SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION ROBBINS ...DE 501] Notice of Ninety Days... · united...

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION In re: MERENDON MINING (Nevada), INC. Case No.: 09-11958-BKC-AJC a/k/a Milowe Brost, Chapter 7 Debtor. __________________________________/ NOTICE OF NINETY DAYS EXPIRING UPON OBJECTIONS TO C LAIMS NOS. 542

& 646 OF THE ESTATES OF WILLIAM B. KEMPER AND MARJO RIE ROBBINS DAGGETT BY CHAPTER 7 TRUSTEE (D.E. 371), AND QUARTZ HILL

MINING, LLC AND SUPERIOR GOLD, LLC (D.E. 446)

Marcia Dunn, as the Chapter 7 Trustee (the “Trustee”) of the consolidated Estate (the

“Estate”) of Merendon Mining (Nevada), Inc.’s (“Merendon Mining (Nevada)” or the “Debtor”),

by and through undersigned counsel, and pursuant to S.D. Fla. (the “District Court”) Local

Rules 7.1(b)(4) and 87.4(h), hereby file this its Notice of Ninety Days Expiring upon her

November 5, 2013 Objection (the “Trustee’s Objection”) (D.E. 371), and Quartz Hill Mining,

LLC (“Quartz”) and Superior Gold, LLC (“Superior”) (collectively the “Caldwell Successors”1)

(the “Caldwell Successors’ Objection”) (D.E. 446) (collectively the “Objections to the Objected

to Claims”) to Claim No. 542 (filed on March 8, 2010) in the secured amount of $1,451,457, as

amended in Claim No. 646 in the unsecured amount of $851,457, and secured amount of

$600,000, for a total claim of $1,451,457 (collectively the” Objected to Claims”), both filed

collectively by the respective probate Estates of William B. Kemper (“Kemper”) and Marjorie

Robbins Daggett (“Daggett”) (collectively “Claimants”).

1 These entities are referred to as the Caldwell Successors because attached to Exhibit B to Claimants’ Motion to Dismiss the Caldwell Successors’ Objection, is an order emanating from the Gilpin County, Colorado Court (D.E. 453, pg. 23, ¶¶5-7, 14) indicating that what is later defined as the Caldwell Heirs, and two of their counsel, are the owners and creators of Quartz and Superior.

Case 09-11958-AJC Doc 501 Filed 09/30/14 of 34

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A hearing was held before this Court on May 28, 2014 at 2:30 p.m. upon the Objections

to the Objected to Claims. At the hearing on the Objections to the Objected to Claims, the Court

heard argument of counsel, had reviewed the Objections, the Objected to Claims, Claimants’

response to the Trustee’s Objection, dated, December 2, 2013 (D.E. 398), the Caldwell

Successors’ Joinder in the Trustee’s Objection (D.E. 448). the Claimants’ Motion to Dismiss or

Strike the Caldwell Successors’ Objection, dated April 17, 2014 (D.E. 453), and the Caldwell

Successors’ reply to Claimants’ Motion to Dismiss, dated May 27, 2014 (D.E. 463).

The Court, also took judicial notice of the record, including hearings, proceedings,

pleadings and orders, on file in (a) this Bankruptcy Case, (b) the Adversary Case No. 09-02518–

AJC (the “Sub Con Adversary Case”), (c) the Adversary Case No. 10-03623-AJC (the “Sale

Adversary Case”), (d) the jointly administered Chapter 11 cases of the Caldwell Successors in

Case No. 14-15419-AJC (the “Caldwell Successors’ Bankruptcy”), and (e) the subsequent

adversary cases brought against Claimants by the Caldwell Successors in Adversary Case Nos.

14-01315-AJC and 14-01328-AJC (the “Caldwell Successors’ Adversary Cases”) (D.E. 445, and

D.E. 1 in each of the Caldwell Successors Adversary Cases), all of which are before this Court.

The Court then instructed the parties to file post hearing briefs in the forms of proposed

Orders, including proposed Findings of Fact and Conclusions of Law, by June 13, 2014. The

Trustee, the Claimants and the Caldwell Successors all timely filed their proposed Orders,

including proposed Findings of Fact and Conclusions of Law. It has now been 109 days since the

parties submitted their respective proposed Orders, including proposed Findings of Fact and

Conclusions of Law, and therefore, there is no further briefing or argument required on the

Objections to the Objected to Claims, and this matter is ripe for timely adjudication by this

Court.


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The Trustee is in the process of trying to sell the last asset of this Estate, complete the last

of hundreds of claims objections, close the substantively consolidated cases, and make a

distribution to the Estate’s creditors. No ruling by this Court prevents that from happening, as

does an adverse ruling from this Court, if it were to allow these Objected to Claims, as secured.

A ruling from this Court sustaining the Objections to the Objected to Claims, allows this case to

smoothly wind down, and for distributions, albeit minimal, to be made to the creditor investors

of this Ponzi scheme. As such, the Trustee requests a prompt ruling from this Court upon the

Objections to the Objected to Claims.

WHEREFORE, for these reasons, the Trustee requests this Court adjudicate these

matters promptly, and enter an Order, including proposed Findings of Facts and Conclusions of

Law in the form as submitted by the Trustee to this Court on June 13, 2014, a copy of which is

attached as Exhibit A hereto, (i) sustaining the Objections to Claims Nos, 542, as amended by

646 (D.E. 371, 446 & 448), (ii) denying Claimants’ motion to dismiss the Caldwell Successors’

Objection, (iii) striking Claimants’ Objected to Claims, (iv) determining that Claimants have no

secured interest in property of the substantively consolidated Estate, including, but not limited to,

the proceeds received by the Trustee and the Estate from the Settlement with the Caldwell Estate

and Heirs, (v) determining that the Caldwell Estate and Heirs have no claim against the Trustee

or the Estate for violation of the Settlement Agreement, and for such further relief that this Court

deems just and proper.

Dated: September 30, 2014 GRAYROBINSON, P.A. Counsel for Chapter 7 Trustee

Ivan J. Reich, Esquire Florida Bar No.: 778011 401 East Las Olas Blvd., Suite 1000 Fort Lauderdale, Florida 33301 Telephone: (954) 761-8111 Facsimile: (954) 761-8112


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\351016\4 - # 3202258 v1

Email: [email protected]

By: /s/ Ivan J. Reich Ivan J. Reich

Certificate of Service

I HEREBY CERTIFY that a true and correct copy of the foregoing has been served on

this 30th day of September, 2014 to parties registered to receive notification via the Court’s

CM/EC system, by electronic mail upon all parties and counsel identified on the CM/ECF

service list maintained by the Court in this case, and, in accordance with the Court’s Order of

December 30, 2009 in the main case, Case No. 09-11958 [D.E. 74], shall be posted to

http://www.gray-robinson.com/news.php?ACTION=view&CAT=1&ID=2221, set up for the

purposes of providing information on this case, on June 11, 2013, and was also served upon co-

counsel for Claimants, E. Alan Hampson, 1420 Vance Street, # 200, Lakewood, CO 80214, via

fax at 303-233-1995, and via email to [email protected], and Robert C. Meyer, 2223

Coral Way, Miami, FL 33145, and via fax at 305-285-8919, and via email to

[email protected]., and Brett M. Amron and Dana R. Quick, Bast Amron LLP, Sun Trust

International Center, One Southeast Third Avenue, Suite 1440, Miami, Florida 33131, and via

fax to 305-379-7905, and via email to [email protected], and [email protected],

and to Counsel for Quartz, Jacqueline Calderin, via email to [email protected],

[email protected], and [email protected], and to Counsel for Superior and

Caldwell, John A. Moffa, via email to [email protected], [email protected],

[email protected], and [email protected]

/s/ Ivan J. Reich Ivan J. Reich


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EXHIBIT “A”


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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION In re: MERENDON MINING (Nevada), INC. Case No.: 09-11958-BKC-AJC a/k/a Milowe Brost, Chapter 7 Debtor. __________________________________/ ORDER GRANTING OBJECTIONS TO CLAIMS NOS. 542 & 646 OF THE ESTATES OF WILLIAM B. KEMPER AND MARJORIE ROBBINS DAGGETT B Y CHAPTER 7 TRUSTEE (D.E. 371), AND QUARTZ HILL MINING, LLC AND SUPERIOR GOLD,

LLC, (D.E. 446) INCLUDING INCORPORATED FINDINGS OF FACT AND CONCLUSIONS OF LAW

THIS CAUSE having come before the Court for hearing on May 28, 2014 at 2:30 p.m.

(D.E. 461) upon (1) Marcia Dunn, as the Chapter 7 Trustee (the “Trustee”) of the consolidated

Estate (the “Estate”) of Merendon Mining (Nevada), Inc.’s (“Merendon Mining (Nevada)” or the

“Debtor”) November 5, 2013 Objection (the “Trustee’s Objection”) (D.E. 371), and Quartz Hill

Mining, LLC (“Quartz”) and Superior Gold, LLC (“Superior”) (collectively the “Caldwell


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Successors”2) (the “Caldwell Successors’ Objection”) (D.E. 446) (collectively the “Objections”)

to Claim No. 542 (filed on March 8, 2010) in the secured amount of $1,451,457, as amended in

Claim No. 646 in the unsecured amount of $851,457, and secured amount of $600,000, for a

total claim of $1,451,457, both filed collectively by the respective probate Estates of William B.

Kemper (“Kemper”) and Marjorie Robbins Daggett (“Daggett”) (collectively “Claimants”), the

Claimants’ response to the Trustee’s Objection, dated, December 2, 2013 (D.E. 398), the

Caldwell Successors’ Joinder in the Trustee’s Objection (D.E. 448). the Claimants’ Motion to

Dismiss or Strike the Caldwell Successors’ Objection, dated April 17, 2014 (D.E. 453), and the

Caldwell Successors’ reply to Claimants’ Motion to Dismiss, dated May 27, 2014 (D.E. 463).

The Court, having considered the Objections, and having also taken judicial notice of the

record, including hearings, proceedings, pleadings and orders, on file in (a) this Bankruptcy

Case, (b) the Adversary Case No. 09-02518–AJC (the “Sub Con Adversary Case”), (c) the

Adversary Case No. 10-03623-AJC (the “Sale Adversary Case”), (d) the jointly administered

Chapter 11 cases of the Caldwell Successors in Case No. 14-15419-AJC (the “Caldwell

Successors’ Bankruptcy”), and (e) the subsequent adversary cases brought against Claimants by

the Caldwell Successors in Adversary Case Nos. 14-01315-AJC and 14-01328-AJC (the

“Caldwell Successors’ Adversary Cases”) (D.E. 445, and D.E. 1 in each of the Caldwell

Successors Adversary Cases), all of which are before this Court, and having heard argument of

counsel, hereby makes the following findings of fact and conclusions of law:

2 These entities are referred to as the Caldwell Successors because attached to Exhibit B to Claimants’ Motion to Dismiss the Caldwell Successors’ Objection, is an order emanating from the Gilpin County, Colorado Court (D.E. 453, pg. 23, ¶¶5-7, 14) indicating that what is later defined as the Caldwell Heirs, and two of their counsel, are the owners and creators of Quartz and Superior.


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FINDINGS OF FACT AND CONCLUSIONS OF LAW

The Merendon Bankruptcy Case

On February 4, 2009 (the “Petition Date”), certain investor creditors, Eileen McCabe,

Jane Otto, and Diane Kaplan-Berk (the “Petitioning Creditors”) filed an Involuntary Petition

against Merendon Mining (Nevada), a Nevada corporation, whose principal place of business

was located at 450 Alton Road, Suite 2930, Miami Beach, Miami-Dade County, Florida, 33139,

requesting an order for relief under chapter 7 of the Bankruptcy Code in this case (the

“Bankruptcy Case”) (D.E. 1). Merendon Mining (Nevada) was the central piece in a group of

related entities involved in the acquisition, development, operation, and financing, of gold mines,

mining rights, smelting, manufacturing and sale of gold in the United States, Canada, Central and

South America, along with miscellaneous other assets and operations, that sold investments in

their various enterprises to investors throughout the United States and Canada (the “Merendon

Mining Enterprise”). On June 6, 2009, this Court entered an Order for Relief under Chapter 7.

(D.E. 29), and on June 10, 2009, Marcia Dunn was appointed as the Chapter 7 Trustee for the

benefit of the creditors of Merendon Mining (Nevada)’s estate (D.E. 30).

The Substantive Consolidation Adversary Proceeding and Motions

On December 15, 2009, an Adversary Complaint (the “Complaint”) (D.E. 65) was

brought by the Trustee under Case No. 09-02518–AJC (the “Sub Con Adversary Case”) (D.E. 1

in the Sub Con Adversary Case) against Defendants Milowe Brost (“Brost”), Elizabeth Brost

(“Elizabeth”), Gary Sorenson (“Sorenson”), Thelma Sorenson (“Thelma”), Larry Adair

(“Adair”), Martin Werner (“Werner”), Merendon Mining (Colorado), Merendon Mining

(Arizona), Inc. (“Merendon Mining (Arizona)”), Merendon Mining (California), Inc.

(“Merendon Mining (California)”), True North Productions, LLC (“True North Productions”),


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Capital Alternatives, Inc. (“Capital Alternatives”), Capital Alternatives (Asia), Ltd. (“Capital

Alternatives (Asia)”), The Institute for Financial Learning Group of Companies, Inc. (“IFFL”),

Merendon Mining Corporation, Ltd. (“Merendon Canada”), Merendon Mining, Inc. (“MMI”),

Merendon de Honduras S.A. de C.V. (“Merendon Honduras”), Merendon de Venezuela C.A.

(“Merendon Venezuela”), Merendon de Peru S.A. (“Merendon Peru”), Merendon de Ecuador

S.A. (“Merendon Ecuador”), Syndicated Gold Depository S.A. n/k/a Bahama Resource Alliance,

Ltd. (“Syndicated Gold”), Consumer Debt Recovery Trust/ Heritage Financial, S.A.

(“Heritage”), C.D.R.T. Program (“C.D.R.T”), Steller (Stellar) Trust (“Steller”), 360 Earth

Resources, Ltd. (“360”), Sterling Trust (“Sterling”), Base Metals Corporation (“Base Metals”),

Strategic Metals Corporation (“Strategic Metals”), Arbor (Arbour) Energy, Inc. (“Arbor”),

Evergreen Management Services, LTD (“Evergreen”), Quatro Communication Corporation

(“Quatro”), Alluvial United Inc. (“Alluvial”), Bearstone Capital Management Inc. (“Bearstone”),

Bridgewater & Co. Inc. (“Bridgewater”), Cascadia Management Services S.A. (“Cascadia”),

Expedia Logistics (“Expedia”), Fortris Business Systems, Inc. (“Fortris”), Nordic Merchant

Credit Union (“Nordic”), Onyx Trading Group LLC (“Onyx”), Perma Securities S.A. (“Perma”),

Steller Management Services (“SMS”), Tena Capital Corporation (“Tena”), Tranisiciones

Universial S.A. (“TU”), Watchers International Transit Ltd. (“Watchers”), GoldenTrail Equity

Management Limited Partnership (“GoldenTrail Equity”), GoldenTrail Management Corporation

(“GoldenTrail Management”), and i E Group, Inc. (“i E Group”), for:

(1) a declaratory finding, pursuant to Chapter 86, Florida Statutes, and its federal

analogue 28 U.S.C. §2201, of alter ego, against Defendants Brost and Sorenson, along with their

wives Elizabeth and Thelma, and the various corporate defendants, Capital Alternatives, Capital

Alternatives (Asia), IFFL, Merendon Canada, Syndicated Gold, Strategic Metals, Merendon


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Mining (Colorado), Merendon Mining (Arizona), Merendon Mining (California), True North

Productions, MMI, Merendon Honduras, Merendon Venezuela, Merendon Peru, Merendon

Ecuador, Heritage, C.D.R.T., Steller , 360, Sterling, Base, Arbor, Evergreen, Quatro, Alluvial,

Bearstone, Bridgewater, Cascadia, Expedia, Fortris, Nordic, Onyx, Perma, SMS, Tena, TU,

Watchers, GoldenTrail Equity, GoldenTrail Management, and i E Group (collectively, the “Alter

Ego Defendants” or the “Non-Debtor Entities”)),

(2) piercing the corporate veil against the Alter Ego Defendants/ Non-Debtor Entities,

(3) a declaratory finding, pursuant to Chapter 86, Florida Statutes, and its federal

analogue 28 U.S.C. §2201 that the property in possession of the Alter Ego Defendants/ Non-

Debtor Entities, was property of the estate pursuant to §541 of the Bankruptcy Code, and that the

Trustee was entitled to turnover of said property pursuant to §542 of the Bankruptcy Code,

including title to the Glory Hole mining properties, also known as Chain-O-Mines, located

outside of Denver in Central City, Gilpin County, Colorado (the “Glory Hole Mine”),

(4) substantive consolidation of the Alter Ego Defendants/ Non-Debtor Entities into the Debtor’s Estate, and,

(5) injunctive relief, pursuant to §726.108(c)(1), Florida Statutes, and to extend the

scope of the automatic stay under §362 of the Bankruptcy Code, and other applicable law, in

relation to all assets of the Alter Ego Defendants/ Non-Debtor Entities, pending determination

whether such assets were property of the estate, and against all persons known or unknown

attempting to seek dominion and control over these assets to the detriment of the Trustee, the

Debtor’s Estate and the Debtor’s creditors.

The Trustee sought the same relief by Motions in this Bankruptcy Case (D.E. 66 & 70,

dated December 18, 2009), and in the Sub Con Adversary Case (D.E. 8, December 23, 2009),


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which Motions were granted by this Court by way of summary judgment, upon the Trustee’s

Motion for Partial Summary Judgment, dated February 10, 2010 (D.E. 27 in the Sub Con

Adversary Case), after hearings on January 12 & 25, 2010, in this Bankruptcy Case and in the

Sub Con Adversary Case on January 27, 2010 (the “Sub Con Orders”) (D.E. 84 & D.E. 20 in the

Sub Con Adversary Case).

In the Sub Con Orders, this Court found (¶¶7-9) that it had jurisdiction over the Sub Con

Adversary Case, the parties, and over the property of the estate pursuant to 28 U.S.C. §§157, 541

and 1334, that venue was proper in this district pursuant to 28 U.S.C. §§1408 and 1409, and that

the Sub Con Adversary Case was a core proceeding pursuant to 28 U.S.C. §157(b)(2)(A), (E),

(G), and (M).

Service in the Adversary Proceeding

In the Sub Con Orders this Court found (¶10) that on or about December 28, 2009, all

Defendants and Non-Debtor Entities named in the Motion, and in the Sub Con Adversary Case,

and interested parties, were served simultaneously with the Summons and Notice of Pretrial/Trial

in an Adversary Proceeding (D.E. 4 in the Sub Con Adversary Case), Order Setting Filing and

Disclosure Requirements for Pretrial and Trial (D.E. 5 in the Sub Con Adversary Case),

Adversary Complaint (D.E. 1 in the Sub Con Adversary Case), Motion for Substantive

Consolidation of Non-Debtor Entities, Motion for Turnover of Property and for Injunctive Relief

(D.E. 70 in the Bankruptcy Case, and D.E. 8 in the Sub Con Adversary Case), Notice of Hearing

on Motion for Substantive Consolidation of Non-Debtor Entities, Motion for Turnover of

Property and for Injunctive Relief (D.E. 72 in the Bankruptcy Case), and Re-notice of Hearing

on Motion for Substantive Consolidation of Non-Debtor Entities, Motion for Turnover of

Property and for Injunctive Relief (D.E. 11 in the Sub Con Adversary Case) by First Class U.S.


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Mail and Air-Mail. (D.E. 75 in Bankruptcy Case, and D.E. 9 & 13 in the Sub Con Adversary

Case). Notice of the same was also served by an automatic email message generated by the

CM/ECF system.

In the Sub Con Orders this Court noted that (¶¶11 & 12) appearances were made at the

Summary Judgment hearing in the Adversary Case by (1) the Trustee, through her counsel, (2)

Martin Werner, and (3) counsel for Gary and Thelma Sorenson, Merendon Honduras, Merendon

Venezuela, Merendon Peru, Merendon Ecuador, Heritage, and Merendon Canada (collectively

Merendon Honduras, Merendon Venezuela, Merendon Peru, Merendon Ecuador, and Merendon

Canada shall be referred to as “Sorenson’s South American Entities”), where only Gary and

Thelma Sorenson and Sorenson’s South American Entities objected to the relief sought in the

Motion.

This Court finds that good and sufficient notice of the relief sought in the Motion had

been given in accordance with Bankruptcy Rules 7004 and 9014, that a reasonable opportunity to

object or be heard regarding the relief requested in the Motion had been afforded to all parties-in-

interest, and this Court had jurisdiction over these parties to enter the relief requested. and that no

other or further notice was required.

This Court’s Specific Factual Findings Regarding The Glory Hole Mine

Amongst the findings made by this Court in in the Sub Con Orders (¶¶27-30, 32) was that

in 2002, Brost began the process of bringing Merendon Mining to the United States. It was

around this time that Paul Garfinkle (“Garfinkle”) was introduced to Brost at one of Brost’s

financial workshops held in Fort Lauderdale, Florida. At the time he met Brost, Garfinkle held a

Power of Attorney over some gold mining properties in Colorado, and had a gold mining

opportunity here in the United States, the Glory Hole Mine. They began to discuss Brost possibly


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acquiring those assets for some of his programs, through his Merendon Mining investment

vehicles. Brost wanted to see some of the reports and paperwork on these opportunities, so

Garfinkle sent Brost geologist reports and information concerning the mining opportunity, maps

and other supporting documentation. The title to the Glory Hole Mine was in litigation between

Harold Caldwell (“Caldwell”) and Judge Robert Barnes (“Barnes”). Garfinkle presented the

Glory Hole Mine to Brost as an opportunity for Capital Alternatives, and the related Merendon

Mining enterprise, to acquire an interest for the benefit of their investors. Upon reviewing the

information on the Glory Hole Mine, Brost wanted to acquire the mine for the Merendon Mining

investments, and said he would fund the litigation as well as the ongoing operations. Brost did

not explain how he was going to fund the litigation and operations of the Glory Hole Mine,

except that Sorenson and his investment group, through one of their Merendon Mining

investment vehicles, would fund the litigation and thereafter develop the Glory Hole Mine. Brost

and Sorenson funded some of the litigation through an entity called Merendon Group

Encumbrance (“Merendon Encumbrance”), but it was later evident that the monies to fund the

litigation with regard to the Glory Hole Mine and to subsequently acquire additional U.S. mines

were coming out of investor money. In particular, the monies used to acquire these mines came

from the investors of what eventually turned into the Debtor, Merendon Mining (Nevada). The

Glory Hole Mine was later transferred into the name of Sentinel Mining Corp. (“Sentinel”), a

Colorado corporation, for which Brost served as an office and director, and Garfinkle was the

registered agent. Ward Capstick (“Capstick”), an individual from Seattle, Washington served as

the original registered agent for Sentinel, and was Brost’s right hand man. Capstick ran the sales

operations for all the Brost and Sorenson companies, including all the Merendon Mining

ventures. The first Merendon Mining company in the United States, Merendon Mining (Nevada),


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the Debtor, was formed in Nevada on December 30, 2002, to begin to develop the Glory Hole

Mine and other mining opportunities. However, there were other existing or ongoing companies

which were all part and parcel in the overall Merendon Mining, Brost and Sorenson operation.

The purpose of the initial U.S. Merendon Mining company was to take over the Glory Hole Mine

and enter into contracts with Caldwell.

This Court’s Substantive Consolidation of the Alter Ego Defendants/ Non-Debtor Entities

As such, this Court held in the Sub Con Orders (¶¶83, 88 & 89) that the Trustee was

entitled to substantive consolidation of this bankruptcy case with the Alter Ego Defendants/ Non-

Debtor Entities that were owned and/or controlled by Brost and Sorenson, their wife and ex-wife,

and that the Debtor, had a legal or equitable interest in amongst other properties, title to the

Glory Hold Mine, which was in the possession, custody, or control of the various Alter Ego

Defendants/ Non-Debtor entities, which was property that the Trustee may use, sell or lease, and

was of consequential and beneficial value to the estate. As a result of this Court granting

substantive consolidation of the Alter Ego Defendants/ Non-Debtor Entities, this Court in the

Sub Con Orders also held that the Motions to (1) deem certain property as property of the Estate,

and (2) for injunctive relief were denied without prejudice as moot. (¶ I).

This Court further ruled in the Sub Con Orders (¶100) that once the proponent in this

case the Trustee) had made a prima facie case for substantive consolidation, “the burden then

shifts to an objecting creditor to show that (1) it has relied on the separate credit of one of the

entities to be consolidated; and (2) it will be prejudiced by substantive consolidation.” Matter of

Lewellyn, 26 B.R. 246, 251-252 (Bankr. S.D. Iowa 1982), (citing Drabkin v. Midland-Ross Corp.

(In re AutoTrain Corp.), 810 F. 2d 270, 276 (D.C. Cir. 1987)). This Court’s ruling was never

challenged or appealed by the Claimants.


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This Court also ruled in the Sub Con Order (¶105) that §541(a) broadly defines property

of the estate to include, in relevant part, “all legal or equitable interests of the debtor in property

as of the commencement of the case,” regardless of where the property is located, or who holds

it. In re American Way Service Corp., 229 B.R. 496, 535 (Bankr. S.D. Fla. 1999), and held

(¶¶105 & 108) that although not titled in the name of the Debtor, the Debtor had a legal or

equitable interest in the title to the Glory Hole Mine, which was in the possession, custody, or

control of various Alter Ego Defendants/ Non-Debtor entities, and was thus, property of the

Estate under §541, and that pursuant to §542(a) the Glory Hole Mine in the possession, custody,

or control of the Alter Ego Defendants/ Non-Debtor Entities was property that the Trustee may

use, sell, or lease, and is therefore of consequential value and benefit to the Estate, and the

Trustee should be entitled to turnover of the Glory Hole Mine, pursuant to §542 of the

Bankruptcy Code.

Nunc Pro Tunc Application of the Substantive Consolidation

This Court further ruled in the Sub Con Order (¶115) that the evidence was

overwhelming that because the affairs of the Merendon Mining Enterprise were entangled prior

to the Petition Date of February 4, 2009, that the substantive consolidation was to be granted

nunc pro tunc to the Petition Date of February 4, 2009, with this Court citing as authority to the

cases of First Nat'l Bank of Barnesville v. Rafoth (In re Baker & Getty Financial Services, Inc.),

974 F.2d 712, 721 (6th Cir. 1992); In re Creditors Service Corp., 195 B.R. 680, 690 fn. 7 (Bankr.

S.D. Ohio 1996); and Evans Temple Church v. Carnegie Body Co. (In re Evans Temple Church),

55 B.R. 976, 982 (Bankr. N.D. Ohio 1986).


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The Amendment of the Sub Con Order to Include Sentinel

On February 26, 2010, after a further hearing on February 19, 2010, this Court entered an

Order (the “Amended Sub Con Orders”) (D.E. 109, D.E. 56 in the Sub Con Adversary Case,

¶¶11 & 13) which amended the Sub Con Orders (D.E. 84 & D.E. 20 in the Adversary Case) to

reflect the amendment of the Adversary Complaint, the Motion and the SubCon Order, to include

Sentinel, as a defendant, and to include Sentinel within the scope of the definition of the “Alter

Ego Defendants” and “Non-Debtor Entities” as those terms are defined in the Sub Con

Adversary Complaint, the Motion and the Sub Con Orders, that all further pleadings in the Sub

Con Adversary Case shall reflect a caption including Sentinel, and that service upon Sentinel

shall be effectuated and made upon Garfinkle, as its registered agent, who had agreed in open

Court to accept service of the pleadings, of which he was already in possession.

Final Sub Con Judgment

On March 11, 2010, this Court entered an Order Granting Motion for Partial Summary

Judgment as to Count II for piercing the corporate veil, and Count III for a declaratory judgment

regarding property of the estate and turnover, of the Sub Con Adversary Complaint solely

against the US Merendon Mining Entities, which by then included Sentinel, and the US

Merendon Mining Properties, which included the Glory Hole Mine (D.E. 62 in the Sub Con

Adversary Case).

That March 11, 2010 Order pierced the corporate veil, solely against the six named U.S.

Merendon Mining Entities, and declared that the U.S. Merendon Mining Property, including the

American Mines, constituted property of this Estate, and that the Trustee was entitled to turnover

of the U.S. Merendon Mining Property, including the American Mines.


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In particular, this Court then found that (a) the Debtor and the U.S. Merendon Mining

Entities were deemed to be one and the same entity, (b) the U.S. Merendon Mining Entities and

their assets, including the American Mines, were property of the Estate pursuant to 11 U.S.C. §541,

and substantively consolidated into this Estate, (c) the U.S. Merendon Mining Entities, and all

persons controlling the same or their assets, including the American Mines, were required to

turnover the assets of those entities to the Trustee., (d) the automatic stay of 11 U.S.C. §362 was

extended over the U.S. Merendon Mining Entities and their assets, including the American Mines,

and all persons or entities who received notice of that Order were enjoined, absent further order of

this Court, from interfering with the Trustee’s administration of those assets, and (e) the Trustee

was granted the authority to use, sell or lease the U.S. Merendon Mining Property, including the

American Mines upon following the appropriate procedures, and notice, set forth in 11 U.S.C.

§363. (D.E. 62, pg. 7, ¶¶F-K, in the Sub Con Adversary Case). As will be shown below, that

§363 sale of the Glory Hole Mine never occurred.

Further, the March 11, 2010 Order went on to say that with respect to those persons

claiming an interest in those properties, by way of ownership or lien, including the Glory Hole

Mine, that (a) they may file a claim or adversary proceeding, as appropriate, in this case, to

determine their right title and interest, and (b) they shall be entitled to have their ownership or

lien interests attach to the proceeds of any sale of that property, conducted by the Trustee under

§363, and shall be entitled to notice of any such sale conducted by the Trustee. (D.E. 62, pg. 8,

¶¶L & M, in the Sub Con Adversary Case). Again, such §363 sale of the Glory Hole Mine never

took place.

Further, with the exception of those parties who are named parties to the Adversary Case,

(i) no findings of fact or conclusions of law in the prior orders of this Court shall be deemed


18

applicable to, or have any res judicata or collateral estoppel effect against those persons claiming

an interest in those properties, nor (ii) shall they be deemed to adjudicate any issues or claims,

including any issues or claims regarding legal or equitable title, or any other right, title, or

interest in any real or personal property, in the U.S. Merendon Mining Property, including the

American Mines, as between the Trustee and/or the Alter Ego Defendants and/or the Non-Debtor

Entities, and those parties claiming an interest, and (iii) both the Trustee and any party claiming

an interest are entitled to a reservation of all their rights and positions as between each other that

they have or may have and/or assert in any current or future legal proceedings between them.

(D.E. 62, pg. 8, ¶¶N-P, in the Sub Con Adversary Case).

Lastly, that and prior Orders dealing with Substantive Consolidation, were to have been

recorded in the counties where the American Mines were located, such as Gilpin County,

Colorado where the Glory Hole Mine was located, and served upon all parties whim the Trustee

has notice has a claim to any ownership or lien interest in the U.S. Merendon Mining Property,

including the American Mines. (D.E. 62, pg. 9, ¶Q, in the Sub Con Adversary Case). Such

Orders were recorded, and the Caldwell Successors, Estate and Heirs, and the Claimants were all

served with the same. On March 12, 2010, the Trustee posted the Judgment to http://gray-

robinson.com/news.php?ACTION=view&CAT=1&ID=1475 in accordance with the Court’s

Order of December 30, 2009 (D.E. 74) (D.E. 63 in the Sub Con Adversary Case). On April 2,

2010, the Subcon Orders and the Judgment were recorded in the county where the Glory Hole

Mine is located in Gilpin County, Colorado (the Subcon Order was recorded on March 17, 2010

(No. 141130) and the Judgment was recorded on April 26, 2010 (No. 141349). (D.E. 170, ¶¶13

& 14). As such, the Caldwell Successors, Estate and Heirs, and the Claimants were all aware that


19

this Court had not adjudicated any rights by and between any of them, including the Trustee, in

the ownership or liens upon the Glory Hole Mine.

Thereafter, on February 14, 2013, this Court entered an Order Granting a Motion to

Enforce an Agreement with the Sorenson Defendants, and for Sanctions against the Sorenson

Defendants and for Final Judgment against the Sorenson Defendants (D.E. 218 in the Sub Con

Adversary Case). On June 4, 2013, this Court entered a Final Permanent Injunction, and Final

Judgment, in the Sub Con Adversary Case which incorporated into it all of this Court’s previous

rulings, orders and judgments (the “Final Sub Con Judgment”) (D.E. 222 in the Sub Con

Adversary Case).

With the exception of a subsequently dismissed appeal by the Sorenson Defendants of the

original Sub Con Orders, no timely appeal or motion to set aside that Final Sub Con Judgment,

or any other order or judgment in the Sub Con Adversary Case or this Bankruptcy Case, have

ever been filed by Claimants, or any other party.

Caldwell’s Relief from Stay to Proceed With Litigation Over the Glory Hole Mine

On September 3, 2010, the Caldwell Estate and Heirs sought relief from the stay to

litigate the Texas litigation, which if successful was asserted by it to be dispositive over the

Colorado litigation concerning the Glory Hole Mine (the “Stay Relief Motion”) (D.E. 166). On

September 14, 2010, the Trustee filed an Objection to the Stay Relief Motion (D.E. 170).

The Glory Hole Mine

The history of the ownership of the Glory Hole Mine, was described in the Trustee’s

Objection to the Stay Relief Motion, and indicates that it had been tied up in litigation in

competing courts in Texas and Colorado for 14 years, and since 1991 as it relates to the

particular dispute in question. (See, D.E. 170, ¶¶25-32) That litigation can best be summarized as


20

follows.

At one time Caldwell, who is now deceased, owned the Glory Hole Mine, and a judgment

was obtained against him in December 1989 in Texas by Barnes, who is also now deceased. That

judgment was later domesticated in Colorado in September, 1991, and Barnes in that Colorado

action then executed upon the judgment in Colorado thereby obtaining title to the Glory Hole

Mine. It had always been Caldwell’s contention that the whole process by which Barnes obtained

his judgment and title to the Glory Hole Mine was invalid for lack of due process.

Subsequent to Barnes obtaining title to the Glory Hole Mine, in August 2002 he sold the

Glory Hole Mine to Debtor, a third party to the entire litigation and transactions between

Caldwell and Barnes, for good and valid consideration, with money that was fraudulently

obtained by Debtor’s principals from the investors who make up the creditor body in this action.

(See Affidavit of Garfinkle), D.E. Bankruptcy 65 & 66, Ex. A, D.E. Sub Con Adversary Case 1

& 3, Ex. A). Debtor’s forensic accountant traced the investors monies into the purchase of the

Glory Hole Mine, as reflected in his report filed in the Adversary Case (See Barry Mukamal

Affidavit dated September 18, 2009, D.E. Bankruptcy 65 & 66, Ex. B, D.E. Sub Con Adversary

Case 1 & 3, Ex. B).

Title to the Glory Hole Mine was then taken in the name of one of the Debtor’s related,

and now subsequently consolidated entities, Sentinel, whose assets were substantively

consolidated into this Estate. In addition, Caldwell subsequently executed a power of attorney in

favor of Garfinkle, and Caldwell, through Garfinkle, executed that power of attorney, which

settled Caldwell’s dispute with Barnes, Debtor and Sentinel, thereby resulting in the title of the

Glory Hole Mine remaining in Sentinel’s name, as it now stands today, and as part of this

Debtor’s Estate. In seeking stay relief, Caldwell sought to have the issue of the validity of that


21

settlement adjudicated in Texas, and by extension sought to adjudicate that issue in Colorado, as

well.

To complicate matters even more, the Trustee had been contacted on June 30, 2010 by

counsel for Clearwater Mining Company (“Clearwater”) (Joe Davies, Denver Technological

Center, 5290 DTC Parkway, Suite 150, Greenwood Village, Colorado 80111, and email

[email protected]), who had advised the Trustee that Caldwell, in July, 1994, while then still

alive and subsequent to his having lost the Glory Hole mine to Barnes, had sold the Glory Hole

mine to Clearwater at a time when he didn’t even have legal title to the Glory Hole Mine, which

dispute with Clearwater also had been tied up in separate litigation. As such, there was a

legitimate question as to whether Caldwell sold his interest in the Glory Hole Mine, whatever

that might be, to Clearwater in 1994. In the meantime, these multiple actions have been pending

and bouncing from court to court for years with no resolution in sight, including the litigation

with the Claimants. In the meantime, the Estate simply had no funds to litigate these matters in

Texas, Colorado, or elsewhere. Of the key witnesses involved in these disputes, all are now

deceased (Caldwell, Judge Barnes, and the Claimants).

Thereafter, by agreement with the Trustee, on January 3, 2011, this Court granted the

Caldwell Estate and Heirs partial relief from stay to litigate over the Glory Hole Mine (the “Stay

Relief Order”) (D.E. 210). The Stay Relief Order, is relevant to this matter since, in ¶3 this Court

held that the Caldwell Estate and Heirs, were granted partial relief from the automatic stay, to

pursue their rights in any litigation, including any lawsuits currently pending in Texas or

Colorado, against (i) any parties other than the Debtor, the Trustee, the Estate, or any of the other

entities and individuals that have been previously substantively consolidated into this Estate (the

“Subcon Parties”) by prior Sub Con Orders of this Court, and (ii) any of the properties not titled


22

in the name of the Debtor, the Trustee, the Estate, or any of the Subcon Parties, or properties that

have been previously substantively consolidated into this Estate by the Subcon Orders (the

“Subcon Properties”).

Such relief was subject to further restrictions in ¶4 of the Stay Relief Order, in that (a)

neither the Trustee, the Estate, nor any of the Subcon Parties, were to be bound by any rulings,

findings of fact, conclusions of law, or any Order or Judgment obtained by the Caldwell Estate

and Heirs, or by the other parties to the litigation which affect or may affect the rights of the

Trustee, the Estate, or any of the Subcon Parties, in property of the Estate, the Subcon Properties,

or in any property that in the future may be substantively consolidated into this Estate by this

Court; (b) the Caldwell Estate and Heirs, and other parties to the non-bankruptcy proceedings

were prohibited from using any findings of fact, conclusions of law, or any Order or Judgment

they might obtain from any non-bankruptcy Court, for collateral estoppel purposes, res judicata

effect, or as evidence in this Bankruptcy case, which provision was intended to act, inter alia, as

an Agreed Order on a Motion in Limine in favor of the Trustee, the Estate, or any of the Subcon

Parties or to attempt to bind the Trustee, the Estate, or any of the Subcon Parties to rulings in

other non-bankruptcy courts, and (c) the Caldwell Estate and Heirs were restricted from

continuing or filing any litigation against the Trustee, the Estate, any of the Subcon Parties or the

Subcon Properties, or that seeks to directly or indirectly try to achieve ownership over any of the

Subcon Properties, or other property of the Estate.

Further, ¶5 of the Stay Relief Order, stated that nothing in that Order was intended to

impair or otherwise diminish the effect of the rulings contained in the Subcon Orders that if a

party had a claim to the Subcon Properties, then it should come and adjudicate that claim before

this Court. (D.E. 62 in the Sub Con Adversary Case). Lastly, ¶6 of the Stay Relief Order, further


23

extended relief from the automatic stay to any other individuals or entities, including Claimants,

involved in non-bankruptcy litigation with the Caldwell Estate and Heirs, under the same terms,

conditions and restriction as set forth in the Stay Relief Order. This last ruling is significant since

Claimants are seeking to bind the Trustee and the Estate by rulings of the Colorado Court and

such stay relief granted by this Court, prohibited them and Caldwell from attempting to do just

that.

The Trustee’s Adversary Complaint to Determine the Validity, Extent, and Priority of Liens

Following an aborted and failed attempt to sell the Colorado Mining Properties, and in

anticipation that those properties would be sold in the future, on September 29, 2010, the Trustee

filed the Sale Adversary Case (D.E. 177, D.E. 1 in the Sale Adversary Case, amended on

October 19, 2010, to add Garfinkle and Sentinel, D.E. 7 & 8 in the Sale Adversary Case) to

determine the validity, extent, and priority of any liens, claims, encumbrances, and interests,

including any competing interests in the Colorado Mining Properties, including the Glory Hole

Mine, pursuant to 11 U.S.C. §363(p)(2) and Fed. R. Bankr. P. 7001(2).

The competing ownership claims known to the Trustee regarding the Colorado Mining

Properties were set out in the Complaint, and Caldwell, Barnes, Clearwater, and the Claimants

were all parties to the same, where their entitlement, if any, to any proceeds from the intended

§363 sale of the Glory Hole Mine, would be adjudicated (D.E. 1 in the Sale Adversary Case).

On November 5, 2010 the Claimants filed their Answer, Affirmative Defenses and

Counterclaim to that Complaint (D.E. 25 & 26 in the Sale Adversary Case), and withdrew the

same on November 17, 2010 (D.E. 34 in the Sale Adversary Case), to be replaced on November

17, 2010 by a new Answer and Affirmative Defenses, without a Counterclaim (D.E. 38 in the

Sale Adversary Case). On December 7, 2010, the Caldwell Estate and Heirs filed their Answer,


24

Affirmative Defenses, Counterclaim and Crossclaim (D.E. 44, 45 & 46 in the Sale Adversary

Complaint), to which Claimants filed their Answer and Affirmative Defenses on December 21,

2010 (D.E. 50 in the Sale Adversary Case). The Caldwell Estate and Heirs’ Counterclaim and

Crossclaim were dismissed by Agreed Order by this Court on January 12, 2011 (D.E. 63 in the

Sale Adversary Complaint).

The Trustee’s Attempt to Sell the Glory Hole Mine

After Sentinel and the Glory Hole Mine had been substantively consolidated into the

Estate, the Trustee, with the assistance of her Court approved auctioneer, Fisher Auctions, had

been able to locate a buyer for the Glory Hole Mine. On June 6, 2011, the Trustee had entered

into an Asset Purchase Agreement for the sale of the Glory Hole Mine to Glory Development

Company (the “Stalking Horse Bidder”) for $495,000.

On June 9, 2011, the Trustee moved this Court for an order approving the §363 sale and

sales procedures as it related to the §363 sale of the Glory Hole Mine (the “Glory Hole Sale

Motion”) (D.E. 245). The hearing on the Colorado Sale Motion was set to be heard on July 21,

2011 at 3:00 p.m. (D.E. 248). Because of contesting claims to ownership of the Glory Hole

Mine, including Sentinel, the Caldwell Estate and Heirs, Clearwater, Barnes, Garfinkel, and

Claimants, the Trustee was not able to sell the Glory Hole Mine, and this Court entered an Order

denying the Glory Hole Sale Motion (D.E. 252).

The Caldwell Settlement

Thereafter, because the Glory Hole Mine could not be sold because of competing claims

to ownership over it, the Trustee rather than sell the Glory Hole Mine, chose to settle its disputes

with the Caldwell Estate and Heirs by agreeing to receive $600,000 in exchange for disavowing

any claims or interest the Trustee or the Estate, whether through Merendon or Sentinel, had in


25

the Glory Hole Mine, and to allow the Caldwell Estate and Heirs to go back to the state courts in

Texas and Colorado to sort out any and all disputes they may have had over the ownership, or

liens upon the Glory Hole Mine, and for the Trustee to cooperate and sign any documents,

including the execution of any “as is” quit claim deeds to the Caldwell Estate and Heirs, and/ or

their assigns, such as they deemed necessary to effectuate the release of any claims or interest the

Trustee or the Estate may have had in the Glory Hole Mine.

As such, on August 19, 2011, the Trustee filed a motion to Compromise Controversy

with and to Approve Settlement with the Caldwell Estate and Heirs (the “Settlement Motion”)

(D.E. 262 & 263). The Settlement Agreement, dated August 18, 2011, was attached as Exhibit A

to the Settlement Motion (D.E. 262-1). The Settlement Motion contained a 21 day negative

notice provision pursuant to Local Rule 9013-1(D) for any interested party to object or otherwise

have been deemed to have consented to the approval of the Settlement Motion. A hearing was

scheduled on the Settlement Motion for September 27, 2011 (D.E. 264), and was served upon all

creditors (D.E. 265-267). The Claimants never objected to the Settlement Motion, and only

Garfinkle objected to the same (D.E. 269), to which the settling parties filed a joint response

(D.E. 274). At the hearing on September 27, 2011, this Court, overruled the Objection of

Garfinkle, and on September 29, 2011 entered an order approved the Settlement Motion (D.E.

282). That Order has never been appealed nor moved to be set aside by any party, including

Claimants.

In ¶¶6-8 of the Settlement Motion, the Trustee asserted that (a) the dispute over the Glory

Hole Mine spans many years of state court proceedings in both Colorado and Texas, and that the

Trustee’s counsel believes that there are complex legal and factual issues regarding how Sentinel

obtained title to the Glory Hole Mine, and whether such conveyance to Sentinel was effective,


26

(b) the resolution of this dispute would involve additional litigation for which the outcome is

uncertain, and that the disputes regarding the ownership of the Glory Hole Mine would have to

be resolved prior to any sale of such property, and (c) that the Settlement will provide $600,000

to the Estate, without further cost, and it will resolve all claims between the Trustee and the

Caldwell Estate and Heirs.

The Settlement Agreement, recited, in addition to the history of substantive

consolidation, the Sale Adversary Case, the Stay Relief Order, and the unsuccessful attempt to

sell the Glory Hole Mine in bankruptcy, as set forth above, that (a) the Trustee and the Caldwell

Estate and Heirs, were parties to the Sale Adversary Case, and (b) Debtor’s alter ego, Sentinel,

was the record title holder to the Glory Hole Mine.

Further, the Caldwell Estate and Heirs asserted in the Settlement Agreement that title to

the Glory Hole Mine was obtained by Sentinel through fraud, by virtue of Garfinkle, who held a

power of attorney from Caldwell, having conveyed title to Sentinel at a time when the power of

attorney had been revoked, and therefore ineffective to convey good title to Sentinel.

In ¶1 of the Settlement Agreement, the settling parties agreed that the recitals contained

therein were true, correct and incorporated therein. Paragraph 3 of the Settlement Agreement

indicates that the $600,000 paid to the Estate was to settle the disputes between those parties, and

was not for the sale of the Glory Hole Mine. Pursuant to ¶4 of the Settlement Agreement, the

Caldwell Heirs obtained the right, as agent or assignee of the Estate, to pay taxes, satisfy tax

liens, or redeem Certificates of Purchase on the Glory Hole Mine. Pursuant to ¶5 of the

Settlement Agreement, upon the Caldwell Heirs doing any of the same, the Trustee was to

execute and transmit any documents that the Caldwell Heirs’ counsel deemed appropriate to file

in Colorado to disclaim, and/or quit claim, from the Trustee to the Caldwell Heirs any interest


27

the Trustee may have had in the Glory Hole Mine, since title to the same was first allegedly

vested in Sentinel. Pursuant to ¶6 of the Settlement Agreement, the Caldwell Heirs broadly

released the Trustee and the Estate of any and all claims and causes of action, yet reserved their

right to bring claims against anyone else who may assert a claim to the Glory Hole Mine.

Pursuant to ¶7 of the Settlement Agreement, the Trustee released and disavowed any and all

claims she, or the Estate, had to the Glory Hole Mine. Pursuant to ¶9 of the Settlement

Agreement, the settling parties stipulated that they did not rely upon any representations from the

other in entering into the Settlement Agreement.

This Court finds that the Settlement Agreement was not for the sale of the Glory Hole

Mine, because as this Court had previously determined, the disputes in multiple litigation

between many different parties, over ownership of that mine, resulted in this Court, and the

Trustee, not being able to sell the Glory Hole Mine under §363, until those ownership issues

were resolved. Because the Trustee and the Estate did not have the resources, nor the inclination,

to fight those fights on multiple fronts, it chose to accept a cash settlement with the Caldwell

Estate and Heirs. That settlement was to resolve their disputes, was not for the sale of the Glory

Hole Mine, but rather was to have the Trustee and the Estate disavow any interest they may have

had in the Glory Hole Mine, which the Trustee did. Claimants have no right to claim a security

interest in the proceeds of that settlement.

Dismissal of Claimants and Amendment of the Sale Adversary Case to Drop Glory Hole Mine from the Case

After the Settlement with the Caldwell Estate and Heirs, in which the Trustee and the

Estate disavowed any interest they may have had in the Glory Hole Mine, on December 16,

2011, the Trustee moved for leave to amend the Complaint (D.E. 123 (and 125, the Amended

Complaint) in the Sale Adversary Case), which leave was granted on December 20, 2011 (D.E.


28

126 in the Sale Adversary Case) whereby the Claimants, the Caldwell Estate and Heirs, Barnes,

and Clearwater, and any other party asserting an interest in the Glory Hole Mine, were dismissed

from the Sale Adversary Case since they were no longer necessary parties to the action, and the

Glory Hole Mine was removed from that litigation (D.E.124 in the Sale Adversary Case).

Claimants’ Proofs of Claim

On March 8, 2010, Claimants timely filed a secured Proof of Claim, against only

Sentinel, in the amount of $1,451,457.12 (Claim No. 542) based upon a judgment (the

“Judgment”) they obtained against Sentinel post-petition on September 28, 2009 in the amount

of $1,402,789.10, plus accrued interest through the date they filed their claim. According to pg. 3

of Claim No. 542, the Judgment was recorded on October 7, 2009 in the public records of Gilpin

County, Colorado.

On January 30, 2012, Claimants amended Claim No. 542 (by Claim No. 646) to assert

that Kemper’s claims was now made on behalf of his probate estate, and that the secured claim

was made on the $600,000 in proceeds of what Claimants purport to be a sale of the Glory Hole

Mine by Sentinel, through the Trustee, to the Caldwell Estate and Caldwell Heirs. (Claim No.

646, pg. 3).

Since Claimants have filed Proofs of Claim in this matter, this Court may adjudicate

these issues concerning property of the Estate, namely the proceeds from the Trustee’s settlement

with the Caldwell Estate and Heirs, to which Claimants incorrectly assert they have a secured

interest.

Claimants’ Judgment

The Judgment (Claim No. 542, pg. 5) granted Claimants a lien upon, and enjoined

Sentinel from conveying or encumbering deeds it received from Glory Hole Mining Co.,


29

Colorado Cielo Vista, Inc., Colorado Viento Vista, Inc., and Westier, Inc., on October 6, 2006,

purporting to be the Glory Hole Mine, and which were recorded in the Gilpin County, Colorado

public records.

However, a review of the Judgment shows that the defendants in that case were Caldwell,

individually and his estate (the “Caldwell Estate”), along with several entities, none of which are

parties to any of these bankruptcy proceedings. Most notably is that neither the main debtor in

this case, Merendon Mining (Nevada), nor Sentinel, nor any of (what will later be defined as) the

Alter Ego/ Non-Debtor Entities, were initially parties to the Gilpin County, Colorado action.

Rather, the Gilpin County, Colorado court (the “Colorado Court”) in reaching this Judgment

against Sentinel, did so as a result of proceedings supplementary to collect against Caldwell, a

defendant in that action, and alleged to be an insolvent judgment debtor, who allegedly

fraudulently conveyed the Glory Hole Mines, to Sentinel and Merendon Mining (Colorado), on

October 6, 2006. While Merendon Mining (Colorado) was a defaulted garnishee, no judgment of

any sort was ever entered against it.

Most interesting and relevant for this matter is that in fn. 4 to the Judgment (Claim 542,

pg. 8) the Colorado Court found that the evidence supported that the multiple transfers of the

Glory Hole Mine from Caldwell to Merendon Mining, in 2002 and 2005, as well as to Sentinel

and multiple parties in 2006, were all fraudulent under Colorado’s version of the Uniform

Fraudulent Transfer Act. As a result, and what is relevant for these purposes, is that the Colorado

Court in the Judgment also set aside the fraudulent transfers of the Glory Hole Mine, and

returned them to the defendant in that action, Caldwell, in trust for the judgment creditors,

Claimants. (Claim 542, pg. 8). Pursuant to the Colorado Court ruling neither Sentinel nor

Merendon ever had any interest in the Glory Hole Mine. If neither had an interest in the Glory


30

Hole Mine, Claimants cannot now assert a secured claim against either Merendon or Sentinel in

the Glory Hole Mine, and on that basis alone the Objections should be sustained.

The Objection to Claims

As such, on November 5, 2013, the Trustee objected to Claimants’ Claims Nos. 542 &

646 (D.E. 371). This Court agrees with the Trustee that the Claimants documentation provided

above does not support their claim as a secured creditor of Sentinel in the Glory Hole Mine, and

in particular Claimants are not secured in the proceeds of the August 18, 2011 Settlement (D.E.

263) made with the Estate of Caldwell, through its Personal Representative, Dawn Caldwell

Fedrigon (the “Caldwell Estate”), and Dawn and Michael Fedrigon (the “Caldwell Heirs”) (D.E.

398).

Claimants’ Response to the Objections

In further support of these conclusions, this Court looks to Exhibit A to Claimants’

Motion to Dismiss or Strike the Caldwell Successors’ Objection (D.E. 453, pg. 17), where

Claimants attach a Motion to Dismiss, and Order granting the same, dated April 14, 2014, they

filed on April 8, 2010, in the Colorado Court, which states that

“Any [articles of conveyance] signed by [Caldwell] were subject to the Plaintiffs’ judgment lien. In a last minute switch, Merendon Mining and Garfinkle created a new entity, [Sentinel] on September 26, 2006 to take title. The property was deed that way by Barnes at the insistence of Garfinkle and Merendon on October 6, 2006. This Court is well aware that this is the fraudulent transfer made to hinder, defraud or delay the creditors of [Caldwell]. There was no claim that [Caldwell] signed or received these deeds. There was evidence of his sale of property he didn’t own, his signing of contracts to convey property he didn’t own and his signing of a power fo attorney over property he didn’t own.”

That Motion and Order also suggests, as the Judgment did, that, as a result of the fraudulent

transfers, neither Sentinel nor Merendon had a claim to ownership in the Glory Hole Mine.

Without an ownership by either of these debtor entities in the Glory Hole Mine, Claimants


31

cannot assert a lien in their ownership interest in in the Glory Hole Mine.

Further, as part of that Exhibit A, was also attached an July 17 2009 Order from another

Colorado Court case titled In re Chain O’Mines Trust, claiming that title vested in, held by,

transferred to or claimed by [Caldwell] in what is presumed to be the Glory Hole Mine3 is vested

in, and the property of, the Chain O’Mines Trust (D.E. 453, pg. 19). Again, according to this

Order, Caldwell’s property in the Glory Hole Mine belonged to the Chain O’Mines Trust, and

clearly neither Sentinel nor Merendon. This is further support that without ownership in the

Glory Hole Mine, Claimants cannot assert a lien against debtors’ interest in the Glory Hole

Mine.

Exhibit B to Claimants’ same Motion to Dismiss contains another Order, dated February

11, 2014 from the Colorado Court, and states that (a) the Colorado action had been pending since

1992, Claimants obtained a judgment against Caldwell on September 2, 1993, and upon

recording in Gilpin County, Colorado that judgment became a lien on any property he owned in

that county (D.E. 453, pg. 23, ¶2), (b) however, that lien was foreclosed upon by a senior

creditor, Barnes, thereby extinguishing Claimants’ lien, but not their judgment (D.E. 453, pg. 23,

¶3), and (c) that in both 1999 and 2005 Claimants had moved to renew the judgment lien,

however, the appropriate legal procedures were not followed, and whether the lien was perfected,

or not, remains subject to dispute, but nonetheless Claimants’ judgment itself remains valid (D.E.

453, pg. 23, ¶4). What that Order makes clear is that Claimants, while they may have had a valid

judgment, did not have an enforceable and perfected judgment lien against the Glory Hole Mine.

So notwithstanding whether Sentinel or Merendon ever had a valid ownership interest in the

Glory Hole Mine, Claimants nonetheless never had an enforceable lien either since Barnes

foreclosed their junior lien in the Glory Hole Mine. 3 Since the exhibit to that order is not attached.


32

That Order, however, without ever bringing the Trustee or these bankruptcy estates in to

the proceedings, thus having no collateral or preclusive effect upon the Trustee or the Estate,

opined on this Court’s Order approving the Settlement Agreement between the Trustee and the

Caldwell Estate and Heirs, and viewed the Settlement Agreement approved by this Court, and

any subsequent deeds issued as a result of the same, still remained subject to the lien arising from

the 2009 Judgment against Sentinel. (D.E. 453, pg. 24, ¶9).

Further, the Colorado Court, in that Order, viewed this Court’s nunc pro tunc application

of the substantive consolidation of Sentinel into this case as unconstitutional under the Fifth

Amendment of the United States Constitution. (D.E. 453, pg. 24, ¶12). However, Claimants

herein, who were served with these proceedings, and did timely file their Claims in this matter

pursuant to that Amended Sub Con Order, never timely appealed, nor timely moved to set aside

the nunc pro tunc application of Sub Con Order to Sentinel under Rule 60, or Bankruptcy Rule

9060, nor the Order approving the Settlement Agreement, nor the Final Judgment in the Sub Con

Adversary Case.

Claimants cannot now be heard to object to the constitutionality or validity of this Court’s

rulings, before this Court now, or before the Colorado Court, by way of an impermissible

subsequent collateral attack by the Colorado Court upon a final ruling of this Federal Bankruptcy

Court. Just as this Court is bound to honor final rulings of state courts, as argued by Claimants

under the various doctrines asserted in their Motion to Dismiss the Caldwell Successors’

Objection (D.E. 453), state courts are likewise bound to follow final rulings of Federal Courts,

including this Court’s final rulings.

Lastly, in that same Order, the Colorado Court noted that the November 10, 2011 quit

claim deeds received as a result of this Court’s approved settlement between the Trustee and the


33

Caldwell Estate and Heirs was “as is” subject to any existing liens. Therefore, having litigated

that issue before the Colorado Court, the Caldwell Successors’ Estate and Heirs cannot now

complain to this Court that they somehow did not get what they bargained for with the Trustee in

the Settlement Agreement if they are forced to live with the result of the Colorado litigation in

which they have been heavily involved from the beginning.

For the foregoing reasons, it is ORDERED and ADJUDGED that:

1. The Objections to Claims Nos, 542, as amended by 646 (D.E. 371, 446 & 448), are

Sustained.

2. Claimants’ motion to dismiss the Caldwell Successors’ Objection is denied.

3. Claimants’ claims are stricken.

4. Claimants have no secured interest in property of the substantively consolidated

Estate, including, but not limited to, the proceeds received by the Trustee and the Estate from the

Settlement with the Caldwell Estate and Heirs.

5. The Caldwell Estate and Heirs have no claim against the Trustee or the Estate for

violation of the Settlement Agreement.

# # #

Submitted by: Ivan J. Reich, Esq. GrayRobinson, PA Attorney for the Trustee 401 E. Las Olas Blvd., Suite 1850 Ft. Lauderdale, FL 33301 Telephone: 954-761-8111 Facsimile: 954-761-8112 [email protected] (Attorney Reich shall upon receipt serve a copy of this Order upon all creditors and interested parties, including co-counsel for Claimants, E. Alan Hampson, 1420 Vance Street, # 200, Lakewood, CO 80214, via fax at 303-233-1995, and via email to [email protected],


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and Robert C. Meyer, 2223 Coral Way, Miami, FL 33145, and via fax at 305-285-8919, and via email to [email protected]., and Brett M. Amron and Dana R. Quick, Bast Amron LLP, Sun Trust International Center, One Southeast Third Avenue, Suite 1440, Miami, Florida 33131, and via fax to 305-379-7905, and via email to [email protected], and [email protected], and to Counsel for Quartz, Jacqueline Calderin, via email to [email protected], [email protected], and [email protected], and to Counsel for Superior and Caldwell, John A. Moffa, via email to [email protected], [email protected], [email protected], and [email protected], and file a certificate of service). 351016\4 - # 3010157 v1


SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION ROBBINS ...DE 501] Notice of Ninety Days... · united...

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Transcript of SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION ROBBINS ...DE 501] Notice of Ninety Days... · united...