid one year from the Order date); (b) Trustee will cause the Trusts and the Debtors to transfer to Black Castle LLC its respective membership interests; (c) existing adversary proceeding would be suspended; (d) Black Castle Parties have signed a Consent to Stipulated Judgment and a Stipulated Judgment to be held by Trustee; (e) 22% per annum interest would be charged on any delinquent settlement payments; and (f) parties agree to mutual releases. An Order was entered by the Bankruptcy Court on April 6, 2015 approving the settlement and the first $400,000 payment was made. An additional payment of $800,000 was received in October 2015. The settlement was a joint settlement between the CAOPI and CAOPII trusts.

Bankruptcy Adversary Proceedings

The information contained on this page is provided for informational purposes only. This page does not purport to include all Trustee-related information relating to the Castle Arch bankruptcy cases which may affect your legal rights. The information on this page is subject to change without notice, and the accuracy of the information is not guaranteed. You are not justified in relying on any of the information provided on this page. You should immediately consult competent professionals (a) to determine your rights and obligations, (b) to identify hearings and deadlines that may affect your rights or obligations, (c) to independently verify all dates and deadlines that may affect your rights and obligations, and (d) to protect your rights and to preserve your rights in the Castle Arch bankruptcy cases.

Last Updated 7/13/2017 11:44:48 AM